allegations that the governor “took bribes in exchange for influencing the state legislature to pass the Racing Acts and for signing the Acts into law” referred to acts that were legislative in nature; therefore, the governor was entitled to absolute legislative immunity
How later courts described this case
- allegations that the governor “took bribes in exchange for influencing the state legislature to pass the Racing Acts and for signing the Acts into law” referred to acts that were legislative in nature; therefore, the governor was entitled to absolute legislative immunity
- legislative immunity for Bla- gojevich
Written by the judges who cited it.
The opinion
In the
United States Court of Appeals
For the Seventh Circuit
Nos. 09-3975 & 10-1019
E MPRESS C ASINO JOLIET C ORPORATION,
an Illinois corporation, et al.,
Plaintiffs-Appellants (No. 09-3975)
Plaintiffs-Appellees (No. 10-1019),
v.
R OD R. B LAGOJEVICH,
Defendant-Appellant (No. 10-1019),
and
B ALMORAL R ACING C LUB, INC.,
M AYWOOD P ARK T ROTTING A SSOCIATION,
INC., A RLINGTON P ARK R ACECOURSE, LLC,
F AIRMOUNT P ARK , INC., and
H AWTHORNE R ACE C OURSE, INC.,
Defendants-Appellees (No. 09-3975).
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 1:09-cv-03585—Matthew F. Kennelly, Judge.
A RGUED F EBRUARY 23, 2010—D ECIDED M ARCH 2, 2011
2 Nos. 09-3975 & 10-1019
Before B AUER, P OSNER, and S YKES, Circuit Judges.
S YKES, Circuit Judge. 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.1 The casinos allege
that Blagojevich “sold” and Johnston “bought” the enact-
ment of two Illinois gaming laws requiring them to pay
3% of their adjusted gross revenue into a “Horse
Racing Equity Trust Fund” as a condition of their
gaming licenses. The proceeds of this fund go not to the
State of Illinois or to any state program or service but
instead are paid directly to a small group of competing
gambling enterprises: five Illinois horse-racing tracks,
including the two owned by Johnston.2 The details of this
scheme are largely derived from the federal criminal
1
Operating in various locations in Illinois, the riverboat
casinos are: Empress Casino Joliet Corporation; Des Plaines
Development LP (doing business as Harrah’s Casino Cruises
Joliet); Hollywood Casino-Aurora, Inc.; and Elgin Riverboat
Resort-Riverboat Casino (doing business as Grand Victoria
Casino). We refer to them collectively as “the casinos.”
2
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.
Nos. 09-3975 & 10-1019 3
complaint that led to Blagojevich’s removal from office
in January 2009 and an indictment later returned against
him. While this case has been pending, the casinos
have continued to pay into the fund (more than $100
million and counting), but the money is frozen on
release and held in escrow under the terms of a temporary
restraining order put in place by the district court.
The casinos’ complaint has two counts: (1) a RICO-
conspiracy claim against Blagojevich, his campaign com-
mittee “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. 3 The defendants moved
to dismiss on multiple grounds, and the casinos sought a
preliminary injunction to maintain the escrow. Each
side prevailed in part. The district court left the RICO
claim standing and also rejected Blagojevich’s claim of
legislative immunity. But the court accepted the race-
tracks’ argument that the casino surcharge is a tax and
therefore the Tax Injunction Act, 28 U.S.C. § 1341, blocked
the court’s jurisdiction to impose a constructive trust.
The court then dismissed the constructive-trust claim,
denied the motion for a preliminary injunction, and
dissolved the TRO. Blagojevich sought immediate
review of the immunity issue; the casinos appealed the
3
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.
4 Nos. 09-3975 & 10-1019
denial of a preliminary injunction, which also brought
up the jurisdictional dismissal of their constructive-
trust claim. We reinstated the TRO pending resolution
of the appeals.
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 legiti-
mate legislative activity. This immunity applies notwith-
standing 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.
The Tax Injunction Act does not bar the court from
imposing a constructive trust on the money disbursed
from the Horse Racing Fund. The casino surcharge is not
a tax. It raises no revenue for the operation of state gov-
ernment and supports no governmental agency,
program, or service. It simply takes profits from a few
private firms for direct transfer to certain favored, ap-
parently less-profitable competitors. The money is held
in a segregated account, may not be used to pay any
state expense, and is disbursed within a few days to the
Nos. 09-3975 & 10-1019 5
beneficiary racetracks. Assessed as a condition of state
licensure, the surcharge is more like a regulatory penalty
or fee than a tax, and therefore the Tax Injunction Act
does not apply. We also reject the racetracks’ alternative
arguments—preclusion, abstention, and failure to state
a claim—offered in support of affirmance. The TRO
remains in effect.
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 ILL. C OMP. S TAT. 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 com-
mingled 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.
6 Nos. 09-3975 & 10-1019
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 gener-
ated 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 chal-
lenging the Act’s constitutionality. They named the
Illinois Treasurer and the Illinois Racing Board as defen-
dants and sued under the “Protest Monies Act,” 30 ILL .
C OMP. S TAT. 230/2a (formally the State Officers and Em-
ployees 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 provi-
sions of the Illinois Constitution, including its takings, due-
process, uniformity, and public-purpose clauses, as well
as the Takings Clause of the Fifth Amendment. The trial
Nos. 09-3975 & 10-1019 7
court entered summary judgment for the casinos, and the
state defendants took a direct appeal to the Illinois Su-
preme Court. On June 5, 2008, the state supreme court
reversed, upholding the 2006 Act against the casinos’
state and federal constitutional challenges.4 Empress
Casino Joliet Corp. v. Giannoulias, 896 N.E.2d 277 (Ill. 2008).
Six months later, on December 7, 2008, the United States
Attorney for the Northern District of Illinois filed a crimi-
nal complaint against Blagojevich accusing the governor
of engaging in a “political corruption crime spree.” In
an affidavit filed with the complaint, an FBI agent re-
counted 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 com-
4
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, 896 N.E.2d 277, 284-87 (Ill.
2008). The court also held that state and federal takings
analysis applies only to uses of the state’s power of eminent
domain, and on this basis rejected the takings claims. Id. at 290-
93. Finally, the court rejected the casinos’ argument that the
2006 Act violated the state constitution’s public-purpose
clause because its primary beneficiaries were private parties;
the court deferred to the legislative findings regarding the
public benefits of the Act. Id. at 293-96.
8 Nos. 09-3975 & 10-1019
mittee’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, including wire fraud, at-
tempted 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 the federal constitution.
On June 8, 2009, the Supreme Court denied certiorari.
Empress Casino Joliet Corp. v. Giannoulias, 129 S. Ct.
2764 (2009).
Two days later, the casinos filed a petition in Will
County Circuit Court for relief from judgment under
735 ILL. C OMP. S TAT. 5/2-1401. The petition was based
on the newly disclosed information from the FBI’s in-
vestigation 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
Nos. 09-3975 & 10-1019 9
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 com-
mittee recommending impeachment.
This effort to reopen the constitutional challenge
failed; on August 17, 2009, the trial judge denied the
casinos’ petition. The judge said the legislature’s motive
in passing the 2006 Racing Act was irrelevant to the
Act’s constitutionality. She specifically declined to
consider the FBI agent’s affidavit, the wiretap transcripts,
or the superseding indictment, saying these items
were inadmissible hearsay, did not contain “facts which
have been proved,” and involved a different case and
different parties. (The judge did, however, take judicial
notice of the special investigative committee’s final
report.) The judge then ordered the Illinois Treasurer to
transfer the money deposited under the 2006 Act from
the protest fund to the Horse Racing Fund, setting up
the imminent disbursement of the money to the race-
tracks. The casinos appealed and asked the trial court
for a stay. This request was denied, and the Illinois Ap-
pellate Court also refused to grant a stay. On January 15,
2010, the casinos voluntarily dismissed this appeal.
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 chal-
lenging the constitutionality of the 2008 Racing Act. Filed
on January 8, 2009, their complaint alleged that the 2008
10 Nos. 09-3975 & 10-1019
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 con-
structive 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 relief
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 dis-
missed this action. The casinos appealed, but later dis-
missed the appeal and instead sought a TRO and pre-
liminary injunction from the district court in this case.
Nos. 09-3975 & 10-1019 11
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 sched-
uled 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 argu-
ments and also maintained that the casinos could not
prove a pattern of racketeering activity or proximate
causation. On the constructive-trust claim, the racetracks
(all of them) asserted multiple defenses: (1) the casino
surcharge was a tax and therefore the Tax Injunction Act
stripped the court of subject-matter jurisdiction; (2) the
action was premature because they had not yet received
disbursement of money under the Racing Acts; (3) as a
matter of law, they were not “unjustly enriched” by the
payment of money under Acts; and (4) the action was
barred by res judicata, or in the alternative, the court
should abstain under the Colorado River doctrine.
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
12 Nos. 09-3975 & 10-1019
judge acknowledged, however, that “the question is not
free from doubt.” The judge then dismissed the
constructive-trust claim, denied the motion for a prelimi-
nary 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 alterna-
tive arguments for dismissal of the constructive-
trust claim. 5 Friends of Blagojevich and Johnston are not
parties to either appeal. We consolidated the appeals
for decision and reinstated the TRO.
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.
5
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.
Nos. 09-3975 & 10-1019 13
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, 472 U.S.
511, 524-25 (1985). Whether Blagojevich is entitled to
legislative immunity is a question of law that we review
de novo. Carvajal v. Dominguez, 542 F.3d 561, 566 (7th
Cir. 2008).
The doctrine of legislative immunity is well-established
by Supreme Court and circuit precedent; state and
local officials are absolutely immune from federal suit
for personal damages for their legitimate legislative
activities. See Bogan v. Scott-Harris, 523 U.S. 44, 55 (1998);
Supreme Court of Virginia v. Consumers Union of U.S., Inc.,
446 U.S. 719, 731-34 (1980); Lake Country Estates, Inc. v.
Tahoe Reg’l Planning Agency, 440 U.S. 391, 403-04 (1979);
Tenney v. Brandhove, 341 U.S. 367, 377 (1951); Biblia Abierta
v. Banks, 129 F.3d 899, 906 (7th Cir. 1997); Thillens, Inc. v.
Cmty. Currency Exch. Ass’n of Ill., Inc., 729 F.2d 1128, 1130-
31 (7th Cir. 1984). Sixty years ago the Supreme Court
explained the contours of this common-law immunity
in Tenney v. Brandhove, 341 U.S. at 377. Tenney holds
that state officials are absolutely immune from civil
liability for activities undertaken in “the sphere of legiti-
mate legislative activity.” Id. at 376-77 (“Legislators are
immune from deterrents to the uninhibited discharge
14 Nos. 09-3975 & 10-1019
of their legislative duty, not for their private indulgence
but for the public good.”). Tenney did not create a
new strain of immunity doctrine; instead, the Court
held that Congress in passing the Civil Rights Act of
1871, the predecessor to 42 U.S.C. § 1983, had not abro-
gated preexisting common-law legislative immunity for
state officials. Id. at 372; see also Lake Country Estates,
440 U.S. at 403 (“The immunity of legislators from civil
suit for what they do or say as legislators has its roots
in the parliamentary struggles of 16th- and 17th-century
England; such immunity was consistently recognized
in the common law and was taken as a matter of course
by our Nation’s founders.”).
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, 523 U.S. at 55 (extending legislative
immunity to a mayor for signing an ordinance into
law); Consumers Union, 446 U.S. at 731-34 (extending
legislative immunity to claims for injunctive and declara-
tory relief brought against judges for promulgating a code
of professional responsibility); Lake Country Estates, 440
U.S. at 404-05 (extending legislative immunity to members
of an interstate planning commission for enacting a
regional land-use ordinance). This functional approach
to legislative immunity is consistent with the normal
method for determining the availability and scope of
common-law immunities. See Forrester v. White, 484 U.S.
219, 224 (1988) (“Running through our cases, with fair
consistency, is a ‘functional’ approach to immunity ques-
Nos. 09-3975 & 10-1019 15
tions other than those that have been decided by express
constitutional or statutory enactment.”); see also Rateree
v. Rockett, 852 F.2d 946, 950 (7th Cir. 1988) (noting func-
tional approach to legislative immunity).
Although the Supreme Court has not specifically ad-
dressed 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 sug-
gested, 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,
930 F.2d 549, 551 (7th Cir. 1991) (“When the governor of
a state is exercising his veto power, he is acting in a
legislative capacity, . . . and he is therefore entitled to
absolute immunity.” (citing Tenney and Consumers Union)).
Other circuits have not hesitated to extend legislative
immunity to governors for their legislative acts. See State
Emps. Bargaining Agent Coal. v. Rowland, 494 F.3d 71, 91-
92 (2d Cir. 2007) (confirming availability of legislative
immunity for governor, but denying it on the ground
that additional discovery was necessary to determine
whether the acts in question were legislative); Baraka v.
McGreevey, 481 F.3d 187, 196-97 (3d Cir. 2007) (absolute
legislative immunity for governor advocating passage
of legislation and signing bill into law); Torres-Rivera
v. Calderón-Serra, 412 F.3d 205, 212-14 (1st Cir. 2005)
(governor entitled to legislative immunity for signing
legislation); Women’s Emergency Network v. Bush, 323
F.3d 937, 950 (11th Cir. 2003) (same).
16 Nos. 09-3975 & 10-1019
Tenney also established that legislative immunity
applies even when the official is accused of misconduct
or other improper motive. 341 U.S. at 376-77 (“The claim
of an unworthy purpose does not destroy the privilege.”);
see also Bogan, 523 U.S. at 54 (“Whether an act is legisla-
tive turns on the nature of the act, rather than on the
motive or intent of the official performing it.”); Biblia
Abierta, 129 F.3d at 903. Accordingly, Tenney’s use of the
phrase “legitimate legislative activity” must be under-
stood as a reference to the governmental sphere in which
the official was operating, not the legality or propriety of
his acts. Tenney, 341 U.S. at 376. Legislative immunity
would have “little value,” the Court has explained, if
forced to give way in the face of allegations of official
misconduct. Id. at 377. Based on this principle, we have
extended legislative immunity to state officials despite
allegations of bribery and improper influence. See
Thillens, 729 F.2d at 1130 (state legislators are entitled to
legislative immunity in spite of bribery allegations). Even
when the plaintiff’s claim is directed primarily at
illegal conduct by public officials, immunity attaches if
the claim requires “ ‘proof of a legislative act or the
motives or purposes underlying such an act.’ ” Id. at 1131
(quoting Gravel v. United States, 408 U.S. 606, 621 (1972));
see also Chappell v. Robbins, 73 F.3d 918, 920, 925 (9th Cir.
1996) (defendant who admitted that he took bribes in
exchange for legislation was protected by legislative
immunity in civil RICO action).
Under this long-standing doctrine, Blagojevich is
entitled to immunity from this civil RICO suit. The al-
legations are that the former governor took bribes in
Nos. 09-3975 & 10-1019 17
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
Blagojevich “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, 73 F.3d at 922; Thillens, 729 F.2d at 1131.
The activity in question—influencing the state legisla-
ture to pass the bills and signing them into law—is unques-
tionably legislative in character. See Bogan, 523 U.S. at
55 (signing a bill into law is a legislative function pro-
tected by immunity); Thillens, 729 F.2d at 1131 (influencing
the legislative process is a legitimate legislative activ-
ity). Because the RICO claim “broadly implicate[s]”
Blagojevich’s role in the legislative process, he is protected
by absolute legislative immunity. Thillens, 729 F.2d at 1131.
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 im-
munity when it enacted the Civil Rights Act of 1871. 341
U.S. at 372-77. The Supreme Court has always defined
legislative immunity broadly as “absolute immunity
from federal damages liability,” without reference to any
specific cause of action. Lake Country Estates, 440 U.S. at
18 Nos. 09-3975 & 10-1019
406 (emphasis added). And like § 1983, there is nothing
in RICO to demonstrate the “clear legislative intent”
required to abrogate common-law immunity. See Pulliam
v. Allen, 466 U.S. 522, 529 (1984) (holding that clear legis-
lative intent is required to abrogate common-law
principles of legislative and judicial immunity); see also
Chappell, 73 F.3d at 923-24 (concluding that nothing in
RICO’s text or legislative history evinces an intent to
abrogate common-law legislative immunity).
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 argu-
ment that persuaded the district court. The casinos insist
that the Illinois Supreme Court’s decision in Jorgensen v.
Blagojevich, 811 N.E.2d 652 (Ill. 2004), which denied then-
Governor Blagojevich legislative immunity under the
Illinois Constitution, must control this case. Not so. It is
blackletter law that “[t]he elements of, and the defenses
to, a federal cause of action are defined by federal law.”
Howlett v. Rose, 496 U.S. 356, 375 (1990); see also Owen v.
City of Independence, 445 U.S. 622, 647 n.30 (1980) (“Munici-
pal defenses—including an assertion of sovereign im-
munity—to a federal right of action are, of course, con-
trolled by federal law.”). Indeed, the Supreme Court has
expressly rejected the position that a state constitution
or other state law should have any effect on federal
common-law legislative immunity. See Lake Country
Estates, 440 U.S. at 404-05 (“[T]he absolute immunity
for state legislators recognized in Tenney reflected the
Court’s interpretation of federal law; the decision
did not depend on the presence of a speech or debate
Nos. 09-3975 & 10-1019 19
clause in the constitution of any State, or on any
particular set of state rules or procedures available
to discipline erring legislators.”).
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, 484 F.2d 602, 607 (7th Cir. 1973).
The suggestion that state immunity law displaces an
otherwise valid claim of federal immunity is a bit odd,
or at least unworkable; for the reasons noted in Hampton,
the scope of a public official’s immunity from suit on
a federal claim in federal court is a matter of federal law.
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,
20 Nos. 09-3975 & 10-1019
954 S.W.2d 811, 823 (Tex. Ct. App. 1997) (“Because the
jurisprudence of legislative immunity is not well devel-
oped in Texas, we will rely on federal authorities to
assess the applicability of this form of immunity to the
case before us.”); see also Brown v. City of Bordentown, 791
A.2d 1007, 1010 (N.J. Super. Ct. App. Div. 2002) (adopting
federal common-law legislative immunity in state-law
action); Dublin v. State, 742 N.E.2d 232, 236-37 (Ohio Ct.
App. 2000) (looking to federal cases to define legislative
immunity).
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. 811 N.E.2d at 654-59. In rejecting
Blagojevich’s claim of legislative immunity, the Illinois
Supreme Court specifically explained that the judges
were not trying to hold the governor personally liable,
nor were they “attempting to force him to take or to
refrain from taking any particular action.” Id. at 666.
There was “nothing unusual about his inclusion as a
party,” the court said, because he was “one of the state
officials involved in the sequence of events” that led to
the judiciary’s failure to receive a cost-of-living increase.
Id. The rejection of immunity in a case like Jorgensen
is unsurprising; state officials are obviously not shielded
from all judicial review of the constitutionality of legisla-
tive acts. See Powell v. McCormick, 395 U.S. 486, 503 (1969)
Nos. 09-3975 & 10-1019 21
(“Legislative immunity does not, of course, bar all
judicial review of legislative acts.”). In short, the type
of legislative immunity from personal-damages suits
articulated in Tenney simply was not implicated in
Jorgensen.
Indeed, Jorgensen did not address common-law legisla-
tive 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. 811 N.E.2d at 666. The state constitution’s
speech-and-debate provision is limited by its terms to
members of the Illinois General Assembly and is plainly
inapplicable to Blagojevich. Id. The same would be true
of the U.S. Constitution’s Speech or Debate Clause, which
applies only to legislators and their aides. See Gravel,
408 U.S. at 616-17. But federal common-law legislative
immunity is distinct from and broader than the federal
constitution’s Speech and Debate Clause. See United
States v. Gillock, 445 U.S. 360, 372 n.10 (1980) (“Despite
the frequent invocation of the federal Speech or Debate
Clause in Tenney, the Court has made clear that the
holding was grounded on its interpretation of federal
common law, not on the Speech or Debate Clause.”).
Recognizing this distinction, state courts, like federal
courts, have not hesitated to extend common-law legisla-
tive immunity to executive officials, including governors.
See, e.g., Humane Soc’y of N.Y. v. City of New York, 729
N.Y.S.2d 360, 363 (N.Y. Sup. Ct. 2001) (“The Speech or
Debate Clause applies by its terms only to ‘members’ of
22 Nos. 09-3975 & 10-1019
the legislature. However, a similar common-law legisla-
tive privilege is applicable to government officials in
the executive branch when engaged in legislative activi-
ties.”); Mandel v. O’Hara, 576 A.2d 766, 781 (Md. 1990)
(governor entitled to common-law legislative immunity
for legislative acts despite literal wording of state con-
stitutional provision). For all these reasons, the casi-
nos—and the district court too—have simply misread
Jorgensen. It is not at all clear that if presented with a
proper claim of common-law legislative immunity, the
Illinois Supreme Court would limit the immunity to
members of the legislature.6
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 Blagojevich 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 Blagojevich
remain as defendants.7
6
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 and content of
federal common-law legislative immunity is determined by
reference to state law. It is not. See Bogan, 523 U.S. at 48-49;
Lake Country Estates, 440 U.S. at 404-05; Tenney, 341 U.S. at 372.
7
In the district court, Blagojevich asserted that legislative
immunity required dismissal of the RICO claim against
(continued...)
Nos. 09-3975 & 10-1019 23
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, 564 F.3d 820, 822 (7th Cir. 2009).
The Tax Injunction Act provides that “[t]he district
courts shall not enjoin, suspend or restrain the assess-
ment, 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’ fed-
eral-court interference with ‘the collection of [state]
taxes.’ ” Hibbs v. Winn, 542 U.S. 88, 105 (2004) (quoting
7
(...continued)
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 Blagojevich is not a party to this appeal and is not itself
entitled to immunity. Our conclusion regarding legislative
immunity extends only to Blagojevich himself.
24 Nos. 09-3975 & 10-1019
California v. Grace Brethren Church, 457 U.S. 393, 408-09
(1982)). But the Court “reads the statute narrowly to bar
only claims that would reduce the flow of state tax reve-
nue.” Levy v. Pappas, 510 F.3d 755, 760 n.1 (7th Cir. 2007).
On this understanding, the Act does not prohibit “fed-
eral-court interference with all aspects of state tax ad-
ministration,” Hibbs, 542 U.S. at 105 (quotation marks
omitted), but operates more narrowly to prevent
federal courts from interfering with a state’s collection of
tax revenue, see id. at 106 (“Our prior decisions [regarding
the Act] are not fairly portrayed cut loose from their
secure, state-revenue-protective moorings.”). “If the
relief sought ‘would . . . operate[] to reduce the flow of
state tax revenue’ or would tie up ‘rightful tax revenue,’
then the Act bars federal jurisdiction over the claims.”
Levy, 510 F.3d at 762 (quoting Hibbs, 542 U.S. at 106,
and Rosewell v. LaSalle Nat’l Bank, 450 U.S. 503, 527-28
(1981)); see also Scott Air Force Base Props., LLC v. Cnty. of
St. Clair, 548 F.3d 516, 520 (7th Cir. 2008) (Tax Injunction
Act applies if “the relief sought would diminish or en-
cumber state tax revenue”).
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 assess-
ment is a tax for purposes of the Tax Injunction Act is
Nos. 09-3975 & 10-1019 25
a question of federal law. Wright v. Riveland, 219 F.3d 905,
911 (9th Cir. 2000); Wright v. McClain, 835 F.2d 143, 144
(6th Cir. 1987); Tramel v. Schrader, 505 F.2d 1310, 1315 n.7
(5th Cir. 1975). That the surcharge survived uniformity
and public-purpose clause challenges under the state
constitution is irrelevant to this question.
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, 84
F.3d 865, 870-71 (7th Cir. 1996); Bidart Bros. v. Cal. Apple
Comm’n, 73 F.3d 925, 930-31 (9th Cir. 1996); San Juan
Cellular Tel. Co. v. Pub. Serv. Comm’n of Puerto Rico, 967
F.2d 683, 685-87 (1st Cir. 1992). We have explained the
distinction in this way:
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 regu-
lated companies or defrays the agency’s cost of reg-
ulation.”
Hager, 84 F.3d at 870 (quoting San Juan Cellular, 967 F.2d
at 685).
Our decision in Hager drew on the First Circuit’s influen-
tial 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:
26 Nos. 09-3975 & 10-1019
[Courts] have sketched a spectrum with a paradig-
matic 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, contrib-
uted 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 reg-
ulation. 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, 967 F.2d at 685 (citations omitted). San
Juan Cellular was a challenge to a 3% “periodic fee” as-
sessed by the Puerto Rico Public Service Commission on
the revenues of a private cellular-telephone company as
a condition of its operating permit. The fee was assessed
by a regulatory agency, placed in a special fund, and
used not for general governmental purposes but to
defray the costs of the agency’s regulatory activities. Id.
at 686. On these facts the First Circuit held that “the
‘periodic fee’ is a regulatory ‘fee,’ not a tax,” and there-
fore the Tax Injunction Act did not apply. Id.
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. 84 F.3d at 871-72. The fee at issue in Hager had been
adopted to promote public safety and help defray the
Nos. 09-3975 & 10-1019 27
municipality’s cost of maintaining the road; the point of
the ordinance was to regulate the operators of large
vehicles who used the road, not to tax them to raise
general revenue. Id. at 871. We reached the opposite
conclusion in Schneider Transport, Inc. v. Cattanach, 657
F.2d 128 (7th Cir. 1981), another case involving levies
on trucks. In Schneider a trucking company sued the
Wisconsin Secretary of Transportation to enjoin the
imposition of a vehicle-registration fee on its fleet of
trucks. Truck-registration fees were deposited in the
state’s transportation fund and used for general trans-
portation purposes, “including highway construction.”
Id. at 132. We concluded that the fee was a tax for
purposes of the Tax Injunction Act. Id. Unlike the
permit fee in Hager, the fee in Schneider was “imposed for
revenue-raising purposes, a characteristic of any tax.”
Id.; see also Hager, 84 F.3d at 872 n.6 (distinguishing Schnei-
der). Though the fees were held in the state transporta-
tion fund and not commingled with general state
revenues, the money was allocated to highway construc-
tion and other traditional governmental services per-
taining to the operation and maintenance of the state’s
transportation infrastructure. Schneider, 657 F.2d at 132.
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 ILL. C OMP. S TAT. 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.
28 Nos. 09-3975 & 10-1019
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 appro-
priation 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), (c-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 de-
posited 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, re-
ally. It’s not even a classic regulatory fee, since no part
of it goes to support the state’s gaming regulatory ap-
paratus. 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 re-
strictions on how the racetracks may spend the money
they receive. All of the money—100%—is for their sole
private benefit; none of it—zero—may be used for any
Nos. 09-3975 & 10-1019 29
state expense. In this sense, the casino surcharge is even
less like a tax than the permit fee in Hager, the proceeds
of which were put toward road repairs, a traditional
public service; nonetheless, we held there that the Tax
Injunction Act did not apply. Hager, 84 F.3d at 871. And
the surcharge is nothing like the truck-registration fee
at issue in Schneider, which we said was a tax; the reg-
istration fee was collected from trucking firms to pay
for highway construction and other general state trans-
portation needs.
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, 510 F.3d at 762.
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 Com-
mission’s assessment of fees on apple producers to
support advertising and other activities designed to
boost apple consumption. 73 F.3d at 927. Like the Racing
Acts here, the enabling legislation at issue in Bidart con-
tained findings about the importance of the apple
30 Nos. 09-3975 & 10-1019
industry to the state’s economy. Id. (noting legislative
findings to the effect that “[t]he maintenance of the
apple industry . . . is necessary to assure the public of a
continuous supply of this vital food product and the
maintenance of needed levels of income for those
persons engaged in the industry”). No matter; the court
held that the apple assessment was a regulatory fee,
not a tax. “The indirect benefit that may accrue to Cali-
fornia’s general populace through increased demand for
apples as a result of advertising or education is not
the type of public benefit that makes an assessment a
tax.” Id. at 933.
Finally, we note that the 2006 and 2008 Racing Acts were
enacted under the state legislature’s police power, not
its tax power.8 Casino gaming and horse-track betting
are highly regulated industries. The Riverboat Gambling
Act, which the Racing Acts amend, is explicit that its
authority is drawn from the police power. See 230 ILL.
C OMP. S TAT. 10/2(b) (“[R]egulatory provisions of this
[Riverboat Gambling] Act are designed to strictly
regulate the facilities, persons, associations and practices
related to gambling operations pursuant to the police
8
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.
Nos. 09-3975 & 10-1019 31
powers of the State, including comprehensive law enforce-
ment supervision.” (emphasis added)). Similarly, the
legislature’s authority to regulate horse racing resides
in the police power. See Finish Line Express, Inc. v. City of
Chicago, 379 N.E.2d 290, 292 (Ill. 1978) (It is “undisputed”
that gambling on horse races is subject to regulation
or complete prohibition under the legislature’s police
power.). This supports our conclusion that the casino
surcharge is properly characterized as a regulatory
penalty or fee, not a tax. See Hager, 84 F.3d at 871 (permit
fee enacted under a municipality’s police power rather
than its taxing power is not a tax).
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 Injunc-
tion 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.9
9
The Supreme Court’s decision in Levin v. Commerce Energy,
Inc., 130 S. Ct. 2323 (2010), does not affect our decision. The
question in Levin was whether the doctrine of comity precludes
the exercise of federal-court jurisdiction in a case challenging
a state tax as discriminatory in violation of equal protection
or the dormant Commerce Clause. Id. at 2332-33. Levin was a
suit against the Ohio Tax Commissioner by sellers of natural
gas seeking declaratory and injunctive relief invalidating tax
exemptions given to their competitors. The Court held that
the claim of discriminatory taxation must proceed originally in
state court, even when “framed as a request to increase a
(continued...)
32 Nos. 09-3975 & 10-1019
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., 721 F.2d 1121, 1124 (7th Cir. 1983). These
additional arguments provide an alternative basis on
which to affirm and are therefore properly before us.
See Munaf v. Geren, 553 U.S. 674, 691 (2008) (“Review of
a preliminary injunction ‘is not confined to the act of
granting the injunctio[n], but extends as well to deter-
mining whether there is any insuperable objection, in
point of jurisdiction or merits, to the maintenance of
[the] bill, and, if so, to directing a final decree dis-
missing it.’ ” (citations omitted)).
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, 474 U.S. 518, 519 (1986); 28 U.S.C. § 1738.
9
(...continued)
commercial competitor’s tax burden.” Id. at 2327. Because
Levin was a federal constitutional challenge to the validity of
Ohio’s natural-gas taxation scheme brought against the state
taxing authority, it entailed “the very interference in state
taxation the comity doctrine aims to avoid.” Id. at 2335. In
contrast, here, the casinos’ suit will not interfere with Illinois’
collection of state tax revenue.
Nos. 09-3975 & 10-1019 33
Under Illinois law “[t]he doctrine of res judicata pro-
vides that a final judgment on the merits rendered by
a court of competent jurisdiction bars any subsequent
actions between the same parties or their privies on
the same cause of action.” Hudson v. City of Chicago, 889
N.E.2d 210, 213 (Ill. 2008) (quotation marks omitted).
Res judicata requires: (1) a final state-court judgment on
the merits; (2) identity of cause of action; and (3) identity
of parties or their privies. Id. Res judicata bars not only
issues that were actually litigated in the prior pro-
ceeding but also issues that could have been raised but
were not. River Park, Inc. v. City of Highland Park,
703 N.E.2d 883, 889 (Ill. 1998). That is, “[t]he doctrine
extends not only to what was actually decided in the
original action, but also to matters which could have
been decided in that suit.” Rein v. David A. Noyes & Co.,
665 N.E.2d 1199, 1204 (Ill. 1996).
The state supreme court’s decision rejecting the con-
stitutional 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 allega-
tions 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-conspiracy 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 claims also involve different parties.
34 Nos. 09-3975 & 10-1019
The constitutional challenge was brought against the
state treasurer and the Illinois Racing Board; the
constructive-trust claim is brought against the race-
tracks, and the RICO claim on which it is based is
against Johnston, Balmoral, Maywood, and Friends of
Blagojevich. It would have made no sense for the casinos
to name any of these defendants in their constitu-
tional challenge to the 2006 Racing Act.
The racetracks attempt to fashion a res judicata argu-
ment 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 Blagojevich and
in the impeachment proceedings against him. But
postjudgment 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, 737 N.E.2d 169, 182
(Ill. 2000). A § 2-1401 petition is analogous to a motion
for relief from judgment under Rule 60(b)(2) of the
Federal Rules of Civil Procedure. See In re Marriage of
Wolff, 822 N.E.2d 596, 604 (Ill. App. Ct. 2005). Like a
motion made under the federal rule, a § 2-1401 petition
is not a vehicle to bring new claims—let alone entirely
different claims against parties that intervened in the
action after the original judgment was entered.1 0
10
The racetracks argue that Illinois law does not distinguish for
res judicata purposes between an intervenor and an original
(continued...)
Nos. 09-3975 & 10-1019 35
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 Blagojevich,
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 thus
no effect on the final judgment—which is, after all, the
limited purpose of a § 2-1401 petition.
The racetracks cite State Farm Illinois Federal Credit
Union v. Hayes, 416 N.E.2d 703 (Ill. App. Ct. 1981), which
they say establishes the res judicata effect of decisions
on § 2-1401 petitions. But Hayes was part of a line of cases
holding that § 2-1401 decisions have res judicata effect
on successive § 2-1401 petitions, not on entirely new
10
(...continued)
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.
36 Nos. 09-3975 & 10-1019
actions filed against different parties. See, e.g., Vill. of
Glenview v. Buschelman, 693 N.E.2d 1242 (Ill. App.
Ct. 1998) (“The [Illinois] supreme court’s decisions in
Deckard v. Joiner, 44 Ill.2d 412, 418-19, 255 N.E.2d 900
(1970), and its progeny have steadily held that repeated
[§ 2-1401 petitions] are prohibited, as they unneces-
sarily frustrate the policy of bringing finality to court
proceedings.”). The reason for this rule is obvious: It cuts
down on the waste of judicial resources by preventing
litigants from plying courts with the same losing argu-
ments again and again. The rule has no application here.
The racetracks also cite Burnicka v. Marquette National
Bank, 431 N.E.2d 358, 360 (Ill. 1982), which held that a § 2-
1401 petition for relief from judgment is the “filing of a
new action.” But this short opinion had nothing to do
with res judicata; it merely held that a petition for
relief from judgment (formerly a motion made under
§ 72 of the Illinois Civil Practice Act) should be treated
as a new action for purposes of the 30-day window
for appeal of a final judgment.1 1 Id.
11
The Racetracks also cite Lubbers v. Norfolk & Western Rail-
way, 473 N.E.2d 955 (Ill. 1984), a case in which the Illinois
Supreme Court remanded with instructions to allow a plain-
tiff to amend a § 2-1401 petition to include an additional
claim. But in Lubbers the claim to be added—a count asserting
“wilful and wanton” misconduct—was joined to a negligence
claim only after it had become clear that the defendant won
the case because it had concealed key evidence. Id. at 959-60.
At most, Lubbers shows that related claims against the same
(continued...)
Nos. 09-3975 & 10-1019 37
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,
665 N.E.2d at 1204. For the same reasons, the state
court’s decision rejecting the casinos’ constitutional
challenge to the 2008 Act has no res judicata effect either.
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 col-
lateral 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, 833 N.E.2d 834, 843 (Ill. 2005). Because
the issues decided in the state-court constitutional chal-
lenges are different from the issues to be decided in
11
(...continued)
defendant may be brought in a § 2-1401 petition; it does not
stand for the broad proposition that unrelated claims against
different defendants must be brought in a § 2-1401 petition. And
it certainly does not mean that the failure to bring such unre-
lated claims operates as res judicata.
38 Nos. 09-3975 & 10-1019
this federal racketeering suit, collateral estoppel does
not apply.
Relatedly, we also reject the racetracks’ contention that
abstention is warranted under the Colorado River doc-
trine. See Colorado River Water Conservation Dist. v. United
States, 424 U.S. 800 (1976). The racetracks maintain that
Colorado River applies because the suit challenging the
constitutionality of the 2008 Act suit is still winding its
way through the Illinois courts. Colorado River abstention
is exercised sparingly and is only appropriate when
“there is a substantial likelihood that the [state-court]
litigation will dispose of all claims presented in the
federal case.” TruServ Corp. v. Flegles, Inc., 419 F.3d 584,
592 (7th Cir. 2005) (citation omitted). This will only be
the case when the state and federal actions are “paral-
lel”; absent that, Colorado River abstention is inapplicable.
Id. As should be obvious by now, the state and fed-
eral actions are not parallel. Colorado River abstention
does not apply.
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 seeks an
equitable remedy for the underlying RICO violation to
prevent the racetracks from being unjustly enriched.
Balmoral and Maywood—the racetracks Johnston
Nos. 09-3975 & 10-1019 39
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 casi-
nos’ 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 ques-
tion . . is whether the alleged violation led directly
to the plaintiff’s injuries.” Anza v. Ideal Steel Supply Corp.,
547 U.S. 451, 461 (2006). A RICO plaintiff must show
that the predicate offense “not only was a ‘but for’ cause
of his injury, but was the proximate cause as well.” Hemi
Group, LLC v. City of New York, 130 S. Ct. 983, 989 (2010)
(quotation marks omitted). What this means is that the
link between the alleged RICO conspiracy and the plain-
tiff’s injury must not be “too remote,” or “purely con-
tingent,” or “indirec[t].” Id. (citation omitted).
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
40 Nos. 09-3975 & 10-1019
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 con-
trary, 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 casinos’ expense via the enactment and signing of
the Racing Acts. The casinos’ injury flowed directly
from the conspiracy, or so a reasonable jury could con-
clude.
Arlington, Fairmount, and Hawthorne make two sepa-
rate arguments relating to the legal sufficiency of the
constructive-trust claim. They contend that the construc-
tive-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.12 These are variations on the preclusion argu-
ments earlier discussed, and we reject them for reasons
that are by now familiar—namely, that the state- and
federal-court actions involve different claims and parties.
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.”
12
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.
Nos. 09-3975 & 10-1019 41
In re Liquidation of Sec. Cas. Co., 537 N.E.2d 775, 782 (Ill.
1989). The casinos may prove that the racetracks were
unjustly enriched by the RICO conspiracy without refer-
ence to the constitutionality of the Racing Acts. Their
claim here is that the Acts are tainted by corruption,
not that they are unconstitutional.
In a different twist on the same argument, the race-
tracks 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 func-
tioned—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.1 3 But
13
For this argument the racetracks cite In re Liquidation,
which held that a court of equity has no power “to dispense with
(continued...)
42 Nos. 09-3975 & 10-1019
a constructive trust on the disbursements received from
the Horse Racing Fund would neither nullify the
Racing Acts nor undo the state-court judgments. True, it
would prevent the racetracks from receiving pay-
ments from the Fund, but only because the casinos
will have proven that they were unjustly enriched by
the RICO conspiracy—not that the Racing Acts or any
order entered by a state court was invalid.
For the foregoing reasons, we R EVERSE the district
court’s order denying Blagojevich’s claim of legislative
immunity and R EMAND with instructions to dismiss
him from the case. We also R EVERSE 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 R EMANDED for further
proceedings consistent with this opinion. The TRO shall
remain in effect.
13
(...continued)
the plain requirements of a statute.” In re Liquidation of Sec. Cas.
Co., 537 N.E.2d 775, 782 (Ill. 1989) (quotation marks omitted).
In that case, the defrauded shareholders of an insurance
company sought to place a constructive trust on the proceeds
of a stock offering; the court held that this remedy was pre-
cluded by the exclusive scheme of the Illinois Insurance Code
governing the distribution of assets from a liquidated
insurer’s estate. Id. at 781-82. The case does no more than
illustrate the unremarkable principle that a court of equity
cannot invalidate a “comprehensive statutory scheme.” Id.
at 781. This principle is not implicated here.
Nos. 09-3975 & 10-1019 43
P OSNER, Circuit Judge, 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 race-
tracks 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 Court of
Virginia v. Consumers Union of the United States, Inc., 446
U.S. 719, 732 (1980); United States v. Gillock, 445 U.S. 360,
372 n. 10 (1980); Bryant v. Jones, 575 F.3d 1281, 1304
(11th Cir. 2009); Fowler-Nash v. Democratic Caucus of Penn-
sylvania House of Representatives, 469 F.3d 328, 330-31 (3d
Cir. 2006); National Ass’n of Social Workers v. Harwood, 69
44 Nos. 09-3975 & 10-1019
F.3d 622, 629 (1st Cir. 1995). Were the scope of official
immunity determined by state law, a state could prevent
the federal courts from enforcing federal statutes, such
as RICO—which are frequently enforced against em-
ployees of state or local government, e.g., United States
v. Genova, 333 F.3d 750 (7th Cir. 2003); United States v.
Thompson, 685 F.2d 993 (6th Cir. 1982) (en banc); United
States v. Long, 651 F.2d 239 (4th Cir. 1981); United States
v. Baker, 617 F.2d 1060 (4th Cir. 1980)—to the full
extent intended by Congress. What is unusual about
this case is that the State of Illinois appears to give its
governors less immunity than the federal common law
might otherwise do; and why should federal courts grant
defendants who are state employees a broader official
immunity than those defendants would be entitled to if
sued under state law? The interest in giving state
officers immunity from suit is a state interest. If a state
places no value on that interest in a particular setting,
such as a suit against the state’s governor, there is no
reason for a federal court, enforcing a federal statute,
to grant the state official immunity from suit.
In Jorgensen v. Blagojevich, 811 N.E.2d 652 (Ill. 2004), the
Supreme Court of Illinois had to decide whether a suit
on behalf of the state’s judges could be maintained
against the governor, who had vetoed a bill granting
the judges a cost-of-living increase. The court ruled that
the governor was not entitled to legislative immunity.
(The court went on to hold, on the merits, that the veto
violated a provision of the Illinois constitution that
forbade reducing judges’ compensation, because the cost-
of-living increase had vested and thus become a part
Nos. 09-3975 & 10-1019 45
of their compensation and therefore could not be re-
scinded. Id. at 665-66.) The ruling on immunity was
surprising because the Governor of Illinois, like the
President of the United States, is effectively a third
branch of the legislature by virtue of his veto power.
Bogan v. Scott-Harris, 523 U.S. 44, 55 (1998); Edwards v.
United States, 286 U.S. 482, 490 (1932). And so when a
governor is performing his legislative role, as Governor
Blagojevich was doing when he vetoed the cost-of-living
bill, he is—or so one might think—entitled to the same
immunity as legislators.
That is the general rule, Baraka v. McGreevey, 481 F.3d
187, 196-98 (3d Cir. 2007); Torres-Rivera v. Calderón-Serra,
412 F.3d 205, 212-13 (1st Cir. 2005); Women’s Emergency
Network v. Bush, 323 F.3d 937, 950 (11th Cir. 2003); cf. Bogan
v. Scott-Harris, supra, 523 U.S. at 55 (mayor), but it may not
be the rule in Illinois after Jorgensen. The opinion said
that the suit did not seek “to hold the Governor
personally liable for his actions, nor are [the judges]
attempting to force him to take or to refrain from
taking any particular action. He was named in the litiga-
tion because he was one of the state officials involved
in the sequence of the events which led to the failure of
the Judges to receive their” cost-of-living increase. 811
N.E.2d at 666. But the judgment nullified his legislative
act—the veto—and the opinion goes on to note that
“examples of Illinois governors being joined as de-
fendants in cases seeking declaratory and injunctive
relief based on alleged violations of state constitutional
and legal requirements are commonplace.” Id. Presidents
and governors are routinely enjoined from enforcing
46 Nos. 09-3975 & 10-1019
unconstitutional statutes, but—precisely because such
statutes can be enjoined—it would be extremely odd to sue
a President or a governor for having signed an uncon-
stitutional bill into law; his act would be harmless. If such
a suit is what Jorgensen permits, the Supreme Court of
Illinois has modified traditional legislative immunity.
The opinion goes on to state that “in Illinois, legislative
immunity is addressed in” a constitutional and a
statutory provision neither of which, the court ruled, “is
applicable to the Governor.” Id. This sounds like the
renunciation of a common law power to add to legisla-
tively specified immunities.
But Jorgensen was an unusual case, and may not be
applicable to our case. The legislative act enjoined was
not a statute, but a veto 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, 523 U.S. at 54-55;
Lake Country Estates, Inc. v. Tahoe Regional Planning
Agency, 440 U.S. 391, 403-05 (1979); Biblia Abierta v.
Banks, 129 F.3d 899, 903-04 (7th Cir. 1997), and the
present suit accuses the governor of having signed the
racetrack legislation because he had been bribed to do
so. One can imagine the Supreme Court of Illinois, given
its skepticism about granting a governor legislative
immunity, holding that a governor has only a qualified
immunity for his legislative acts—an immunity that
would not shield him from being sued for accepting
Nos. 09-3975 & 10-1019 47
bribes to sign laws. The court might think it odd that
were Blagojevich convicted for criminal acts that
included the racetrack bribe he could not be sued civilly
for the same acts.
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, 445 U.S. at 372-
73. (The legislative immunity of federal legislators is
broader because of the Constitution’s “speech or debate”
clause. U.S. Const. art I, § 6, cl. 1; United States v. Gillock,
supra, 445 U.S. at 366-73; In re Witness Before Special Grand
Jury 2000-2, 288 F.3d 289, 295 (7th Cir. 2002); Romero-Barcelo
v. Hernandez-Agosto, 75 F.3d 23, 30 (1st Cir. 1996).) Other-
wise the immunity would not be absolute. The Court in
Gillock, in refusing to extend the immunity to criminal
prosecutions, reasoned that the federal interest in
enforcing federal criminal laws is greater than the
interest in enforcing civil laws. But the Supreme Court
of Illinois gives less weight to the legislative interest in
immunity from civil cases than the federal rule does.
One doubts therefore that the Illinois court would grant
a governor absolute legislative immunity.
If this is right, we should give him no greater
immunity in the name of federal common law. The Su-
preme 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 of state law.’ Our cases
48 Nos. 09-3975 & 10-1019
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’Melveney & Myers v. FDIC, 512 U.S. 79, 87-88
(1994) (citations omitted). “[A] court should endeavor
to fill the interstices of federal remedial schemes with
uniform federal rules only when the scheme in question
evidences a distinct need for nationwide legal standards,
or when express provisions in analogous statutory
schemes embody congressional policy choices readily
applicable to the matter at hand. Otherwise, we have
indicated that federal courts should ‘incorporat[e] [state
law] as the federal rule of decision,’ unless ‘application of
[the particular] state law [in question] would frustrate
specific objectives of the federal programs.’ ” Kamen v.
Kemper Financial Services, Inc., 500 U.S. 90, 98 (1991) (cita-
tions omitted); see also United States v. Kimbell Foods, Inc.,
440 U.S. 715, 728 (1979); Miller v. Illinois Central R.R.,
474 F.3d 951, 952-53 (7th Cir. 2007); FDIC v. Braemoor
Associates, 686 F.2d 550, 554 (7th Cir. 1982); compare
United States v. Gillock, 445 U.S. 360 (1980).
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, 535 U.S. 613, 618-20 (2002);
Wisconsin Dep’t of Corrections v. Schacht, 524 U.S. 381, 389
(1998); Clark v. Barnard, 108 U.S. 436, 447 (1883). It is true
that state officials continue to enjoy official immunity
Nos. 09-3975 & 10-1019 49
in federal suits after a state indemnifies its officials.
Greenberg v. Kmetko, 922 F.2d 382, 384 (7th Cir. 1991);
Jaworski v. Schmidt, 684 F.2d 498, 500 (7th Cir. 1982); Buckles
v. King County, 191 F.3d 1127, 1136 (9th Cir. 1999), just as
a state does not lose its Eleventh Amendment immunity
from suit by having a right to be indemnified by the
federal government. Regents of University of California
v. Doe, 519 U.S. 425, 430-31 (1997). Some states have
decided, rather than giving their employees immunity
and thus denying relief to victims of the employees’
torts, to abrogate immunity but indemnify their em-
ployees in cases in which the employees would have
been immune. We have not followed suit when the state
employee is sued for a federal civil rights violation, but
that is because 42 U.S.C. § 1988(a) reverses in such
cases the rule of Kimbell Foods of presumptive adoption
of state law to furnish the content of federal common law.
Section 1988(a) provides that the “jurisdiction in civil
and criminal matters conferred on the district courts by
the [federal civil rights law] . . . shall be exercised and
enforced in conformity with the laws of the United
States, so far as such laws are suitable . . .; but in all cases
where they are not adapted to the object, or are deficient
in the provisions necessary to furnish suitable remedies
and punish offenses against law,” state law shall apply.
Section 1988(a) was first enacted as section 3 of the
Civil Rights Act of 1866, 14 Stat. 27, and its presumption
in favor of federal rules of decision was undoubtedly
based on concerns about southern hostility to civil rights.
Interpretation of Jorgensen is further complicated by
the fact that the suit did not seek damages from the
50 Nos. 09-3975 & 10-1019
governor. Official immunity usually just means immunity
from damages suits. Pulliam v. Allen, 466 U.S. 522, 536-38
(1984); Supreme Court of Virginia v. Consumers Union of
United States, Inc., supra, 446 U.S. at 736-37; 13D Charles A.
Wright et al., Federal Practice and Procedure § 3573.3, pp. 605-
06, 615-16 (3d ed. 2008); David Achtenberg, “Immunity
Under 42 U.S.C. § 1983: Interpretive Approach and the
Search for the Legislative Will,” 86 Nw. U. L. Rev. 497, 516-
17 (1992). But legislative immunity confers immunity
from injunctive relief as well, in Illinois, Fletcher v. City
of Paris, 35 N.E.2d 329, 332 (Ill. 1941); People ex rel.
Huempfner v. Benson, 128 N.E. 387, 388 (Ill. 1920), as else-
where. Supreme Court of Virginia v. Consumers Union of
United States, Inc., supra, 446 U.S. at 731-34; Eastland
v. United States Servicemen’s Fund, 421 U.S. 491, 502-03
(1975).
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 Act forbids federal district courts
to “enjoin, suspend or restrain the assessment, levy or
collection of any tax under State law,” provided that an
Nos. 09-3975 & 10-1019 51
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, 450 U.S. 503, 522
(1981). The Court in Ex parte Young, 209 U.S. 123 (1908), had
as a practical matter stripped away the states’ sovereign
immunity from equitable suits; so were it not for the
Tax Injunction Act “ ‘state tax administration might be
thrown into disarray, and taxpayers might escape the
ordinary procedural requirements imposed by state
law. During the pendency of the federal suit the collec-
tion of revenue under the challenged law might be ob-
structed, with consequent damage to the State’s budget,
and perhaps a shift to the State of the risk of taxpayer
insolvency.’ ” Rosewell v. LaSalle Nat’l Bank, supra, 450 U.S.
at 527, quoting Perez v. Ledesma, 401 U.S. 82, 128 n. 17 (1971)
(separate opinion); see also Hill v. Kemp, 478 F.3d 1236,
1246-47 (10th Cir. 2007). And “it is upon taxation that
the several States chiefly rely to obtain the means to
carry on their respective governments, and it is of the
utmost importance to all of them that the modes adopted
to enforce the taxes levied should be interfered with as
little as possible. Any delay in the proceedings of the
officers, upon whom the duty is devolved of collecting the
taxes, may derange the operations of government, and
thereby cause serious detriment to the public.” Dows v.
City of Chicago, 78 U.S. (11 Wall.) 108, 109-10 (1871). Of
course enjoining a particular tax is unlikely to “derange
the operations of government.” That was a bit of 1871-
52 Nos. 09-3975 & 10-1019
style hyperbole. But the Tax Injunction Act is not limited
to “deranging” taxes, and the majority opinion if it
stands may make the application of the Act turn on
judges’ guesses concerning the importance of a par-
ticular tax to the operations of state government.
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 “derange-
ment” 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 pre-
senting evidence of corruption in the process by which
the taxing statute had been enacted. This has been recog-
nized in analogous contexts, see, e.g., City of Columbia
v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 374-78
(1991) (state immunity from federal antitrust suits)—
notably that of absolute immunity, Pierson v. Ray, 386
U.S. 547, 553-54 (1967), as I pointed out in discussing the
federal (but maybe not the Illinois) rule on legislative
immunity.
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, §§ 9-1A-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 un-
usual; think of the social security tax. Horse racing,
the beneficiary of the casino tax, is a major activity in
Nos. 09-3975 & 10-1019 53
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, § 1(3)-(4); Illinois Racing Board,
“2009 Annual Report” 2, 6 (Mar. 2010), www.state.il.us/
ag e n c y/ ir b /r ac in g /r ep o r ts/2009_A n nu al_R ep ort.p df
(visited Feb. 15, 2011); Commission on Government
Forecasting and Accountability, “Wagering in Illinois—
2009 Update” 51-57 (2010), www.ilga.gov/commission/
cgfa2006/Upload/2009wagering_in_il.pdf (visited Feb. 15,
2011). And that’s just the beginning, because horse
racing boosts the horse population of Illinois, which
benefits breeders, horse farms, feed companies, and
other commercial activities ancillary to horse racing.
Bill Wright, “Where Illinois’ Economy Gets Its Horse-
power,” Chicago Tribune, Mar. 10, 2002, p. 6. Governments
routinely subsidize favored activities—not by taxing
the persons or firms engaged in the activities, which
would negate the subsidy, but by taxing someone else.
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?,”
54 Nos. 09-3975 & 10-1019
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 Account-
ability, supra, at 56-57; Will Buss, “Hoffman: Bill Will
Help Fairmount,” Belleville News-Democrat, Mar. 27, 2008,
p. A1. 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, govern-
ment would keep its hands off the competition between
the casinos and the racetracks. The disappearance of
racetracks, jockeys, horses, bridles, blacksmiths, race-
track 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 reg-
ulatory powers to redistribute wealth from one group
in society to another. This may be good or bad, but it
Nos. 09-3975 & 10-1019 55
is routine and constitutional. Federal payroll taxes are
earmarked for such programs as Medicare, social
security, and unemployment benefits; the federal gaso-
line tax is used to subsidize highway construction; other
earmarked taxes (taxes the revenues from which are
specified for a particular use) are common. See
Susannah 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 un-
known. 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 technologies, 30 ILCS 730/3; and Ohio taxes wine
from all over the world to pay for research on grapes
in Ohio. Ohio Rev. Code Ann. §§ 924.51 et seq., 4301.43(B).
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
56 Nos. 09-3975 & 10-1019
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 at-
tendance 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 pur-
poses of the Tax Injunction Act. We have explained
the difference as follows: “If the fee is a reasonable
estimate of the cost imposed by the person required
to pay the fee, then it is a user fee and is within the mu-
nicipality’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., 958 F.2d 1388, 1399
(7th Cir. 1992). For examples of exactions held to be fees
rather than taxes for purposes of the Tax Injunction
Act, see Hager v. City of West Peoria, 84 F.3d 865, 870-71 (7th
Cir. 1996) (fees for permits for use of certain streets by
heavy trucks); Government Suppliers Consolidating Services,
Nos. 09-3975 & 10-1019 57
Inc. v. Bayh, 975 F.2d 1267, 1271 n. 2 (7th Cir. 1992) (regis-
tration fees for waste-collection vehicles), and Trailer
Marine Transport Corp. v. Rivera Vazquez, 977 F.2d 1, 4-6 (1st
Cir. 1992) (annual fee imposed on owners of motor
vehicles to fund compulsory accident compensation). For
examples of exactions held to be taxes for purposes of the
Act, see Hill v. Kemp, supra, 478 F.3d at 1243-46 (costs
of specialty license plates; revenue in excess of admin-
istrative costs go to general fund and elsewhere); Folio v.
City of Clarksburg, 134 F.3d 1211, 1217 (4th Cir. 1998)
(city fee for fire protection); Wright v. McClain, 835 F.2d
143, 145 (6th Cir. 1987) (parolee’s payments to a victim
compensation fund); and cf. Diginet, Inc. v. Western Union
ATS, Inc., supra, 958 F.2d at 1399 (“franchise fee” imposed
on use of a fiber optic network to generate revenues
that are “use[d] to offset unrelated costs or confer unre-
lated benefits”).
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, 84 F.3d at 870. The reference to “narrow benefits”
may seem to describe this case, since only racetracks
received the proceeds of the casino tax. But this is to
ignore the words in the Hager opinion that follow “pro-
vides more narrow benefits”: “to regulated companies
or defrays the agency’s cost of regulation.” A fee matches
revenue to cost: a doctor’s fee pays for his service. The
58 Nos. 09-3975 & 10-1019
tax on the casinos does not go to pay for some service
that the State of Illinois renders to casinos; it goes to
subsidize racetracks, and so it falls within the rule that
exactions of money earmarked for designated purposes
rather than just collected to swell the state’s coffers are
taxes within the meaning of the Tax Injunction Act
whether or not they are levied for a purpose of which
judges approve. Schneider Transport, Inc. v. Cattanach, 657
F.2d 128, 132 (7th Cir. 1981) (registration fee held to be a
tax even though the tax revenues were deposited in a
segregated fund, the state transportation fund, earmarked
for state highway construction); Valero Terrestrial Corp. v.
Caffrey, 205 F.3d 130, 135 (4th Cir. 2000) (solid waste
disposal assessment fee held to be a tax even though
the revenues were earmarked for environmental clean
up); Wright v. McClain, supra, 835 F.2d at 145 (charges
earmarked for corrections held to be a tax). The majority
opinion in the present case invokes Bidart Brothers v.
California Apple Comm’n, 73 F.3d 925 (9th Cir. 1996),
but that case involved an assessment of fees on apple
producers to support advertising and other activities
designed to boost apple consumption. The fees were to
pay for services to the payors of the fees. Taxes are
levied on people or firms who may derive no benefit at
all from them, as in the present case. Workers who die
before reaching the age of eligibility for social security
receive no social security benefits, though they may have
paid many thousands of dollars in social security taxes.
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
Nos. 09-3975 & 10-1019 59
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, 115 F.3d 1372, 1383 (8th
Cir. 1997); San Juan Cellular Telephone Co. v. Public Service
Comm’n of Puerto Rico, 967 F.2d 683, 686-87 (1st Cir. 1992).
But if the use of tax moneys to subsidize racetracks is
enjoined, the subsidy program is halted until the injunc-
tion is lifted—unless the rule is to be that an earmarked
tax, held to be enjoinable, can be replaced by a tax
having a broader base. This would inject the federal
courts deeply into the design of injunction-proof state
taxes.
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, 305 F.3d 757, 761 (7th Cir. 2002); Beatty v.
Guggenheim Exploration Co., 122 N.E. 378, 380 (N.Y. 1919)
(Cardozo, J.); 1 Dan B. Dobbs, Law of Remedies § 4.3(2),
pp. 589-90 (2d ed. 1993). If allowed in cases in which
an injunction would be unlawful, it would defeat the
purpose of the Tax Injunction Act. So the Second Circuit
held in the name of the Tax Anti-Injunction Act, 26
U.S.C. § 7421(a)—the counterpart, in federal taxation, to
the Tax Injunction Act—with regard to the imposition of
a constructive trust on moneys that would otherwise
have been used to satisfy federal tax liabilities. SEC v.
Credit Bancorp, Ltd., 297 F.3d 127, 137-38 (2d Cir. 2002).
60 Nos. 09-3975 & 10-1019
Other forms of equitable relief have been held to be
forbidden by the Tax Injunction Act when, even though
no equitable relief was sought against the state itself, the
relief sought would have indirectly but substantially
interfered with tax collection by the state. In Sipe v.
Amerada Hess Corp., 689 F.2d 396, 403-04 (3d Cir. 1982),
for example, the plaintiffs sought to enjoin their em-
ployers from deducting unemployment taxes from
their paychecks. And in RTC Commercial Assets Trust 1995-
NP3-1 v. Phoenix Bond & Indemnity Co., 169 F.3d 448, 454-
56 (7th Cir. 1999), the plaintiff sought a declaration that
a tax certificate that the private defendant had pur-
chased at a tax sale was invalid. In both cases the
plaintiffs lost. See also Blangeres v. Burlington Northern, Inc.,
872 F.2d 327, 328 (9th Cir. 1989) (per curiam); cf. California
v. Grace Brethren Church, 457 U.S. 393, 407-11 (1982); Wright
v. Pappas, 256 F.3d 635 (7th Cir. 2001).
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, 450 U.S. at 512-15. There is.
The casinos can ask an Illinois state court to impose a
constructive trust on the tax receipts. See Village of Itasca
v. Village of Lisle, 817 N.E.2d 160, 170 (Ill. App. 2004);
Selmaville Community Consolidated School Dist. No. 10 v.
Salem Elementary School Dist. No. 111, 421 N.E.2d 1087, 1091
(Ill. App. 1981). Whether they can seek a refund of the
taxes they paid is less clear, because it is unclear whether
the refund statute cited by the parties—the State Officers
and Employees Money Disposition Act, 30 ILCS 230/2a,
Nos. 09-3975 & 10-1019 61
which was the statutory basis for the casinos’ claims in
a previous state court action, Empress Casino Joliet Corp. v.
Giannoulias, 896 N.E.2d 277, 283 (Ill. 2008)—authorizes
the recovery of tax money that has already been dis-
bursed. If the unlawfulness can be traced to the race-
tracks, the casinos can seek damages from them (as
they are trying to do with respect to the two racetracks
that it charges with having violated the RICO statute).
What the casinos cannot be permitted to do is to freeze
the state’s tax moneys by imposition of a constructive
trust on them.
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 plain-
tiffs’ constructive trust claim is barred by the Tax Injunc-
tion Act should be affirmed.
3-2-11