Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-15-03113/USCOURTS-ca7-15-03113-0/pdf.json

Parties Involved:
City of Chicago
Appellee
Manistee Apartments, LLC
Appellant

Document Text:

In the 

United States Court of Appeals 

For the Seventh Circuit ____________________

No. 15‐3113

MANISTEE APARTMENTS, LLC,

individually and as class representative,

Plaintiff‐Appellant,

v.

CITY OF CHICAGO, a municipal corporation,

Defendant‐Appellee.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 1:14‐cv‐06813 — Robert W. Gettleman, Judge.

____________________

ARGUED SEPTEMBER 28, 2016 — DECIDED DECEMBER 20, 2016

____________________

Before POSNER, FLAUM, and MANION, Circuit Judges.

MANION, Circuit Judge. Plaintiff Manistee Apartments sued

the City of Chicago alleging that the City violated their due

process rights by refusing to release judgment liens until the

debtors paid attorneys’ fees and costs. The district court

dismissed the plaintiff’s class action complaint, holding that

the plaintiff  suffered no deprivation of a constitutionally

protected property interest. The court also denied the

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plaintiff’s motion for reconsideration and for leave to file an

amended complaint. For the reasons below, we affirm.

I.  BACKGROUND

On September 19, 2011, the City of Chicago obtained a

default administrative judgment of $3,540 against Manistee

Apartments, based upon a finding of various violations of the

Chicago Municipal Code. Pursuant to Illinois state law, the

City later registered this judgment with the Circuit Court of

Cook County and imposed a lien against plaintiff’s real estate.

735 ILCS 5/12‐101; 65 ILCS 5/1‐2.1‐8(d). Plaintiff contends that

it first received actual notice of this lien (as opposed to

constructive notice, which it received as soon as the lien was

recorded) during routine title insurance review and

underwriting that occurred as it was preparing to sell its

properties. Upon discovery that the title to the property was

not clean, and with a pending sale, plaintiff sought to quickly

settle its bill with the City.  

On January 27, 2014, and in response to inquiry, the City

of Chicago provided a “payoff letter” demanding $5,655.16.

This demand letter reflected the original, undisputed $3,540

lien, plus $720.34 in uncontested statutory interest. The

remainder, $1,394.82, represents collection costs and

attorneys’ fees that the City demanded, and is the sole amount

in controversy before this court, an amount better suited for

small claims court in Illinois.

The day after the City issued the payoff letter, January 28,

2014, the plaintiff conveyed the property via warranty deed,

alleging to an out‐of‐state buyer that the title was

unencumbered. Around this time, the plaintiff  also settled

with the City, paying the full amount demanded, $5,655.16,

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No. 15‐3113 3

under protest. Eight months later, plaintiff filed a class action

complaint in federal district court, alleging violations of the

Due Process Clause of the Fourteenth Amendment, the

Illinois state constitution, and other violations of Illinois state

law.  

The plaintiff contends that by responding to its request for

a payoff letter with a demand for payment greater than the

lien amount, the City of Chicago was violating the plaintiff’s

due process rights. What the City should have done,

apparently, is one of two things. It could have responded with

information the plaintiff already had—the publicly available

lien recorded in Cook County and the publicly available

statutory interest calculation, along with an offer to settle for

that amount or less. It also could have replied with a lawsuit

in Illinois court seeking from plaintiff the fees and costs. What

was not permissible, in the plaintiff’s view, was asking for

anything more. By refusing to release the lien immediately or

take action in Illinois state court, the plaintiff  contends, the

City was depriving it of a property interest and thus needed

to provide the plaintiff due process. Since the City already

had a judgment, however, it had no incentive to settle for less.

Manistee’s litigation position, it seems, was intentionally

unreasonable: more calculated to triggering a ripe lawsuit

than actually seeking quick release of a lien.  

The district court disagreed, granting the City’s motion to

dismiss. It noted that the plaintiff failed to allege facts that

plausibly supported the assertion that it paid the City’s

demand under duress. Because it was not under duress,

Manistee’s payment was voluntary. And because its payment

was voluntary, Manistee was not deprived of a

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constitutionally protected property interest, and therefore

failed to state a claim under 42 U.S.C. §1983.

Finding no violation of the federal Constitution, the

district court went on to find no violation of the state

constitution (“the same tests apply”), and declined to exercise

supplemental jurisdiction over the purely state law claims.

Plaintiff then moved for reconsideration and leave to amend

the class action complaint, which the court denied. Plaintiff 

appeals both the dismissal of its case and the denial of its

motions for reconsideration and leave to amend.  

II.  ANALYSIS

We review a district court’s order granting a motion to

dismiss under Rule 12(b)(6) de novo. Andonissamy v. Hewlett‐

Packard Co., 547 F.3d 841, 847 (7th Cir. 2008). We assume all

well‐pleaded allegations are true and draw all reasonable

inferences in the light most favorable to the plaintiff. To

survive such a motion, a complaint must “state a claim to

relief that is plausible on its face.” Justice v. Town of Cicero, 577

F.3d 768, 771 (7th Cir. 2009). We review a district court’s

denial of a motion for reconsideration under Rule 59(e) and

denial of a motion for leave to amend only for abuse of

discretion. Billups v. Methodist Hosp. of Chicago, 922 F.2d 1300,

1305 (7th Cir. 1991); Chavez v. Ill. State Police, 251 F.3d 612, 628

(7th Cir. 2001).  

A.  Dismissal of Constitutional Due Process Claims

The Fourteenth Amendment explicitly prohibits state

governments from depriving persons of “life, liberty, or

property, without due process of law.” U.S. CONST. amend.

XIV, § 1. Individual citizens are afforded a cause of action to

vindicate this constitutional right to procedural due process

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No. 15‐3113 5

through 42 U.S.C. § 1983. To state a claim for a procedural due

process violation, a plaintiff  must demonstrate (1) a

cognizable property interest; (2) a deprivation of that

property interest; and (3) a denial of due process. Buttitta v.

City of Chicago, 9 F.3d 1198, 1201 (7th Cir. 1993).  

It is, of course, indisputable that the plaintiff  had a

cognizable property interest in the entirety of the amount it

paid to the City of Chicago, $5,655.16. But, as the district court

correctly noted, Manistee voluntarily paid this amount to the

City, and voluntary payment is not a property deprivation.1  

Against this, the plaintiff alleges that its payment was not,

in fact, voluntary, but coerced. Obviously, no one wants to

have to pay more than they have to in order to obtain a

benefit, such as the release of a lien outside established formal

process. Here, the City did not threaten to do anything to

Manistee: it just refused to accede to a demand by a private

party for a thing—immediate release of a lien—to which that

private party was not entitled.

As the district court properly held, Manistee was not

coerced to pay anything. The district court noted that

Manistee had a number of other options it could have taken

                                                 

1 Even assuming Manistee were deprived of this payment, there appears

to have been ample pre‐  and post‐deprivation process. First, the

underlying administrative judgment itself—uncontested by the plaintiff—

explicitly noted that “Pursuant to Municipal Code Chapter 1‐19, the city’s

collection costs and attorney’s fees shall be added to the balance due if the

debt is not paid prior to being referred for collection.” This constituted

pre‐deprivation notice. Second, the plaintiff’s original complaint alleged

state law claims for restitution—this, and any prerequisite state law

administrative filings for overpayment suggest that state law provides

avenues for relief.

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without affecting the legal relationship between it and the

City. Manistee could have done as it had for years prior:

nothing. Eventually the City might move to foreclose on its

property, or the City might not. Or Manistee could have

tendered payment of principal and interest to the City and

sought immediate release of its lien under Illinois state law.

735 ILCS 5/12‐183(b). It chose not to do that. Or Manistee

could have sought a declaratory judgment action in state

court.

The district court notes a fourth option available to

Manistee: it could have sold the property encumbered by the

lien. And in its reply brief, the City raises a curious fact

relating to Manistee’s claim to have been over a barrel:

plaintiff  managed to sell its property without actually

recording the release of judgment provided by the City. The

lien was only released on June 10, 2016, while this action was

pending. The property, however, was sold for $10 via

warranty deed to an Arizona corporation on January 28,

2014.2  

These facts cut to the heart of the plaintiff’s contention that

it was forced to pay the $5,655.16 to the City, lest it break its

contract and miss out on a lucrative business deal. At the time

Manistee paid the City, the contract was already broken.

Presuming that the sale of the property was arm’s‐length, it

appears the value of the property less the City’s lien was

negative. The administrative record of municipal code

violations suggests that, at the time, the out‐of‐compliance

property was abandoned, requiring extensive repairs before

being certified for occupancy. In such a situation the

                                                 

2 Brief and Appendix of Defendant‐Appellee at A4.

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economically rational thing to do would be to do nothing.

Surely if the property had substantial value and the plaintiff 

were in a hurry to clear the title, the closing price would not

turn out to be $10.  

And if the property were not valuable, what would be the

hurry? After recording the lien in January 2012 and then

failing to serve the plaintiff with a citation to discover assets,

the City simply gave up. Under state law, the City could have

foreclosed, however. And that might have mooted the

plaintiff’s class action.  

The fact of the sale prior to clearing title also exposes the

heart of the plaintiff’s proposed class action. It claims that the

aggrieved class is numerous—in the hundreds, if not

thousands. But how many corporations find themselves in a

position like Manistee’s—having promised a third party that

title was clean, conveyed that property without clean title, and

allegedly at the mercy of the City over a lien no longer

attached to real property they own? Put another way: how

often is the City in a position to “coerce” payment from a

payee on the hook for a broken contract? That class cannot be

very large.

Finally, on appeal the plaintiff  suggests that the

deprivation of the property interest occurred when the City

refused to release the lien upon receipt of the request for a

payoff letter. This might be taken to allege that the cognizable

property interest was not the $5,655.16, but a sort of option‐

contract interest—immediate release of a lien upon tendering

payment. But as the City makes clear, Manistee never actually

did tender payment of the judgment plus interest, nor did it

seek immediate release of the lien through the state law

process established by 735 ILCS 5/12‐183(b).

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In sum, on any read of the plaintiff’s allegations, no

property deprivation occurred, and thus, no violation of

constitutional due process.  

So why would such a small amount cause the plaintiff to

exert so much time and effort? Obviously the filing fees and

attorneys’ fees relating to the many hours and hundreds of

pages of brief‐writing far eclipses $1,394.82. Bringing a federal

civil suit and litigating it to conclusion is an expensive

business. As conceded at oral argument by plaintiff’s counsel,

the only reason this case makes any economic sense is due to

its anticipated class action payout.  

By demanding a payoff letter, and knowing full well that

the letter would include attorneys’ fees and costs above and

beyond the lien amount plus interest, plaintiff’s counsel was

able to obtain a benchmark for determining class damages.

And the hope in such cases is typically not to litigate the claim

to resolution, but to survive a motion to dismiss and settle the

case, obtaining a large award from the City.   

Upon surviving a motion to dismiss, it is certain that class

counsel would argue the potential class to be extremely

broad.  But as noted, given the uniqueness of the plaintiff’s

case it is highly unlikely there could be any class certification.

As a result, it is apparent that the goal here would be to settle

after surviving a motion to dismiss, but before losing at the

class certification stage.

The City might suspect as much, but might still be faced

with a situation where the costs to get through discovery and

briefing on the subject would be greater than the settlement

offer that plaintiff’s counsel might offer. In such a situation

the settlement offer represents the “nuisance value” of the

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No. 15‐3113 9

case. This is a persistent problem for defendants in class

action lawsuits.  

One possible solution to this problem is requiring judges

to do some threshold level of review of the merits of a class

action before allowing certification of a class, or before

approving a settlement.3 This has been held to be generally

barred under the current Rule 23, although the line has not

always been clear.4  Nevertheless, it is cases like the one before

us that demonstrate precisely why the courts, and Congress,

ought to be on the lookout for ways to correct class action

abuses.  

Given the complexity of our legal system, it is impossible

to develop perfect standards for identifying and quickly

disposing of frivolous claims. Inevitably this court and other

courts will be faced with cases that waste the time and money

of everybody. Beyond addressing the legal claims before us

as we would in any ordinary case, we must frankly identify

situations where we suspect the lawyers, rather than the

claimants, are the only potential beneficiaries. This is one such

case.

                                                 

3 See Randy J. Kozel & David Rosenberg, Solving the Nuisance‐Value

Settlement Problem: Mandatory Summary Judgment, 90 VA. L. REV. 1849

(2004). This article was written prior to the Class Action Fairness Act of

2005, Pub. L. No. 109‐2. That law ameliorated, but by no means solved, the

problem of class action abuse. See Mark Moller, The Rule of Law Problem:

Unconstitutional Class Actions and Options for Reform, 28 HARV. J.L. & PUB.

POL’Y 855 (2005); Keith N. Hylton, Asbestos and Mass Torts with Fraudulent

Victims, 37 SW. U. L. REV. 575 (2008).

4 Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974); see also Szabo v. Bridgeport

Machs., Inc., 249 F.3d 672, 677 (7th Cir. 2001).

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B.  Denial of Motions to Reconsider and Amend

We also affirm the district court’s decision to deny both

Manistee’s motion for reconsideration and its motion for

leave to amend its complaint. The plaintiff’s motion for

reconsideration and its proposed amended complaint, both of

which are in the record, allege no new facts or law which

could turn Manistee’s payment into a property deprivation,

and thus state a claim for relief. Reconsideration or

amendment would have been a waste of that court’s time.

III.  CONCLUSION

We agree with the district court that the plaintiff has failed

to state a claim against the City of Chicago. The dismissal of

its case, and denial of its motions for reconsideration and

amendment, are therefore

AFFIRMED.

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