A small miracle in the world of takings law

February 18, 2012 | By JENNIFER THOMPSON

Robert Thomas, managing attorney of PLF’s Hawaii Center in Honolulu recently highlighted an important takings case on his excellent blog, inversecondemnation.com.  The Third Circuit Court of Appeals decided R & J Holding Company v. Redevelopment Authority  in December and found that a property owner did have the right to bring his Fifth Amendment takings claim in federal court.  Why, might you ask, is that so remarkable?

Here’s the deal:
The Fifth Amendment of the Federal Constitution provides, “nor shall private property be taken for public use, without just compensation.”  In a very poorly reasoned case from 1985 called Williamson County Regional Planning Commission v. Hamilton Bank, the US Supreme Court said that the Fifth Amendment doesn’t actually mean that government cannot take your property unless and until it pays you for it.  The Court said instead that the Fifth Amendment only requires that “a reasonable, certain and adequate provision for obtaining compensation exist at the time of the taking.”  From that dubious assertion, the Court concluded that “if a State provides an adequate procedure for seeking just compensation, the property owner cannot claim a violation of the Just Compensation Clause until it has used the procedure and been denied just compensation.”  The implication from Williamson County was that after a property owner had unsuccessfully sought compensation in state court, he would then be able to pursue his Fifth Amendment takings claim in federal court.

The problem was that when property owners did just that—lost in state court and then tried to bring their takings claim in federal court—the federal courts held that their claim was barred by traditional legal principles of preclusion.  The idea is that once someone has litigated a claim in court and lost, he should not be allowed to try again, partly because the courts must give “full faith and credit” to the legal decisions of other courts.  In 2005, the Supreme Court addressed the problem it had created in Williamson County in another case called San Remo Hotel v. City and County of San Francisco.  There, the Court held that a takings plaintiff could not relitigate issues in federal court that were decided against him while in state court pursuing a state compensation remedy.  The result is that his claim is forever barred under preclusion principles from being heard on the merits in federal court.

As many commentators have pointed out, the rule of Williamson County punishes would-be federal takings plaintiffs by preventing them from ever having their claims heard in federal court.  No other federal constitutional rights are subject to this treatment and, in fact, Congress went out of its way after the Civil War to ensure that people were able to bring their federal constitutional claims directly in federal court.  It passed legislation creating a cause of action for vindicating federal rights in 42 U.S.C. Section 1983, which was designed to “interpos[e] the federal courts between the States and the people, as guardians of the people’s federal rights.”  But Williamson County, when combined with San Remo Hotel, nullifies that recourse for property owners seeking to enforce their right to compensation under the Fifth Amendment.

That is why the fact that the Third Circuit found that the plaintiff in R & J Holding company could even bring his takings claim in federal court is so remarkable.  Even so, his victory came only after enduring a grueling procedural obstacle course.  First, the plaintiff brought his claim initially in federal court and had it dismissed because he had not sought compensation from a state court—as required by Williamson County.  Next, he went back to state court where he eventually lost on appeal.  He then filed his claim a second time in federal court which dismissed the case based on preclusion principles like those articulated in San Remo Hotel.  On appeal to the Third Circuit, however, that court reversed and found that Pennsylvania law did not require dismissal based on preclusion.  Because the Third Circuit relied on state law, as opposed to federal law in reaching this conclusion, the decision is unlikely to be reversed by the US Supreme Court.

While this is good news for property owners in the Third Circuit, the state of the law on this subject is still sorely disconcerting.  Recently, PLF asked the U.S. Supreme Court on three separate occasions to reconsider Williamson County and the trap it sets up for property owners in light of San Remo Hotel.  The court declined to hear any of the cases.  We hope that one day, the Court will come to its senses and restore to property owners the same opportunity to vindicate their constitutional right to Just Compensation as that afforded to other constitutional protections.