11 F.3d 668 (7th Cir. 1993), 93-3582, United States v. Board of Educ. of City of Chicago

Docket Nº:93-3582.
Citation:11 F.3d 668
Party Name:UNITED STATES of America, Plaintiff-Appellee, v. BOARD OF EDUCATION OF the CITY OF CHICAGO, Defendant-Appellee. Chicago School Finance Authority, Intervenor-Appellant.
Case Date:November 10, 1993
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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11 F.3d 668 (7th Cir. 1993)

UNITED STATES of America, Plaintiff-Appellee,



Chicago School Finance Authority, Intervenor-Appellant.

No. 93-3582.

United States Court of Appeals, Seventh Circuit.

November 10, 1993

Submitted Nov. 8, 1993.

Opinion Dec. 9, 1993.

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Michele M. Fox, Asst. U.S. Atty., Chicago, IL, William B. Reynolds, Michael H. Sussman, Dept. of Justice, Civil Rights Div., Appellate Section, William Kanter, Neil H. Koslowe, Dept. of Justice, Civil Div., Appellate Section, Washington, DC, David George Lubben,

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U.S. Dept. of Justice, Chicago, IL, Alexander C. Ross, U.S. Dept. of Justice, Civil/Appellate Div., Washington, DC, for U.S.

James G. Bradtke, Kathleen Mangold-Spoto, Robert C. Howard, Futterman & Howard, Chicago, IL, for defendant-appellee.

Roger Pascal, Joseph R. Lundy, Deborah A. Golden, Schiff, Hardin & Waite, Chicago, IL, for intervenor-appellant.

Before POSNER, Chief Judge, and BAUER and CUDAHY, Circuit Judges.

POSNER, Chief Judge.

The Chicago School Finance Authority has appealed from a purported temporary restraining order blocking enforcement of an Illinois law that prohibits the Board of Education of the City of Chicago from making expenditures (other than for debt service) except in conformity with a budget approved by the finance authority. The law forbids the finance authority to approve a budget that is not balanced, and the school board has not submitted a balanced budget; so were it not for the restraining order, it could not have operated the schools and they would have had to close. Because the restraining order was due to expire on November 15 and a hearing in the district court was scheduled for that day, this court considered the appeal on an expedited basis. The last brief was filed on November 8, and we issued our order vacating the temporary restraining order on November 10 with a notation that an opinion would follow. Judge Cudahy dissented, stating that he would uphold the temporary restraining order for the reasons the district judge had given in issuing it.

At the request of the school board we stayed our order until midnight on Friday, November 12, to permit an orderly shutdown of the schools. On Sunday, November 14, however, the Illinois legislature passed and the governor signed a law resolving the political impasse by (among other things) suspending the balanced-budget requirement and lifting the statutory cap on the issuance of school bonds. So classes resumed as usual on Monday.

Thirteen years ago, in 1980, the school board resolved a discrimination suit that the United States had brought against it by entering into a consent decree in which it agreed to take certain steps to remedy the lingering effects of past racial and ethnic segregation in the Chicago public schools. The decree (amended in 1987) contains provisions concerning magnet schools, student transfers, remedial education, and other methods for promoting integrated schooling and, where that is infeasible, for providing compensatory education for disadvantaged black and Hispanic students. When the decree was issued, the vast majority of students in the Chicago public schools were black or Hispanic. The same is true today. Disputes relating to the decree have been brought to this court several times before. See United States v. Board of Education, 799 F.2d 281, 283-84 (7th Cir.1986), and cases cited there.

Also in 1980, the State of Illinois enacted the School Finance Authority Act, 105 ILCS 5/34A-101 et seq., which created the Chicago School Finance Authority to issue school bonds and monitor the school board's finances. If the finance authority does not approve the school board's budget--and it cannot lawfully approve a budget that is not balanced--the board cannot spend any money and the schools must close. With the 1993-1994 school year about to start and the school board unable to come up with a balanced budget, the Illinois legislature suspended the Act's balanced-budget requirement from September 1 to 12, 1993, but with conditions that caused the school board to decide not to open the schools. The day after the suspension expired, the school board asked for and obtained the temporary restraining order from the district court, and the schools finally opened.

The board wanted the district court, which has jurisdiction to enforce, modify, or rescind the consent decree, to authorize the board to spend in violation of state law. The board had cash that would enable it to keep operating, for a while anyway; and for the longer term it wanted the court to lift the cap on the finance authority's borrowing powers. The ground for the relief sought was that if the schools are closed, the objectives of the consent decree cannot be achieved. As nothing in the consent decree requires the schools to

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operate if they lack the funds to do so, it may appear that the school board was asking the district court to modify the consent decree to make it more stringent. This would mean, since the board is the defendant in the underlying discrimination suit in which the consent decree was issued, that the board was in effect suing itself. Such a suit would obviously lack the adverseness that is a precondition to the exercise of federal jurisdiction under Article III of the Constitution.

But self-suing would not be a realistic interpretation of what the board was trying to do. The board was seeking not to tie its own hands but to free itself from the constraints of state law. Concretely it was trying to get the district judge to enjoin a nonparty to the consent decree, the Chicago School Finance Authority, from exercising its statutory control over the board's finances. The district judge was therefore right to permit the finance authority (which is expressly authorized to sue and be sued, 105 ILCS 5/34A-201(a)) to intervene in opposition to the school board's request. The finance authority is the real defendant, and the school board the real plaintiff, in what amounts to a proceeding to supplement or modify the consent decree, or perhaps to obtain entirely new relief unrelated to the decree. The United States, the board's nominal adversary in the discrimination suit, did not appear at the initial hearing on the board's request for relief and has in fact played virtually no role in the proceedings on that request. Although it might seem that the Illinois attorney general would be the proper defender of a state statute (the School Finance Authority Act, which the school board was asking the district court to suspend), neither he nor the state were named as defendants. There cannot be any doubt, however, about the authority of the finance authority to defend the Act without the participation of the state attorney general. We know this because when a constitutional challenge was brought against the Act, it was defended by private counsel hired by the finance authority; there was no participation by the attorney general. Polich v. Chicago School Finance Authority, 79 Ill.2d 188, 37 Ill.Dec. 357, 402 N.E.2d 247 (1980). And later the finance authority, again represented by private counsel and again without participation by the attorney general, was permitted to seek mandamus against the Chicago City Council to assure that there would be sufficient revenues to repay the bonds that the authority had issued. Chicago School Finance Authority v. City Council, 104 Ill.2d 437, 84 Ill.Dec. 668, 472 N.E.2d 805 (1984). That is essentially what it is seeking in the present case: assurance that the school board has net revenues before debt service sufficient to pay interest on and eventually repay the principal of the bonds.

Of course the finance authority should not have been compelled to intervene in order to bring its defenses before the district court; the school board should have named it as the defendant in its request for relief. The failure to do so left initially unclear whom the temporary restraining order was intended to restrain.

With the parties realigned to reflect the actual dispute, it is apparent that there is that real, concrete adversity required by Article III to ground federal jurisdiction. The finance authority in its role as issuer of...

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