Tejas Motel v City of Mesquite – Fifth Circuit Court of Appeals

2023-3-22 Tejas-Motel-L-L-C-v-City-of-Mesquite-No-22-10321-5th-Cir

Catching up on some recent takings cases (after watching Jury Duty for a week. LOL).

The Fifth Circuit determined that a property owner could not “relitigate a takings claim in federal court that was previously dismissed in state court.”  Full text of opinion above.

The owner operated a small motel in the City of Mesquite, Texas.  The City “enacted a series of strict zoning ordinances that turned the motel property into a nonconforming use. It then ordered Tejas to comply with the minimum zoning requirements or cease operations.”

Tejas sued in state court, claiming that the City violated both the state United States Court of Appeals
Fifth Circuit and federal constitutions by effecting a taking without just compensation.  The state trial court dismissed. The Texas Court of Appeals affirmed, holding that Tejas’s state claim was procedurally barred and its federal claim was not “viable.” Tejas then brought the same federal takings claim in federal court, seeking a different result.”

The Circuit Court’s ruling was succinct:  “The law of res judicata bars Tejas’s second suit. Because the district court rightly dismissed the case on that ground, we affirm.”

The Circuit Court recognized the “terrible double-bind” confronting property owners from 1985 until 2019 – –  “If a plaintiff brought a takings claim in federal court first, the suit would be deemed unripe (per Williamson County). But if he brought a takings claim in state court and lost, res judicata would likely bar any subsequent federal litigation (per San Remo).”

The Court solved that problem in Knick v. Township of Scott, 139 S. Ct. 2162 (2019). It bemoaned the “preclusion trap” created by Williamson County and San Remo, which made the promise of a federal forum for takings plaintiffs “ring[] hollow.” Id. at 2167. Thus, the Court overruled Williamson County and its “exhaustion requirement.” Id. at 2173, 2179. No longer do plaintiffs need to litigate their takings claims in state court first. Instead, “a government violates the Takings Clause when it takes property without compensation,” and “a property owner may bring a Fifth Amendment claim under § 1983 at that time” in federal court.”

In 2018, the owner was notified by the City that if it did not come into compliance with zoning, it would amortize the property.  In July of 2018, the owner “agreed” that it would cease motel operations until it could comply.  “Three months later”, in October of 2018, the owner sued in State Court alleging taking claims under the United States Constitution.  The Texas trial court dismissed the case.  The Texas Court of Appeal affirmed:  “[T]he court held that “Tejas failed to state any viable federal constitutional claim.”
It reasoned that Tejas “has no constitutionally protected interest in continuing to use the property in violation of the City’s zoning ordinances when it acquired the property knowing it was in violation of those ordinances.” Because Tejas failed to state a viable claim, its federal claim was properly dismissed.”

The owner was doomed when the Circuit Court analyzed its claims based on the Texas law of res judicata.

The final pages are probably the most interesting.  The Circuit Court explains why it rejected the owner’s final argument that Knick was a “sea change” in the law that should preclude the operation of res judicata:

“But that contention fails for three reasons. First, Tejas has the timeline wrong. Although Knick was not on the books when the state trial court first dismissed Tejas’s claims, the case had been decided for a full year before the Texas Court of Appeals ruled in favor of the City. See Knick, 139 S. Ct. at 2162. It was governing law on appeal, and the appeals court’s judgment (and subsequent order) is what gets preclusive effect here. Thus, Knick is not really an “intervening” change between the first and second action, given that it was operative law at the time of the first final judgment.  Additionally, even if Knick is “intervening” in a loose sense, Knick had no effect on the merits of Tejas’s claim. Knick eliminated the requirement for takings plaintiffs to exhaust state judicial remedies, but it did not change the substantive law about what constitutes a taking under the federal Constitution. See Knick, 139 S. Ct. at 2177. Said another way, the merits of Tejas’s claim would be adjudicated under the same judicial rules with and without Knick.  Finally, Knick did not purport to overrule San Remo, which held that state adjudications of federal takings claims have res judicata effect.”

One of the policies behind res judicata is to limit litigation.  I don’t think the Circuit Court’s interpretation will achieve that policy objective.