The Money Store, Inc. v. Harriscorp Finance, Inc.

POSNER, Circuit Judge,

concurring.

I write separately not to register disagreement with anything in Judge Ripple’s opinion but to propose that the standard for modifying injunctions be viewed differently in litigation over property rights — a type of litigation well illustrated by the present case — from how it is viewed in litigation designed to reform public agencies, a type of litigation illustrated for example by a case in which a prison is enjoined from mistreating its inmates. The hard line against modification that the district judge and we have taken in this private case is sensible for private cases but not for “institutional reform litigation,” such as my hypothetical prison case. An intermediate case, which I discuss briefly later, is institutional reform litigation directed against a private rather than a public entity.

The injunction that The Money Store [TMS] seeks to modify resolved a dispute between it and Harriscorp Finance over the right to use the name “The Money Store” as a trademark. The resolution was to enjoin TMS from using the name in Chicago and Harriscorp from using it anywhere else. In effect, the injunction defined the respective scope of the parties’ property rights — giving Chicago to Harriscorp and the rest of the country to TMS — and it is desirable that such definitions be as clear and definite as possible in order to facilitate transactions. Harriscorp’s dwindling use of the name “The Money Store” since the injunction was entered suggests that the right to use the name in Chicago as elsewhere has become more valuable to TMS than to Harriscorp. If so, TMS can be expected to buy the right from Harris-corp at a mutually agreeable price — and indeed the record indicates an extended effort by TMS to do just that, the failure of which (no doubt due to TMS’s unwillingness to pay as high a price as Harriscorp demanded) precipitated the application to modify the injunction. By our decision today we rightly decline to encourage TMS to hope that it can obtain the right to use the name “The Money Store” in Chicago for nothing but attorney’s fees by persuading the district judge to modify the injunction on the basis of the relative value of the name to the parties. We refuse to do in this case what the law in general refuses to do — condition property rights on the ability of an owner to show that his is the most valuable use to which his property can be put. By forbearing to attach such conditions, the law assigns the task of reallocating property rights to the market rather than to the judiciary. If TMS wants to use the name “The Money Store” in Chicago, it must buy the name from its owner.

It is a detail that in speaking of a trademark as a property right, I am using the term “property rights” loosely, just as when one speaks of a taxi medallion or a television license as “property” — which, functionally, they are. It is also a detail that if rather than seeking to modify the injunction TMS had violated Harriscorp’s property rights by using the name “The Money Store” in Chicago without Harris-corp’s leave, Harriscorp, rather than having to bring its own suit to remedy TMS’s “trespass,” could have asked the district court to hold TMS in contempt. The injunction created a system of de facto property rights, and a property right should be enforceable whether or not the present owner values it more than the trespasser. The trespasser should not be allowed to bypass the market.

I do not want to overargue the point. Taken literally, the idea that an injunction resolving a dispute over property rights is itself a form of property might be thought *375 to imply that it could not be modified without violating the takings clause of the Fifth Amendment, a proposition rejected long ago, and rightly so even if “property” is broadly construed. See Ladner v. Siegel Co., 298 Pa. 487 , 148 A. 699 (1930), cited in United States v. Swift & Co., 286 U.S. 106, 114 , 52 S.Ct. 460, 462 , 76 L.Ed. 999 (1932). The scope of a property right is a matter of expectations, and Harriscorp could not reasonably have expected its injunctive right to be immune from modification by the court that had issued the injunction. The district court had expressly reserved the power to modify the injunction, and such a reservation was in any event implicit. See United States v. Swift & Co., supra, 286 U.S. at 114 , 52 S.Ct. at 462 . The existence of a reserved right of modification distinguishes cases such as Hodges v. Snyder, 261 U.S. 600, 603 , 43 S.Ct. 435, 436 , 67 L.Ed. 819 (1923), which teach that “the private rights of parties which have been vested by the judgment of a court cannot be taken away by subsequent legislation.”

There are trademark cases, as there are other property cases, where the modification of an injunction has been held to be proper. An example is Coca-Cola Co. v. Standard Bottling Co., 138 F.2d 788 (10th Cir.1943), where as a result of an old decree enforcing a trademark that other courts had found invalid, the party seeking modification (the defendant) was the only firm not allowed to use the word “cola” to describe its soft drink. The continuation of the injunction would have enabled the plaintiff to extort a price for its dissolution unrelated to the plaintiffs property in the word. Admittedly, there is a danger of that here. But the district court found that Harriscorp was making some use of the name “The Money Store.” Its refusal to relinquish its right was not purely extortionate.

Property rights are never absolute, and specifically, as we have just seen, the form of “property right” created by an injunction is subject to modification by the issuing court, just as a fee simple is subject to modification by nuisance law and eminent domain. Nevertheless the considerations bearing on modification are not the same in a case where an injunction creates property rights as they are where an injunction regulates the activities of a public agency. Injunctions of the latter type frequently have effects on third parties whose interests are not adequately represented by the parties to the litigation or by the court. And the litigation may be collusive, yet this fact may be concealed from the court. The two points are related; sometimes an unrepresented third party is hurt because the parties to the litigation have ganged up against him.

We had such a case recently, and though it was not a modification case it is instructive. Black police sergeants had sued the City of Chicago, charging racial discrimination, and had obtained a remedial decree. Many years later the decree was still in effect, but by then Chicago had a black mayor and a black police chief. The parties submitted to the district court a proposal, which the court promptly accepted since no one before it was objecting, to alter the results of the test for promotion to lieutenant — even though it was a test the parties had devised jointly — in order to increase the number of blacks promoted to that rank. The white sergeants who would be hurt by the proposal were not represented in the litigation. We held that they were entitled to intervene. See United States v. City of Chicago, 870 F.2d 1256 (7th Cir.1989). In their new status as parties they would be entitled to press for modification of the decree to reflect the changed political circumstances in Chicago.

Alliance to End Repression v. City of Chicago, 742 F.2d 1007 (7th Cir.1984) (en banc), a case about the interpretation rather than the modification of an institutional reform decree, is also instructive. Mindful of third-party effects and potential lack of adversariness, we interpreted the decree more liberally than we would have interpreted a private decree; probably we would have been receptive to a proposal to modify it. In the waning days of the Carter Administration, the Justice Department had consented to the entry of a decree limiting the investigative powers of the FBI in Chicago. The Reagan Administration adopted *376 new FBI guidelines which arguably were less stringent than the consent decree— creating the potential paradox that the FBI might have fewer powers in Chicago than anywhere else in the United States. We interpreted the decree to avoid this anomaly. It would have been a cleaner case if the Justice Department had asked us to modify the decree to bring it into line with the current guidelines, but the Department no doubt was inhibited by the traditional reluctance of courts to modify decrees except in the most exceptional of circumstances.

The reluctance is misplaced in the setting of institutional reform litigation. A court should be wary of efforts by government officials to use a tacitly collusive suit to bind the officials’ successors and otherwise thwart the interests of the public. It should therefore be receptive to proposals to modify the decree in such a suit, if modification is designed to lighten what may well be the dead hand of the past. It should be especially receptive where the decree was a consent decree entered without any adversary proceedings, for there the danger of collusion is at its height. Decrees entered after token opposition should be viewed similarly. Of course many consent decrees settle genuinely adversary contests, whether or not there have been formal adversary proceedings; I am speaking of a risk, not a certainty, of collusion or of lack of adversary zeal. A further point is that a decree may become collusive through passage of time, as in the City of Chicago case.

The “regulatory” decree — the decree that burdens the courts with continuing supervisory responsibilities unlimited in duration — has long been thought problematic in other contexts, even when the danger of collusion was slight. See, e.g., DeBow, Judicial Regulation of Industry: An Analysis of Antitrust Consent Decrees, 1987 U.Chi.Legal Forum 353, 359. The problems have sometimes been overlooked in the institutional reform context in the rush to enlist the courts in the cause of social reform. But consider: Correctional authorities often welcome suits to reform prison conditions, in the hope that the resulting decree will force the state to appropriate additional money for the prisons. Realistically, these are collusive suits. They bypass not only the democratic process but also the adversarial process.

The strong policy against modification rightly expressed in a case such as the present would be perverse in an institutional reform case. We should relax the policy in such cases, and we can do so without exceeding our authority. The standard in Rule 60(b)(5) of the Federal Rules of Civil Procedure — whether continued enforcement of a prospective decree would be equitable — is flexible enough to allow my suggested modification of the modification rule. And the famous tough language in Justice Cardozo’s opinion for the Supreme Court in United States v. Swift & Co., supra, 286 U.S. at 119 , 52 S.Ct. at 464 . “Nothing less than a clear showing of grievous wrong evoked by new and unforeseen conditions should lead us to change what was decreed after years of litigation with the consent of all concerned” — is not a bar. Judicial language, like other language, should be read in context. Swift involved a request by a private defendant to modify an antitrust decree against it. It was not an institutional reform case. There were few such cases at the time. The efflorescence of this type of federal litigation lay many years in the future.

In fact Swift itself makes the very distinction that I am suggesting “between restraints that give protection to rights fully accrued upon facts so nearly permanent as to be substantially impervious to change, and those that involve the supervision of changing conduct or conditions and are thus provisional and tentative.” Id. at 114 , 52 S.Ct. at 462 . See also Safe Flight Instrument Corp. v. United Control Corp., 576 F.2d 1340, 1342 (9th Cir.1978) (per curiam); Newman v. Graddick, 740 F.2d 1513, 1520 (11th Cir.1984). Modification should be more difficult in the first class of cases, illustrated by the present case, than in the second class, which includes institutional reform litigation, see, e.g., Nelson v. Collins, 659 F.2d 420, 424 (4th Cir.1981) (en banc). There is growing *377 recognition of the distinction. See Duran v. Elrod, 760 F.2d 756, 758 (7th Cir.1985); Alliance to End Repression v. City of Chicago, supra, 742 F.2d at 1020 ; Kozlowski v. Coughlin, 871 F.2d 241, 247 (2d Cir.1989); Ruiz v. Lynaugh, 811 F.2d 856, 861 (5th Cir.1987) (per curiam); New York State Ass’n for Retarded Children, Inc. v. Carey, 706 F.2d 956, 967-71 (2d Cir.1983); see also Twelve John Does v. District of Columbia, 861 F.2d 295, 298 (D.C.Cir.1988); Badgley v. Santacroce, 853 F.2d 50, 52-53 (2d Cir.1988). “A strict standard for modification of consent decrees between private parties ... is inappropriate in institutional reform litigation.” Plyler v. Evatt, 846 F.2d 208, 212 (4th Cir.1988); see also Note, The Modification of Consent Decrees in Institutional Reform Litigation, 99 Harv.L.Rev. 1020 (1986).

I have contrasted litigation over property-rights with litigation aimed at the reform of public agencies, but there are other kinds of equitable litigation, notably litigation seeking to reform private institutions. Some of that litigation presents the same danger of abuse as litigation aimed at bringing about institutional reform in the public sector. Suppose a group of white workers brought a “reverse discrimination” suit complaining about the effect of their employer’s affirmative-action plan on the employment of whites. The employer might be entirely willing to consent to the entry of a decree that would make it more difficult to hire blacks. If the black workers persuaded the employer to seek modification of the decree, the court ought not consider itself cabined by the strict language of Swift. This conclusion is bolstered by the Supreme Court’s recent decision in Martin v. Wilks, — U.S. -, 109 S.Ct. 2180 , 104 L.Ed.2d 835 (1989), which holds that a decree settling an employment discrimination case does not bar workers adversely affected by the decree from challenging its validity in an independent suit. It would be odd to suppose that if they sought to modify the decree rather than challenge it in a separate suit — if in short they followed a cleaner, quicker route— they would face the heavy burden that a literal reading of Swift might be thought to impose. Cf. Laycock, Consent Decrees Without Consent: The Rights of Nonconsenting Third Parties, 1987 U.Chi.Legal Forum 103, 143-44. Why encourage collateral attacks in lieu of motions to modify? Cf. Kramer, Consent Decrees and the Rights of Third Parties, 87 Mich.L.Rev. 321, 364 (1988).

I am not urging that modification of institutional reform decrees be allowed at the drop of a hat. If it is too easy to modify a decree, the negotiation of consent decrees will be retarded because the parties will not know what they are getting into; they will be delegating an open-ended power to the court. Maybe there should be fewer consent decrees in institutional reform litigation; maybe there should be less such litigation. But there might be too few such decrees, and too little such litigation, if consent decrees in institutional reform litigation were too freely modifiable, too flexible. Certainly in this case, however, we do not have to decide how flexible is too flexible. This case involves not institutional reform but private property; in such a case, within broad limits, the less hospitable the courts are to pleas to modify, the better.