United States v. County of Cook, Illinois

167 F.3d 381, 1999 WL 50269
CourtCourt of Appeals for the Seventh Circuit
DecidedApril 30, 1999
Docket98-1107
StatusPublished
Cited by101 cases

This text of 167 F.3d 381 (United States v. County of Cook, 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
United States v. County of Cook, Illinois, 167 F.3d 381, 1999 WL 50269 (7th Cir. 1999).

Opinions

EASTERBROOK, Circuit Judge.

This long-running dispute about real estate taxation of two buildings in which the United States was a tenant was resolved by United States v. Hynes, 20 F.3d 1437 (7th Cir.1994) (en banc). Or so we thought. But the United States now contends that because its lawyers neglected to invoke sovereign immunity it is entitled to a fresh adjudication. Needless to say, the taxing authorities reply that claim preclusion (res judicata) cannot be avoided by raising new arguments; judgments are conclusive not only with respect to arguments actually made, but also with respect to arguments that could have been made. Nevada v. United States, 463 U.S. 110, 129-30, 103 S.Ct. 2906, 77 L.Ed.2d 509 (1983); Migra v. Warren City School District Board of Education, 465 U.S. 75, 83-85, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984); Cromwell v. County of Sac, 94 U.S. 351, 24 L.Ed. 195 (1876); Doe v. Allied-Signal, Inc., 985 F.2d 908, 913 (7th Cir.1993). We must decide whether there is a sovereign-immunity exception to this rule.

Hynes explains the essential facts, so we can be brief. Although state and local governments usually cannot tax transactions or entities in which the United States has a beneficial interest, see McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 4 L.Ed. 579 (1819), Congress has consented to the taxation of real estate when the United States has entered into a financing lease. 40 U.S.C. § 602a(d). Two federal buildings in Chicago were constructed under this program. Construction funds were advanced, and title was held, by private investors until the United States exercised its option to purchase outright. Cook County sought to collect real estate taxes based on the value of each building, and despite § 602a(d) the United States invoked intergovernmental tax immunity. A panel of this court sustained that defense, United States v. County of Cook, 725 F.2d 1128 (7th Cir.1984), but after a change in the local tax statutes the full court overruled the panel’s decision and held that § 602a(d) relinquishes any immunity the United States otherwise would enjoy. After our decision the United States prepaid the leases for the remaining years and took title to both buildings, which stopped the accrual of taxes (and avoided any possibility that the buildings would be sold to satisfy unpaid tax bills). When title changed hands, the United States owed more than $65 million in taxes, interest, and penalties for 1985-93. Cook County has not sought to collect for earlier years, but the United States insists that despite our opinion it need not pay the balance. It has tendered the principal amount of taxes but refuses to pay more, observing that sovereign immunity bars interest and penalties against the United States unless Congress has authorized these remedies explicitly. Department of Energy v. Ohio, 503 U.S. 607, 112 S.Ct. 1627, 118 L.Ed.2d 255 (1992) (penalties); Library of Congress v. Shaw, 478 U.S. 310, 106 S.Ct. 2957, 92 L.Ed.2d 250 (1986) (interest).

Section 602a(d) refers only to “taxes” and therefore, the United States insists, does not encompass interest and penalties for delayed payment of taxes. This argument could have been made in prior proceedings but was not. By the time the United States brought its action substantial interest and penalties had accrued, and more were in prospect. Some of the penalties are attributable to the sale of the County’s tax claims under state law, but this does not affect the scope of preclusion. Objections to all penalties available under state and local law could have been asserted in the prior litigation. Every legal theory pertaining to one transaction is part of a single claim. E.g., Herrmann v. Cencom Cable Associates, Inc., 999 F.2d 223 (7th Cir.1993); Supporters to Oppose Pollution, Inc. v. Heritage Group, 973 [384]*384F.2d 1320 (7th Cir.1992); Car Carriers, Inc. v. Ford Motor Co., 789 F.2d 589 (7th Cir.1986). Although an effort to sell the buildings today, after the United States has acquired title, would generate a new claim, the County does not seek such relief. Only money is at issue. All of the financial consequences of nonpayment were, or could have been, addressed in the earlier litigation, and all are therefore part of the same claim. The arguments the United States now advances are foreclosed by normal principles of preclusion unless these have a sovereign-immunity exception. The district court held, 1997 U.S. Dist. Lexis 15993, 1997 WL 639049, that they do. Reaching the merits, the court concluded that, despite Reconstruction Finance Corp. v. Beaver County, 328 U.S. 204, 66 S.Ct. 992, 90 L.Ed. 1172 (1946), and Federal Reserve Bank v. Richmond, 957 F.2d 134 (4th Cir.1992), interest and penalties are not comprehended in the authorization of “taxes.”

Two preliminary matters require attention. First is the oddity that each side has filed an appeal to a different court. Cook County and its tax officials have appealed to us. The United States took an appeal to the Federal Circuit from the portion of the district court’s order that transferred to the Court of Federal Claims two legal arguments that the district court thought were based on the takings clause of the fifth amendment, and therefore came within the Court of Federal Claims’ exclusive jurisdiction. We inquired at oral argument how a single judgment could be appealed to two circuits and why, if part of the case is indeed within the Court of Federal Claims’ jurisdiction, the whole appeal does not lie to the Federal Circuit under 28 U.S.C. § 1295(a)(2). The answer to the second inquiry is that § 1295(a)(2) directs an appeal to the Federal Circuit only when the district court’s jurisdiction depends on a statute listed in that subsection. In our case jurisdiction depends on 28 U.S.C. § 1345, which authorizes suit by the United States. Takings theories were injected as counterclaims, which do not change the jurisdictional foundation of the suit and therefore do not redirect the appeal. As for the first inquiry: 28 U.S.C. § 1292(d)(4)(A) gives the Federal Circuit exclusive jurisdiction of any appeal from an order transferring “an action” to the Court of Federal Claims under 28 U.S.C. § 1631. It is doubtful that the district court has transferred “an action”, for a legal theory is not an “action” or even a claim for relief; that’s the point of our treatment of preclusion; moreover, the partial transfer is problematic under 28 U.S.C. § 1500. So it may well be that the Federal Circuit lacks jurisdiction. We are confident, however, that we have jurisdiction of the County’s appeal.

The second preliminary issue is whether sovereign immunity has anything to do with the problem at hand. Arguments before the panel in 1984, and the en banc court in 1994, concentrated on intergovernmental .tax immunity for a reason: the County has not imposed a tax on the United States.

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167 F.3d 381, 1999 WL 50269, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-county-of-cook-illinois-ca7-1999.