8th Circuit: Rooker-Feldman Not Applicable, But Federal Claims Precluded Under San Remo

To paraphrase comedian Jeff Foxworthy, if you understand the title of this post...you might be a regulatory takings lawyer.

And when you hear the terms "Rooker-Feldman" and "San Remo," you know you are knee deep in the often-bizarre procedural maze where a regulatory takings claim in federal court may be too early (ripeness), too late (preclusion and full faith and credit), or completely barred (Rooker-Feldman).

The Rooker-Feldman doctrine posits that federal district courts do not have jurisdiction to review the decisions of state supreme courts, where it is alleged that the state court's judgment itself violates the plaintiff's federal rights. San Remo Hotel, L.P. v. City and County of San Francisco, 545 U.S. 323 (2005) is the Supreme Court's most recent "ripeness" decision, affirming that property owners do not have to bring their federal takings claims in state court, but even if they specifically reserved those claims for later federal court adjudication, the principle of full faith and credit meant that once they lost in state court on their state claims and thus ripened their federal claims for federal court consideration, that court was entitled to find that the federal claims that were reserved by the property owner were in fact litigated in state court.

Confused yet? The U.S. Court of Appeals' opinion in Knutson v. City of Fargo, No. 08-1894 (Apr. 12, 2010) represents nothing particularly new in this area, but it is still worth reviewing since it demonstrates the hurdles facing property owners when they present what appears to be a modest request: that a federal court hear federal constitutional claims on the merits.

In Knutson, the property owners brought a state-law inverse condemnation claim under the North Dakota Constitution's takings clause in North Dakota state court after a water main belonging to the city broke and flooded their property. The text of the North Dakota takings clause is nearly identical to the Fifth Amendment ("Private property shall not be taken or damaged for public use without just compensation having been first made to, or paid into court for the owner, unless the owner chooses to accept annual payments as may be provided for by law."), but the Knutsons did not raise any federal law claims in state court. The trial court entered summary judgment for the city, and the North Dakota Supreme Court affirmed.

Thus, under Williamson County, their federal takings claims were then ripe, because the state court had denied them compensation. The Knutsons brought their federal claims in federal court, but were dismissed under Rooker-Feldman for lack of subject matter jurisdiction, and alternatively because their federal claims had already been litigated in the state court action.

The Eighth Circuit reversed the Rooker-Feldman ruling, holding that the Knutsons' federal complaint did not allege that the North Dakota Supreme Court's opinion affirming summary judgment in favor of the city violated their federal rights, only that the city's causing their property to be flooded did. Slip op. at 3-4. The Eighth Circuit, however, affirmed the district court's determination that the North Dakota Supreme Court's opinion should be given full faith and credit in federal court. In other words, because the property owner brought analogous state law claims for inverse condemnation in state court, they were in effect litigating their federal law claims even though they were not (and could not under Williamson County).

The court held that the Knutsons' inverse condemnation claim under the North Dakota Constitution was the same "substantive issue" as a federal takings claim, and therefore the state court's summary judgment against the Knutsons actually decided their federal claims. This judgment was entitled to full faith and credit in federal court, and the Knutsons therefore were prohibited from litigating them again.

As recognized by four concurring Justices in San Remo (who suggested that it was high time to revisit and review the wisdom of Williamson County), this is a very strange result. A property owner is barred from raising her federal claims in state court and can expressly reserve them for later federal court adjudication. Yet, if the property owner is denied state law compensation in state court and then goes to federal court to litigate her federal takings claims (which are ripe by virtue of the state court denying compensation under state law), the federal court will hold that she already litigated those claims (even though she expressly did not) in the course of losing her state law claim.