Title: River Park, Inc. v. City of Highland Park

State: illinois

Issuer: Illinois Supreme Court

Document:

River Park, Inc. v. City of Highland Park, No. 85246 (Ill. S.Ct.)
Docket No. 85246-Agenda 35-September 1998.
Filed November 19, 1998.
JUSTICE McMORROW delivered the opinion of the court:
This case arises from the efforts of plaintiffs River Park, Inc., Spatz & 
Company, and Country Club Estates, Ltd., to develop a parcel of real estate 
located within defendant City of Highland Park. After defendant failed to 
approve their plan to develop the property and their request for rezoning, 
plaintiffs sought relief under 42 U.S.C. §1983 (1994) by filing a complaint 
against defendant in federal court. Following the dismissal of their federal 
cause of action, plaintiffs asserted various violations of state law in an 
amended complaint filed against defendant in the circuit court of Lake County. 
The circuit court dismissed this complaint pursuant to defendant's motion to 
dismiss under section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 
(West 1996)). The circuit court found that (1) the dismissal of plaintiffs' 
federal complaint barred their state claims under the doctrine of res 
judicata, and (2) plaintiffs' state claims were also barred by the one-year 
statute of limitations contained in section 8-101 of the Local Governmental and 
Governmental Employees Tort Immunity Act (745 ILCS 10/8-101 (West 1996)). The 
appellate court affirmed the circuit court's dismissal of plaintiffs' claim for 
tortious interference with business expectancy, but reversed its decision to 
dismiss plaintiffs' claims for breach of implied contract and abuse of 
governmental power and remanded the cause for further proceedings on these 
counts. 295 Ill. App. 3d 90. We granted defendant's petition for leave to 
appeal. 166 Ill. 2d R. 315. We reverse in part the judgment of the appellate 
court on the basis that plaintiffs' state claims were barred by the doctrine of 
res judicata.
BACKGROUND
According to the allegations of plaintiffs' amended complaint, which we take 
as true for purposes of our review of the rulings on defendant's motion to 
dismiss (see Calloway v. Kinkelaar, 168 Ill. 2d 312, 325 (1995)), River 
Park, Inc. (River Park), had an ownership interest in a 162-acre piece of land 
in the City of Highland Park known as the Highland Park Country Club (Country 
Club). Plaintiff Spatz & Company (Spatz) was a builder and had purchased the 
capital stock of River Park. Spatz's purchase of the capital stock was financed 
in part by a loan from LaSalle National Bank of Chicago (LaSalle). The loan was 
secured by a mortgage on the Country Club property. Plaintiff Country Club 
Estates (CCE) was a limited partnership and purchased a portion of the Country 
Club property from River Park in 1991.
In July 1988, Spatz petitioned defendant on behalf of River Park to obtain 
approval for its plans to develop the Country Club property. In the petition, 
Spatz requested that defendant change the zoning classification of one portion 
of this property from R-1 to R-4. The petition also included a request for 
approval of a planned residential development on the property.
Between April 1988 and October 1989, Spatz appeared at numerous hearings 
before the City of Highland Park plan commission. While Spatz's petition was 
pending before the commission, a city council member, Raymond Geraci, formed a 
citizen's group named "Save the Open Space," the purpose of which was to 
encourage defendant to purchase the property in order to prevent Spatz's planned 
development. Geraci also proposed at city council meetings that defendant 
purchase the property in order to prevent Spatz's development. Without Spatz's 
knowledge, the city council ordered studies to assess the economic feasibility 
of defendant's purchase of the property.
On November 14, 1989, the commission approved the zoning change Spatz had 
proposed. The commission also approved the planned development, with certain 
modifications. On November 22, 1989, the commission provided the city council 
with an unconditional recommendation for approval of the zoning change and the 
planned development.
Between November 1989 and January 22, 1990, Spatz appeared before the city 
council three times to discuss the commission's recommendation. During this 
time, the city council received the results of the feasibility studies in 
executive session. The city council did not, however, communicate to Spatz that 
it was interested in purchasing the property. On January 22, 1990, the city 
council adopted the commission's zoning recommendation and approved the 
preliminary development plan.
For Spatz to obtain final approval, defendant's zoning ordinance required it 
to provide the commission and the city council with final engineering plans and 
a final development plan that conformed with the preliminary plan. In addition, 
Spatz was required by defendant's zoning ordinance to obtain the city engineer's 
verification that the engineering plans complied with applicable statutes and 
ordinances. According to the ordinance, if a developer failed to receive the 
city engineer's approval of the engineering plans within one year of preliminary 
plat approval, the development plan would be deemed withdrawn.
In April 1990, Spatz submitted the final engineering plans to the city 
engineering department. The city engineer refused Spatz's requests to review or 
discuss the plans until October 5, 1990. At that time, defendant's engineers and 
Spatz's engineers agreed that, with certain modifications and corrections, 95% 
of the engineering plans were complete and satisfied all of defendant's 
requirements. Defendant's engineers agreed to review the remaining 5% of the 
plans by December 1, 1990, and provide criteria for completion of those 
plans.
Spatz made the necessary corrections for the 95% of the plans already 
reviewed by defendant's engineers, but the city engineer refused to review 
either the corrected plans or the other 5% by the December 1 deadline. Spatz 
requested that its rezoning petition be placed on the city council agenda so 
that Spatz could obtain the council's approval of its plans prior to January 22, 
1991, the date on which the engineering review period would expire. Based on the 
city engineer's failure to act on the plans, however, the city council refused 
Spatz's request to place the petition on its agenda.
Defendant was aware of Spatz's and River Park's financing arrangement with 
LaSalle and were advised by their attorney that, without approval of the final 
development plans by January 22, 1991, LaSalle would foreclose its mortgage on 
the Country Club property. On January 22, 1991, the city council withdrew its 
preliminary approval of the plans and informed Spatz that, in order to have the 
zoning of the Country Club property changed, it would be required to start the 
commission review process from the beginning.
As a result of defendant's failure to approve the final development plans, 
River Park was forced to declare bankruptcy. As part of the bankruptcy 
reorganization plan, River Park entered into an agreement to sell 34 acres of 
the Country Club property to CCE. In March 1991, River Park, Spatz, and CCE 
filed a new petition with defendant, in which they requested R-4 zoning only for 
the 34-acre parcel purchased by CCE. Again, plaintiffs participated in public 
hearings on the petition before the commission. The transcript of these hearings 
was delivered to the commission on June 29, 1992. Under defendant's zoning 
ordinance, the commission had 45 days from this date to vote on the 
petition.
In June 1992, LaSalle instituted foreclosure proceedings on the Country Club 
property. Plaintiffs entered into an agreement with LaSalle whereby they would 
continue to pursue rezoning and would have the right to redeem the property if 
their efforts were successful. Defendant was aware of this arrangement with 
LaSalle. Without plaintiffs' knowledge, however, defendant negotiated with 
LaSalle for the purchase of the mortgaged property while the second petition for 
rezoning was pending.
On July 21, 1992, the commission adopted a resolution requiring plaintiffs to 
submit proof of their ownership of the subject property by August 11, 1992. The 
resolution further provided that the commission would deem the petition 
withdrawn if it did not receive plaintiffs' evidence of title by this date. 
Plaintiffs challenged the commission's authority to require them to provide 
evidence of ownership. Nevertheless, they notified the commission that they had 
requested proof of title from LaSalle but would be unable to obtain this 
documentation by August 11, 1992. The commission refused to grant plaintiffs an 
extension of time. When plaintiffs attempted to present proof of ownership at a 
later commission meeting, the commission informed plaintiffs that their petition 
had been deemed withdrawn and that they would be required to once again start 
the rezoning process from the beginning.
Subsequently, defendant purchased the Country Club property from LaSalle for 
$10 million, a price far below the market value of the property. According to 
plaintiffs' information and belief, defendant sold or attempted to sell 
substantial portions of this property to others for residential development.
Based on these alleged events, on February 23, 1993, plaintiffs filed a 
two-count complaint against defendant in the United States District Court for 
the Northern District of Illinois. In this complaint, plaintiffs asserted that 
defendant was liable pursuant to 42 U.S.C. §1983 (1994) for depriving them of 
their property rights without due process of law in violation of the United 
States Constitution. According to plaintiffs, they had a legal entitlement to 
approval of their engineering plans and to the rezoning they requested. They 
alleged that defendant's failure to act on the plans and vote on their second 
petition deprived them of this property right without due process of law. The 
complaint alleged no claims under state law.
Defendant filed a motion to dismiss plaintiffs' federal complaint for lack of 
subject matter jurisdiction and for failure to state a claim upon which relief 
can be granted. See Fed. R. Civ. P. 12(b)(1), (b)(6). On July 22, 1993, the 
district court issued a written order in which it found that plaintiffs' had 
failed to allege a violation of due process. The court therefore granted 
defendant's motion and dismissed plaintiffs' complaint with prejudice. River 
Park v. City of Highland Park, No. 93-C-1179, slip op. at 11-12 (N.D. Ill. 
July 22, 1993). On April 25, 1994, the United States Court of Appeals for the 
Seventh Circuit affirmed the dismissal of plaintiffs' federal complaint. 
River Park, Inc. v. City of Highland Park, 23 F.3d 164 (7th Cir. 
1994).
Having failed in their attempt to obtain a remedy for defendant's actions in 
federal court, plaintiffs filed a six-count complaint against defendant in the 
circuit court of Lake County on November 21, 1994. On March 15, 1995, they filed 
an amended complaint, which added a seventh count. The theories of relief 
asserted in plaintiffs' amended complaint were based on state law and included, 
inter alia, (1) tortious interference with business expectancy, (2) 
breach of implied contract, and (3) abuse of governmental power. In the tortious 
interference with business expectancy count of the amended complaint, plaintiffs 
alleged that they had a reasonable expectation of entering into profitable sale 
and development contracts and that defendant had intentionally interfered with 
this expectancy by delaying the rezoning and plat approval process in order to 
acquire the property at a price less than market value. With respect to their 
claim for breach of implied contract, plaintiffs alleged that, by accepting the 
fee they paid for processing their zoning petition, defendant entered into an 
implied contract to process this petition in good faith. They alleged that 
defendant breached this agreement by prolonging the zoning process, by failing 
to review the engineering plans within a reasonable period of time, and by 
deeming their application withdrawn. In the abuse of power count of their 
amended complaint, plaintiffs alleged that, by forcing them into bankruptcy and 
foreclosure in order to acquire their land at a reduced price, defendant abused 
its power under the Illinois Constitution to acquire private property for public 
use in exchange for just compensation. In each of these counts, plaintiffs 
requested damages of $25 million. They requested an additional $25 million in 
punitive damages for their abuse of governmental power claim.
Defendant filed a motion pursuant to section 2-615 of the Code of Civil 
Procedure (735 ILCS 5/2-615 (West 1994)) to dismiss plaintiffs' amended 
complaint in its entirety for failure to state a claim. The circuit court 
granted defendant's motion and dismissed all counts of plaintiffs' complaint 
with prejudice.
On appeal, the appellate court affirmed the circuit court's dismissal of all 
but three of the counts included in plaintiffs' amended complaint. The appellate 
court found that the circuit court had erred in dismissing the counts of 
plaintiffs' complaint involving tortious interference with business expectancy, 
breach of implied contract, and abuse of governmental power. The court remanded 
the cause for further proceedings on these counts. River Park, Inc. v. City 
of Highland Park, 281 Ill. App. 3d 154 (1996) (River Park I).(1) 
This court denied the City's petition for leave to appeal from this decision. 
River Park, Inc. v. City of Highland Park, 168 Ill. 2d 624 (1996).
On remand, defendant moved to dismiss the remaining three counts of 
plaintiffs' amended complaint. Defendant requested that these claims be 
dismissed pursuant to section 2-619 of the Code of Civil Procedure on the basis 
that (1) plaintiffs' claims were barred under the doctrine of res 
judicata by the dismissal of plaintiffs' federal complaint, and (2) the 
one-year statute of limitations contained in section 8-101 of the Local 
Governmental and Governmental Employees Tort Immunity Act (745 ILCS 10/8-101 
(West 1996)) (Tort Immunity Act) barred plaintiffs' claims. The circuit court 
granted this motion and dismissed plaintiffs' complaint with prejudice.
Plaintiffs again appealed the dismissal of their complaint to the appellate 
court. The appellate court affirmed the circuit court's dismissal of plaintiffs' 
tortious interference with business expectancy claim, but it reversed the 
dismissal of their claims for breach of implied contract and for abuse of 
governmental power. 295 Ill. App. 3d 90 (River Park II).(2) 
The appellate court found that plaintiffs' state claims were not barred by the 
doctrine of res judicata. According to the appellate court, the 
dismissal of plaintiffs' federal complaint was not an adjudication on the merits 
because it was based on lack of subject matter jurisdiction as well as failure 
to state a claim. In addition, the court found that the doctrine of res 
judicata did not apply because the cause of action asserted in plaintiffs' 
federal complaint differed from the cause of action alleged in the complaint 
they filed in state court. River Park II, 295 Ill. App. 3d at 94. 
Although the appellate court found that plaintiffs' claim for tortious 
interference with business expectancy was barred by the one-year statute of 
limitations contained in section 8-101 of the Tort Immunity Act, it held that 
this provision did not apply to plaintiffs' claims for breach of implied 
contract and abuse of governmental power. The court reasoned that section 2-101 
of the Tort Immunity Act (745 ILCS 5/2-101 (West 1996)) exempts contract actions 
from the provisions of the Act and that the Act has been held to be inapplicable 
to violations of constitutional rights. The court concluded that the five-year 
statute of limitations contained in section 13-205 of the Code of Civil 
Procedure (735 ILCS 5/13-205 (West 1996)) governed these claims and that they 
had been filed within this time limit. The appellate court, therefore, remanded 
the cause for further proceedings on plaintiffs' claims for breach of implied 
contract and abuse of governmental power. River Park II, 295 Ill. App. 
3d at 97.
Defendant filed a petition for leave to appeal as a matter of right or, in 
the alternative, for leave to appeal pursuant to Illinois Supreme Court Rule 315 
(166 Ill. 2d R. 315; 134 Ill. 2d R. 317). We granted their petition. We also 
allowed amicus curiae briefs to be filed by the City of Chicago, Cook 
County, and the Illinois Municipal League. For the reasons that follow, we 
reverse the judgment of the appellate court.
ANALYSIS
In this court, defendant argues that it was error for the appellate court to 
reinstate plaintiffs' claims for breach of implied contract and abuse of 
governmental power in River Park II. Defendant asserts four bases for 
reversing the appellate court: (1) the dismissal of plaintiffs' federal 
complaint precludes their state claims under the doctrine of res 
judicata; (2) plaintiffs' state claims are untimely pursuant to the 
one-year statute of limitations contained in section 8-101 of the Tort Immunity 
Act (745 ILCS 10/8-101 (West 1994)); (3) defendant is immune from liability 
pursuant to section 2-104 of the Tort Immunity Act (745 ILCS 5/2-104 (West 
1996), which provides local governmental entities with immunity from liability 
associated with refusals to issue permits and licenses; and (4) plaintiffs have 
failed to state a claim for breach of implied contract.
Plaintiffs respond that the appellate court's reasoning and holding in 
River Park II were correct and, therefore, the first two arguments 
defendant raises do not warrant reversal of its judgment. With respect to 
defendant's third and fourth arguments, plaintiffs assert that these issues are 
not properly before us. They argue that these issues were resolved in their 
favor by the appellate court in River Park I, and this court denied 
defendant's petition for leave to appeal from that decision. In addition, they 
contend that defendant's failure to present these issues to the appellate court 
in River Park II precludes it from raising them in this court. In 
addition to making this waiver argument in their brief, plaintiffs filed a 
motion asking us to strike the portions of defendant's brief addressing these 
issues. We ordered plaintiffs' motion taken with the case.
We begin by addressing defendant's argument that the doctrine of res 
judicata required the dismissal of plaintiffs' claims for breach of implied 
contract and abuse of governmental power. Under the doctrine of res 
judicata, a final judgment on the merits rendered by a court of competent 
jurisdiction acts as a bar to a subsequent suit between the parties involving 
the same cause of action. Rein v. David A. Noyes & Co., 172 Ill. 2d 325, 334-35 (1996); Rodgers v. St. Mary's Hospital, 149 Ill. 2d 302, 
311-12 (1992). The bar extends to what was actually decided in the first action, 
as well as those matters that could have been decided in that suit. 
La Salle National Bank v. County Board of School Trustees, 61 Ill. 2d 524, 529 (1975). For the doctrine of res judicata to apply, the 
following three requirements must be satisfied: (1) there was a final judgment 
on the merits rendered by a court of competent jurisdiction, (2) there is an 
identity of cause of action, and (3) there is an identity of parties or their 
privies. Downing v. Chicago Transit Authority, 162 Ill. 2d 70, 73-74 
(1994).
In the case before us, the parties do not dispute that plaintiffs' federal 
and state suits involve an identity of parties. They do, however, disagree with 
respect to the existence of the other two prerequisites to the application of 
the res judicata doctrine. According to defendant, the federal court 
dismissed plaintiffs' complaint for failure to state a claim, which operated as 
a final adjudication on the merits. In addition, defendant contends that the 
causes of action asserted in plaintiffs' federal and state complaints are the 
same because they arose out of the same core of operative facts. Defendant notes 
that both actions were based on its alleged wrongful refusal to act on or 
approve plaintiffs' plan to develop the Country Club property, resulting in 
foreclosure and the plaintiffs' loss of this property.
By contrast, plaintiffs argue that the dismissal of their federal complaint 
was based in part on a lack of subject matter jurisdiction and was, therefore, 
not a decision on the merits. They also dispute defendant's assertion that their 
federal and state suits involved the same cause of action. Plaintiffs argue that 
their section 1983 action required "proof of facts (i.e., a federally 
protected property interest and violation of due process) which are not 
necessary" to sustain their state claims for breach of implied contract and 
abuse of governmental power. Since the evidence necessary to prove their state 
and federal claims is different, plaintiffs maintain that these suits do not 
constitute the same cause of action.
To determine whether the doctrine of res judicata applies in this 
case, our initial inquiry is whether the dismissal of plaintiffs' federal 
complaint was a final judgment on the merits. Illinois Supreme Court Rule 273 
provides:
Under Illinois law, therefore, it is clear that the dismissal of a complaint 
for failure to state a claim is an adjudication on the merits (see Bentley 
v. Glenn Shipley Enterprises, Inc., 248 Ill. App. 3d 647, 650 (1993); 
McGann v. Illinois Hospital Ass'n, 172 Ill. App. 3d 560, 568-69 
(1988)), while the dismissal of a complaint for lack of subject matter 
jurisdiction is not considered a decision on the merits of that complaint (see 
Lenz v. Julian, 276 Ill. App. 3d 66, 74 (1995)). The same is true under 
federal law. See Fed. R. Civ. P. 41(b); Cannon v. Loyola University, 
609 F. Supp. 1010, 1015 (N.D. Ill. 1985) (dismissal for failure to state a claim 
operates as an adjudication on the merits); Paganis v. Blonstein, 3 F.3d 1067, 1071 (7th Cir. 1993) (same); Bunker Ramo Corp. v. United Business 
Forms, Inc., 713 F.2d 1272, 1277 (7th Cir. 1983) (dismissal for lack of 
subject matter jurisdiction does not operate as an adjudication on the 
merits).
Neither party challenges these principles. Instead, they disagree with 
respect to the basis of the federal court's dismissal of plaintiffs' complaint. 
Defendant argues that the federal court dismissed the complaint for failure to 
state a claim, while plaintiffs maintain that the dismissal was for failure to 
state a claim and lack of subject matter jurisdiction. Our review of 
the text of the decisions issued by the federal district and appellate courts 
convinces us that defendant's interpretation is the correct one.
In the opening paragraph of its written memorandum opinion and order, the 
district court notes that the bases for defendant's motion to dismiss 
plaintiffs' complaint were failure to state a claim (Fed. R. Civ. P. 12(b)(6)), 
as well as lack of subject matter jurisdiction (Fed. R. Civ. P. 12(b)(1)). No 
further mention of this jurisdictional issue is made in the court's opinion, and 
it is clear from the court's analysis that lack of subject matter jurisdiction 
was not the reason for its decision to dismiss plaintiffs' complaint. For 
example, the district court's opinion begins by reciting the standards for 
dismissal for failure to state a claim: "Dismissal of the complaint is proper 
only if it appears beyond doubt that the plaintiffs can prove no set of facts in 
support of their claim which would entitle them to relief." River Park, Inc. 
v. City of Highland Park, No. 93-C- 1179, slip op. at 1-2 (July 22, 1993). 
In the remainder of the opinion, the court explains that plaintiffs failed to 
establish the second element of their section 1983 action, the deprivation of a 
property interest without due process of law. According to the district court, 
plaintiffs' allegations failed to show an entitlement to the rezoning they 
sought: "[P]laintiffs do not allege a protectable interest implicating due 
process. Therefore, River Park's due process claims will be dismissed." 
River Park, slip op. at 11. Moreover, the district court observed that, 
even if plaintiffs had established a property interest, they would be unable to 
establish a due process violation because "allegations of arbitrary and 
irrational application of zoning ordinances are not sufficient to state a 
substantive due process claim." River Park, slip op. at 11-12. 
According to the district court, plaintiffs would have to rely on state law for 
relief. The district court, therefore, dismissed their complaint with prejudice. 
River Park, slip op. at 11-12.
Thus, the language of the district court's opinion does not permit the 
conclusion that the jurisdictional issue raised in defendant's motion to dismiss 
served as a basis for the court's decision to dismiss plaintiffs' complaint. 
Rather, its dismissal was plainly based on the insufficiency of the allegations 
of the complaint.
The Seventh Circuit's opinion affirming the district court's dismissal of 
plaintiffs' complaint also undermines plaintiffs' contention that the dismissal 
of their federal complaint was based on lack of subject matter jurisdiction in 
addition to failure to state a claim. The opinion is devoid of any references to 
jurisdiction. Instead, like the district court's opinion, the Seventh Circuit 
opinion focuses exclusively on the insufficiency of the allegations of the 
complaint. See River Park, Inc. v. City of Highland Park, 23 F.3d 164, 
167 (7th Cir. 1993). Although the Seventh Circuit disagreed with the district 
court's conclusion that plaintiffs had failed to establish a protectable 
property interest, it affirmed the dismissal of plaintiffs' complaint because it 
found that the "process" plaintiffs had received was constitutionally 
sufficient. According to the Seventh Circuit, the due process clause of the 
United States Constitution imposes only minimal procedural requirements for 
municipalities in zoning cases and permits cities to make political zoning 
decisions, as defendant did in this case. The court noted that state law might 
impose more stringent procedural rules, but found that plaintiffs had failed to 
take advantage of their state remedies until it was too late. River 
Park, 23 F.3d  at 167.
After reviewing these federal decisions, we are unable to find any support 
for the appellate court's determination that lack of subject matter jurisdiction 
served as a basis for the dismissal of plaintiffs' federal complaint. Indeed, as 
defendant notes, the federal courts' review of the sufficiency of plaintiffs' 
allegations suggests the opposite conclusion. If, as plaintiff argues, the 
federal courts had found subject matter jurisdiction to be lacking, there would 
have been no need for the courts to discuss the sufficiency of plaintiffs' 
allegations. Further, without subject matter jurisdiction, they would have had 
no power to conduct this sort of review. See Steel Co. v. Citizens for a 
Better Environment, 523 U.S. ___, ___, 140 L. Ed. 2d 210, 227, 118 S. Ct. 1003, 1012 (1998) (" `Without jurisdiction the court cannot proceed at all 
in any cause. Jurisdiction is power to declare the law, and when it ceases to 
exist, the only function remaining to the court is that of announcing the fact 
and dismissing the cause' "), quoting Ex parte McCardle, 74 U.S. 
(7 Wall.) 506, 514, 19 L. Ed. 264, 265 (1869). The analysis contained in the 
federal court decisions concerning plaintiffs' complaint indicates that 
plaintiffs' failure to state a claim under 42 U.S.C. §1983 (1994) was the sole 
basis for dismissal. Accordingly, the dismissal of plaintiffs' federal complaint 
was an adjudication on the merits.
Having found that two of the three elements for the applicability of the 
res judicata doctrine are present in this case, we turn to a discussion 
of the third requirement: identity of cause of action. Recently, in Rodgers 
v. St. Mary's Hospital, 149 Ill. 2d 302, 311-12 (1992), we explained that 
Illinois courts have adopted two tests for determining whether causes of action 
are the same for purposes of res judicata. Under the "same evidence" 
test, a second suit is barred "if the evidence needed to sustain the second suit 
would have sustained the first, or if the same facts were essential to maintain 
both actions." Rodgers, 149 Ill. 2d  at 312. The "transactional" test 
provides that " ` "the assertion of different kinds or theories of 
relief still constitutes a single cause of action if a single group of operative 
facts give rise to the assertion of relief." ' " Rodgers, 149 Ill. 2d  at 312, quoting Pfeiffer v. William Wrigley Jr. Co., 139 Ill. 
App. 3d 320, 323 (1985), quoting Baird & Warner, Inc. v. Addison 
Industrial Park, Inc., 70 Ill. App. 3d 59, 64 (1979).
In almost all cases in which Illinois courts have discussed these two tests, 
the courts have found that the result of the analysis was the same, regardless 
of which test was applied. Courts, including this court, either have found that 
an identity of cause of action exists under either test (see, e.g., 
Rein v. David A. Noyes & Co., 172 Ill. 2d 325, 338-40 (1996); 
People ex rel. Burris v. Progressive Land Developers, Inc., 151 Ill. 2d 285, 295-96 (1992); Board of Education of Sunset Ridge School District No. 
29 v. Village of Northbrook, 295 Ill. App. 3d 909, 917 (1998); Zabel v. 
Cohn, 283 Ill. App. 3d 1043, 1051 (1996); but see Agriserve, Inc. v. 
Belden, 268 Ill. App. 3d 828, 830-37 (1994) (basing its decision on the 
transactional test only)) or they have found that there is no identity of cause 
of action under either test (see, e.g., Rodgers v. St. Mary's 
Hospital, 149 Ill. 2d 302, 312 (1992); Regan v. Ivanelli, 246 Ill. 
App. 3d 798, 807-08 (1993); City of Rolling Meadows v. National Advertising 
Co., 228 Ill. App. 3d 737, 743-44 (1991); Best Coin-Op, Inc. v. Paul F. 
Ilg Supply Co., 189 Ill. App. 3d 638, 654, 657 (1989); Pfeiffer v. 
William Wrigley Jr. Co., 139 Ill. App. 3d 320, 323-24 (1985)). As a result, 
it has been unnecessary for this court to decide which test is controlling if 
there is a conflict between the results.
In this case, however, the question of which test prevails when the results 
differ is presented by the parties' arguments. Although each party argues that 
we may decide the res judicata issue in their favor under either test, 
they clearly disagree as to which is the appropriate test. Plaintiffs rely on 
the same evidence test to show that their federal and state suits are not the 
same causes of action for purposes of res judicata. According to 
plaintiffs,
In support of their argument plaintiffs cite, inter alia, 
Schmitt v. Woods, 73 Ill. App. 3d 498 (1979), and Kahler v. Don E. 
Williams Co., 59 Ill. App. 3d 716 (1978). In these cases, the courts do not 
acknowledge the transactional test. Instead, these courts based their findings 
that the suits at issue did not involve the same cause of action exclusively on 
the same evidence test. See Schmitt, 73 Ill. App. 3d at 500; 
Kahler, 59 Ill. App. 3d at 718-19.
Defendant responds that plaintiffs' reliance on these older appellate court 
cases is inconsistent with recent decisions of this court adopting the 
transactional test. See Rein, 172 Ill. 2d at 338-39; Burris, 
151 Ill. 2d at 295-96; Rodgers, 149 Ill. 2d  at 312. Defendant also 
notes that the adoption of the transactional test is in accordance with the 
modern trend of court decisions, as well as the approach contained in the 
Restatement (Second) of Judgments. See Restatement (Second) of Judgments §24, 
Comment a, at 197 (1982). Based on these arguments by the parties, we 
find it appropriate in this case to address whether the transactional or same 
evidence test should be applied in cases involving issues of res 
judicata.
Although Illinois courts have generally reached the same result under either 
the transactional test or the same evidence test, it is important to note that 
these tests are not the same. As the language used to describe these tests in 
Rodgers indicates, under the same evidence test the definition of what 
constitutes a cause of action is narrower than under the transactional test. See 
Rodgers, 149 Ill. 2d  at 312. As explained in the Restatement (Second) 
of Judgments, the same evidence test is tied to the theories of relief asserted 
by a plaintiff, the result of which is that two claims may be part of the same 
transaction, yet be considered separate causes of action because the evidence 
needed to support the theories on which they are based differs. Restatement 
(Second) of Judgments §24, Comment a, at 197 (1982). By contrast, the 
transactional approach is more pragmatic. Under this approach, a claim is viewed 
in "factual terms" and considered "coterminous with the transaction, regardless 
of the number of substantive theories, or variant forms of relief flowing from 
those theories, that may be available to the plaintiff; *** and regardless of 
the variations in the evidence needed to support the theories or rights." 
Restatement (Second) of Judgments §24, Comment a, at 197 (1982).
This court has recognized the validity of the transactional test. See 
Rein, 172 Ill. 2d  at 338-39 ("to determine whether there is an identity 
of causes of action between the first and second suits, we must look to the 
facts that give rise to plaintiffs' right to relief, not simply to the facts 
which support the judgment in the first action, as plaintiffs contend"); 
Burris, 151 Ill. 2d  at 295, 296 ("A cause of action is defined by the 
facts which give the plaintiff a right to relief. While one group of facts may 
give rise to a number of different theories of recovery, there remains only a 
single cause of action. *** [I]n this matter, the single group of operative 
facts common to both cases is that monies used to form Progressive came from the 
members of the Nation and therefore constituted charitable assets"); 
Rodgers, 149 Ill. 2d  at 312. Like other Illinois courts, however, we 
have also continued to use the standards contained in the same evidence test in 
our analysis of res judicata cases. See Rein, 172 Ill. 2d at 
338-39; Burris, 151 Ill. 2d at 295-96; Rodgers, 149 Ill. 2d  at 
312. Not only has this resulted in courts having to engage in lengthy analyses 
of claims under both tests, it has also created confusion as to the proper 
application of these tests. See Agriserve, Inc. v. Belden, 268 Ill. 
App. 3d 828, 837-38 (1994) (Cook, J., specially concurring) (noting that some 
courts have mistakenly indicated that the tests are the same and suggesting that 
the court reject the same evidence test); see also 4 R. Michael, Illinois 
Practice §41.5, at 315 (1989) ("It is submitted that Illinois should adopt the 
Restatement Second position, and eliminate the contradiction and confusion in 
the cases"). In this case, defendant suggests that the continued application of 
the same evidence test is inconsistent with our adoption of the transactional 
test. We agree.
Having adopted the more liberal transactional test for determining whether 
claims are part of the same transaction, it makes little sense to perform the 
identity-of-cause-of-action analysis under the more stringent standards of the 
same evidence test. If these stricter standards are indeed controlling, our 
acceptance of the transactional test would be meaningless. Consequently, our 
approval of the transactional test necessitates a rejection of the same evidence 
test. Accordingly, we hold that the same evidence test is not determinative of 
identity of cause of action. Instead, pursuant to the transactional analysis, 
separate claims will be considered the same cause of action for purposes of 
res judicata if they arise from a single group of operative facts, 
regardless of whether they assert different theories of relief. See 
Rodgers, 149 Ill. 2d  at 312. Of course, under the transactional 
analysis, the nature of the evidence needed to prove the claims at issue remains 
relevant for purposes of demonstrating that the claims arise from the same group 
of operative facts. Unlike the same evidence test, however, the transactional 
test permits claims to be considered part of the same cause of action even if 
there is not a substantial overlap of evidence, so long as they arise from the 
same transaction. See Restatement (Second) of Judgments §24, Comment b, 
at 199.
Our adoption of the transactional test in lieu of the same evidence 
test is consistent with the approach proposed in the Restatement (Second) of 
Judgments, as well as the trend of decisions in other jurisdictions. In 1982, 
the Restatement abandoned the same evidence test in favor of the transactional 
test. See Agriserve, 268 Ill. App. 3d at 838 (Cook, J., specially 
concurring). The current version of the Restatement advances the transactional 
test:
The Restatement further provides that a claim is extinguished under these 
principles,
Like the Restatement, a majority of federal courts, as well as numerous 
courts in other states, have applied a transactional analysis when determining 
whether there is an identity of cause of action for purposes of res 
judicata. See, e.g., Massachusetts School of Law at Andover, 
Inc. v. American Bar Ass'n, 142 F.3d 26, 38 (1st Cir. 1998); Landscape 
Properties, Inc. v. Whisenhunt, 127 F.3d 678, 684 (8th Cir. 1997); 
Stanton v. District of Columbia Court of Appeals, 127 F.3d 72, 78 (D.C. 
Cir. 1997); Computer Associates International, Inc. v. Altai, Inc., 126 F.3d 365, 369 (2d Cir. 1997); Roboserve, Inc. v. Kato Kagaku Co., 121 F.3d 1027, 1034-35 (7th Cir. 1997); King v. Union Oil Co., 117 F.3d 443, 445 (10th Cir. 1997); In re Varat Enterprises, Inc., 81 F.3d 1310, 
1316 (4th Cir. 1996); In re Int'l Nutronics, Inc., 28 F.3d 965, 971 
(9th Cir. 1994); Agrilectric Power Partners, Ltd. v. General Electric 
Co., 20 F.3d 663, 665 (5th Cir. 1994); Board of Trustees of Trucking 
Employees of North Jersey Welfare Fund, Inc.-Pension Fund v. Centra, 983 F.2d 495, 504 (3d Cir. 1992); In re Justice Oaks II, Ltd., 898 F.2d 1544, 1551 (11th Cir. 1990); Young Engineers, Inc. v. United States 
International Trade Comm'n, 721 F.2d 1305, 1314-15 (Fed. Cir. 1983); 
Terry ex rel. Christian Book Center v. Taylor, 293 Ark. 237, 240, 737 S.W.2d 437, 438 (1987); Delahunty v. Massachusetts Mutual Life Insurance 
Co., 236 Conn. 582, 590, 674 A.2d 1290, 1294-95 (1996); Faulkner v. 
Government Employees Insurance Co., 618 A.2d 181, 183 (D.C. App. 1992); 
Kauhane v. Acutron Co., 71 Haw. 458, 464, 795 P.2d 276, 279 (1990); 
Vergne v. Lamaze, 670 So. 2d 599, 601-02 (La. App. 1996); Petit v. 
Key Bancshares of Maine, Inc., 635 A.2d 956, 959 (Me. 1993); Douglas v. 
First Security Federal Savings Bank, Inc., 101 Md. App. 170, 188, 643 A.2d 920, 929 (1994); Bergeron v. Busch, 228 Mich. App. 618, 620-21, 579 N.W.2d 124, 126 (1998); Delhagen v. Miracle Recreation Equipment Co., 
924 S.W.2d 582, 586 (Mo. App. 1996); Grava v. Parkman Township, 73 Ohio 
St. 3d 379, 382, 653 N.E.2d 226, 229 (1995); Eigabri v. Lekas, 681 A.2d 271, 276-77 (R.I. 1996); Barr v. Resolution Trust Corp., 837 S.W.2d 627, 630-31 (Tex. 1992); Northern States Power Co. v. Bugher, 189 Wis. 
2d 541, 553, 525 N.W.2d 723, 728-29 (1995). Our decision in this case that the 
transactional test should control is in accordance with these authorities, as 
well as this court's existing recognition of this analysis.
We now turn to an application of the transactional test to the case before 
us. Under this test, we find that plaintiffs' claims for breach of implied 
contract and abuse of governmental power are the same cause of action as the 
section 1983 claim alleged in their federal complaint. Plaintiffs' federal and 
state claims are the same cause of action for purposes of res judicata 
because they arise from the same core of operative facts. Like their section 
1983 action, plaintiffs' state law claims are based on defendant's alleged 
refusals to timely process and approve their rezoning petition in an effort to 
deprive plaintiffs of their rightful use of their property. Plaintiffs 
themselves concede in their brief that "both the federal action and the present 
state action in the case at bar arise out of the processing of the plaintiffs' 
applications for plan approval by the defendant and both actions seek damages 
for the wrongful acts of the defendants in processing those applications."
Perhaps the most telling indication of identity of cause of action in this 
case, however, is the parallels between the factual allegations of plaintiffs' 
state complaint and their federal complaint. In support of their section 1983 
claim, plaintiffs alleged, inter alia, that (1) they had received 
preliminary approval of their zoning request and development plan, (2) as a 
result of the city engineer's refusal to act on the engineering plans they 
submitted, defendant withdrew its preliminary approval, (3) the withdrawal of 
this approval resulted in LaSalle's foreclosure on the property, (4) defendant 
was without authority to demand proof of plaintiffs' ownership of the property 
and failed to give plaintiffs a reasonable time to provide this information, (5) 
plaintiffs were entitled to the zoning approval they requested, and (6) 
defendant's refusals to properly process plaintiffs' request for rezoning were 
intended to prevent plaintiffs' development of the Country Club property so that 
defendant could purchase the property itself at a reduced price. As our previous 
description of the facts contained in plaintiffs' state complaint demonstrates, 
the facts on which they base their claim for relief under state law are 
virtually identical to the facts on which their federal claim was based. 
In arguing that their federal and state claims are not the same causes of 
action, plaintiffs rely on differences in the theories of relief asserted in 
these suits. This is contrary to the principles of the transactional analysis, 
which we have explained before and reaffirm in this case. As we stated in 
Torcasso v. Standard Outdoor Sales, Inc., 157 Ill. 2d 484, 490-91 
(1993), suits involving different theories of relief may constitute the same 
cause of action:
See also People ex rel. Burris v. Progressive Land Developers, Inc., 
151 Ill. 2d 285, 295 (1992) ("A cause of action is defined by the facts which 
give the plaintiff a right to relief"). For example, in Burris, we 
found that the causes of action asserted in a probate proceeding and an unjust 
enrichment suit were the same for purposes of res judicata. The suits 
in Burris concerned the ownership of assets contributed to a charitable 
religious movement organized by Elijah Muhammad. These assets were kept in a 
fund entitled "Elijah Muhammad's Number Two Poor Fund Treasury." During 
Muhammad's lifetime, some of these assets were transferred from the Poor Fund 
Treasury to Progressive Land Developers, Inc. After he died intestate, 
Muhammad's heirs filed a petition in the probate proceeding to recover for the 
estate assets transferred from the Poor Fund Treasury. In addition, the Attorney 
General filed an unjust enrichment action against Progressive, in which the 
Attorney General alleged that Progressive had no entitlement to the charitable 
funds transferred from the Poor Fund Treasury. Burris, 151 Ill. 2d  at 
287-88.
We upheld the appellate court's decision that the decision on the heirs' 
petition in the probate proceeding barred the Attorney General's unjust 
enrichment suit under the doctrine of res judicata. We explained that 
these causes of action were the same: "[T]he single group of operative facts 
common to both cases is that monies used to form Progressive came from the 
members of the Nation and therefore constituted charitable assets. [Citation.]" 
Burris, 151 Ill. 2d  at 295-96. See also, e.g., Board of Education 
of Sunset Ridge School District No. 29 v. Village of Northbrook, 295 Ill. 
App. 3d 909, 917 (1998) (earlier suit between the parties concerning annexation 
involved the same cause of action as a subsequent suit involving annexation); 
Zabel v. Cohn, 283 Ill. App. 3d 1043, 1049-50 (1996) (former employee's 
suit against employer for unjust enrichment, breach of contract, quantum 
meruit, and administrative review of the dismissal of his wage claim 
involved the same cause of action as his previous suit alleging an entitlement 
to a distribution of the assets of the law firm where he worked); Bennett v. 
Gordon, 282 Ill. App. 3d 378, 383 (1996) (attorney's fee petition and 
client's legal malpractice action were the same cause of action); Horton v. 
Caterpillar, Inc., 260 Ill. App. 3d 150, 153 (1994) (employee's federal 
action against his employer was the same cause of action as his state claim for 
retaliatory discharge).
In the case before us, our review of the pleadings convinces us that there is 
no material difference between plaintiffs' federal and state causes of action. 
Plaintiffs' assertion of state law claims for breach of implied contract and 
abuse of governmental power after their section 1983 action was dismissed was 
merely a "substitution of labels" (Neuberg v. Michael Reese Hospital & 
Medical Center, 118 Ill. App. 3d 93, 99 (1983) (holding that a suit for 
fraud was barred under the doctrine of res judicata by the dismissal of 
an earlier suit for intentional infliction of emotional distress); see also 
Phillips v. Elrod, 135 Ill. App. 3d 70, 75 (1985) (the plaintiff's 
state wrongful death suit was the same cause of action as her previously 
dismissed federal section 1983 case); Restatement of Judgments 2d §25, Comment 
e, at 213 (1982) (a given claim may be based on either federal or state 
law and, if a plaintiff brings an action where he could have presented both 
grounds, he may not bring a second action presenting the other ground). We hold 
that the breach of implied contract and abuse of governmental power claims 
contained in the amended complaint plaintiffs filed in state court are the same 
cause of action as the section 1983 claim alleged in plaintiffs' federal 
complaint. Accordingly, the three requirements for the application of the 
doctrine of res judicata are satisfied in this case.
Nevertheless, plaintiffs contend that the doctrine of res judicata 
should not bar their state claims because they could not have asserted these 
claims in federal court. According to plaintiffs, the district court would have 
lacked subject matter jurisdiction over these claims after it dismissed their 
section 1983 action. This argument is unavailing.
While it is true that the doctrine of res judicata does not bar a 
claim if a court would not have had subject matter jurisdiction to decide that 
claim in the first suit involving the same cause of action (see Airtite v. 
DPR Ltd. Partnership, 265 Ill. App. 3d 214, 219 (1994); Restatement 
(Second) of Judgments §26(1) (1982)), we cannot say in this case that the 
district court would have lacked jurisdiction over plaintiffs' state law claims. 
Federal courts are entitled to exercise supplemental jurisdiction over claims 
that are part of the "same case or controversy" as a claim over which they have 
original jurisdiction. 28 U.S.C. §1367 (a) (1994). Plaintiffs do not argue that 
their state claims would not have been considered part of the same case or 
controversy of their section 1983 claim. Instead, they contend that the district 
court would have dismissed these state claims for lack of subject matter 
jurisdiction when it dismissed their section 1983 claim. Contrary to plaintiffs' 
assertion, a district court is not required to dismiss pendent state claims 
after dismissing the claim from which its original jurisdiction stems. Instead, 
a district court has the discretion to exercise supplemental jurisdiction over 
pendent state claims under these circumstances. See 28 U.S.C. §1367 (c) (1994) 
("[t]he district courts may decline to exercise supplemental 
jurisdiction over a claim *** if *** (3) the district court has dismissed all 
claims over which it has original jurisdiction" (emphasis added)); Timm v. 
Mead Corp., 32 F.3d 273, 276-77 (7th Cir. 1994).
In this case, we cannot agree with plaintiffs that, had they attempted to 
bring their state claims in federal court, the district court would have 
dismissed them for lack of subject matter jurisdiction after it dismissed their 
section 1983 claim. First, plaintiffs filed no state claims in federal court. 
Consequently, we do not know whether the district court would have refused to 
exercise supplemental jurisdiction over these claims. In addition, federal 
courts have chosen to exercise supplemental jurisdiction under circumstances 
similar to those in this case. See, e.g., Timm v. Mead Corp., 
32 F.3d 273, 274 (7th Cir. 1994) (upholding the district court's exercise of 
supplemental jurisdiction over the plaintiff's pendent state claims after 
granting summary judgment in favor of the defendant on the plaintiff's federal 
claim); Myers v. County of Lake, 30 F.3d 847 (7th Cir. 1994) (upholding 
the district court's exercise of supplemental jurisdiction over the plaintiffs' 
pendent state claims after granting summary judgment in favor of the defendant 
on the plaintiffs' federal claim). Plaintiffs' state claims are, therefore, 
claims that "could have been decided" in their federal suit. As such, they are 
barred under the doctrine of res judicata by the dismissal of the 
federal suit.
Plaintiffs argue that it is unfair to bar their state claims under the 
res judicata doctrine. They profess that they are caught in a 
"Catch-22" situation: the federal courts directed them to seek relief in state 
court, but the Circuit Court of Lake County held that their state claims were 
barred by the dismissal of their federal action. We observe, however, that any 
"Catch-22" situation was created by plaintiffs themselves when they chose not to 
assert their state causes of action in their suit in federal court. "The purpose 
of res judicata is to promote judicial economy by requiring parties to 
litigate, in one case, all rights arising out of the same set of operative facts 
and also [to] prevent[] the unjust burden that would result if a party could be 
forced to relitigate what is essentially the same case." Henstein v. 
Buschbach, 248 Ill. App. 3d 1010, 1015-16 (1993); see also Rein v. 
David A. Noyes & Co., 172 Ill. 2d 325, 343 (1996). This purpose would 
be undermined if plaintiffs were permitted to pursue their state claims after 
bringing the same cause of action against defendant in federal court. We hold 
that the circuit court properly dismissed plaintiffs' claims for breach of 
implied contract and abuse of governmental power under the doctrine of res 
judicata, and the appellate court erred in overturning the dismissal of 
these claims.
Given our decision that the doctrine of res judicata requires us to 
reverse the appellate court's judgment, it is unnecessary for us to address the 
merits of the other three bases proposed by defendant for reversal. The portions 
of defendant's brief that plaintiffs ask us to strike in the motion taken with 
the case, therefore, concern issues that do not affect our disposition of this 
appeal. We hereby deny that motion.
The judgment of the appellate court is affirmed in part and reversed in part, 
and the judgment of the circuit court, dismissing plaintiffs' complaint, is 
affirmed.
Appellate court judgment affirmed
in part and reversed in part;
circuit court judgment affirmed.
Footnotes
1. To facilitate our discussion of the procedural history of 
this case, we will refer to the state court proceedings up to and including the 
1996 appellate court decision as River Park I.
2. We refer to the proceedings in state court after remand 
as River Park II.