SGB Finan Services v. Consolidated City IN ( 2000 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-1637
SGB Financial Services, Inc., doing business
as Timber Ridge Apartments,
Plaintiff-Appellant,
v.
Consolidated City of Indianapolis-Marion
County, Indiana, et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. IP 98-977-C H/G--David F. Hamilton, Judge.
Argued December 5, 2000--Decided December 20, 2000
Before Posner, Easterbrook, and Evans, Circuit Judges.
Easterbrook, Circuit Judge. Indianapolis put the
Timber Ridge Apartments on its "acquisition list"
of properties that the city plans to acquire (by
negotiation or condemnation) eventually. SGB
Financial Services, which owns the 26 buildings
in the Timber Ridge complex, asked Indianapolis
either to disclaim any interest in acquiring the
property or to complete the transaction swiftly;
when the city failed to do either, SGB brought
this suit under 42 U.S.C. sec.1983, contending
that the city had accomplished a taking just by
listing the apartments. SGB offered to prove that
it had become unable to sell the buildings at a
profit, or borrow funds to improve them, because
potential buyers and lenders feared that
Indianapolis would acquire the property at a low
price. This sounds like an argument that Indiana
courts do not award full market value in
condemnation proceedings, for it must be the
anticipated buyout price rather than a property’s
simple presence on the list that affects how
lenders and potential purchasers deal with owners
in the meantime. If the state pays full market
price in the event of an acquisition, then buyers
will be willing to pay the market price in prior
transactions, and owners will make (and lenders
will fund) all cost-justified improvements
whether or not an acquisition occurs. If, on the
other hand, state courts systematically award
inadequate compensation, then prices of property
will fall in anticipation, whether or not the
property appears on a formal list. (The mayor’s
statement at a press conference that the city was
looking into acquiring a parcel for a highway or
school would have the same effect as listing.)
But the district court did not decide whether
anticipation of an improperly low award in the
future could support relief now; instead the
court dismissed the case because Indiana offers
SGB a forum in which to pursue an inverse-
condemnation claim. 2000 U.S. Dist. Lexis 7204
(S.D. Ind. Feb. 7, 2000).
Indiana has authorized inverse-condemnation
actions (that is, property owners’ suits seeking
compensation for what they say are takings). I.C.
sec.32-11-1-12. Because the takings clause of the
fifth amendment (applied to the states by the
fourteenth, see Chicago, Burlington & Quincy R.R.
v. Chicago, 166 U.S. 226 (1897)), does not forbid
takings but simply requires "just compensation"
for the property, a state violates the
Constitution only by refusing to pay up. If the
state offers a forum that will decide whether a
taking has occurred and, if so, will fix just
compensation--that is, if the state entertains
inverse-condemnation suits--it is hard to see how
the state could be thought in violation of the
Constitution. And if the state is not violating
the Constitution, there is no basis for relief
under sec.1983. This is the chain of reasoning
behind Williamson County Regional Planning
Commission v. Hamilton Bank, 473 U.S. 172 (1985),
which held that a takings claim does not accrue
until available state remedies have been tried
and proven futile. "Available" is an important
qualifier. If the state does not offer just
compensation even for admitted takings then there
is a real constitutional problem. But Indiana
offers financial relief via inverse-condemnation
suits.
SGB argues, however, that Indiana’s courts are
not open to the kind of claim it wants to make.
For this proposition SGB relies exclusively on
Reel Pipe & Valve Co. v. Indianapolis, 633 N.E.2d
274 (Ind. App. 1994), where a panel of the
state’s intermediate appellate court rejected an
inverse-condemnation claim based on a property’s
presence on Indianapolis’s acquisition list.
According to SGB, Reel Pipe holds that as a
matter of law placement on an acquisition list
cannot be a taking; the city, by contrast,
insists that the opinion holds only that a
particular property owner had not established a
financial loss. We need not decide which reading
is right--and not only because the Supreme Court
of Indiana has yet to speak. (That court’s denial
of transfer in Reel Pipe, like a denial of
certiorari by the Supreme Court of the United
States, does not telegraph any particular view of
the merits.) SGB treats state remedies as
available only if the property owner is likely to
prevail; but that is not what Williamson County
says. Its stands instead for the proposition that
there is no uncompensated taking--that is,
nothing to litigate under sec.1983--until the
state has established (a) what it has taken, and
(b) its refusal to pay "just compensation." A
final decision about the disposition of the
plaintiff’s property, coupled with a lack of any
financial remedy (for example, the absence of
inverse-condemnation actions in state court)
could satisfy both (a) and (b); but efforts to
predict how state courts will handle a particular
inverse-condemnation suit are bootless. Instead
of asking a federal judge to guess what a state
court is likely to do, why not ask the state
court?
Williamson County is just one among many
federal doctrines routing suits to state court.
Sometimes, as with Williamson County, this is
justified because there is no federal wrong
unless the state judicial system is unavailable.
See, e.g., Parratt v. Taylor, 451 U.S. 527(1981); Hudson v. Palmer, 468 U.S. 517, 530-36
(1984). Sometimes it is justified because state
actors must be given an opportunity to consider
the federal claims and prevent (or correct)
errors; this is a principal justification of
exhaustion rules such as the one in 28 U.S.C.
sec.2254(c). No one believes that a criminal
defendant may bypass state court and present his
claims to federal court in the first instance
just because in some other case the state
judiciary has rejected on the merits a legal
argument similar to the one the prisoner wants to
make. Similarly, we held in Perez v. Wisconsin
Department of Corrections, 182 F.3d 532 (7th Cir.
1999), that state remedies do not become
unavailable for purposes of 42 U.S.C.
sec.1997e(a) just because resort to them may
fail: "As for the possibility that administrative
remedies could be declared futile ex ante,
without ever being tried: what would be the point
of asking judges to be seers? Then the simplicity
of sec.1997e(a) would be lost, and instead of
requiring exhaustion of administrative remedies
it would lead to guesswork about counterfactual
situations. No one can know whether
administrative requests will be futile; the only
way to find out is to try." 182 F.3d at 536(emphasis in original).
The Tax Injunction Act, 28 U.S.C. sec.1341, may
be the federal statute closest in spirit to the
idea behind Williamson County. Section 1341
provides: "The district courts shall not enjoin,
suspend or restrain the assessment, levy or
collection of any tax under State law where a
plain, speedy and efficient remedy may be had in
the courts of such State." Does a state offer a
"plain" or "speedy" remedy if its courts have
rejected on the merits similar arguments by other
taxpayers? The answer is yes. See Rosewell v.
LaSalle National Bank, 450 U.S. 503, 514-15
(1981); Folio v. Clarksburg, 134 F.3d 1211 (4th
Cir. 1998); Carrier Corp. v. Perez, 677 F.2d 162(1st Cir. 1982); Cities Service Gas Co. v.
Oklahoma Tax Commission, 656 F.2d 584 (10th Cir.
1981). The right question, these decisions
conclude, is whether the state courts are
available to receive arguments and resolve
disputes; that the federal plaintiff likely would
lose on the merits is neither here nor there. See
also Sacks Brothers Loan Co. v. Cunningham, 578
F.2d 172 (7th Cir. 1978). We can’t see any reason
why a state’s stock of precedents would make
state court unavailable for purposes of
Williamson County even though that same court,
with equally adverse precedents, offers a "plain,
speedy and efficient remedy" for purposes of
sec.1341. In principle one could imagine a
precedent with the same effect as the lack of an
inverse-condemnation law. Suppose, for example,
the Supreme Court of Indiana had held that
regulatory takings as a class are never
compensable under the state’s inverse-
condemnation law. But SGB does not contend that
Indiana has a blanket rule, of either statutory
or judicial creation, that would block all
consideration of a claim that regulatory action
amounts to a taking.
Federal inverse-condemnation proceedings, like
federal suits against tax collections, can
interfere with state and local programs and
revenues. If as Williamson County holds an
inverse-condemnation proceeding normally belongs
in state court, which can determine whether the
state is willing to pay compensation for any
taking, the proceeding belongs in state court
even if the plaintiff is convinced that it will
lose. Otherwise we would have a curious
allocation of business: strong inverse-
condemnation actions (those on which the property
owner is most likely to prevail) would be routed
to state court, while weak claims (those on which
similar claims have been litigated and lost
already) would be routed to federal court. That
allocation has little to commend it, and
Williamson County (plus the analogy to the Tax
Injunction Act) to condemn it.
Affirmed