Unanimous Supreme Court Ruling Bolsters Right to File Federal Takings Cases Against State and Local Governments

The Court clarified that the challenged policy need only be a "de facto final" decision, and that property owners are not required to exhaust all possible state bureaucratic procedures before filing a federal takings case. The Court also emphasized that Takings Clause property rights have "full-fledged constitutional status."

In Pakdel v. City and County of San Francisco, a unanimous per curiam decision issued earlier today, the Supreme Court gave a boost to property owners' right to file federal takings cases against state and local governments. The decision extends the Court's earlier ruling in Knick v. Township of Scott (2019).

In Knick, the Court overruled a Williamson County Regional Planning Commission v. Hamilton Bank, a 1985 decision requiring takings plaintiffs to first exhaust all possible state remedies before filing a case in federal court. At that point, various procedural rules ensured that it was still impossible to file a federal case, thereby creating a Catch-22 effectively barring nearly all such cases from federal court. But the Knick decision left in place the requirement that plaintiffs must first have a "final decision" from the government agency restricting their property rights.

In Pakdel, the lower court ruling by the Ninth Circuit held that the plaintiffs claiming that San Francisco took their property rights were required to first exhaust all possible bureaucratic options to get the city to change its decision. The Supreme Court has now reversed that ruling. Here's a key excerpt:

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.'" Suitum, 520 U. S., at 739….In this case, there is no question about the city's position:

Petitioners must "execute the lifetime lease" or face an "enforcement action." Brief for Respondents 9. 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. Williamson County, 473 U. S., at 193.

The rationales for the finality requirement underscore that nothing more than de facto finality is necessary. This requirement ensures that a plaintiff has actually "been injured by the Government's action" and is not prematurely suing over a hypothetical harm. Horne, 569 U. S., at 525….

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.'" Knick, 588 U. S., at ___ (slip op., at 2). That guarantee includes "the settled rule" that "exhaustion of state remedies is not a prerequisite to an action under . . . §1983…."

The Ninth Circuit's demand that a plaintiff seek "an exemption through the prescribed [state] procedures," 952F. 3d, at 1167, plainly requires exhaustion…

Whatever policy virtues this doctrine might have, administrative "exhaustion of state remedies" is not a prerequisite for a takings claim when the government has reached a conclusive position. Knick, 588 U. S., at ___ (slip op., at 2).

This is a significant ruling because it ensures that state and local governments will not be able to use the final decision rule as a tool for circumventing Knick's  abolition of the state-exhaustion requirement. It is also noteworthy because all nine Supreme Court justices joined the decision, including the three liberal justices who joined Justice Kagan's forceful dissent in Knick.

Conservative and liberal justices differ on whether Knick was rightly decided. But at least on this key point, they agree on what it means.

The Court's opinion in Pakdel concludes by emphasizing that Knick repudiated the second-class status of Takings Clause property rights:

Given that the Fifth Amendment enjoys "full-fledged constitutional status," the Ninth Circuit had no basis to relegate petitioners' claim "'to the status of a poor relation' among the provisions of the Bill of Rights." Knick, 588 U. S., at ___ (slip op., at 6).

This, to my mind, was the central issue in Knick itself, and in many other constitutional property rights cases. Once you recognize that  Takings Clause  rights deserve the same treatment as other parts of the Bill of Rights, Knick seems entirely normal.

I wrote about Knick and the broader issues it raises in greater detail in a series of articles here, here, and here. The "poor relation" status of property rights is also an issue in the Supreme Court's ultradeferential approach to "public use" challenges to takings, among other matters.

These anomalies are unlikely to be fully addressed any time soon. But it's  still nice to see the Court unanimously reiterate the general principle that Takings Clause rights enjoy "full-fledged constitutional status."

NOTE: The plaintiffs in Pakdel were represented by the Pacific Legal Foundation, where my wife works. However, she was not personally involved in litigating the case. PLF has recently had a run of victories in the Supreme Court and elsewhere, highlighted by the Supreme Court's ruling in Cedar Point Nursery v. Hassid, last week.

As regular VC readers know, I have been writing about takings and other property rights issues since long before my wife started her job at PLF in May 2020. That event did not change any of my views on these matters.