resolution of these claims can be made only with reference to state contract and property law.
Fourth, abstaining will avoid piecemeal litigation. Continuing to adjudicate this action
would constitute a waste of judicial resources given that another class of annuitants seeks
substantially the same relief in state court. The exercise of our jurisdiction potentially could lead
to inconsistent judgments, if annuitants, depending on whether they retired before or after
December 31, 1987, were deemed to possess different rights. See Caminiti, 962 F.2d at 701
(avoiding piecemeal litigation involves avoiding “duplicative and wasteful litigation with the
potential of inconsistent resolutions of the issue”). Fifth, the Court has no reason to doubt that
the federal plaintiffs’ rights will be protected in the state court proceeding. In fact, although the
Appellate Court in 2000 ruled that the Circuit Court did not improperly deny the post-1987
annuitants intervention in Korshak, the Circuit Court in 2001 nevertheless granted the Korshak
plaintiffs leave to file an amended complaint that would have included the putative Jacobson
class. Impatient with the Circuit Court’s refusal to extend automatically the scope of the
temporary restraining order to include the post-1987 annuitants, the Korshak plaintiffs withdrew
their motion to amend the complaint. Instead, the putative class members seek relief in this
Court, which leads to the final factor—the vexatious or contrived nature of the federal claim. We
question why Plaintiffs filed the instant suit rather than joining the state action, and suspect that
Plaintiffs might have been improperly seeking another forum in which to test their claims.
Accordingly, the balance of factors strongly weighs in favor of abstention. Both this
Court and the Circuit Court have been asked to determine the annuitants’ rights to fixed-rate
subsidized healthcare plans, “Wise judicial administration” counsels the Court to abstain from

exercising jurisdiction in this case. Colorado River, 424 U.S. at 817. The state court’s

13



healthcare benefits for another five years or through June 30, 2002. Also, in April 1998 the City
notified the annuitants of substantial rate increases for their plans.

Upon the expiration of the ten-year Korshak settlement period in June 1998, the Korshak
class petitioned the Circuit Court to reinstate the case and enlarge the Korshak class to include
the putative federal class in this case, The Circuit Court denied reinstatement, ruling that it had
no jurisdiction over the dispute because a permanent solution had been reached. City of Chi. v.
Korshak, No. 87 CH 10134 (Cir. Ct. of Cook County Sept. 1, 1998). The Appellate Court
reversed the Circuit Court’s decision—holding that the 1997 Amendments to the Pension Code,
which continued the City’s obligations only through 2002, was not a permanent solution—and
remanded the case to the Circuit Court. City of Chi. v. Korshak, No. 1-98-3465 and 1-98-3667
(Ill. App. Ct. June 15, 2000). The Appellate Court affirmed, however, the denial of the proposed
intervenors’ petition because they failed to demonstrate how their interests were any different
from the annuitants who had already intervened (i.e. the Korshak class). Id. at 8.

During the time when the post-settlement period jurisdictional issues were being decided
by the Illinois courts, the Jacobson plaintiffs sought relief in this Court, which dismissed the case
pending resolution of the Korshak appeal. Jacobson, et al. v. Policemen’s Annuity, et al., No. 99
C 0627 (N.D. Ill. Feb. 5, 1999). The Jacobson plaintiffs returned to this Court in 2001 and filed
their initial complaint on June 25, 2001. Thus, currently there are related actions proceeding in
both this Court and in the Circuit Court.

II. Pending State Court Action
In May 2002 the plaintiffs in the Korshak litigation filed an amended class action

complaint. The complaint includes eleven counts, primarily based on the annuitants’ contention



II. Abstention

As an alternative to dismissal under the Rooker-Feldman doctrine, Defendants argue that
the Court should stay this action in deference to the pending state proceeding. Defendants argue
for a stay under two abstention doctrines: Colorado River abstention to further wise judicial
administration, Colorado River Water Conservation District v. United States, 424 U.S. 800
(1976), and Pullman abstention to avoid unnecessary constitutional adjudication, Railroad
Commission of Texas v. Pullman Company, 312 U.S. 496 (1941).

Abstention under the Colorado River doctrine and the conservation of judicial
resources is appropriate when a party is contemporaneously litigating parallel suits in two
forums. Colo. River, 424 U.S. at 817; Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,
460 U.S, 1 (1983). See also Sverdrup Corp. v. Edwardsville Cmty. Unit Sch. Dist. No. 7,125
F.3d 546 (7" Cir, 1997). A two-part test determines the propriety of abstention under the
doctrine. First, the two pending suits must be parallel, which in this case means that substantially
the same parties are contemporaneously litigating substantially the same issues in two forums.
Caminiti and Iatarola, Ltd. v. Behnke Warehousing, Inc., 962 F.2d 698, 700 (7° Cir. 1992)
(citations omitted). Second, if the suits are parallel, the district court must consider ten factors in
deciding whether to abstain in favor of a pending state court action. “No one factor is necessarily
determinative.” Colo. River, 424 U.S. at 818. The Court should carefully consider both the
obligation to exercise jurisdiction and the combination of factors counseling against the exercise
of jurisdiction. Id, at 818-819, We must consider: (1) whether the first court assumed
jurisdiction over property; (2) the inconvenience of the federal forum; (3) the desirability of

avoiding piecemeal litigation; and (4) the order in which jurisdiction was obtained by the

9



effective), filed a second amended complaint in this Court. As in the Korshak amended
complaint, the Jacobson complaint primarily is based primarily on the plaintiffs’ asserted
contract and property rights in a fixed-rate subsidized healthcare plan. The complaint includes
eight counts: (1) a 42 U.S.C. § 1983 claim for denial of Fourteenth Amendment property and due
process rights; (2) common law breach of contract; (3) impairment of contract rights violating
Article 13, Section 5 of the 1970 Illinois Constitution; (4) impairment of contract rights violating
Article I, Section 10 of the United States Constitution; (5) ex post impairment of contract
violating Article I, Section 16 of the 1970 Illinois Constitution; (6) violations of the due process
protections of Article 1, Section 2 of the 1970 Illinois Constitution; (7) a violation of the Illinois
Consumer Fraud Act; and (8) special legislation violating Article 4, Section 13 of the 1970
Illinois Constitution. (R. 46, 2d Am. Compl.) Currently before the Court are both the City’s and
the Funds’ motions to dismiss the Jacobson complaint on various grounds. .In deciding this
motion, the Court will focus on the threshold jurisdictional issues.
LEGAL STANDARDS

A motion to dismiss tests the sufficiency of the complaint, not the merits of the suit.
Autry v. Northwest Premium Servs., Inc., 144 F.3d 1037, 1039 (7" Cir. 1998). When considering
a motion to dismiss, this Court views all facts alleged in the complaint, as well as any inferences
teasonably drawn from those facts, in the light most favorable to the plaintiff. /d. We will grant
a motion to dismiss only if it appears beyond doubt that the plaintiff can prove no set of facts
entitling him to relief. Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 432 (7°
Cir. 1993). In examining a motion to dismiss for lack of subject matter jurisdiction, the Court

may also look beyond the complaint and consider other evidence. Meridian v. Rail Prods. Corp.



that they have a contract or property right to fixed-rate subsidized healthcare plans:

(1) impairment of contract rights violating Article 13, Section 5 of the 1970 Illinois Constitution;
(2) common law breach of contract; (3) common law estoppel; (4) violation of the Illinois
Consumer Fraud Act; (5) ex post facto impairment of contract violating Article 1, Section 16 of
the 1970 Illinois Constitution; (6) deprivation of property rights violating the Fourteenth
Amendment, actionable under 42 U.S.C. § 1983; (7) impairment of contract right violating
Article I, Section 10, Clause 1 of the United States Constitution; (8) violations of the procedural
and substantive due process protections of the Fourteenth Amendment; (9) violation of the due
process protections of Article 1, Section 2 of the 1970 Illinois Constitution; (10) a taking
violating Article 1, Section 15 of the Illinois Constitution; and (11) special legislation violating
Article 4, Section 13 of the 1970 Illinois Constitution. (R. 42, App., Ex. A, Am. Compl.)

After the 2000 Appellate Court remand and despite the Appellate Court’s ruling that the
Circuit Court did not abuse its discretion in denying the intervenors’ petition, the Circuit Court in
2001 ruled that the Korshak class could be enlarged to include annuitants who retired after
December 31, 1987. The Korshak plaintiffs withdrew their motion to amend, however, when the
Circuit Court denied the plaintiffs’ request to extend an injunction to any annuitant beyond the
Korshak class. The case was set for a hearing on May 30, 2002 on the parties’ cross-motion for
summary judgment.

III. Pending Federal Court Action

On May 15, 2002, Korshak class counsel, representing a putative class of annuitants who

retired or were vested in their retirement benefits after December 31, 1987 (the cut-off date for

the Korshak class) and on or before August 23, 1989 (the date Public Act 86-273 became


In this case and at this stage of the proceedings, we decline to bar Plaintiffs’ claims in
their entirety under the Rooker-Feldman doctrine. Plaintiffs should be advised, however, that we
have strong doubts as to the propriety of this Court’s jurisdiction to the extent that their claims
challenge the Korshak settlement. For purposes of the Rooker-Feldman doctrine, a state court
approved settlement agreement is a judgment that should not be reviewed by this Court. 490/
Corp. v. Town of Cicero, 220 F.3d 522, 528 n.5 (7" Cir. 2000). The Korshak settlement
provided for the City’s obligations to pay the annuitants’ coverage and for the support of Pension
Code legislation, Public Act 86-273, which provided for a ten-year settlement period expiring in
June 1998. The Jacobson plaintiffs challenge the settlement and ensuing legislation and allege
injuries (e.g. rate increases, coverage denials) arising from the settlement agreement. In other
words, but for the state court judgment in Korshak—in this case, the settlement agreement—the
Jacobson plaintiffs’ claims would narrow significantly. Remer, 205 F.3d at 998.

Plaintiffs’ federal claims, Counts I and IV, the basis for this Court’s jurisdiction, can be
read, however, to include injuries arising not only from the Korshak settlement and Public Act
86-273 but from plan changes in 1998 and 2001 that did not constitute part of the Korshak
settlement. Defendants cannot argue that these latter claims are “inextricably intertwined” with
the state court judgment, as these claims could not have possibly been brought in the state
proceeding. Long, 182 F.3d at 558. Therefore, we will not bar the Jacobson Plaintiffs’ claims in
their entirety, but if called upon to review Plaintiffs’ claims in the future, we will be mindful of

the impropriety of lower federal court review of state court judgments.





class members technically are not parties to the state court action, such identity is not required if
their interests are similar to or represented by the Korshak class members. See Admin. Comm. v.
Gauf, 188 F.3d 767, 772 (7" Cir. 1999); see also Romine v. Compuserve Corp., 160 F.3d 337,
340 (6" Cir. 1998). Both the Jacobson and Korshak plaintiffs, distinguished by the date of their
retirement, represent or seek to represent classes of annuitants in the City’s health care plans,
who allege rights to a fixed-rate subsidized healthcare plan. Beyond the different retirement
dates, the Jacobson plaintiffs have not shown how their interests differ from the Korshak
plaintiffs. Indeed, when the Jacobson plaintiffs were denied intervention in the Korshak
litigation, the Appellate Court drew an identical conclusion when it noted that “(t]he proposed
intervenors have failed to demonstrate how their interests are any different from the annuitants
who have already intervened in this matter.” City of Chi. v. Korshak, No. 1-98-3465 and 1-98-
3667 (Ill. App. Ct. June 15, 2000). Thus, the parties in the state and federal actions are
substantially similar for purposes of the Colorado River doctrine.

Moreover, substantially the same issues are being litigated in both Korshak and Jacobson.
Plaintiffs’ claims in both suits are premised on the plaintiffs’ claimed right to subsidized
healthcare benefits at a fixed rate for life. In both suits, the plaintiffs challenge Pension Code
legislation and seek to enforce their alleged rights by claiming Fourteenth Amendment violations
as well as the equivalent state constitutional violation, impairment of contract under the United
States and Illinois Constitutions, ex post facto impairment of contract under the Illinois
Constitution, special legislation in violation of the Illinois Constitution, common law breach of
contract and a violation of the Illinois Consumer Fraud Act. Therefore, the two actions are

parallel, for purposes of the first prong of the Colorado River test.

11


concurrent forum. Jd. at 818. Applying the Colorado River test in the arbitration context, the
Moses H. Cone court added two factors to the test, including: (5) whether state or federal law
provides the rule of decision; and (6) whether the state court proceeding adequately protects the
federal plaintiff's rights. Moses H. Cone, 460 U.S. at 23-27. Furthermore, the Seventh Circuit
has gleaned four additional factors from considerations noted in Supreme Court cases: (7) the
relative progress of the state and federal proceedings; (8) the presence or absence of concurrent
jurisdiction; (9) the availability of removal; and (10) the vexatious or contrived nature of the
federal claim. Sverdrup, 125 F.3d at 550.

Applying the first step of the Colorado River test, we find that the state suit and the
federal suit are parallel actions as defined by Seventh Circuit caselaw. See Caminiti, 962 F.2d at
700. In other words, substantially the same parties are contemporaneously litigating substantially
the same issues in both state and federal court. /d. In the state action, the parties include the
class of annuitants who were participants on December 31, 1987, the City, the Policemen’s Fund,
the Firemen’s Fund, the Municipal Employees’ Fund and the Laborers’ Fund as well as various
officials. (See R. 42, App., Ex. A, Am. Compl. at 4-5.) The City and the same four funds are
also party to the federal action, along with a class of annuitants defined as those who retired or
whose benefits vested after December 31, 1987 but on or before August 23, 1989.

The differences between the parties to the two actions does not preclude a determination
that the two actions are parallel. First, the presence of the additional individual defendants in the
state action does not affect our determination. See AAR Int’l, Inc., Nimelias Enters. S.A., 250
F.3d 510, 518 (7* Cir. 2001) (“mere presence of additional parties or issues in one of the cases

will not necessarily preclude a finding that they are parallel”). Second, although the Jacobson

10



v. Amsted Indus., Inc., No. 02 C 3708, 2002 WL 31103479, at *2 (N.D. Ill. Sept. 18, 2002).
ANALYSIS

I. Rooker-Feldman Doctrine +
The Court must first address whether we can properly exercise jurisdiction over
Plaintiffs’ claims. Both the City and the Funds argue that Plaintiffs’ claims are barred under the
Rooker-Feldman doctrine. The doctrine, which arises from the Supreme Court’s decisions in
Rooker v. Fidelity Trust Company, 263 U.S. 413 (1923), and District of Columbia Court of
Appeals v, Feldman, 460 U.S. 462 (1983), prohibits federal court review of state court
judgments. Essentially, we must decide whether the plaintiffs seek to set aside a state court
judgment or whether they present independent claims. Edwards v. Ill. Bd. of Admissions to the
Bar, 261 F.3d 723, 728 (7" Cir. 2001) (citation and quotations omitted). The federal plaintiffs’
claims are barred if their claimed injury resulted from the state court judgment. Jd. at 729
(citations and quotations omitted). Thus, in cases where the doctrine applies, the federal
plaintiffs would have no complaint but for the state court determinations. Remer v. Burlington
Area Sch, Dist., 205 F.3d 990, 998 (7" Cir. 2000) (citations omitted). Moreover, the doctrine
bars not only those claims that result from the state court judgment, but also those claims that are
“inextricably intertwined” with it, or, in other words, those claims that call upon the federal court
to review the state court judgment. Edwards, 261 F.3d at 729. Claims can be inextricably
intertwined with the state court judgment, however, only if the plaintiff reasonably could have
raised the claims in the state court proceedings. Long v. Shorebank Dev. Corp., 182 F.3d 548,

558 (7 Cir. 1999).


alia, the City agreed to pay at least 50% of the cost of annuitants’ health care coverage. The City
and the Funds also agreed to support legislation to implement the settlement agreement. The
resulting legislation, Public Act 86-273 (effective August 23, 1989), provided that the City’s
obligations would terminate at the end of 1997, and that in the event that a permanent solution
was not reached by 1998, the annuitants would be permitted to reassert any rights they claimed at
the beginning of the 1988 bench trial. Over the objections of the Korshak class, the Circuit Court
approved the settlement agreement, ruling that it was in the best interest of the class because it
eliminated the risk that the annuitants would have to pay the entire cost of their health benefits or
would be unable to obtain coverage. City of Chi. v. Korshak, 565 N.E.2d 68, 71 (Ill. App. Ct.
1990). The Illinois Appellate Court affirmed the Circuit Court’s approval of the settlement
agreement. /d., cert. denied, 575 N.E.2d 912 (Ill. 1991), cert. denied, 503 U.S. 918 (1992).

Many developments related to the Korshak litigation occurred throughout the 1990s.
First, in 1990 the Retired Chicago Police Association (“RCPA”), represented by Korshak class
counsel, filed a suit in federal court challenging the Korshak settlement on behalf of a class of
annuitants who began participating in the City’s health care plan after December 31, 1987 and
before August 23, 1989. Retired Chi. Police Ass'n, 1414 F.R.D. 477 (N.D. IL. 1992). That
litigation ended after two rounds of appeals in which the Seventh Circuit upheld the district
court’s denial of class certification and denial of a group of annuitants’ motion to intervene, as
well as the district court’s dismissal of the case on remand for the RCPA’s lack of associational
standing. Retired Chi. Police Ass’n v. City of Chi., 7 F.3d 584, 594-99 (7" Cir. 1993); Retired
Chi. Police Ass'n v. City of Chi., 76 F.3d 856, 863-67 (7 Cir. 1996). Second, the Illinois

legislature passed Public Act 90-32 (effective June 1997), which continued annuitants’



involvement in the Korshak litigation commenced at a much earlier date and has progressed to a
more mature stage in the litigation process. Additionally, the dispute involves many questions of
state law, which are more properly decided by the state court.' Finally, this Court reiterates its
long held view that the federal courts do not possess capabilities superior to those of our state
court colleagues. See, e.g., CIGNA Healthcare of St. Louis, Inc., et al. v. Kaiser, et al., 181 F.
Supp. 2d (N.D. Ill. 2002), aff'd, 294 F.3d 849 (7" Cir. 2002). This Court commends its state
court colleagues for their diligent handling of this complex litigation. Therefore, we abstain from
exercising jurisdiction under the Colorado River doctrine.
CONCLUSION
For the foregoing reasons, the Court abstains from exercising jurisdiction over Plaintiffs’
claims and stays this action pending the resolution of the Korshak litigation. Therefore,
Defendants’ motions to dismiss are denied. (R. 41-1; 47-1.) In the event that the stay is lifted,
however, and this Court is called upon to exercise jurisdiction, the parties should
limit their claims so that this Court avoids review of the Korshak settlement in violation of the
Rooker-Feldman doctrine.
ENTERED:
Judge Ruben Castillo
United States District Court

Dated: November 21, 2002

' The Court notes that the Pullman doctrine provides an additional ground for abstention.
R.R. Comm'n of Tex. v. Pullman Co., 312 U.S. 496 (1941). The doctrine seeks to avoid
unnecessary constitutional litigation in the federal courts, In this case, the resolution of
Plaintiffs’ federal constitutional claims might be obviated if the state court rules that the
annuitants have no property or contract rights in a fixed-rate subsidized healthcare plan.
Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716-17 (1996). Therefore, abstention is further
supported under the Pullman doctrine.

14



constitutional claims as well as a claim against the City under the Illinois Consumer Fraud Act.
Currently before the Court are the City’s and the Funds’ motions to dismiss pursuant to Federal
Rules of Procedure 12(b)(1) and 12(b)(6). The City and the Funds provide a host of arguments
for dismissal of this suit. The Court has carefully considered all of the parties’ arguments, and
although we have reservations as to the propriety of this Court’s jurisdiction over some of
Plaintiffs’ claims, we will not bar them in their entirety under the Rooker-Feldman doctrine.
Rather, the Court opines that the more just and efficient result is a stay of this litigation pending
resolution of the Korshak litigation in the Circuit Court of Cook County. City of Chi. v.
Korshak, No. 01 CH 4962, previously 87 CH 10134 (Cir. Ct. of Cook County). As such, the
City’s and the Funds’ motions to dismiss are denied. (R. 41-1; 47-1.)
RELEVANT FACTS

I. Litigation History

The roots of the instant dispute extend back to 1987, when the City sued the Funds to
require them to obtain healthcare coverage for annuitants and to pay restitution for monies the
City had expended on annuitants’ healthcare benefits since 1982. City of Chi. v. Korshak, No. 87
CH 10134 (Cir. Ct. of Cook County). The Funds, in turn, filed counterclaims and sought an
injunction to prevent termination of the annuitants’ coverage. A group of annuitants then
intervened in the suit to protect the interests of participants in the City’s healthcare plan, and was
certified as representatives of a class of annuitants who had retired on or before December 31,
1987 (“Korshak class”). Although the Circuit Court dismissed the City’s complaint, the case
proceeded to a bench trial on the Funds’ counterclaims in June 1988. Before the Circuit Court

issued its ruling, however, the City and the Funds reached a settlement agreement, in which, inter



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION D
DONALD M. JACOBSON, DONALD ) DOCKET
KARNER and ROBERT VALLEYFIELD, ) NOV 2 2, 2002
)
Plaintiffs, )
) No, 01 C 4814
v. )
) Judge Ruben Castillo
CITY OF CHICAGO, POLICEMEN’S )
ANNUITY AND BENEFIT FUND OF )
CHICAGO, FIREMEN’S ANNUITY AND )

BENEFIT FUND OF CHICAGO, MUNICIPAL )
EMPLOYEES’, OFFICERS’ AND OFFICIALS’)
ANNUITY AND BENEFIT FUND and )

LABORERS’ AND RETIREMENT BOARD)
EMPLOYEES’ ANNUITY AND BENEFIT )
FUND, )
)
Defendants. )

NDUM OPINIO! ORDE

This case arises from a long-standing dispute among the City of Chicago (“City”),
participants in the City’s annuitant healthcare plans and four of the City’s annuitant and benefit
funds. In the instant dispute, annuitants Donald M. Jacobson, Donald Karner and Robert
Valleyfield sue the City, the Policemen’s Annuity and Benefit Fund, the Firemen’s Annuity and
Benefit Fund, the Municipal Employees’, Officers’ and Officials’ Annuity and Benefit Fund and
the Laborers’ and Retirement Board Employees’ Annuity and Benefit Fund (collectively
“Funds”). Plaintiffs’ eight-count complaint alleges two federal claims against both the City and
the Funds: (1) a 42 U.S.C. § 1983 claim for deprivation of their Fourteenth Amendment property
and due process rights; and (2) impairment of contract under Article I, Section 10 of the United

States Constitution. Plaintiffs also allege state law claims for breach of contract, several state

al


Having found that the state and federal actions are parallel, the Court must carefully
consider the obligation to exercise jurisdiction along with the factors that militate in favor of
abstention. Four of the factors—the first, second, eighth and ninth—are neutral and do not affect
our analysis. First, the state court did not assume jurisdiction over property which would have
conferred exclusive jurisdiction on the state court. Second, the two forums, both in Cook
County, are equally convenient to the parties. Third, both the state and federal court could
exercise jurisdiction over the Jacobson complaint. Fourth, the availability of removal is not at
issue because the time period during which Defendants could have removed from state court has
expired, 28 U.S.C. § 1446(b).

Analysis of the remaining six factors, however, strongly counsels abstention in favor of
the Xorshak litigation in Circuit Court. First, the state court obtained jurisdiction over
annuitants’ claims long before this Court. The Korshak litigation has a long history in state
court, commencing in 1987, with a bench trial in 1988, a settlement in 1988, a ten-year
settlement period between 1988 and 1998, followed by renewed litigation in state court
beginning in 1998. The current federal action, on the other hand, commenced in 2001. Second,
the state litigation has progressed further than the federal litigation. While this case is in its
nascent stages, Korshak was set for a hearing on May 30, 2002 on the parties’ cross-motions for
summary judgment. Third, most of the Jacobson plaintiffs’ claims arise under state law, not
federal law, Six of the Jacobson plaintiffs’ eight counts are claims under Illinois common law,
the Illinois Constitution or Illinois statutes. Moreover, although the two remaining counts—a
§ 1983 count for deprivation of property rights and due process rights under the Fourteenth

Amendment and a constitutional claim for impairment of contract—are federal counts, the

12