Court Opinion

ID: 4576101
Source: CourtListenerOpinion
Date Created: 2020-10-13 18:00:33.236959+00
Date Added: 2024-06-11T08:47:27.202780
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

PEYMAN PAKDEL; SIMA CHEGINI,             No. 17-17504
            Plaintiffs-Appellants,
                                            D.C. No.
                v.                       3:17-cv-03638-
                                               RS
CITY AND COUNTY OF SAN
FRANCISCO; SAN FRANCISCO BOARD
OF SUPERVISORS; SAN FRANCISCO               ORDER
DEPARTMENT OF PUBLIC WORKS,
             Defendants-Appellees.

               Filed October 13, 2020

     Before: Ronald M. Gould, Carlos T. Bea, and
        Michelle T. Friedland, Circuit Judges.

                       Order;
              Dissent by Judge Collins
2       PAKDEL V. CITY & CNTY. OF SAN FRANCISCO

                          SUMMARY *

                           Civil Rights

    The panel denied on behalf of the court a petition for
rehearing en banc in an action brought pursuant to 42 U.S.C.
§ 1983 against the City and County of San Francisco
asserting a Takings Clause challenge to the City’s Expedited
Conversion Program, which allows property owners to
convert their tenancy-in-common properties into
condominium properties on the condition that the owners
agree to offer any existing tenants lifetime leases in units
within the converted property.

    Dissenting from the denial of rehearing en banc, Judge
Collins, joined by Judges Callahan, M. Smith, Ikuta,
R. Nelson, Bade, Bress, Bumatay, and VanDyke, stated that
the panel’s unprecedented decision sharply departed from
settled law and directly contravened the Supreme Court’s
decision in Knick v. Township of Scott, 139 S. Ct. 2162
(2019), which held that a plaintiff asserting a Takings Clause
claim under § 1983 is not required to exhaust state remedies.

    *
      This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
       PAKDEL V. CITY & CNTY. OF SAN FRANCISCO             3

                        COUNSEL

Jeffrey W. McCoy (argued), James S. Burling, and Erin E.
Wilcox, Pacific Legal Foundation, Sacramento, California;
Paul F. Utrecht, Utrecht & Lenvin, LLP, San Francisco,
California; Thomas W. Connors, Black McCuksey Souers &
Arbaugh, LPA, Canton, Ohio; for Plaintiffs-Appellants.

Kristen A. Jensen (argued) and Christopher T. Tom, Deputy
City Attorneys; Dennis J. Herrera, City Attorney; Office of
the City Attorney, San Francisco, California; for
Defendants-Appellees.

Sarah Harbison, Pelican Institute for Public Policy, New
Orleans, Louisiana; for Amicus Curiae Pelican Institute for
Public Policy.

Kimberly S. Hermann, Southeastern Legal Foundation,
Roswell, Georgia; for Amici Curiae Southeastern Legal
Foundation, National Federation of Independent Business
Small Business Legal Center, and Beacon Center of
Tennessee.

                         ORDER

    Judge Gould and Judge Friedland have voted to deny the
petition for rehearing en banc. Judge Bea has voted to grant
the petition for rehearing en banc.

    The full court has been advised of the petition for
rehearing en banc. A judge of the court requested a vote on
en banc rehearing. The matter failed to receive a majority of
votes of non-recused active judges in favor of en banc
consideration. Fed. R. App. P. 35(f).
4      PAKDEL V. CITY & CNTY. OF SAN FRANCISCO

   The petition for rehearing en banc is DENIED. Judge
Collins’s dissent from the denial of en banc rehearing is filed
concurrently herewith.

COLLINS, Circuit Judge, with whom CALLAHAN,
M. SMITH, IKUTA, R. NELSON, BADE, BRESS,
BUMATAY, and VANDYKE, Circuit Judges, join,
dissenting from the denial of rehearing en banc:

    Less than one year after the Supreme Court squarely held
that a plaintiff asserting a Takings Clause claim under
§ 1983 is not required to exhaust state remedies, see Knick
v. Township of Scott, 139 S. Ct. 2162, 2167 (2019), the panel
majority in this case effectively imposed such a requirement
by holding that a plaintiff who commits a procedural default
during the local administrative process forfeits any right to
thereafter assert a takings claim. Because the panel’s
unprecedented decision sharply departs from settled law and
directly contravenes the Supreme Court’s decision in Knick,
I respectfully dissent from our denial of rehearing en banc.

                              I

    Prior to 2013, the City and County of San Francisco
(“City”) had a program whereby the multiple property
owners who hold interests in multi-unit properties as tenants
in common could convert their jointly owned buildings to
individually owned condominiums. Pakdel v. City & Cnty.
of San Francisco, 952 F.3d 1157, 1161 (9th Cir. 2020).
Conversion rights were granted based on an annual lottery,
and demand for conversion far outstripped the program’s
limited allotment. Id. In 2013, in an attempt to clear the
backlog of conversion applications, the City replaced the
conversion lottery with the Expedited Conversion Program
        PAKDEL V. CITY & CNTY. OF SAN FRANCISCO                5

(“ECP”). Id. The ECP allows all owners to convert their
properties to condominiums, subject to an application fee
and certain conditions, among which was the requirement
that, if an owner was renting his or her unit to a tenant, the
owner had to offer that tenant a lifetime lease—i.e., the
“Lifetime Lease Requirement.” Id. An owner who offered
a lifetime lease to a tenant received a partial refund of the
ECP application fee. Id. The City’s program notably
contained a program-wide poison pill: any legal challenge to
the Lifetime Lease Requirement would trigger a suspension
of the entire ECP for all owners of tenant-occupied units for
the duration of the litigation. Id. at 1162.

    Peyman Pakdel and Sima Chegini (“Plaintiffs”)
purchased an interest in a tenancy-in-common property in
San Francisco in 2009. 952 F.3d at 1161. The couple had
hoped to move into their unit of the building when they
retired. Id. In the meantime, they rented their unit to a
tenant. Id. Plaintiffs’ “Tenancy in Common Agreement”
obligated them to cooperate with the other owners by taking
all steps necessary to convert their building to
condominiums. At the time Plaintiffs purchased their
interest and executed the Tenancy in Common Agreement,
the City was still operating the conversion lottery, under
which there was no Lifetime Lease Requirement.

    In 2015, pursuant to their contractual obligations,
Plaintiffs—along with the other joint owners of their
building—submitted an ECP application to the San
Francisco Department of Public Works (“the Department”).
952 F.3d at 1161. In January 2016, after a public hearing,
the Department approved their “tentative conversion map.”
Id. Subsequently, Plaintiffs signed an agreement with the
City to offer a lifetime lease to their tenant and then did offer
their tenant such a lease. Id. at 1161–62. Because they had
6      PAKDEL V. CITY & CNTY. OF SAN FRANCISCO

done so, the couple received a partial refund of their
application fee. Id. at 1162. In December 2016, the
Department approved their “final conversion map.” Id.

    Instead of executing the lease, however, Plaintiffs twice
requested, on June 9 and 13, 2017, that the City grant them
an exemption from the Lifetime Lease Requirement or else
compensate them for offering the lease. 952 F.3d at 1162.
As the panel majority notes, “the City refused both
requests.” Id. Plaintiffs then sued in federal court under
Revised Statutes § 1979, 42 U.S.C. § 1983, claiming, inter
alia, that the City had taken their property without just
compensation, in violation of the Fifth Amendment’s
Takings Clause. The district court granted the City’s motion
to dismiss, finding that Plaintiffs’ suit was not ripe because
they had not sought compensation for the alleged taking in
state court, as required under the Supreme Court’s decision
in Williamson County Regional Planning Commission v.
Hamilton Bank of Johnson City, 473 U.S. 172 (1985). See
Pakdel v. City & Cnty. of San Francisco, 2017 WL 6403074,
at *4 (N.D. Cal. Nov. 20, 2017).

    While the district court’s order was on appeal before this
court, the Supreme Court issued its decision in Knick, which
overruled the portion of Williamson County on which the
district court had relied. Specifically, the Court eliminated
the requirement that § 1983 takings plaintiffs must first seek
compensation in state court. 139 S. Ct. at 2169–70. As the
Court explained, this aspect of “Williamson County
effectively established an exhaustion requirement for § 1983
takings claims,” contrary to the “‘general rule’” governing
all other “constitutional claims under § 1983.” Id. at 2172–
73.

   Rather than remand the case, however, the panel
majority affirmed the district court’s decision on the
       PAKDEL V. CITY & CNTY. OF SAN FRANCISCO                7

alternative ground that Plaintiffs failed to meet Williamson
County’s separate “ripeness” requirement that Plaintiffs
secure a “final decision” from the relevant decisionmaker.
Pakdel, 952 F.3d at 1163. The majority reached this
conclusion even though there are concededly no further
avenues of administrative relief open to Plaintiffs to avoid
the City’s definitive imposition of the Lifetime Lease
Requirement on Plaintiffs’ unit. In the majority’s view, the
City’s now-unalterable decision to extract a lifetime lease
from Plaintiffs should nonetheless be deemed to be non-final
for takings purposes because Plaintiffs “bypassed”
previously available administrative procedures that might
have avoided the lease. Id. at 1167.

    Judge Bea dissented, concluding that “the City here has
indeed reached . . . a final decision,” and that Williamson
County required nothing more. 952 F.3d at 1170. Judge Bea
noted that, by making the finality of the City’s decision turn
on whether Plaintiffs had committed a procedural default
during the administrative process, “rather than simply
evaluating whether a decision about the application of a
regulation is final,” the majority’s approach had departed
from Williamson County and had effectively “‘establish[ed]
an exhaustion requirement for § 1983 takings claims,’
something the law does not allow.” Id.

                              II

    The Supreme Court has long held that suits under § 1983
are not subject to exhaustion. See Knick, 139 S. Ct. at 2167
(“[T]he settled rule is that exhaustion of state remedies is not
a prerequisite to an action under 42 U.S.C. § 1983.”
(simplified)); see also Patsy v. Board of Regents, 457 U.S.
496, 504 (1982) (§ 1983 provides “immediate access to the
federal courts”). In Knick, the Supreme Court affirmed that
takings claims are no exception and that exhaustion of state
8      PAKDEL V. CITY & CNTY. OF SAN FRANCISCO

remedies is not required for such claims—indeed, that point
was one of the bases on which the Supreme Court rested its
partial overruling of Williamson County. The Court held
that, in requiring property owners to first pursue just
compensation in state court, Williamson County had
“effectively established an exhaustion requirement for
§ 1983 takings claims” and that, had Williamson County
expressed its holding “in those terms[,] . . . its error would
have been clear.” 139 S. Ct. at 2173. Thus, under Knick,
exhaustion of state remedies is not required for § 1983
takings claims.

    Knick left undisturbed Williamson County’s second
holding, which is that, before bringing a takings claim, a
property owner must obtain a “final decision regarding the
application of the regulations to the property at issue.” See
Williamson Cnty., 473 U.S. at 186.              This ripeness
requirement is driven by the “very nature” of the Takings
Clause inquiry, which depends on fact-intensive
considerations that “simply cannot be evaluated until the
administrative agency has arrived at a final, definitive
position regarding how it will apply the regulations at issue
to the particular land in question.” Id. at 190–91. Thus, in
order to ensure that a local land-use authority, such as a
zoning board, has arrived at a definitive position regarding a
specific dispute, a property owner must invoke available
administrative procedures, including seeking exemptions
from otherwise applicable requirements. Id. at 188. In the
absence of such a definitive application of the regulations to
the property at issue, the federal court would be “unable to
discern how a grant of a variance . . . would have affected
the profitability of the development,” thereby rendering the
takings inquiry “impossible.” Id. at 191; see also Southern
Pac. Transp. Co. v. City of Los Angeles, 922 F.2d 498, 504
       PAKDEL V. CITY & CNTY. OF SAN FRANCISCO               9

(9th Cir. 1990) (“It is precisely this type of speculation that
the ripeness doctrine is intended to avoid.”).

    The Court in Williamson County, however, carefully
distinguished this finality requirement from an exhaustion
requirement, noting that the “question whether
administrative remedies must be exhausted is conceptually
distinct . . . from the question whether an administrative
action must be final before it is judicially reviewable.”
473 U.S. at 192. The purpose of a finality requirement, the
Court explained, is simply to ensure that “the initial
decisionmaker has arrived at a definitive position on the
issue that inflicts an actual, concrete injury,” whereas an
exhaustion requirement focuses on whether the claimant has
complied with “administrative and judicial procedures” for
seeking relief. Id. at 193.

    Under the facts of this case, the application of
Williamson County’s finality requirement is straightforward.
The City has definitively imposed the Lifetime Lease
Requirement on Plaintiffs’ property, and there is no further
avenue open to them under local law to avoid that. Indeed,
Plaintiffs twice requested an exemption from the
requirement, and the City rejected both requests. Neither the
City nor the panel majority contend that any route of
administrative appeal remains available to Plaintiffs. There
is therefore no danger that a federal court would have to
speculate as to how the City would apply the Lifetime Lease
Requirement here. The City’s decision is final, the Lifetime
Lease Requirement applies, and Plaintiffs’ suit is ripe. The
10         PAKDEL V. CITY & CNTY. OF SAN FRANCISCO

panel therefore should have remanded the case to the district
court for consideration of the merits of Plaintiffs’ claim. 1

                                    III

     The panel majority nonetheless holds that, because
Plaintiffs previously “could have sought an exemption” from
the City and failed to do so, the City’s now-unalterable
imposition of the Lifetime Lease Requirement is deemed to
be forever “unripe” for review. 952 F.3d at 1163, 1165. The
majority reaches this conclusion even though it concedes
that, as matters now stand, there are no longer any
administrative procedures available to Plaintiffs to forestall
the challenged action of the City. Id. at 1167–68. The panel
majority’s decision thus saddles Plaintiffs with a plainly
final decision that will nonetheless be deemed (forever) to be
“non-final” for takings purposes simply because, earlier
during the administrative process, Plaintiffs failed to pursue
possible administrative measures that the City now denies to
them. This is not the finality requirement described in
Williamson County and it bears no relation to any
conventional notion of “ripeness” doctrine. On the contrary,
it is an exhaustion requirement pure and simple, backed up
(as exhaustion requirements are) by procedural-default rules.
The panel has thus defied Supreme Court authority by
converting Williamson County’s finality requirement into
precisely the sort of exhaustion requirement disavowed in
that case and explicitly rejected as a “clear” error in Knick.

    We know that the panel majority’s rule is an
“exhaustion” requirement, because the Supreme Court has
told us that it is: under familiar principles of administrative

     1
         I express no view as to whether Plaintiffs’ takings claim has any
merit.
         PAKDEL V. CITY & CNTY. OF SAN FRANCISCO                     11

law governing exhaustion, a plaintiff “must complete the
administrative review process in accordance with the
applicable procedural rules, including deadlines, as a
precondition to bringing suit in federal court.” Woodford v.
Ngo, 548 U.S. 81, 88 (2006) (emphasis added); see also id.
at 90. 2 As the Woodford Court noted, the concept of “proper
exhaustion” in the administrative-law context is analogous
to the exhaustion requirement in habeas law, where “the
sanction for failing to exhaust properly (preclusion of review
in federal court) is given the separate name of procedural
default.” Id. at 92. Under that procedural-default doctrine,
a prisoner must “comply with the deadline for seeking state-
court review” of federal claims or else be “barred from
asserting those claims in a federal habeas proceeding.” Id.
at 92–93. Woodford’s description of this concept of
exhaustion exactly fits the rule that the panel majority
applied here—because Plaintiffs did not invoke previously
available administrative procedures in a timely manner, their
claims are now barred and will never be considered on their
merits. The panel majority’s holding that Plaintiffs’ failure
to pursue an earlier administrative process bars their takings
claim is an exhaustion requirement, and it is flatly precluded
by Knick (which expressly bars requiring exhaustion for
takings claims) and by Williamson County (which affirmed

    2
      The decision in Woodford involved the Prison Litigation Reform
Act (“PLRA”), in which Congress created an explicit statutory exception
to the general rule that § 1983 claims need not be exhausted. See
42 U.S.C. § 1997e(a) (“No action shall be brought with respect to prison
conditions under section 1983 . . . until such administrative remedies as
are available are exhausted.”). Because the Woodford Court held that
the PLRA “uses the term ‘exhausted’ to mean what the term means in
administrative law,” 548 U.S. at 93, its general description of ordinary
exhaustion principles extends beyond the PLRA context and thereby
identifies the type of exhaustion rules that generally do not apply to
§ 1983 claims, including (after Knick) takings claims.
12     PAKDEL V. CITY & CNTY. OF SAN FRANCISCO

that its ripeness requirement was not an exhaustion
requirement).

    The panel majority’s illicit imposition of an exhaustion
requirement is further confirmed by the fact that the panel
majority expressly borrows its rule from caselaw
interpreting the very state-litigation requirement from
Williamson County that Knick expressly overruled as
constituting an improper exhaustion requirement. The
majority notes that courts interpreting the now-overruled
requirement to exhaust state litigation remedies had rejected
claims by plaintiffs who “missed deadlines or failed to
comply with other requirements” when pursuing
compensation in state proceedings. See Pakdel, 952 F.3d
at 1166–67 (collecting cases). Such an outcome is exactly
what one would expect from an exhaustion or procedural-
default regime, and Knick overruled the state-litigation
requirement for the very reason that it was an exhaustion
regime. The fact that the majority’s holding relies on the
now-overruled state-litigation cases confirms that it is
clearly wrong: the state-litigation requirement and the
majority’s interpretation of the finality requirement both
create exhaustion requirements where none should exist.

                             IV

   The panel majority’s attempt to ground its new
exhaustion requirement in existing case authority fails.

    The panel majority remarkably suggests that Williamson
County itself actually endorsed the view that missed
deadlines produce the sort of oxymoronic perpetual
unripeness that the majority adopted here. 952 F.3d at 1166.
The panel majority’s cryptic discussion of Williamson
County is somewhat hard to follow, but the majority appears
to suggest that the Court considered and rejected the view
       PAKDEL V. CITY & CNTY. OF SAN FRANCISCO              13

that the applicant there could satisfy the finality requirement
by defaulting on available remedies until the point that any
further hope of obtaining variances “would have been too
late under the commission’s regulations.” Id. Williamson
County says nothing of the sort. There was no hint in that
case that remedies would expire or become forever
unavailable through procedural default. Rather, the claimant
in Williamson County argued that it should not have to
invoke available variance procedures before challenging, as
a taking, the local government’s disapproval of its proposed
development plat. 473 U.S. at 192. The Court rejected this
argument, because resorting to the available “procedure for
obtaining variances would result in a conclusive
determination by the Commission whether it would allow
respondent to develop the subdivision in the manner
respondent proposed.” Id. at 193. Given that, under the
Commission’s regulations, “any condition shown on the plat
which would require a variance will constitute grounds for
disapproval of the plat,” id. at 190 (emphasis added), it
followed that the Commission’s disapproval of the plat
merely “prevent[ed] respondent from developing its
subdivision without obtaining the necessary variances, but
leaves open the possibility that respondent may develop the
subdivision according to its plat after obtaining the
variances,” id. at 193–94 (emphasis added). Williamson
County was thus relying on the continued availability of
variances; it said nothing at all about procedural default.

   The majority is likewise wrong in suggesting that our
decision in Southern Pacific Transportation Co. endorsed its
view. See 952 F.3d at 1165. In that case, the appellants
opposed the rezoning of land that they owned, but they had
never proposed an alternative plan for use of the land or
requested variances from the new zoning requirements.
922 F.2d at 504. We held that their takings claim was not
14     PAKDEL V. CITY & CNTY. OF SAN FRANCISCO

ripe because, without an actual plan, “federal courts would
be required to guess what possible proposals appellants
might have filed with the City, and how the City might have
responded to these imaginary applications.” Id. The clear
premise of our holding was that the opportunity to submit a
plan was still available.

    Beyond these inapposite citations, the panel majority
points to no case in which we have ever applied ripeness or
finality doctrine in the peculiar way the panel majority did
here. On the contrary, we have repeatedly held that when a
takings plaintiff has “no further procedures available to [it]
to challenge that decision,” the finality requirement of
Williamson County is satisfied. See Hacienda Valley Mobile
Estates v. City of Morgan Hill, 353 F.3d 651, 657 (9th Cir.
2003); see also Hall v. City of Santa Barbara, 833 F.2d
1270, 1281 n.28 (9th Cir. 1986) (to the extent that
Williamson County’s finality requirement applied, it was
satisfied, because the plaintiffs “have no further
administrative recourse available”), overruled on other
grounds by Yee v. City of Escondido, 503 U.S. 519 (1992).

                      *       *       *

    By applying procedural-default rules to bar a takings
claim concerning an unquestionably final decision, the panel
majority’s decision imposes an impermissible exhaustion
requirement, not a finality requirement. The result is to put
takings claims back into a second-class status, less than one
year after the Supreme Court had squarely put them on the
same footing as other constitutional claims. I respectfully
dissent from our failure to rehear this case en banc.