4901 Corp. et al v. Town of Cicero

• Decision Date: 17 July 2000
• Docket Number: No. 99-1836,99-1836
• Citation: 220 F.3d 522
• Parties: (7th Cir. 2000) 4901 Corporation, an Illinois corporation, d/b/a Pure Gold and Dollounge, Incorporated, an Illinois corporation, d/b/a Dollounge, Plaintiffs-Appellants, v. Town of Cicero, an Illinois municipal corporation, Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 522

220 F.3d 522 (7th Cir. 2000)

4901 Corporation, an Illinois corporation, d/b/a Pure Gold and Dollounge, Incorporated, an Illinois corporation, d/b/a Dollounge, Plaintiffs-Appellants, v. Town of Cicero, an Illinois municipal corporation, Defendant-Appellee.

No. 99-1836

In the United States Court of Appeals For the Seventh Circuit

Argued November 4, 1999

Decided July 17, 2000

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 98 C 326--Charles R. Norgle, Sr., Judge. [Copyrighted Material Omitted]

Before Manion, Kanne, and Evans, Circuit Judges.

Manion, Circuit Judge.

The 4901 Corporation and Dollounge, Inc., ("Bars") are striptease bars in Cicero, Illinois. The Bars and Cicero agreed in 1997 to settle a state court action where the Bars had challenged Cicero's repeal of a provision of its municipal code providing for late night liquor licenses. Within a year the Bars sued Cicero again, this time in federal court, challenging their duty to comply with Cicero's Adult Use Ordinance--another part of the town's licensing mechanism for striptease bars-- which seemed to be a part of the 1997 settlement agreement. The district court ultimately found that res judicata barred the Bars' federal lawsuit and entered judgment in favor of Cicero. Although the Bars' arguments about the settlement agreement are waived and their challenge to the Adult Use Ordinance is barred by res judicata, we dismiss the appeal because we lack jurisdiction to consider the Bars' claims under the Rooker- Feldman doctrine.

I. Background

For at least the last few years, the Bars had been providing nude or semi-nude female dancing in Cicero and had been staying open until 6:00 a.m., pursuant to a Cicero Class A/F liquor license. A "Class A" liquor license allows taverns to serve liquor until 2:00 a.m.; a "Class F" (late hour) liquor/entertainment license allowed taverns to serve liquor and provide entertainment until 6:00 a.m. (Cicero asserts that the "entertainment" aspect of that provision never did cover nude dancing, so to speak.) Cicero also has a more generic "entertainment" license provision (Section 5-9) for what the Bars call "non-adult" entertainment, and it has an "Adult Use Ordinance" for erotic entertainment (called "adult uses"). This ordinance requires businesses offering erotic entertainment to obtain licenses, and it requires their employees to wear at least minimal clothing. The employees also must refrain from exposing certain body parts and from engaging in certain sexual acts. These three provisions are how Cicero has regulated nude dancing.

When the Bars applied to renew their A/F liquor licenses at the end of 1996, Cicero advised them that it had repealed the provision of its Liquor Control Ordinance allowing F licenses. It also told them that, for the first time, they would have to obtain Entertainment Licenses under Section 5-9. The Bars responded by filing an action in state court in January 1997, challenging on numerous grounds the repeal of the Class F liquor license provision. They alleged that the repeal of this provision deprived them of due process and the equal protection of the laws under both the Illinois and United States Constitutions and that it violated their rights to freedom of expression under the First Amendment to the federal constitution. They also alleged that the repeal of the F license provision violated Illinois' Liquor Control and Administrative Procedures Acts as well as the common law. The Bars did not challenge Cicero's Adult Use Ordinance, although it is clear from their state court complaint that they were fully aware of this ordinance

Plaintiff is likely to succeed on the merits in that Plaintiff has a vested and inalienable right guaranteed by the First Amendment to the United States Constitution to offer or provide entertainment to its patrons upon its premises as long as the entertainment falls within the realm of protected expressive conduct. Plaintiff employs female dancers whose performances fall within the lawful parameters of Section 22-301 of the Code [Cicero's Adult Use Ordinance].

State complaint, para.25 (emphasis added). As part of their relief, the Bars requested that the state court declare that they have "a vested and inalienable [First Amendment] right to offer and provide lawful entertainment upon [their] premises as long as the entertainment falls within the realm of protected expressive conduct".

The Bars and Cicero agreed to settle the state action in March 1997. The settlement agreement provided that "upon the completion of a Town of Cicero Application For Business License with the attached Statement and the payment of the requisite application and license fees, the Town of Cicero shall issue to the [Bars] Entertainment Licenses as defined in Cicero Municipal Code Section 5-9." (Emphasis added.) The "attached statement" to the agreement pertained exclusively to the Adult Use Ordinance, and in three similar paragraphs labeled "Food And Drink Service," "Table And Personal Dancing," and "Stage Dancing," expressly referred to that ordinance and summarized its requirements. For example, the first paragraph provided

1. Food And Drink Service

The women and men serving cocktails and other food and drinks shall be clad in the outfits described in the attached pictures and such clothing shall cover the specified anatomical areas specified in the Town of Cicero Adult Use Ordinance Sections 22- 301 and 22-303 attached herein. In addition, any activities regarding food an [sic] drink service shall not include any of the specified sexual activities described in the Town of Cicero Adult Use Ordinance Sections 22-301 and 22-302 attached herein.

Attached to this statement were, in turn, four pictures of examples of appropriate attire for employees under the Adult Use Ordinance, a copy of Section 5-9 (the generic entertainment license provision), and a complete copy of the Adult Use Ordinance itself. The settlement agreement also provided that the Bars would voluntarily dismiss their state court action.

The state court incorporated the settlement agreement into its April 1997 order of dismissal, expressly approving, ratifying, and adopting the agreement's terms and conditions and ordering the parties to comply with them.¹. The order also recounted that the Bars were voluntarily dismissing their complaint, and that the state court would retain jurisdiction over the case to enforce the agreement. The Bars applied for Entertainment Licenses by completing forms that stated they would comply with the Adult Use Ordinance. Cicero issued the Bars the licenses, but within a year, the Bars were cited for violations of the Liquor and Adult Use Ordinances and their licenses were revoked (according to the administrative complaint, one of the Bars had also, at times, been operating more like a bordello than a bar). The Bars responded by filing this case in federal court seeking declaratory and injunctive relief as to the Adult Use Ordinance, alleging that it banned protected expression in violation of the First Amendment and gave officials too much licensing discretion in violation of the Due Process Clause of the Fourteenth Amendment.

Cicero moved to dismiss the complaint under Fed. R. Civ. P. 12(b)(6) on the ground that the Bars' claims were barred by res judicata, arguing that the substance of the state and federal actions were the same, and that even if they were not, the actions were similar enough so that the Bars could have challenged the Adult Use Ordinance in the state action. The district court denied Cicero's motion, concluding that the "identity of the cause of action" requirement for res judicata was not satisfied because in the state action the Bars challenged Cicero's repeal of the "F" licencing provision of its Liquor Control Ordinance, while in the present case they were challenging Cicero's Adult Use Ordinance.

The Bars then moved for summary judgment. In opposition, Cicero maintained that the federal action was barred. It first argued that in the state court settlement the Bars agreed to comply with the Adult Use Ordinance, and that under Illinois law the settlement agreement, together with the accompanying state court dismissal order, constituted a final judgment to which federal courts must give full faith and credit. Cicero reasserted that even if the Bars did not challenge the Adult Use Ordinance in their state suit, they could have done so. The Bars replied that, for various reasons, whether they violated a settlement agreement from a prior action was irrelevant to their ability to maintain the present action.² The district court reconsidered its prior order on Cicero's motion to dismiss, this time focusing on the settlement agreement. It held that the parties had "settled issues that are in dispute in this matter," and as a result, res judicata barred the Bars' challenges to the Adult Use Ordinance. The order stated

Specifically, as part of the decree over which the state judge presided and approved, [the Bars] agreed to comply with the specific portions of the Adult Use Ordinance they criticize in this case. Specifically, [the Bars] agreed, as part of their application for entertainment licenses, that any men or women involved in food or drink service, table and personal dancing, or stage dancing, would be clad in clothing that would "cover the specified anatomical areas specified in the Town of Cicero Adult Use Ordinance . . ." Attached to the agreement were photographs demonstrating appropriate clothing. [The Bars] further agreed that all such individuals would not partake in any "specified sexual activities" described in the ordinance. Their capitulation in the state case is determinative in this matter. Because they agreed to abide by the Adult Use Ordinance, the agreement is conclusive and bars [the Bars] from asserting otherwise.

The court denied the Bars' motion for summary judgment...