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August 15, 1980


The opinion of the court was delivered by: Grady, District Judge.


Plaintiffs have brought these § 1983 actions against the City of Chicago challenging the City's practice of delaying the payment of judgments obtained against it.*fn1 Plaintiffs in Evans and Balark are original judgment*fn2 holders — that is, they have not assigned their judgments or obtained them by assignment — whereas plaintiff in Collum is an assignor — that is, he assigned his judgment at a discount. On May 1, 1979, we held that the complaint in the Evans case stated a cause of action under § 1983 and on January 2, 1980, certified a class. Defendants have filed motions to dismiss in Collum and Balark. We will deny those motions and certify separate classes in both cases.

The Collum Case

On January 23, 1976, plaintiff Collum and the City of Chicago and four police officers entered into a Stipulation as to Judgment for $17,500.00 in plaintiff's § 1983 action for an alleged beating by the police. Collum Complaint ¶ 6, 7. This court (Austin, J.) thereafter entered a judgment order in accordance with the settlement and on February 6, 1976, the defendants signed a waiver of appeal. Plaintiff alleges that the judgment was then placed on a "waiting list" and that, at the time his judgment was entered, it was the practice and custom of the City to withhold payment of tort judgments*fn3 up to two years. The current waiting period is allegedly four years. Complaint at ¶ 11.

The applicable statute for the payment by the City of tort judgments against it is Chapter 85, §§ 9-102, 9-104, Ill.Rev.Stat. Section 9 102 provides:

Section 9-104 provides:

    (a) If a local public entity does not pay a tort
  judgment or settlement during the fiscal year in
  which it becomes final and if, in the opinion of its
  governing body, the unpaid amount of the tort
  judgment is not too great to be paid out of revenues
  for the ensuing fiscal year, the governing body shall
  pay the balance of the judgment during the ensuing
  fiscal year.
    (b) If the local public entity does not pay the
  tort judgment or settlement during the fiscal year
  when it becomes final and its governing body is of
  the opinion that the unpaid amount of the judgment or
  settlement is so great that undue hardship will arise
  if the entire amount is paid out of the revenues for
  the ensuing fiscal year, the governing body shall pay
  the judgment or settlement, with interest thereon, in
  not more than 10 annual installments. Each payment
  shall be of an equal portion of the principal of the
  tort judgment or settlement. The governing body, in
  its discretion, may prepay any one or more
  installments or any part of an installment.

Plaintiff in Collum alleges that in reliance upon the City's policy and practice of delaying payment of judgments, he assigned his judgment on February 16, 1976, (Complaint, Exhibit B) at a discount of 13 per cent. The judgment was paid to the assignee at the face amount of $17,000.00 plus interest thereon. The City's practice of delaying payment of judgments has allegedly created a "discounting business which in essence preys most heavily upon the poor, the injured and minorities." Complaint, ¶ 19. Presently, assignors are discounting their judgments at a rate of 20 per cent.

Plaintiff's theory of recovery is based upon due process and equal protection arguments. He also seeks certification of a class of assignors under Rule 23, which we will discuss later. In Count I of the two-count complaint, plaintiff alleges that he had a right of entitlement to prompt payment of the judgment and that the City's policy and practice of delay is a deprivation of that interest without due process of law. But for this unconstitutional policy and practice of delay, plaintiff would not have assigned his judgment and suffered the discount amount. The complaint seeks a declaratory judgment that § 9-104 is unconstitutional as applied and on its face in violation of the due process clause and also seeks compensatory damages plus attorneys fees and costs.

In Count II of the Collum complaint, plaintiff alleges that the City pays non-tort judgments (e.g., contract, eminent domain) promptly while it delays payment of tort judgments. It is alleged that this practice violates the equal protection clause.

The Balark Case

In 1977, plaintiffs in Balark brought a § 1983 action against Chicago police officers. The parties settled that case, each of the four plaintiffs receiving $4,250.00. By stipulation, this court (Perry, J.) entered a judgment order in the action on April 10, 1979.

On May 14, 1979, the Balarks filed the § 1983 action presently before us. In Count I of the two-count complaint, plaintiffs allege a "practice, custom and policy of [defendants] to arbitrarily and capriciously, in violation of plaintiffs' rights to substantive and procedural due process, withhold payment of tort `judgments' for up to four years." Balark Complaint, ¶ 10. Further, plaintiffs claim a "right of entitlement" to prompt payment of their judgment (¶ 13) and allege that the practice, policy and custom of withholding payment of judgments and paying only 6 (if judgment is against City only) or 8 per cent simple interest during this delay is a taking of plaintiffs' property without due process of law. ¶ 16. It is also alleged that the policy of delay has, in effect, created a discount business where judgment holders sell their judgments at upwards of a 20 per cent discount in order to receive present payment. ¶¶ 14, 15.

Whereas the Collum complaint challenges the constitutionality of § 9-104 on its face and as applied, the Balark complaint does not challenge the facial constitutionality of the statute. The due process attack in Balark is that the City's policy and practice of delay simply ignores the statute.

In Count II, plaintiffs allege that tort judgment creditors are placed on a four year "waiting list" whereas "other" judgment creditors (i.e. contract, eminent domain) are paid promptly. ¶¶ 19, 20. Plaintiffs challenge that practice as violating the equal protection clause of the Fourteenth Amendment.

The following relief is requested in Balark: (1) a declaratory judgment that defendants' denial of payment violates the due process and equal protection clauses; (2) an injunction compelling defendants to pay the judgments; (3) certification of a class under Fed.R.Civ.P. 23(a) and (b)(1) and (3); and (4) compensatory damages and attorneys fees and costs.

Preliminary Arguments in Motions to Dismiss Collum and Balark

Defendants raise a variety of arguments in support of their motions to dismiss: (1) lack of standing; (2) waiver of right to prompt payment; (3) abstention; (4) Comptroller Burris is an improper party defendant; and (5) constitutionality of § 9-104 and defendants' payment policies or practices. We will consider the constitutional questions later. The questions of waiver, abstention and propriety of the Comptroller as a defendant are common to the Collum and Balark motions to dismiss, and thus our rulings on these questions will be dispositive of both cases. The standing issue is unique to Collum.

Standing of Plaintiff in Collum. Defendants argue that plaintiff Collum lacks standing to bring this action because he has assigned his judgment and "received satisfaction of his claim." Motion to Dismiss at 2. Since the claim has been satisfied, so the argument goes, plaintiff has no standing to complain of delay in payment of judgment.

The relevant inquiry to determine standing is whether plaintiffs have alleged an actual or threatened injury to themselves that is likely to be redressed by a favorable decision. Simon v. Eastern Ky. Welfare Rights Organization, 426 U.S. 26, 37-39, 96 S.Ct. 1917, 1923-1924, 48 L.Ed.2d 450 (1976); American Medical Ass'n v. Matthews, 429 F. Supp. 1179, 1189 (N.D.Ill. 1977). They need not show that that decision will be in their favor. Id. The Collum complaint clearly alleges an actual injury to assignors who, because of the City's policy and practice of delay, discounted their judgments and thereby received less than they would have absent the practice of delay. Defendants' argument that the assignors' claims have been "satisfied" ignores the fact of the substantial discount suffered. We hold, therefore, that plaintiff has standing to bring this action.

Waiver. In further support of its motion to dismiss in Collum and Balark, defendants argue that in the settlement agreements with the City, plaintiffs waived any right to prompt payment of the judgments.*fn4 The focus of this argument is on Paragraph 9 of the Stipulation which Collum signed on January 23, 1976. A substantially similar clause was in the agreement signed by the Balarks.*fn5

    9. Plaintiff, upon advice of his counsel, is aware
  of the manner, method and means of the payment of the
  judgment herein (including the delay in time of such
  payment of approximately two years), is satisfied
  with the same; and is further satisfied with the sum
  of money indicated in the Stipulation and Judgment.
  Further, plaintiff understands that such sum of money
  is a total settlement of any and all claims he has,
  or may have in the future, arising out of the
  incidents which were the subject matter and/or basis
  of the litigation, against the City of Chicago, its
  officers, officials, agents, servants and employees.

Complaint, Exhibit A.

"While the Supreme Court has recognized that one may voluntarily relinquish constitutional rights, it has also required that such relinquishments be entered into voluntarily under all of the circumstances presented." Boyd v. Adams, 513 F.2d 83, 87 (7th Cir. 1975); Schneckloth v. Bustamonte, 412 U.S. 218, 93 S.Ct. 2041, 36 L.Ed.2d 854 (1973); D.H. Overmyer Co. v. Frick Co., 405 U.S. 174, 92 S.Ct. 775, 31 L.Ed.2d 124 (1971). A waiver must be "voluntary, knowing, and intelligently made" — "an intentional relinquishment or abandonment of a known right or privilege." Overmyer, supra, at 185-186, 92 S.Ct. at 782-783. The Supreme Court has also indicated that inequality of bargaining power is a factor for consideration in determining the validity of a waiver. Id. at 186, 92 S.Ct. at 782-783. We must "indulge every reasonable presumption against waiver." Aetna Insurance Co. v. Kennedy, 301 U.S. 389, 393, 57 S.Ct. 809, 811, 81 L.Ed. 1177 (1937).

We believe that plaintiffs may be able to show that they did not, under all the circumstances, voluntarily relinquish their right to bring a § 1983 action challenging the constitutionality of § 9-104 and defendants' payment practices. Plaintiffs might demonstrate that the circumstances surrounding paragraph 9 involved an inherently coercive situation. Had plaintiffs chosen not to sign the settlement agreement, they would have been faced with the delay and expense of litigation in addition to the delay in payment following judgment. The settlement would at least expedite the procurement of the judgment — an alternative which might seem especially compelling in light of post-judgment delays of at least two years under § 9-104(a), 10 more years if the installment plan of subsection (b) is used, or an indefinite period of delay if the City unlawfully ignores the statute. Since plaintiffs may show that paragraph 9 put them to the choice of either (1) not settling and thus incurring additional substantial delay or (2) waiving their right to sue the City to obtain full satisfaction of their judgments, we cannot conclude at this stage of the proceeding that the element of voluntariness necessary for a relinquishment of constitutional rights is present here.

Plaintiffs may also be able to show an inequality of bargaining power between plaintiffs and the City. The alleged marginal economic circumstances of many successful plaintiffs against the City (see Collum Complaint ¶ 19) may increase the incentive to bargain away money as well as rights for the sake of quick payment. That incentive is alleged to account for the high numbers of plaintiffs who have settled, or sold their judgments at a discount, or both.

Abstention. With respect to defendants' argument in Collum and Balark that we should abstain from proceeding with these cases due to pending state court litigation, we incorporate by reference here our opinion in the Evans case dated July 9, 1979, in which we held that abstention is inappropriate.

The City has, without citing any authority, argued that Comptroller Burrus is not a proper party defendant. We will deny the motion to dismiss as to Burrus.

Due Process and Equal Protection Issues

We should note at the outset that the questions concerning the constitutionality of § 9-104 and the City's payment practices are before us on a motion to dismiss for failure to state a claim upon which relief can be granted, Fed.R.Civ.P. 12(b)(6). We do not, therefore, at this stage in the proceedings, rule upon the constitutionality of § 9-104 and the payment practices but consider only whether plaintiff has stated a claim. See e.g., Kalodimos v. City of Chicago, 78 C 5012, Memorandum Opinion, Grady, J. (July 11, 1979) (denying motion to dismiss § 1983 action challenging constitutionality under due process clause of City's policy and practice of withholding towed cars until towing costs paid).

Due Process

The procedural aspect of due process requires a two-step analysis: (1) whether due process applies — that is, whether plaintiffs have been deprived of a protectable property interest; and (2) what process is due. Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972). We will address these questions in turn.

To have a property interest protectable by due process, a person must have "a legitimate claim of entitlement to it." Roth, supra, at 577, 92 S.Ct. at 2709. Property interests "are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law — rules or understandings that secure certain benefits and that support claims of entitlement to those benefits." Id. at 577, 92 S.Ct. at 2709; Bishop v. Wood, 426 U.S. 341, 344, n. 7, 96 S.Ct. 2074, 2077, n. 7, 48 L.Ed.2d 684 (1976).

Rights acquired by a judgment are property rights which cannot be taken without due process of law. Louisiana ex rel. Folsom v. Mayor and Administrators of New Orleans, 109 U.S. 285, 3 S.Ct. 211, 27 L.Ed. 936 (1883); Collins v. Welsh, 75 F.2d 894 (9th Cir. 1935); Arnold & Murdock Co. v. Industrial Commission, 314 Ill. 251, 145 N.E. 342 (1924); Martinez v. Fox Valley Bus Lines, 17 F. Supp. 576, 577 (N.D.Ill. 1936) (applying Illinois law); Gilman v. Tucker, 128 N.Y. 190, 28 N.E. 1040 (1891); Livingston v. Livingston, 173 N.Y. 377, 66 N.E. 123 (1903); 16A Am.Jur.2d § 598 at 535. Indeed, it has been stated in Illinois that "A city and its officers can have no higher duty than the payment of an honest debt reduced to judgment against the City. . . ." People ex rel. Farwell v. Kelly, 367 Ill. 616, 12 N.E.2d 612 (1938); 26 Ill.L.P., Mandamus, § 82 at 71.

Having established that plaintiffs have a property interest in the payment of their judgments against the City, the question becomes whether the City's delay in paying the judgments constitutes a taking or a deprivation within the meaning of the Fourteenth Amendment. "[A]s long as a property deprivation is not de minimis, its gravity is irrelevant to the question whether account must be taken of the Due Process Clause." Goss v. Lopez, 419 U.S. 565, 576, 95 S.Ct. 729, 737, 42 L.Ed.2d 725 (1975). "Any significant taking of property by the State is within the purview of the Due Process Clause." Fuentes v. Shevin, 407 U.S. 67, 86, 92 S.Ct. 1983, 1997, 32 L.Ed.2d 556 (1972); North Georgia Finishing, Inc. v. Di-Chem, 419 U.S. 601, 606, 95 S.Ct. 719, 722, 42 L.Ed.2d 751 (1975). "Although the length or severity of a deprivation of use or possession would be another factor to weigh in determining the appropriate form of hearing, it [is] not deemed to be determinative of the right to a hearing of some sort." Id. A temporary, nonfinal deprivation of property is nonetheless a "deprivation" in terms of the Fourteenth Amendment." Fuentes v. Shevin, supra, 407 U.S. at 84-85, 92 S.Ct. at 1996-1997.

In ordinary, quotidian business transactions, there are, of course, unavoidable delays which take place in the payment of money. The processing of checks, for example, takes time. Although the creditor does not have the present use of his money in the interim, the conclusion for due process purposes might be that such an unavoidable, temporary deprivation is de minimis (Goss v. Lopez, supra) — certainly not significant enough for a hearing to be required. The same cannot be said about delays in payment of judgments for two, four or even ten years. While there is a degree of arbitrariness in determining just when the taking occurs, we are aware that "[t]he Fourteenth Amendment draws no bright lines around three-day, 10-day, or 50-day deprivations of property." Fuentes, supra, at 86, 92 S.Ct. at 1997. We believe that in a case such as this involving the payment of tort judgments by a municipality, a taking occurs from the date of judgment until satisfied.*fn6 This determination is separate from the issue of what process is due — when a hearing is required — which we discuss below.

While we have clarified the source of the property interest here, finding that it arises from the judgment itself rather than the statute, we reaffirm our earlier opinion in Evans holding that the original judgment holders have a protectable property interest which has been taken by the City. We now reach the same conclusion with respect to the assignors in Collum and the original judgment holders in Balark.

What Process is Due

"[D]ue process is flexible and calls for such procedural protections as the particular situation demands." Morrissey v. Brewster, 408 U.S. 471, 481, 92 S.Ct. 2593, 2600, 33 L.Ed.2d 484 (1972). Accordingly, resolution of the issue of whether the procedures provided by § 9-104 are constitutionally sufficient requires analysis of the governmental and private interests that are affected. Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970). In Matthews w. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 903, 47 L.Ed.2d 18 (1976), the Supreme Court said that "identification of the specific dictates of due process generally requires consideration of three distinct factors:"

    First, the private interest that will be affected
  by the official action; second, the risk of an
  erroneous deprivation of such interest through the
  procedures used, and the probable value, if any, of
  additional or substitute procedural safeguards; and
  finally, the Government's interest, including the
  function involved and the fiscal and ...

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