## Facts

- San Francisco enacted an ordinance limiting conversion of low-cost residential hotel units to tourist use.
- The ordinance required owners seeking conversion permits to build replacement units or pay an in-lieu fee funding replacement housing.
- San Remo Hotel owners sought permits to convert 62 residential units to tourist units and were required to pay a $567,000 fee as a permit condition.
- The owners challenged the fee and ordinance as an unconstitutional taking.
- The owners litigated takings claims in California courts, where state takings law was treated as coextensive with federal takings law, and lost in the California Supreme Court.
- After the state-court loss, the owners returned to federal court asserting federal takings claims based on the same underlying issues; the City asserted issue preclusion under 28 U.S.C. § 1738.

## Issues

1. Whether federal courts may create an exception to 28 U.S.C. § 1738 to prevent state-court issue preclusion from barring federal takings claims when plaintiffs first litigated in state court to satisfy Williamson County ripeness.
2. Whether an attempted England reservation preserves federal takings issues for later federal adjudication when the plaintiff litigated coextensive takings issues to final judgment in state court.
3. Whether, under applicable state preclusion rules, the prior state-court judgment resolved issues identical to the later-asserted federal takings claims.

## Decision

- The Supreme Court unanimously affirmed the judgment barring the federal action.
- The Court held that federal courts may not craft a takings-specific exception to § 1738; state-court judgments must receive the same preclusive effect in federal court as they would in the rendering state’s courts.
- Applying California preclusion law, the Court concluded that issue preclusion barred relitigation because the state courts had decided the same takings issues under a state standard treated as congruent with the federal Takings Clause.
- The Court held that the owners’ attempted England reservation did not avoid preclusion because they had submitted and litigated coextensive takings issues to a final state-court judgment.
- A concurrence agreed with applying § 1738 but questioned whether Williamson County’s state-litigation requirement should be reconsidered in a future case.

## Legal Principles

- 28 U.S.C. § 1738 requires federal courts to give state-court judgments the same preclusive effect they would receive under the rendering state’s preclusion law.
- Federal courts lack authority to create ad hoc exceptions to § 1738 for particular federal constitutional claims, including takings claims.
- Issue preclusion applies when the later federal claim depends on issues identical to those actually litigated and necessarily decided in a prior state-court action that reached final judgment.
- An England reservation does not preserve federal issues for later federal adjudication where the plaintiff litigated coextensive issues in state court to final judgment rather than limiting the state proceeding to distinct state-law questions.

## Conclusion

The Court held that § 1738 mandates full preclusive effect for state-court judgments in subsequent federal litigation, and that takings plaintiffs who litigate coextensive takings issues to final judgment in state court cannot relitigate those issues in federal court by seeking a takings-specific exception or invoking an England reservation.


San Remo Hotel, L.P. v. City & County of San Francisco, 545 U.S. 323 (2005)