MSA Realty Corp. v. State of Ill., 92 C 3540.

• Decision Date: 07 July 1992
• Docket Number: No. 92 C 3540.,92 C 3540.
• Parties: MSA REALTY CORPORATION, an Indiana Corporation, Plaintiff, v. The STATE OF ILLINOIS; Jim Edgar, as Governor of the State of Illinois; Douglas Whitley, as Director of the Department of Revenue of the State of Illinois; Patrick Quinn, as Treasurer of the State of Illinois and Dawn Clark Netsch, as Comptroller of the State of Illinois, Defendants.
• Court: U.S. District Court — Northern District of Illinois

794 F. Supp. 267

MSA REALTY CORPORATION, an Indiana Corporation, Plaintiff, v. The STATE OF ILLINOIS; Jim Edgar, as Governor of the State of Illinois; Douglas Whitley, as Director of the Department of Revenue of the State of Illinois; Patrick Quinn, as Treasurer of the State of Illinois and Dawn Clark Netsch, as Comptroller of the State of Illinois, Defendants.

No. 92 C 3540.

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

July 7, 1992.

COPYRIGHT MATERIAL OMITTED

James H. Ryan, Kai Allen Nebel, Darryl R. Davidson, Mary Beth Snyder, Keck, Mahin & Cate, Chicago, Ill., for plaintiff.

Roland W. Burris, Illinois Atty. Gen., Louise M. Calvert, Asst. Atty. Gen., Revenue Litigation Div., Marita Sullivan, Asst. Atty. Gen., General Law Div., Chicago, Ill., for defendants.

ORDER

NORGLE, District Judge.

Before the court is defendants' motion to dismiss pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure.¹ The court grants the motion for the following reasons.

FACTS

In 1977, the State of Illinois adopted the Tax Increment Allocation Redevelopment Act, Ill.Rev.Stat. ch. 24, ¶ 11-74.4-1 et seq. (the "Act"), to promote redevelopment in blighted or conservation areas. It sought to accomplish this goal through enabling Illinois municipalities to create tax increment financing districts ("TIF districts") in statutorily qualified areas within their boundaries. The municipalities could then use local real property tax increment and, after amendment in 1985, sales tax increment revenues to finance redevelopment costs. The participating municipalities become obligated to cover various redevelopment costs and are authorized to issue bonds and/or other obligations for financing.

The Village of Buffalo Grove on March 16, 1987, adopted a redevelopment project by Ordinance No. 87-25. Buffalo Grove authorized the issuance of $8.5 million in revenue bonds to cover the project costs. The ordinance provides that the bonds are limited obligations, payable solely from the collection of the incremental taxes and amounts on deposit in various funds and accounts. Incremental taxes include the amount of real property taxes due to Buffalo Grove in accordance with the Act, plus the amount of various sales taxes due to Buffalo Grove in accordance with the Act. The increments are calculated by a formula contained in the Act or its amendments. The provisions of the ordinance constitute a contract between Buffalo Grove and the registered owners of the bonds.²

On March 1, 1987, Buffalo Grove issued its Tax Increment Allocation Revenue Bonds in the total principal amount of $8.5 million, for a term of 10 years, interest payable semi-annually, and principal payable at the expiration of the term. The security for the bonds, and the exclusive source for debt service on the bonds, include real property tax increment, municipal sales tax increment, and state sales tax increment. MSA Realty purchased the bonds on June 30, 1987.

MSA Realty filed suit on May 29, 1992 alleging that the State of Illinois and several executive officials — Governor Jim Edgar, Director Douglas Whitley of the Department of Revenue, Treasurer Patrick Quinn, and Comptroller Clark Netsch, all in their official capacities — impaired MSA Realty's contract rights in violation of the Contracts Clause of the United States Constitution. U.S. Const. art. I, § 10, cl. 1. MSA Realty further claims the defendants' actions and inactions constitute violations of the Fourteenth Amendment and the contracts clause, thus entitling it to relief under 42 U.S.C. § 1983.

MSA Realty maintains that the executive branch impaired the obligation of contracts by (1) seeking and obtaining a formula reduction in the statutory entitlement apportioned for the TIF districts, (2) failing and refusing to budget amounts the Act required, and (3) vetoing legislative appropriations "endeavoring to comply with the Act." MSA Realty further asserts that various legislative enactments impaired its contract rights by reducing the amount of tax increment revenues available for Buffalo Grove's TIF districts, thus impairing its right to the payment of interest and principal on the bonds. Furthermore, MSA Realty attempts to enjoin the Illinois General Assembly from entertaining the Governor's fiscal year 1993 budget proposal which expressly fails to budget any amount for the state sales tax increment program.

Defendants filed the present motion to dismiss contending that the complaint fails to state a claim and that the court lacks jurisdiction. The court will address the issues under each count of MSA Realty's complaint.

DISCUSSION

Count II of MSA Realty's complaint alleges a claim under Section 1983. On a motion to dismiss, all well-pleaded factual allegations are taken as true. Johnson v. Martin, 943 F.2d 15, 16 (7th Cir.1991); Perkins v. Silverstein, 939 F.2d 463, 466 (7th Cir.1991). The court also accepts all reasonable inferences drawn from those allegations as true. Meriwether v. Faulkner, 821 F.2d 408, 410 (7th Cir.), cert. denied, 484 U.S. 935, 108 S.Ct. 311, 98 L.Ed.2d 269 (1987). The complaint need not specify the correct legal theory nor point to the right statute. Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078 (7th Cir.1992). However, a party fails to state a claim upon which relief may be granted if that party can prove no set of facts upon which legal relief may be granted. Ross v. Creighton Univ., 957 F.2d 410, 413 (7th Cir.1992).

MSA Realty's Section 1983 claim is directed against the State of Illinois, as well as a number of executive officials. States and State officials acting in their official capacities are unamenable to suit under Section 1983. Will v. Michigan Dep't of State Police, 491 U.S. 58, 71, 109 S.Ct. 2304, 2311, 105 L.Ed.2d 45 (1989). Accordingly, the court dismisses MSA Realty's Section 1983 claim alleged in Count II.

Count I contains MSA Realty's claim under the contracts clause. Lack of subject matter jurisdiction is appropriately raised in a motion to dismiss under Fed. R.Civ.P. 12(b)(1), and may be supported by any documents needed to resolve the issue. Barnhart v. United States, 884 F.2d 295, 296 (7th Cir.1989), cert. denied, 495 U.S. 957, 110 S.Ct. 2561, 109 L.Ed.2d 743 (1990). Once questioned, it is plaintiff's burden to establish that all jurisdictional requirements have been satisfied. Kontos v. U.S. Dept. of Labor, 826 F.2d 573, 576 (7th Cir.1987). In this context, it is proper for the court to look beyond the jurisdictional allegations in the complaint and to view whatever evidence has been submitted in response to the motion. Roman v. United States Postal Serv., 821 F.2d 382, 385 (7th Cir.1987).

The defendants base their jurisdictional objections on the political question doctrine and the Eleventh Amendment. First, there are six types of controversies the political question doctrine may bar a district court from determining: (1) cases that involve "a textually demonstrable constitutional commitment of the issue to a coordinate political" branch; (2) cases that "lack ... judicially discoverable and manageable standards" for determination; (3) cases involving initial policy determinations clearly reserved for nonjudicial discretion; (4) issues that are impossible for a court to resolve independently without "expressing lack of the respect due coordinate branches of government"; (5) issues involving a need for "unquestioning adherence to a political decision already made"; or (6) decisions that involve potential "of embarrassment for multifarious pronouncements by various departments on one question." Baker v. Carr, 369 U.S. 186, 217, 82 S.Ct. 691, 710, 7 L.Ed.2d 663 (1962).

Political questions, however, only involve federal separation of powers concerns and do not involve issues which pertain to the proper relationship between the federal judiciary and the state governments. Id. at 210, 82 S.Ct. at 706; see also Nowak & Rotunda, Constitutional Law 106 (4th ed. 1991) ("it is the relationship between the judiciary and the coordinate branches of the Federal Government, and not the federal judiciary's relationship to the states, that gives rise to the `political question'"). Accordingly, the court does not lack jurisdiction over MSA Realty's claim because of its political nature.

Second, there is a question as to whether the Eleventh Amendment bars this court from determining if Illinois has violated the contracts clause. The Eleventh Amendment declares that federal courts lack jurisdiction over suits "commenced or prosecuted against one of the United States by Citizens of another State...." U.S. Const. amend. XI. The Supreme Court has long held that, absent a waiver or valid congressional override, the Eleventh Amendment bars actions brought in federal court against a state. Papasan v. Allain, 478 U.S. 265, 276, 106 S.Ct. 2932, 2939, 92 L.Ed.2d 209 (1986); Kentucky v. Graham, 473 U.S. 159, 169, 105 S.Ct. 3099, 3107, 87 L.Ed.2d 114 (1985). This is true whether the plaintiff seeks legal or equitable relief. Papasan, 478 U.S. at 276, 106 S.Ct. at 2939; see also Cory v. White, 457 U.S. 85, 90, 102 S.Ct. 2325, 2328, 72 L.Ed.2d 694 (1982) (where a state is the real party at interest and has not consented to suit, the Eleventh Amendment bars suit regardless of the nature of the relief sought).

By contrast, a plaintiff may bring an injunctive or declaratory action grounded on federal law against state officials as defendants and overcome the immunity of the Eleventh Amendment. Pennhurst State School and Hosp. v. Halderman, 465 U.S. 89, 102, 105, 104 S.Ct. 900, 909, 910, 79 L.Ed.2d 67 (1984); Ex parte Young, 209 U.S. 123, 159-60, 28 S.Ct. 441, 454-55, 52 L.Ed. 714 (1908). Where, however, there is no ongoing violation of federal law, a federal court cannot issue a declaratory judgment that state officials violated federal law in the past. Green v. Mansour, 474 U.S. 64, 73, 106 S.Ct. 423, 428, 88 L.Ed.2d 371 (1985). As a result, a federal court...