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SMITH v. CITY OF CHICAGO

November 2, 2004.

ED H. SMITH, et al., Plaintiffs,
v.
CITY OF CHICAGO, Defendant.



The opinion of the court was delivered by: REBECCA PALLMEYER, District Judge

MEMORANDUM OPINION AND ORDER

Twenty-three current or former aldermen of the City of Chicago sued the City under the First and Fourteenth Amendments for unequal treatment in the payment of attorneys' fees and expenses in connection with litigation surrounding the 1992 remap of Chicago's ward boundaries. Following a bench trial, the court entered judgment in favor of Plaintiffs in the amount of $246,354.07. See Smith v. City of Chicago, No. 94 C 920, 2004 WL 1300180 (N.D. Ill. June 10, 2004). Plaintiffs now seek to amend the judgment to provide for an award of pre-judgment interest. For the reasons set forth below, the motion is granted.

BACKGROUND

  The facts of this matter are more fully presented in this court's June 10, 2004 Memorandum Opinion and Order. See Smith, 2004 WL 1300180, at *1-7. This opinion assumes the reader's familiarity with the earlier decision and will summarize the relevant facts here only briefly.

  In 1991, the Chicago City Council was required by law to draw a new map of the city's ward boundaries in accordance with the 1990 Census. Unable to agree on a map, the council members divided into two competing groups. One group consisted of 28 predominantly white aldermen who were generally sympathetic to Mayor Richard M. Daley's administration. This group, referred to as the "Administration Aldermen," promoted a map with 24 majority white wards, 19 majority African-American wards, and 7 majority Latino wards. A second group, 23 predominantly African-American aldermen, were at that time often at odds with Mayor Daley's administration. These aldermen, referred to as "Opposition Aldermen," are Plaintiffs in this case; they supported a map having 21 or 22 majority white wards, 21 or 22 majority African-American wards, and 7 or 8 majority Latino wards. Id. at *1. The two proposals were submitted for a referendum vote by Chicago voters pursuant to Illinois state election law, and on March 17, 1992, voters approved the map submitted by the Administration Aldermen (the "Referendum Map"). Id.

  This outcome produced three lawsuits. In Barnett v. Daley, No. 92 C 1683, nine African-American voters claimed the Referendum Map was unconstitutional and violated the Voting Rights Act, 42 U.S.C. § 1973. In Smith v. Daley, No. 92 C 2104 ("Smith I"), Plaintiffs in this case alleged a Voting Rights Act claim on behalf of all African-American residents of the City. Finally, in Bonilla v. City Council of the City of Chicago, No. 92 C 2666, six Latino voters sought changes to the map that would have created additional wards "alleged to have sufficient population to permit Latino residents in those wards to elect the candidates of their choice." Smith, 2004 WL 1300180, at *1. All of the City's aldermen were named as defendants in Barnett, but the court later dismissed them from the suit in December 1992. See Barnett v. Daley, 809 F. Supp. 1323 (N.D. Ill. 1992). None of the aldermen was named as a defendant in Smith I or Bonilla, but the Administration Aldermen voluntarily intervened as defendants in both cases. They also voluntarily intervened as defendants in Barnett after being dismissed from that suit. Ultimately, all three cases were assigned to Judge Brian Barnett Duff of this court, and Smith I was consolidated with Barnett. The Second Amended Complaint in Barnett, filed in 1993, did not name any aldermen as defendants, but the Administration Aldermen remained in the case voluntarily as defendant-intervenors. Smith, 2004 WL 1300180, at *1.

  The Administration Aldermen and Opposition Aldermen separately retained private counsel to represent them in the aforementioned lawsuits. The City paid the attorneys' fees incurred by the Administration Aldermen for the time devoted to the case when they were named defendants as well as for the time when they participated in the litigation voluntarily as intervenors. The City refused, however, to pay any legal fees on behalf of the Opposition Aldermen, claiming that "there is no basis in the Municipal Code of the City of Chicago to . . . authorize the payment of legal fees for those persons [who sue the City]." Id. at *2 (quoting Letter from Alderman Edward M. Burke to Alderman Lawrence S. Bloom of 2/16/93). The Opposition Aldermen responded with the instant lawsuit (Smith II) in which they allege that such disparate treatment violated their First and Fourteenth Amendment rights. Id. Judge Plunkett supervised discovery in the case over a lengthy period before partially granting the City's motion for summary judgment on August 1, 2002. See Smith v. City of Chicago, No. 94 C 920, 2002 WL 1770532 (N.D. Ill. Aug. 1, 2002), amended in part, 2003 WL 57035 (N.D. Ill. Jan. 7, 2003). Judge Plunkett held that Plaintiffs did not have standing to pursue injunctive and declaratory relief under the First Amendment, but allowed them to proceed with their claims for injunctive relief for the City's alleged racial discrimination and speech-based equal protection violations. Id. at *5, 6.

  The case was ultimately reassigned to this court on May 20, 2003 pursuant to 28 U.S.C. § 294(b). Following an eight-day bench trial between September 17 and October 3, 2003, the court entered judgment in favor of Plaintiffs on June 10, 2004 and awarded damages in the amount of $246,354.07.*fn1 The court first found that Plaintiffs had standing to sue for reparative injunctive relief because it "would accord [Plaintiff's] the equal treatment to which they are entitled" notwithstanding that the disputed payment would be made to third parties (the attorneys). Smith, 2004 WL 1300180, at *7 (quoting Smith, 2002 WL 1770532, at *6). The court next determined that the City violated Plaintiffs' right to equal protection by treating them differently than the Administration Aldermen based solely on their membership in a group that opposed the Referendum Map. Id. at *9-11. The City failed to offer any rational basis for the differential treatment and, thus, the court ordered the City to pay Plaintiffs' attorneys' fees.*fn2 Id. at *15-19.

  On June 24, 2004, Plaintiffs filed a motion to alter the judgment to provide for an additional $168,956.24 in prejudgment interest. Plaintiffs requested prejudgment interest in their post-trial memorandum but did not provide any specific figure or calculation at that time. (Plaintiffs' Post-Trial Memorandum, at 72 ("Plaintiffs seek prejudgment interest calculated at the prime rate . . . on all outstanding relief requested above"). The City did not respond to Plaintiffs' initial request in its post-trial memorandum, but now objects that an award of prejudgment interest is improper in this case.

  DISCUSSION

  A motion for prejudgment interest that is filed after entry of a final judgment is a motion to alter or amend judgment pursuant to FED. R. Civ. P. 59(e). McNabola v. Chicago Transit Auth., 10 F.3d 501, 519-20 (7th Cir. 1993) (citing Ostemeck v. Ernst & Whinney, 489 U.S. 169, 175 (1989)). As the Supreme Court explained, prejudgment interest "is an element of [plaintiff's] complete compensation" and is therefore "intertwined in a significant way with the merits of the plaintiff's primary case as well as the extent of his damages." Ostemeck, 489 U.S. at 175. Plaintiffs claim that prejudgment interest is necessary in this case to put them in the position they would have been in had the City paid their attorneys' fees immediately. (Pl. Mem. ¶ 5; Pl. Reply, at 6)*fn3 (citing Matter of Oil Spill by Amoco Cadiz, 954 F.2d 1279, 1331 (7th Cir. 1992) ("[m]oney today is not a full substitute for the same sum that should have been paid years ago"). The City argues that prejudgment interest is inappropriate because the court awarded injunctive relief and not money damages. The City also claims that prejudgment interest is not necessary to make Plaintiffs whole because Plaintiffs never lost the time value of their money. (Def. Mem., at 3-4.)*fn4

  A. Entitlement to Prejudgment Interest

  "The basic purpose of prejudgment interest is to put a party in the position it would have been in had it been paid immediately." American Nat'l Fire Ins. Co. ex rel. Tabacalera Contreras Cigar Co. v. Yellow Freight Sys., Inc., 325 F.3d 924, 935 (7th Cir. 2003). Prejudgment interest is designed to "ensure that an injured party is fully compensated for its loss," City of Milwaukee v. Cement Div., Nat'l Gypsum Co., 515 U.S. 189, 195 (1995), and also to prevent unjust enrichment. Trustmark Life Ins. Co. v. University of Chicago Hospitals, 207 F.3d 876, 885 (7th Cir. 2000).

  The City suggests that Plaintiffs are not entitled to prejudgment interest because they did not recover traditional compensatory damages. In ruling on the City's motion for summary judgment, Judge Plunkett held that Plaintiffs had no standing to pursue claims to recover attorneys' fees to the extent the legal representation was "on a purely contingent basis." See Smith, 2002 WL 1770532, at *5. In the City's view, "Judge Plunkett was clear that Plaintiffs were not entitled to traditional compensatory damages" and, thus, "this Court should disallow additional remedies that are necessarily linked to traditional compensatory damage awards." (Def. Mem., at 2.) Plaintiffs correctly note that the mere fact that Plaintiffs recovered equitable relief in the form of a reparative injunction does not alone preclude an award of prejudgment interest. (Pl. Reply, at 3.) In Securities and Exchange Comm'n v. Lipson, 278 F.3d 656 (7th Cir. 2002), for example, the defendant violated securities laws by trading on inside information. Id. at 659. The judge ordered him to disgorge "the loss his insider trading had avoided" and to pay prejudgment ...


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