Court Opinion

ID: 2996556
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:29:43.733828+00
Date Added: 2024-06-11T15:02:49.951487
License: Public Domain

In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 02-2708
SHAHID SHAIKH,
                                               Plaintiff-Appellant,
                                 v.

CITY OF CHICAGO, JULIA STASCH,
and DAVID SALTZMAN,
                                            Defendants-Appellees.
                          ____________
            Appeal from the United States District Court
       for the Northern District of Illinois, Eastern Division.
          No. 00 C 4235—Matthew F. Kennelly, Judge.
                          ____________
    ARGUED APRIL 18, 2003—DECIDED AUGUST 25, 2003
                     ____________

  Before EASTERBROOK, KANNE, and DIANE P. WOOD,
Circuit Judges.
   KANNE, Circuit Judge. Plaintiff Shahid Shaikh (an East-
Asian Muslim, born in India, now a U.S. citizen and
Connecticut resident) outbid his competitors at a public
auction and entered into a purchase agreement with the
U.S. Department of Housing and Urban Development to
buy the Lowe Avenue Terrace Apartments—an apartment
building located at 6531 South Lowe Avenue in Chicago,
Illinois. HUD had acquired the building through foreclo-
sure proceedings. Before the closing, the City of Chicago
(acting through its then-Commissioner of the Department
of Housing, Julia Stasch, and then-Deputy Commissioner
2                                            No. 02-2708

of the Department of Housing, David Salzman) attempted
repeatedly to persuade both HUD and Shaikh to cancel
their purchase agreement. The City had sought to acquire
the Lowe apartments for a possible expansion of the
Kennedy-King City College campus, located a few blocks
away at 6800 South Wentworth Avenue. To that end, the
City had informed both HUD and Shaikh that it was
considering condemning the property. HUD held to its
agreement, but ultimately Shaikh withdrew after the City
further offered him $20,000 to recoup his out-of-pocket
expenses.
  With Shaikh out of the picture, HUD offered the prop-
erty to the second-highest bidders at the auction, John
Schlick and David Horn (two Caucasian, non-Muslim
residents of Washington, D.C.). The City once again tried
to convince HUD and the potential buyers to withdraw,
informing Schlick and Horn of its intention to take the
property by eminent domain. This time though, HUD
refused to allow Schlick and Horn to back out of their
agreement.
  After the sale had completed, the City never used its
powers of eminent domain to acquire the property from
Schlick and Horn nor did it proceed with the Kennedy-
King campus relocation or expansion plans. It also re-
neged on its offer to pay Shaikh $20,000 for his expenses.
Shaikh then brought this action against the City, Stasch,
and Salzman, arguing that in causing him to withdraw
from his purchase agreement with HUD, the defendants
(hereinafter collectively referred to as the City) inten-
tionally discriminated against him on account of his race
and nationality in violation of 42 U.S.C. § 1981 (which
prohibits discrimination in contractual relations) and 42
U.S.C. § 1982 (which prohibits discrimination in the sale
of property) and violated 42 U.S.C. § 1983 by depriving
him of equal protection under the law and by imped-
No. 02-2708                                                  3

ing his substantive-due-process rights and his right to
travel.1
  The district court granted summary judgment to the
City on Shaikh’s §§ 1981 and 1982 claims and his equal-
protection, right-to-travel, and substantive-due-process
claims under § 1983, finding that Shaikh could neither
prove that the City treated similarly situated individ-
uals outside his protected class (whether based on race,
nationality, or citizenship) more favorably than he was
treated nor that the City’s stated reason for persuading
Shaikh to cancel his contract (the Kennedy-King college
expansion) was either illegitimate or pretextual. It also
rejected Shaikh’s “class of one” equal-protection argu-
ment because Shaikh failed to produce any evidence that
tended to suggest that the City had a personal vendetta
against him. Shaikh appeals.
  Although in the final analysis we agree with the dis-
trict court that the City behaved as inefficiently, irratio-
nally, and for that matter impolitely, in trying to con-
vince Shaikh not to proceed with the Lowe-apartments
purchase as it did in trying to dissuade Schlick and Horn
or any other potential purchaser without regard to pref-
erences of race, nationality, citizenship, or personality,
Shaikh’s §§ 1981 and 1982 claims fail for a more funda-
mental reason: Because the City had no power directly to
affect HUD’s proposed sale of the property to Shaikh, it
did not unlawfully or unconstitutionally impede upon
Shaikh’s ability to purchase the building. More fundamen-
tally still, the possibility that the City would seek to take
the Lowe apartments by eminent domain is a risk every
private property owner bears, but it is a risk balanced by

1
  Shaikh’s original complaint advanced four additional counts
under the Fair Housing Act. 42 U.S.C. §§ 3601 et seq. (2003).
Those claims were previously dismissed by the district court in
a ruling that is not challenged here.
4                                              No. 02-2708

constitutional requirements to take the property only for
the public use and then to compensate the owner for the
property’s fair market value. And Shaikh has not pre-
sented any theory that would allow him to recover under
§§ 1981 or 1982 for the City providing him with advance
notice of its intent to exercise that power within those
constitutionally mandated limits.
  The City did not own the Lowe apartment building—HUD
did—and so the City could not refuse to sell it to Shaikh.
HUD had acquired the property by foreclosing on a Fed-
eral Housing Authority administered loan and, under the
terms of the Multifamily Property Disposition Reform Act
of 1994, it had informed the City of its acquisition. 12
U.S.C. § 1701z-11(c)(3)(A) (2003). At that time, the City
took no action to acquire the property, even though the
statute grants the City a right of first refusal. See id. at
§ 1701z-11(i). When the City later changed its mind and
informed HUD of its interest in the property for the
Kennedy-King expansion, it was too late: HUD had de-
cided to proceed to auction. At this point, the City was
powerless to stop the auction sale. The Act afforded them
no further opportunity to lay claim to the property after
they had passed on their right of first refusal. And under
the Supremacy Clause, the City could not pursue con-
demnation proceedings against HUD to obtain the prop-
erty in advance of, and for the purpose of cancelling, the
auction. See Utah Power & Light Co. v. United States, 243
U.S. 389, 404-05 (1917) (holding that private rights in
public lands of the United States within a state cannot
be acquired under the state’s power of eminent domain,
unless Congress confers that right).
  Unable to prevent HUD from proceeding to auction and
eventual sale, the City redirected its persuasive efforts
towards the successful bidder, Shaikh. After the auction,
Shaikh and HUD entered into a purchase agreement for
the property. For the same reasons discussed above, the
No. 02-2708                                               5

City lacked leverage over HUD to get it to break its bar-
gain with Shaikh (although that didn’t stop it from urging
HUD to adhere strictly to the purchase agreement and
not to overlook any technical violations by Shaikh). In-
stead, it tried to convince Shaikh to back out of the deal,
“threatening” him with condemnation proceedings. This,
Shaikh suggests, was unconstitutional and unlawful con-
duct if motivated by discriminatory animus.
  We disagree. To succeed on this theory under §§ 1981
and 1982, Shaikh must argue that advance notice of a local
government’s intent to use its eminent-domain power can
constitute unlawful interference with his contractual
rights and otherwise make unavailable or deny him the
opportunity to purchase the target property. See Morris v.
Office Max, Inc., 89 F.3d 411, 413 (7th Cir. 1996) (holding
that to succeed on a § 1981 or a § 1982 claim, a plaintiff
must allege, inter alia, intentional discrimination con-
cerning the making and enforcing of a contract or the
sale or lease of real property). Shaikh is correct in noting
that a third party’s interference with an individual’s
equal opportunity to enter into contracts or purchase
property can support civil-rights claims under §§ 1981
and 1982. See Sullivan v. Little Hunting Park, Inc., 396
U.S. 229, 237 (1969) (“The right to ‘lease’ is protected by
§ 1982 against the actions of third parties, as well as
against the actions of the immediate lessor. . . . A narrow
construction of the language of § 1982 would be quite
inconsistent with the broad and sweeping nature of the
protection meant to be afforded by [the Act].” (citations
omitted)); Faraca v. Clements, 506 F.2d 956, 959 (5th Cir.
1975) (extending Sullivan’s rationale to § 1981 claims for
interference with contractual relations). The problem for
Shaikh, however, is that what he alleges the City did in
this case—inform him that it was contemplating the use
of its eminent-domain power—never interfered with his
ability to purchase the building.
6                                               No. 02-2708

  The Supreme Court in Sullivan did not discuss what type
of action it anticipated would constitute third-party inter-
ference. But the concept of third-party interference with
contractual or business relationships is not novel; it is
a well-recognized common-law tort. And that tort is es-
sentially what Shaikh complains about here—that the
City, a competitor, interfered with his business oppor-
tunity to purchase and develop the Lowe avenue apart-
ments by “threatening” to take the property from him by
eminent domain. To succeed on a tortious-interference
claim under Illinois law the plaintiff must show inter alia
“an intentional interference by the defendant which pre-
vents the [plaintiff’s] expectancy from ripening into a
valid business relationship.” Heying v. Simonaitis, 466
N.E.2d 1137, 1140-41 (Ill. App. Ct. 1984) (citation omitted).
  Here, the City’s actions never prevented Shaikh’s legiti-
mate interest in purchasing the property from ripening.
HUD at all times remained a willing seller and Shaikh
was free to proceed with the transaction. The City could
not stop him. The gravamen of Shaikh’s complaint is that
he withdrew from the sale because he had envisioned the
Lowe-apartment purchase as a long-term investment and
no longer considered that prospect lucrative in light of
the City’s statements. But whether or not the City informed
him of the possibility that it could seek to take the prop-
erty by eminent domain, it was always a risk he bore.
See United States v. 16.92 Acres of Land, 670 F.2d 1369,
1371 (7th Cir. 1982) (“Every person who acquires or oc-
cupies land does so at the risk of being evicted by the
exercise of the superior right of the government or its
delegate to acquire his interest upon payment of just
compensation.” (citation omitted)). Shaikh’s choice to
withdraw from his purchase agreement with HUD was a
means to avoid a possibility that any purchaser of residen-
tial rental property that has been foreclosed upon may
face—the local government may seek to have the property
condemned.
No. 02-2708                                                      7

  But to hear Shaikh tell it, the City’s presale “threats”
sound ominous. After all, Shaikh alleges that the
City, without any concrete authority or intent to follow
through, strongarmed him out of his purchase agreement
by suggesting that after he invested his time, money,
and efforts into acquiring the property, the City would
snatch it from him. Moreover, he argues that the only
reason the City advanced these threats was to prevent
him, an out-of-state U.S. citizen of Indian-Muslim descent,
from acquiring the property in the first place. Shaikh
argues we should analogize the City’s statements to
threats against potential purchasers to enforce the hous-
ing code vigorously, to deny future zoning permits, or to
withhold municipal services such as police and fire pro-
tection, all in an effort to prevent the purchase. See, e.g.,
Vill. of Willowbrook v. Olech, 528 U.S. 562, 564 (2000)
(per curiam) (affirming appellate court’s reversal of dis-
trict court’s dismissal of plaintiff’s “class of one” equal
protection claim, which alleged discriminatory animus in
municipality’s demand for a 33-foot easement to property
in return for a connection to the municipal water supply
in excess of standard requirement of 15-foot easement);
Metro. Hous. Dev. Corp. v. Vill. of Arlington Heights, 558
F.2d 1283, 1294 (7th Cir. 1977) (finding statutory obliga-
tion under Fair Housing Act to refrain from zoning pol-
icies that effectively foreclose the construction of low-
cost housing within municipality; remanding to deter-
mine whether that obligation was violated); 24 C.F.R.
§ 100.70(b) & (d)(4) (2003).2

2
  The regulations pertaining to discriminatory conduct under
the Fair Housing Act explain that
    (b) It shall be unlawful, because of race, color, religion,
    sex, handicap, familial status, or national origin, to
    engage in any conduct relating to the provision of hous-
                                                     (continued...)
8                                                     No. 02-2708

  Shaikh’s comparisons are not apt. The City didn’t
threaten to harm Shaikh’s person if he bought the prop-
erty. See, e.g., Vietnamese Fisherman’s Ass’n v. Knights
of the Ku Klux Klan, 518 F. Supp. 993, 1008 (S.D. Tex.
1981) (permitting § 1981 claim where plaintiffs complained
of defendants’ threats and intimidation, which interfered
with their ability to make contractual relationships with
dock owners and thereby engage in commercial fishing
business). It didn’t threaten to withhold fire or police
protection, which could endanger Shaikh or others resid-
ing in the building, result in the destruction of his prop-
erty, or prevent him from obtaining necessary hazard
insurance. See, e.g., 24 C.F.R. 100.70(b) & (d)(4). And
it didn’t engage in any conduct under the veil of legal
authority (such as rezoning or the refusal to rezone) hav-
ing the effect of making the property unavailable for
purchase. See, e.g., Metro. Hous. Dev. Corp., 558 F.2d at
1294. In the first two examples the threat of personal in-
jury or catastrophic loss without recompense may legiti-
mately and reasonably impair an individual’s freedom to
contract or purchase property. In the third, the municipal-

2
    (...continued)
       ing or of services and facilities in connection therewith
       that otherwise makes unavailable or denies dwellings to
       persons.
      ....
      (d) Prohibited activities relating to dwellings under
      paragraph (b) of this section include, but are not limited
      to:
      ....
      (4) Refusing to provide municipal services or property or
      hazard insurance for dwellings or providing such services
      or insurance differently because of race, color, religion,
      sex, handicap, familial status, or national origin.
24 C.F.R. § 100.70(b) & (d)(4) (2003).
No. 02-2708                                                 9

ity’s action directly prevents the sale. In contrast to
these examples, all that the City did here is state its
intention to exercise its statutory authority to pursue
condemnation proceedings at some future point in time.
That authority, if ever exercised, would have to be
carried out within constitutionally and statutorily man-
dated limits. And considering those limits, we cannot
construe the City’s prospective statements as “interfer-
ence” with Shaikh’s ability to purchase the property.
  The takings clause of the Fifth Amendment (made
applicable to state and local governments vis a vis Four-
teenth Amendment incorporation, see Chicago, Burlington
& Quincy R.R. Co. v. City of Chicago, 166 U.S. 226 (1897))
imposes considerable limits on the exercise of the eminent-
domain power. Primary among them are that the taking
must be for public use and that the government must
pay the owner just compensation, which is determined
to be the property’s fair market value. See, e.g., United
States v. Miller, 317 U.S. 369, 373-74 (1943); United States
v. 58.16 Acres of Land, 478 F.2d 1055, 1058 (7th Cir. 1973).
Although the mere “threat” to use the power of eminent
domain doesn’t constitute a taking and trigger these
protections, see, e.g., Tahoe-Sierra Pres. Council, Inc. v.
Tahoe Reg’l Planning Agency, 535 U.S. 302, 321-23 (2002)
(a taking requires government confiscation or physical
occupation, or in the case of a regulatory taking, a regula-
tion so severe that it leaves no reasonably economically
viable use of the property), if the City ever followed through
and initiated condemnation proceedings it would have
to comply with these constitutional strictures. The public-
use protections would resolve Shaikh’s concerns that
the City was not motivated to take his property for the
stated intention of relocating the Kennedy-King campus
but rather by unlawful, discriminatory animus. See, e.g.,
58.16 Acres of Land, 478 F.2d at 1060 (observing that
allegations of bad faith, arbitrariness, and capriciousness
10                                              No. 02-2708

in the exercise of the eminent-domain power all bear
upon the public-use determination). And if the City’s
intentions were valid, Shaikh would be entitled to re-
ceive the fair market value for the property, regardless if
the City in its negotiations with Shaikh suggested other-
wise. See Miller, 317 U.S. at 374 (1943).
  Moreover, the City, as an Illinois municipal corporation,
holds no sovereign power of eminent domain. Instead, the
state legislature must delegate that authority by specifi-
cally conferring the right by legislative enactment. And
the City must exercise that delegated authority in strict
compliance with the State’s statutory grant. Forest Pre-
serve Dist. v. Chicago, 513 N.E.2d 22, 23 (Ill. App. Ct.
1987); see, e.g., 65 ILL. COMP. STAT. ANN. § 5/11-61-1 (2003)
(delegating to all municipalities the exercise of eminent
domain by condemnation proceedings, in conformity
with the Illinois constitution and state statutes, to ac-
quire property for municipal purposes).
  Under Illinois law, a person who wishes to challenge
the propriety of a condemnation proceeding must file a
motion to dismiss during the preliminary stage of the
condemnation proceedings. Towne v. Town of Liberty-
ville, 546 N.E.2d 810, 813 (Ill. App. Ct. 1989). And the
state-court condemnation process, with possibility of ulti-
mate appeal to the U.S. Supreme Court, provides the
appropriate venue to raise constitutional or statutory
challenges to the exercise of the eminent-domain power
by state or local governments. See Green St. Ass’n v.
Daley, 373 F.2d 1, 6-7 (7th Cir. 1967); S.W. Ill. Dev. Auth.
v. Vollman, 600 N.E.2d 926, 928-29 (Ill. App. Ct. 1992)
(noting availability of interlocutory appeal to challenge
exercise of eminent-domain power); Towne, 546 N.E.2d
at 814 (noting trial court’s ability to determine constitu-
tional challenges to the exercise of the eminent-domain
power). Thus, Shaikh would have a venue to raise his
challenges to the City’s actual exercise of their eminent-
No. 02-2708                                                11

domain power at the earliest opportunity, once the City
undertook action in a state court to initiate condemna-
tion proceedings.
  If, on the other hand, the City had no concrete author-
ity to pursue condemnation proceedings at the time it
spoke and never intended to follow through, then Shaikh
never had any reason to worry. Cf. Garry v. Geils, 82 F.3d
1362, 1368 (7th Cir. 1996) (observing that the takings
injury alleged was only complete when state court ac-
tually condemned the property). In Geils, we held that
we had no federal jurisdiction under the Rooker-Feldman
doctrine to consider plaintiff’s civil-rights claims, which
alleged that local authorities had unconstitutionally
exercised their eminent-domain power. 82 F.3d at 1368-70.
The injury that the plaintiff suffered was not complete
until the state court, in a condemnation proceeding, issued
an order condemning the property. Id. at 1368. Thus, the
plaintiff essentially claimed injury at the hands of the
state court (for failure to root out the municipality’s im-
proper motives) and sought collateral review of that
decision under the guise of a federal civil-rights action. Id.
While the plaintiff could have raised his constitutional
challenges in the state-court condemnation proceedings
and appealed an adverse result to the highest court in
the land, he could not seek to attack the result collateral-
ly in a federal civil-rights action. Id. at 1369-70.
  Although not directly controlling precedent (because
the City never initiated condemnation proceedings), we find
the deference we exercised in Geils to the state court’s
opportunity to resolve the types of challenges Shaikh
asserts here, informative. It seems incongruous to hold, on
the one hand, that because a state court has the opportu-
nity and responsibility in condemnation proceedings to
ensure the lawful exercise of a local government’s eminent-
domain power, a federal court must abstain from render-
ing civil-rights relief that would essentially invalidate
12                                              No. 02-2708

the result of those proceedings, and yet allow, on the
other hand, a property owner to avoid those state-court
condemnation proceedings altogether by seeking preemp-
tive federal civil-rights relief at the first suggestion of
a municipality’s intent to take the property.
   As a matter of fact, instead of complaining about the
government talking too much or too early about seizing
property by eminent domain, a more typical complaint
from property owners is that the government talked too
little or too late, and violated due process by not timely or
adequately informing them of its intention to exercise its
eminent-domain power. See, e.g., United States v. 125.2
Acres of Land, 732 F.2d 239 (1st Cir. 1984) (when the
government knew the landowner’s name and hometown
and could have looked up his street address in the tele-
phone book it could easily have notified the owner of
condemnation proceeding by mail or other direct means,
such as leaving a notice at his residence; its failure to do
so and decision instead to content itself with publishing
and posting rendered the notice defective). We hesitate
to impose a Catch-22 rule whereby those governments
contemplating the use of their eminent-domain powers
are subjected to liability regardless of whether they
choose to remain silent or to speak.
  Shaikh’s §§ 1981 and 1982 claims are therefore barred
because the City’s statements never interfered with his
ability to purchase the property, accord Morris, 89 F.3d
at 414-15 (upholding grant of summary judgment to
defendants on §§ 1981 and 1982 claims where plaintiff
failed to show actual loss of contract interest or denial of
right to purchase property; possible loss of future con-
tract possibilities was insufficient). It may be, however,
that Shaikh’s assorted § 1983 claims alleging discrimina-
tion on account of his race, nationality, citizenship, or
personality survive the §§ 1981 and 1982 analysis. To
succeed under § 1983, Shaikh need only show that the
No. 02-2708                                               13

City acted under color of law intentionally to deprive him
of “rights, privileges, or immunities secured by the Consti-
tution or laws of the United States.” New Burnham
Prairie Homes, Inc. v. Village of Burnham, 910 F.2d 1474,
1479 (7th Cir. 1990) (quotations omitted). And the equal-
protection and due-process clauses of the Fourteenth
Amendment carry neither the contractual nor sale-of-
property elements found in §§ 1981 and 1982 respectively.
  Thus, it is at least conceivable that the City’s state-
ments—although of no ultimate effect upon Shaikh’s abil-
ity to proceed with the transaction—could nevertheless
constitute invidious racial, religious, ethnic, or other dis-
crimination actionable under § 1983. For example, we
could envision some municipal government that, moti-
vated by unlawful discriminatory animus to prohibit the
introduction of a particular minority group into a commu-
nity, employs a policy of contacting each prospective
minority purchaser and informing them that if they buy
the property, it will seek to take it from them by eminent
domain a short time later. Confronted with evidence of
such blatantly discriminatory harassment, we might be
less sanguine about the prospective nature of the muni-
cipality’s statements and their resulting immateriality.
But we need not consider that issue here since Shaikh’s
own pleadings and materials reveal that the City treated
both him and the second set of buyers (Caucasian, non-
Muslim, out-of-state citizens) the same. The only differ-
ence between the two is that the second set of purchas-
ers were unsuccessful in withdrawing from their pur-
chase agreement with HUD. Nor has Shaikh provided
any facts suggesting that the City treated any other
similarly situated, non-minority individual differently
than he. Therefore, even if we must construe the City’s
prospective statements as an action triggering the pro-
tections of the Fourteenth Amendment, Shaikh’s § 1983
claims cannot survive summary judgment because he
14                                           No. 02-2708

has not shown that he was the victim of any differential
treatment, let alone that the City intended to treat him
unfavorably.
  In sum, because the City was not the property owner,
it lacked any authority directly to affect the sale be-
tween HUD and Shaikh and thus did not prevent Shaikh
from buying the property. Furthermore, Shaikh, like all
citizens, acquires or occupies his property subject to the
superior right of eminent domain exercised in accordance
with constitutionally and statutorily mandated restric-
tions upon that power. Reasonably construed against
those restrictions (and the opportunity that state-court
condemnation proceedings provide to enforce them), the
City’s statements here were not intimidating threats that
restrained or interfered with Shaikh’s ability to pur-
chase the property. Shaikh therefore has no civil-rights
remedy under §§ 1981 or 1982. And even if Shaikh could
still assert equal-protection or due-process claims under
§ 1983 on the basis of the City’s statements alone, he
cannot survive summary judgment on those claims be-
cause he has not shown that he was a victim of invidious
discrimination. We therefore AFFIRM the district court’s
grant of summary judgment.

A true Copy:
      Teste:

                       ________________________________
                       Clerk of the United States Court of
                         Appeals for the Seventh Circuit

                  USCA-02-C-0072—8-25-03