Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 82 C 6517--Paul E. Plunkett, Judge.
Richard D. Cudahy, Kenneth F. Ripple and Daniel A. Manion, Circuit Judges.
KENNETH F. RIPPLE, Circuit Judge.
The plaintiffs are owners and developers of a 145-acre parcel of real estate located in DuPage County, Illinois between the Villages of Lisle and Woodridge. They brought the present action under 42 U.S.C. § 1983, in which they allege that the defendants wrongfully violated their constitutional right to make reasonable use of their property. The plaintiffs claim that the defendants have violated the equal protection, due process, and taking clauses of the fifth and fourteenth amendments. The district court dismissed the plaintiffs' claims under the doctrine of res judicata. We reverse.
This lawsuit has been through a long and tortuous litigation history, and its facts are complicated. Fortunately, those facts have been set forth already in an earlier appeal in this court. See LaSalle Nat'l Bank v. County of DuPage, 777 F.2d 377 (7th Cir. 1985), cert. denied, 476 U.S. 1170, 106 S. Ct. 2892, 90 L. Ed. 2d 979 (1986). We borrow heavily from that rendition.
In 1969, the plaintiffs purchased a 145-acre parcel of unincorporated land in DuPage County near Chicago with the intention of developing the area for luxury housing and related commercial businesses. The 145-acre development is known as "Hobson Greene" and lies within a largely unincorporated 1,500-acre tract known as the "Greene Area." The defendant DuPage County (the County), through the defendant Board of Commissioners, governs the unincorporated portions of DuPage County including the area containing Hobson Greene. The other defendants, the Villages of Lisle and Woodridge (Lisle and Woodridge, or, collectively, the Villages), are located within DuPage County on the eastern boundary of the Greene Area.
The plaintiffs allege that the defendants have engaged in a continuing conspiracy over a fifteen-year period to deprive them wrongfully of their right to make reasonable use of their property. Their complaint initially alleged violations of the antitrust laws. In their amended complaint, the operative pleading at this stage of the litigation, they allege that the defendants have violated the equal protection, due process, and taking clauses of the fifth and fourteenth amendments. The plaintiffs allege that the conspiracy involved overt acts in three areas: zoning, water and annexation, and sewage.
Zoning : In 1970, the plaintiffs petitioned the DuPage County Zoning Board of Appeals for a special use permit that would have allowed them to proceed with the development of Hobson Greene. After conducting a public hearing, the Zoning Board of Appeals recommended that the Board of Commissioners deny the petition for the special use permit. On December 24, 1974, the Board of Commissioners adopted the recommendation of the Zoning Board of Appeals to deny the petition. The plaintiffs appealed the denial and an Illinois appeals court ultimately reversed the decision of the Board of Commissioners. The court found that the action of the Board of Commissioners had "little or no relation to the public health, safety and welfare of DuPage County." LaSalle Nat'l Bank v. County of DuPage, 54 Ill. App. 3d 387, 369 N.E.2d 505, 512, 12 Ill. Dec. 8 (Ill. App. Ct. 1977). The plaintiffs allege that "the initial denial of the necessary special use permit and the consequent delay in obtaining the permit were occasioned by the conspiracy among the County, Woodridge, and Lisle." Appellants' Br. at 9.
Water and Annexation : In 1978, the Villages entered into an agreement to divide the unincorporated land lying between their borders for purposes of annexation and the provision of water service. The plaintiffs approached Woodridge about providing water service to the Hobson Greene development. Woodridge conditioned the provision of water service on the plaintiffs' acceptance of Woodridge's annexation of the Hobson Greene development. The plaintiffs, not satisfied with the terms of Woodridge's offer, approached Lisle about water service. Since Hobson Greene lies beyond Lisle's exclusive territory, Lisle refused to deal with the plaintiffs. The plaintiffs allege that "the purpose and effect of this division of territory was to give Woodridge the power to extract whatever demands it desired from any developer in its 'territory' who needed water service," and that, "as a result of defendants' refusal to provide water service to Hobson Greene, plaintiffs were forced to rely on well water." Appellants' Br. at 10. Because the plaintiffs had to resort to well water, they were required to split their development into three phases.
Sewage : In or about 1971, the County and the Villages decided to consolidate the ownership and management of their various sewage treatment facilities. To this end, the County purchased the sewage treatment facilities of each of the Villages and agreed to provide sewage treatment service to the Villages. Among the provisions in the sales agreements was one reserving for the Villages the right to determine which users outside the Villages would receive sewage treatment service from the sewage treatment plant the Villages were selling to the County. The agreements also specified that, in the event new sewage treatment connections had to be rationed, the Villages would each have a right of first refusal to a certain number of connections.
The plaintiffs needed sewer permits from the Illinois Environmental Protection Agency (IEPA) and the County to construct sewer lines and to connect them to a sewage treatment plant. The plaintiffs received the necessary connection permits from the IEPA for Phase One and Phase Two of Hobson Greene on February 8, 1979 and January 31, 1979, respectively. Each permit was valid for two years, which meant that the plaintiffs could preserve their rights by laying sewer pipe any time before early 1981.
In 1979, the contingency contemplated in the sales agreements between the County and the Villages occurred when the IEPA determined that the consolidated DuPage County sewage treatment plant was overburdened. The IEPA sought to place a freeze on all further connections to the sewage treatment system until capacity was increased. At this point, another developer in the County, Corporate West, brought suit in the Circuit Court of DuPage County against the IEPA, the County, Lisle, and Woodridge. In this suit, Corporate West sought a declaration that it could connect its development to the Lisle-Woodridge plant regardless of the IEPA's action placing the plant on restricted status. The IEPA then filed a cross-claim against the County, Lisle, and Woodridge in which it sought to enjoin them from issuing further building or connection permits. Corporate West ultimately was allowed to connect its development to the plant and was dismissed from the suit.
The IEPA then negotiated a settlement of its cross-claim with the other defendants under which it agreed to allow a limited number of new connections if the County would take certain steps to upgrade its treatment facility. The County and Villages agreed on a formula for dividing additional connections according to the following percentages: thirty-eight percent to Lisle, thirty-four percent to Woodridge, and twenty-eight percent to unincorporated portions of DuPage County. The agreement was subsequently embodied in a state circuit court decree, Corporate West Development, Inc. v. Illinois Environmental Protection Agency, No. 79 MR 257 (Cir. Ct. DuPage County Aug. 13, 1980) (Corporate West). The plaintiffs were not given notice or an opportunity to be heard prior to entry of the Corporate West decree even though they had preexisting valid permits from the IEPA. The twenty-eight percent allotted to the County for unincorporated areas was not sufficient to meet the needs of the Hobson Greene development. Consequently, the plaintiffs sought and were granted leave to intervene in the Corporate West suit. Their original intervention petition sought only injunctive relief and ultimately was mooted by the construction of a new sewage treatment plant with sufficient capacity to treat all the sewage generated by Hobson Greene. The state trial court's dismissal of that original petition, however, was without prejudice, and the plaintiffs subsequently filed an amended intervenor complaint asserting a section 1983 claim for damages arising out of the sewage controversy. The state court dismissed the amended intervenor complaint because it determined that the plaintiffs had not been injured by any of the defendants' actions. At issue in this case is whether the state court's judgment dismissing the plaintiffs' amended intervenor complaint in the Corporate West suit bars the present suit under the doctrine of res judicata.
1. The Illinois state court action
The Corporate West case was filed on May 31, 1979 in the circuit court in DuPage County. The plaintiffs moved to intervene on October 10, 1980 and fully participated thereafter. The purpose of the plaintiffs' intervention was to challenge the court's August 13, 1980 order, which allocated additional sewer capacity among the defendants, as a violation of the plaintiffs' rights to their IEPA sewer permits. The factual basis for the Corporate West complaint was limited to the defendants' alleged denial of sewage hookups and the events surrounding the entry of the Corporate West decree. Events concerning zoning and water and annexation were not at issue in that suit.
The plaintiffs' original intervenor complaint was dismissed as moot on May 13, 1984 with leave to amend. On June 11, 1984, the plaintiffs filed an amended intervenor complaint that sought damages for alleged violations of the due process, equal protection, and taking clauses of the fifth and fourteenth amendments. The defendants filed several motions to dismiss the amended intervenor complaint. The state trial court granted the defendants' third motion to dismiss. In an opinion by Judge Peccarelli, issued on December 16, 1986, the trial court found that:
5. [The plaintiffs were] never prohibited from exercising [their] rights, under the 1979 permit, to construct and connect [their] sewer line to the Lisle and Woodridge Plant by the August 13, 1980 Order of this Court or otherwise. During the existence of the permit, [the plaintiffs] never obtained a judicial or administrative judgment as to the status of the 1979 permit, nor constructed and attempted to connect [their] sanitary system to the Lisle and Woodridge Plant.
6. [The plaintiffs were] never injured in fact in [their] rights under the 1979 permit because [they were] never actually refused the right to connect. In fact, during the existence of the permit, the structural work necessary to connect with the Lisle and Woodridge Plant, and ...