Court Rejects Neighboring Property Owners’ Due Process Claim to Prevent ‘Wolf Point’ Construction in River North Area (Chicago)

I thought I was gonna have to dust off my 18,000-pound crimson-covered Laurence Tribe Constitutional Law book from 1993 Fall semester for this one.   

Seriously though, when I see a case that discusses substantive and procedural due process issues refers to Federal and State Constitutional amendments, my PTSD flashbacks to 1L are triggered.  

In Residences at Riverbend Condominium Association v. City of Chicago, 2013 WL 6080685 (N.D.Ill. 2013), the Northern District dismissed the plaintiff condominium association’s lawsuit to prevent the City from enforcing a zoning ordinance change that would allow a large-scale construction project to commence in Chicago’s River North neighborhood. 

The basis for the Rule 12(b)(6) dismissal: plaintiff failed to allege a protectable due process property interest in preventing the construction project.

Facts: The lawsuit involves Wolf Point – land on the north bank of the Chicago river near the Merchandise Mart which has been vacant for about 40 years. 

In 2013, the City approved a zoning variance that allows the site’s owners to construct a three-building mixed use development on the site.  The plaintiffs, adjoining land owners, sued to bar the development; citing increased pedestrian and vehicular traffic in the area, plus the project’s unbearable strain on city infrastructure.

The plaintiffs also claimed they weren’t properly notified of the zoning change or given a meaningful chance to oppose it as required under the law.  The Court granted defendant’s motion to dismiss with prejudice.

Rules/Reasoning:

A due process claimant must establish a legitimate property interest.  U.S. Const. Amend XIV; Ill. Const. of 1970, art. I, s. 2 (and cases interpreting them).  

He must show he was deprived of life, liberty or property without sufficient procedural or substantive government safeguards. 

A due process clause property interest means an entitlement or benefit that the state can’t tamper with or remove.  *2-3.  A mere expectation or hope, though, doesn’t rise to the level of a due process property right.  *4.

The Court held that the plaintiffs lacked a property interest in Wolf Point.  They don’t own the land and any interest they have in receiving statutory notice of the zoning change isn’t a right of constitutional dimension.

The Court also found that zoning challenges based on a state’s failure to follow its own notice procedures should be brought in state not Federal Court.  *4.

The Northern District also noted that under Illinois law, a property owner’s rights to light, air, or certain property values – while certainly desirable – still don’t merit constitutional protection. property interest. *4. 

And since the plaintiffs don’t own the Wolf Point property and at most, only alleged a right to statutory zoning change notice, the plaintiffs failed to allege a colorable right to prevent the City from enforcing the amended zoning rule.

Take-away: A valid constitutional due process claim must go beyond speculation or unilateral expectation.  Instead, the interest being sued on must constitute an entitlement or benefit that the government has no discretion to remove or reduce.  

But all may not be lost for the plaintiffs: the Riverbend court suggests that plaintiffs may be able to seek administrative review in the Circuit Court to overturn the amended zoning ordinance.

 

 

Defamation Law: The Qualified Privilege Defense (N.D. Ill.)

webIn Tamburo v. Dworkin, 2013 WL 5408540 (N.D.Ill. 2013), an Internet libel case, the Illinois Northern District examined the nature and reach of the qualified privilege and truth defenses to defamation claims filed by a software company against a defendant that made disparaging comments about the company on web message boards.

Facts:  Defendant, a professional dog breeder, created a website that provided free canine pedigree information to the dog-breeding community.  Plaintiffs created a Data Mining Robot that “harvested” defendant’s site data, packaged it and sold it to the public.  Defendant, irate that plaintiffs took defendant’s dog data without  permission, accused plaintiffs of stealing the pedigree information.  Plaintiffs sued for defamation and tortious interference with contract and prospective economic advantage.  Defendant moved to dismiss all counts of the complaint.

Holding: Defendant’s Rule 12(b)(6) motion to dismiss is granted.  All claims dismissed.

Reasoning:

The plaintiffs alleged that defendant’s venomous posts caused plaintiffs to fall into disrepute in the business community.  An Illinois defamation plaintiff must allege (1) a false statement about the plaintiff, (2) published to a third party, (3) that causes damage to the plaintiff.  *8. 

If its defamation per se (imputing commission of crime, infection with a loathsome disease, incompetence or lack of integrity in employment, adultery or fornication), the plaintiff doesn’t have to show special damages.  Common defamation defenses include truth, that the statement is capable of an innocent construction, the statement is an opinion (not factual), and the challenged statement is “rhetorical hyperbole.” *8.

Qualified Privilege Defense

Another defamation defense is the qualified privilege defense.  This applies where a statement implicates a legitimate interest of the speaker/publisher or an interest of the recipient of the statement/publication.  A prototypical example is a false statement that involves matters of important public concern.  

To defeat a qualified privilege defense, the defamation plaintiff must show (a) the statement was false; and (b) the defendant abused the privilege by intentionally publishing the falsehood or by displaying a “reckless disregard” concerning the statement’s truth or falsity.  Reckless disregard means the defendant “entertained serious doubts” about the truth of the statement yet failed to properly investigate its truth.  *11. 

The court held that defendant’s statements that plaintiffs’ principal was unethical and deceitful, while defamatory per se, were still non-actionable statements of opinion protected by the First Amendment.  In addition, defendant’s statements that plaintiffs stole (committed “theft”) defendant’s data and was engaged in “hacking” were substantially true: plaintiffs’ web trolling Robot did swipe data from defendant’s website without permission and later sold it for a profit.  *9,

The defendant also had a legitimate interest in protecting her time investment in compiling the pedigree information and there was a public interest in protecting private information from unconsented Web harvesting.  The Court also found that plaintiffs produced no evidence that defendant abused the qualified privilege by making the theft accusations recklessly or indiscriminately publishing them to unnecessary recipients.  *10, 13.

Finally, the Court found that defendant’s statement that the plaintiffs “took” defendant’s data and was “holding it hostage” were not actionable since the former statement was reasonably susceptible to an innocent construction (defendant didn’t literally mean that plaintiff removed the information from defendant’s site) and the latter “held hostage” statement was pure rhetorical hyperbole.  *15-16.

Case Lessons: It’s hard to prove defamation.  A defamation defendant has a varied arsenal of defenses including truth, innocent construction, opinion vs. fact and rhetorical hyperbole, among others.  The qualified privilege defense will apply where a defendant can show that he has a legitimate interest in the subject matter of the statement or if the statement implicates an important public policy interest.  In Tamburo, there an undercurrent (my interpretation) of the Court viewing plaintiffs’ practices as unfair: swiping or “scraping” the fruits of defendant’s labor (information compiled over a five-year period and provided free of charge to the pubic) and then trying to profit from it.   

 

7th Circuit Tackles Registering State Court Judgments In Fed. Court, Removal Jurisdiction

GE Betz, Inc. v. Zee Company, Inc., 2013 WL 1846541 (7th Cir. 2013) examines Federal jurisdiction and removal practice and how those rules impact creditors’ rights in post-judgment proceedings. 

Facts and Procedural History: Plaintiff obtained a multi-million dollar judgment in North Carolina state court against Defendant.  

The defendant then secretly transferred several million dollars to a Chicago bank that recorded liens against the funds and all other defendant assets.

When plaintiff found out about the transfer, it registered the NC judgment in Illinois and issued a third-party citation against the bank to whom defendant transferred its assets.

The judgment debtor (and defendant in the NC state court case) moved to transfer the case to the Northern District of Illinois under diversity jurisdiction rules.  

Plaintiff objected to removal based on lack of subject matter jurisdiction and sought remand back to NC state court.  The Northern District denied Plaintiff’s remand attempt and kept the case. 

Held: Reversed.  The District Court should have granted plaintiff’s motion for remand based on the “forum defendant” rule.  See 28 U.S.C. § 1441(b)(2). 

Rules/Reasoning: The Northern District had original jurisdiction over the action since there was complete diversity  among the parties: plaintiff is a Pennsylvania corporation, defendant is a Tennessee corporation, and the third-party respondent bank is a Delaware corporation whose principal place of business is in Illinois. 

The Seventh Circuit also held that the District Court had jurisdiction to enforce a state court judgment under section 28 U.S.C. § 1963, which permits a Federal court to register the judgment of another “district court.” 

Giving a broad reading to Section 1963, the Court noted that several state courts use the “district court” moniker.  Because of this, the Court held that the Illinois Northern District could register the NC state court judgment.  *8

But the argument that carried the day for the Plaintiff was the “forum defendant” rule.  This rule states that “a civil action otherwise removable solely on the basis of [diversity jurisdiction] may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.”  28 U.S.C. § 1441(b)(2). 

But the forum defendant rule involves a statutory defect rather than a jurisdictional one: meaning that the defect is waived if not objected to within 30 days of the removal notice. (*9), 28 U.S.C. § 1447(c)(motion to remand – other than for lack of subject matter jurisdiction – must be brought within 30 days after filing the notice of removal). 

Since the bank’s principal place of business was Illinois, it clearly met the “forum” component of the “forum defendant” test.  The Court also held that the bank was a “defendant” within the rule because its interest in the defendants assets were completely opposed to the plaintiff’s interest. (*11-14). 

Lastly, the Court found that Plaintiff properly objected to removal within 30 days – as evidenced by its motion to reconsider filed 16 days after the Northern District denied its remand motion. 

Take-away:

– If an Illinois party is sued by a foreign plaintiff and the damages exceed $75K, removal isn’t proper.  However, if the plaintiff fails to timely seek a remand, he will have waived the defect and the removal will stand;

a foreign state court judgment can arguably be registered in a Federal District Court.