High court vacates 9th Circuit in condo takings case

The U.S. Supreme Court vacated a 9th U.S. Circuit Court of Appeals decision in favor of San Francisco Monday in its dispute with property owners who wanted to convert one of their units to a condominium or be compensated if they had to offer a tenant a lease.

The high court, in a per curiam order, disagreed with the lower court and concluded the city's decision was ripe for judicial resolution.

"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," the court wrote. Pakdel v. City and County of San Francisco, 2021 DJDAR 6459 (S. Ct, order filed June 28, 2021).

Jeffrey W. McCoy, an attorney with the Pacific Legal Foundation who represents the plaintiffs, said the Fifth Amendment takings dispute may have broader implications than just the case over a San Francisco apartment building.

"We do think we have a good argument on remand" that San Francisco's action constitutes a taking, McCoy said in a telephone interview.

He said the case may have broader implications, citing two other lawsuits -- including one pending in the 9th Circuit -- that involve similar disputes between property owners and counties over whether restrictions on construction to protect sensitive habitat also is a taking.

The Supreme Court instructed the 9th Circuit to give further consideration to the high court's ruling in another takings case decided last week, when it ruled that giving unions access to private farm property was a taking under the Fifth and 14th Amendments to the U.S. Constitution. Cedar Point Nursery et al. v. Hassid et al., 20-107.

John Cote, a spokesman for the San Francisco city attorney's office, emphasized that the high court's decision in Pakdel was procedural.

Jeff McCoy

"We are disappointed in the decision, but we anticipate we will prevail when the courts address the merits," he said.

Peyman Pakdel and Sima Chegini, a married couple, bought an interest in the apartment building in 2009, planning to move there upon retirement, but then asked the city to grant an exemption or compensate them for offering their tenant a lifetime lease.

They sued in federal court claiming the city had taken their property without just compensation in violation of the Fifth Amendment's takings clause.

U.S. District Judge Richard Seeborg sided with the city, and a 9th Circuit panel affirmed the decision because the plaintiffs never got a final decision from the city as required by a 1985 U.S. Supreme Court ruling. Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985).

The 9th Circuit decided against rehearing the case en banc, over the objections of Judge Daniel P. Collins, an appointee of President Donald Trump, and other conservatives who said the majority improperly ignored a more recent high court ruling. Knick v. Township of Scott, 139 S. Ct 2162, 2167 (2019).

The Supreme Court agreed with the 9th Circuit dissenters' view of finality.

"Petitioners must 'execute the lifetime lease' or face an 'enforcement action,'" the opinion stated. "And there is no question that the government's 'definitive position on the issue [has] inflict[ed] an actual, concrete injury' of requiring petitioners to choose between surrendering possession of their property or facing the wrath of the government."

Cote wrote it was the couple who chose San Francisco's fast-track program and that the city did not compel them to do so.

"The Pakdels agreed to all terms of the expedited program, and even presented the lease to their tenant to sign," he wrote.

"But after the city granted the requested condo conversion and issued a condo map, and after the property owner recorded that map against title to preserve its new property rights, the Pakdels told the city for the first time that they objected to the lifetime lease requirement," Cote added.

The Pakdel case isn't the only one that could be affected.

Paul J. Beard II, a partner with FisherBroyles LLP who represents a landowner in a lawsuit against San Mateo County, argues in court papers that the county's argument that plaintiff Felix Mendelson's claims are unripe is a "disingenuous" way to avoid his takings allegation. Mendelson v. County of San Mateo, 20-17389 (9th Cir., filed Dec. 8, 2020).

"Yes, we believe Pakdel reaffirms the 'modest' nature of the finality requirement," he wrote in an email on Monday afternoon.

"It doesn't require needless permit applications that will necessarily be denied, just for the sake of 'exhaustion.'"

Beard added that it only requires that the court know how the regulation at issue applies to the plaintiff's property.

Deputy County Counsel Lauren F. Carroll said in a response to Mendelson's appeal that the claim is unripe because "Mr. Mendelson cannot bring a constitutional challenge to the county's land-use regulations before the county has reached a final decision about how those regulations apply to his property."

"It would be a departure from settled law to find these claims ripe, when Mr. Mendelson has not even tried to secure a development permit," she added.