Lead Opinion
This civil racketeering suit has some factual overlap with the federal prosecution of former Illinois Governor Rod Blagojevich, now awaiting retrial on various criminal counts that were tried last summer but resulted in a hung jury. Four riverboat casinos claim they are victims of a pay-to-play scheme engineered by Blagojevich and John Johnston, the owner of two Illinois horse-racing tracks.
The casinos’ complaint has two counts: (1) a RICO-conspiracy claim against Blagojevich, his campaign committee “Friends of Blagojevich,” Johnston, and the two racetracks he owns; and (2) a constructive-trust claim against all five racetracks as beneficiaries of the ill-gotten gains of the conspiracy.
We now reverse. The former governor is entitled to legislative immunity. The Supreme Court has made clear that state and local officials are absolutely immune from federal suits filed against them in their personal capacities for actions taken in connection with legitimate legislative activity. This immunity applies notwithstanding allegations of misconduct and regardless of whether the office held is legislative or executive — as long as the activity in question is functionally legislative. Under this established federal doctrine, Blagojevich is immune from civil suit for his role in inducing the Illinois legislature to adopt the Horse Racing Acts of 2006 and 2008 and for signing those Acts into law. The RICO claim survives, however; Friends of Blagojevich, Johnston, and the two racetracks he owns remain as defendants on that claim.
I. Background
On May 26, 2006, Governor Blagojevich signed a most unusual bill into law. The 2006 Horse Racing Act, Illinois Public Act 94-804, targeted the state’s four highest-earning riverboat casinos and compelled them to pay 3% of their adjusted gross revenue into a segregated fund, the “Horse Racing Equity Trust Fund,” for a period of two years. 230 III. Comp. Stat. 10/7(a). The money deposited into the Fund — a “non-appropriated trust fund held separate and apart from State moneys” — is disbursed directly to five Illinois horse-racing tracks, the defendants here, within ten days of deposit. Id. § 5/54.5(a), (b). The money held in the Fund may not be transferred to the State’s general revenue fund or otherwise commingled with public funds and may not be allocated to any state agency or program or used to pay any state cost or expense. The racetracks must spend 60% of the money they receive from the Fund on the “purse” — a cash prize awarded to the owners of top-finishing horses — and the remaining 40% on operational expenses. Id. The racetracks are also required to provide the Illinois Racing Board with a detailed account of money received and spent from the Fund.
The Illinois General Assembly made several legislative findings in connection with the 2006 Racing Act. It noted that from 1992 — the first year riverboat casinos began operating in Illinois — through 2005, on-track horse wagering in Illinois decreased by 46%. This decline would be reversed, the legislature found, if funds generated by the 2006 Racing Act were paid directly to the horse-racing tracks. Helping the horse-racing industry, in turn, would have important downstream benefits for Illinois farmers, breeders, and horse-racing fans. After the 2006 Act expired, the legislature enacted the 2008 Horse Racing Act, Illinois Public Act 95-1008, which effectively extended the 2006 Act for another three years, through December 2011.
The enactment of the 2006 Racing Act set in motion an extraordinary confluence of events, legal and political. The history is lengthy and complex but important to some of the issues raised on appeal, so we cannot skip over it. Four days after passage of the 2006 Act, the casinos filed suit in Will County Circuit Court challenging the Act’s constitutionality. They named the Illinois Treasurer and the Illinois Racing Board as defendants and sued under the “Protest Monies Act,” 30 III. Comp. Stat. 230/2a (formally the State Officers and Employees Money Disposition Act), which allows taxpayers to challenge state laws and pay the contested monies into a protest fund until the action is resolved. They claimed that the 2006 Racing Act violated several provisions of the Illinois Constitution, including its takings, due-
Six months later, on December 7, 2008, the United States Attorney for the Northern District of Illinois filed a criminal complaint against Blagojevich accusing the governor of engaging in a “political corruption crime spree.” In an affidavit filed with the complaint, an FBI agent recounted the contents of intercepted phone conversations in which Blagojevich discussed (as relevant here) soliciting payments as a quid pro quo for signing the 2006 Racing Act. The Illinois House of Representatives immediately convened a special investigative committee to investigate Blagojevich’s alleged malfeasance and determine whether he should be impeached. The committee’s final report recommended impeachment based in part on Blagojevich’s arrangement with Johnston for political contributions in exchange for his signature on the 2006 Act. The Illinois House quickly voted to impeach Blagojevich, and the Senate removed him from office on January 30, 2009. On April 2, 2009, the U.S. Attorney filed a superseding indictment charging Blagojevich with 17 crimes, in-eluding wire fraud, attempted extortion, bribery conspiracy, and racketeering. A 24-count second superseding indictment was filed on February 4, 2010.
In the meantime, in January 2009 the casinos filed a petition for certiorari in the United States Supreme Court seeking review of the Illinois Supreme Court’s decision rejecting their claim that the 2006 Racing Act violated the Takings Clause of thе federal constitution. On June 8, 2009, the Supreme Court denied certiorari. Empress Casino Joliet Corp. v. Giannoulias, - U.S. -,
Two days later, the casinos filed a petition in Will County Circuit Court for relief from judgment under 735 III. Comp. Stat. 5/2-1401. The petition was based on the newly disclosed information from the FBI’s investigation of Blagojevich. The casinos told the court the new evidence would show that the legislative findings in the 2006 Racing Act — on which the Illinois Supreme Court had so heavily relied— were basically a sham. The 2006 Act, they maintained, was the product of a “corrupt bargain” between Blagojevich and Johnston and therefore violated the due-process clause of the Illinois Constitution. In support of their petition, the casinos later submitted the FBI agent’s affidavit, wiretap transcripts, the April 2009 superseding indictment, and the report of the legislature’s special investigative committee recommending impeachment.
While these constitutional challenges to the 2006 Act were winding their way through the courts, the casinos commenced a second suit in Will County against the Illinois Treasurer and the Illinois Racing Board challenging the constitutionality of the 2008 Racing Act. Filed on January 8, 2009, their complaint alleged that the 2008 Act was the product of a pay-to-play scheme and violated various provisions of the Illinois Constitution. Relying exclusively on the earlier denial of the casinos’ § 2-1401 petition for postjudgment relief in the case challenging the 2006 Act, the Will County court dismissed the new suit with prejudice on November 19, 2009. At the time of this ruling, all the racetracks except Fairmount had intervened as defendants. The casinos appealed, and the Illinois Appellate Court denied their motion for a stay. On February 11, 2011, the appellate court affirmed.
We now arrive at this case. On June 12, 2009, two days after filing their motion for postjudgment relief in the first of the state-court cases, the casinos filed this action in the Northern District of Illinois— the first to assert claims directly against Blagojevich, Johnston, and the racetracks. As we have noted, it has two counts: (1) a RICO-conspiracy claim against Blagojevich, Friends of Blagojevich, Johnston, Balmoral, and Maywood; and (2) a state-law claim against all five racetracks seeking a constructive trust to prevent their unjust enrichment from the proceeds of the racketeering scheme.
A few weeks after this action was filed, the casinos commenced yet another state-court suit, this time in Cook County Circuit Court, seeking injunctive reliеf against the Illinois Treasurer to prevent the imminent transfer of the money from the protest fund to the Horse Racing Fund and then to the racetracks. The court dismissed this action. The casinos appealed, but later dismissed the appeal and instead sought a TRO and preliminary injunction from the district court in this case. They asked that any money disbursed from the Horse Racing Fund be held in an interest-bearing special escrow account pending resolution of the federal suit. The district court entered a TRO to that effect and scheduled a hearing on the request for a preliminary injunction.
The defendants opposed the preliminary injunction and moved to dismiss on several legal theories. Blagojevich asserted legislative immunity, and he and his campaign committee also argued the suit was barred by res judicata and failed to adequately state a RICO claim. The other defendants on the RICO claim — Johnston, Balmoral, and Maywood — joined the latter two arguments and also maintained that the casinos
The district court denied the motion to dismiss the RICO count and also rejected Blagojevich’s claim of legislative immunity. On the constructive-trust claim, the judge agreed with the racetracks’ argument that the casino surcharge was a tax and therefore the Tax Injunction Act eliminated the court’s jurisdiction. The judge acknowledged, however, that “the question is not free from doubt.” The judge then dismissed the constructive-trust claim, denied the motion for a preliminary injunction, and dissolved the TRO. Blagojevich appealed the denial of legislative immunity, and the casinos appealed the denial of their motion for a preliminary injunction, which was premised on the jurisdictional dismissal of the constructive-trust claim. The racetracks responded to the casinos’ appeal, defending the district court’s decision to dismiss under the Tax Injunction Act and also reiterating their alternative arguments for dismissal of the constructive-trust claim.
In August 2010, after a two-month trial and 14 days of deliberations, a federal jury convicted Blagojevich on one criminal count — making false statements to the FBI — but could not reach a verdict on the other 23. He awaits retrial, currently scheduled for April.
II. Discussion
A. Blagojevich’s Claim of Legislative Immunity
We begin with the question raised in Blagojevich’s appeal: Does legislative immunity shield the former governor from this suit? The district court answered “no” and denied his motion to dismiss. A decision denying a claim of immunity is immediately appealable under the collateral-order doctrine. Mitchell v. Forsyth,
The doctrine of legislative immunity is well-established by Supreme Court and circuit precedent; stаte and local officials are absolutely immune from federal suit for personal damages for their legitimate legislative activities. See Bogan v. Scott-Harris,
Cases decided since Tenney have made clear that this immunity extends to all state and local officials, including those outside the legislative branch, for the performance of acts that are legislative in character or function. See Bogan,
Although the Supreme Court has not specifically addressed a legislative-immunity claim by a governor, there is no principled reason to think the established doctrine applies any differently to governors who are sued for their role in legislative activity. Our circuit has suggested, albeit in dicta, that governors are entitled to legislative immunity against claims for injunctive relief as well as damages suits when the conduct at issue relates to the legislative process. See Risser v. Thompson,
Tenney also established that legislative immunity applies even when the official is accused of misconduct or other improper motive.
Under this long-standing doctrine, Blagojevieh is entitled to immunity from this civil RICO suit. The allegations are that the former governor took bribes in exchange for influencing the state legislature to pass the Racing Acts and for signing the Acts into law. Or in the casinos’ own formulation, Johnston “bought” and Blagojevieh “sold” the Racing Acts. The casinos’ claim cannot be made without reference to the former governor’s role in securing the enactment of these Acts. See Chappell,
The casinos weakly suggest that legislative immunity is somehow limited to § 1983 suits and does not apply to claims under RICO. This is a nonstarter. We held long ago that legislative immunity applies in a RICO suit. See id. at 1129 (holding that legislative immunity bars a civil RICO suit as well as claims under § 1983, the Sherman Antitrust Act, and various state-law torts). As we have already noted, Tenney did not create a new immunity applicable only to § 1983; rather, it held that Congress did not abrogate common-law legislative immunity when it enacted the Civil Rights Act of 1871.
These principles of federal law are so clear that the casinos focus most of their attention on a wholly different point — -that state immunity law applies. This is the argument that persuaded the district court. The casinos insist that the Illinois Supreme Court’s decision in Jorgensen v. Blagojevich,
There is good reason to preserve the content and scope of federal immunity doctrine from state encroachment. Were it otherwise, states could strip their officials of immunity in federal court or immunize them for federal constitutional or statutory violations, frustrating the operation and uniformity of federal law. Then-Judge Stevens made this point explicit in an opinion for this court more than thirty years ago:
Conduct by persons acting under color of state law which is wrongful under 42 U.S.C. § 1983 or § 1985(3) cannot be immunized by state law. A construction of the federal statute which permitted a state immunity defense to have controlling effect would transmute a basic guarantee into an illusory promise; and the supremacy clause of the Constitution insures that the proper construction may be enforced.
Hampton v. City of Chicago,
Moreover, some states have little or no developed jurisprudence in this area. Indeed, the law often runs in the opposite direction. State courts have imported federal common-law immunity doctrine into actions arising under state law. See, e.g., Camacho v. Samaniego,
We also reject application of Jorgensen on its own terms. Jorgensen did not involve a question of legislative immunity from a personal-damages suit. To the contrary, Jorgensen was a class-action suit filed by Illinois judges against Governor Blagojevich and the Illinois Comptroller in their official capacities seeking a declaration that the governor’s use of his veto to block a judicial pay raise was unconstitutional.
Indeed, Jorgensen did not address common-law legislative immunity at all. Instead, the Illinois Supreme Court relied on Article IV of the Illinois Constitution— Illinois’ equivalent of the U.S. Constitution’s Speech or Debate Clause — and § 107-7 of the Illinois Code of Criminal Procedure.
Recognizing this distinction, state courts, like federal courts, have not hesitated to extend common-law legislative immunity to executive officials, including governors. See, e.g., Humane Soc’y of N.Y. v. City of New York,
Regardless, it is abundantly clear that for this federal claim in federal court, state legislative-immunity law has no effect; federal immunity doctrine applies. And under that doctrine Blagojevieh is immune from this civil RICO action and must be dismissed from the suit. The RICO claim may proceed in his absence, however; Johnston, Balmoral, Maywood, and Friends of Blagojevieh remain as defendants.
B. Tax Injunction Act
We now move to the question raised in the casinos’ appeal: Does the Tax Injunction Act block the court’s jurisdiction to impose a constructive trust on the proceeds disbursed from the Horse Racing Fund? The district court answered “yes” and dismissed the constructive-trust claim for lack of jurisdiction, denied the casinos’ motion for a preliminary injunction, and dissolved the TRO. A decision denying a preliminary injunction may be immediately appealed. 28 U.S.C. § 1292(a)(1). Whether the Tax Injunction Act applies is a question of law that we review de novo. United States v. Rosenbohm,
The Tax Injunction Act provides that “[t]he district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.” 28 U.S.C. § 1341. The Supreme Court has explained that “the principal purpose of the [Tax Injunction Act] [i]s to ‘limit drastically’ federal-court interference with ‘the collection of [state] taxes.’ ” Hibbs v. Winn,
A threshold question under the Act is whether the casino surcharge is a “tax.” The racetracks maintain that it is and therefore the Act applies; their argument is based largely on the Illinois Supreme Court’s decision in Empress Casino v. Giannoulias. The racetracks contend that we should defer to the way the state supreme court characterized the surcharge in upholding it against the casinos’ constitutional challenges. This argument is misplaced. Whether a particular state or local assessment is a tax for purposes of the Tax Injunction Act is a question of federal law. Wright v. Riveland,
A common difficulty in applying the Tax Injunction Act is distinguishing between a “tax” and a “regulatory fee.” Fees assessed pursuant to a regulatory scheme fall outside the ambit of the Act, and so federal suits challenging state or local regulatory fees do not implicate the Act’s jurisdictional bar. Hager v. City of W. Peoria,
Courts faced with distinguishing a “tax” from a “fee” “have tended ... to emphasize the revenue’s ultimate use, asking whether it provides a general benefit to the public, of a sort often financed by a general tax, or whether it provides more narrow benefits to regulated companies or defrays the agency’s cost of regulation.”
Hager,
Our decision in Hager drew on the First Circuit’s influential opinion in San Juan Cellular, in which then-Judge Breyer elaborated on the difference between a tax and a regulatory fee for purposes of the Tax Injunction Act:
[Courts] have sketched a spectrum with a paradigmatic tax at one end and a paradigmatic fee at the other. The classic “tax” is imposed by a legislature upon many, or all, citizens. It raises money, contributed to a general fund, and spent for the benefit of the entire community. The classic “regulatory fee” is imposed by an agency upon those subject to its regulation. It may serve regulatory purposes directly by, for example, deliberately discouraging particular conduct by making it more expensive. Or, it may serve such purposes indirectly by, for example, raising money placed in a special fund to help defray the agency’s regulation-related expenses.
San Juan Cellular,
Applying these principles in Hager, we held that a permit fee assessed on trucks exceeding a certain weight limit on a three-block stretch of roadway in West Peoria, Illinois, was not a tax for purposes of the Tax Injunction Act.
The casino surcharge at issue here has none of the normal characteristics of a tax. The surcharge is assessed as a “condition of licensure” and appears in the section of the Riverboat Gambling Act captioned “Owners [sic] Licenses.” 230 III. Comp. Stat. 10/7. Though not dispositive, the Racing Acts never refer to it as a “tax.” Other provisions in the Riverboat Gambling Act lay taxes on riverboat casinos for general public purposes. For example, section 13 of the Riverboat Gambling Act, entitled “Wagering tax; rate; distribution,” lays out a detailed tax scheme applicable to all riverboat casinos. Id. § 10/13. The taxes collected under this section are explicitly referred to as “tax revenue” subject to appropriation by the Illinois General Assembly; the revenue supports traditional governmental services (e.g., the criminal justice system, education) and is distributed to the counties in which the casinos are situated. Id. § 10/13(b), (e-20), (d).
In contrast, the casino surcharge simply skims profits from a handful of private companies for the direct benefit of a few of their competitors. It applies only to the state’s four highest-earning riverboat casinos, not a broader segment of the population. The money is dеposited in a special segregated account, not the state’s general revenue fund, and is disbursed within a few days directly to the racetracks. Not a penny can be touched by any state agency or used for any state program or expense. In short, the surcharge raises no state revenue in the usual sense — or in any sense, really. It’s not even a classic regulatory fee, since no part of it goes to support the state’s gaming regulatory apparatus. As this regulatory scheme is set up, the state is little more than a middleman for the involuntary transfer of property from one private owner to another.
It is immaterial that the Racing Acts place certain restrictions on how the racetracks may spend the money they receive.
The obvious object of the casino surcharge is not to raise money for a governmental program or public service but to protect the racetracks from the effects of competition from riverboat gambling. This purpose is regulatory, not revenue-raising. A constructive trust on the proceeds of the Horse Racing Fund would have no effect on the public fisc; it would defeat the state’s regulatory purpose but would not “operate[ ] to reduce the flow of state tax revenue.” Levy,
That the General Assembly identified an indirect public benefit from propping up the racetracks is not enough to make the casino surcharge a tax. On this point the Ninth Circuit’s decision in Bidart is instructive. In that case, the court held that the Tax Injunction Act did not bar a federal suit challenging the California Apple Commission’s assessment of fees on apple producers to support advertising and other activities designed to boost apple consumption.
Finally, we note that the 2006 and 2008 Racing Acts were enacted under the state legislature’s police power, not its tax power.
Because the surcharge is not a tax, a constructive trust on the proceeds of the Racing Acts will not interfere with the state’s collection of tax revenue, and the Tax Injunction Act does not apply. There is no jurisdictional bar to the constructive-trust claim and no jurisdictional basis to deny the casinos’ motion for a preliminary injunction.
C. Preclusion and Abstention
In the district court, the racetracks advanced several alternative reasons to dismiss the constructive-trust claim and deny preliminary injunctive relief, and they reiterate these arguments on appeal. The scope of our review of an interlocutory order under 28 U.S.C. § 1292(a)(1) extends to arguments that “bear upon and are central to the grant or denial of the injunction.” Shaffer v. Globe Prot, Inc.,
We start with the preclusion argument. Federal courts must give state-court judgments the same preclusive effect they would have in state court. Parsons Steel, Inc. v. First Ala. Bank,
The state supreme court’s decision rejecting the constitutional challenges to the 2006 Racing Act does not have res judicata effect here; the claims and parties in the two suits are materially different. In Giannoulias the casinos challenged the validity of the 2006 Racing Act under various provisions of the Illinois Constitution and the Takings Clause of the federal constitution. The constructive-trust claim, in contrast, is based on allegations of a criminal pay-to-play conspiracy that has unjustly enriched the racetracks at the casinos’ expense. Indeed, the allegations of political corruption at the root of RICO-eonspiracy and constructive-trust claims did not even come to light until December 2008 — six months after the Illinois Supreme Court delivered its decision in Giannoulias. The сlaims also involve different parties. The constitutional challenge was brought against the state treasurer and the Illinois Racing Board; the constructive-trust claim is brought against the racetracks, and the RICO claim on which it is based is against Johnston, Balmoral, Maywood, and Friends of Blagojevieh. It would have made no sense for the casinos to name any of these defendants in their constitutional challenge to the 2006 Racing Act.
The racetracks attempt to fashion a res judicata argument around the Will County court’s order denying their petition for postjudgment relief, which was based on some of the information made public by the U.S. Attorney in the federal prosecution of Blagojevieh and in the impeachment proceedings against him. But post-judgment proceedings are limited in scope to the underlying case; the purpose of a § 2-1401 petition is to bring to the court’s attention facts that had they been known at the time of judgment would have precluded its entry. People v. Haynes,
A brief look at how the Will County judge treated the § 2-1401 petition shows that the ruling does not preclude this federal action. First, the judge did not address the alleged criminal scheme involving Blagojevieh, Johnston, and the racetracks on the merits. Instead, she rejected the “new evidence” out of hand because it was unrelated to the underlying constitutional challenge. The judge held that improper motive was not a basis on which to invalidate the 2006 Racing Act. The court also rejected most of the evidence submitted in support of the petition — the FBI agent’s affidavit, superseding indictment, and wiretap transcripts' — as inadmissible hearsay unrelated to the case and involving different parties. The judge said that even if she were inclined to credit the allegations of corruption, they would have no effect on the constitutionality of the 2006 Act and
The racetracks cite State Farm Illinois Federal Credit Union v. Hayes,
The racetracks also cite Burnicha v. Marquette National Bank,
In sum, neither the Illinois Supreme Court’s decision in Giannoulias nor the decision denying the casinos’ § 2-1401 petition has res judicata effect on the constructive-trust or RICO claims here. The claims were not decided and could not have been raised in the action challenging the constitutionality of the 2006 Racing Act. See Rein,
Having concluded that res judicata does not apply, we have little trouble holding that the casinos’ claims are not barred by collateral estoppel. Under Illinois law the “minimum requirements” for application of collateral estoppel are:
(1) the issue decided in the prior adjudication is identical with the one presented in the suit in question, (2) there was a final judgment on the merits in the prior adjudication, and (3) the party against whom estoppel is asserted was a party or in privity with a party to the prior adjudication.
Gumma v. White,
Relatedly, we also reject the racetracks’ contention that abstention is warranted under the Cobrado River doctrine. See Colorado River Water Conservation Dist. v. United States,
D. Failure to State a Constructive-Trust Claim
Finally, the racetracks argue that the casinos have failed to state a constructive-trust claim. This is actually a backdoor challenge to the sufficiency of the RICO allegations; the constructive-trust claim is not an independent basis for liability but instead sеeks an equitable remedy for the underlying RICO violation to prevent the racetracks from being unjustly enriched. Balmoral and Maywood — the racetracks Johnston owns — argue that we should affirm the dismissal of the constructive-trust claim because the conduct underlying the RICO count was not a proximate cause of the casinos’ injury. The cause of the injury, they assert, is the drafting and enactment of the Racing Acts by the Illinois General Assembly, not any conspiracy among the RICO defendants. They made the same argument in the district court in support of their motion to dismiss the RICO count for failure to state a claim. The district court rejected it, and we agree. The casinos’ allegations are sufficient to support RICO proximate cause.
The Supreme Court has said that when evaluating proximate causation under RICO, “the central question .. is whether the alleged violation led directly to the plaintiffs injuries.” Anza v. Ideal Steel Supply Corp.,
The casinos allege the following: that the 2006 and 2008 Racing Acts were the product of a corrupt bargain between Blagojevich and Johnston; that Blagojevich solicited and Johnston paid large sums of money to the governor’s campaign committee in exchange for the governor’s influence in getting the Racing Acts passed and for signing them into law; that Blagojevich delivered on this agreement; and that by operation of these two corruption-tainted laws, they are forced to turn over 3% of their profits to the racetracks. These allegations state a direct line of causation. The casinos’ injury is not too remote from the conspiracy; to the contrary, the object of the conspiracy was to put money in Blagojevich’s pocket (or in his campaign committee’s coffers) in exchange for the enrichment of the racetracks at the casi
Arlington, Fairmount, and Hawthorne make two separate arguments relating to the legal sufficiency of the constructive-trust claim. They contend that the constructive-trust claim was properly dismissed because (1) the constitutionality of the Racing Acts has already been upheld by the state courts; and (2) a constructive trust would be an impermissible attack on the state-court judgments.
A constructive trust is “an equitable remedy imposed by a court to prevent the unjust enrichment of a party through actual fraud or breach of a fiduciary relationship.” In re Liquidation of Sec. Cas. Co.,
In a different twist on the same argument, the racetracks maintain that the constructive-trust claim cannot proceed because the state courts have determined that the casinos must pay the surcharge and that they (the racetracks) are entitled to receive the proceeds from the Horse Racing Fund. The state-court orders do not speak quite so broadly. The state courts dismissed the casinos’ suits under the Protest Monies Act and ordered the state treasurer to transfer the money to the Horse Racing Fund. From there the Racing Acts functioned — and continue to function — normally. An order from the district court in this case would not disturb these state-court judgments. A constructive trust would operate on the special escrow account now holding the money disbursed from the Horse Racing Fund. The TRO is structured so that it does not enjoin the Illinois Treasurer from performing actions prescribed by state law or required by state-court order.
Finally, the racetracks suggest that a constructive trust would, in essence, repeal the Racing Acts — an action a federal court obviously has no authority to take.
For the foregoing reasons, we Reverse the district court’s order denying Blagojevich’s claim of legislative immunity and Remand with instructions to dismiss him from the case. We also Reverse the district court’s order dismissing the constructive-trust claim for lack of jurisdiction, denying preliminary injunctive relief, and dissolving the TRO. The case is Remanded for further proceedings consistent with this opinion. The TRO shall remain in effect.
Notes
. Operating in various locations in Illinois, the riverboat casinos are: Empress Casino
. Johnston’s horse-racing tracks are Balmoral Racing Club, Inc., and Maywood Park Trotting Association, Inc.; the others are Arlington Park Racecourse LLC; Fairmount Park, Inc.; and Hawthorne Race Course, Inc. We refer to them collectively as "the racetracks” unless the context requires otherwise.
. Count I alleges violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c), (d). Count II seeks a common-law constructive trust over the proceeds of the RICO conspiracy alleged in Count I.
. The Illinois Supreme Court held that the 2006 Racing Act did not arbitrarily or unreasonably single out the casinos in violation of the state constitution's uniformity clause. Empress Casino Joliet Corp. v. Giannoulias,
. Arlington Park, Fairmount Park, and Hawthorne appear jointly on appeal. Balmoral and Maywood, the two racetracks owned by Johnston, appear together but separately from the other three racetracks. We will continue to refer to them collectively as “the racetracks" unless the context requires otherwise.
. We agree with our dissenting colleague that Jorgensen was an unusual case. But we do not agree that this means we should certify the immunity question to the Illinois Supreme Court. That approach assumes that the scope of federal common-law legislative immunity is determined by reference to state law. It is not. See Bogan,
. In the district court, Blagojevieh asserted that legislative immunity required dismissal of the RICO claim against Friends of Blagojevich because proximate cause could not be proved without inquiry into acts protected by legislative immunity. Whatever the merits of this argument, Friends of Blagojevieh is not a party to this appeal and is not itself entitled to immunity. Our conclusion regarding legislative immunity extends only to Blagojevieh himself.
. The General Assembly's authority to enact the Racing Acts must be located in one of two plenary legislative powers — the power to tax or the police power. When we raised this issue at oral argument, counsel suggested that the source of the legislature's power was either the uniformity clause or the public-purpose clause of the Illinois Constitution. This is incorrect; the uniformity and public-purpose clauses are limits on state legislative power, not sources of it.
. The Supreme Court’s decision in Levin v. Commerce Energy, Inc., - U.S. -,
. The racetracks argue that Illinois law does not distinguish for res judicata purposes between an intervenor and an original party. However, they cite only cases in which intervening plaintiffs were barred from bringing subsequent, related suits after they had lost. They cite no authority for the proposition that res judicata bars subsequent, different claims against defendants who intervened after the original judgment.
. The Racetracks also cite Lubbers v. Norfolk & Western Railway,
. The casinos believe that these arguments have been waived. They were not waived. The arguments were raised, with minor variation, in Hawthorne's briefing in district court.
. For this argument the racetracks cite In re Liquidation, which held that a court of equity has no power “to dispense with the plain requirements of a statute.” In re Liquidation of Sec. Cos. Co.,
Dissenting Opinion
dissenting.
I disagree with the decision in two respects that merit airing in a public dissent. The first is whether ex-Governor Blagojevich is entitled to legislative immunity in this RICO suit, as the majority believes, and the second is whether, as the majority does not believe, the Tax Injunction Act, 28 U.S.C. § 1341, bars the district court from imposing a constructive trust in favor of the casino plaintiffs on the money received by the racetracks under the 2006 and 2008 Illinois statutes that impose a 3 percent excise tax on the casinos and require that the proceeds be placed in a segregated state fund — the “Horse Racing Equity Trust Fund” — and then promptly disbursed to the racetracks to be used as prescribed by the statutes. Ill. Pub. Act 94-804, effective May 26, 2006; Ill. Pub. Act 95-1008, effective Dec. 15, 2008. It is sufficiently uncertain whether Blagojevich is entitled to immunity to warrant certifying the question to the Supreme Court of Illinois. But there is no doubt that the Tax Injunction Act bars the imposition by a federal district court of a constructive trust on revenues from the casino tax.
1. When a state employee is sued in federal court for violating a federal statute, whether he is immune from suit by virtue of his official status is a question of federal law, ordinarily federal common law. Supreme Count, of Virginia v. Consumers Union оf the United States, Inc.,
In Jorgensen v. Blagojevich,
That is the general rule, Baraka v. McGreevey,
But Jorgensen was an unusual case, and may not be applicable to our case. The legislative act enjoined was not a statute, but a vetо by the governor; if not he, who would be sued? If he were granted immunity, there would be no way to nullify his unconstitutional act.
We cannot be certain, however, that the Illinois court would confine Jorgensen to vetoes. Legislative immunity is absolute, Bogan v. Scott-Harris, supra,
It is true that the federal common law of legislative immunity for state officials, since it is an immunity from civil suits, does not bar criminal actions, while barring civil actions even if based on charges of criminal misconduct. United States v. Gillock, supra,
If this is right, we should give him no greater immunity in the name of federal common law. The Supreme Court has said that the displacement of state law by federal common law is “limited to situations where there is a ‘significant conflict between some federal policy or interest and the use оf state law.’ Our cases uniformly require the existence of such a conflict as a precondition for recognition of a federal rule of decision. Not only the permissibility but also the scope of the judicial displacement of state rules turns upon such a conflict.” O’Melveny & Myers v. FDIC,
There is no federal interest in giving the Governor of Illinois a broader immunity from suit than he would enjoy in an Illinois state court, just as there is no federal interest in enforcing the Eleventh Amendment if a state decides to waive its sovereign immunity from suit. Lapides v. Board of Regents,
Interpretation of Jorgensen is further complicated by the fact that the suit did not seek damages from the governor. Official immunity usually just means immunity from damages suits. Pulliam v. Allen,
For all these reasons, it is uncertain whether Illinois governors enjoy legislative immunity from suit — the only kind that Blagojevich is claiming. Given the delicacy of the issue and particularly the uncertain scope of the Jorgensen opinion, the prudent course for us in this case would be to certify to the Supreme Court of Illinois, pursuant to 7th Cir. R. 52 and Ill. S.Ct. R. 20, the question whether the common law of official immunity in Illinois permits a suit to go forward against a governor when the suit is based on his performing a legislative act (not limited to a veto) for a criminal purpose.
2. The Tax Injunction Aсt forbids federal district courts to “enjoin, suspend or restrain the assessment, levy or collection of any tax under State law,” provided that an adequate remedy is available in the state courts. 28 U.S.C. § 1341. The Act has been described by the Supreme Court as “first and foremost a vehicle to limit drastically federal district court jurisdiction to interfere with so important a local concern as the collection of taxes.” Rosewell v. LaSalle Nat’l Bank,
My colleagues may have difficulty taking the question of the effect of the Tax Injunction Act in this case seriously because of the corrupt origin of the casino tax and a certain risible element in the idea of taxing one gambling business to subsidize another (the “derangement” question). But the corrupt origin of the tax is irrelevant. The Act would be thwarted if a taxpayer could get a federal court to enjoin a tax case just by presenting evidence of corruption in the process by which the taxing statute had been enacted. This has been recognized in analogous contexts, see, e.g., City of Columbia v. Omni Outdoor Advertising, Inc.,
Gambling taxes are not unusual; casino taxes may be, but they are certainly not unique. See Ind.Code §§ 4-33-12-1, - 6(b)(6); N.J. Stat. §§ 5:12-203(a), -205; cf. Md.Code, State Gov’t, §§ 9-lA-27(a)(5), - 29. They are real taxes, not service fees. The fact that the revenue from a particular tax is earmarked for a particular purpose is hardly unusual; think of the social security tax. Horse racing, the beneficiary of the casino tax, is a major activity in Illinois and one with considerable economic significance for the state. It employs more than 30,000 people and generates more than $700 million in annual betting and some $16 million in state and local government revenues. Ill. Pub. Act 94-804, § l(3)-(4); Illinois Racing Board, “2009 Annual Report” 2, 6 (Mar.2010), www.state.il.us/ agency/irb/racing/reports/2009_Annual_ Reportpdf (visited Feb. 15, 2011); Commission on Government Forecasting and Accountability, “Wagering in Illinois — 2009 Update” 51-57 (2010), www.ilga.gov/ commission/cgfa2006/Upload/2009 wagering_in_il.pdf (visited Feb. 15, 2011).
Casinos are recent additions to the legal gambling scene in Illinois; the first casino in the state opened in 1991. Jerry Shnay, “Alton Riverboat Already Hitting Jackpot,” Chicago Tribune, Sept. 25, 1991, at 4. They compete with the racetracks and thus attract gamblers away from them. So at least it is widely believed, see Illinois Harness Horsemen’s Ass’n, Press Release, “Top State Horsemen Flee to Greener Pastures in Eastern States” (Nov. 30, 2005), and William Nack, “A House Divided,” Sports Illustrated, July 10, 1995, at 52, 56, though Douglas M. Walker and John D. Jackson, in their article “Do U.S. Gambling Industries Cannibalize Each Other?,” 36. Public Finance Rev. 308, 322-24 (2008), present contrary evidence— evidence that casino and other non-racetrack gambling increases the demand for racetrack gambling by increasing the demand for gambling in general. What is not debatable is that, whether because of the advent of casinos or because of other factors, racetrack attendance and revenues in Illinois have plummeted in recent years, along with the state’s horse population and the commercial activities that are correlated with the number of horses. Illinois Racing Board, supra, at 9; Commission on Government Forecasting and Accountability, supra, at 56-57; Will Buss, “Hoffman: Bill Will Help Fairmount,” Belleville News-Democrat, Mar. 27, 2008, p. Al. The first of these sources shows horse-racing bets falling from $1.2 billion in 1996 to $700 million in 2009, though some of the drop is doubtless attributable to the miserable economic situation in 2009, for the 2007 total was $900 million.
In a laissez-faire or Social Darwinist society, government would keep its hands off the competition between the casinos and the racetracks. The disappearance of racetracks, jockeys, horses, bridles, blacksmiths, racetrack touts, and DVDs of “National Velvet” — replaced by croupiers, glassy-eyed retirees at one-armed bandits, roulette wheels, and blackjack tables, all on riverboat casinos — would be commended as progress. But American government is not committed to the laissez-faire vision of society. Congress and state legislatures are constantly using their taxing and spending and regulatory powers to redistribute wealth from one group in society to another. This may be good or bad, but it is routine and constitutional. Federal payroll taxes are earmarked for such programs as Medicare, social security, and unemployment benefits; the federal gasoline tax is used to subsidize highway construction; other earmarked taxes (taxes the revenues from which are specified for a particular use) are common. See Susan-nah Camic, “Earmarking: The Potential Benefits,” 4 Pitt. Tax Rev. 55, 60-61 (2006). Rarely are the taxpayers closely matched with the recipients of the spending that the taxes support. The levying of taxes on a particular industry for the sole benefit of another industry is somewhat uncommon but certainly not unknown. For example, the federal Audio Home Recording Act of 1992 taxes digital media to subsidize prerecorded media, 17 U.S.C. § 1001 et seq.; the Illinois Coal Technology Development Assistance Fund taxes gas and electrical utilities to pay for the development of coal teсhnologies, 30 ILCS 730/3; and Ohio taxes wine from all over
An excise tax on casinos is a tax, and where the tax money goes is irrelevant to the applicability of the Tax Injunction Act. Suppose the revenues from the casino tax were earmarked for cosmetic surgery for members of the Illinois legislature. Would anyone doubt that the casino tax was still a tax? Would it matter that the tax revenues were disbursed to the intended recipients of the subsidy funded by those revenues within 10 days of receipt? I think not, and yet the racetrack subsidy is less absurd than my hypothetical example. Sixty percent of the subsidy is earmarked for the purses for winners and runners-up in horse races on the theory that bigger purses attract the owners of the better horses and the better the horses in a race the larger the attendance and therefore the more money is bet on the race and so the greater are the track’s revenues because they’re a percentage of the amount of money that is bet. The other 40 percent of the revenue from the casino tax is to be used for physical improvements of the racetracks. The subsidy is rationally designed to promote the horse racing industry in Illinois, which seems no less proper an objective than promoting a state’s film industry by offering tax credits to filmmakers, a common form of state subsidy. Horse racing and movies are two forms of entertainment.
What is true is that not every state receipt is the fruit of a tax. Fees for services are not deemed taxes for purposes of the Tax Injunction Act. We have explained the difference as follows: “If the fee is a reаsonable estimate of the cost imposed by the person required to pay the fee, then it is a user fee and is within the municipality’s regulatory power. If it is calculated not just to recover a cost imposed on the municipality or its residents but to generate revenues that the municipality can use to offset unrelated costs or confer unrelated benefits, it is a tax, whatever its nominal designation.” Diginet, Inc. v. Western Union ATS, Inc.,
A potential source of confusion is that “courts faced with distinguishing a ‘tax’ from a ‘fee’ ‘have tended ... to emphasize the revenue’s ultimate use, asking whether it provides a general benefit to the public, of a sort often financed by a general tax, or whether it provides more narrow benefits to regulated companies or defrays the agency’s cost of regulation.’ ” Hager v. City of West Peoria, supra,
The practical reason for the difference in treatment under the Tax Injunction Act between fees and taxes is that enjoining the collection of a fee is less likely to disrupt state programs than enjoining a tax. Fees are for services and if the collection of the fees is enjoined, the state can curtail the services. Cf. Ben Oehrleins & Sons & Daughter, Inc. v. Hennepin County,
It is true that the plaintiffs are not seeking to enjoin the casino tax in the narrow sense of “enjoin”; the money has been collected and paid to the racetracks or placed in a separate fund that if the casinos lose this case will also be paid to the racetracks. But a constructive trust, just like an injunction, is an equitable remedy. Bontkowski v. Smith,
But even though, if I’m right, this suit is a challenge to a state tax, the Tax Injunction Act is a bar only if there is available to the plaintiffs a state remedy that is “plain, speedy and efficient.” 28 U.S.C. § 1341; see, e.g., Rosewell v. LaSalle Nat’l Bank, supra,
To summarize my position, the question whether Blagojevich is entitled to absolute immunity from a civil suit challenging his legislative acts while governor should be certified to the Supreme Court of Illinois; the district court’s ruling that the plaintiffs’ constructive trust claim is barred by the Tax Injunction Act should be affirmed.