Opinion ID: 205792
Heading Depth: 2
Heading Rank: 3

Heading: Preclusion and Abstention

Text: 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, 128 S.Ct. 2207, 171 L.Ed.2d 1 (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, 106 S.Ct. 768, 88 L.Ed.2d 877 (1986); 28 U.S.C. § 1738. 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, 228 Ill.2d 462, 321 Ill.Dec. 306, 889 N.E.2d 210, 213 (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, 184 Ill.2d 290, 234 Ill.Dec. 783, 703 N.E.2d 883, 889 (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., 172 Ill.2d 325, 216 Ill.Dec. 642, 665 N.E.2d 1199, 1204 (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. 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 post-judgment 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, 192 Ill.2d 437, 249 Ill.Dec. 779, 737 N.E.2d 169, 182 (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, 355 Ill.App.3d 403, 290 Ill.Dec. 1011, 822 N.E.2d 596, 604 (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] 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, 92 Ill. App.3d 1127, 48 Ill.Dec. 430, 416 N.E.2d 703 (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 actions filed against different parties. See, e.g., Vill. of Glenview v. Buschelman, 296 Ill.App.3d 35, 230 Ill.Dec. 491, 693 N.E.2d 1242 (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, 88 Ill.2d 527, 59 Ill.Dec. 73, 431 N.E.2d 358, 360 (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. [11] Id. 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, 216 Ill.Dec. 642, 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, 216 Ill.2d 23, 295 Ill.Dec. 628, 833 N.E.2d 834, 843 (2005). Because the issues decided in the state-court constitutional challenges are different from the issues to be decided in 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, 96 S.Ct. 1236, 47 L.Ed.2d 483 (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.