MSA Realty Corp. v. Illinois

990 F.2d 288
CourtCourt of Appeals for the Seventh Circuit
DecidedMarch 29, 1993
DocketNo. 92-2922
StatusPublished
Cited by24 cases

This text of 990 F.2d 288 (MSA Realty Corp. v. Illinois) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
MSA Realty Corp. v. Illinois, 990 F.2d 288 (7th Cir. 1993).

Opinion

CRABB, District Judge.

In 1977, the State of Illinois enacted the Tax Increment Allocation Redevelopment Act, Ill.Rev.Stat. ch. 24, par. 11-74.4-1 et seq., to promote local redevelopment by enabling Illinois municipalities to create tax increment financing districts in statutorily qualified blighted or conservation areas within their boundaries and to use local real property tax increments resulting from the redevelopment to finance the redevelopment costs. In 1985, the state legislature amended the Act to include state sales tax increment revenues in the program. For municipalities electing to participate in TIF (Tax Increment Financing) districts, all of the state sales tax attributable to new retail sales generated in the TIF districts would be returned to the TIF districts, so long as the municipality deposited into a special Tax Increment Allocation Fund its entire real property and local 1% sales tax increments resulting from the redevelopment. Ill.Rev.Stat. ch. 24, par. 11-74.4-9. In response to this legislation, the Village of Buffalo Grove issued Tax Increment Revenue Bonds in June 1987, in the total principal amount of $8,500,000. Both the semi-annual interest payments and the principal payable at term on March 1, 1997 are payable only out of real property and state and local sales tax increments as defined in Ill.Rev.Stat. ch. 24, par. 11-74.4-1 et seq.

In 1988, the Illinois General Assembly amended the Act to reduce the sales tax increment that would be returned to participating municipalities. The original 5% state sales tax increment was reduced by an 80%-60%-40% formula. Ill.Rev.Stat. § 11-74.4-3©. Thereafter, the governor and the director of the Department of Revenue budgeted less than the legislatively directed formula, so that in fiscal year 1992 the program-wide appropriation was only $18,000,000 instead of the full formula funding of $24,000,000. The governor’s fiscal 1993 budget contains no funding for the state sales tax increment for qualified TIFs.

MSA Corporation, an Indiana corporation and holder of all of the June 1987 tax [290]*290increment revenue bonds issued by the Village of Buffalo Grove, brought suit against the State of Illinois and its principal executive officers in their official capacities, contending that these defendants had impaired MSA’s contract rights unconstitutionally when they reduced the state sales tax increment payable to eligible municipalities for the financing of local redevelopment projects. MSA sought as relief (1) a declaration that defendants have violated both the constitutional prohibition against impairment of contract and MSA’s due process rights by their reductions in the return of the full 5% state sales tax increment and (2) an injunction requiring the state to return for fiscal year 1993 and thereafter the full 5% state sales tax increment to the Village of Buffalo Grove for use by the village to pay debt service on the bonds. When the district judge granted the state’s and the officers’ motion to dismiss and denied MSA’s motion for reconsideration, MSA took an expedited appeal to this court.

In ruling on a motion to dismiss, a court may consider only the allegations of the complaint. In its complaint, MSA alleged that reliance on the state sales tax increment program in the issuance of bonds was foreseeable by the State of Illinois and was induced expressly by the legislation. It alleged also that after the bonds were issued, the executive branch of state government tried repeatedly to renege on the full state sales tax increment promised in the Act by seeking and obtaining a formula reduction in the 5% statutory entitlement, by failing and refusing to budget the amounts required by the legislation and by vetoing legislative efforts to appropriate funds to comply with the Act.

OPINION

The threshold question is whether the district court had jurisdiction to entertain MSA’s suit. The state and state officials contend that the answer is no, because the eleventh amendment bars suits in federal court against the states or against state officers who are sued for money damages in their official capacities, as these officers are. The district judge agreed that the eleventh amendment prevented MSA from suing the State of Illinois and dismissed the action against the state on this ground. He agreed also that the amendment prohibited federal actions against state officials for retrospective monetary relief, but he held that it did not preclude money damage claims against state officials in their official capacities that are limited to prospective injunctive relief “even where ‘a substantial ancillary effect on the state treasury’ accompanies the relief sought.” MSA Realty Corp. v. Illinois, 794 F.Supp. 267, 271-72 (N.D.Ill.1992). He then considered whether MSA had stated a viable claim under the contracts clause of the Constitution and concluded it had not. First, MSA had not shown that the village lacked the ability to pay interest or principal on the bonds and second, MSA had not shown that it had any contractual right to the 5% sales tax increment, since the bonds themselves provided that they were issued pursuant to the Act “and all laws amenda-tory and supplemental thereof.”

On this appeal, MSA does not contest the district court’s rulings that the state cannot be sued (although it has retained the state as a defendant in the caption of its appeal) and that retrospective monetary damages are unavailable. We conclude that the eleventh amendment bars all aspects of the suit, making it unnecessary to reach any of the other arguments addressed by the district court and urged by the parties.

Determining the scope and coverage of the eleventh amendment is often difficult, although the amendment itself appears straightforward. It provides that

The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.

The amendment makes no mention of sovereign immunity. Indeed, some scholars believe it was never intended to incorporate the concept but was intended only to deny that the identity of the parties could serve as a basis of jurisdiction when a state was [291]*291sued by a noncitizen or alien, “or stated differently, whether the eleventh amendment did no more than partially repeal the provisions of article III, § .2, that ‘the judicial Power shall extend’ ... to Controversies ... between a state and Citizens of another State ... and between a State ... and foreign States, Citizens, or Subjects.” David L. Shapiro, Comment, Wrong Turns: The Eleventh Amendment and the Pennhurst Case, 98 Harv.L.Rev. 61, 67 n. 87 (1984). See also William A. Fletcher, A Historical Interpretation of the Eleventh Amendment: A Narrow Construction of an Affirmative Grant of Jurisdiction Rather than a Prohibition Against Jurisdiction, 35 Stan.L.Rev. 1033 (1983); John J. Gibbons, The Eleventh Amendment and State Sovereign Immunity: A Reinterpretation, 83 Colum.L.Rev. 1889 (1983); John Y. Orth, The Interpretation of the Eleventh Amendment, 1798-1908: A Case Study of Judicial Power, 1983 U.Ill.L.Rev. 423. These writers and others question whether sovereign immunity was thought of as a constitutional limitation of federal judicial power in the late 18th or early 19th centuries. However, the Supreme Court has said definitively that the eleventh amendment affirms “the fundamental principle of sovereign immunity [that] limits the grant of judicial authority in Art.

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Bluebook (online)
990 F.2d 288, Counsel Stack Legal Research, https://law.counselstack.com/opinion/msa-realty-corp-v-illinois-ca7-1993.