New West, L.P. v. City of Joliet ( 2007 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 06-3665
NEW WEST, L.P.,
Plaintiff-Appellant,
v.
CITY OF JOLIET, et al.,
Defendants-Appellees.
____________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 05 C 1743—Charles R. Norgle, Judge.
____________
ARGUED MAY 22, 2007—DECIDED JULY 5, 2007
____________
Before EASTERBROOK, Chief Judge, and WILLIAMS and
SYKES, Circuit Judges.
EASTERBROOK, Chief Judge. New West owns and
operates Evergreen Terrace, an apartment complex in
Joliet, Illinois. The Department of Housing and Urban
Development subsidizes Evergreen Terrace under §8 of
the Housing Act of 1937, 42 U.S.C. §1437f, so that per-
sons with low incomes can afford to live there. Joliet
thinks that Evergreen Terrace, built in 1965, is so run-
down that it is a public nuisance. It has filed suit in
state court seeking to condemn the property; it also has
lobbied HUD not to renew the federal subsidy for Ever-
green Terrace.
2 No. 06-3665
New West has responded with this federal suit. It makes
three principal claims: first, that “the Supremacy Clause”
forbids all of the City’s activities; second, that the City’s
litigating and lobbying violates 42 U.S.C. §§ 1982 and
1983; third, that the City has violated the Fair Housing
Act, 42 U.S.C. §§ 3601-19, by discouraging current and
prospective tenants (most of them minorities) from living
in Evergreen Terrace. The district court dismissed the
complaint on the pleadings, largely for lack of a case or
controversy within the scope of Article III. 2006 U.S. Dist.
LEXIS 68693 (N.D. Ill. Sept. 8, 2006). New West is trying
to litigate the tenants’ rights rather than its own, the
district court thought, and to the extent that New West
champions its own rights it must do so in state court.
This complaint cannot be dispatched so easily. Let us
start with the Supremacy Clause. The district court
understood that this clause does not create any substan-
tive rights; instead it provides that national law prevails
over state and local law in the event of conflict. The federal
rules must come from §8 or the Fair Housing Act, and
if these preempt any action under state law (such as the
pending condemnation suit), then New West could invoke
preemption as a defense in the state litigation. The dis-
trict court held that this defensive use is the exclusive
remedy. That would be so if defendants were private
actors. See, e.g., Holmes Group, Inc. v. Vornado Air
Circulation Systems, Inc., 535 U.S. 826, 830-32 (2002);
Franchise Tax Board v. Construction Laborers Vacation
Trust, 463 U.S. 1, 9-12 (1983); Taylor v. Anderson, 234
U.S. 74, 75-76 (1914). But §1983 allows a suit against
state actors when the objective is to obtain a declaration
that a rule of federal law supersedes the rules that the
state actors are implementing. See, e.g., Verizon Maryland
Inc. v. Public Service Commission of Maryland, 535 U.S.
635 (2002); Golden State Transit Corp. v. Los Angeles, 493
U.S. 103, 107-08 (1989). This means that claims of preemp-
No. 06-3665 3
tion may be litigated affirmatively under §1983, and not
just as defenses. The district court did not notice the
difference between public actors, who may be sued under
§1983, and private actors, who cannot be.
Dismissing this claim was especially inappropriate, as
the suit in which preemption would be offered as a defense
is itself in federal court. The condemnation action was
removed by the Department of Housing and Urban Devel-
opment and is pending in the Northern District of Illinois
as No. 05 C 6746 before the same judge who resolved New
West’s suit. The condemnation action had been on the
judge’s docket for more than nine months before New
West’s suit was dismissed. What sense could it make
to send New West to state court to make a preemption
defense to a suit pending in federal court? That the
condemnation action is pending in federal court suggests
that it is imprudent to resolve the current suit until the
condemnation proceeding has been finally resolved; why
deal with a defense independent of the action to which it
pertains? Why struggle to assess injury when resolution
of the condemnation proceeding may allow “just compen-
sation” and otherwise clarify the financial consequences?
The issues that divide New West and Joliet have been
taken out of order, with regrettable results.
The district court stated that §1983 cannot support this
litigation because of Monell v. New York City Department
of Social Services, 436 U.S. 658 (1978), which holds that
municipalities are not vicariously liable for acts of sub-
ordinate employees. But filing condemnation and nuisance
suits is action by the City itself, as are statements made
(to HUD and the public) by the Mayor. See Auriemma
v. Rice, 957 F.2d 397 (7th Cir. 1992). The Mayor and
other top officials are defendants in their own right,
moreover; there can be no doubt that §1983 is available
to New West.
4 No. 06-3665
So is §1982, which provides that all citizens of the
United States enjoy the same rights to own and manage
real property as do white citizens. The district court
wrote that New West, as a corporation, is not a “citizen”.
For this proposition it cited no authority. Since the
Supreme Court held 163 years ago that a corporation is
a citizen, no such authority is to be found. See Louisville,
Cincinnati & Charleston R.R. v. Letson, 43 U.S. (2 How.)
497 (1844), overruling Bank of the United States v.
Deveaux, 9 U.S. (5 Cranch) 61 (1809). There are scattered
exceptions—for example, a corporation is not a “citizen” for
the purpose of the privileges and immunities clause, see
Hamphill v. Orloff, 277 U.S. 537 (1928)—but no court
has held that corporations cannot be citizens under §1982.
Of course, New West isn’t a corporation anyway; it is
a partnership. For the purpose of 28 U.S.C. §1332, a
partnership is not a “citizen.” See Carden v. Arkoma
Associates, 494 U.S. 185 (1990). But all of its members
are citizens, and if we consider the partners directly, as
is done under §1332, they can invoke §1982. It may be
enough for the purpose of §1982 that a partnership is a
“person”. See 1 U.S.C. §1 ¶6. Other collective entities have
been allowed to litigate under §1982. See, e.g., Shaare
Tefila Congregation v. Cobb, 481 U.S. 615 (1987) (religious
organization). But we needn’t decide whether “personhood”
is enough, given the ability to look through the partnership
to find “citizens” with rights protected by §1982. What is
more, New West’s actual and potential tenants also are
citizens, and we know from Sullivan v. Little Hunting
Park, Inc., 396 U.S. 229 (1969), that property owners
injured by discrimination against their customers may
invoke §1982 whether or not the businesses are “citizens”
as §1982 uses that term.
As for the Fair Housing Act: the district judge under-
stood New West to be raising claims on behalf of the actual
No. 06-3665 5
and prospective tenants. Some passages in the complaint
could be understood that way, but the complaint also
contends that New West was injured in a proprietary
capacity. Its vacancy rate rose, allegedly as a result of
the City’s efforts to discourage people from living in
Evergreen Terrace. The complaint also alleges that
New West incurred extra expense when the City’s lobby-
ing led HUD to delay renewing the §8 subsidy contract.
These financial losses give it Article III standing.
For some statutes it matters whether the injuries are
direct or derivative. See, e.g., Anza v. Ideal Steel Supply
Corp., 126 S. Ct. 1991 (2006); Holmes v. SIPC, 503
U.S. 258 (1992). The Fair Housing Act is not among
those statutes; the Supreme Court has held that only the
Constitution’s own requirements, and not any prudential
supplements, apply to litigation under this statute. Thus
Gladstone, Realtors v. Bellwood, 441 U.S. 91 (1979), held
that a village and its white residents could sue real-
estate brokers who allegedly discriminated against black
persons who sought to move in; it was enough, the Court
held, that the plaintiffs alleged a reduction in their own
enjoyment as a result of having fewer black neighbors. And
in Arlington Heights v. Metropolitan Housing Development
Corp., 429 U.S. 252 (1977), the Court held that a real-
estate developer that had been denied a zoning variance
could sue, even though the complaint alleged that the
village sought to discriminate against minority tenants
rather than the developer itself. New West relies on
these decisions; defendants’ brief ignores them, and the
district court did not mention them. They are dispositive
in favor of New West’s standing.
The district court’s first order of business on remand
should be to resolve the condemnation action. If Joliet
prevails, that would knock out many of the theories on
which New West relies in this suit and may put limits on
the recovery available for the rest (since to decide “just
6 No. 06-3665
compensation” the court will have to resolve any dispute
about Evergreen Terrace’s profitability). New West
contends that §8 and the Fair Housing Act prevent con-
demnation of Evergreen Terrace, but it does not rely on
any particular provision of that statute. Section 8 is a
subsidy program, a carrot rather than a stick. HUD’s
regulations implementing the §8 program contemplate
the possibility of the parcel’s condemnation; they do
not purport to forbid condemnations. See 24 C.F.R.
§§ 245.405, 248.101. For its part, the Fair Housing Act
forbids discrimination in housing programs without
providing that any given housing development has a
right to continued existence. Just as with §8, federal
regulations implementing the FHA cover the demolition
of housing projects. 24 C.F.R. Part 970, and exempt
condemned buildings from these rules, see 24 C.F.R.
§970.3. If Joliet thinks that a given parcel of land should
be put to a public use, such as a park, and is willing to
foot the bill, it is hard to see any obstacle in federal law.
The City’s condemnation action has been pending for
27 months; it is well past time to reach a decision.
If any issue survives the condemnation action, the next
question is whether the Noerr-Pennington doctrine
applies. See Eastern Railroad Presidents Conference v.
Noerr Motor Freight, Inc., 365 U.S. 127 (1961); Mine
Workers v. Pennington, 381 U.S. 657 (1965). New West
complains about Joliet’s litigation, lobbying, and public
statements. Joliet has filed several suits (a nuisance
action and complaints about violations of the building
code, in addition to the condemnation action); it has
sent letters to HUD and met with federal employees in
an effort to persuade the agency to cut off federal funding
for Evergreen Terrace; it has made public statements
accusing New West of operating run-down buildings and
informing the City’s populace (including prospective
tenants) that it would do what was possible to close and
raze the complex.
No. 06-3665 7
New West characterizes these steps as violations of
multiple federal statutes, but the Noerr-Pennington
doctrine protects litigation, lobbying, and speech. Noerr-
Pennington has been extended beyond the antitrust
laws, where it originated, and is today understood as an
application of the first amendment’s speech and petition-
ing clauses. See, e.g., Bill Johnson’s Restaurants, Inc. v.
NLRB, 461 U.S. 731 (1983); Professional Real Estate
Investors, Inc. v. Columbia Pictures Industries, Inc., 508
U.S. 49 (1993); BE&K Construction Co. v. NLRB, 536 U.S.
516 (2002). As far as the national government is con-
cerned, a municipality has a right to speak and petition
for redress of grievances, so the Noerr-Pennington doc-
trine applies fully to municipal activities. See Columbia
v. Omni Outdoor Advertising, Inc., 499 U.S. 365 (1991).
See also Affordable Housing Development Corp. v. Fresno,
433 F.3d 1182, 1193 (9th Cir. 2006); White v. Lee, 227 F.3d
1214, 1231-33 (9th Cir. 2000); Manistee Town Center v.
Glendale, 227 F.3d 1090, 1093-94 (9th Cir. 2000), all
applying the Noerr-Pennington doctrine to block suits
under the Fair Housing Act arising out of allegedly biased
litigation or lobbying by municipalities.
At oral argument, counsel for New West maintained that
the Noerr-Pennington doctrine is inapplicable because
Joliet (supposedly) lied to HUD and its own populace. That
is no distinction; the holding of Noerr is that lobbying
is protected whether or not the lobbyist used deceit.
New West also maintains that the suits that Joliet has
filed are “shams.” Yet none has been adjudicated in
New West’s favor—and even if New West ultimately wins
them all, that would not demonstrate that the suits
were shams, a term that the Supreme Court has used to
denote baseless litigation filed only because of the ex-
pense that the defendant must incur. See Professional
Real Estate Investors, 508 U.S. at 60-61. New West has
settled (for a substantial payment) one of the suits that
8 No. 06-3665
Joliet filed in state court, so that one cannot have been a
sham; the proper classification of the rest remains to be
determined.
Only if the Noerr-Pennington doctrine is inapplicable
must the district court address the merits of New West’s
contentions. Discussion of that subject on this appeal
would be premature.
REVERSED AND REMANDED
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—7-5-07