Special thanks to Robert J. Tribek and other attorneys at Rhoads & Sinon LLP (in Harrisburg, PA) for authoring this brief on behalf of IMLA and other parties.
There’s a long history to this case, with litigation itself spanning back 15 years, and the squabbles before that spanning back to the mid-80s. In short, a state court invalidated the Redevelopment Authority’s attempted exercise of its eminent domain power because the Authority had improperly delegated that authority to a private developer. The decision hinged on the fact that development agreements allowed the private developer to choose the specific time when the Authority would initiate condemnation proceedings against R&J. The state court awarded R&J Holding over $550,000 in attorneys fees and other litigation costs.
R&J then filed a Sec 1983 case claiming a taking, because Pennsylvania state law transferred title from the land owner to the Authority as soon as the Authority initiated condemnation proceedings against R&J. The federal court kicked the case out under Williamson County ripeness rules. For those who are not familiar with Williamson County, it essentially stands for the premise that a federal court will not hear a takings claim until a plaintiff first goes through state inverse condemnation proceedings first. Williamson County v. Hamilton Bank, 473 U.S. 172 (1985).
R&J then filed its inverse condemnation in state court, while at the same time invoking an England reservation to preserve their federal claims in federal court. England v. Louisiana State Board of Medical Examiners, 375 U.S. 411 (1964). Eventually, Pennsylvania state courts ruled that state law does not entitle a prevailing condemnee to compensatory damages, but only to out-of-pocket expenses, which the owner had already received (the 550k).
A dejected R&J then returned to federal court filing the case at issue here. R&J asserted, among other things, a Fifth Amendment takings claim. The Authority moved to dismiss, arguing that the takings claim was barred by the doctrine of claim and issue preclusion. The district court agreed.
In December 2011, the Third Circuit reversed. Under the Full Faith and Credit statue, 28 USC 1738, “judicial proceeding … shall have the same full faith and credit in every court within the United States … as they have by law or usage in the courts of” the state from which they emerged. The Supreme Court in San Remo Hotel v. City & Cnty. Of San Francisco, 545 U.S. 323 (2005), added that it “has long been understood to encompass the doctrines of [claim and issue preclusion.” What the Third Circuit has done in this case is rely on the language in San Remo to create a rule that claim/issue preclusion analysis must be conducted utilizing the issue/claim preclusion rules that state law dictates. Under Pennsylvania common law, issue/claim preclusion analysis includes the factor that for preclusion to apply, the defendant (in this case, the Authority) must object to any attempt by the Plaintiff to reserve their federal claims. In this case the Third Circuit ruled that because the Authority did not object to R&J’s England reservation, issue/claim preclusion did not apply.
This decision still flies in the face of established Supreme Court precedent. In San Remo, it is seemingly clear that its language is not intended to force federal courts to use state law issue/claim preclusion doctrines to resolve takings claims. In addition, San Remo also makes it clear that an England reservation is intended in situations where the state law claim is distinct from the federal law claim, unlike here.
The Williamson doctrine, issue/claim preclusion, and the England reservation, are some of the more controversial issues in land use (for plaintiffs). However, at the end of the day, there needs to be finality to litigation. This case has already taken 15 years and cost the Authority countless dollars. Allowing two bites at the apple will only cost the Authority more time and money. The Supreme Court itself states in cases like these “we apply our normal assumption that the weighty interests in finality and comity trump the interest in giving losing litigants access to an additional appellate tribunal.” San Remo.