Holliday Amusement Co. v. South Carolina

• Decision Date: 03 July 2007
• Docket Number: No. 06-1668.,06-1668.
• Citation: 493 F.3d 404
• Parties: HOLLIDAY AMUSEMENT COMPANY OF CHARLESTON, INCORPORATED; Warren P. Holliday, Plaintiffs-Appellants, v. SOUTH CAROLINA, State of; Grady L. Patterson, Jr., in his official capacity as Treasurer of the State of South Carolina; Jim Hodges, Governor of South Carolina; Charles M. Condon, Attorney General; Robert M. Stewart, individually, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

493 F.3d 404

HOLLIDAY AMUSEMENT COMPANY OF CHARLESTON, INCORPORATED; Warren P. Holliday, Plaintiffs-Appellants, v. SOUTH CAROLINA, State of; Grady L. Patterson, Jr., in his official capacity as Treasurer of the State of South Carolina; Jim Hodges, Governor of South Carolina; Charles M. Condon, Attorney General; Robert M. Stewart, individually, Defendants-Appellees.

No. 06-1668.

United States Court of Appeals, Fourth Circuit.

Argued: May 22, 2007.

Decided: July 3, 2007.

ARGUED: Roger J. Marzulla, Marzulla & Marzulla, Washington, DC, for Appellants. Robert Holmes Hood, Hood Law Firm, Charleston, South Carolina, for Appellees. ON BRIEF: Nancie G. Marzulla, Marzulla & Marzulla, Washington, DC, for Appellants. James B. Hood, Deborah H. Sheffield, Hood Law Firm, Charleston, South Carolina; Henry D. McMaster, South Carolina Attorney General, C. Havird Jones, Jr., Senior Assistant Attorney General, Attorney General's Office, Columbia, South Carolina, for Appellees.

Before WIDENER, WILKINSON, and KING, Circuit Judges.

Affirmed by published opinion. Judge WILKINSON wrote the opinion, in which Judge WIDENER and Judge KING joined.

OPINION

WILKINSON, Circuit Judge:

Plaintiffs Warren P. Holliday and Holliday Amusement Company of Charleston, Inc. ("Holliday"), seek just compensation for an alleged regulatory taking. Holliday claims that 1999 S.C. Act No. 125, which outlawed video gaming machines in the state of South Carolina, destroyed Holliday's business and thus effected an unconstitutional taking of his property without just compensation. Holliday brought suit in federal district court, and the court granted summary judgment to the state and its officials. We now affirm.

I.

From 1976 to 2000, Holliday Amusement Co. of Charleston, Inc., a business owned and operated by Warren Holliday, distributed video poker machines in the state of South Carolina. On July 1, 1999, South Carolina enacted 1999 S.C. Act No. 125 (codified at S.C.Code Ann. § 12-21-2710 (2000)), which outlawed the possession of video gaming machines in the state and subjected such machines to forfeiture, effective July 1, 2000.

After the Act was passed and before it went into effect, certain owners and lessees of video gaming machines filed suit in South Carolina court challenging the constitutionality of the Act. See Westside Quik Shop, Inc. v. Stewart, 341 S.C. 297, 534 S.E.2d 270 (2000). They sought an injunction against the Act's enforcement, on the ground that it represented an unconstitutional taking of their property without just compensation. Id. at 271. Holliday was not a party to this litigation, although he was a member of the South Carolina Coin Operators Association, which filed an amicus brief. The South Carolina Supreme Court held that Act 125 did not constitute a taking of plaintiffs' video gaming machines, business, or real property and that compensation was thus not required under either the South Carolina or the U.S. Constitution. Id. The Act went into effect on July 1, 2000. At that time, Holliday owned 532 operational video poker machines, costing approximately $7000 each.

On January 19, 2001, Holliday brought this action in federal district court, claiming that Act 125 worked a taking of his property, for which he was entitled to just compensation under the Fifth and Fourteenth Amendments. Holliday claimed that, as a result of the Act, his video poker machines (which had been modified to South Carolina specifications such that they could not be used elsewhere) lost all market value, and his business became worthless. Holliday sought compensation for these losses under the Constitution and 42 U.S.C. § 1983.

The district court first granted the state's motion to dismiss for lack of subject matter jurisdiction under the Rooker-Feldman doctrine. On appeal, this court vacated the district court judgment, because Rooker-Feldman only applies to parties to the previous state-court litigation. See Holliday Amusement Co. of Charleston, Inc. v. South Carolina, 401 F.3d 534, 537 (4th Cir.2005) (citing Johnson v. De Grandy, 512 U.S. 997, 1005-06, 114 S.Ct. 2647, 129 L.Ed.2d 775 (1994)).

Upon remand, the district court granted summary judgment to the defendants. The district court held that, under Supreme Court precedent, no taking had occurred; in addition, it held that plaintiff's claim was collaterally estopped by the Westside decision, and that sovereign immunity barred some claims. Holliday appeals.

II.

As an initial matter, we doubt this federal action to be ripe under the requirements of Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985). Williamson set forth "two independent prudential hurdles" to a claim for just compensation for a regulatory taking brought against a state entity in federal court. Suitum v. Tahoe Reg'l Planning Agency, 520 U.S. 725, 733-34, 117 S.Ct. 1659, 137 L.Ed.2d 980 (1997). First, the property owner must have a final administrative decision regarding the application of the challenged regulations to the property. Williamson, 473 U.S. at 186, 105 S.Ct. 3108. Second, "if a State provides an adequate procedure for seeking just compensation, the property owner cannot claim a violation of the Just Compensation Clause until it has used the procedure and been denied just compensation." Id. at 195, 105 S.Ct. 3108.

It is the second Williamson requirement, the "state procedures requirement," which poses an obstacle here. Plaintiff has not satisfied this requirement because, as he admits, he has not sought just compensation through a state court procedure. In our view, given that South Carolina opens its courts to inverse condemnation claims arising from regulatory takings, see, e.g., Hardin v. South Carolina Dept. of Transp., 371 S.C. 598, 641 S.E.2d 437, 441 (2007); Byrd v. City of Hartsville, 365 S.C. 650, 620 S.E.2d 76, 81 (2005), the plaintiff was obligated under Williamson to avail himself of those procedures.

We recognize, of course, that the state procedures requirement does not apply to facial challenges to the validity of a state regulation. See San Remo Hotel, L.P. v. City and County of San Francisco, 545 U.S. 323, 345, 125 S.Ct. 2491, 162 L.Ed.2d 315 (2005); see also Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 125 S.Ct. 2074, 161 L.Ed.2d 876 (2005). This case is not a facial challenge, nor is it a challenge to a statute requiring direct transfer of funds to the government. See Eastern Enters. v. Apfel, 524 U.S. 498, 521, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998) (plurality); see also Washlefske v. Winston, 234 F.3d 179, 183 (4th Cir.2000) (suit was ripe where only question to be determined was legality of state program). Rather, it is a regulatory takings case, in which the plaintiff has made clear throughout that he "does not seek to prohibit the taking of his property under Act 125 but, to the contrary, accepts the validity of the governmental action as a prerequisite of maintaining this suit for just compensation." Brief of Appellant at 26, Holliday, 401 F.3d 534 (4th Cir.2005); see also Brief of Appellant at 12. Being such a suit, state procedures for the award of just compensation must be utilized.

Plaintiff argues, however, that he is exempt from the state procedures requirement by virtue of the fact that another group of videogaming operators unsuccessfully asserted a takings claim in Westside Quik Shop, Inc. v. Stewart, 341 S.C. 297, 534 S.E.2d 270 (2000). He further argues that his position is supported by the Supreme Court's decision in City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687, 119 S.Ct. 1624, 143 L.Ed.2d 882 (1999), in which, he claims, the Court recognized a "futility" exception to the state procedures requirement.

We conclude, however, that the relevant Supreme Court precedent does not establish an exception to the state procedures requirement in a case such as this. Although the Court has not categorically defined what constitutes an "adequate" state procedure, its cases discussing when a plaintiff might eschew state procedures involve instances where state procedures were not available for plaintiff's claim. In Williamson itself, for instance, the Court found plaintiff's claim unripe because the state of Tennessee had available a statutory inverse condemnation scheme which state courts had interpreted "to allow recovery through inverse condemnation where the `taking' is effected by restrictive zoning laws or development regulations." Id. at 196, 105 S.Ct. 3108. In contrast, in Suitum v. Tahoe Regional Planning Agency, while refraining from deciding the state procedures issue because it was not addressed below, the Court noted that the parties appeared to agree that the defendant local planning agency "d[id] not ... have provisions for paying just compensation," thus making a federal suit the "sole remedy" for the alleged taking. 520 U.S. at 734 n. 8, 117 S.Ct. 1659.

Although plaintiff argues that the present case merits an exception under City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687, 119 S.Ct. 1624, 143 L.Ed.2d 882 (1999), we do not take that case to say anything different from Williamson and Suitum, much less to create a new exception broad enough to accommodate the present circumstances. Rather, the situation in Del Monte Dunes was of the kind anticipated in Williamson itself: in contrast to Williamson, where the Court explicitly noted that Tennessee allowed claims for regulatory takings, at the time of the alleged taking in Del Monte Dunes, California provided no statelaw inverse condemnation procedure for regulatory takings. Id. at 710, 119 S.Ct. 1624. This deficiency meant that "Del Monte Dunes was not required to pursue relief in state court as a precondition to federal relief." Id. at 699, 119 S.Ct. 1624. Del Monte Dunes and the present case, by contrast, are in no way identical. In this case, the plaintiff asserts that his state-court claim will...