ARLIN-GOLF v. VILLAGE OF ARLINGTON HEIGHTS (January 21, 2011)

Ronald Popp and Victor Valenti purchased the Arlin-Golf Shopping Center in the Village of Arlington Heights, Illinois in 2001. Within a year, the Village implemented aTax Increment Financing District and announced that the Center would be demolished and the property redeveloped within months. The Village never followed through with its plan, however. The owners claim that they did encourage Center tenants to leave, discouraged prospective tenants from renting, and generally continued to announce falsely that the property would be condemned and redeveloped. The owners sued the Village in state court challenging the ordinance itself and alleging that the Village's actions constituted a taking under Illinois' Constitution. In 2008, the owners and the Village settled their lawsuit. Under the terms of the settlement, the owners dismissed the suit with prejudice and the Village purchased the property for $1.6 million. A few weeks after the sale closed, the owners brought suit in federal court against the Village, several Village officials, a brokerage firm that had assisted the owners in trying to sell the property before the settlement, a local bank, and the bank's chairman. Their complaint included allegations of violations of the Equal Protection, Due Process, and Takings Clauses, among others. Essentially, their claim was that the defendants' actions resulted in significant financial losses in connection with their ownership of the Center. Judge Coar (N.D. Ill.) dismissed the complaint on res judicata grounds. The owners appeal.

In their opinion, Judges Cudahy, Flaum, and Kanne affirmed. The Court noted the three res judicata requirements: a) a final judgment, b) identity of cause of action, and c) the identity of the parties. Under Illinois law, identity of cause of action exists if the claims arise from the same operative facts, even if they assert totally different theories of relief. The Court found that test met here. Both suits arise from the Village's implementation of its ordinance and the conduct of the defendants that allegedly led to the owners’ financial losses. The federal suit does not allege any material facts that occurred after the state court settlement. The Court also found no error in the district court's refusal to allow the owners to amend their pleadings, noting that the owners did not submit a proposed amended complaint to the district court in order to show that an amendment would not be futile.