580 F.2d 302 (8th Cir. 1978), 77-1768, Jackson Sawmill Co., Inc. v. United States

Docket Nº:77-1768.
Citation:580 F.2d 302
Party Name:JACKSON SAWMILL COMPANY, INC., a corporation, Allen G. Bohmer, Dr. Paul T. Scoggins, and the Reverend Daniel D. McKee, Appellants, v. The UNITED STATES of America, the Honorable William T. Coleman, Individually and as Secretary of Transportation of the United States, the Honorable Daniel Walker, Governor of the State of Illinois, Langhorne M. Bond,
Case Date:July 12, 1978
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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580 F.2d 302 (8th Cir. 1978)

JACKSON SAWMILL COMPANY, INC., a corporation, Allen G.

Bohmer, Dr. Paul T. Scoggins, and the Reverend

Daniel D. McKee, Appellants,

v.

The UNITED STATES of America, the Honorable William T.

Coleman, Individually and as Secretary of Transportation of

the United States, the Honorable Daniel Walker, Governor of

the State of Illinois, Langhorne M. Bond, Individually and

as Secretary of the Department of Transportation of the

State of Illinois, the Department of Transportation of the

State of Illinois, the City of East St. Louis, William

Mason, Individually and as Mayor of the City of East St.

Louis, Jack Curtis, Individually and as Chairman of the

State Highway Commission of Missouri, the State Highway

Commission of Missouri, the Illinois State Toll Highway

Authority, the Honorable Joseph Teasdale, Governor of the

State of Missouri, the State of Missouri and the State of

Illinois, Appellees.

No. 77-1768.

United States Court of Appeals, Eighth Circuit

July 12, 1978

Submitted April 11, 1978.

Page 303

Kenneth F. Teasdale, Armstrong, Teasdale, Kramer & Vaughan, St. Louis, Mo., for appellant; by Richard A. Oertli and Timothy K. Kellett, St. Louis, Mo., on brief.

Paul J. Bargiel, Asst. Atty. Gen., Chicago, Ill., for appellees, State of Illinois, et al.; William J. Scott, Atty. Gen., Stephen R. Swofford, and Patricia Rosen, Asst. Attys. Gen., Chicago, Ill., on brief.

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Andrew Vrtjak, Asst. Atty. Gen., Oakbrook, Ill., for appellee, Illinois State Toll Highway Authority; William J. Scott, Atty. Gen., Chicago, Ill., and Walter K. Pyle, Asst. Atty. Gen., Oakbrook, Ill., on brief.

Thomas M. Pearson, Asst. Counsel, Missouri State Highway Commission, Kirkwood, Mo., for Missouri appellees; John D. Ashcroft, Atty. Gen., and J. Paul Allred, Asst. Atty. Gen., Jefferson City, Mo., Bruce A. Ring, Chief Counsel, State Highway Bldg., Jefferson City, Mo., on brief.

Joseph B. Moore, Asst. U. S. Atty., St. Louis, Mo., for Federal appellees; Robert D. Kingsland, U. S. Atty., St. Louis, Mo., on brief.

Before BRIGHT and ROSS, Circuit Judges, and TALBOT SMITH, Senior District Judge. [*]

BRIGHT, Circuit Judge.

Holders of municipal bonds issued by the City of East St. Louis, Illinois (the City), brought this class action against several federal, state, and local government entities after the City defaulted on the bonds. The district court 1 dismissed the bondholders' second amended complaint under Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim upon which relief can be granted. The bondholders then brought this appeal. The basic issue raised on appeal is whether the dismissal was premature given the liberal construction of pleadings mandated by the Federal Rules of Civil Procedure. This question necessarily implicates two considerations: (a) whether the state defendants are entitled to absolute immunity under the eleventh amendment, and (b) whether the complaint states a cause of action against the other defendants, assuming all the allegations in the complaint are true.

I. Background.

The bondholders alleged the following facts in their complaint. In the early 1950's, traffic volume increased substantially between the cities of St. Louis, Missouri, and East St. Louis, Illinois, connected by bridges across the Mississippi River. In spite of the burgeoning problem, the states of Illinois and Missouri and the United States failed or refused to build new bridges.

The City determined, however, that it would construct an expressway extension on the eastern approach of the Veterans Memorial Toll Bridge (subsequently renamed the Martin Luther King Toll Bridge, to which we refer as the King Bridge) in order to ease the traffic problem on its side of the river. To implement the improvements, the City entered into an agreement with the Department of Transportation of the State of Illinois that called for the City to pay for a portion of these highway improvements and Illinois to pay for the remainder. The City was also encouraged to make the improvements by the State of Illinois and the United States, which arranged to include the expressway extension in the Interstate Highway System.

In order to finance the City's portion of the construction cost of the extension and to refinance bonds previously issued to build the bridge, 2 the City, as authorized by Illinois law, executed a trust agreement with the St. Louis Union Trust Company providing for the issuance of $15.5 million worth of municipal bonds. According to the appellants, the trust agreement expressly provided that the toll rates of the bridge would be subject to regulation by the United States and that the United States had participated in an agreement with the Department of Transportation of Illinois and the City to provide for construction of the extension. Finally, the trust

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agreement called for payment of both principal and interest on the bonds wholly from tolls and other bridge revenues but stipulated that the City would not permit construction of a rival bridge within the city limits that would divert traffic and diminish revenues. Relying on the latter guarantee and the actions and implied good faith of the City, the State of Illinois, and the United States, the appellants purchased the City's bonds.

At some time after January 1, 1956, however, defendant city, state, and federal governments determined to build a new bridge across the Mississippi connecting St. Louis and East St. Louis. This bridge, the Poplar Street Bridge, opened on November 10, 1967, and was constructed in such a manner that it was easily accessible from all of the major federally-financed highways leading to East St. Louis. Traffic over the King Bridge diminished, and by January 1, 1974, declining revenue forced the City to default on the bridge bonds.

The bondholders thereafter commenced the present class action on June 30, 1976, against the City, the States of Illinois and Missouri, the United States, and several state, local, and federal officials. For relief, the bondholders sought

an order compelling defendants to condemn the MLK Bridge and to compensate the bondholders thereof, and to take over and to integrate said MLK Bridge into the interstate traffic needs of the cities of St. Louis and East St. Louis and the surrounding areas in the State of Illinois and Missouri; or in the alternative for damages suffered as a result of defendants' actions in the sum of the principal and interest owed as of the date of judgment; and for an order for reasonable attorney's fees and costs of court.

This appeal follows from the district court's dismissal, on August 4, 1977, of bondholders' second amended complaint for failure to state a claim on which relief can be granted under Rule 12(b)(6).

II. The Issues.

The dismissed complaint contained two causes of action. 3 Count I was an inverse condemnation claim apparently premised on the fifth and fourteenth amendments and the state constitutional counterparts:

By means of the above-stated acts of the defendants various harm, damages and wrongs have been suffered by the plaintiffs and the plaintiffs have been denied their property without receiving just compensation, without having received due process, and without having had their property condemned, all in violation of the Constitution and the Statutes of the United States of America and the State of Illinois and the State of Missouri. Plaintiffs have no adequate remedy at law.

Count II was an impairment of contract claim, basically resting on article I, section 10, of the Constitution (as against the state and local defendants) and incorporation of article I, section 10, by the fifth amendment (as against the federal defendants):

Plaintiffs allege and state that as authorized by the Constitution and Statutes of the State of Illinois, the City of East St. Louis contractually covenanted with the plaintiffs in the Trust Agreement of January 1, 1956 that it would not contract or cause or permit the construction of a bridge any part of which would lie within the corporate limits of the City, and which would or might divert traffic from the MLK Bridge with a resultant decrease in revenues derived from the operation of the MLK Bridge. After the City of East St. Louis entered into such a covenant with plaintiffs, the State of Illinois expressly ratified, validated and confirmed said covenant, and all other obligations attendant to the revenue bonds now held by plaintiffs, by enacting Section 10-809 of Chapter 121 of the Illinois Revised Statutes. As a consequence, the subsequent enactments, appropriations and actions of the City of East St. Louis, the State of Illinois and the other Illinois

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defendants, and the State of Missouri and the other Missouri defendants, and the United States and other federal defendants, permitting creating or encouraging the construction of a bridge within the boundaries of the city limits of East St. Louis, are void and in violation of the Constitution of the United States, specifically Article one, Section Ten, and the Fifth and Fourteenth Amendments thereto, and the Constitution of the State of Illinois, specifically Article One, Section Sixteen, and the Constitution of Missouri, specifically Article One, Section Thirteen, as impairing the obligation of a contract.

We now consider whether the district court was justified in dismissing both of these causes of action based on the pleadings. In...

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