In the

United States Court of Appeals

For the Seventh Circuit

Nos. 09-3975 & 10-1019

EMPRESS CASINO JOLIET CORPORATION,

an Illinois corporation, et al.,

Plaintiffs-Appellants (No. 09-3975)

Plaintiffs-Appellees (No. 10-1019),

v.

ROD R. BLAGOJEVICH,

Defendant-Appellant (No. 10-1019),

and

BALMORAL RACING CLUB, INC.,

MAYWOOD PARK TROTTING ASSOCIATION,

INC., ARLINGTON PARK RACECOURSE, LLC,

FAIRMOUNT PARK, INC., and

HAWTHORNE RACE COURSE, INC.,

Defendants-Appellees (No. 09-3975).

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 1:09-cv-03585—Matthew F. Kennelly, Judge.

ARGUED FEBRUARY 23, 2010—DECIDED MARCH 2, 2011
2 Nos. 09-3975 & 10-1019

Operating in various locations in Illinois, the riverboat 1

casinos are: Empress Casino Joliet Corporation; Des Plaines

Development LP (doing business as Harrah’s Casino Cruises

Joliet); Hollywood Casino-Aurora, Inc.; and Elgin Riverboat

Resort-Riverboat Casino (doing business as Grand Victoria

Casino). We refer to them collectively as “the casinos.”

Johnston’s horse-racing tracks are Balmoral Racing Club, Inc., 2

and Maywood Park Trotting Association, Inc.; the others are

Arlington Park Racecourse LLC; Fairmount Park, Inc.; and

Hawthorne Race Course, Inc. We refer to them collectively

as “the racetracks” unless the context requires otherwise.

Before BAUER, POSNER, and SYKES, Circuit Judges.

SYKES, Circuit Judge. This civil racketeering suit has

some factual overlap with the federal prosecution of

former Illinois Governor Rod Blagojevich, now awaiting

retrial on various criminal counts that were tried last

summer but resulted in a hung jury. Four riverboat

casinos claim they are victims of a pay-to-play scheme

engineered by Blagojevich and John Johnston, the owner

of two Illinois horse-racing tracks. The casinos allege 1

that Blagojevich “sold” and Johnston “bought” the enactment of two Illinois gaming laws requiring them to pay

3% of their adjusted gross revenue into a “Horse

Racing Equity Trust Fund” as a condition of their

gaming licenses. The proceeds of this fund go not to the

State of Illinois or to any state program or service but

instead are paid directly to a small group of competing

gambling enterprises: five Illinois horse-racing tracks,

including the two owned by Johnston. The details of this 2

scheme are largely derived from the federal criminal
Nos. 09-3975 & 10-1019 3

Count I alleges violations of the Racketeer Influenced and 3

Corrupt Organizations Act, 18 U.S.C. § 1962(c), (d). Count II

seeks a common-law constructive trust over the proceeds of

the RICO conspiracy alleged in Count I.

complaint that led to Blagojevich’s removal from office

in January 2009 and an indictment later returned against

him. While this case has been pending, the casinos

have continued to pay into the fund (more than $100

million and counting), but the money is frozen on

release and held in escrow under the terms of a temporary

restraining order put in place by the district court.

The casinos’ complaint has two counts: (1) a RICOconspiracy claim against Blagojevich, his campaign committee “Friends of Blagojevich,” Johnston, and the

two racetracks he owns; and (2) a constructive-trust

claim against all five racetracks as beneficiaries of the illgotten gains of the conspiracy. The defendants moved

3

to dismiss on multiple grounds, and the casinos sought a

preliminary injunction to maintain the escrow. Each

side prevailed in part. The district court left the RICO

claim standing and also rejected Blagojevich’s claim of

legislative immunity. But the court accepted the racetracks’ argument that the casino surcharge is a tax and

therefore the Tax Injunction Act, 28 U.S.C. § 1341, blocked

the court’s jurisdiction to impose a constructive trust.

The court then dismissed the constructive-trust claim,

denied the motion for a preliminary injunction, and

dissolved the TRO. Blagojevich sought immediate

review of the immunity issue; the casinos appealed the
4 Nos. 09-3975 & 10-1019

denial of a preliminary injunction, which also brought

up the jurisdictional dismissal of their constructivetrust claim. We reinstated the TRO pending resolution

of the appeals.

We now reverse. The former governor is entitled to

legislative immunity. The Supreme Court has made clear

that state and local officials are absolutely immune

from federal suits filed against them in their personal

capacities for actions taken in connection with legitimate legislative activity. This immunity applies notwithstanding allegations of misconduct and regardless of

whether the office held is legislative or executive—as

long as the activity in question is functionally legislative.

Under this established federal doctrine, Blagojevich

is immune from civil suit for his role in inducing the

Illinois legislature to adopt the Horse Racing Acts of

2006 and 2008 and for signing those Acts into law. The

RICO claim survives, however; Friends of Blagojevich,

Johnston, and the two racetracks he owns remain as

defendants on that claim.

The Tax Injunction Act does not bar the court from

imposing a constructive trust on the money disbursed

from the Horse Racing Fund. The casino surcharge is not

a tax. It raises no revenue for the operation of state government and supports no governmental agency,

program, or service. It simply takes profits from a few

private firms for direct transfer to certain favored, apparently less-profitable competitors. The money is held

in a segregated account, may not be used to pay any

state expense, and is disbursed within a few days to the
Nos. 09-3975 & 10-1019 5

beneficiary racetracks. Assessed as a condition of state

licensure, the surcharge is more like a regulatory penalty

or fee than a tax, and therefore the Tax Injunction Act

does not apply. We also reject the racetracks’ alternative

arguments—preclusion, abstention, and failure to state

a claim—offered in support of affirmance. The TRO

remains in effect.

I. Background

On May 26, 2006, Governor Blagojevich signed a most

unusual bill into law. The 2006 Horse Racing Act, Illinois

Public Act 94-804, targeted the state’s four highestearning riverboat casinos and compelled them to pay 3%

of their adjusted gross revenue into a segregated fund,

the “Horse Racing Equity Trust Fund,” for a period

of two years. 230 ILL. COMP. STAT. 10/7(a). The money

deposited into the Fund—a “non-appropriated trust

fund held separate and apart from State moneys”—is

disbursed directly to five Illinois horse-racing tracks, the

defendants here, within ten days of deposit. Id. § 5/54.5(a),

(b). The money held in the Fund may not be transferred

to the State’s general revenue fund or otherwise commingled with public funds and may not be allocated to

any state agency or program or used to pay any state

cost or expense. The racetracks must spend 60% of the

money they receive from the Fund on the “purse”—a

cash prize awarded to the owners of top-finishing

horses—and the remaining 40% on operational expenses.

Id. The racetracks are also required to provide the Illinois

Racing Board with a detailed account of money received

and spent from the Fund.
6 Nos. 09-3975 & 10-1019

The Illinois General Assembly made several legislative

findings in connection with the 2006 Racing Act. It

noted that from 1992—the first year riverboat casinos

began operating in Illinois—through 2005, on-track

horse wagering in Illinois decreased by 46%. This decline

would be reversed, the legislature found, if funds generated by the 2006 Racing Act were paid directly to the

horse-racing tracks. Helping the horse-racing industry,

in turn, would have important downstream benefits

for Illinois farmers, breeders, and horse-racing fans. After

the 2006 Act expired, the legislature enacted the 2008

Horse Racing Act, Illinois Public Act 95-1008, which

effectively extended the 2006 Act for another three

years, through December 2011.

The enactment of the 2006 Racing Act set in motion

an extraordinary confluence of events, legal and political.

The history is lengthy and complex but important to

some of the issues raised on appeal, so we cannot skip

over it. Four days after passage of the 2006 Act, the

casinos filed suit in Will County Circuit Court challenging the Act’s constitutionality. They named the

Illinois Treasurer and the Illinois Racing Board as defendants and sued under the “Protest Monies Act,” 30 ILL.

COMP. STAT. 230/2a (formally the State Officers and Employees Money Disposition Act), which allows taxpayers

to challenge state laws and pay the contested monies

into a protest fund until the action is resolved. They

claimed that the 2006 Racing Act violated several provisions of the Illinois Constitution, including its takings, dueprocess, uniformity, and public-purpose clauses, as well

as the Takings Clause of the Fifth Amendment. The trial
Nos. 09-3975 & 10-1019 7

The Illinois Supreme Court held that the 2006 Racing Act did 4

not arbitrarily or unreasonably single out the casinos in

violation of the state constitution’s uniformity clause. Empress

Casino Joliet Corp. v. Giannoulias, 896 N.E.2d 277, 284-87 (Ill.

2008). The court also held that state and federal takings

analysis applies only to uses of the state’s power of eminent

domain, and on this basis rejected the takings claims. Id. at 290-

93. Finally, the court rejected the casinos’ argument that the

2006 Act violated the state constitution’s public-purpose

clause because its primary beneficiaries were private parties;

the court deferred to the legislative findings regarding the

public benefits of the Act. Id. at 293-96.

court entered summary judgment for the casinos, and the

state defendants took a direct appeal to the Illinois Supreme Court. On June 5, 2008, the state supreme court

reversed, upholding the 2006 Act against the casinos’

state and federal constitutional challenges. Empress 4

Casino Joliet Corp. v. Giannoulias, 896 N.E.2d 277 (Ill. 2008).

Six months later, on December 7, 2008, the United States

Attorney for the Northern District of Illinois filed a criminal complaint against Blagojevich accusing the governor

of engaging in a “political corruption crime spree.” In

an affidavit filed with the complaint, an FBI agent recounted the contents of intercepted phone conversations

in which Blagojevich discussed (as relevant here)

soliciting payments as a quid pro quo for signing the

2006 Racing Act. The Illinois House of Representatives

immediately convened a special investigative committee

to investigate Blagojevich’s alleged malfeasance and

determine whether he should be impeached. The com-
8 Nos. 09-3975 & 10-1019

mittee’s final report recommended impeachment based

in part on Blagojevich’s arrangement with Johnston for

political contributions in exchange for his signature on

the 2006 Act. The Illinois House quickly voted to

impeach Blagojevich, and the Senate removed him from

office on January 30, 2009. On April 2, 2009, the U.S.

Attorney filed a superseding indictment charging

Blagojevich with 17 crimes, including wire fraud, attempted extortion, bribery conspiracy, and racketeering. A

24-count second superseding indictment was filed on

February 4, 2010.

In the meantime, in January 2009 the casinos filed a

petition for certiorari in the United States Supreme

Court seeking review of the Illinois Supreme Court’s

decision rejecting their claim that the 2006 Racing Act

violated the Takings Clause of the federal constitution.

On June 8, 2009, the Supreme Court denied certiorari.

Empress Casino Joliet Corp. v. Giannoulias, 129 S. Ct.

2764 (2009).

Two days later, the casinos filed a petition in Will

County Circuit Court for relief from judgment under

735 ILL. COMP. STAT. 5/2-1401. The petition was based

on the newly disclosed information from the FBI’s investigation of Blagojevich. The casinos told the court

the new evidence would show that the legislative

findings in the 2006 Racing Act—on which the Illinois

Supreme Court had so heavily relied—were basically a

sham. The 2006 Act, they maintained, was the product

of a “corrupt bargain” between Blagojevich and Johnston

and therefore violated the due-process clause of the
Nos. 09-3975 & 10-1019 9

Illinois Constitution. In support of their petition, the

casinos later submitted the FBI agent’s affidavit, wiretap

transcripts, the April 2009 superseding indictment, and

the report of the legislature’s special investigative committee recommending impeachment.

This effort to reopen the constitutional challenge

failed; on August 17, 2009, the trial judge denied the

casinos’ petition. The judge said the legislature’s motive

in passing the 2006 Racing Act was irrelevant to the

Act’s constitutionality. She specifically declined to

consider the FBI agent’s affidavit, the wiretap transcripts,

or the superseding indictment, saying these items

were inadmissible hearsay, did not contain “facts which

have been proved,” and involved a different case and

different parties. (The judge did, however, take judicial

notice of the special investigative committee’s final

report.) The judge then ordered the Illinois Treasurer to

transfer the money deposited under the 2006 Act from

the protest fund to the Horse Racing Fund, setting up

the imminent disbursement of the money to the racetracks. The casinos appealed and asked the trial court

for a stay. This request was denied, and the Illinois Appellate Court also refused to grant a stay. On January 15,

2010, the casinos voluntarily dismissed this appeal.

While these constitutional challenges to the 2006 Act

were winding their way through the courts, the casinos

commenced a second suit in Will County against the

Illinois Treasurer and the Illinois Racing Board challenging the constitutionality of the 2008 Racing Act. Filed

on January 8, 2009, their complaint alleged that the 2008
10 Nos. 09-3975 & 10-1019

Act was the product of a pay-to-play scheme and violated

various provisions of the Illinois Constitution. Relying

exclusively on the earlier denial of the casinos’ § 2-1401

petition for postjudgment relief in the case challenging

the 2006 Act, the Will County court dismissed the new

suit with prejudice on November 19, 2009. At the time

of this ruling, all the racetracks except Fairmount had

intervened as defendants. The casinos appealed, and the

Illinois Appellate Court denied their motion for a stay.

On February 11, 2011, the appellate court affirmed.

We now arrive at this case. On June 12, 2009, two days

after filing their motion for postjudgment relief in the

first of the state-court cases, the casinos filed this action

in the Northern District of Illinois—the first to assert

claims directly against Blagojevich, Johnston, and the

racetracks. As we have noted, it has two counts: (1) a

RICO-conspiracy claim against Blagojevich, Friends of

Blagojevich, Johnston, Balmoral, and Maywood; and (2) a

state-law claim against all five racetracks seeking a constructive trust to prevent their unjust enrichment from

the proceeds of the racketeering scheme.

A few weeks after this action was filed, the casinos

commenced yet another state-court suit, this time in

Cook County Circuit Court, seeking injunctive relief

against the Illinois Treasurer to prevent the imminent

transfer of the money from the protest fund to the Horse

Racing Fund and then to the racetracks. The court dismissed this action. The casinos appealed, but later dismissed the appeal and instead sought a TRO and preliminary injunction from the district court in this case.
Nos. 09-3975 & 10-1019 11

They asked that any money disbursed from the Horse

Racing Fund be held in an interest-bearing special

escrow account pending resolution of the federal suit.

The district court entered a TRO to that effect and scheduled a hearing on the request for a preliminary injunction.

The defendants opposed the preliminary injunction

and moved to dismiss on several legal theories.

Blagojevich asserted legislative immunity, and he and

his campaign committee also argued the suit was barred

by res judicata and failed to adequately state a RICO

claim. The other defendants on the RICO claim—Johnston,

Balmoral, and Maywood—joined the latter two arguments and also maintained that the casinos could not

prove a pattern of racketeering activity or proximate

causation. On the constructive-trust claim, the racetracks

(all of them) asserted multiple defenses: (1) the casino

surcharge was a tax and therefore the Tax Injunction Act

stripped the court of subject-matter jurisdiction; (2) the

action was premature because they had not yet received

disbursement of money under the Racing Acts; (3) as a

matter of law, they were not “unjustly enriched” by the

payment of money under Acts; and (4) the action was

barred by res judicata, or in the alternative, the court

should abstain under the Colorado River doctrine.

The district court denied the motion to dismiss the

RICO count and also rejected Blagojevich’s claim of

legislative immunity. On the constructive-trust claim,

the judge agreed with the racetracks’ argument that

the casino surcharge was a tax and therefore the Tax

Injunction Act eliminated the court’s jurisdiction. The
12 Nos. 09-3975 & 10-1019

Arlington Park, Fairmount Park, and Hawthorne appear 5

jointly on appeal. Balmoral and Maywood, the two racetracks

owned by Johnston, appear together but separately from the

other three racetracks. We will continue to refer to them

collectively as “the racetracks” unless the context requires

otherwise.

judge acknowledged, however, that “the question is not

free from doubt.” The judge then dismissed the

constructive-trust claim, denied the motion for a preliminary injunction, and dissolved the TRO. Blagojevich

appealed the denial of legislative immunity, and

the casinos appealed the denial of their motion for a

preliminary injunction, which was premised on the

jurisdictional dismissal of the constructive-trust

claim. The racetracks responded to the casinos’ appeal,

defending the district court’s decision to dismiss under

the Tax Injunction Act and also reiterating their alternative arguments for dismissal of the constructivetrust claim. Friends of Blagojevich and Johnston are not 5

parties to either appeal. We consolidated the appeals

for decision and reinstated the TRO.

In August 2010, after a two-month trial and 14 days

of deliberations, a federal jury convicted Blagojevich on

one criminal count—making false statements to the

FBI—but could not reach a verdict on the other 23. He

awaits retrial, currently scheduled for April.
Nos. 09-3975 & 10-1019 13

II. Discussion

A. Blagojevich’s Claim of Legislative Immunity

We begin with the question raised in Blagojevich’s

appeal: Does legislative immunity shield the former

governor from this suit? The district court answered “no”

and denied his motion to dismiss. A decision denying

a claim of immunity is immediately appealable under

the collateral-order doctrine. Mitchell v. Forsyth, 472 U.S.

511, 524-25 (1985). Whether Blagojevich is entitled to

legislative immunity is a question of law that we review

de novo. Carvajal v. Dominguez, 542 F.3d 561, 566 (7th

Cir. 2008).

The doctrine of legislative immunity is well-established

by Supreme Court and circuit precedent; state and

local officials are absolutely immune from federal suit

for personal damages for their legitimate legislative

activities. See Bogan v. Scott-Harris, 523 U.S. 44, 55 (1998);

Supreme Court of Virginia v. Consumers Union of U.S., Inc.,

446 U.S. 719, 731-34 (1980); Lake Country Estates, Inc. v.

Tahoe Reg’l Planning Agency, 440 U.S. 391, 403-04 (1979);

Tenney v. Brandhove, 341 U.S. 367, 377 (1951); Biblia Abierta

v. Banks, 129 F.3d 899, 906 (7th Cir. 1997); Thillens, Inc. v.

Cmty. Currency Exch. Ass’n of Ill., Inc., 729 F.2d 1128, 1130-

31 (7th Cir. 1984). Sixty years ago the Supreme Court

explained the contours of this common-law immunity

in Tenney v. Brandhove, 341 U.S. at 377. Tenney holds

that state officials are absolutely immune from civil

liability for activities undertaken in “the sphere of legitimate legislative activity.” Id. at 376-77 (“Legislators are

immune from deterrents to the uninhibited discharge
14 Nos. 09-3975 & 10-1019

of their legislative duty, not for their private indulgence

but for the public good.”). Tenney did not create a

new strain of immunity doctrine; instead, the Court

held that Congress in passing the Civil Rights Act of

1871, the predecessor to 42 U.S.C. § 1983, had not abrogated preexisting common-law legislative immunity for

state officials. Id. at 372; see also Lake Country Estates,

440 U.S. at 403 (“The immunity of legislators from civil

suit for what they do or say as legislators has its roots

in the parliamentary struggles of 16th- and 17th-century

England; such immunity was consistently recognized

in the common law and was taken as a matter of course

by our Nation’s founders.”).

Cases decided since Tenney have made clear that this

immunity extends to all state and local officials,

including those outside the legislative branch, for the

performance of acts that are legislative in character or

function. See Bogan, 523 U.S. at 55 (extending legislative

immunity to a mayor for signing an ordinance into

law); Consumers Union, 446 U.S. at 731-34 (extending

legislative immunity to claims for injunctive and declaratory relief brought against judges for promulgating a code

of professional responsibility); Lake Country Estates, 440

U.S. at 404-05 (extending legislative immunity to members

of an interstate planning commission for enacting a

regional land-use ordinance). This functional approach

to legislative immunity is consistent with the normal

method for determining the availability and scope of

common-law immunities. See Forrester v. White, 484 U.S.

219, 224 (1988) (“Running through our cases, with fair

consistency, is a ‘functional’ approach to immunity ques-
Nos. 09-3975 & 10-1019 15

tions other than those that have been decided by express

constitutional or statutory enactment.”); see also Rateree

v. Rockett, 852 F.2d 946, 950 (7th Cir. 1988) (noting functional approach to legislative immunity).

Although the Supreme Court has not specifically addressed a legislative-immunity claim by a governor, there

is no principled reason to think the established doctrine

applies any differently to governors who are sued for

their role in legislative activity. Our circuit has suggested, albeit in dicta, that governors are entitled to

legislative immunity against claims for injunctive relief

as well as damages suits when the conduct at issue

relates to the legislative process. See Risser v. Thompson,

930 F.2d 549, 551 (7th Cir. 1991) (“When the governor of

a state is exercising his veto power, he is acting in a

legislative capacity, . . . and he is therefore entitled to

absolute immunity.” (citing Tenney and Consumers Union)).

Other circuits have not hesitated to extend legislative

immunity to governors for their legislative acts. See State

Emps. Bargaining Agent Coal. v. Rowland, 494 F.3d 71, 91-

92 (2d Cir. 2007) (confirming availability of legislative

immunity for governor, but denying it on the ground

that additional discovery was necessary to determine

whether the acts in question were legislative); Baraka v.

McGreevey, 481 F.3d 187, 196-97 (3d Cir. 2007) (absolute

legislative immunity for governor advocating passage

of legislation and signing bill into law); Torres-Rivera

v. Calderón-Serra, 412 F.3d 205, 212-14 (1st Cir. 2005)

(governor entitled to legislative immunity for signing

legislation); Women’s Emergency Network v. Bush, 323

F.3d 937, 950 (11th Cir. 2003) (same).
16 Nos. 09-3975 & 10-1019

Tenney also established that legislative immunity

applies even when the official is accused of misconduct

or other improper motive. 341 U.S. at 376-77 (“The claim

of an unworthy purpose does not destroy the privilege.”);

see also Bogan, 523 U.S. at 54 (“Whether an act is legislative turns on the nature of the act, rather than on the

motive or intent of the official performing it.”); Biblia

Abierta, 129 F.3d at 903. Accordingly, Tenney’s use of the

phrase “legitimate legislative activity” must be understood as a reference to the governmental sphere in which

the official was operating, not the legality or propriety of

his acts. Tenney, 341 U.S. at 376. Legislative immunity

would have “little value,” the Court has explained, if

forced to give way in the face of allegations of official

misconduct. Id. at 377. Based on this principle, we have

extended legislative immunity to state officials despite

allegations of bribery and improper influence. See

Thillens, 729 F.2d at 1130 (state legislators are entitled to

legislative immunity in spite of bribery allegations). Even

when the plaintiff’s claim is directed primarily at

illegal conduct by public officials, immunity attaches if

the claim requires “ ‘proof of a legislative act or the

motives or purposes underlying such an act.’ ” Id. at 1131

(quoting Gravel v. United States, 408 U.S. 606, 621 (1972));

see also Chappell v. Robbins, 73 F.3d 918, 920, 925 (9th Cir.

1996) (defendant who admitted that he took bribes in

exchange for legislation was protected by legislative

immunity in civil RICO action). 

Under this long-standing doctrine, Blagojevich is

entitled to immunity from this civil RICO suit. The allegations are that the former governor took bribes in
Nos. 09-3975 & 10-1019 17

exchange for influencing the state legislature to pass the

Racing Acts and for signing the Acts into law. Or in the

casinos’ own formulation, Johnston “bought” and

Blagojevich “sold” the Racing Acts. The casinos’ claim

cannot be made without reference to the former

governor’s role in securing the enactment of these Acts.

See Chappell, 73 F.3d at 922; Thillens, 729 F.2d at 1131.

The activity in question—influencing the state legislature to pass the bills and signing them into law—is unquestionably legislative in character. See Bogan, 523 U.S. at

55 (signing a bill into law is a legislative function protected by immunity); Thillens, 729 F.2d at 1131 (influencing

the legislative process is a legitimate legislative activity). Because the RICO claim “broadly implicate[s]”

Blagojevich’s role in the legislative process, he is protected

by absolute legislative immunity. Thillens, 729 F.2d at 1131.

The casinos weakly suggest that legislative immunity

is somehow limited to § 1983 suits and does not apply

to claims under RICO. This is a nonstarter. We held

long ago that legislative immunity applies in a RICO suit.

See id. at 1129 (holding that legislative immunity bars

a civil RICO suit as well as claims under § 1983, the

Sherman Antitrust Act, and various state-law torts). As

we have already noted, Tenney did not create a new

immunity applicable only to § 1983; rather, it held that

Congress did not abrogate common-law legislative immunity when it enacted the Civil Rights Act of 1871. 341

U.S. at 372-77. The Supreme Court has always defined

legislative immunity broadly as “absolute immunity

from federal damages liability,” without reference to any

specific cause of action. Lake Country Estates, 440 U.S. at
18 Nos. 09-3975 & 10-1019

406 (emphasis added). And like § 1983, there is nothing

in RICO to demonstrate the “clear legislative intent”

required to abrogate common-law immunity. See Pulliam

v. Allen, 466 U.S. 522, 529 (1984) (holding that clear legislative intent is required to abrogate common-law

principles of legislative and judicial immunity); see also

Chappell, 73 F.3d at 923-24 (concluding that nothing in

RICO’s text or legislative history evinces an intent to

abrogate common-law legislative immunity).

These principles of federal law are so clear that the

casinos focus most of their attention on a wholly different

point—that state immunity law applies. This is the argument that persuaded the district court. The casinos insist

that the Illinois Supreme Court’s decision in Jorgensen v.

Blagojevich, 811 N.E.2d 652 (Ill. 2004), which denied thenGovernor Blagojevich legislative immunity under the

Illinois Constitution, must control this case. Not so. It is

blackletter law that “[t]he elements of, and the defenses

to, a federal cause of action are defined by federal law.”

Howlett v. Rose, 496 U.S. 356, 375 (1990); see also Owen v.

City of Independence, 445 U.S. 622, 647 n.30 (1980) (“Municipal defenses—including an assertion of sovereign immunity—to a federal right of action are, of course, controlled by federal law.”). Indeed, the Supreme Court has

expressly rejected the position that a state constitution

or other state law should have any effect on federal

common-law legislative immunity. See Lake Country

Estates, 440 U.S. at 404-05 (“[T]he absolute immunity

for state legislators recognized in Tenney reflected the

Court’s interpretation of federal law; the decision

did not depend on the presence of a speech or debate
Nos. 09-3975 & 10-1019 19

clause in the constitution of any State, or on any

particular set of state rules or procedures available

to discipline erring legislators.”).

There is good reason to preserve the content and scope

of federal immunity doctrine from state encroachment.

Were it otherwise, states could strip their officials of

immunity in federal court or immunize them for federal

constitutional or statutory violations, frustrating the

operation and uniformity of federal law. Then-Judge

Stevens made this point explicit in an opinion for this

court more than thirty years ago: 

Conduct by persons acting under color of state law

which is wrongful under 42 U.S.C. § 1983 or § 1985(3)

cannot be immunized by state law. A construction of

the federal statute which permitted a state immunity

defense to have controlling effect would transmute

a basic guarantee into an illusory promise; and the

supremacy clause of the Constitution insures that

the proper construction may be enforced.

Hampton v. City of Chicago, 484 F.2d 602, 607 (7th Cir. 1973).

The suggestion that state immunity law displaces an

otherwise valid claim of federal immunity is a bit odd,

or at least unworkable; for the reasons noted in Hampton,

the scope of a public official’s immunity from suit on

a federal claim in federal court is a matter of federal law.

Moreover, some states have little or no developed

jurisprudence in this area. Indeed, the law often runs in

the opposite direction. State courts have imported

federal common-law immunity doctrine into actions

arising under state law. See, e.g., Camacho v. Samaniego,
20 Nos. 09-3975 & 10-1019

954 S.W.2d 811, 823 (Tex. Ct. App. 1997) (“Because the

jurisprudence of legislative immunity is not well developed in Texas, we will rely on federal authorities to

assess the applicability of this form of immunity to the

case before us.”); see also Brown v. City of Bordentown, 791

A.2d 1007, 1010 (N.J. Super. Ct. App. Div. 2002) (adopting

federal common-law legislative immunity in state-law

action); Dublin v. State, 742 N.E.2d 232, 236-37 (Ohio Ct.

App. 2000) (looking to federal cases to define legislative

immunity).

We also reject application of Jorgensen on its own

terms. Jorgensen did not involve a question of legislative

immunity from a personal-damages suit. To the contrary,

Jorgensen was a class-action suit filed by Illinois judges

against Governor Blagojevich and the Illinois Comptroller

in their official capacities seeking a declaration that the

governor’s use of his veto to block a judicial pay raise was

unconstitutional. 811 N.E.2d at 654-59. In rejecting

Blagojevich’s claim of legislative immunity, the Illinois

Supreme Court specifically explained that the judges

were not trying to hold the governor personally liable,

nor were they “attempting to force him to take or to

refrain from taking any particular action.” Id. at 666.

There was “nothing unusual about his inclusion as a

party,” the court said, because he was “one of the state

officials involved in the sequence of events” that led to

the judiciary’s failure to receive a cost-of-living increase.

Id. The rejection of immunity in a case like Jorgensen

is unsurprising; state officials are obviously not shielded

from all judicial review of the constitutionality of legislative acts. See Powell v. McCormick, 395 U.S. 486, 503 (1969)
Nos. 09-3975 & 10-1019 21

(“Legislative immunity does not, of course, bar all

judicial review of legislative acts.”). In short, the type

of legislative immunity from personal-damages suits

articulated in Tenney simply was not implicated in

Jorgensen.

Indeed, Jorgensen did not address common-law legislative immunity at all. Instead, the Illinois Supreme Court

relied on Article IV of the Illinois Constitution—Illinois’

equivalent of the U.S. Constitution’s Speech or Debate

Clause—and § 107-7 of the Illinois Code of Criminal

Procedure. 811 N.E.2d at 666. The state constitution’s

speech-and-debate provision is limited by its terms to

members of the Illinois General Assembly and is plainly

inapplicable to Blagojevich. Id. The same would be true

of the U.S. Constitution’s Speech or Debate Clause, which

applies only to legislators and their aides. See Gravel,

408 U.S. at 616-17. But federal common-law legislative

immunity is distinct from and broader than the federal

constitution’s Speech and Debate Clause. See United

States v. Gillock, 445 U.S. 360, 372 n.10 (1980) (“Despite

the frequent invocation of the federal Speech or Debate

Clause in Tenney, the Court has made clear that the

holding was grounded on its interpretation of federal

common law, not on the Speech or Debate Clause.”).

Recognizing this distinction, state courts, like federal

courts, have not hesitated to extend common-law legislative immunity to executive officials, including governors.

See, e.g., Humane Soc’y of N.Y. v. City of New York, 729

N.Y.S.2d 360, 363 (N.Y. Sup. Ct. 2001) (“The Speech or

Debate Clause applies by its terms only to ‘members’ of
22 Nos. 09-3975 & 10-1019

We agree with our dissenting colleague that Jorgensen was an 6

unusual case. But we do not agree that this means we

should certify the immunity question to the Illinois Supreme

Court. That approach assumes that the scope and content of

federal common-law legislative immunity is determined by

reference to state law. It is not. See Bogan, 523 U.S. at 48-49;

Lake Country Estates, 440 U.S. at 404-05; Tenney, 341 U.S. at 372.

In the district court, Blagojevich asserted that legislative 7

immunity required dismissal of the RICO claim against

(continued...)

the legislature. However, a similar common-law legislative privilege is applicable to government officials in

the executive branch when engaged in legislative activities.”); Mandel v. O’Hara, 576 A.2d 766, 781 (Md. 1990)

(governor entitled to common-law legislative immunity

for legislative acts despite literal wording of state constitutional provision). For all these reasons, the casinos—and the district court too—have simply misread

Jorgensen. It is not at all clear that if presented with a

proper claim of common-law legislative immunity, the

Illinois Supreme Court would limit the immunity to

members of the legislature.6

Regardless, it is abundantly clear that for this federal

claim in federal court, state legislative-immunity law has

no effect; federal immunity doctrine applies. And

under that doctrine Blagojevich is immune from this civil

RICO action and must be dismissed from the suit. The

RICO claim may proceed in his absence, however;

Johnston, Balmoral, Maywood, and Friends of Blagojevich

remain as defendants.7
Nos. 09-3975 & 10-1019 23

(...continued) 7

Friends of Blagojevich because proximate cause could not be

proved without inquiry into acts protected by legislative

immunity. Whatever the merits of this argument, Friends

of Blagojevich is not a party to this appeal and is not itself

entitled to immunity. Our conclusion regarding legislative

immunity extends only to Blagojevich himself.

B. Tax Injunction Act

We now move to the question raised in the casinos’

appeal: Does the Tax Injunction Act block the court’s

jurisdiction to impose a constructive trust on the

proceeds disbursed from the Horse Racing Fund? The

district court answered “yes” and dismissed the

constructive-trust claim for lack of jurisdiction, denied

the casinos’ motion for a preliminary injunction, and

dissolved the TRO. A decision denying a preliminary

injunction may be immediately appealed. 28 U.S.C.

§ 1292(a)(1). Whether the Tax Injunction Act applies is a

question of law that we review de novo. United States

v. Rosenbohm, 564 F.3d 820, 822 (7th Cir. 2009).

The Tax Injunction Act provides that “[t]he district

courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where

a plain, speedy and efficient remedy may be had in the

courts of such State.” 28 U.S.C. § 1341. The Supreme

Court has explained that “the principal purpose of the

[Tax Injunction Act] [i]s to ‘limit drastically’ federal-court interference with ‘the collection of [state]

taxes.’ ” Hibbs v. Winn, 542 U.S. 88, 105 (2004) (quoting
24 Nos. 09-3975 & 10-1019

California v. Grace Brethren Church, 457 U.S. 393, 408-09

(1982)). But the Court “reads the statute narrowly to bar

only claims that would reduce the flow of state tax revenue.” Levy v. Pappas, 510 F.3d 755, 760 n.1 (7th Cir. 2007).

On this understanding, the Act does not prohibit “federal-court interference with all aspects of state tax administration,” Hibbs, 542 U.S. at 105 (quotation marks

omitted), but operates more narrowly to prevent

federal courts from interfering with a state’s collection of

tax revenue, see id. at 106 (“Our prior decisions [regarding

the Act] are not fairly portrayed cut loose from their

secure, state-revenue-protective moorings.”). “If the

relief sought ‘would . . . operate[] to reduce the flow of

state tax revenue’ or would tie up ‘rightful tax revenue,’

then the Act bars federal jurisdiction over the claims.”

Levy, 510 F.3d at 762 (quoting Hibbs, 542 U.S. at 106,

and Rosewell v. LaSalle Nat’l Bank, 450 U.S. 503, 527-28

(1981)); see also Scott Air Force Base Props., LLC v. Cnty. of

St. Clair, 548 F.3d 516, 520 (7th Cir. 2008) (Tax Injunction

Act applies if “the relief sought would diminish or encumber state tax revenue”).

A threshold question under the Act is whether the

casino surcharge is a “tax.” The racetracks maintain that

it is and therefore the Act applies; their argument is

based largely on the Illinois Supreme Court’s decision in

Empress Casino v. Giannoulias. The racetracks contend

that we should defer to the way the state supreme court

characterized the surcharge in upholding it against

the casinos’ constitutional challenges. This argument is

misplaced. Whether a particular state or local assessment is a tax for purposes of the Tax Injunction Act is
Nos. 09-3975 & 10-1019 25

a question of federal law. Wright v. Riveland, 219 F.3d 905,

911 (9th Cir. 2000); Wright v. McClain, 835 F.2d 143, 144

(6th Cir. 1987); Tramel v. Schrader, 505 F.2d 1310, 1315 n.7

(5th Cir. 1975). That the surcharge survived uniformity

and public-purpose clause challenges under the state

constitution is irrelevant to this question.

A common difficulty in applying the Tax Injunction

Act is distinguishing between a “tax” and a “regulatory

fee.” Fees assessed pursuant to a regulatory scheme

fall outside the ambit of the Act, and so federal suits

challenging state or local regulatory fees do not implicate

the Act’s jurisdictional bar. Hager v. City of W. Peoria, 84

F.3d 865, 870-71 (7th Cir. 1996); Bidart Bros. v. Cal. Apple

Comm’n, 73 F.3d 925, 930-31 (9th Cir. 1996); San Juan

Cellular Tel. Co. v. Pub. Serv. Comm’n of Puerto Rico, 967

F.2d 683, 685-87 (1st Cir. 1992). We have explained the

distinction in this way:

Courts faced with distinguishing a “tax” from a “fee”

“have tended . . . to emphasize the revenue’s ultimate

use, asking whether it provides a general benefit to

the public, of a sort often financed by a general tax,

or whether it provides more narrow benefits to regulated companies or defrays the agency’s cost of regulation.” 

Hager, 84 F.3d at 870 (quoting San Juan Cellular, 967 F.2d

at 685).

Our decision in Hager drew on the First Circuit’s influential opinion in San Juan Cellular, in which then-Judge

Breyer elaborated on the difference between a tax and

a regulatory fee for purposes of the Tax Injunction Act:
26 Nos. 09-3975 & 10-1019

[Courts] have sketched a spectrum with a paradigmatic tax at one end and a paradigmatic fee at the

other. The classic “tax” is imposed by a legislature

upon many, or all, citizens. It raises money, contributed to a general fund, and spent for the benefit of the

entire community. The classic “regulatory fee” is

imposed by an agency upon those subject to its regulation. It may serve regulatory purposes directly

by, for example, deliberately discouraging particular

conduct by making it more expensive. Or, it may

serve such purposes indirectly by, for example,

raising money placed in a special fund to help

defray the agency’s regulation-related expenses. 

San Juan Cellular, 967 F.2d at 685 (citations omitted). San

Juan Cellular was a challenge to a 3% “periodic fee” assessed by the Puerto Rico Public Service Commission on

the revenues of a private cellular-telephone company as

a condition of its operating permit. The fee was assessed

by a regulatory agency, placed in a special fund, and

used not for general governmental purposes but to

defray the costs of the agency’s regulatory activities. Id.

at 686. On these facts the First Circuit held that “the

‘periodic fee’ is a regulatory ‘fee,’ not a tax,” and therefore the Tax Injunction Act did not apply. Id.

Applying these principles in Hager, we held that a

permit fee assessed on trucks exceeding a certain weight

limit on a three-block stretch of roadway in West Peoria,

Illinois, was not a tax for purposes of the Tax Injunction

Act. 84 F.3d at 871-72. The fee at issue in Hager had been

adopted to promote public safety and help defray the
Nos. 09-3975 & 10-1019 27

municipality’s cost of maintaining the road; the point of

the ordinance was to regulate the operators of large

vehicles who used the road, not to tax them to raise

general revenue. Id. at 871. We reached the opposite

conclusion in Schneider Transport, Inc. v. Cattanach, 657

F.2d 128 (7th Cir. 1981), another case involving levies

on trucks. In Schneider a trucking company sued the

Wisconsin Secretary of Transportation to enjoin the

imposition of a vehicle-registration fee on its fleet of

trucks. Truck-registration fees were deposited in the

state’s transportation fund and used for general transportation purposes, “including highway construction.”

Id. at 132. We concluded that the fee was a tax for

purposes of the Tax Injunction Act. Id. Unlike the

permit fee in Hager, the fee in Schneider was “imposed for

revenue-raising purposes, a characteristic of any tax.”

Id.; see also Hager, 84 F.3d at 872 n.6 (distinguishing Schneider). Though the fees were held in the state transportation fund and not commingled with general state

revenues, the money was allocated to highway construction and other traditional governmental services pertaining to the operation and maintenance of the state’s

transportation infrastructure. Schneider, 657 F.2d at 132.

The casino surcharge at issue here has none of the

normal characteristics of a tax. The surcharge is assessed

as a “condition of licensure” and appears in the section

of the Riverboat Gambling Act captioned “Owners [sic]

Licenses.” 230 ILL. COMP. STAT. 10/7. Though not

dispositive, the Racing Acts never refer to it as a “tax.”

Other provisions in the Riverboat Gambling Act lay

taxes on riverboat casinos for general public purposes.
28 Nos. 09-3975 & 10-1019

For example, section 13 of the Riverboat Gambling Act,

entitled “Wagering tax; rate; distribution,” lays out a

detailed tax scheme applicable to all riverboat casinos.

Id. § 10/13. The taxes collected under this section are

explicitly referred to as “tax revenue” subject to appropriation by the Illinois General Assembly; the revenue

supports traditional governmental services (e.g., the

criminal justice system, education) and is distributed to

the counties in which the casinos are situated. Id.

§ 10/13(b), (c-20), (d).

In contrast, the casino surcharge simply skims profits

from a handful of private companies for the direct

benefit of a few of their competitors. It applies only to

the state’s four highest-earning riverboat casinos, not

a broader segment of the population. The money is deposited in a special segregated account, not the

state’s general revenue fund, and is disbursed within a

few days directly to the racetracks. Not a penny can

be touched by any state agency or used for any state

program or expense. In short, the surcharge raises no

state revenue in the usual sense—or in any sense, really. It’s not even a classic regulatory fee, since no part

of it goes to support the state’s gaming regulatory apparatus. As this regulatory scheme is set up, the state

is little more than a middleman for the involuntary

transfer of property from one private owner to another.

It is immaterial that the Racing Acts place certain restrictions on how the racetracks may spend the money

they receive. All of the money—100%—is for their sole

private benefit; none of it—zero—may be used for any
Nos. 09-3975 & 10-1019 29

state expense. In this sense, the casino surcharge is even

less like a tax than the permit fee in Hager, the proceeds

of which were put toward road repairs, a traditional

public service; nonetheless, we held there that the Tax

Injunction Act did not apply. Hager, 84 F.3d at 871. And

the surcharge is nothing like the truck-registration fee

at issue in Schneider, which we said was a tax; the registration fee was collected from trucking firms to pay

for highway construction and other general state transportation needs.

The obvious object of the casino surcharge is not to

raise money for a governmental program or public

service but to protect the racetracks from the effects of

competition from riverboat gambling. This purpose is

regulatory, not revenue-raising. A constructive trust on

the proceeds of the Horse Racing Fund would have

no effect on the public fisc; it would defeat the state’s

regulatory purpose but would not “operate[] to reduce

the flow of state tax revenue.” Levy, 510 F.3d at 762.

That the General Assembly identified an indirect public

benefit from propping up the racetracks is not enough

to make the casino surcharge a tax. On this point the

Ninth Circuit’s decision in Bidart is instructive. In that

case, the court held that the Tax Injunction Act did not

bar a federal suit challenging the California Apple Commission’s assessment of fees on apple producers to

support advertising and other activities designed to

boost apple consumption. 73 F.3d at 927. Like the Racing

Acts here, the enabling legislation at issue in Bidart contained findings about the importance of the apple
30 Nos. 09-3975 & 10-1019

The General Assembly’s authority to enact the Racing Acts 8

must be located in one of two plenary legislative powers—the

power to tax or the police power. When we raised this issue

at oral argument, counsel suggested that the source of the

legislature’s power was either the uniformity clause or the

public-purpose clause of the Illinois Constitution. This is

incorrect; the uniformity and public-purpose clauses are

limits on state legislative power, not sources of it.

industry to the state’s economy. Id. (noting legislative

findings to the effect that “[t]he maintenance of the

apple industry . . . is necessary to assure the public of a

continuous supply of this vital food product and the

maintenance of needed levels of income for those

persons engaged in the industry”). No matter; the court

held that the apple assessment was a regulatory fee,

not a tax. “The indirect benefit that may accrue to California’s general populace through increased demand for

apples as a result of advertising or education is not

the type of public benefit that makes an assessment a

tax.” Id. at 933.

Finally, we note that the 2006 and 2008 Racing Acts were

enacted under the state legislature’s police power, not

its tax power. Casino gaming and horse-track betting 8

are highly regulated industries. The Riverboat Gambling

Act, which the Racing Acts amend, is explicit that its

authority is drawn from the police power. See 230 ILL.

COMP. STAT. 10/2(b) (“[R]egulatory provisions of this

[Riverboat Gambling] Act are designed to strictly

regulate the facilities, persons, associations and practices

related to gambling operations pursuant to the police
Nos. 09-3975 & 10-1019 31

The Supreme Court’s decision in Levin v. Commerce Energy, 9

Inc., 130 S. Ct. 2323 (2010), does not affect our decision. The

question in Levin was whether the doctrine of comity precludes

the exercise of federal-court jurisdiction in a case challenging

a state tax as discriminatory in violation of equal protection

or the dormant Commerce Clause. Id. at 2332-33. Levin was a

suit against the Ohio Tax Commissioner by sellers of natural

gas seeking declaratory and injunctive relief invalidating tax

exemptions given to their competitors. The Court held that

the claim of discriminatory taxation must proceed originally in

state court, even when “framed as a request to increase a

(continued...)

powers of the State, including comprehensive law enforcement supervision.” (emphasis added)). Similarly, the

legislature’s authority to regulate horse racing resides

in the police power. See Finish Line Express, Inc. v. City of

Chicago, 379 N.E.2d 290, 292 (Ill. 1978) (It is “undisputed”

that gambling on horse races is subject to regulation

or complete prohibition under the legislature’s police

power.). This supports our conclusion that the casino

surcharge is properly characterized as a regulatory

penalty or fee, not a tax. See Hager, 84 F.3d at 871 (permit

fee enacted under a municipality’s police power rather

than its taxing power is not a tax).

Because the surcharge is not a tax, a constructive trust

on the proceeds of the Racing Acts will not interfere with

the state’s collection of tax revenue, and the Tax Injunction Act does not apply. There is no jurisdictional bar

to the constructive-trust claim and no jurisdictional basis

to deny the casinos’ motion for a preliminary injunction.9
32 Nos. 09-3975 & 10-1019

(...continued) 9

commercial competitor’s tax burden.” Id. at 2327. Because

Levin was a federal constitutional challenge to the validity of

Ohio’s natural-gas taxation scheme brought against the state

taxing authority, it entailed “the very interference in state

taxation the comity doctrine aims to avoid.” Id. at 2335. In

contrast, here, the casinos’ suit will not interfere with Illinois’

collection of state tax revenue.

C. Preclusion and Abstention

In the district court, the racetracks advanced several

alternative reasons to dismiss the constructive-trust

claim and deny preliminary injunctive relief, and they

reiterate these arguments on appeal. The scope of our

review of an interlocutory order under 28 U.S.C.

§ 1292(a)(1) extends to arguments that “bear upon and

are central to the grant or denial of the injunction.” Shaffer

v. Globe Prot., Inc., 721 F.2d 1121, 1124 (7th Cir. 1983). These

additional arguments provide an alternative basis on

which to affirm and are therefore properly before us.

See Munaf v. Geren, 553 U.S. 674, 691 (2008) (“Review of

a preliminary injunction ‘is not confined to the act of

granting the injunctio[n], but extends as well to determining whether there is any insuperable objection, in

point of jurisdiction or merits, to the maintenance of

[the] bill, and, if so, to directing a final decree dismissing it.’ ” (citations omitted)).

We start with the preclusion argument. Federal courts

must give state-court judgments the same preclusive

effect they would have in state court. Parsons Steel, Inc. v.

First Ala. Bank, 474 U.S. 518, 519 (1986); 28 U.S.C. § 1738.
Nos. 09-3975 & 10-1019 33

Under Illinois law “[t]he doctrine of res judicata provides that a final judgment on the merits rendered by

a court of competent jurisdiction bars any subsequent

actions between the same parties or their privies on

the same cause of action.” Hudson v. City of Chicago, 889

N.E.2d 210, 213 (Ill. 2008) (quotation marks omitted).

Res judicata requires: (1) a final state-court judgment on

the merits; (2) identity of cause of action; and (3) identity

of parties or their privies. Id. Res judicata bars not only

issues that were actually litigated in the prior proceeding but also issues that could have been raised but

were not. River Park, Inc. v. City of Highland Park,

703 N.E.2d 883, 889 (Ill. 1998). That is, “[t]he doctrine

extends not only to what was actually decided in the

original action, but also to matters which could have

been decided in that suit.” Rein v. David A. Noyes & Co.,

665 N.E.2d 1199, 1204 (Ill. 1996).

The state supreme court’s decision rejecting the constitutional challenges to the 2006 Racing Act does not

have res judicata effect here; the claims and parties in

the two suits are materially different. In Giannoulias the

casinos challenged the validity of the 2006 Racing Act

under various provisions of the Illinois Constitution and

the Takings Clause of the federal constitution. The

constructive-trust claim, in contrast, is based on allegations of a criminal pay-to-play conspiracy that has

unjustly enriched the racetracks at the casinos’ expense.

Indeed, the allegations of political corruption at the root

of RICO-conspiracy and constructive-trust claims did not

even come to light until December 2008—six months

after the Illinois Supreme Court delivered its decision

in Giannoulias. The claims also involve different parties.
34 Nos. 09-3975 & 10-1019

The racetracks argue that Illinois law does not distinguish for 10

res judicata purposes between an intervenor and an original

(continued...)

The constitutional challenge was brought against the

state treasurer and the Illinois Racing Board; the

constructive-trust claim is brought against the racetracks, and the RICO claim on which it is based is

against Johnston, Balmoral, Maywood, and Friends of

Blagojevich. It would have made no sense for the casinos

to name any of these defendants in their constitutional challenge to the 2006 Racing Act.

The racetracks attempt to fashion a res judicata argument around the Will County court’s order denying

their petition for postjudgment relief, which was based

on some of the information made public by the U.S.

Attorney in the federal prosecution of Blagojevich and

in the impeachment proceedings against him. But

postjudgment proceedings are limited in scope to

the underlying case; the purpose of a § 2-1401 petition is

to bring to the court’s attention facts that had they

been known at the time of judgment would have

precluded its entry. People v. Haynes, 737 N.E.2d 169, 182

(Ill. 2000). A § 2-1401 petition is analogous to a motion

for relief from judgment under Rule 60(b)(2) of the

Federal Rules of Civil Procedure. See In re Marriage of

Wolff, 822 N.E.2d 596, 604 (Ill. App. Ct. 2005). Like a

motion made under the federal rule, a § 2-1401 petition

is not a vehicle to bring new claims—let alone entirely

different claims against parties that intervened in the

action after the original judgment was entered.10
Nos. 09-3975 & 10-1019 35

(...continued) 10

party. However, they cite only cases in which intervening

plaintiffs were barred from bringing subsequent, related suits

after they had lost. They cite no authority for the proposition

that res judicata bars subsequent, different claims against

defendants who intervened after the original judgment.

A brief look at how the Will County judge treated the § 2-

1401 petition shows that the ruling does not preclude

this federal action. First, the judge did not address

the alleged criminal scheme involving Blagojevich,

Johnston, and the racetracks on the merits. Instead, she

rejected the “new evidence” out of hand because it was

unrelated to the underlying constitutional challenge.

The judge held that improper motive was not a basis

on which to invalidate the 2006 Racing Act. The court

also rejected most of the evidence submitted in support

of the petition—the FBI agent’s affidavit, superseding

indictment, and wiretap transcripts—as inadmissible

hearsay unrelated to the case and involving different

parties. The judge said that even if she were inclined to

credit the allegations of corruption, they would have

no effect on the constitutionality of the 2006 Act and thus

no effect on the final judgment—which is, after all, the

limited purpose of a § 2-1401 petition.

The racetracks cite State Farm Illinois Federal Credit

Union v. Hayes, 416 N.E.2d 703 (Ill. App. Ct. 1981), which

they say establishes the res judicata effect of decisions

on § 2-1401 petitions. But Hayes was part of a line of cases

holding that § 2-1401 decisions have res judicata effect

on successive § 2-1401 petitions, not on entirely new
36 Nos. 09-3975 & 10-1019

The Racetracks also cite Lubbers v. Norfolk & Western Rail- 11

way, 473 N.E.2d 955 (Ill. 1984), a case in which the Illinois

Supreme Court remanded with instructions to allow a plaintiff to amend a § 2-1401 petition to include an additional

claim. But in Lubbers the claim to be added—a count asserting

“wilful and wanton” misconduct—was joined to a negligence

claim only after it had become clear that the defendant won

the case because it had concealed key evidence. Id. at 959-60.

At most, Lubbers shows that related claims against the same

(continued...)

actions filed against different parties. See, e.g., Vill. of

Glenview v. Buschelman, 693 N.E.2d 1242 (Ill. App.

Ct. 1998) (“The [Illinois] supreme court’s decisions in

Deckard v. Joiner, 44 Ill.2d 412, 418-19, 255 N.E.2d 900

(1970), and its progeny have steadily held that repeated

[§ 2-1401 petitions] are prohibited, as they unnecessarily frustrate the policy of bringing finality to court

proceedings.”). The reason for this rule is obvious: It cuts

down on the waste of judicial resources by preventing

litigants from plying courts with the same losing arguments again and again. The rule has no application here.

The racetracks also cite Burnicka v. Marquette National

Bank, 431 N.E.2d 358, 360 (Ill. 1982), which held that a § 2-

1401 petition for relief from judgment is the “filing of a

new action.” But this short opinion had nothing to do

with res judicata; it merely held that a petition for

relief from judgment (formerly a motion made under

§ 72 of the Illinois Civil Practice Act) should be treated

as a new action for purposes of the 30-day window

for appeal of a final judgment. Id. 11
Nos. 09-3975 & 10-1019 37

(...continued) 11

defendant may be brought in a § 2-1401 petition; it does not

stand for the broad proposition that unrelated claims against

different defendants must be brought in a § 2-1401 petition. And

it certainly does not mean that the failure to bring such unrelated claims operates as res judicata.

In sum, neither the Illinois Supreme Court’s decision in

Giannoulias nor the decision denying the casinos’ § 2-1401

petition has res judicata effect on the constructive-trust

or RICO claims here. The claims were not decided and

could not have been raised in the action challenging

the constitutionality of the 2006 Racing Act. See Rein,

665 N.E.2d at 1204. For the same reasons, the state

court’s decision rejecting the casinos’ constitutional

challenge to the 2008 Act has no res judicata effect either.

Having concluded that res judicata does not apply,

we have little trouble holding that the casinos’ claims

are not barred by collateral estoppel. Under Illinois law

the “minimum requirements” for application of collateral estoppel are:

(1) the issue decided in the prior adjudication is

identical with the one presented in the suit in

question, (2) there was a final judgment on the merits

in the prior adjudication, and (3) the party against

whom estoppel is asserted was a party or in privity

with a party to the prior adjudication.

Gumma v. White, 833 N.E.2d 834, 843 (Ill. 2005). Because

the issues decided in the state-court constitutional challenges are different from the issues to be decided in
38 Nos. 09-3975 & 10-1019

this federal racketeering suit, collateral estoppel does

not apply.

Relatedly, we also reject the racetracks’ contention that

abstention is warranted under the Colorado River doctrine. See Colorado River Water Conservation Dist. v. United

States, 424 U.S. 800 (1976). The racetracks maintain that

Colorado River applies because the suit challenging the

constitutionality of the 2008 Act suit is still winding its

way through the Illinois courts. Colorado River abstention

is exercised sparingly and is only appropriate when

“there is a substantial likelihood that the [state-court]

litigation will dispose of all claims presented in the

federal case.” TruServ Corp. v. Flegles, Inc., 419 F.3d 584,

592 (7th Cir. 2005) (citation omitted). This will only be

the case when the state and federal actions are “parallel”; absent that, Colorado River abstention is inapplicable.

Id. As should be obvious by now, the state and federal actions are not parallel. Colorado River abstention

does not apply.

D. Failure to State a Constructive-Trust Claim

Finally, the racetracks argue that the casinos have

failed to state a constructive-trust claim. This is

actually a backdoor challenge to the sufficiency of the

RICO allegations; the constructive-trust claim is not

an independent basis for liability but instead seeks an

equitable remedy for the underlying RICO violation to

prevent the racetracks from being unjustly enriched.

Balmoral and Maywood—the racetracks Johnston
Nos. 09-3975 & 10-1019 39

owns—argue that we should affirm the dismissal of the

constructive-trust claim because the conduct underlying

the RICO count was not a proximate cause of the casinos’ injury. The cause of the injury, they assert, is the

drafting and enactment of the Racing Acts by the Illinois

General Assembly, not any conspiracy among the

RICO defendants. They made the same argument in the

district court in support of their motion to dismiss the

RICO count for failure to state a claim. The district court

rejected it, and we agree. The casinos’ allegations are

sufficient to support RICO proximate cause.

The Supreme Court has said that when evaluating

proximate causation under RICO, “the central question . . is whether the alleged violation led directly

to the plaintiff’s injuries.” Anza v. Ideal Steel Supply Corp.,

547 U.S. 451, 461 (2006). A RICO plaintiff must show

that the predicate offense “not only was a ‘but for’ cause

of his injury, but was the proximate cause as well.” Hemi

Group, LLC v. City of New York, 130 S. Ct. 983, 989 (2010)

(quotation marks omitted). What this means is that the

link between the alleged RICO conspiracy and the plaintiff’s injury must not be “too remote,” or “purely contingent,” or “indirec[t].” Id. (citation omitted).

The casinos allege the following: that the 2006 and

2008 Racing Acts were the product of a corrupt bargain

between Blagojevich and Johnston; that Blagojevich

solicited and Johnston paid large sums of money to the

governor’s campaign committee in exchange for the

governor’s influence in getting the Racing Acts passed

and for signing them into law; that Blagojevich
40 Nos. 09-3975 & 10-1019

The casinos believe that these arguments have been waived. 12

They were not waived. The arguments were raised, with

minor variation, in Hawthorne’s briefing in district court.

delivered on this agreement; and that by operation of

these two corruption-tainted laws, they are forced to

turn over 3% of their profits to the racetracks. These

allegations state a direct line of causation. The casinos’

injury is not too remote from the conspiracy; to the contrary, the object of the conspiracy was to put money

in Blagojevich’s pocket (or in his campaign committee’s

coffers) in exchange for the enrichment of the racetracks

at the casinos’ expense via the enactment and signing of

the Racing Acts. The casinos’ injury flowed directly

from the conspiracy, or so a reasonable jury could conclude.

Arlington, Fairmount, and Hawthorne make two separate arguments relating to the legal sufficiency of the

constructive-trust claim. They contend that the constructive-trust claim was properly dismissed because (1) the

constitutionality of the Racing Acts has already been

upheld by the state courts; and (2) a constructive trust

would be an impermissible attack on the state-court

judgments. These are variations on the preclusion argu- 12

ments earlier discussed, and we reject them for reasons

that are by now familiar—namely, that the state- and

federal-court actions involve different claims and parties.

A constructive trust is “an equitable remedy imposed

by a court to prevent the unjust enrichment of a party

through actual fraud or breach of a fiduciary relationship.”
Nos. 09-3975 & 10-1019 41

For this argument the racetracks cite In re Liquidation,

13

which held that a court of equity has no power “to dispense with

(continued...)

In re Liquidation of Sec. Cas. Co., 537 N.E.2d 775, 782 (Ill.

1989). The casinos may prove that the racetracks were

unjustly enriched by the RICO conspiracy without reference to the constitutionality of the Racing Acts. Their

claim here is that the Acts are tainted by corruption,

not that they are unconstitutional.

In a different twist on the same argument, the racetracks maintain that the constructive-trust claim cannot

proceed because the state courts have determined that

the casinos must pay the surcharge and that they (the

racetracks) are entitled to receive the proceeds from

the Horse Racing Fund. The state-court orders do not

speak quite so broadly. The state courts dismissed the

casinos’ suits under the Protest Monies Act and

ordered the state treasurer to transfer the money to the

Horse Racing Fund. From there the Racing Acts functioned—and continue to function—normally. An order

from the district court in this case would not disturb

these state-court judgments. A constructive trust would

operate on the special escrow account now holding

the money disbursed from the Horse Racing Fund. The

TRO is structured so that it does not enjoin the Illinois

Treasurer from performing actions prescribed by state

law or required by state-court order.

Finally, the racetracks suggest that a constructive

trust would, in essence, repeal the Racing Acts—an action

a federal court obviously has no authority to take. But 13
42 Nos. 09-3975 & 10-1019

(...continued) 13

the plain requirements of a statute.” In re Liquidation of Sec. Cas.

Co., 537 N.E.2d 775, 782 (Ill. 1989) (quotation marks omitted).

In that case, the defrauded shareholders of an insurance

company sought to place a constructive trust on the proceeds

of a stock offering; the court held that this remedy was precluded by the exclusive scheme of the Illinois Insurance Code

governing the distribution of assets from a liquidated

insurer’s estate. Id. at 781-82. The case does no more than

illustrate the unremarkable principle that a court of equity

cannot invalidate a “comprehensive statutory scheme.” Id.

at 781. This principle is not implicated here.

a constructive trust on the disbursements received from

the Horse Racing Fund would neither nullify the

Racing Acts nor undo the state-court judgments. True, it

would prevent the racetracks from receiving payments from the Fund, but only because the casinos

will have proven that they were unjustly enriched by

the RICO conspiracy—not that the Racing Acts or any

order entered by a state court was invalid.

For the foregoing reasons, we REVERSE the district

court’s order denying Blagojevich’s claim of legislative

immunity and REMAND with instructions to dismiss

him from the case. We also REVERSE the district court’s

order dismissing the constructive-trust claim for lack of

jurisdiction, denying preliminary injunctive relief, and

dissolving the TRO. The case is REMANDED for further

proceedings consistent with this opinion. The TRO shall

remain in effect.
Nos. 09-3975 & 10-1019 43

POSNER, Circuit Judge, dissenting. I disagree with the

decision in two respects that merit airing in a public

dissent. The first is whether ex-Governor Blagojevich is

entitled to legislative immunity in this RICO suit, as the

majority believes, and the second is whether, as the

majority does not believe, the Tax Injunction Act, 28

U.S.C. § 1341, bars the district court from imposing a

constructive trust in favor of the casino plaintiffs on the

money received by the racetracks under the 2006 and

2008 Illinois statutes that impose a 3 percent excise tax

on the casinos and require that the proceeds be placed in

a segregated state fund—the “Horse Racing Equity

Trust Fund”—and then promptly disbursed to the racetracks to be used as prescribed by the statutes. Ill. Pub.

Act 94-804, effective May 26, 2006; Ill. Pub. Act 95-

1008, effective Dec. 15, 2008. It is sufficiently uncertain

whether Blagojevich is entitled to immunity to warrant

certifying the question to the Supreme Court of Illinois.

But there is no doubt that the Tax Injunction Act bars

the imposition by a federal district court of a constructive

trust on revenues from the casino tax.

1. When a state employee is sued in federal court

for violating a federal statute, whether he is immune from

suit by virtue of his official status is a question of federal

law, ordinarily federal common law. Supreme Court of

Virginia v. Consumers Union of the United States, Inc., 446

U.S. 719, 732 (1980); United States v. Gillock, 445 U.S. 360,

372 n. 10 (1980); Bryant v. Jones, 575 F.3d 1281, 1304

(11th Cir. 2009); Fowler-Nash v. Democratic Caucus of Pennsylvania House of Representatives, 469 F.3d 328, 330-31 (3d

Cir. 2006); National Ass’n of Social Workers v. Harwood, 69
44 Nos. 09-3975 & 10-1019

F.3d 622, 629 (1st Cir. 1995). Were the scope of official

immunity determined by state law, a state could prevent

the federal courts from enforcing federal statutes, such

as RICO—which are frequently enforced against employees of state or local government, e.g., United States

v. Genova, 333 F.3d 750 (7th Cir. 2003); United States v.

Thompson, 685 F.2d 993 (6th Cir. 1982) (en banc); United

States v. Long, 651 F.2d 239 (4th Cir. 1981); United States

v. Baker, 617 F.2d 1060 (4th Cir. 1980)—to the full

extent intended by Congress. What is unusual about

this case is that the State of Illinois appears to give its

governors less immunity than the federal common law

might otherwise do; and why should federal courts grant

defendants who are state employees a broader official

immunity than those defendants would be entitled to if

sued under state law? The interest in giving state

officers immunity from suit is a state interest. If a state

places no value on that interest in a particular setting,

such as a suit against the state’s governor, there is no

reason for a federal court, enforcing a federal statute,

to grant the state official immunity from suit.

In Jorgensen v. Blagojevich, 811 N.E.2d 652 (Ill. 2004), the

Supreme Court of Illinois had to decide whether a suit

on behalf of the state’s judges could be maintained

against the governor, who had vetoed a bill granting

the judges a cost-of-living increase. The court ruled that

the governor was not entitled to legislative immunity.

(The court went on to hold, on the merits, that the veto

violated a provision of the Illinois constitution that

forbade reducing judges’ compensation, because the costof-living increase had vested and thus become a part
Nos. 09-3975 & 10-1019 45

of their compensation and therefore could not be rescinded. Id. at 665-66.) The ruling on immunity was

surprising because the Governor of Illinois, like the

President of the United States, is effectively a third

branch of the legislature by virtue of his veto power.

Bogan v. Scott-Harris, 523 U.S. 44, 55 (1998); Edwards v.

United States, 286 U.S. 482, 490 (1932). And so when a

governor is performing his legislative role, as Governor

Blagojevich was doing when he vetoed the cost-of-living

bill, he is—or so one might think—entitled to the same

immunity as legislators.

That is the general rule, Baraka v. McGreevey, 481 F.3d

187, 196-98 (3d Cir. 2007); Torres-Rivera v. Calderón-Serra,

412 F.3d 205, 212-13 (1st Cir. 2005); Women’s Emergency

Network v. Bush, 323 F.3d 937, 950 (11th Cir. 2003); cf. Bogan

v. Scott-Harris, supra, 523 U.S. at 55 (mayor), but it may not

be the rule in Illinois after Jorgensen. The opinion said

that the suit did not seek “to hold the Governor

personally liable for his actions, nor are [the judges]

attempting to force him to take or to refrain from

taking any particular action. He was named in the litigation because he was one of the state officials involved

in the sequence of the events which led to the failure of

the Judges to receive their” cost-of-living increase. 811

N.E.2d at 666. But the judgment nullified his legislative

act—the veto—and the opinion goes on to note that

“examples of Illinois governors being joined as defendants in cases seeking declaratory and injunctive

relief based on alleged violations of state constitutional

and legal requirements are commonplace.” Id. Presidents

and governors are routinely enjoined from enforcing
46 Nos. 09-3975 & 10-1019

unconstitutional statutes, but—precisely because such

statutes can be enjoined—it would be extremely odd to sue

a President or a governor for having signed an unconstitutional bill into law; his act would be harmless. If such

a suit is what Jorgensen permits, the Supreme Court of

Illinois has modified traditional legislative immunity.

The opinion goes on to state that “in Illinois, legislative

immunity is addressed in” a constitutional and a

statutory provision neither of which, the court ruled, “is

applicable to the Governor.” Id. This sounds like the

renunciation of a common law power to add to legislatively specified immunities.

But Jorgensen was an unusual case, and may not be

applicable to our case. The legislative act enjoined was

not a statute, but a veto by the governor; if not he, who

would be sued? If he were granted immunity, there

would be no way to nullify his unconstitutional act.

We cannot be certain, however, that the Illinois court

would confine Jorgensen to vetoes. Legislative immunity

is absolute, Bogan v. Scott-Harris, supra, 523 U.S. at 54-55;

Lake Country Estates, Inc. v. Tahoe Regional Planning

Agency, 440 U.S. 391, 403-05 (1979); Biblia Abierta v.

Banks, 129 F.3d 899, 903-04 (7th Cir. 1997), and the

present suit accuses the governor of having signed the

racetrack legislation because he had been bribed to do

so. One can imagine the Supreme Court of Illinois, given

its skepticism about granting a governor legislative

immunity, holding that a governor has only a qualified

immunity for his legislative acts—an immunity that

would not shield him from being sued for accepting
Nos. 09-3975 & 10-1019 47

bribes to sign laws. The court might think it odd that

were Blagojevich convicted for criminal acts that

included the racetrack bribe he could not be sued civilly

for the same acts.

It is true that the federal common law of legislative

immunity for state officials, since it is an immunity

from civil suits, does not bar criminal actions, while

barring civil actions even if based on charges of criminal

misconduct. United States v. Gillock, supra, 445 U.S. at 372-

73. (The legislative immunity of federal legislators is

broader because of the Constitution’s “speech or debate”

clause. U.S. Const. art I, § 6, cl. 1; United States v. Gillock,

supra, 445 U.S. at 366-73; In re Witness Before Special Grand

Jury 2000-2, 288 F.3d 289, 295 (7th Cir. 2002); Romero-Barcelo

v. Hernandez-Agosto, 75 F.3d 23, 30 (1st Cir. 1996).) Otherwise the immunity would not be absolute. The Court in

Gillock, in refusing to extend the immunity to criminal

prosecutions, reasoned that the federal interest in

enforcing federal criminal laws is greater than the

interest in enforcing civil laws. But the Supreme Court

of Illinois gives less weight to the legislative interest in

immunity from civil cases than the federal rule does.

One doubts therefore that the Illinois court would grant

a governor absolute legislative immunity.

If this is right, we should give him no greater

immunity in the name of federal common law. The Supreme Court has said that the displacement of state law

by federal common law is “limited to situations where

there is a ‘significant conflict between some federal

policy or interest and the use of state law.’ Our cases
48 Nos. 09-3975 & 10-1019

uniformly require the existence of such a conflict as a

precondition for recognition of a federal rule of decision.

Not only the permissibility but also the scope of the

judicial displacement of state rules turns upon such a

conflict.” O’Melveney & Myers v. FDIC, 512 U.S. 79, 87-88

(1994) (citations omitted). “[A] court should endeavor

to fill the interstices of federal remedial schemes with

uniform federal rules only when the scheme in question

evidences a distinct need for nationwide legal standards,

or when express provisions in analogous statutory

schemes embody congressional policy choices readily

applicable to the matter at hand. Otherwise, we have

indicated that federal courts should ‘incorporat[e] [state

law] as the federal rule of decision,’ unless ‘application of

[the particular] state law [in question] would frustrate

specific objectives of the federal programs.’ ” Kamen v.

Kemper Financial Services, Inc., 500 U.S. 90, 98 (1991) (citations omitted); see also United States v. Kimbell Foods, Inc.,

440 U.S. 715, 728 (1979); Miller v. Illinois Central R.R.,

474 F.3d 951, 952-53 (7th Cir. 2007); FDIC v. Braemoor

Associates, 686 F.2d 550, 554 (7th Cir. 1982); compare

United States v. Gillock, 445 U.S. 360 (1980).

There is no federal interest in giving the Governor of

Illinois a broader immunity from suit than he would

enjoy in an Illinois state court, just as there is no federal

interest in enforcing the Eleventh Amendment if a state

decides to waive its sovereign immunity from suit.

Lapides v. Board of Regents, 535 U.S. 613, 618-20 (2002);

Wisconsin Dep’t of Corrections v. Schacht, 524 U.S. 381, 389

(1998); Clark v. Barnard, 108 U.S. 436, 447 (1883). It is true

that state officials continue to enjoy official immunity
Nos. 09-3975 & 10-1019 49

in federal suits after a state indemnifies its officials.

Greenberg v. Kmetko, 922 F.2d 382, 384 (7th Cir. 1991);

Jaworski v. Schmidt, 684 F.2d 498, 500 (7th Cir. 1982); Buckles

v. King County, 191 F.3d 1127, 1136 (9th Cir. 1999), just as

a state does not lose its Eleventh Amendment immunity

from suit by having a right to be indemnified by the

federal government. Regents of University of California

v. Doe, 519 U.S. 425, 430-31 (1997). Some states have

decided, rather than giving their employees immunity

and thus denying relief to victims of the employees’

torts, to abrogate immunity but indemnify their employees in cases in which the employees would have

been immune. We have not followed suit when the state

employee is sued for a federal civil rights violation, but

that is because 42 U.S.C. § 1988(a) reverses in such

cases the rule of Kimbell Foods of presumptive adoption

of state law to furnish the content of federal common law.

Section 1988(a) provides that the “jurisdiction in civil

and criminal matters conferred on the district courts by

the [federal civil rights law] . . . shall be exercised and

enforced in conformity with the laws of the United

States, so far as such laws are suitable . . .; but in all cases

where they are not adapted to the object, or are deficient

in the provisions necessary to furnish suitable remedies

and punish offenses against law,” state law shall apply.

Section 1988(a) was first enacted as section 3 of the

Civil Rights Act of 1866, 14 Stat. 27, and its presumption

in favor of federal rules of decision was undoubtedly

based on concerns about southern hostility to civil rights.

Interpretation of Jorgensen is further complicated by

the fact that the suit did not seek damages from the
50 Nos. 09-3975 & 10-1019

governor. Official immunity usually just means immunity

from damages suits. Pulliam v. Allen, 466 U.S. 522, 536-38

(1984); Supreme Court of Virginia v. Consumers Union of

United States, Inc., supra, 446 U.S. at 736-37; 13D Charles A.

Wright et al., Federal Practice and Procedure § 3573.3, pp. 605-

06, 615-16 (3d ed. 2008); David Achtenberg, “Immunity

Under 42 U.S.C. § 1983: Interpretive Approach and the

Search for the Legislative Will,” 86 Nw. U. L. Rev. 497, 516-

17 (1992). But legislative immunity confers immunity

from injunctive relief as well, in Illinois, Fletcher v. City

of Paris, 35 N.E.2d 329, 332 (Ill. 1941); People ex rel.

Huempfner v. Benson, 128 N.E. 387, 388 (Ill. 1920), as elsewhere. Supreme Court of Virginia v. Consumers Union of

United States, Inc., supra, 446 U.S. at 731-34; Eastland

v. United States Servicemen’s Fund, 421 U.S. 491, 502-03

(1975).

For all these reasons, it is uncertain whether Illinois

governors enjoy legislative immunity from suit—the

only kind that Blagojevich is claiming. Given the

delicacy of the issue and particularly the uncertain

scope of the Jorgensen opinion, the prudent course for us

in this case would be to certify to the Supreme Court of

Illinois, pursuant to 7th Cir. R. 52 and Ill. S. Ct. R. 20, the

question whether the common law of official immunity

in Illinois permits a suit to go forward against a

governor when the suit is based on his performing a

legislative act (not limited to a veto) for a criminal purpose.

2. The Tax Injunction Act forbids federal district courts

to “enjoin, suspend or restrain the assessment, levy or

collection of any tax under State law,” provided that an
Nos. 09-3975 & 10-1019 51

adequate remedy is available in the state courts. 28

U.S.C. § 1341. The Act has been described by the

Supreme Court as “first and foremost a vehicle to limit

drastically federal district court jurisdiction to interfere

with so important a local concern as the collection of

taxes.” Rosewell v. LaSalle Nat’l Bank, 450 U.S. 503, 522

(1981). The Court in Ex parte Young, 209 U.S. 123 (1908), had

as a practical matter stripped away the states’ sovereign

immunity from equitable suits; so were it not for the

Tax Injunction Act “ ‘state tax administration might be

thrown into disarray, and taxpayers might escape the

ordinary procedural requirements imposed by state

law. During the pendency of the federal suit the collection of revenue under the challenged law might be obstructed, with consequent damage to the State’s budget,

and perhaps a shift to the State of the risk of taxpayer

insolvency.’ ” Rosewell v. LaSalle Nat’l Bank, supra, 450 U.S.

at 527, quoting Perez v. Ledesma, 401 U.S. 82, 128 n. 17 (1971)

(separate opinion); see also Hill v. Kemp, 478 F.3d 1236,

1246-47 (10th Cir. 2007). And “it is upon taxation that

the several States chiefly rely to obtain the means to

carry on their respective governments, and it is of the

utmost importance to all of them that the modes adopted

to enforce the taxes levied should be interfered with as

little as possible. Any delay in the proceedings of the

officers, upon whom the duty is devolved of collecting the

taxes, may derange the operations of government, and

thereby cause serious detriment to the public.” Dows v.

City of Chicago, 78 U.S. (11 Wall.) 108, 109-10 (1871). Of

course enjoining a particular tax is unlikely to “derange

the operations of government.” That was a bit of 1871-
52 Nos. 09-3975 & 10-1019

style hyperbole. But the Tax Injunction Act is not limited

to “deranging” taxes, and the majority opinion if it

stands may make the application of the Act turn on

judges’ guesses concerning the importance of a particular tax to the operations of state government.

My colleagues may have difficulty taking the question

of the effect of the Tax Injunction Act in this case

seriously because of the corrupt origin of the casino tax

and a certain risible element in the idea of taxing one

gambling business to subsidize another (the “derangement” question). But the corrupt origin of the tax is

irrelevant. The Act would be thwarted if a taxpayer

could get a federal court to enjoin a tax case just by presenting evidence of corruption in the process by which

the taxing statute had been enacted. This has been recognized in analogous contexts, see, e.g., City of Columbia

v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 374-78

(1991) (state immunity from federal antitrust suits)—

notably that of absolute immunity, Pierson v. Ray, 386

U.S. 547, 553-54 (1967), as I pointed out in discussing the

federal (but maybe not the Illinois) rule on legislative

immunity.

Gambling taxes are not unusual; casino taxes may be,

but they are certainly not unique. See Ind. Code §§ 4-33-12-

1, -6(b)(6); N.J. Stat. §§ 5:12-203(a), -205; cf. Md. Code,

State Gov’t, §§ 9-1A-27(a)(5), -29. They are real taxes, not

service fees. The fact that the revenue from a particular

tax is earmarked for a particular purpose is hardly unusual; think of the social security tax. Horse racing,

the beneficiary of the casino tax, is a major activity in
Nos. 09-3975 & 10-1019 53

Illinois and one with considerable economic significance

for the state. It employs more than 30,000 people and

generates more than $700 million in annual betting and

some $16 million in state and local government revenues.

Ill. Pub. Act 94-804, § 1(3)-(4); Illinois Racing Board,

“2009 Annual Report” 2, 6 (Mar. 2010), www.state.il.us/

agency/irb/racing/reports/2009_Annual_Report.pdf

(visited Feb. 15, 2011); Commission on Government

Forecasting and Accountability, “Wagering in Illinois—

2009 Update” 51-57 (2010), www.ilga.gov/commission/

cgfa2006/Upload/2009wagering_in_il.pdf (visited Feb. 15,

2011). And that’s just the beginning, because horse

racing boosts the horse population of Illinois, which

benefits breeders, horse farms, feed companies, and

other commercial activities ancillary to horse racing.

Bill Wright, “Where Illinois’ Economy Gets Its Horsepower,” Chicago Tribune, Mar. 10, 2002, p. 6. Governments

routinely subsidize favored activities—not by taxing

the persons or firms engaged in the activities, which

would negate the subsidy, but by taxing someone else.

Casinos are recent additions to the legal gambling

scene in Illinois; the first casino in the state opened in

1991. Jerry Shnay, “Alton Riverboat Already Hitting

Jackpot,” Chicago Tribune, Sept. 25, 1991, at 4. They

compete with the racetracks and thus attract gamblers

away from them. So at least it is widely believed, see

Illinois Harness Horsemen’s Ass’n, Press Release, “Top

State Horsemen Flee to Greener Pastures in Eastern

States” (Nov. 30, 2005), and William Nack, “A House

Divided,” Sports Illustrated, July 10, 1995, at 52, 56, though

Douglas M. Walker and John D. Jackson, in their article

“Do U.S. Gambling Industries Cannibalize Each Other?,”
54 Nos. 09-3975 & 10-1019

36 Public Finance Rev. 308, 322-24 (2008), present contrary

evidence—evidence that casino and other non-racetrack

gambling increases the demand for racetrack gambling

by increasing the demand for gambling in general. What

is not debatable is that, whether because of the

advent of casinos or because of other factors, racetrack

attendance and revenues in Illinois have plummeted in

recent years, along with the state’s horse population

and the commercial activities that are correlated with

the number of horses. Illinois Racing Board, supra, at 9;

Commission on Government Forecasting and Accountability, supra, at 56-57; Will Buss, “Hoffman: Bill Will

Help Fairmount,” Belleville News-Democrat, Mar. 27, 2008,

p. A1. The first of these sources shows horse-racing

bets falling from $1.2 billion in 1996 to $700 million in

2009, though some of the drop is doubtless attributable

to the miserable economic situation in 2009, for the

2007 total was $900 million.

In a laissez-faire or Social Darwinist society, government would keep its hands off the competition between

the casinos and the racetracks. The disappearance of

racetracks, jockeys, horses, bridles, blacksmiths, racetrack touts, and DVDs of “National Velvet”—replaced

by croupiers, glassy-eyed retirees at one-armed bandits,

roulette wheels, and blackjack tables, all on riverboat

casinos—would be commended as progress. But

American government is not committed to the laissezfaire vision of society. Congress and state legislatures

are constantly using their taxing and spending and regulatory powers to redistribute wealth from one group

in society to another. This may be good or bad, but it
Nos. 09-3975 & 10-1019 55

is routine and constitutional. Federal payroll taxes are

earmarked for such programs as Medicare, social

security, and unemployment benefits; the federal gasoline tax is used to subsidize highway construction; other

earmarked taxes (taxes the revenues from which are

specified for a particular use) are common. See

Susannah Camic, “Earmarking: The Potential Benefits,” 4

Pitt. Tax Rev. 55, 60-61 (2006). Rarely are the taxpayers

closely matched with the recipients of the spending

that the taxes support. The levying of taxes on a

particular industry for the sole benefit of another

industry is somewhat uncommon but certainly not unknown. For example, the federal Audio Home

Recording Act of 1992 taxes digital media to subsidize

prerecorded media, 17 U.S.C. § 1001 et seq.; the Illinois

Coal Technology Development Assistance Fund taxes

gas and electrical utilities to pay for the development

of coal technologies, 30 ILCS 730/3; and Ohio taxes wine

from all over the world to pay for research on grapes

in Ohio. Ohio Rev. Code Ann. §§ 924.51 et seq., 4301.43(B).

An excise tax on casinos is a tax, and where the tax

money goes is irrelevant to the applicability of the Tax

Injunction Act. Suppose the revenues from the casino

tax were earmarked for cosmetic surgery for members

of the Illinois legislature. Would anyone doubt that the

casino tax was still a tax? Would it matter that the tax

revenues were disbursed to the intended recipients of

the subsidy funded by those revenues within 10 days of

receipt? I think not, and yet the racetrack subsidy is

less absurd than my hypothetical example. Sixty percent

of the subsidy is earmarked for the purses for winners
56 Nos. 09-3975 & 10-1019

and runners-up in horse races on the theory that

bigger purses attract the owners of the better horses

and the better the horses in a race the larger the attendance and therefore the more money is bet on the

race and so the greater are the track’s revenues

because they’re a percentage of the amount of money

that is bet. The other 40 percent of the revenue from

the casino tax is to be used for physical improvements

of the racetracks. The subsidy is rationally designed to

promote the horse racing industry in Illinois, which

seems no less proper an objective than promoting

a state’s film industry by offering tax credits to

filmmakers, a common form of state subsidy. Horse

racing and movies are two forms of entertainment.

What is true is that not every state receipt is the fruit

of a tax. Fees for services are not deemed taxes for purposes of the Tax Injunction Act. We have explained

the difference as follows: “If the fee is a reasonable

estimate of the cost imposed by the person required

to pay the fee, then it is a user fee and is within the municipality’s regulatory power. If it is calculated not just

to recover a cost imposed on the municipality or its

residents but to generate revenues that the municipality

can use to offset unrelated costs or confer unrelated

benefits, it is a tax, whatever its nominal designation.”

Diginet, Inc. v. Western Union ATS, Inc., 958 F.2d 1388, 1399

(7th Cir. 1992). For examples of exactions held to be fees

rather than taxes for purposes of the Tax Injunction

Act, see Hager v. City of West Peoria, 84 F.3d 865, 870-71 (7th

Cir. 1996) (fees for permits for use of certain streets by

heavy trucks); Government Suppliers Consolidating Services,
Nos. 09-3975 & 10-1019 57

Inc. v. Bayh, 975 F.2d 1267, 1271 n. 2 (7th Cir. 1992) (registration fees for waste-collection vehicles), and Trailer

Marine Transport Corp. v. Rivera Vazquez, 977 F.2d 1, 4-6 (1st

Cir. 1992) (annual fee imposed on owners of motor

vehicles to fund compulsory accident compensation). For

examples of exactions held to be taxes for purposes of the

Act, see Hill v. Kemp, supra, 478 F.3d at 1243-46 (costs

of specialty license plates; revenue in excess of administrative costs go to general fund and elsewhere); Folio v.

City of Clarksburg, 134 F.3d 1211, 1217 (4th Cir. 1998)

(city fee for fire protection); Wright v. McClain, 835 F.2d

143, 145 (6th Cir. 1987) (parolee’s payments to a victim

compensation fund); and cf. Diginet, Inc. v. Western Union

ATS, Inc., supra, 958 F.2d at 1399 (“franchise fee” imposed

on use of a fiber optic network to generate revenues

that are “use[d] to offset unrelated costs or confer unrelated benefits”).

A potential source of confusion is that “courts faced

with distinguishing a ‘tax’ from a ‘fee’ ‘have tended . . . to

emphasize the revenue’s ultimate use, asking whether

it provides a general benefit to the public, of a sort often

financed by a general tax, or whether it provides more

narrow benefits to regulated companies or defrays the

agency’s cost of regulation.’ ” Hager v. City of West Peoria,

supra, 84 F.3d at 870. The reference to “narrow benefits”

may seem to describe this case, since only racetracks

received the proceeds of the casino tax. But this is to

ignore the words in the Hager opinion that follow “provides more narrow benefits”: “to regulated companies

or defrays the agency’s cost of regulation.” A fee matches

revenue to cost: a doctor’s fee pays for his service. The
58 Nos. 09-3975 & 10-1019

tax on the casinos does not go to pay for some service

that the State of Illinois renders to casinos; it goes to

subsidize racetracks, and so it falls within the rule that

exactions of money earmarked for designated purposes

rather than just collected to swell the state’s coffers are

taxes within the meaning of the Tax Injunction Act

whether or not they are levied for a purpose of which

judges approve. Schneider Transport, Inc. v. Cattanach, 657

F.2d 128, 132 (7th Cir. 1981) (registration fee held to be a

tax even though the tax revenues were deposited in a

segregated fund, the state transportation fund, earmarked

for state highway construction); Valero Terrestrial Corp. v.

Caffrey, 205 F.3d 130, 135 (4th Cir. 2000) (solid waste

disposal assessment fee held to be a tax even though

the revenues were earmarked for environmental clean

up); Wright v. McClain, supra, 835 F.2d at 145 (charges

earmarked for corrections held to be a tax). The majority

opinion in the present case invokes Bidart Brothers v.

California Apple Comm’n, 73 F.3d 925 (9th Cir. 1996),

but that case involved an assessment of fees on apple

producers to support advertising and other activities

designed to boost apple consumption. The fees were to

pay for services to the payors of the fees. Taxes are

levied on people or firms who may derive no benefit at

all from them, as in the present case. Workers who die

before reaching the age of eligibility for social security

receive no social security benefits, though they may have

paid many thousands of dollars in social security taxes.

The practical reason for the difference in treatment

under the Tax Injunction Act between fees and taxes is

that enjoining the collection of a fee is less likely to
Nos. 09-3975 & 10-1019 59

disrupt state programs than enjoining a tax. Fees are for

services and if the collection of the fees is enjoined, the

state can curtail the services. Cf. Ben Oehrleins & Sons &

Daughter, Inc. v. Hennepin County, 115 F.3d 1372, 1383 (8th

Cir. 1997); San Juan Cellular Telephone Co. v. Public Service

Comm’n of Puerto Rico, 967 F.2d 683, 686-87 (1st Cir. 1992).

But if the use of tax moneys to subsidize racetracks is

enjoined, the subsidy program is halted until the injunction is lifted—unless the rule is to be that an earmarked

tax, held to be enjoinable, can be replaced by a tax

having a broader base. This would inject the federal

courts deeply into the design of injunction-proof state

taxes.

It is true that the plaintiffs are not seeking to enjoin

the casino tax in the narrow sense of “enjoin”; the money

has been collected and paid to the racetracks or placed

in a separate fund that if the casinos lose this case will

also be paid to the racetracks. But a constructive trust,

just like an injunction, is an equitable remedy. Bontkowski

v. Smith, 305 F.3d 757, 761 (7th Cir. 2002); Beatty v.

Guggenheim Exploration Co., 122 N.E. 378, 380 (N.Y. 1919)

(Cardozo, J.); 1 Dan B. Dobbs, Law of Remedies § 4.3(2),

pp. 589-90 (2d ed. 1993). If allowed in cases in which

an injunction would be unlawful, it would defeat the

purpose of the Tax Injunction Act. So the Second Circuit

held in the name of the Tax Anti-Injunction Act, 26

U.S.C. § 7421(a)—the counterpart, in federal taxation, to

the Tax Injunction Act—with regard to the imposition of

a constructive trust on moneys that would otherwise

have been used to satisfy federal tax liabilities. SEC v.

Credit Bancorp, Ltd., 297 F.3d 127, 137-38 (2d Cir. 2002).
60 Nos. 09-3975 & 10-1019

Other forms of equitable relief have been held to be

forbidden by the Tax Injunction Act when, even though

no equitable relief was sought against the state itself, the

relief sought would have indirectly but substantially

interfered with tax collection by the state. In Sipe v.

Amerada Hess Corp., 689 F.2d 396, 403-04 (3d Cir. 1982),

for example, the plaintiffs sought to enjoin their employers from deducting unemployment taxes from

their paychecks. And in RTC Commercial Assets Trust 1995-

NP3-1 v. Phoenix Bond & Indemnity Co., 169 F.3d 448, 454-

56 (7th Cir. 1999), the plaintiff sought a declaration that

a tax certificate that the private defendant had purchased at a tax sale was invalid. In both cases the

plaintiffs lost. See also Blangeres v. Burlington Northern, Inc.,

872 F.2d 327, 328 (9th Cir. 1989) (per curiam); cf. California

v. Grace Brethren Church, 457 U.S. 393, 407-11 (1982); Wright

v. Pappas, 256 F.3d 635 (7th Cir. 2001).

But even though, if I’m right, this suit is a challenge to a

state tax, the Tax Injunction Act is a bar only if there is

available to the plaintiffs a state remedy that is “plain,

speedy and efficient.” 28 U.S.C. § 1341; see, e.g., Rosewell v.

LaSalle Nat’l Bank, supra, 450 U.S. at 512-15. There is.

The casinos can ask an Illinois state court to impose a

constructive trust on the tax receipts. See Village of Itasca

v. Village of Lisle, 817 N.E.2d 160, 170 (Ill. App. 2004);

Selmaville Community Consolidated School Dist. No. 10 v.

Salem Elementary School Dist. No. 111, 421 N.E.2d 1087, 1091

(Ill. App. 1981). Whether they can seek a refund of the

taxes they paid is less clear, because it is unclear whether

the refund statute cited by the parties—the State Officers

and Employees Money Disposition Act, 30 ILCS 230/2a,
Nos. 09-3975 & 10-1019 61

which was the statutory basis for the casinos’ claims in

a previous state court action, Empress Casino Joliet Corp. v.

Giannoulias, 896 N.E.2d 277, 283 (Ill. 2008)—authorizes

the recovery of tax money that has already been disbursed. If the unlawfulness can be traced to the racetracks, the casinos can seek damages from them (as

they are trying to do with respect to the two racetracks

that it charges with having violated the RICO statute).

What the casinos cannot be permitted to do is to freeze

the state’s tax moneys by imposition of a constructive

trust on them.

To summarize my position, the question whether

Blagojevich is entitled to absolute immunity from a

civil suit challenging his legislative acts while

governor should be certified to the Supreme Court

of Illinois; the district court’s ruling that the plaintiffs’ constructive trust claim is barred by the Tax Injunction Act should be affirmed.

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