Booth v. General Dynamics Corporation

• Decision Date: 25 January 1967
• Docket Number: No. 66 C 673.,66 C 673.
• Citation: 264 F. Supp. 465
• Parties: Harry R. BOOTH, Plaintiff, v. GENERAL DYNAMICS CORPORATION, a foreign corporation, Defendant,
• Court: U.S. District Court — Northern District of Illinois

264 F. Supp. 465

Harry R. BOOTH, Plaintiff, v. GENERAL DYNAMICS CORPORATION, a foreign corporation, Defendant,

No. 66 C 673.

United States District Court N. D. Illinois, E. D.

January 25, 1967.

COPYRIGHT MATERIAL OMITTED

Harry R. Booth, Chicago, Ill., for plaintiff.

Albert E. Jenner, Jr., Edward R. Johnston, Keith F. Bode, Raymond, Mayer, Jenner & Block, Chicago, Ill., for defendant.

MEMORANDUM OPINION

WILL, District Judge.

Plaintiff brought this class action on behalf of the taxpayers of Cook County, Illinois, to obtain equitable relief against defendant's allegedly fraudulent deprivation of the taxpayers' rights in property owned by the Metropolitan Sanitary District of Greater Chicago.¹ The defendant has moved to dismiss the complaint and has urged several grounds in support of its motion.

While we agree with defendant's contention that plaintiff has no standing to sue under Illinois law^1a and, therefore, no standing to sue in this court under our diversity jurisdiction, we do not agree that plaintiff is entirely foreclosed from seeking federal relief. Contrary to defendant's position, we conclude that Illinois courts do recognize that municipal taxpayers have an equitable interest in municipal property, that municipal taxpayers do have standing to enjoin federal constitutional deprivations of that equitable property right and, finally, that the amended complaint alleges facts which present a "case or controversy" within the jurisdictional grant of Article III of the federal constitution.²

Further, we conclude that while equitable relief to protect property rights from constitutional deprivation cannot be sought under the "civil rights" statutes,³ protection can be invoked under this court's general federal question jurisdiction.⁴ The complaint raises substantial federal questions, and since we conclude that this suit is maintainable as a class action under present Rule 23 of the Federal Rules of Civil Procedure, the claims of the individual members of the class can be aggregated to meet the jurisdictional amount requirement of § 1331.

In order to treat defendant's many faceted challenge to the sufficiency of the complaint coherently, we will, after a brief synopsis of plaintiff's allegations, deal separately with defendant's arguments which assert plaintiff's failure to state a claim and defendant's arguments which question our jurisdiction.

The complaint alleges that the defendant received valuable leases of Sanitary District land at grossly inadequate rentals pursuant to a fraudulent conspiracy between defendant and officials of the Sanitary District. Plaintiff claims that these "give-away" leases constitute a a fraud on Sanitary District taxpayers and also violate those taxpayers' rights to due process and equal protection under the fourteenth amendment to the United States Constitution. He asks this court to impose a constructive trust for the benefit of Sanitary District taxpayers on certain funds and property now held by defendants and other individuals to whom the defendant has made payments in furtherance of the asserted conspiracy.

I

Defendant's contention that the complaint fails to state a claim upon which relief can be granted rests on several grounds. It argues that plaintiff lacks standing to sue under state law since he failed to allege facts showing special damage beyond the damage suffered by taxpayers in common. Defendant concludes that this court is therefore powerless to grant plaintiff relief under our diversity jurisdiction since that jurisdiction is based on the application of substantive state law. Defendant also contends that plaintiff has not raised any federal questions which might entitle him to relief. It argues that Illinois law does not recognize any property right in the taxpayer and that, therefore, no property right existed in plaintiff which could be subject to constitutional deprivation. It further claims that a suit by municipal taxpayers to enjoin the misuse of public property cannot assert the deprivation of individual taxpayers' constitutional rights as a basis for relief. Finally, defendant argues that Frothingham v. Mellon, 262 U.S. 447, 43 S.Ct. 597, 67 L.Ed. 1078 (1923), which denied standing to a federal taxpayer seeking to enjoin a federal expenditure, must also be held to bar the assertion of federal rights in a suit by a municipal taxpayer to enjoin the misuse of municipal assets.

We agree with defendant's claim that plaintiff is barred from state relief. Illinois law is clear that, absent a showing of special injury, a taxpayer does not have standing to demand equitable relief against the misuse of public land. Droste v. Kerner, 34 Ill.2d 495, 217 N.E.2d 73 (1966). Plaintiff seeks to avoid the impact of Droste by relying on the distinction made there between taxpayer suits for misuse of public funds and taxpayer suits for misuse of public real estate. There, the Illinois Supreme Court acknowledged that a taxpayer has standing to sue for misuse of public funds but held that a showing of special damage was necessary in a suit for misuse of public real estate. Plaintiff argues that since the complaint alleges the misuse of public funds, his action is not barred by the Droste holding.

While the complaint does allege that public funds have been expended, that allegation alone is not enough to avoid the special damage bar. The only expenditure alleged in the complaint involves the improvement of waterways, and that expenditure is not here challenged by the plaintiff. The transactions of which the plaintiff complains involve only the leasing of real estate, not the expenditure of public funds. The misconduct alleged here therefore falls squarely within the special damage restriction of Droste.

Plaintiff attempts a further distinction of the Droste holding by arguing that fraud exists in this case, while fraud was not an element of the suit there. He fails to cite any Illinois cases which hold that the special damage prerequisite to a suit for misuse of public land does not apply where fraud is involved. The potpourri of authorities cited by plaintiff in support of this alleged distinction can only stand for the general proposition that fraud is actionable. It does not support the conclusion that the special damage requirement does not apply to this type of case.

As his final attempt to avoid the special damage bar, plaintiff charges that the special damage rule violates the equal protection clause of the fourteenth amendment in that, as applied here, it makes an invidious discrimination between wealthy property owners and poor taxpayers. While we can conceive a situation where a specific application of the special damage rule might result in a classification within the proscription of the equal protection clause, we have no basis for making such a determination here. Plaintiff has not alleged any facts to support a conclusion that special damage resulting from the allegedly fraudulent leases would be suffered disproportionately by wealthy property owners or that they could establish special damages more easily than other property owners.

Defendant argues that the existence of the special damage rule is proof that Illinois law does not recognize any property right held by municipal taxpayers in municipal real estate. Since plaintiff's constitutional claims are based on his alleged equitable property interest, defendant concludes that the constitutional claims are without merit in light of the non-existence of such interest.

We disagree. The theoretical basis of the special damage rule is at present highly confused.⁵ However, in none of the cases cited by the defendant do we find any indication that the special damage rule is based on the theory that the taxpayer lacks an interest in public property. Indeed, the rationale for taxpayer suits to enjoin the misuse of public property is based on the taxpayers' equitable interest in public property. Jones v. O'Connell, 266 Ill. 443, 107 N.E. 731 (1914); Fergus v. Russel, 270 Ill. 304, 110 N.E. 130 (1915).

Defendant next argues that a municipal taxpayers' suit to enjoin the misuse of public property cannot assert deprivations of individual taxpayer's constitutional rights as grounds for relief. In support of this argument, defendant cites Otto v. Somers, 332 F.2d 697 (6 Cir. 1964). In Somers, the Court of Appeals for the Sixth Circuit applied a derivative suit analysis to a municipal taxpayers' suit to enjoin the misuse of public funds. The court considered the right of action to lie in the municipal corporation, not in the taxpayers. Since the court considered the taxpayers to be suing not in their own right but in the interest of the municipal corporation, it concluded that the taxpayers could not assert a deprivation of their own constitutional rights as a ground for relief.

While the court in Somers reached an accurate conclusion in light of its derivative suit analysis, plaintiff is not here asserting a derivative right. Under Illinois law, the right asserted in a taxpayers' suit is not the legal property right held by the municipal corporation; the action rests on the taxpayers' equitable ownership of the public property. Jones v. O'Connell; Fergus v. Russel, supra.

Nor are we convinced by the two other cases cited by defendant in support of its argument that individual constitutional deprivations cannot be asserted in an action such as this. In Owensboro Waterworks Co. v. City of Owensboro, 200 U.S. 38, 26 S.Ct. 249, 50 L.Ed. 361 (1906), the Supreme Court held that the mere illegality under state law of an expenditure of public funds did not create a federal constitutional question. The court observed that the challenged expenditure, while illegal under state law, might be consistent with federal constitutional standards. However, the court did not hold that a taxpayer could never challenge a disposition of public property on the ground that his constitutional rights had been impinged by...