Parvati Corporation v. City of Oak Forest ( 2010 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 09-1107
P ARVATI C ORPORATION,
Plaintiff-Appellant,
v.
C ITY OF O AK F OREST, ILLINOIS,
an Illinois Municipal Corporation, et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 1:06-cv-01772—Amy J. St. Eve, Judge.
A RGUED M AY 19, 2010—D ECIDED D ECEMBER 23, 2010
Before O’C ONNOR, Associate Justice, Œ and W ILLIAMS
and SYKES, Circuit Judges.
S YKES, Circuit Judge. This appeal arises from a zoning
dispute between Parvati Corporation and the City of
Œ
The Honorable Sandra Day O’Connor, Associate Justice of
the United States Supreme Court (Ret.), sitting by designation
pursuant to 28 U.S.C. § 294(a).
2 No. 09-1107
Oak Forest, Illinois, over a hotel in the city that Parvati
owned but wanted to sell. In 2004 Parvati contracted to
sell the property to Bethlehem Enterprise, Inc., contingent
upon the latter’s securing the City’s approval to
convert the hotel into a senior-living facility. The City’s
Zoning Commission denied approval because the pro-
posed use was prohibited by a recently enacted zoning
ordinance. Parvati and its buyer then sought judicial
review in state court; they also asserted other claims
for relief against the City and several of its officials. The
suit was removed to federal court, and on July 20, 2007,
a district judge upheld the Zoning Commission’s deci-
sion. This resolved the administrative-review claim—
which was dismissed with prejudice—but left the other
claims pending. Parvati then moved for voluntary dis-
missal of its remaining claims. The motion was granted,
and the judge entered judgment terminating the case.
About a year later, Parvati, acting without Bethlehem,
moved for postjudgment relief under Rule 60(b)(3) of the
Federal Rules of Civil Procedure, claiming that the City
had misrepresented material facts during the zoning
proceedings. Parvati asked the judge to vacate her
July 20, 2007 order affirming the Zoning Commission’s
decision. By this time, however, Parvati no longer
owned the hotel; it had conveyed the property to its
mortgage lender to resolve foreclosure proceedings
initiated a few months earlier. In the meantime Parvati
filed a new lawsuit repleading the claims it volun-
tarily dismissed from this suit. The judge denied Parvati’s
Rule 60(b)(3) motion, and its Rule 59(e) motion for recon-
sideration as well, and Parvati appealed.
No. 09-1107 3
We cannot reach the merits. Based on the interim devel-
opments we have just described, this case is now moot.
The relief Parvati wants—a decision vacating the court’s
July 20, 2007 order and reversing the Zoning Commission’s
action—is a remedy that can benefit only the property
owner. Because Parvati no longer owns the property, it
lacks standing to challenge the Zoning Commission’s
decision. It is true that Parvati’s other claims—seeking
damages from the City and several municipal officials—do
not depend on its continued ownership of the property.
But they were dismissed at Parvati’s request and are
now the subject of the second lawsuit. To the extent that
the July 20, 2007 order—later reduced to a final merits
judgment—has preclusive effect on Parvati’s effort to re-
suscitate the dismissed claims in the second suit, that
injury is entirely self-inflicted; it is not fairly traceable
to the defendants’ conduct. As such, the potential pre-
clusive effect of the July 20 order does not suffice to
supply standing; stated differently, it does not “unmoot”
this case.
I. Background
Parvati is an Illinois corporation owned by Balkrishna
Ambalal Patel and his wife Nirmala Balkrishna Patel.
For several years Parvati owned and operated a
Ramada Inn in the City of Oak Forest. In March 2004
Parvati agreed to sell the hotel to Bethlehem Enter-
prise, an Illinois corporation owned by the Bethlehem
Temporary Missionary Baptist Church. The sale of the
hotel was contingent upon Bethlehem receiving the
4 No. 09-1107
City’s permission to operate the property as a senior-
living facility.1
On February 1, 2006, the City’s Zoning Commission
held a hearing to consider whether to grant Bethlehem a
commercial business license for this purpose. At that
hearing City officials explained that the City had
recently enacted Zoning Ordinance 2836, and under that
ordinance a senior-living facility was not a permissible
use of the property. On this basis the Commission
denied Bethlehem’s application for a business license.
Parvati and Bethlehem responded with this lawsuit
against the City, the Zoning Commission, and certain
city officials alleging a potpourri of federal and state-
law claims.2 The suit was filed in state court and
sought judicial review of the Zoning Commission’s deci-
sion pursuant to the Illinois Administrative Review Law,
see 735 ILL. C OMP. S TAT. 5/3-110, as well as money
damages for violation of 42 U.S.C. §§ 1981 and 1982;
the Fair Housing Act, 42 U.S.C. §§ 3601 et seq.; and the
guarantees of equal protection and due process under
1
The exact nature of the business Bethlehem sought to
operate on the property is not entirely clear. The parties vari-
ously refer to it as a senior-living facility and an extended-
stay hotel. The distinction is irrelevant to the disposition of
this appeal; we use the term “senior-living facility” through-
out this opinion.
2
We use the term “City” to refer collectively to all defendants
unless the context requires otherwise.
No. 09-1107 5
the Fourteenth Amendment and 42 U.S.C. § 1983.3The defendants removed the case to federal court. In
an order dated July 20, 2007, the district court af-
firmed the Zoning Commission’s decision and dismissed
the state-law administrative-review claim. Parvati and
Bethlehem then moved for voluntary dismissal of the
constitutional and statutory claims. On September 28,
2007, the district court granted the motion, dismissed
the remaining claims without prejudice, and entered a
judgment terminating the case.4
In early 2008 Parvati claims to have discovered infor-
mation suggesting that the City and its officials misrep-
resented material facts at the hearing before the
Zoning Commission and in their filings in the district
court. Specifically, Parvati maintains that city officials
misrepresented the validity of Ordinance 2836 knowing
that the City had failed to follow the proper legal proce-
dures when enacting the ordinance. Parvati contends
that because of these procedural anomalies, Ordinance
2836 is a nullity and Bethlehem’s license application
should have been evaluated under the prior zoning
ordinance.
3
The federal civil-rights claims alleged discrimination on
the basis of race and ethnicity. The Patels are of Indian descent;
the pastors and members of the Bethlehem Temporary Mission-
ary Baptist Church are black.
4
By agreement of the parties, the district court also dis-
missed all claims against the Zoning Commission with preju-
dice.
6 No. 09-1107
Accordingly, Parvati—acting without Bethlehem,
which is no longer a party to the case 5 —moved for post-
judgment relief under Rule 60(b)(3) alleging “fraud . . . ,
misrepresentation, or misconduct by an opposing
party.” This motion was filed on July 14, 2008, nearly
a year after the district court entered its July 20, 2007
order affirming the Zoning Commission’s decision.
Parvati asked the district court to vacate its July 20, 2007
order and reevaluate the Zoning Commission’s action
under the prior zoning ordinance.
The City responded to the Rule 60(b)(3) motion on the
merits, but also maintained that Parvati lacked standing
to reopen the administrative-review claim because it
had transferred ownership of the property to Mutual
Bank, its mortgage lender, a few months earlier. Mutual
Bank had initiated foreclosure proceedings against
Parvati, and on March 18, 2008, the parties entered
into an “Agreement in Lieu of Foreclosure” whereby
Parvati conveyed the property to the bank in exchange
for a release from its obligations arising under the terms
of mortgage. That same day Parvati also executed a
warranty deed to the property in favor of Mutual Bank.
The district court acknowledged that Parvati’s convey-
ance of the property called into question its standing to
pursue postjudgment relief on the administrative-
review claim. Parvati’s injury—its inability to sell the
property to Bethlehem—could no longer be redressed
by the sort of relief afforded by administrative review
5
Bethlehem is no longer interested in purchasing the property.
No. 09-1107 7
of the Zoning Commission’s action. But the court deter-
mined that Parvati had standing by virtue of other in-
tervening developments. On January 31, 2008, Parvati
had filed a new lawsuit reasserting the claims it had
voluntarily dismissed in the first suit and adding a
few others. The court held that the potential preclusive
effect of the July 20, 2007 order on the claims Parvati
was attempting to assert in the second suit gave Parvati
standing to seek relief from the judgment in the first.
The court then proceeded to the merits and reaffirmed
its July 20, 2007 order. More specifically, the court held
that the alleged misrepresentations did not prevent
Parvati from “fully and fairly presenting its case”
because early on in the litigation Parvati’s attorneys had
in their possession all the relevant documents necessary
to alert them to the possible invalidity of the ordinance.
As such, Parvati could have advanced a legal theory
challenging the ordinance at any time while the case
was pending. Because Rule 60(b) may not be used to
propound new legal theories that could have been
raised prior to entry of judgment, see Provident Sav. Bank
v. Popovich, 71 F.3d 696, 698 (7th Cir. 1995), the court
denied Parvati’s motion for postjudgment relief. Parvati
moved for reconsideration under Rule 59(e), which
was also denied.
II. Discussion
Our first question in this appeal—and as it turns out,
our last—is whether Parvati has standing to pursue
the particular relief it requests. Article III of the Constitu-
8 No. 09-1107
tion confines the federal courts to adjudicating actual
cases or controversies, U.S. C ONST. art. III, § 2, and the
requirements of Article III case-or-controversy standing
are threefold: (1) an injury in-fact; (2) fairly traceable
to the defendant’s action; and (3) capable of being re-
dressed by a favorable decision from the court. Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560-61 (1992); Allen v.
Wright, 468 U.S. 737, 751 (1984). The asserted injury
must be both (a) concrete and particularized and (b)
actual or imminent, not conjectural or hypothetical.
Lujan, 504 U.S. at 560. Moreover, a plaintiff must demon-
strate standing separately for each form of relief sought.
Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc.,
528 U.S. 167, 185 (2000). Finally, standing must be present
at all stages of the litigation, including on appeal. See
Korczak v. Sedeman, 427 F.3d 419, 420 (7th Cir. 2005).
When a party with standing at the inception of the liti-
gation loses it due to intervening events, the inquiry
is really one of mootness. See Friends of the Earth, 528
U.S. at 189. Mootness is “the doctrine of standing set in
a time frame: The requisite personal interest that must
exist at the commencement of the litigation (standing)
must continue throughout its existence (mootness).”
Id. (quotation marks omitted).
There is no question that when this litigation began,
Parvati had standing to seek judicial review of the
Zoning Commission’s decision. It owned the property
in question, and the Commission’s denial of Bethlehem’s
application for a license to operate a senior-living facil-
ity on the property scuttled the Parvati-Bethlehem deal
and prevented the sale. This was a concrete, actual injury,
No. 09-1107 9
traceable to the City’s conduct and redressable by the
requested ad m inistrative relief. B ut after the
district court issued its order affirming the Zoning Com-
mission’s decision and thereafter entered judgment
dismissing the case, Parvati transferred ownership of the
property to its mortgage lender in lieu of foreclosure.6
Because Parvati no longer owns the property, it lost
standing to challenge the Zoning Commission’s deci-
sion.7 The type of relief available on the administrative-
review claim—an order directing the Zoning Commission
to issue a license for a senior-living facility—cannot
help Parvati now.
The district court found a different basis for Parvati’s
standing: the potential preclusive effect of the July 20,
2007 order on the second lawsuit Parvati filed against
the City. The new suit reasserted the constitutional and
6
The record contains a copy of the “Agreement in Lieu of
Foreclosure” memorializing Parvati’s promise to convey the
property to Mutual Bank, as well as a copy of the warranty
deed reflecting that Parvati in fact conveyed the property to
the bank on March 18, 2008.
7
Parvati notes that under Illinois law the grantee must accept
a deed before the conveyance is effective, see Seibert v. Seibert,
41 N.E.2d 544, 547 (Ill. 1942), and raises the possibility that
Mutual Bank might not have accepted the conveyance. This
is conjecture, and in any event is contradicted by the docu-
mentary evidence. The “Agreement in Lieu of Foreclosure”
and the warranty deed convincingly establish that Parvati’s
conveyance was effective; there is nothing in the record
to suggest otherwise.
10 No. 09-1107
statutory claims for money damages that Parvati had
voluntarily dismissed in the first suit, as well as other
claims stemming from the same set of facts. These
claims do not depend on Parvati’s continued owner-
ship of the property. If the court were to vacate the judg-
ment in the first suit and revisit and reverse the July 20,
2007 order, the threat of claim or issue preclusion in
the parallel case would be removed. The court held that
the “potential negative impact of the July 20, 2007
Order on the 2008 case is sufficiently concrete and im-
minent” to supply standing.
But there is another requirement for standing that
the court did not address: The injury must be fairly trace-
able to the conduct of the defendant. Under the circum-
stances here, the potential for preclusion was created
entirely by Parvati’s litigation conduct, not by any
action of the City or its officials. After failing to win
reversal of the Zoning Commission’s decision, Parvati
moved to dismiss its remaining claims rather than press
on with the litigation. The district court granted this
motion. Although the dismissal of the statutory
and constitutional claims was without prejudice, the
simultaneous entry of a final merits judgment on the
administrative-review claim had obvious preclusion
implications for any subsequent effort to refile those
claims. Now that Parvati has refiled them—along with
some previously unfiled claims arising from the same
core of operative facts—the doctrine of preclusion
No. 09-1107 11
hovers over the later-filed case.8 See generally H-D
Mich., Inc. v. Top Quality Serv., Inc., 496 F.3d 755, 760
(7th Cir. 2007) (collateral estoppel applies where a
litigated issue, essential to the final judgment in the
earlier case, is asserted against a party who had
the opportunity to litigate the issue in the earlier pro-
ceeding); Highway J Citizens Group v. U.S. Dep’t of
Transp., 456 F.3d 734, 741 (7th Cir. 2006) (res judicata
applies where a claim concerns the same core of opera-
tive facts, involves the same parties, and implicates a
previous final judgment on the merits).
This sort of procedural “injury,” however, is not trace-
able to the City’s alleged unlawful conduct. It is
entirely self-inflicted, resulting solely from Parvati’s
decision to split its claims. See Petro-Chem Processing, Inc. v.
EPA, 866 F.2d 433, 438 (D.C. Cir. 1989) (Ginsburg, R.B., J.)
(self-inflicted injuries break the causal chain linking
the defendant’s conduct to the asserted injury); 13A
8
As it turned out, the district court relied on preclusion
doctrine to dismiss some of the previously unfiled claims, i.e.,
those that Parvati asserted for the first time in the second case.
See Parvati Corp. v. City of Oak Forest, No. 08-cv-0702 (N.D. Ill.
Sept. 17, 2009) (order dismissing certain claims). It is not
clear why the preclusion defense is being raised piecemeal;
claims that are voluntarily dismissed without prejudice
do not necessarily escape a preclusion bar. See Muhammad v.
Oliver, 547 F.3d 874, 876-78 (7th Cir. 2008) (a party’s decision
to voluntarily dismiss claims in one case does not neces-
sarily reserve a right to reassert those claims in a subsequent
case after the court renders a final judgment in the first).
12 No. 09-1107
C HARLES A. W RIGHT & A RTHUR R. M ILLER, F EDERAL P RAC-
TICE AND P ROCEDURE § 3531.5, at 362 (3d ed. 2008) (same);
see also Diamond v. Charles, 476 U.S. 54, 70-71 (1986)
(a party’s liability for attorney’s fees was a consequence
of its own decision to intervene in the case and
therefore could not be fairly traced to the law chal-
lenged); Pennsylvania v. New Jersey, 426 U.S. 660, 664
(1976) (injuries to plaintiff states’ fiscs were “self-in-
flicted,” and “[n]o State can be heard to complain about
damage inflicted by its own hand”).
Had Parvati not voluntarily dismissed its claims for
monetary relief in the first case, it would have faced no
risk of preclusion; the district court would have con-
sidered all of Parvati’s grievances in one lawsuit. So long
as Parvati maintained standing to assert the claims (and
as we have noted, Parvati need not own the property
to benefit from a monetary remedy), the district court
would have been free to revisit the zoning determina-
tion in the continuing litigation. And of course the pro-
priety of the district court’s ruling on the administrative-
review claim could have been taken up on an appeal
from a final judgment in the case.
But Parvati chose to accept its loss on the administra-
tive-review claim, dismissed its claims for damages,
and permitted final judgment to be entered on the merits
of the zoning challenge. Now that it no longer owns the
property, Parvati lacks standing to reopen the judgment
on that claim. This is so regardless of how that judgment
may affect the related litigation. If the potential preclusive
effect of a judgment in a subsequent case were enough
No. 09-1107 13
to avoid mootness, then no case would ever be moot.
See Commodity Futures Trading Comm’n v. Bd. of Trade,
701 F.2d 653, 656 (7th Cir. 1983). Such a rule would
impair judicial economy, see Muhammad v. Oliver, 547
F.3d 874, 877 (7th Cir. 2008), and create an impermis-
sible end-run around the case-or-controversy require-
ments of Article III. Here, the possibility of preclusion is
not an injury fairly traceable to the City’s conduct or
the conduct of its officials. Instead, it was brought on
by Parvati’s litigation decisions.
Accordingly, for the foregoing reasons, we V ACATE
the orders of the district court denying Parvati’s
Rule 60(b)(3) and Rule 59(e) motions on the merits and
R EMAND with instructions to D ISMISS them for lack of
jurisdiction.
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