Property rights: the former ‘poor relation’ takes its place at the table

The federal Civil Rights Act of 1871 authorizes Americans to sue in federal court to vindicate the government's violation of their civil rights. Congress guaranteed the federal forum out of concern that state courts could not entirely be trusted to protect constitutional rights. For this reason, civil rights plaintiffs generally may sue directly in federal court even if state law would otherwise require them to pursue state agency or court proceedings.

The Supreme Court created an exception to the general rule in Williamson County Reg'l Planning Comm'n v. Hamilton Bank (1985) when it held that property owners seeking to vindicate their constitutional right to be compensated when the government takes their property must exhaust state remedies before suing in federal court. The case treated property rights as inferior to other constitutional protections, like free speech and due process. Two years ago, the Supreme Court recognized its error and overruled Williamson County's exhaustion requirement in Knick v. Township of Scott (2019). The Knick decision emphasized that property rights are civil rights -- the same as any other claim grounded in the Bill of Rights -- and cannot be relegated to second-class status.

The Supreme Court was divided 5-4 as to whether Rose Knick could sue in federal court without a years-long detour jumping through state court hoops. But in Pakdel v. City and County of San Francisco, 2021 DJDAR 6459, decided on June 28, the court spoke with one voice. Knick means what it says: There is no state exhaustion requirement and a court that warps other justiciability doctrines to impose one will be summarily reversed.

The Pakdel case challenges a San Francisco ordinance that conditioned condo conversions on non-occupant owners offering a lifetime lease to any existing tenant. Peyman Pakdel and his wife had a contract with other owners in their building to participate in the conversion process, so they were required to offer their tenant the lifetime lease. Later, they asked the city to waive the requirement, but the city refused, reminding the Pakdels they would be subject to "an enforcement action" if they did not comply.

The Pakdels sued in federal district court in 2017, only to be kicked out under the Williamson County exhaustion rule. While their appeal was pending in the 9th Circuit, the Supreme Court decided Knick, and the Pakdels requested a remand to litigate the merits of their takings claims. To their surprise, a divided court affirmed the dismissal, holding that because the Pakdels had not administratively appealed the lifetime lease requirement, their claims were not ripe, even though no procedures remained available that could avoid the lifetime lease requirement.

The Supreme Court's unsigned per curiam decision in Pakdel rejected the 9th Circuit's holding that a property owner's claim is not ripe if he failed to pursue administrative remedies in a timely manner. In short, "administrative missteps do not defeat ripeness once the government has adopted its final position." There is no special test for determining whether a decision is final. It is a "relatively modest" requirement to show that there is no question how the challenged regulation applies to the plaintiff's property. Here, the city's explicit refusal to waive the lifetime lease requirement sufficed.

On remand, the lower courts should address the merits of the Pakdels' claims. Yet, they may face another hurdle. The 9th Circuit decision also held that the district court properly dismissed their unconstitutional conditions claim because the lifetime lease requirement was imposed through legislation rather than a specific adjudicative procedure as to their particular property. While not ruling on this aspect of the decision directly, the Supreme Court pointedly suggested that the court should review the Pakdels' claims on remand in light of Cedar Point Nursery v. Hassid, 2021 DJDAR 6262, decided just five days previous.

Cedar Point struck down a California law that gave union organizers a "right to take access" to private agricultural land for up to three hours per day, 120 days per year. The Supreme Court held that the law gave rise to a per se physical taking, in large part because it eliminated the property owner's right to exclude trespassers. The right to exclude, the court explained, is of "central importance to property ownership" and if the government intrudes upon that right -- whether by "regulation (or statute, or ordinance, or miscellaneous decree)," the government must pay compensation. The property right to exclude cannot be "balanced away." Viewed through the Cedar Point lens, the Pakdels' inability to evict their tenant for his entire lifetime looks a lot like a taking of the right to exclude.

If the 9th Circuit doubles down on its refusal to consider the Pakdels' takings claim because it arose from operation of a law, rather than an adjudication, then the case will be well-positioned for another trip to the Supreme Court and with property rights now established as deserving of full-fledged constitutional protection, the odds favor the Pakdels. 