Kihagi v. City of San Francisco

Background

Anna Kihagi, Xelan Prop 1, LLC, Renka Prop, LLC, and Zoriall LLC sued the City of San Francisco and other defendants. They alleged that enforcement of building, property-maintenance, construction, and other ordinances involving their properties violated their constitutional rights. The allegations included discriminatory enforcement, improper inspections, permit-related actions, and a code-enforcement violation.

The federal case was stayed while a state enforcement action brought by the City proceeded. After trial, the state court found that Kihagi had illegally evicted tenants; that the City had not arbitrarily denied permits; that Kihagi had failed to obtain required permits; that the inspections and citations were lawful; that the properties warranted inspection; and that Kihagi had prevented lawful inspections. The state court imposed more than $2.7 million in penalties, and the California Court of Appeal affirmed the decision, including the forfeiture of Kihagi’s testimony.

Motions and preclusion ruling

The defendants moved to dismiss the federal complaint with prejudice. Kihagi instead sought dismissal without prejudice under Federal Rule of Civil Procedure 41(a)(2), which allows a plaintiff to end an action by court order on terms the court considers proper. The court stated that dismissal was appropriate but had to decide whether it should be with or without prejudice.

The court held that Kihagi’s claims were barred by issue preclusion, a rule that prevents a party from relitigating a factual or legal issue that was actually litigated and resolved in an earlier valid judgment. The court noted that the federal and state cases asserted different claims but were based on the same facts, including the evictions, inspections, citations, and permit decisions.

The court found that the state court had already decided the factual foundation of Kihagi’s constitutional claims. In particular, the state court had found that the March 4, 2015 inspection was lawful, that Kihagi had impeded lawful inspections, that the Filbert Street violation was proper, and that the properties had serious conditions affecting tenant health and safety. The state court also found repeated harassment and fraudulent evictions of tenants.

Kihagi argued that she had not been allowed to litigate the federal claims in the state case. The court rejected that argument, finding that Kihagi had the opportunity to litigate the underlying facts but forfeited that opportunity by refusing to comply with discovery obligations, which led to evidentiary sanctions. The court concluded that allowing the federal constitutional claims to proceed would require relitigating facts already decided against Kihagi.

The court added that a possible claim concerning discriminatory enforcement compared with other landlords who committed similar extensive violations might not be precluded. It nevertheless held that the claims actually pleaded in this case were based on facts already decided against Kihagi and therefore had to be dismissed with prejudice.

Attorney-fee request and disposition

The defendants requested monetary sanctions under Federal Rule of Civil Procedure 11 and 28 U.S.C. § 1927. The court declined to award sanctions, although it described the matter as a close call and found evidence suggesting bad faith and unnecessary litigation expense.

Judge Westmore granted the defendants’ motion to dismiss with prejudice, denied Kihagi’s motion to dismiss without prejudice, and denied the defendants’ request for monetary sanctions.