In the 

United States Court of Appeals 

For the Seventh Circuit ____________________

No. 16‐3838

HEUNG K. BAEK, et al.,

Plaintiffs‐Appellants,

v.

PATRICIA A. CLAUSEN, et al.,

Defendants‐Appellees.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 1:14‐cv‐03928 — Thomas M. Durkin, Judge.

____________________

ARGUED SEPTEMBER 27, 2017 — DECIDED APRIL 2, 2018

____________________

Before RIPPLE, SYKES, and HAMILTON, Circuit Judges.

RIPPLE, Circuit Judge. Clark & Leland Condominiums, LLC

(“C & L”), and its shareholders, Heung Baek and Hyun

Baek‐Lee (collectively “the Baeks”), brought this action

against Northside Community Bank (“NCB”) and several of

its employees, alleging violations of the Racketeer Influenced

and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1964(c).
2 No. 16‐3838

The predicate acts set forth in the complaint focus on the al‐

legedly fraudulent and abusive acts committed by NCB in the

course of a lending relationship with the plaintiffs.  

This RICO action is the last in a series of legal actions be‐

tween the parties: the first, a foreclosure action (“Foreclosure

Action”), was brought by NCB in state court in 2010; the sec‐

ond, an action on the loan guaranty (“Guaranty Action”), fol‐

lowed in 2012; and, finally, a fraud and breach of contract ac‐

tion (“Parallel Action”), was brought by Mr. Baek and

Ms. Baek‐Lee in 2014. The latter two actions were consoli‐

dated in the Circuit Court of Cook County.

In response to the RICO complaint, NCB initially moved

to dismiss, or in the alternative, to stay the proceeding under

Colorado River Water Conservation District v. United States, 424

U.S. 800 (1976). After the state court struck or dismissed all of

the plaintiffs’ claims and granted summary judgment to NCB

on its claims, NCB amended its motion to assert an alternative

ground for dismissal: res judicata. The district court granted

NCB’s amended motion.  

On reconsideration, the district court vacated its earlier

dismissal because it is not clear under Illinois law whether an

adjudication is final for purposes of res judicata if an appeal

is pending. The district court therefore stayed the action

pending the disposition of the plaintiffs’ appeal in state court.

After the state appellate court affirmed the judgment in favor

of NCB, the district court reinstated its dismissal with preju‐

dice.  

We now affirm. The district court correctly determined

that res judicata precludes the plaintiffs’ present action. There

has been a final judgment on the merits, the same parties are
No. 16‐3838 3

litigating here as in state court, and the claims arise from a

single group of operative facts. Moreover, given the nature

and extent of litigation that had taken place in the state court,

we perceive no abuse of discretion in the district court’s deci‐

sion to stay the RICO action under Colorado River.

1   

I

BACKGROUND

A.  Facts

The facts, as set forth in the plaintiffs’ complaint, allege the

following events.2 The Baeks came to the United States from

Korea in 1999. Mr. Baek desired to develop real estate and, to

this end, purchased property through his limited liability

company, C & L.3 The property was financed by Labe Bank,

and Bill Frank was the loan officer who serviced the loan.

Frank later moved to NCB and asked Mr. Baek to switch his

business to NCB. Frank represented that NCB would provide

Mr. Baek a larger construction loan at a lower rate than

Labe Bank had provided. In July 2006, Mr. Baek entered a

construction loan with NCB for approximately $11,750,000.  

                                                 

1 The district court had jurisdiction over this case under 28 U.S.C. § 1331.

Our jurisdiction is premised on 28 U.S.C. § 1291.

2 “In reviewing a dismissal under Federal Rule of Civil Procedure 12(b)(6),

we accept as true all factual allegations in the complaint and draw all rea‐

sonable inferences in favor of the plaintiff.” Parungao v. Cmty. Health Sys.,

Inc., 858 F.3d 452, 457 (7th Cir. 2017).

3 Mr. Baek is the “manager” and “sole member” of C & L. See R.1, ¶¶ 1,

12.
4 No. 16‐3838

Mr. Baek executed a construction loan agreement, con‐

struction mortgage, promissory note, and commercial guar‐

anty. NCB had not indicated that it would require

Ms. Baek‐Lee to sign a guaranty; however, at closing NCB

presented a guaranty document which had lines for both of

their signatures. Ms. Baek‐Lee did not sign the guaranty at

closing. She does not recall ever signing a commercial guar‐

anty; nevertheless NCB maintains that, in January 2008, eight‐

een months after closing, she did sign a guaranty.  

NCB, C & L, and Mr. Baek then entered into several loan

modification agreements. One of those loan modification

agreements bears Ms. Baek‐Lee’s signature. Ms. Baek‐Lee

contends that her signature was forged and, in support, notes

that her passport reflects that she was out of the country on

the date the document purportedly was signed.

The relationship between Mr. Baek and NCB was rocky

almost from the outset. In July 2007, NCB demanded that

Mr. Baek deposit more money in the construction loan ac‐

count because the loan was “out of balance”;4 although

Mr. Baek disagreed with this assessment, he nevertheless

complied with this request. NCB then began to demand addi‐

tional collateral, including the title to Mr. Baek’s home. Even

when Mr. Baek acquiesced, however, NCB refused to dis‐

burse funds to C & L’s contractors. NCB also required

Mr. Baek to sell other real estate and to give up control of the

construction operating account. Although NCB would not re‐

lease funds to Mr. Baek or to C & L, NCB did withdraw its

                                                 

4 Id. ¶ 17.
No. 16‐3838 5

attorney’s fees from the account.5 As a result of these with‐

drawals, at least one of C & L’s checks was returned for insuf‐

ficient funds.

According to the Baeks’ federal complaint, NCB also frus‐

trated Mr. Baek’s efforts to comply with its demands. For in‐

stance, it required the Baeks to provide their 2009 income tax

returns, but refused to release statements concerning the op‐

erating account which were necessary for the Baeks to com‐

plete those returns.

On October 15, 2010, NCB issued a default letter. Mr. Baek

then put a stop payment on his monthly payment to NCB,

which prompted NCB to institute foreclosure proceedings

against C & L.

B.  State Court Proceedings  

On October 26, 2010, NCB filed the Foreclosure Action

against C & L in state court. Just a few days later, NCB filed

the Guaranty Action in the Circuit Court of Cook County

against the Baeks as guarantors on the loan. The Baeks filed

several affirmative defenses and a counterclaim.  

On January 29, 2012, while the Guaranty Action was pend‐

ing, the Baeks and Soo Corporation d/b/a Blue Ocean Con‐

temporary Sushi6 filed the Parallel Action against NCB and its

vice‐president, William Kivit. The plaintiffs alleged seven

claims against NCB and Mr. Kivit related to the construction

                                                 

5 Id. ¶ 22.

6 Mr. Baek is described as an “owner‐investor” in Soo Corporation. R.5‐6

at 1, ¶ 1.
6 No. 16‐3838

loan: bad faith breach of contract, breach of fiduciary duty,

constructive trust, fraud, accounting, implied contract/unjust

enrichment, and emotional distress. This Parallel Action was

consolidated with the Guaranty Action.

On February 7, 2012, the Circuit Court of Cook County en‐

tered a judgment of foreclosure and sale of the property at is‐

sue. The property was sold on October 9, 2012, and a defi‐

ciency judgment was entered against C & L for $2,863,489.

C & L moved for reconsideration on numerous grounds, in‐

cluding that NCB committed notary fraud; NCB was prohib‐

ited from filing the foreclosure action; NCB’s enforcement of

the loan documents constituted extortion, fraud, misrepre‐

sentation, and violated RICO; and NCB took advantage of

non‐English speakers. C & L’s motion was denied.

Also in October 2012, NCB filed motions to strike and to

dismiss the Baeks’ affirmative defenses and counterclaims in

the Guaranty Action and to dismiss the Parallel Action. With

respect to the affirmative defenses, NCB argued that many of

the defenses—including unjust enrichment, fraud in the in‐

ception, and failure to perform—were legally flawed. NCB

also argued that, to the extent there was any merit to the af‐

firmative defenses, only C & L, not the Baeks, had standing to

assert them. NCB further maintained that any defenses in fa‐

vor of C & L were barred by res judicata and collateral estop‐

pel based on the judgment in the Foreclosure Action. NCB

made similar arguments with respect to the Baeks’ counter‐

claims and to the claims raised by the Baeks and Soo Corpo‐

ration in the Parallel Action.  

On November 28, 2012, C & L, the Baeks, and Soo Corpo‐

ration moved to amend their complaint in the Parallel Action

to include, among other new allegations, a RICO claim. The
No. 16‐3838 7

RICO claim alleged racketeering activity by means of extor‐

tionate collections, fraudulent notarial acts, and bank fraud. It

named as defendants Mr. Kivit, Patricia Clausen,

Belinda Baier, Tasha Spencer7 and John Does.

On May 30, 2013, the Circuit Court granted NCB’s motion

to strike and to dismiss the Baeks’ affirmative defenses and

counterclaims in the Guaranty Action. It also granted NCB’s

motion to dismiss Counts I through VII of the complaint in

the Parallel Action. The court gave the Baeks and Soo Corpo‐

ration leave to replead Counts VIII through XI—their pro‐

posed amendments in the Parallel Action—within twenty‐

eight days. The Baeks and Soo Corporation did not file an

amended complaint within the time allowed by the Circuit

Court.

On August 19, 2013, NCB moved for summary judgment

on the merits of the Guaranty Action. On April 24, 2014, ten

months after the deadline for filing an amended complaint,

the Baeks filed a motion asking the Circuit Court to reconsider

its May 30, 2013 order dismissing their affirmative defenses,

counterclaims, and Counts I through VII of the Parallel Ac‐

tion; they also requested leave to file an amended complaint,

including a new RICO claim. The new RICO claim differed

from the one in their November 28, 2012 proposed amended

complaint, but mirrors the present federal RICO action.8

On September 11, 2014, the Circuit Court denied the

Baeks’ motion to reconsider and for leave to file an amended

                                                 

7 These individuals are employees of NCB.

8 Compare R.5‐10 at 23–51 with R.1.
8 No. 16‐3838

complaint. It also granted NCB’s motion for summary judg‐

ment in the Guaranty Action, which rendered the Baeks

jointly and severally liable for $2,359,743.55.  

On October 10, 2014, the Baeks and Soo Corporation filed

a post‐judgment motion to vacate the Circuit Court’s sum‐

mary judgment ruling and for leave to file amended defenses

and counterclaims. The court denied those motions on Octo‐

ber 30, 2014. The Baeks then appealed the judgment in the

Guaranty Action and the dismissal of their Parallel Action.

On March 24, 2016, the state appellate court affirmed the

summary judgment for NCB and the dismissal of the Baeks’

claims.9  

B.

On May 28, 2014, the Baeks and C & L filed this federal

RICO action. To place the filing in historical context, it oc‐

curred after the Circuit Court had dismissed the Baeks’ af‐

firmative defenses and counterclaims in the Guaranty Action,

and Counts I through VII of the Parallel Action. It also fol‐

lowed the Baeks’ motion to reconsider that dismissal order

and their motion to amend the Parallel Action to include a

RICO claim. At the time of filing, however, the Circuit Court

had not yet ruled on NCB’s motion for summary judgment in

the Guaranty Action.  

The underlying fraudulent acts alleged in the federal

RICO claim include: (1) extortion of borrowers by NCB by

                                                 

9 See R.38‐1.
No. 16‐3838 9

claiming that loans were “out of balance”;10 (2) fraud in the

execution of notarized documents (with respect to

Ms. Baek‐Lee’s signature on the modification agreements);11

(3) manipulation of the construction loan agreement;12 and (4)

unauthorized withdrawal of funds from the operating ac‐

count.13 On July 31, 2014, NCB moved to dismiss the case, or

in the alternative, to stay proceedings pursuant to the Colorado

River doctrine.  

Before the plaintiffs responded to the motion to dismiss,

the Circuit Court entered its September 11, 2014 order deny‐

ing the Baeks’ motion to reconsider, denying them leave to

file an amended complaint, and granting summary judgment

to NCB in the Guaranty Action. Consequently, on November

4, 2014, NCB moved to amend its motion “so as to assert an

alternative ground for dismissal based upon res judicata.”14  

C & L and the Baeks then filed their response to all pend‐

ing motions in the federal RICO action. They argued that res

judicata could not apply to their RICO claim because they

never had filed a similar RICO claim in state court. Although

they had attempted to amend their complaint to include such

a claim, that motion had been denied. According to the Baeks,

“a claim that was never filed could not be dismissed.”15 The

                                                 

10 R.1, ¶ 35.

11 See id. ¶ 38.

12 See id. ¶¶ 44–48.

13 See id. ¶ 51.

14 R.13 at 1.

15 R.16 at 2.  
10 No. 16‐3838

Baeks did not argue that a dismissal on res judicata grounds

would be premature because, at that time, there was no final

judgment. The Baeks also maintained that the defendants’

Colorado River doctrine analysis was incomplete and that a

correct application of the doctrine required the court to exer‐

cise jurisdiction in the present case.16  

In its reply in support of its motion to dismiss, NCB noted

that “the Colorado River doctrine has been mooted by subse‐

quent developments in the Circuit Court of Cook County dis‐

missing the Plaintiffs’ claims in their entirety and entering

judgment in favor of [NCB].”17 The final disposition of the

Circuit Court action, it continued, “cement[ed] the bar of res

judicata.”18 Consequently, given that there had been a final

judgment in the Circuit Court action, NCB did not address the

merits of the plaintiffs’ Colorado River argument.19  

On June 17, 2015, the district court entered a memoran‐

dum and order dismissing the plaintiffs’ federal RICO com‐

plaint with prejudice on res judicata grounds. Applying Illi‐

nois law of res judicata, it determined that there had been a

final judgment both in the Parallel Action and in the Guaranty

Action;20 there was identity of the parties (or their privies) in

                                                 

16 See id. at 3.

17 R.17 at 1.  

18 Id.  

19 See id. at 5.

20 See R.25 at 12, 16.
No. 16‐3838 11

the Parallel and Guaranty Actions and the federal RICO ac‐

tion;21 and those causes of action were the same as the federal

RICO claim because they all involved “a single group of op‐

erative facts.”22 The district court therefore granted the de‐

fendants’ motion to dismiss the complaint with prejudice.

On July 15, 2015, the Baeks filed a motion to reconsider

under Federal Rule of Civil Procedure 59(e).23 Their motion

reiterated several of the arguments included in their opposi‐

tion to the motion to dismiss.24 The Baeks and C & L, however,

also argued forthe first time that the state court’s adjudication

of their claims was not final because the state appeal was still

pending.25 Consequently, they contended, the court “should

not have dismissed the Plaintiffs’ complaint with preju‐

dice.”26 They reiterated that, applying the ten factors deline‐

ated in Colorado River, the district court should have allowed

this case to proceed.27 Finally, they requested that the district

court vacate the order dismissing the complaint with preju‐

dice and apply the Colorado River doctrine to determine

                                                 

21 See id. at 12–13, 16–17.

22 Id. at 13–19.

23 The plaintiffs actually filed two separate, but identical, Rule 59(e) mo‐

tions. See R.27; R.28.  

24 For instance, the Baeks argued that the Circuit Court had given them

permission to file an amended complaint and, therefore, the dismissal was

not final, and that the RICO claim had not been adjudicated because it

never had been included in a Circuit Court complaint.  

25 See R.27 at 6.  

26 Id. at 9.  

27 See id.  
12 No. 16‐3838

whether it should proceed with the case or abstain until the

outcome of the appeal of the state case.28  

In its response, NCB maintained that the motion “fail[ed]

to raise any of the four proper grounds for reconsideration

under Rule 59(e).”29 Instead, “all of the arguments raised

could have been presented at the time of the original briefing

on the Defendants’ Motion to Dismiss.”30 NCB maintained

that, putting aside the procedural infirmities of the motion,

the district court had not erred in granting the motion to dis‐

miss because, even if there were not a final decision in the

Guaranty or Parallel Action, there had been a final judgment

in the state Foreclosure Action, which served as an independ‐

ent bar to the federal RICO cause of action. Finally, NCB sub‐

mitted that the authority on which the plaintiffs were relying

for their Colorado River argument, Huon v. Johnson & Bell, Ltd.,

657 F.3d 641 (7th Cir. 2011) (“Huon I”), was “wholly mis‐

placed” given our subsequent decision in Huon v. Johnson &

Bell, Ltd., 757 F.3d 556 (7th Cir. 2014) (“Huon II”), in which we

affirmed the dismissal of the federal action based on claim

preclusion.31  

The district court granted in part and denied in part the

Rule 59(e) motion. It noted that it previously had considered

and rejected two of the plaintiffs’ arguments.32 The plaintiffs’

                                                 

28 See id.  

29 R.31 at 3.  

30 Id. at 3–4.

31 Id. at 10.  

32 See R.37 at 5.  
No. 16‐3838 13

third argument—that the Circuit Court’s adjudication was

not final until the appeal had been resolved—had not been

brought to the district court’s attention in the underlying mo‐

tion to dismiss.33 Although this argument did not “rely on

new law or new facts,” the district court noted that it did

“raise an important argument not yet passed upon.”34 The

district court therefore considered the argument on the mer‐

its.  

The district court observed that the Supreme Court of Illi‐

nois had held that, “[f]or purposes of applying the doctrine of

collateral estoppel, finality requires that the potential for ap‐

pellate review must have been exhausted.”35 Although there

was some question whether this principle was equally appli‐

cable to res judicata, the district court followed the course we

had suggested in Rogers v. Desiderio, 58 F.3d 299, 302 (7th Cir.

1995): it erred on the side of caution, reinstated the plaintiffs’

action, and stayed all further proceedings pending the out‐

come of the state court appeal.36 The district court’s stay order

issued on January 25, 2016.

Less than two months later, the state appellate court is‐

sued an order affirming the judgment rendered in the Circuit

                                                 

33 See id. at 5–6.  

34 Id. at 6.

35 Id. (alteration in original) (quoting Ballweg v. City of Springfield, 499

N.E.2d 1373, 1375 (Ill. 1986)).

36 See id. at 6–7.
14 No. 16‐3838

Court with respect to both the Guaranty Action and the Par‐

allel Action. At that point, the district court granted NCB’s

motion to dismiss with prejudice.37  

The Baeks and C & L timely appealed.

II

DISCUSSION

A.  Res Judicata

The Baeks contend that the district court erred in conclud‐

ing that the present RICO claim is barred by res judicata be‐

cause the state court never adjudicated this RICO complaint

on the merits. We review a dismissal on res judicata grounds

de novo. Bell v. Taylor, 827 F.3d 699, 706 (7th Cir. 2016). Be‐

cause an Illinois state court rendered the judgment on which

the application of res judicata is based, we apply Illinois law

to determine whether res judicata bars the present action. See

Whitaker v. Ameritech Corp., 129 F.3d 952, 955 (7th Cir. 1997).

Under Illinois law 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.” River Park, Inc. v. City of Highland Park,

703 N.E.2d 883, 889 (Ill. 1998). For 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 compe‐

tent jurisdiction, (2) there is an identity of cause of action, and

(3) there is an identity of parties or their privies.” Id. Illinois

courts interpret “identity of cause of action” broadly such that

                                                 

37 See R.46.
No. 16‐3838 15

“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.” Id. at 893. The bar to subsequent litigation

“extends to what was actually decided in the first action, as

well as those matters that could have been decided in that

suit.” Id. at 889. Finally, “the doctrine bars claims based on

facts that would have constituted a counterclaim or defense

in the earlier proceeding where successful prosecution of the

later action would either nullify the earlier judgment or im‐

pairthe rights established in the earlier action.” Cabrera v. First

Nat’l Bank of Wheaton, 753 N.E.2d 1138, 1145 (Ill. App. Ct.

2001).

Here, the plaintiffs do not take issue with the district

court’s conclusion that the requirement of identity of parties

has been met. That approach is well founded. The Guaranty

Action involved NCB as the plaintiff and Mr. Baek and

Ms. Baek‐Lee as defendants. The present action was brought

by the Baeks and C & L against NCB and several of its em‐

ployees. The presence of C & L as a defendant does not pre‐

clude the operation of res judicata because Mr. Baek is the

manager and sole member of C & L. See Nat’l Union Fire Ins.

Co. of Pittsburgh v. DiMucci, 34 N.E.3d 1023, 1034 (Ill. App. Ct.

2015) (noting that a director and sole shareholder of a limited

liability company “had an equal stake in defending” a prior

action involving the company and therefore “reject[ing] out‐

right any contention that this action does not involve the same

parties” simply because the director and sole shareholder of a

limited liability company was not named in the prior action).

Similarly, because employees are in privity with their em‐

ployer for purposes of res judicata, see Ross Advert., Inc. v.

Heartland Bank & Trust Co., 969 N.E.2d 966, 976 (Ill. App. Ct.
16 No. 16‐3838

2012), the presence of NCB employees as defendants in this

action does not defeat res judicata. The same is true of the Par‐

allel Action, which involved Mr. Baek, Ms. Baek‐Lee, and

Soo Corporation as plaintiffs, with NCB, Mr. Kivit, and John

Does as defendants.   

It also is beyond dispute that the present RICO claim and

the Guaranty and Parallel Actions arise from a single group

of operative facts: all of the actions center on NCB’s admin‐

istration of the construction loan issued to C & L. A compari‐

son between the allegations contained in the Parallel Action

and the federal RICO action demonstrate the similarity. In the

Parallel Action, the plaintiffs alleged that NCB frustrated their

efforts to file C & L’s tax returns;38 that NCB withdrew attor‐

neys’ fees from the operating account causing C & L’s check

to bounce;39 that NCB demanded payment of additional

funds from C & L on threat of default;40 and that NCB com‐

mitted notary fraud with respect to the signature of

Ms. Baek‐Lee.41 These allegations parallel directly those

found in the federal RICO action.42  

                                                 

38 See R.5‐6 at 5, ¶¶ 22–24.

39 See id. ¶¶ 26–27.

40 See id. at 5–6, ¶¶ 30–31.

41 See id. at 11, ¶ 75.

42 See R.1, ¶ 27 (alleging that NCB “demanded ... 2009 income tax re‐

turns,” but did not provide statements from the operating account neces‐

sary to complete the returns); id. ¶¶ 22–23 (alleging that NCB withdrew

funds from the operating account as its attorney’s fees, causing a check

written by C & L to ComEd to bounce); id. ¶¶ 17–19 (alleging that NCB
No. 16‐3838 17

Given the identity of the parties and the cause of action,

the Baeks quite understandably focus their attack on the dis‐

trict court’s conclusion that there was a final adjudication on

the merits. They maintain that, because the May 30, 2013 or‐

der allowed them to replead new claims with respect to the

Parallel Action, it was not a final order for purposes of res ju‐

dicata. They also submit that their unpled RICO claim in the

Parallel Action was simply one theory of relief based on the

defendants’ actions, and, therefore, the state court’s ruling on

other theories of relief did not affect the RICO claim.

We first turn to the argument that the May 30 order was

not final because it allowed the Baeks to replead new claims.

It is undisputed that the Baeks attempted to raise in Cir‐

cuit Court the very RICO claim later brought in the district

court and that this RICO claim could have been decided in the

state case. See River Park, Inc., 703 N.E.2d at 889. It also is un‐

disputed that the Circuit Court ultimately dismissed the Par‐

allel Action in which the Baeks attempted to raise this RICO

claim. Finally, Illinois Supreme Court Rule 273 states that,

“[u]nless the order of dismissal or a statute of this State oth‐

erwise specifies, an involuntary dismissal of an action ... op‐

erates as an adjudication upon the merits.” Consequently, by

virtue of the dismissal of the Parallel Action in Circuit Court,

the Baeks’ RICO claim was adjudicated on the merits.

The Baeks submit, nonetheless, that, because the Cir‐

cuit Court’s May 30, 2013 order granted them permission to

file an amended complaint, that court “otherwise specifie[d]”

                                                 

demanded additional payments on the claim that the loan was “out of bal‐

ance”); id. ¶¶ 15, 43 (alleging notary fraud related to Ms. Baek‐Lee’s sig‐

nature).
18 No. 16‐3838

that the dismissal should not be on the merits. This argument

is untenable. The May 30, 2013 dismissal order was not the

final order in the Parallel Action. The May 30, 2013 order gave

the Baeks twenty‐eight days to file an amended complaint,

but they failed to do so. When they sought permission (nearly

ten months later) to file an amended complaint, the Circuit

Court denied their motion.43 In the same order, the Circuit

Court granted summary judgment to NCB on the Guaranty

Action, thus ending all litigation in the state court.44 A motion

to reconsider the grant of summary judgment in the Guaranty

Action also was denied.45 Neither of these later orders con‐

tained any limitations about the resolution of the merits of the

action. There can be no question that there was a final adjudi‐

cation on the merits of the RICO claim by the Circuit Court.  

We now turn to the Baeks’ second argument. They main‐

tain that Wilson v. Edward Hospital, 981 N.E.2d 971 (Ill. 2012),

allows them to pursue their RICO claim even though other

theories of relief were rejected by the state court. We are not

persuaded.

We pause to examine the Supreme Court of Illinois’ deci‐

sion in Wilson in some detail. This case involved a medical

malpractice claim brought by an injured party and his mother

against Edward Hospital, two physicians, their practice

groups, and a nurse. They sought damages for injuries that

occurred during a surgery to repair a broken leg. The plain‐

tiffs alleged that the hospital was liable for the physicians’

                                                 

43 See R.21‐48 at 2.

44 Id.

45 See R.21‐51.  
No. 16‐3838 19

negligence because the physicians were “‘agent[s] in law or in

fact’ of the hospital.” Id. at 974. The trial court granted partial

summary judgment to the hospital on the ground that the two

physicians were not the hospital’s actual agents. It further

held, however, that issues of fact precluded summary judg‐

ment for the hospital regarding the physicians’ apparent

agency. The plaintiffs then voluntarily dismissed their com‐

plaint. When the plaintiffs refiled their action, they alleged

that both physicians were “apparent agents of the hospital.”

Id. The hospital moved to dismiss on the ground that the trial

court’s prior determination that the physicians were not ac‐

tual agents was a final judgment on the merits for purposes

of res judicata. The trial court denied the hospital’s motion to

dismiss but granted its motion to certify the question to the

state appellate court.  

The question eventually reached the Supreme Court of Il‐

linois, which held that the earlier ruling did not act as a bar to

the plaintiffs’ amended complaint. Initially, the court ob‐

served that one of the requirements of res judicata is a final

judgment on the merits. “An order is final,” the court ex‐

plained, “if it either terminates the litigation between the par‐

ties on the merits or disposes of the rights of the parties, either

on the entire controversy or a separate branch thereof.” Id. at

978. The summary judgment entered by the trial court, how‐

ever, did not end the litigation. Id. Moreover, “the order find‐

ing that the doctors were not the hospital’s actual agents” did

not “dispose[] of the rights of the parties on a separate branch

of the controversy.” Id. The court explained that actual agency

and apparent agency are not causes of action, but, instead,

“are merely part of the duty analysis in a case where the plain‐

tiff seeks to hold the principal liable for the agent’s alleged
20 No. 16‐3838

negligence.” Id. at 980. The court therefore held “that appar‐

ent agency and actual agency are not separate claims for pur‐

poses of res judicata and that no final order was entered.” Id.

at 980–81. Consequently, “[t]he trial court’s grant of partial

summary judgment on actual agency merely removed some

of the allegations against the hospital from the case.” Id. at

981. Because other “[a]llegations of agency remain[ed],” the

plaintiffs still could have “prove[n] the hospital liable for neg‐

ligence based upon their remaining allegations of apparent

agency.” Id.  

In the case before us, there is no question that there has

been a final adjudication on the merits. The Circuit Court dis‐

missed the Baeks’ Parallel Action and granted summary judg‐

ment to NCB in the Guaranty Action. This judgment was af‐

firmed by the Illinois Appellate Court. This is not a situation

where the trial court issued summary judgment on a discrete

factual issue, leaving other factual issues to be resolved; the

Circuit Court disposed of all aspects of the Baeks’ claims and

entered final judgment. Consequently, the Baeks’ RICO claim

is not saved by the Illinois Supreme Court’s ruling in Wilson.

The district court’s dismissal of this claim on res judicata

grounds was correct.

B.  Colorado River Doctrine

The Baeks maintain that the entire issue of res judicata

would have been avoided if the district court had not stayed

the federal action. In their view, NCB did not establish excep‐

tional circumstances as required by the Colorado River doc‐

trine. They submit that the district court should have adjudi‐

cated the federal RICO claim on the merits while awaiting the
No. 16‐3838 21

ruling of the state appellate court.  

The Colorado River “doctrine allows courts to conserve ju‐

dicial resources by abstaining from accepting jurisdiction

when there is a parallel proceeding elsewhere.” Deb v. SIRVA,

Inc., 832 F.3d 800, 814 (7th Cir. 2016). In Colorado River, the Su‐

preme Court recognized that “considerations of ‘[w]ise judi‐

cial administration,’” specifically regard for “conservation of

judicial resources and comprehensive disposition of litiga‐

tion,” may counsel abstention by federal courts in the face of

pending actions in state court concerning the same matter. 424

U.S. at 817 (alterations in original) (quoting Kerotest Mfg. Co.

v. C‐O‐Two Fire Equip. Co., 342 U.S. 180, 183 (1952)). The Court

set forth several considerations that might make abstention

appropriate, including: “the court first assuming jurisdiction

over property”; “the inconvenience of the federal forum; the

desirability of avoiding piecemeal litigation; and the order in

which jurisdiction was obtained by the concurrent forums.”

Id. at 818 (citations omitted). The Court emphasized that “[n]o

one factor is necessarily determinative,” but that a court

should “carefully consider[] ... both the obligation to exercise

jurisdiction and the combination of factors counselling

against that exercise.” Id. at 818–19.

In the wake of Colorado River, we have adopted a two‐part

analysis to guide judicial considerations of whether this sort

of abstention is appropriate. “First, the court must determine

whether the state and federal court actions are parallel.” Freed

v. J.P. Morgan Chase Bank, N.S., 756 F.3d 1013, 1018 (7th Cir.

2014). If the proceedings are parallel, the court must deter‐

mine if abstention is proper by weighing ten non‐exclusive

factors. Id. These are:  

(1) whether the state has assumed jurisdiction
22 No. 16‐3838

over property;  

(2) the inconvenience of the federal forum;  

(3) the desirability of avoiding piecemeal litiga‐

tion;

(4) the order in which jurisdiction was obtained

by the concurrent forums;

(5) the source of governing law, state or federal;

(6) the adequacy of state‐court action to protect

the federal plaintiff’s rights;

(7) the relative progress of state and federal pro‐

ceedings;

(8) the presence or absence of concurrent juris‐

diction;

(9) the availability of removal; and

(10) the vexatious or contrived nature of the fed‐

eral claim.  

Id. (quoting Tyrer v. City of South Beloit, 456 F.3d 744, 754 (7th

Cir. 2006)). “A district court’s decision to stay federal proceed‐

ings pending the resolution of a state court action is reviewed

under an abuse of discretion standard.” Id.

There have been instances, however, when, despite the

district court’s failure to engage in this two‐step process or to

consider meticulously each of the ten factors, we nevertheless

have held abstention to be appropriate. Most notable among

these is Rogers, 58 F.3d 299. In Rogers, an Illinois school district

and two of its residents challenged a referendum in favor of

detaching a parcel of one school district and annexing it to

another; they did so in both state and federal court. The state

court ruled against the plaintiffs on the merits, and the federal

court abstained under Younger v. Harris, 401 U.S. 37 (1971).

The plaintiffs appealed in both cases.  
No. 16‐3838 23

On appeal of the federal action, we concluded that the dis‐

trict court’s invocation of Younger abstention was error and

that the plaintiffs’ claims, instead, “should be analyzed under

the rules for claim‐splitting.” Rogers, 58 F.3d at 301. We there‐

fore looked to Illinois law to determine what preclusive effect

should be given to the state court’s judgment. Because of con‐

flicting case law, however, we had “no idea what the law of

Illinois [wa]s on the question whether a pending appeal de‐

stroys the claim preclusive effect of a judgment.” Id. at 302. As

a result, we adopted the following approach:

Under the circumstances, a stay rather than im‐

mediate decision is the prudent course. A fed‐

eral judge confronted with duplicative litigation

need not barge ahead on the off‐chance of beat‐

ing the state court to a conclusion. It is sensible

to stay proceedings until an earlier‐filed state

case has reached a conclusion, and then (but

only then) to dismiss the suit outright on

grounds of claim preclusion. Colorado River Wa‐

ter Conservation District v. United States, 424 U.S.

800, 817–21 (1976). A stay requires a good justi‐

fication; here, although plaintiffs’ state and fed‐

eral suits got underway contemporaneously,

the state suit pulled far ahead while the parties

debated Younger in the district court. Plaintiffs

themselves, by choosing to file two suits, sup‐

plied strong reason for a stay. There is no excuse

for trying to decide the merits immediately—

but also no reason (yet) to dismiss the suit, be‐

cause, if the state case should break down in a

way that avoids the preclusive effect of the
24 No. 16‐3838

judgment, plaintiffs would be entitled to a deci‐

sion on the merits from the federal court.

Rogers, 58 F.3d at 302 (citations omitted).

We followed this approach again in Hearne v. Board of Ed‐

ucation of the City of Chicago, 185 F.3d 770 (7th Cir. 1999). In

Hearne, after a public school teacher’s employment had been

terminated, he instituted both a state action alleging viola‐

tions of the state constitution and statutes, as well as a federal

suit alleging federal constitutional and statutory violations.

The state court rendered a partial judgment for the teacher,

which was appealed. The district court noted that if the

teacher were “able to hold on to his judgment in state court,

there [wa]s no need for [it] to decide any of his claims.” Hearne

v. Bd. of Educ. of City of Chi., 996 F. Supp. 773, 777 (N.D. Ill.

1998). It therefore abstained under both Younger and Colorado

River.  

On appeal, we observed that “it appear[ed] that this case

is ... one in which proceedings in the state trial court have

come to a close and further appellate review is possible.”

Hearn, 185 F.3d at 778. Unlike the district court, however, we

did not “find Younger particularly useful” because “the kind

of extraordinary state interest that underlies the Younger com‐

mand to abstain in favor of a pending state court proceeding

d[id] not appear to be present.” Id. “Yielding to the state court

process under the ‘wise judicial administration’ principles of

Colorado River,” however, was “another matter.” Id. (quoting

Colorado River, 424 U.S. at 817). We explained that  

Colorado River acknowledged that more than the

simple pendency of an action in state court per‐

taining to the same matter as a suit in federal
No. 16‐3838 25

court is necessary before the federal court

should dismiss or stay an action. On the other

hand, as in Rogers, we have more than that: the

state trial court has actually concluded its con‐

sideration of the case. The clarity of the Illinois

law of preclusion (which applies here) on the ef‐

fect of a judgment that is still being appealed

has not changed appreciably since we decided

Rogers. Nevertheless, the principles of sound ju‐

dicial administration that animated the decision

in Colorado River caused this court to require a

stay of the federal proceedings in Rogers.

Id. (citation omitted).

Here, the district court was faced with the same dilemma

that we confronted in both Rogers and Hearn. In response to

the plaintiffs’ federal RICO complaint, NCB filed a motion to

dismiss orto stay the federal action. Before the plaintiffs could

respond, the state court entered summary judgment in the

Guaranty Action and denied both the Baeks’ motion to recon‐

sider in the Guaranty Action and the Baeks’ motion to amend

their complaint in the Parallel Action. At that point, and while

the Baeks’ state court appeal was pending, NCB asked for

leave to amend its motion to dismiss to include the ground of

res judicata. Heeding our guidance to abstain in circum‐

stances like the present one pending the resolution of state

court appeals, the district court “follow[ed] suit” and stayed

the action pending the outcome of the state appeal.46 Because

the district court acted in consonance with Rogers and Hearn,

it did not abuse its discretion, but rather demonstrated sound

                                                 

46 R.37 at 7.
26 No. 16‐3838

judgment.

The plaintiffs, however, fault the district court for failing

to engage in a more searching Colorado River analysis. They

maintain that our decision in Huon I, 657 F.3d 641, mandates

such an approach. We cannot accept this contention.  

In Huon I, following the termination of his employment,

an attorney filed an administrative charge ofrace and national

origin discrimination with the Illinois Department of Human

Rights and the EEOC. Before the charges were resolved, he

also filed an action in state court against three attorneys at his

former firm, alleging that they had made false and defama‐

tory statements about his work on an annual performance

evaluation. The state court granted the defendants’ motion to

dismiss; Huon appealed the state court judgment.  

The EEOC subsequently issued a right to sue letter, and

Huon filed an action in federal court alleging race and na‐

tional origin discrimination, as well as a pendent state‐law

claim for tortious interference with a prospective business re‐

lationship. The defendants moved to dismiss for failure to

state a claim or, alternatively, to stay the state law claim under

Colorado River. Before Huon could respond, the district court

ordered supplemental briefing on the application of “the doc‐

trines of claim splitting and res judicata to this action.” Id. at

644 (internal quotation marks omitted). At this point, the de‐

fendants urged the district court to stay proceedings on all of

the claims; according to the defendants, the state court action

included “general allegations of racial discrimination and

bias” and therefore was substantially similar to the action be‐

fore the district court. Id. The district court agreed. It con‐

cluded that the actions were parallel because they involved a

common core of operative facts. It then found that three of the
No. 16‐3838 27

ten Colorado River factors weighed in favor of abstention. It

therefore stayed the federal action pending resolution of the

state court appeal.

We reversed. We noted that the district court committed

several missteps in its analysis. First, instead of assessing

whether the actions were parallel for purposes of Colorado

River, the district court had assessed whether the claims arose

from the same core of operative facts for purposes of res judi‐

cata. See id. at 646. However, “even under the arguably more

liberal analysis for claim preclusion, the district court’s rea‐

soning f[ell] short.” Id. We observed that “[t]he court con‐

cluded that the two cases ar[o]se from the same facts because

Huon allege[d] in both suits that he performed his job satis‐

factorily.” Id. But it was not clear to us whether, under these

circumstances, “Illinois would find impermissible claim‐split‐

ting,” and, therefore, this question had to be explored on re‐

mand. Id. at 647.  

Moreover, had the district court applied the correct test for

determining whether the actions were parallel under Colorado

River, it likely would have reached a different result. We ex‐

plained that “[o]ne important factor is whether both cases

would be resolved by examining largely the same evidence.”

Id.  

Although all of Huon’s claims relate[d] to al‐

leged mistreatment he suffered at work, the ev‐

idence necessary to establish defamation or

emotional distress would be different from that

required to prove discrimination. ... [I]t [wa]s

unlikely that allegations of discrimination

would come up in his state suit, despite Huon’s
28 No. 16‐3838

passing references in his state complaint to dis‐

criminatory treatment.

Id.  

After concluding that the district court’s parallel analysis

was flawed, we also noted that its treatment of the ten factors

was lacking. We ventured that “the real motivation behind

the district court’s decision was its guess that res judicata

would eventually preclude all of Huon’s claims in federal

court.” Id. at 649. “Huon’s federal case,” we continued, “ha[d]

been languishing for almost two years on the assumption that

the Illinois circuit court’s judgment w[ould] someday be af‐

firmed, but that outcome [wa]s far from certain.” Id. at 650.

Consequently, we vacated the district court’s stay and re‐

manded for further proceedings.

Here the district court’s judgments are not riddled with

the same legal infirmities and factual assumptions as in Huon

I. After NCB asserted a res judicata defense, the district court

properly focused on the three requirements for res judicata

under Illinois law.47 It examined the allegations contained in

the Guaranty and Parallel Actions compared to the federal

RICO action, applied the correct legal standard, and con‐

cluded that the state and federal actions arise from a single

group of operative facts.48 Thus, the district court did not

merely venture a “guess” that res judicata would apply if the

judgment were affirmed on appeal; it thoroughly and cor‐

rectly reasoned that the Guaranty and Parallel Actions would

preclude the federal RICO claim.  

                                                 

47 See R.25 at 11.

48 See id. at 13–19.  
No. 16‐3838 29

Moreover, unlike in Huon I, the Baeks do not dispute that

the federal RICO action and the Guaranty and Parallel Ac‐

tions are “parallel” for purposes of Colorado River. Indeed,

such an argument would be insupportable.  

Suits are parallel if “substantially the same par‐

ties are litigating substantially the same issues

simultaneously in two fora.” Suits need not be

identical to be parallel, and the mere presence of

additional parties or issues in one of the cases

will not necessarily preclude a finding that they

are parallel.

AAR Int’l, Inc. v. Nimelias Enters. S.A., 250 F.3d 510, 518 (7th

Cir. 2001) (citations omitted) (quoting Schneider Nat’l Carriers,

Inc. v. Carr, 903 F.2d 1154, 1156 (7th Cir. 1990)). Here, in the

federal RICO claim, like the Guaranty and Parallel Actions,

the parties were litigating the propriety of NCB’s actions with

respect to the administration of the construction loan. Just by

way of example, both the federal and the state actions cen‐

tered on whether NCB improperly declared the construction

loan to be in default; whether, consistent with the loan and

modification agreements, NCB could demand additional se‐

curity because the loan was “out of balance”; and whether

there was fraud in the execution of loan documents and nota‐

rizations.

It is true that, like the district court in Huon I, the district

court here did not articulate and analyze each of the ten, non‐

exclusive Colorado River factors before staying the action. Nev‐

ertheless, in this case, we do not see how the district court

could have reached a reasoned decision to allow the federal

action to go forward.  
30 No. 16‐3838

Looking at the Colorado River factors, see Freed, 756 F.3d at

1018, the desire to avoid piecemeal litigation here clearly

weighed in favor of abstention. The same is true with respect

to the orderin which the jurisdiction was obtained: the federal

action was filed three and one‐half years after the Foreclosure

and Guaranty Actions. Moreover, there is no question that the

state forum was adequate to address the RICO claim, as this

was the initial forum in which the Baeks attempted to pursue

that claim. The relative progress of the proceedings also

weighs heavily in favor of abstention; the state actions had

been litigated for over four years and had reached a final

judgment in the Circuit Court at the time the district court en‐

tered its stay. Finally, the vexatious nature of the federal claim

supports abstention here. On April 24, 2014, the Baeks at‐

tempted to file in Circuit Court a RICO claim—identical to

that in the present action—ten months after the Circuit

Court’s deadline for filing an amended complaint had ex‐

pired. Only one month later, the Baeks filed the present RICO

action in federal district court. Clearly, this was an effort to

try to circumvent the Circuit Court’s long‐past deadline and

get a second bite at the apple.  

The nature and length of the litigation history among the

parties weigh heavily in favor of abstention in the federal ac‐

tion. Although the district court did not consider these in the

manner we have set forth, it was well aware of this history,

which provided the factual backdrop for its abstention order.

Consequently, it did not abuse its discretion in ordering the

federal RICO action stayed pending resolution of the state ap‐

peal of the Guaranty and Parallel Actions.

Finally, and most importantly, even if we had detected

some deficiency in the district court’s analysis, a remand here
No. 16‐3838 31

would not be in order. At this point, the state appellate court

has affirmed the judgments in the Guaranty and Parallel Ac‐

tions, and, therefore, there is, indisputably, a final judgment

on the merits. The situation, therefore, is indistinguishable

from the one we faced in Huon II, 757 F.3d 556, the appeal fol‐

lowing the remand in Huon I. After our remand, the defend‐

ants moved for judgment on the pleadings based on claim

preclusion. Applying the same test for preclusion that we

have applied here,49 the district court entered judgment for

the defendants, and Huon again appealed. We concluded that

the district court correctly applied this standard, and we af‐

firmed. As in Huon II, we now have a final state court judg‐

ment, and res judicata bars the Baeks’ federal RICO claim. See

Blair v. Equifax Check Servs., Inc., 181 F.3d 832, 838 (7th Cir.

1999) (“When the cases proceed in parallel, the first to reach

judgment controls the other, through claim preclusion (res ju‐

dicata).”).  

  

Conclusion

For the reasons set forth in this opinion, the judgment of

the district court dismissing the plaintiffs’ complaint as

barred by res judicata is affirmed.

         AFFIRMED 

  

                                                 

49 See supra at 14–18.