U.S. SUPREME COURT APPLIES KNICK “FINALITY” PROVISIONS TO NINTH CIRCUIT DECISION INVOLVING RESIDENTIAL PROPERTY CONVERSIONS

This post was authored by Edward J. Sullivan, Esq.  

Pakdel v City and County of San Francisco, No. 20–1212, 594 U. S. ____ (2021) was a per curiam decision that explored the ramifications of the Court’s landmark ruling in Knick v. Township of Scott, 588 U. S. ___,  (2019) where the determined that a taking claim against a state or local government could proceed in federal court without having to be adjudicated first in a state court proceeding, so long as the underlying decision were “final.”

              This case involved Defendant City and County denied Plaintiff’s request for an exemption to a requirement that, in order to convert a multi-unit residential building from a tenancy in common held with others to a condominium-type arrangement, Plaintiff, as a non-residential owner, must offer any tenant a lifelong lease of the unit. Plaintiff agreed with other tenants in common to make the conversion when he purchased his interest, but the opportunity to do so was limited because Defendant originally allowed such conversions under a limited “lottery” system.  Defendant amended the system to allow conversions to non-residential owners, so long as the life tenancy were provided to tenants. Plaintiff agreed to do so, but later asked to void the requirement or be paid compensation therefor, which Defendant declined to do, whereupon Defendant threatened and Plaintiff brought a takings claim under the Civil Rights Act in federal court.

              The trial court found the claim not “ripe” under existing precedent, as Plaintiff had not sought compensation in state court, a position superseded by the Knick decision. The Ninth Circuit affirmed the result, interpreting that portion of Knick that remained, i.e., that there be a “final decision” by the public agency below, as precluding relief. The Ninth Circuit found petitioners’ regulatory “takings claim remain[ed] unripe because they never obtained a final decision regarding the application of the Lifetime Lease Requirement to their Unit,” even though Defendant had twice denied Plaintiff’s applications to be relieved of that requirement. The Supreme Court noted the dissenting opinions in the Ninth Circuit decision to the same effect, stating:

              We, too, think that the Ninth Circuit’s view of finality is incorrect. The finality requirement is relatively modest. All a plaintiff must show is that “there [is] no question . . . about how the ‘regulations at issue apply to the particular land in question.’”

The Supreme Court noted that the Defendant’s position was clear – it demanded the lifetime

Lease and had arguably inflicted an actual, concrete injury on Plaintiff – to elect to surrender

his premises or face enforcement proceedings, calling the requirement mere de facto finality to

show actual, rather than hypothetical harm. Defendant’s commitment to its position, the court

knows how far the use of the property is allowed and assess whether a taking has occurred.

              Moreover, the Court cited Knick for the proposition that a claimant contending that the

exemption requirement was unconstitutional no longer must first seek that exemption in state

judicial or administrative proceedings and that Knick had ended any de jure or de facto

exhaustion requirement:

                             The Ninth Circuit’s contrary approach—that a conclusive decision is not “final” unless the plaintiff also complied with administrative processes in obtaining that decision—is inconsistent with the ordinary operation of civil-rights suits. Petitioners brought their takings claim under §1983, which “guarantees ‘a federal forum for claims of unconstitutional treatment at the hands of state officials.’”

The “final decision” requirement had not been overruled in Knick and the Court noted that “a

plaintiff ’s failure to properly pursue administrative procedures may render a claim unripe if

avenues still remain for the government to clarify or change its decision.” However, for the

limited purpose of ripeness, however, ordinary finality is sufficient.” Defendant’s position was

sufficiently clear for “ordinary finality” and the case could proceed to trial under current case

law, although Congress could change that result by legislation to impose procedural burdens on

such claims. The Court vacated the Ninth Circuit decision and remanded the case for further

proceedings consistent with its decision.

           This decision demonstrates that the Supreme Court will be skeptical of attempts to

Impose burdens on federal courts hearing takings cases where the state or local decision is

clearly final. Public agency decision-makers must now be vigilant in their consideration of those

claims and anticipate responses before a final decision is rendered.

Pakdel v City and County of San Francisco, No. 20–1212, 594 U. S. ____ (2021)