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Arlin-Golf, LLC v. The village of Arlington

January 21, 2011


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 09 C 1907-David H. Coar, Judge.

The opinion of the court was delivered by: Flaum, Circuit Judge.


Before CUDAHY, FLAUM, and KANNE, Circuit Judges.

Arlin-Golf, LLC, ("Arlin-Golf") sued The Village of Arlington Heights ("the Village") in Illinois state court in 2006. The two entered a settlement agreement in 2008 pursuant to which Arlin-Golf voluntarily dismissed the case with prejudice. In 2009, the plaintiffs in this case sued the defendants in this case based on facts and legal theories similar to those asserted in the 2006 state suit. Accordingly, the district court dismissed the federal suit based on res judicata, among other grounds. We affirm.

I. Background

The plaintiffs-appellants, Arlin-Golf and Arlin-Golf's two partners, Ronald Popp and Victor Valenti, purchased the Arlin-Golf Shopping Center ("the Center") in June 2001. On January 22, 2002, the Village announced a Tax Increment Financing ("TIF") District that included the property on which the Center was built. The Village implemented the TIF District in a July 2002 ordinance, in which the Village announced that the Center would be condemned, knocked down, and redeveloped in roughly six months. But the Village never executed this plan. Instead, from 2002 to 2008, the Village allegedly encouraged tenants to move out from the Center or break their lease agreements with Arlin-Golf, discouraged prospective tenants from renting space, repeatedly announced that the Center was condemned and would be knocked down in a few months, and asserted that the Village already owned the Center, when in fact it did not. Due to the actions of the Village and its agents, the plaintiffs allege that they have been unable to use or profit from the Center since 2002.

In 2006, Arlin-Golf filed a lawsuit against the Village in Illinois state court, alleging that the Village's implementation of the TIF District was improper under Illinois statutory law, and that the Village's conduct constituted a constructive taking under Illinois's constitution.

In 2008, the plaintiffs contacted Brian Properties, Inc., a real estate brokerage, to help them sell the Center. The plaintiffs allege that Brian Properties, Jack Whisler, a broker and owner of Brian Properties, the Village, Arlene Mulder, the Village's mayor, William Enright, the Village's Deputy Director of Planning and Community Development, Village Bank & Trust of Arlington Heights ("the Bank"), which lent money to the plaintiffs, and S. Michael Polanski, the Bank's Chairman and CEO, worked together to coerce the plaintiffs into selling the Center to the Village. The plaintiffs claim that they were threatened physically and financially-they allege that they were threatened with the foreclosure of loans they had outstanding with the Bank that were unrelated to their mortgage on the Center and that were not in default.

The plaintiffs eventually accepted a settlement offer from the Village pursuant to which the Village would purchase the Center for $1.6 million and Arlin-Golf would agree to withdraw the state suit with prejudice. On September 18, 2008, Arlin-Golf voluntarily dismissed the state suit with prejudice. On November 3, 2008, Arlin-Golf and the Village executed a real estate contract that provided for the sale of the Center to the Village for $1.6 million. The sale closed on March 4, 2009. The plaintiffs claim to have lost millions from their investment in the Center, which they attribute to the Village's and its agents' conduct.

On March 27, 2009, the plaintiffs in this case sued the defendants in this case, alleging that the defendants' conduct resulted in financial losses to Arlin-Golf in connection with its ownership of the Center. In a ten-count complaint, the plaintiffs allege violations of the Equal Protection Clause (Count I), the Due Process Clause (Count II), and the Takings Clause (Count III), claims under the parallel provisions of the Illinois Constitution (Counts I-III), a § 1983 conspiracy (Count IV), a § 1983 claim against several defendants for violations of well-known rights (Count V), and supplemental state law claims for interference with contract relations (Count VI), interference with economic expectancy (Count VII), civil conspiracy (Count VIII), breach of fiduciary duty (Count IX), and inducement of breach of fiduciary duty (Count X).

On June 10, 2009, the defendants filed a motion to dismiss under Rule 12(b)(6) based on res judicataarising from the settlement of the state action, among other grounds. On March 9, 2010, the district court granted the motion to dismiss based on res judicata, among other grounds on particular counts and for particular defendants. It dismissed Counts I through V and X with prejudice, and VI through IX with prejudice to the Village and without prejudice to the other defendants. On April 6, 2010, the plaintiffs moved to vacate the judgment and to amend their pleadings. The district court denied the plaintiffs' motion on April 7, 2010. This appeal followed, challenging solely the application of res judicata.

II. Analysis

The appellants primarily assert four arguments on appeal. First, they argue that the causes of action in the state and federal suits were not identical, and, thus, that the second element for applying res judicatais not satisfied. Second, they argue that applying res judicata would be unfair under the circumstances of this case. Third, they argue that the settlement agreement should not be enforced because of the circumstances under which it was procured. Finally, they argue that the district court erred by dismissing their case with preju-dice and, thus, without leave to amend their complaint. We review de novo the district court's decision to grant the defendants' motion to dismiss. Brzostowski v. Laidlaw Waste Sys., Inc., 49 F.3d 337, 338 (7th Cir. 1995).

To determine whether res judicataapplies, we apply the preclusion law of Illinois, the state that rendered the judgment. Hicks v. Midwest Transit, Inc., 479 F.3d 468, 471 (7th Cir. 2007); see also 28 U.S.C. ยง 1738. The Supreme ...

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