River Park, Inc. v. City of Highland Park
703 N.E.2d 883 (1998)
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Rule of Law:
Under the doctrine of res judicata, separate claims are considered the same cause of action if they arise from a single group of operative facts, regardless of whether they assert different legal theories. A prior federal court judgment on the merits bars a subsequent state court action if the state claims could have been brought in the federal action under supplemental jurisdiction.
Facts:
- In July 1988, Spatz & Company, on behalf of River Park, Inc., petitioned the City of Highland Park for rezoning and approval of a plan to develop the Highland Park Country Club property.
- While the petition was pending, a city council member formed a citizens' group to oppose the development and encourage the city to purchase the land, and the city council secretly ordered feasibility studies for such a purchase.
- On January 22, 1990, the city council granted preliminary approval for the zoning and development plan, contingent on final engineering plan approval within one year.
- Spatz submitted final engineering plans, but the city engineer refused to review them in a timely manner, causing Spatz to miss the January 22, 1991 deadline.
- As a result of the missed deadline, the city council withdrew its preliminary approval, which caused River Park's lender, La Salle National Bank, to move toward foreclosure, forcing River Park into bankruptcy.
- In 1991, plaintiffs filed a new, smaller rezoning petition. While this second petition was pending, the city secretly negotiated with La Salle Bank to purchase the property.
- In August 1992, the city's plan commission deemed the second petition withdrawn after plaintiffs failed to meet a short deadline to provide proof of title, which was complicated by the foreclosure proceedings.
- Subsequently, the City of Highland Park purchased the property from La Salle Bank for a price substantially below its market value.
Procedural Posture:
- Plaintiffs sued the City of Highland Park in the U.S. District Court for the Northern District of Illinois, alleging a civil rights violation under 42 U.S.C. § 1983.
- The federal district court dismissed the complaint with prejudice for failure to state a claim upon which relief can be granted.
- The U.S. Court of Appeals for the Seventh Circuit affirmed the district court's dismissal.
- Plaintiffs then filed a new multi-count complaint in the Circuit Court of Lake County, Illinois (a state trial court), asserting various state law claims.
- The state circuit court initially dismissed the complaint, but the Illinois Appellate Court reversed in part, remanding three counts for further proceedings (referred to as River Park I).
- On remand, the circuit court again dismissed the remaining counts, finding them barred by res judicata and the statute of limitations.
- Plaintiffs appealed again to the Illinois Appellate Court, which reversed the dismissal of the breach of implied contract and abuse of power claims (referred to as River Park II).
- The City of Highland Park, as appellant, was granted leave to appeal to the Supreme Court of Illinois.
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Issue:
Does the doctrine of res judicata bar plaintiffs' state law claims when their prior federal lawsuit, arising from the same core of operative facts, was dismissed with prejudice for failure to state a claim?
Opinions:
Majority - Justice McMorrow
Yes. The doctrine of res judicata bars the state law claims because they constitute the same cause of action as the previously dismissed federal claim. For res judicata to apply, there must be (1) a final judgment on the merits by a court of competent jurisdiction, (2) an identity of the cause of action, and (3) an identity of parties. Here, the parties are identical. The federal court's dismissal for failure to state a claim was a final judgment on the merits, not a dismissal for lack of jurisdiction. To determine identity of cause of action, this court formally adopts the 'transactional test' over the 'same evidence test.' Under the transactional test, claims are the same if they arise from a single group of operative facts. Here, both the federal § 1983 claim and the state law claims for breach of contract and abuse of power arose from the same core facts: the city's alleged wrongful conduct in delaying and denying the development plans to acquire the property cheaply. Because the state claims could have been brought in the federal action via supplemental jurisdiction, the plaintiffs' failure to do so bars them from litigating those claims now.
Analysis:
This case is significant for formally adopting the 'transactional test' from the Restatement (Second) of Judgments as the standard for determining identity of cause of action under Illinois res judicata doctrine. By explicitly rejecting the narrower 'same evidence test,' the court resolved prior confusion and aligned Illinois law with the modern trend followed by federal courts and a majority of states. The decision reinforces the policy against claim-splitting, requiring litigants to bring all claims arising from a single transaction in one lawsuit or risk forfeiture. It clarifies for practitioners that merely changing legal theories is insufficient to escape the bar of res judicata when the underlying factual basis for the suit remains the same.
