Kevin Sroga v. Steve Laboda ( 2019 )

NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with Fed. R. App. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted January 14, 2019*
Decided January 16, 2019
Before
FRANK H. EASTERBROOK, Circuit Judge
MICHAEL S. KANNE, Circuit Judge
DAVID F. HAMILTON, Circuit Judge
No. 17-2049
KEVIN SROGA, Appeal from the United States District
Plaintiff-Appellant, Court for the Northern District of Illinois,
Eastern Division.
v.
No. 16 C 8366
STEVE LABODA, DANIEL HOMEL,
and THE CITY OF CHICAGO, Harry D. Leinenweber,
Defendants-Appellees. Judge.
ORDER
Kevin Sroga alleges that he purchased vehicles from the City of Chicago at a
public auction, but the City prevented him from taking possession of them by
unlawfully “seizing” them. He sued the City, two named employees, and multiple Jane
and John Does for violating his federal constitutional rights as well as state tort law.
* Steve Laboda and Daniel Homel, the individual defendants, were not served in the district court
and are not participating on appeal. We have agreed to decide this case without oral argument because
the briefs and record adequately present the facts and legal arguments, and oral argument would not
significantly aid the court. FED. R. APP. P. 34(a)(2)(C).
No. 17-2049 Page 2
After dismissing the municipal-liability claim against the City, the district court
dismissed the whole action for lack of subject-matter jurisdiction. We affirm the
judgment, though we slightly modify it.
According to his complaint, Sroga purchased “8 to 10” vehicles through the City
of Chicago Public Surplus auction sometime before June 2014. That month, the vehicles
were “unlawfully and illegally seized” when they were removed from the “secured
location … from where they were purchased.” Sroga learned on August 25 that the
vehicles had been moved, and he “took appropriate steps” to locate them and “stop the
contract sale” of the vehicles, unsuccessfully.
Vehicles that the City sells at the auction are stored at the City impound yard
until the winning bidders complete their purchase and retrieve their vehicles. Under the
auction’s Terms and Conditions,1 a bidder must submit full payment within five days
of the auction’s close. If the bidder fails to remove the vehicle within 30 calendar days
after submitting payment, the bidder is deemed to have ceded ownership of the vehicle
to the City, and the City can dispose of the vehicle and retain any proceeds.
Sroga filed suit under 42 U.S.C. § 1983, asserting that the individual defendants
violated the Fourth Amendment by unlawfully seizing his vehicles and that the City
was also liable under Monell v. Department of Social Services, 436 U.S. 658 (1978). He
further claimed intentional infliction of emotional distress and conspiracy. The district
court granted the City’s motion to dismiss the Monell claim. It later dismissed the
remainder of Sroga’s case for want of prosecution because he failed to properly serve
the individual defendants. Sroga moved to vacate the dismissal, arguing that he had, in
fact, properly served the defendants. After a hearing, the court granted Sroga’s motion
to vacate the dismissal for want of prosecution but then dismissed the case once more,
this time for lack of subject-matter jurisdiction. A transcript of the hearing
corresponding to the court’s summary order is not in the record.
1 The defendants request that we take judicial notice of the City of Chicago’s Online Auction
Terms and Conditions, the “contract” that governed Sroga’s purchases at the auction; Sroga has not
objected to this request. We can take judicial notice of an adjudicative fact if it can be readily determined
from sources whose accuracy cannot reasonably be questioned. See FED. R. EVID. 201(b); In re Steven Robert
Lisse, 905 F.3d 495, 496–97 (7th Cir. 2018) (Easterbrook, J., Chambers). The “Terms and Conditions” is a
public document that is posted on the City of Chicago’s Public Surplus auction website, and it was last
updated in 2012, thus governing Sroga’s purchases in 2014. We therefore take judicial notice of the Online
Auction Terms and Conditions.
No. 17-2049 Page 3
On appeal, Sroga argues that the district court erred by dismissing his claim for
lack of subject-matter jurisdiction because he stated a claim for a Fourth Amendment
violation. The City argues that Sroga’s Fourth Amendment claim is really a breach of
contract claim in disguise and therefore does not “aris[e] under” federal law for
purposes of the court’s jurisdiction under 28 U.S.C. § 1331. We agree with the City.
We review the dismissal for lack of subject-matter jurisdiction de novo. See Silha
v. ACT, Inc., 807 F.3d 169, 172 (7th Cir. 2015). Sroga first asserts error because the district
court dismissed the case for lack of jurisdiction sua sponte. We cannot be sure whether
this is true—we lack a transcript of the relevant hearing and neither party tells us how
the decision came about. But, in any event, courts must investigate the existence of
jurisdiction sua sponte if the parties fail to address it. See Grupo Dataflux v. Atlas Glob.
Grp., L.P., 541 U.S. 567, 593 (2004). If the district court did so here, there was no error.
In addressing whether the district court lacked subject-matter jurisdiction, again
we are hamstrung by the absence of a transcript. Although our review is de novo, it is
far from ideal to have only the district court’s single statement—“This case is dismissed
for lack of subject matter jurisdiction”—to focus our review. But we can infer from the
arguments in the parties’ briefs that the dismissal was premised on the absence of a
substantial federal claim.
A federal district court has subject-matter jurisdiction under § 1331 when a
substantial claim is founded on federal law. Merrill Lynch, Pierce, Fenner & Smith Inc. v.
Manning, 136 S. Ct. 1562, 1571 (2016). To have substance, the federal claim must be more
than a pretext to bring a state-law dispute in federal court. See Avila v. Pappas, 591 F.3d
552, 553 (7th Cir. 2010). Sroga alleged that the defendants violated the Fourth
Amendment by unlawfully seizing his vehicles. Looking past Sroga’s label, however,
see Int’l Armor & Limousine Co. v. Maloney Coachbuilders, Inc., 272 F.3d 912, 915 (7th Cir.
2001), his injury, if any, is contractual. The contract he entered into with the City when
purchasing vehicles in the online surplus auction governs when buyers must remove
their purchased vehicles, and when the City is permitted to deem the vehicles forfeited
back to its possession. Any alleged wrongdoing by the City, therefore, arises from its
duties under the contract.
Breach of contract is a claim arising under state law. When the government
breaches a contract that it has with a private citizen, “and the subject matter of that
contract does not implicate fundamental liberty or property interests,” the state courts
are the proper tribunal to litigate the issues arising from that contract. Taake v. Cty. of
No. 17-2049 Page 4
Monroe, 530 F.3d 538, 542 (7th Cir. 2008). That Sroga contracted with a state actor does
not turn his grievance into a federal constitutional claim. Id. Nor does his conclusory
assertion that the defendants violated his constitutional rights. See id. at 541–42.
Tellingly, Sroga seeks only damages. See id. at 543. The district court properly
concluded that it lacked subject-matter jurisdiction over Sroga’s claim that the
defendants improperly seized his vehicles.
Sroga’s remaining claims for intentional infliction of emotional distress and civil
conspiracy (on theories of both direct and vicarious liability) also are governed
exclusively by state law. See, e.g., Naeem v. McKesson Drug Co., 444 F.3d 593, 604 (7th Cir.
2006); Feltmeier v. Feltmeier, 798 N.E.2d 75, 79 (Ill. 2003). And because there is no
“related” federal claim to trigger a district court’s supplemental jurisdiction,
see 28 U.S.C. § 1367(a), dismissal of the entire action was proper.
We note, however, that before the jurisdictional dismissal, the district court had
granted the City’s motion under Rule 12(b)(6), a disposition that is “deemed to be with
prejudice.” Harmon v. Gordon, 712 F.3d 1044, 1055 (7th Cir. 2013). Because the district
court lacked subject-matter jurisdiction, we clarify that the dismissal with respect to the
City is without prejudice. See Kowalski v. Boliker, 893 F.3d 987, 994 (7th Cir. 2018) (“[A]
dismissal for want of subject-matter jurisdiction is necessarily without prejudice.”).
With that modification, the judgment is AFFIRMED.