Reed v. Village of Shorewood

• Decision Date: 07 July 1983
• Docket Number: No. 82-2190,82-2190
• Citation: 704 F.2d 943
• Parties: John A. REED, Gerald G. Kaluzny, and RBK, Ltd., Plaintiffs-Appellants, v. VILLAGE OF SHOREWOOD, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 943

704 F.2d 943

John A. REED, Gerald G. Kaluzny, and RBK, Ltd., Plaintiffs-Appellants, v. VILLAGE OF SHOREWOOD, et al., Defendants-Appellees.

No. 82-2190.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 6, 1983.

Decided April 5, 1983.

Rehearing and Rehearing En Banc Denied July 7, 1983.

Timothy T. McLaughlin, Parker & McLaughlin, Chicago, Ill., for plaintiffs-appellants.

Gerald L. Maatman, Baker & McKenzie, Chicago, Ill., for defendants-appellees.

Before CUMMINGS, Chief Judge, POSNER, Circuit Judge, and NEAHER, ^* Senior District Judge.

POSNER, Circuit Judge.

This appeal from the dismissal on the defendants' motion for summary judgment of a suit for damages under 42 U.S.C. Sec. 1983 requires us to consider questions under the First, Fourteenth, and Twenty-First Amendments, and also whether local legislators and judicial officers, and their municipal employer, have absolute immunity from such a suit.

The plaintiffs owned a bar in the Village of Shorewood, Illinois, and they allege that the defendants--a police officer, the police chief, and virtually the entire officialdom of the Village, as well as the Village itself--interfered with and eventually destroyed their business, in violation of the due process clause of the Fourteenth Amendment. According to the complaint as fleshed out by a factual summary in the plaintiffs' memorandum opposing summary judgment, in 1976 the Village had issued the plaintiffs a Class A liquor license, which allowed them to offer live entertainment along with liquor, and although the license was for only one year it was renewed for each of the three succeeding years. But in 1979 the defendants began to harass the plaintiffs--arresting customers and employees on baseless charges, demanding proof of age from customers who obviously were many years over the legal drinking age, and bringing groundless proceedings to take away their Class A license. Defendant Talaga, who was both mayor and local liquor control commissioner, first tried to destroy the plaintiffs' business by suspending their license for 30 days for alleged infractions of the Village's liquor control ordinance. On appeal to the Illinois Liquor Control Commission, the suspension was reduced to five days. But then, in a ten-minute meeting of the Village Board of Trustees (whose other members are also named as defendants), Talaga rammed through an ordinance reducing the number of Class A liquor licenses in the Village from four to three, and informed the plaintiffs that their license would not be renewed for 1980. The plaintiffs appealed to the Illinois Liquor Control Commission, which reversed, holding that they were entitled to a hearing before a decision was made not to renew their license and granting them a stay to enable them to continue operating under their expired 1979 license. No hearing was held on remand. Instead, Talaga revoked the plaintiffs' license on trumped-up charges. Again the Illinois Liquor Control Commission reversed. In 1981 the defendants again refused to renew the plaintiffs' license, again without a hearing, and were again reversed. Weary of the endless hassle, the plaintiffs tried to sell their business, but the defendants interfered with their selling efforts and eventually the plaintiffs had to shut down their bar and surrender their liquor license. The plaintiffs attribute the defendants' animosity to the fact that the live entertainment in the bar was provided by a rock and roll band.

The district judge dismissed the complaint, but not because any of the plaintiffs' factual allegations was shown in pretrial discovery to be baseless. He held that since the defendants never did succeed in yanking the plaintiffs' license (except for the five-day suspension which went into effect after the plaintiffs had been accorded due process by the Illinois Liquor Control Commission, and a three-hour closing as to which the plaintiffs' right to a subsequent hearing gave them all the process that was due), there was no deprivation of plaintiffs' property, even if a liquor license is property (the defendants argue it is not). He also held that while the plaintiffs may have had a First Amendment right to play rock and roll music they had no constitutional right to sell liquor at the same time.

Since Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972), judicial discussions of whether a license or other interest is property for purposes of the due process clause of the Fourteenth Amendment invariably begin by observing that the answer depends on state (or, where applicable, which it is not here, federal) law; and when this observation is juxtaposed with the statement in section 1 of the Illinois Liquor Control Act, Ill.Rev.Stat.1981, ch. 43, p 119, that a liquor license "shall be purely a personal privilege ... and shall not constitute property," the conclusion may seem inescapable that these plaintiffs had no Fourteenth Amendment property right in their liquor license. But it is not, even if one takes literally the proposition that property, unlike life and liberty, comes from government.

"Property" in the Illinois Liquor Control Act need not mean the same thing as "property" in the due process clause. Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972), the companion case to Roth, held that a teacher's tenure contract creates a species of property, though it would not be so described under state law. And the rights of welfare recipients, though also not property in the conventional sense, were held in Goldberg v. Kelly, 397 U.S. 254, 261-62, 90 S.Ct. 1011, 1016-1017, 25 L.Ed.2d 287 (1970), to be property for purposes of the due process clause. Liquor licenses in Illinois cannot be sold or bequeathed and are limited in other ways that deprive them of some of the conventional attributes of property, but this does not mean they are not property in a due process clause sense. The statement that a liquor license is not property may have been intended just to emphasize these limitations, which appear in section 1 of the Liquor Control Act right after the statement.

So we must look behind labels, cf. Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 448 (2d Cir.1980); Winkler v. County of De Kalb, 648 F.2d 411, 414 (5th Cir.1981), and decide whether the plaintiffs' license was "property" in a functional sense. Since, viewed functionally, property is what is securely and durably yours under state (or as in Goldberg federal) law, as distinct from what you hold subject to so many conditions as to make your interest meager, transitory, or uncertain, we must ask whether under Illinois law a liquor license is securely and durably the licensee's. The license is good for one year and during that time, clearly, it is securely held, for it can be revoked only for cause, after notice and hearing, and subject to judicial review. See Ill.Rev.Stat.1981, ch. 43, paragraphs 149, 153. These are the same conditions under which a teacher's tenure, a form of property under the Fourteenth Amendment, can be revoked.

Although the Liquor Control Act does not prescribe equivalent protections for nonrenewal, it does provide (again in section 1) that "any licensee may renew his license at the expiration thereof, provided he is then qualified to receive a license and the premises for which such renewal license is sought are suitable for such purposes...." These criteria for renewal are undemanding, which suggests that the Illinois legislature expected most licenses to be renewed as a matter of course. From here it is only a step to equating nonrenewal with revocation and requiring the same safeguards against arbitrary nonrenewal as the statute expressly provides against arbitrary revocation. That step was taken in City of Wyoming v. Liquor Control Comm'n of Illinois, 48 Ill.App.3d 404, 409, 6 Ill.Dec. 258, 262, 362 N.E.2d 1080, 1084 (1977): "it could not have been the legislative intent that a local liquor control commissioner be able to easily avoid the application of the statutory procedural requirements to license revocation by waiting for the license to expire and then refuse to issue a renewal license. For that reason, we interpret the term 'revocation' [in section 5 of the Liquor Control Act] to include the refusal to issue a renewal license." The plaintiffs allege that the defendants "wait[ed] for the license to expire and then refuse[d] to issue a renewal license," and if true this entitled them under City of Wyoming to all the protections, procedural and substantive, of the revocation process, thus making their interest in renewal a property right for purposes of the Fourteenth Amendment. Cf. Memphis Light, Gas & Water Div. v. Craft, 436 U.S. 1, 1-12, 98 S.Ct. 1554, 1554-1561, 56 L.Ed.2d 30 (1978).

This is so even though section 1 provides that renewal is not a "vested right" but a "privilege" that shall not prevent the local liquor control commissioner "from decreasing the number of licenses to be issued ...." If the number is reduced just to eliminate a particular licensee, which is what the plaintiffs allege was done here, the principle of City of Wyoming--that you may not do indirectly by nonrenewal what you could not do directly by revocation--comes into play. Otherwise City of Wyoming would be a dead letter.

We must consider next whether the defendants could be found to have deprived the plaintiffs of their property rights. The defendants never succeeded in taking away the plaintiffs' license either by revocation or nonrenewal; their efforts to do so were thwarted by the Illinois Liquor Control Commission; and though the brief suspensions were deprivations, see North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 606, 95 S.Ct. 719, 722, 42 L.Ed.2d 751 (1975), they were not denials of due process. But "deprive" in the due process clause cannot just mean "destroy." If the state prevents you from entering your house it...