Gen'l Auto Service v. City of Chicago

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 02-1588
GENERAL AUTO SERVICE STATION LLC, et al.,
Plaintiffs-Appellants,
v.
CITY OF CHICAGO, ILLINOIS, and LAMAR ADVERTISING CO.,
Defendants-Appellees.
____________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 00 C 368—Rebecca R. Pallmeyer, Judge.
____________
ARGUED DECEMBER 6, 2002—DECIDED FEBRUARY 10, 2003
____________
Before EASTERBROOK, RIPPLE, and MANION, Circuit
Judges.
EASTERBROOK, Circuit Judge. Since 1962 a large com-
mercial sign has been painted on the south wall of the
building at 1127 North State Street in Chicago. Some-
time after 1962 lighting was added. General Auto Service
Station owns the building; Whiteco Outdoor Advertising
leases the wall and operates the sign. (We skip over the
details of the ownership and lease, which may be found
in the district court’s opinion, 2001 U.S. Dist. LEXIS 23711(N.D. Ill. May 17, 2001), and for consistent usage we refer
to the lessee as Whiteco even though the current lessee
2 No. 02-1588
is Lamar Advertising Company.) In 1990 Chicago amended
its zoning ordinances to set a limit of 100 square feet on
illuminated signs located within 250 feet of residential
properties. Whiteco’s sign is 1,534 square feet, and the
building is about 200 feet from the nearest residence.
Chicago Municipal Code §17-6.7-1(a) is a grandfather
clause deeming any sign “that was lawfully erected pursu-
ant to a permit lawfully issued prior to the effective date
of this section [to be a] legal non-conforming sign.” Whiteco
sought to take advantage of this proviso, and in 1994 the
Zoning Administrator tentatively agreed. This tentative
approval did not become definitive (the record does not
explain why), and in 1997 the City issued a notice of vio-
lation. Whiteco invoked the grandfather clause again,
but this time the Zoning Administrator and the Zoning
Board of Appeals both said no, on the ground that even if
Whiteco’s pre-1990 use was lawful, it lacked a permit
verifying this, and the grandfather clause is limited to
signs “erected pursuant to a permit”. Whiteco was ordered
to pay a fine of $250.
Whiteco sought judicial review of the Zoning Board’s
decision in state court, contending that the Board’s order
was an incorrect application of the City’s ordinance.
General Auto, the building’s owner, filed this suit in fed-
eral court, under 42 U.S.C. §1983, contending that the
ordinance and the Board’s action, taken together, violate
both the first amendment and the due process clause of
the Constitution. Both lost, though for different reasons.
In Whiteco’s suit, the state court held that Whiteco had
not made the proper arguments before the Board, forfeit-
ing its right to judicial review, and at all events had failed
to establish that the pre-1990 use was “lawful” with or
without a permit. This would have entailed showing
what the zoning rules and permit requirements had been,
and where residential properties were located, not only
in 1962 but also in whatever year the sign became illumi-
No. 02-1588 3
nated, all subjects on which both the administrative and
the judicial records were silent. Whiteco Outdoor Adver-
tising v. Chicago, No. 98 CH 14280 (Cir. Ct. Cook County
Mar. 2, 2000), affirmed, No. 1-00-1194 (Ill. App. 1st Dist.
Sept. 17, 2001), leave to appeal denied, 198 Ill. 2d 610, 766
N.E.2d 245 (2002).
In General Auto’s suit, the district court did not reach
the merits, instead abstaining under Younger v. Harris,
401 U.S. 37 (1971), and its successors. Younger holds
that, except in extraordinary situations, a federal court
may not enjoin ongoing state proceedings that arise out
of important state interests, if the litigant has an ade-
quate opportunity to present its constitutional arguments
in the state forum. One problem with abstention is that
General Auto did not ask for an injunction or declaratory
judgment, see Samuels v. Mackell, 401 U.S. 66 (1971)
(equating the two remedies), that would halt the litigation
between Whiteco and the Board; it sought only a declara-
tion of its substantive rights vis à vis the City. A second
problem is that no state forum was available to General
Auto. The City has not fined it, so there is no pending (or
impending) case in which it could mount a constitutional
defense. Whether it sues in state or federal court, General
Auto will be the plaintiff. What is more, General Auto
tried to litigate in state court—and was rebuffed. It sought
to intervene in Whiteco’s suit, a sensible step that would
have enabled the state judiciary to resolve all theories
affecting all parties at one go. Yet Chicago opposed its
motion to intervene, and the state court denied the mo-
tion. Once the state court has announced that it will not
entertain constitutional arguments, Younger is no longer
applicable.
Chicago nonetheless asks us to affirm the district
court’s decision because, the City insists, General Auto
could and should have appealed the denial of its motion. It
may not have been required to intervene, see Hoover v.
4 No. 02-1588
Wagner, 47 F.3d 845, 848 (7th Cir. 1995), but once it started
down that road it was “in” state court and had to persevere,
the City submits. See Sekerez v. Supreme Court of Indiana,
685 F.2d 202, 206 (7th Cir. 1982). Even if it could not have
appealed immediately (for Illinois treats the denial of a
motion to intervene as an interlocutory order appealable
only in the court’s discretion, see Chicago, Milwaukee, St.
Paul & Pacific R.R. v. Harris Trust & Savings Bank, 63 Ill.
App. 3d 1012, 380 N.E.2d 835 (1st Dist. 1978)) General
Auto could have appealed from the final decision in
Whiteco’s suit. True enough, but appeal exists to correct
error. If the court was right to deny General Auto’s motion,
an appeal would have been pointless. And in Chicago’s view
the state court was right. After all, Chicago opposed its
motion to intervene. Having persuaded the state court that
General Auto was not entitled to adjudication of its consti-
tutional theories, Chicago is estopped to argue in federal
court that General Auto could have litigated in state court
if only it had tried harder. See New Hampshire v. Maine,
532 U.S. 742, 749-51 (2001) (discussing the doctrine of
judicial estoppel); Astor Chauffeured Limousine Co. v.
Runnfeldt Investment Corp., 910 F.2d 1540, 1547-49 (7th
Cir. 1990). We therefore take the state court’s decision
about intervention as correct, which means that the
conditions for Younger abstention have not been satisfied.
Offering additional arguments in support of the judg-
ment, Chicago contends that General Auto’s claim is barred
by the Rooker-Feldman doctrine. See Rooker v. Fidelity
Trust Co., 263 U.S. 413 (1923); District of Columbia Court
of Appeals v. Feldman, 460 U.S. 462 (1983). Decisions of
state courts may not be challenged in litigation under
§1983; instead the aggrieved party must pursue all reme-
dies through the state system and then seek certiorari
under 28 U.S.C. §1257. If General Auto were contesting,
as a violation of its constitutional rights, the state court’s
decision not to permit intervention, then the Rooker-
No. 02-1588 5
Feldman doctrine would come into play. But this is not
General Auto’s point; its due process theory is that Chi-
cago’s zoning officials violated its rights by refusing to
classify the sign as a lawful non-conforming use. Such a
protest, concerning the adversary’s pre-litigation conduct
rather than an injury caused by a judicial decision, is
unaffected by the Rooker-Feldman doctrine.
Chicago also contends that the district court’s judgment
may be sustained on the basis of claim preclusion (res
judicata): Whiteco, which was in privity with General Auto,
litigated and lost in state court. Although it lost for fail-
ing to build a proper record and make the right argu-
ments in the administrative forum, and did not present
any constitutional theory, Illinois applies the doctrine of
claim preclusion to all arguments that were or could
have been presented to the tribunal. See River Park,
Inc. v. Highland Park, 184 Ill. 2d 290, 306, 703 N.E.2d
883, 891 (1998); People ex rel. Burris v. Progressive Land
Developers, Inc., 151 Ill. 2d 285, 294-96, 602 N.E.2d 820,
825 (1992). See also Durgins v. East St. Louis, 272 F.3d 841(7th Cir. 2001) (discussing Illinois law). So if Whiteco
was General Auto’s stalking horse, then General Auto
has had its day in court and may not try again. See
Montana v. United States, 440 U.S. 147 (1979).
One sign that Whiteco was not General Auto’s proxy
is the fact that General Auto tried to intervene—and the
state court denied its motion not on the ground that it
was already well represented, but on the ground that
Whiteco and General Auto are distinct, and that because
General Auto had not appeared in its own name in the
zoning proceedings it could not attack the Board’s deci-
sion. Once again Chicago has switched sides: having per-
suaded the state court that Whiteco and General Auto
should be treated as different entities, it now seeks to
persuade us that they are (or should be treated as) the
same entity. Once again this flip-flop is barred by the
6 No. 02-1588
doctrine of judicial estoppel. The state court held, at Chi-
cago’s urging, that Whiteco’s deeds are not attributed
to General Auto. As we must give the state court’s deci-
sion the same effect that the state system would give it, see
28 U.S.C. §1738, this fatally undercuts Chicago’s plea of
res judicata. If Whiteco’s appearance before the Zoning
Appeals Board was not imputed to General Auto on the
basis of privity, then Whiteco’s litigation in state court
should not be imputed to General Auto on the basis of
privity.
For what it may be worth, we very much doubt that
state courts would treat Whiteco as General Auto’s repre-
sentative if they were to tackle the matter free of any
concern about Chicago’s litigation strategy. Illinois fol-
lows the Restatement (2d) of Judgments §42(1) (1982),
which states as a blackletter principle that a “person is
not bound by a judgment for or against a party who pur-
ports to represent him if . . . (e) The representative failed
to prosecute or defend the action with due diligence
and reasonable prudence, and the opposing party was on
notice of facts making that failure apparent.” See, e.g.,
Diversified Financial Systems, Inc. v. Boyd, 286 Ill. App. 3d
911, 918, 678 N.E.2d 308, 312 (4th Dist. 1997). Thus it is
not enough that Whiteco and General Auto are trading
partners; Whiteco’s litigation is preclusive against Gen-
eral Auto only if Whiteco acted with reasonable prudence
to protect General Auto’s interests. Yet Whiteco lost pre-
cisely because of lapses before both the agency and the
court. Chicago not only was on notice of these deficiencies
but also took advantage of them by urging that Whiteco’s
suit be dismissed without a decision on the merits. This
is not to say that Whiteco could be deemed an inadequate
representative for omitting a constitutional theory; in
zoning disputes, state-law theories often offer the best
chance of success. See, e.g., River Park, Inc. v. Highland
Park, 23 F.3d 164 (7th Cir. 1994); Northside Sanitary
No. 02-1588 7
Landfill, Inc. v. Indianapolis, 902 F.2d 521 (7th Cir. 1990).
But Whiteco did not prosecute even the state-law theories
competently. To have any hope of success under the grand-
father clause, it had to show that the sign was lawful,
and possessed any permits that may have been required,
when first illuminated, but it did not offer any evidence
on these matters. General Auto is entitled to its own
crack at the subject. It has better incentives than Whiteco
did: a lessee will not invest in litigation more than it ex-
pects the remaining months or years of the lease to be
worth, while the owner will take account of the property’s
long-term value.
We do not consider whether General Auto has a good
federal claim. The merits, which have not been briefed
in the appeal, must be addressed initially by the district
court.
REVERSED AND REMANDED
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—2-10-03