This week, the Court addresses the application of abstention doctrine to federal takings litigation and whether the Hollywood Foreign Press Association’s membership policies violate antitrust law.
THOMAS GEARING ET AL. V. CITY OF HALF MOON BAY
The Court holds that Knick v. Township of Scott, 139 S. Ct. 2162 (2019), and Pakdel v. City and County of San Francisco, 141 S. Ct. 2226 (2021), do not explicitly limit the application of the Pullman abstention doctrine in takings litigation.
The panel: Judges Thomas, M. Smith, and McShane (D. Or.), with Judge M. Smith writing the opinion.
Key highlight: “[N]either Knick nor Pakdel explicitly limit abstention in takings litigation. Neither case even addresses abstention. Rather, they address ripeness, which goes to when a claim accrues for purposes of judicial review. Abstention, on the other hand, allows courts to stay claims that have already accrued. Abstention doctrines do not create a condition precedent to litigation; rather, they serve federalism by allowing a state court to decide state-law issues in the first instance.” (Internal quotation marks and citations omitted).
Background: Plaintiffs own property in an area of the City of Half Moon Bay. Under the City’s Land Use Plan (LUP), a landowner seeking to build on that area must submit a master plan for approval that analyzes a proposed development’s impact. Plaintiffs instead submitted an application for approval to build housing pursuant to California Senate Bill 330 (SB 330). They took the position that SB 330—which prohibits agencies from rejecting affordable-housing proposals unless they find the project would have an adverse impact on public health or safety—required the City’s approval of their proposal. The City rejected the proposal, explaining that SB 330 did not apply because a master plan under the LUP had never been approved.
Plaintiffs filed suit in federal court, claiming the City had effected a regulatory taking by rejecting their proposal and enforcing the LUP’s restrictions. The City then filed an eminent domain action in state court to acquire plaintiffs’ property. It also filed a motion to abstain in the federal case pending resolution of the state action, which the district court granted. Plaintiffs appealed.
Result: The Ninth Circuit affirmed. The Court first rejected plaintiffs’ argument that the Supreme Court’s recent decisions in Knick v. Township of Scott, 139 S. Ct. 2162 (2019), and Pakdel v. City and County of San Francisco, 141 S. Ct. 2226 (2021) explicitly preclude the application of Pullman abstention in takings litigation. Knick held that plaintiffs challenging a taking in federal court did not need to first seek compensation for the taking in state court, because this procedure would “effectively establish[] an exhaustion requirement.” And Pakdel “rejected the imposition of an administrative exhaustion requirement on takings plaintiffs.” As the Court explained, these cases “address ripeness”—that is, “when a claim accrues for purposes of judicial review.” Pullman abstention, by contrast, “is an equitable doctrine that allows federal courts to refrain from deciding sensitive federal constitutional questions when state law issues may moot or narrow the constitutional questions.” It does not concern ripeness because it applies to “claims that have already accrued.” Accordingly, neither Knick nor Pakdel explicitly limit abstention.
Plaintiffs then contended that Knick and Pakdel nevertheless implicitly precluded abstention here, because abstention would effectively require them to exhaust their takings claim in state court. Assuming without deciding that these cases could be read broadly to prohibit “effective exhaustion requirements,” the Court rejected this argument as well. The Court reasoned that the state court could “adjudicate the eminent domain action without reaching the regulatory taking issue because eminent domain and regulatory takings suits compensate property owners for different injuries.” The former suit pays an owner the property’s fair market value, while the latter compensates an owner for the economic impact of a taking, including the extent to which a regulation interferes with investment-backed expectations. Plaintiffs could thus “recover the fair market value of their property as restricted” by the City’s regulations, and then litigate their takings claim and recover damages for the regulations’ economic impact.
Finally, the Court concluded that Pullman’s requirements were satisfied. Pullman abstention is appropriate when “(1) the federal constitutional claim touches a sensitive area of social policy, (2) constitutional adjudication plainly can be avoided or narrowed by a definitive ruling by a state court, and (3) a possibly determinative issue of state law is doubtful.” (alterations omitted). All those factors were present here: land use planning is a sensitive area of social policy; the state-court ruling would likely narrow the constitutional question because the state court would need to interpret the LUP and SB 330, which were also relevant to the constitutional claim; and the possibly determinative state-law question of whether and how SB 330 impacted the LUP was unsettled.
FLAA V. HOLLYWOOD FOREIGN PRESS ASSOCIATION
The Court holds that the Hollywood Foreign Press Association’s (HFPA) restrictive membership practices do not violate federal or California antitrust law or California’s right of fair procedure.
The panel: Judges Owens, Miller, and Christensen (D. Mont.), with Judge Miller writing the opinion.
Key highlight: “We do not question that membership in the HFPA provides economic benefits, in part because the ability to vote on the Golden Globe Awards can generate valuable business opportunities. But membership in almost any trade association provides some kind of economic benefit. It does not follow that every trade association must open itself to all comers.”
Background: The HFPA is a California non-profit best known for hosting the Golden Globes. Because movie studios are eager to curry favor with Golden Globes voters, membership in the HFPA confers significant professional advantages on foreign entertainment journalists. Plaintiffs are two foreign entertainment journalists who have repeatedly failed to gain admission to the HFPA’s exclusive membership. Plaintiffs sued, alleging that the HFPA’s membership policies violate California and federal antitrust law and California’s right of fair procedure. Plaintiffs also sought a declaration that HFPA’s self-interested bylaws were illegal in light of its status as a tax-exempt mutual benefit corporation. The district court dismissed for failure to state a claim and lack of subject matter jurisdiction.
Result: The Ninth Circuit affirmed. Analyzing the state and federal antitrust claims together, it concluded that the HFPA’s membership policies were neither per se unlawful nor illegal under a rule of reason analysis. Plaintiffs presented two theories that the HFPA’s membership policies were per se unlawful. First, because they constituted an anti-competitive boycott of non-member foreign entertainment journalists. The Court rejected this theory because the HFPA had none of the three characteristics that indicate that a group boycott is per se unlawful: The HFPA had not cut off access to a supply necessary for non-member journalists to compete, did not enjoy market power, and could plausibly offer pro-competitive explanations for its membership policies. Plaintiffs’ second theory, that the HFPA’s members had illegally agreed to divide the foreign market for entertainment news, was undermined by their own allegations that HFPA members competed in different product markets and countries. The Court concluded that if the HFPA’s members did not compete in the same market, they could not have entered an unlawful market-division agreement. Plaintiffs’ antitrust claims also failed under a rule of reason analysis, which requires the plaintiff to “allege that the defendant has market power within a relevant market.” Newcal Indus., Inc. v. Ikon Off. Sol., 513 F.3d 1038, 1044 (9th Cir. 2008) (internal quotation marks omitted). The Court concluded that it was not plausible that the HFPA had power within the market for foreign reporting on American films given the organization’s small size and inability to exclude from the market non-member foreign journalists like plaintiffs.
Plaintiffs’ right to fair procedure claim failed because that right, which guards against “arbitrary decisions by private organizations,” Potvin v. Metropolitan Life Ins. Co., 997 P.2d 1153, 1156 (Cal. 2000), only applies to decisions made by entities that are quasi-public in nature. The HFPA is not quasi-public in nature because it does not provide particularly important goods or services, make representations about its members’ qualifications, or enjoy legislative recognition as a quasi-public association. The HFPA’s ability to produce economic or professional harm, non-profit status, and connection to the film industry did not alter this analysis. Finally, 28 U.S.C. § 2201(a) barred plaintiffs’ request for declaratory relief. That provision makes declaratory relief unavailable “with respect to Federal taxes.” Plaintiffs’ request for a declaration that the HFPA’s bylaws are inconsistent with its tax-exempt status was tantamount to a request for a declaration that the HFPA had violated federal tax law, and so § 2201(a)’s jurisdictional bar applied.
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