In Gearing v. City of Half Moon Bay, published December 8, 2022, the 9th Circuit Court of Appeals affirmed a district court decision granting the defendant city's motion to abstain under Railroad Commission of Texas v. Pullman Co. (1941) 312 U.S. 496 from hearing the plaintiffs' regulatory takings case while the city's eminent domain suit regarding the same property was pending in state court. The plaintiffs own parcels of land in areas zoned for restricted land use. The plaintiffs contended that under California's SB 330, intended to increase the stock of affordable housing, the city was required to approve their project. The city contended that SB 330 did not require approval, because the plaintiffs had not met the city's development requirements. Shortly after rejecting the plaintiffs' application, the city informed the plaintiffs that it intended to acquire their property through eminent domain. The plaintiffs rejected the city's purchase offer. The plaintiffs then filed their regulatory takings action in federal court. A week later, the city filed an eminent domain action in state court. The city then filed their motion to abstain.
The 9th Circuit agreed with the district court that Pullman abstention was appropriate. The court rejected the arguments that the Supreme Court's decisions in Knick v. Township of Scott (2019) 139 S. Ct. 2162 (holding that landowners need not exhaust state judicial remedies before bringing a federal takings action) and Pakdel v. City and County of San Francisco (2021) 141 S. Ct. 2226 (holding that landowners need not exhaust administrative remedies before bringing a federal takings action) precluded abstention. Those cases address when a takings claim is ripe, which goes to when a claim accrues for purposes of judicial review. Abstention allows courts to stay cases that have already accrued. It does not create a condition precedent to litigation. It merely serves federalism by allowing a state court to decide state-law issues in the first instance. There is not a danger of claim preclusion: the state court can adjudicate the eminent domain action without reaching the regulatory takings issue. The two suits compensate property owners for different injuries. Eminent domain compensates for the forced sale of properties to the government by transferring the land to the government and paying the owner the property's fair market value as of the date the government made a deposit on the property. A regulatory takings action compensates the owner for the economic impact of a regulation on distinct investment-backed expectations regarding property. The landowners can defend the eminent domain action without addressing the constitutionality of the city's regulations, and recover the fair market value of the property as restricted by those regulations; then litigate their regulatory taking claim and recover ddamages for the economic impact of the regulation. Further, the plaintiffs had made an England reservation in the state proceedings, reserving their right to litigate federal issues in their federal action. The court of appeals also ruled that the Pullman abstention requirements were satisfied. The complaint touched upon a sensitive area of social policy--land use planning. The constitutional questions in the regulatory takings action could be narrowed by a ruling in the state case, because the state court will have to interpret the local regulation and SB 330 to ascertain the fair market value of the property. Finally, the litigation involves an unclear question of state law: the interaction of SB 330 and the local regulation.
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