The Seventh Circuit's opinion in New West, L.P. v. City of Joliet, No. 17-2865 (May 23, 2018) is short -- 4 1/2 pages -- and is written in Judge Easterbrook's trademark plain language and breezy style. We picked it up anticipating of a good read. It was.
Then why did we have to read it three times before we understood it?
Here's the deal. As the opinions notes, "[t]his is the fourth published appellate opinion in a long-running dispute between New West and the City of Joliet." Slip op. at 1. Follow along:
- NW v. City (federal court): City is violating the federal Fair Housing Act.
- City v. NW (state court, filed seven months later): We're condemning your property, New West.
- NW removed the state court eminent domain case to federal court.
- NW argued in the removed eminent domain case that condemning its property would violate the Fair Housing Act.
- The Seventh Circuit rejected argument NW is immune from eminent domain, directed District Court on remand to determine just compensation "with dispatch."
- On remand, District Judge concluded City could take NW's property (i.e., the condemning NW's property would not violate the Fair Housing Act), after which jury determined $15 million was just compensation.
- In the NW v. City case (see bullet point #1 above), District Judge held that the judgment in favor of the City in the eminent domain action collaterally estopped NW from relitigating its Fair Housing Act claim.
- NW appealed to Seventh Circuit.
The question the Seventh Circuit addressed was whether collateral estoppel deprived NW of its right to a jury trial on its FHA claims, since, in the eminent domain action the FHA issue came up as a power-to-take question, and as a consequence the District Judge, and not the jury, made that determination.
The court held no, because the two cases were in federal court and had been "coordinated." It faulted NW for raising the FHA claim as a counterclaim in the eminent domain case:
New West’s current problem is of its own making. It concedes that the FHA was not a compulsory counterclaim in the condemnation suit. New West’s lawyer asserted at oral argument that it presented the FHA arguments as defenses to the City’s suit because it was afraid that, otherwise, the judge would have deemed them forfeited or waived. That’s inconceivable. This suit began six months before the condemnation action; nothing in it has been forfeited or waived. When New West imported its FHA claim into the condemnation action, Joliet protested, asking the judge to rule that the FHA has no place in an eminent-domain action. Joliet thus waived any argument that the FHA theories had to be presented as defenses in the City’s suit. New West was free to reserve the FHA claim for this suit, where it would have been entitled to a jury trial. Its FHA claim was resolved in a bench trial only because New West insisted on presenting it there.
Slip op. at 4.
In other words, because NW had already raised the FHA claim in its already-existing federal lawsuit against the City, when the City several months later filed an eminent domain action to take NW's property (an action that NW believed the City could not do because of the FHA), NW should not have made that argument in the eminent domain action (what the opinion called "importing"), but should have pressed on only in its existing lawsuit. Or, if NW did raise the issue as a counterclaim in the eminent domain action in the context of a power to take argument, understand that it was waiving its right to have the issue tried by a jury.
The vibe of the opinion is "be careful what you ask for," because the Seventh Circuit concluded that NW should have not raised the FHA claim in the eminent domain case, but should have let that case resolve first, then pressed forward with its FHA claim in the earlier lawsuit before a jury:
The condemnation action could have been resolved speedily by leaving the FHA claim to this suit. Once we held in 2009 that federal financing did not block the use of state and local eminent-domain powers, the condemnation claim could have gone to trial with a simple question: Was the taking for a public purpose? Then the FHA claim could have been resolved, by a jury, in this suit. But New West wanted the FHA to be treated as a defense to condemnation, and the district court acquiesced. New West’s own choice is responsible for the fact that a judge rather than a jury brought the FHA claim to a conclusion.
Slip op. at 5.
As we noted at the start of this post, it took us a few times reading the opinion to understand the rationale. And while we now do, we also think that the court's conclusion is a bit blithe.
Let's say you are the landowner's lawyer, and you've made FHA claims against the City in federal court, but then the City goes and files in state court what looks like an end-run around your FHA lawsuit to just take your land by eminent domain. Would you be comfortable letting the eminent domain case remain in state court if you could remove it? Would you just sit back and object in the eminent domain action on public purpose grounds (yeah, good luck with that!) and not raise the FHA arguments at all, confident that the federal court in your FHA lawsuit would, somewhere down the road, reject the City's argument when you went back there after the eminent domain case was resolved, when faced with the City's argument that your failure to raise the FHA claim as a defense to the taking meant you could not "relitigate" it in the FHA case? The Tucker Act Shuffle writ small.
It sure does appear that the City's goal was to whipsaw NW, forcing it to make these choices about when and where to raise claims, at the risk of either waiving the claim, or its right to a jury. And the Seventh Circuit bought it.