Appeal from the United States District Court for the Western District of Wisconsin. No. 84 C 191--Barbara B. Crabb, Judge.
Cudahy and Posner, Circuit Judges, and Eschbach, Senior Circuit Judge.
A retail grocer, Del's, and its owners, Mr. and Mrs. Robish, seek damages under section 1 of the Civil Rights Act of 1871, now 42 U.S.C. § 1983, from Del's' wholesale supplier, Carpenter Cook, and from Carpenter Cook's lawyers, claiming that the defendants deprived the plaintiffs of their property, under color of state law, without due process. They did this, argue the plaintiffs (whom, for the sake of simplicity, we shall usually refer to just as "Del's"), by executing an ex parte order that had been issued by a Wisconsin state judge. The order authorized Carpenter Cook to repossess the collateral of its loans to Del's and in other ways to protect its security interest. The oddity that a purely private suit arising from a commercial dispute would be brought in federal court under a statute designed to protect persons from unconstitutional conduct by state officers is only one of the unusual features of this litigation.
Carpenter Cook had sold groceries to Del's on credit and had taken back a promissory note and a security interest in both inventory and fixtures. As further security it persuaded Del's to give it an option, exercisable upon default, to rent Del's' store for five years. Del's owned the store but under a land contract rather than a deed; if the option was exercised Carpenter Cook would assume Del's' obligations (essentially those of a mortgagor) under the land contract. Del's did default, owing almost $300,000 to Carpenter Cook, which brought suit in state court to collect this debt and at the same time asked the judge to issue an ex parte order protecting its security interest. The judge issued the order. The order required Carpenter Cook to post a $100,000 bond and directed Del's to turn over the collateral (mainly groceries) to Carpenter Cook, to let Carpenter Cook "place one of its manager's [sic] in charge of said store to preserve the collateral by operating the business as a going concern," and to remove any personal effects (i.e., property not covered by the security agreement) from the store as soon as Carpenter Cook took possession.
Carpenter Cook's lawyers, together with an executive of the company, proceeded to the grocery store, order in hand, to take possession of the store. They placed the personal effects of the Robishes on the sidewalk in front of the store, the executive took charge of the store, Carpenter Cook exercised its option to rent the store, and the new management began selling the groceries to satisfy Carpenter Cook's lien. The ex parte order required that the income from these sales be deposited in a separate account. The Robishes first learned of the ex parte order when Carpenter Cook's people arrived to take possession of the store.
The order did not fix a hearing date and apparently Del's never did move the court for a hearing on, or other relief from, the order. Instead it brought this suit, three months after the ex parte order was served on it. Del's argues that the prompt execution of the ex parte order deprived it of its property without notice or an opportunity for a predeprivation hearing, and hence, it argues, without due process of law. A few weeks after the district court granted the defendants' motion to dismiss for failure to state a claim, 603 F. Supp. 1071 (W.D. Wis. 1985), a state judge granted Carpenter Cook summary judgment on its underlying suit to collect the amount in default from Del's.
Section 1983 provides a remedy only against action taken under color of state law, and the usual defendant in a section 1983 case is therefore a state officer. We first must consider whether the absence of such a defendant puts the case beyond the reach of the statute. We think not. A state cannot avoid its obligations under the due process clause by delegating to private persons the authority to deprive people of their property without due process of law. If as Del's alleges the effect of Wisconsin's law of repossession is to arm creditors with the state's power to dispossess debtors of their property, Del's can challenge the law in a suit against the creditor under section 1983. The ex parte order instructed the sheriff to assist Carpenter Cook if need be to carry out the order. The fact that the sheriff remained in the background and hence could not be joined as a defendant does not deprive Carpenter Cook's action in enforcing a judicial order of its character as state action.
In so holding, we take one step beyond Lugar v. Edmondson Oil Co., 457 U.S. 922, 73 L. Ed. 2d 482, 102 S. Ct. 2744 (1982). Edmondson had obtained a writ of attachment against Lugar's property from a state court, and the county sheriff had executed the writ. Lugar sued Edmondson under section 1983, challenging the constitutionality of the state's statutory procedure for attachment. The Supreme Court held that the suit could be maintained even though no public official had been named as a defendant; "when the State has created a system whereby state officials will attach property on the ex parte application of one party to a private dispute," this is sufficient state action to come within the reach of section 1983. Id. at 942. The quoted language describes the present case equally well, the only difference being that in this case the writ of attachment (as in effect the order to repossess the collateral was) was executed by the private party without having to call on the sheriff. See also Greco v. Guss, 775 F.2d 161, 168 (7th Cir. 1985). But as we said, this should not make a difference. The state court's order gave Carpenter Cook the powers of the sheriff, and if Del's had resisted the attachment the sheriff would have popped in and taken over from Carpenter Cook; the order directed the sheriff to assist. Carpenter Cook's lawyers were in fact if not in form deputy sheriffs pro tem. when they seized the store and dumped the owners' personal property on the sidewalk. See also Lewis Service Center, Inc. v. Mack Financial Corp., 696 F.2d 66 (8th Cir. 1982); Folsom Investment Co. v. Moore, 681 F.2d 1032, 1037 (5th Cir. 1982).
Another preliminary question is whether Del's can use a federal civil rights action as the vehicle for contesting the validity of an order issued by a state court. We considered the general question at length in Lynk v. LaPorte Superior Court No. 2, 789 F.2d 554 (7th Cir. 1986), and can therefore be brief about it here. Many an order issued by a state court deprives a person of what he claims is his property. An order for specific performance of a real estate contract, directed against a recalcitrant seller, is one example. Yet the seller could not challenge the order's scope, evidentiary basis, or legal validity by suing the buyer in federal court under section 1983. To allow such suits could lead to displacing almost all of the civil law of the states into the federal courts.
Several principles stand in the way of this unacceptable result. Until the state court's order becomes final, the federal court has the power in an appropriate case to stay proceedings in the federal court suit. Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 818-19, 47 L. Ed. 2d 483, 96 S. Ct. 1236 (1976) (federal abstention in favor of pending parallel state litigation); Shapiro, Jurisdiction and Discretion, 60 N.Y.U. L. Rev. 543, 587-88 (1985). The delay of three months between the filing of the state suit by Carpenter Cook and the filing of the federal suit by Del's might not be a sufficient ground for exercising that power, cf. Evans Transportation Co. v. Scullin Steel Co., 693 F.2d 715, 719 (7th Cir. 1982), but an additional factor is that Del's failed to follow the simple route open to it under state law for obtaining complete relief -- namely, moving for a hearing in state court on the propriety of the ex parte order. Maybe unless and until it did so the federal court could refuse to proceed with the federal suit, though this we need not decide. Apart from any doctrines of abstention, the fact that an order subject to further review in the state court system is unlikely to work a deprivation of property will in any event make a suit under section 1983 premature until that review is completed.
After the state court's order becomes final, an attempt to challenge it by means of a section 1983 suit in federal court will ordinarily be blocked by the defense of res judicata -- assuming that the federal grounds for challenging the order could have been raised by way of defense in state court, a question not free from doubt in this case, compare Fuller v. Hurley, 559 F. Supp. 313, 320 (W.D. Va. 1983); Hernandez v. Finley, 471 F. Supp. 516, 518-20 (N.D. Ill. 1978) (three-judge court), aff'd without opinion under the name of Quern v. Hernandez, 440 U.S. 951, 59 L. Ed. 2d 765, 99 S. Ct. 1488 (1979), but one we shall not have to explore. If the federal grounds were raised in the state court and explicitly or implicitly decided there, the attempt to use a section 1983 suit to reexamine them in federal court might be blocked independently by the rule that the only federal court with appellate jurisdiction over state court judgments is the Supreme Court. See 28 U.S.C. § 1257; Lynk v. LaPorte Superior Court No. 2, supra, 789 F.2d at 563, and cases cited there; Nordgren v. Hafter, 789 F.2d 334, 336 (5th Cir. 1986) (per curiam). We state this proposition tentatively because if as in this case the federal plaintiff is not actually trying to set aside the state court's judgment (Del's doesn't want to set aside the repossession order, which was fully executed long ago -- it wants damages for the consequences of the order) the federal suit is not easily characterized as appellate and hence may not violate section 1257. Currie, Res Judicata: The Neglected Defense, 45 U. Chi. L. Rev. 317, 324-25 (1978).
None of these doctrines would pose an insuperable obstacle to this suit if the order of which Del's complains had become moot on or after its execution, for then there would never have been a final judgment that could be appealed within the state court system or that could have the effect of res judicata in the federal. But recall that Carpenter Cook, to get the order, had to post a substantial bond. This ensured that the order would not be rendered moot by its execution. If Del's was hurt by the order it could come back to the state court, show why the order was invalid, and demand compensation out of the bond. It did eventually come back to the state court -- when Carpenter Cook moved for summary judgment on its underlying claim -- and argued that there hadn't been a default under the terms of the loan; and it lost. If it had won, that would have demonstrated the invalidity of the ex parte order. Since Del's could have raised federal as well as state grounds for thinking the order invalid, its failure to do so delivered into the hands of its enemies a beautiful res judicata defense to assert in the present action. But Carpenter Cook has never argued res judicata, presumably because it won the case in the district court on other grounds before the Wisconsin state court issued its decision in Carpenter Cook's suit against Del's -- and for all we know that decision may not be final within the Wisconsin court system. Even in this court none of the defendants argues res judicata; the defense is therefore waived.
If Del's had raised a federal defense in the state court proceeding and if the decision rejecting that ground had become final, an effort to relitigate it in this suit in federal court under section 1983 might as we said be blocked by the rule that only the Supreme Court (among federal courts) can review state court judgments deciding federal questions; and if so, this rule, being jurisdictional, would compel the dismissal of the suit even though Carpenter Cook has never asserted this ground for reversal. But since Del's did not raise a federal question in state court the Supreme Court never obtained potential appellate jurisdiction, exclusive or otherwise, over the state court's proceeding, even if that proceeding is now final. The present suit is an effort not to appeal from the state court's resolution of a federal question but to split the plaintiffs' state and federal claims between state and federal courts. The effort is improper, but it is improper by virtue of the doctrine of res judicata, a defense that is waivable and was waived here. So we need ...