United States District Court, Northern District of Illinois, E.D
January 19, 1982
NORTH AMERICAN COLD STORAGE COMPANY, ET AL., PLAINTIFFS,
COUNTY OF COOK, ET AL., DEFENDANTS.
The opinion of the court was delivered by: Grady, District Judge.
This is an action by taxpayers seeking compensatory and
punitive damages under 42 U.S.C. § 1983 for injuries
allegedly caused by various county and state taxing officials
and by the County of Cook in connection with the overassessment
of plaintiffs' real property. Before the court is the motion of
the County defendants to dismiss the amended complaint. The
motion is denied. Also before the court is plaintiffs' motion
to certify the action as a class action. That motion is denied
with respect to Counts I through III and granted with respect
to Count IV.
On September 1, 1978, plaintiffs filed a three-count
complaint in this case. Defendants submitted a motion to
dismiss all counts, and on April 10, 1979, that motion
was denied.*fn1 On December 10, 1980, plaintiffs amended the
complaint by adding a fourth count. The County defendants now
challenge by way of a Fed.R.Civ.P.Rule 12(b) motion not only
Count IV but also Counts I and II of the original complaint.
In their motion to dismiss, defendants argue that this court
lacks subject matter jurisdiction, that the complaint must be
dismissed pursuant to abstention principles recently announced
by the Supreme Court in Fair Assessment in Real Estate
Association, Inc. v. McNary, ___ U.S. ___, 102 S.Ct. 177,
70 L.Ed.2d 271 (1981), that the causes of action in Counts I,
II and IV are barred by collateral estoppel and that Count IV
fails to state a claim.
At the outset, plaintiffs respond that the County defendants,
having already filed one Rule 12(b) motion, may not attack
Counts I and II through another such motion. Fed.R.Civ.P. 12(g)
provides in relevant part that "[I]f a party makes a motion
under this rule but omits therefrom any defense or objection
then available to him which this rule permits to be raised by
motion, he shall not thereafter make a motion based on the
defense or objection so omitted. . . ."
Plaintiffs' argument is without merit. Fed.R.Civ.P. 12(h)(3)
permits a defendant to raise the issue that a court lacks
subject matter jurisdiction at any time during the proceedings.
City of Milwaukee v. Saxbe, 546 F.2d 693 (7th Cir.
1976). Thus, Rule 12(b) does not prevent consideration of this
Second, the Fair Assessment case, supra, had not
been decided at the time defendants made their first motion to
dismiss. This basis for the motion to dismiss was therefore not
"available" to defendants at that time.
Third, defendants argue that plaintiffs' claims are barred by
collateral estoppel. This is an affirmative defense that is not
waived if included in the answer. Fed.R.Civ.P. 12(b). Because
defendants have pleaded an affirmative defense based on a
former adjudication,*fn2 we will treat their motion on
collateral estoppel grounds as one for summary judgment.
Fed.R.Civ.P. 56(e). Rule 12(g) does not prohibit consideration
of affirmative defenses by summary adjudication.
I. Subject Matter Jurisdiction
Defendants argue that this court lacks subject matter
jurisdiction under 28 U.S.C. § 1343(3). We need not decide
whether we have jurisdiction under § 1343 since, as
plaintiffs point out, jurisdiction has been alleged under
28 U.S.C. § 1331. This statute confers jurisdiction upon the
court in the instant case. See Maine v. Thiboutot,
448 U.S. 1, 8 n. 6, 100 S.Ct. 2502, 2506 n. 6, 65 L.Ed.2d 555
(1980)(§ 1983 claim which cannot be brought under §
1343(3) may be brought under § 1331 if that statute's
$10,000.00 limit is satisfied). Since the $10,000.00
jurisdictional limit is no longer required under § 1331,
plaintiff's claims may be heard under this statute.
We now turn to defendants' contention that the Supreme
Court's decision in Fair Assessment in Real Estate
Associates, Inc. v. McNary, supra, requires this court to
abstain from the case. In Fair Assessment, the Court
[T]axpayers are barred by the principle of comity
from asserting § 1983 actions against the
validity of state tax systems in federal courts.
Such taxpayers must seek protection of their
federal rights by state remedies, provided of
course that those remedies are plain, adequate,
and complete. . . .
___ U.S. at ___, 102 S.Ct. at 186.
We hold, however, that since interest and attorney's fees are
not recoverable in a state court refund procedure,
Clarendon Associates v. Korzen, 56 Ill.2d 101,
306 N.E.2d 299 (1973),
that remedy is neither "adequate" nor "complete." LaSalle
National Bank v. Rosewell, 604 F.2d 530, 532-537 (7th Cir.
1979), rev'd on other grounds, 450 U.S. 503, 101 S.Ct.
1221, 67 L.Ed.2d 464 (1981).*fn3
While the Court of Appeals' decision in Rosewell
sufficiently explains why the absence of a provision for
interest renders the state court remedy inadequate, we add one
observation. "A federal district court is under an equitable
duty to refrain from interfering with a state's collection of
its revenue except in cases where an asserted federal right
might otherwise be lost." Tully v. Griffin,
429 U.S. 68, 73, 97 S.Ct. 219, 222, 50 L.Ed.2d 227 (1976); Fair
Assessment, supra, ___ U.S. at ___, at n. 8, 102 S.Ct. at
186 n. 8. Plaintiffs in the instant case assert a federal right
to be fully compensated for injuries arising from a
constitutional violation, i.e., a discriminatory assessment. In
Carey v. Piphus, 435 U.S. 247, 98 S.Ct. 1042, 55
L.Ed.2d 252 (1978), the Supreme Court held that when a cause of
action under § 1983 has been proved, there is a federal
right to be fully compensated for the injury.
Our legal system's concept of damages reflects
this view of legal rights. "The cardinal principle
of damages in Anglo-American law is that of
compensation for the injury caused to
plaintiff by defendant's breach of duty." 2
F.Harper & F.James, Law of Torts § 25.1, p.
1299 (1956) (emphasis in original). The Court
implicitly has recognized the applicability of
this principle to actions under § 1983 by
stating that damages are available under that
section for actions "found . . . to have been
violative of . . . constitutional rights and to
have caused compensable injury. . . ." Wood v.
Strickland, 420 U.S.  at 319 [95 S.Ct.
992 at 999, 43 L.Ed.2d 214] (emphasis supplied).
435 U.S. at 254-255, 99 S.Ct. at 1047-1048.
The common law recognizes that "an injured party suffers an
economic injury from the fact that he did not receive the
monies to which be was entitled immediately after the injury
which created the entitlement" and that he deserves to be
compensated accordingly. Southern Pacific Transportation
Co. v. U.S., 471 F. Supp. 1186, 1193 (E.D.Cal. 1979);
Socony Mobile Oil Co. v. Texas Coastal & International,
Inc., 559 F.2d 1008, 1009 (5th Cir. 1977) ("Prejudgment
interest is not awarded as a penalty, but is in the nature of
compensation for the use of the funds."); Rosa v. Insurance
Company of Pennsylvania, 421 F.2d 390 (9th Cir. 1970);
Glens Falls Insurance Co. v. Danville Motors, Inc.,
333 F.2d 187 (6th Cir. 1964); Chesapeake & Ohio Ry. Co. v.
Elk Refining Co., 186 F.2d 30 (4th Cir. 1950).*fn4 Thus,
inasmuch as plaintiffs would be compensated for pre-judgment
interest at common
law, they have a federal right to pre-judgment
interest as compensation for suffering a violation of §
1983. Confining plaintiffs to state law refund remedies would,
of course, deprive them of this federal right.
III. Preclusive Effect of State Court Suits
Next we consider defendants' argument that plaintiffs' claims
are precluded by judgments plaintiffs obtained in state court
refund actions. In arguing for preclusion, defendants
inaccurately rely on the doctrine of collateral estoppel.
Collateral estoppel is inapplicable, since it precludes only
those issues which were fully and fairly litigated in the first
action. Allen v. McMurry, 449 U.S. 90, 95, 101 S.Ct.
411, 415, 66 L.Ed.2d 308 (1981). Since plaintiffs did not
litigate the constitutionality of the overcharges in state
court, collateral estoppel will not preclude litigation of that
The doctrine of res judicata, however, may preclude
plaintiffs from splitting their cause of action between state
and federal courts. Id. at 95, 101 S.Ct. at 415.
Simply stated, res judicata means that
[A] judgment on the merits, rendered in a former
suit between the same parties or their privies, on
the same cause of action, by a court of competent
jurisdiction, operates as a bar not only as to
every matter which was offered and received to
sustain or defeat the claim, but as to every other
matter which might with propriety have been
litigated and determined in that action. In other
words, he must present his whole case, extending
his claim so as to embrace everything which
properly constitutes a part of his cause of action
or defense, and cannot bring a new suit to recover
something more on the same cause of action.
Liddel v. Smith, 345 F.2d 491, 493 (7th Cir. 1965).
Plaintiffs first argue that they have not improperly split
their cause of action since in a refund proceeding under Ill.
Rev. Stats. ch. 120, § 716, the state court is not
empowered to grant any remedy other than a tax refund and that,
consequently, a cause of action designed to secure additional
relief is a different cause of action. We recognize that refund
cases are heard pursuant to special statutory jurisdiction
under the Revenue Act, Stein v. Olsen, 26 Ill. App.3d 858,
326 N.E.2d 176 (1975); LaSalle National Bank v.
Hoffman, 1 Ill. App.3d 470, 274 N.E.2d 640 (1971), and
that in proceedings under that Act, the court may only grant a
remedy as provided therein. Nonetheless, these principles do
not preclude joinder of other claims under other jurisdictional
statutes, e.g., 42 U.S.C. § 1983. See, e.g.,
Alberty v. Daniel, 25 Ill. App.3d 291, 323 N.E.2d 110
(1975). Pursuant to the Illinois Civil Practice Act, Ill. Rev.
Stats. ch. 110, § 44, a plaintiff may, "[S]ubject to
rules . . . join any causes of action whether legal or
equitable against any defendant or defendants. . . ." Pursuant
to § 38 of the Illinois Practice Act, a defendant may plead as
a counterclaim "any demand by one or more defendants against
one or more plaintiffs . . . whether in the nature of a setoff,
recoupment, cross-bill in equity, cross demand or
otherwise . . . ." These sections, as well as the entire Civil
Practice Act, do not apply to "those proceedings in which
procedure is regulated by separate statutes. In all those
proceedings, the separate statutes control to the extent to
which they regulate procedure, but this Act applies as to
matters of procedure not so regulated by separate statutes."
Ill. Rev. Stats. ch. 110, § 1. Thus, some statutes expressly
prohibit joinder of claims not germane to the subject matter of
the statute, and these provisions override § 44 of the Illinois
Practice Act. See, e.g., III. Rev. Stats. ch. 97, § 6
(proceedings ne exeat republica) and Ill. Rev. Stats.
ch. 3, § 5 (proceedings for the administration of estates).
Since § 716 contains no such restrictions on joinder of
claims or counterclaims, we conclude that, pursuant to ch. 110,
§ 44, joinder of other claims and counterclaims and the
grant of other relief would have been possible.*fn5
Plaintiffs next argue that they have not impermissably split
their cause of action since the refund procedure in state court
is not really an "action" at all. Under the procedure
established in Ill. Rev. Stats. ch. 120, §§ 675 and 716, the
refund action is not commenced by the taxpayer. Rather, if the
taxpayer objects to the assessment, he pays the tax under
protest and then appears as a defendant in the collector's
annual application for judgment and order of sale. In answer to
the collector's suit, the taxpayer may offer a "defense . . .
to the entry of judgment" against the real estate. Objection
that the land was overassessed is a defense that may be
offered. In the absence of an objection, judgment for the full
amount of the tax is entered for the collector against the
taxpayer. Illinois courts have construed the collector's
application to be in the nature of a complaint to which the
taxpayer's objections are, in the language of the statute, a
defense. People ex rel. Thompson v. Clark, 34 Ill. App.3d 228,
338 N.E.2d 408, 411 (1975).
Plaintiffs conclude that since they instituted no "action" in
state court, res judicata principles are inapplicable.
Plaintiffs' argument is not entirely correct. "The well-settled
rule for the purpose of determining the res judicata effect of
a judgment is that a `cause of action' comprises
defenses, . . . that were or might have been raised." Martino
v. McDonald's System, Inc., 598 F.2d 1079, 1084 (7th Cir.
1979). The rule stated in Martino was derived from the
Supreme Court case of Cromwell v. County of Sac,
94 U.S. 351, 352, 24 L.Ed. 195 (1876), where it was stated, by way
of illustration, that
[A] judgment rendered on a promissory note is
conclusive as to the validity of the instrument
and the amount due upon it, although it be
subsequently alleged that perfect defenses
actually existed, of which no proof was offered,
such as forgery, want of consideration, or
payment. If such defenses were not presented in
the action, and established by competent evidence,
the subsequent allegation of their existence is of
It is evident from this illustration that the application of
res judicata bars only the subsequent assertion of matters that
were or might have been asserted defensively in a
prior action. As the Court of Appeals noted in
Martino, "When facts form the basis of both a defense
and a counterclaim, the defendant's failure to allege these
facts as a defense or a counterclaim `does not preclude him
from relying on those facts in an action subsequently brought
by him against the plaintiff.' Restatement (Second) of
Judgments § 56.1(1), Comment b (Tent.Draft No. 1,
1973)."*fn6 Martino v. McDonald's System, Inc., 598
F.2d at 1084.
We have held that plaintiffs in the instant case could have
interposed a counterclaim under § 1983 against the
collector in the state court action. However, under the
principles of res judicata discussed above, they were not
obligated to do so. Since the facts underlying the alleged
constitutional violations provided both a defense in state
court and separate grounds for recovery in federal court, the
defense there and the complaint here comprise separate causes
Defendants' motion to dismiss the claims as res judicata is
IV. Failure to State a Claim Under Count IV
As noted above, in Count IV plaintiffs request the court to
enjoin the County Collector from using two types of documents
in connection with settlements of real estate tax protests. The
first document is a release which provides that
The undersigned objector in consideration of this
settlement agreement does hereby release and
forever discharge the County of Cook and its
officials, agents and employees involved in either
the assessment of the subject property or the
levying and collection of real estate taxes
thereon from any and all claims or causes of
action whatsoever including any civil rights
damage claims under 42 U.S.C. § 1983, which he, his
heirs and assigns now have or hereafter may have
against the County of Cook and its officials,
agents and employees involved in either the
assessment of the subject property or the levying
and collection of real estate taxes thereon, for
the year in question.
The second document complained of is the final order proposed
by the County in all settlements. This order states that the
challenged overassessment "was not the result of intentional or
reckless conduct on the part of any taxing official." First
Amended Complaint, Count IV, ¶ 7.
Plaintiffs claim that the use of the release and the final
order offends public policy. Defendants move to dismiss on the
ground that the release merely notifies the taxpayer that he
possesses federal civil rights in connection with his refund
claim and encourages the taxpayer to pursue the federal
remedies in the state court action. Defendants further argue
that no taxpayer is coerced into settling a case.
We cannot agree that the release serves only to notify
taxpayers of their federal rights. Insofar as the release and
settlement order condition voluntary dismissal on the
taxpayer's waiver of a cause of action for intentional injury,
the use of those documents may suppress complaints regarding
official misconduct or malfeasance. Boyd v. Adams,
513 F.2d 83, 88-89 (7th Cir. 1975) ("These agreements suppress
complaints against police misconduct which should be thoroughly
aired in a free society." quoting Dixon v. District of
Columbia, 394 F.2d 966, 969 (D.D.C. 1968). Suppression of
complaints is all the more likely where, in light of the two
year interest-free waiting period for a refund, settlement
becomes an "economic necessity." First Amended Complaint, Count
IV, ¶ 5.
The releases may prove offensive to public policy in another
way. Where officials have overassessed property, they may in
bad faith refuse to lower the assessment until they have
obtained a personal release from the taxpayer. See Boyd,
supra at 89; Dixon, supra at 969-970 (citizen's
promise not to press complaint against police officers in
exchange for prosecutor's promise not to prosecute citizen may
"tempt the prosecutor to trump up charges for use in bargaining
for suppression of complaint." 394 F.2d at 969). The use of
such a release may be particularly disturbing in that it might
entail the use of official power of the purse to protect
government agents from personal liability.
Thus, although use of the purported release ostensibly
affects only private parties, its use may seriously undermine
the public, interest in detecting misconduct by public
officials. For this reason, the claim asserted in Count IV will
not be dismissed. Brooklyn Bank v. O'Neil,
324 U.S. 697, 712-713, 65 S.Ct. 895, 904-905, 89 L.Ed. 1296 (1945);
Redel's Inc. v. General Electric Co., 498 F.2d 95 (5th
Cir. 1974); Chastang v. Flynn & Emrich Co.,
365 F. Supp. 957, 968 (D.Md. 1973).
V. Plaintiffs' Motion for Class Certification With Respect
to Counts I-III
On November 10, 1980, we denied plaintiffs' motion for class
certification in connection with Counts I, II and III on the
ground that individual questions predominated over common
questions of law and fact. Mem.Op., November 10, 1980. The
class proposed at that time consisted of (1) taxpayers whose
commercial or industrial real estate in Cook County was
assessed for any of the tax years 1972-1977 at more than 50 per
cent of fair cash value and (2) taxpayers whose residential
real estate in Cook County was assessed for the years 1972-1973
at more than 50 per cent or for any of the years 1974-1977 at
more than 45 per cent of fair cash value. Id. at 1. In
denying the motion, we stated that the only common question was
whether defendants engaged in a pattern and practice of
discriminatorily assessing real estate and that individual
questions would include not only calculation of damages but
also the more basic question of whether each class member was
overassessed. "In other words, [each putative class member]
would have to prove that he was a member of the class."
Id. at 2.
In an effort to limit the individual questions, plaintiffs
now propose a class of
taxpayers for industrial, commercial or
residential (composed' of six or more apartment
units) real estate in Cook County, Illinois, who,
pursuant to 120 Ill. Rev. Stats. §§ 675 and
716, filed specific objections challenging taxes
for the tax year 1972 or any subsequent year, paid
the challenged taxes on or after 9-1-73, and
obtained a refund of the challenged taxes.
Pltfs. Motion for Cert. of Subclass.
Defendants object that this class definition is also too
broad in that it includes not only those taxpayers who received
a refund after their claims were tried to judgment but also
those who received a refund pursuant to a settlement. The
latter group cannot be included in the class since the court
would have to examine the facts of each settled case to
determine whether the state violated § 1983 in connection
with the assessments. This determination cannot be made merely
by reference to the settlement agreements since they contain no
admissions of liability by the defendants. See
materials submitted by defendants to this court in response to
our order of October 2, 1981.
The court is prepared, however, to certify a class of
taxpayers who tried their cases to judgment and were awarded
refunds. The court is unsure, however, that this class will
meet the numerosity requirements of Fed.R.Civ.P. 23(a)(1). If
plaintiffs desire to certify the class as we have defined it,
plaintiffs should request the court to set a brief hearing on
the numerosity question.
The motion to certify plaintiffs' proposed class for Counts
I-III is denied.
VI. Plaintiffs' Motion to Certify a Class With Respect to
We also think that Count IV may appropriately proceed as a
class action. We therefore certify a subclass of those
taxpayers who entered into a settlement in exchange for which
they signed the release and settlement order complained of in
Count IV. Since this class prays only for injunctive relief,
the action will proceed as a Fed.R.Civ.P. 23(b)(1)(A) and
23(b)(2) class action.