denying an attempt by the United States to seek immunity from liability after arguing, appealing, and losing a case on the merits, arguing that such an attempt was a collateral attack and to otherwise allow the defense "would reduce to advisory status all decisions adverse to the financial interests of the United States."
How later courts described this case
- denying an attempt by the United States to seek immunity from liability after arguing, appealing, and losing a case on the merits, arguing that such an attempt was a collateral attack and to otherwise allow the defense "would reduce to advisory status all decisions adverse to the financial interests of the United States."
- observing that the exception from res judicata for collateral attacks challenging jurisdiction is necessary "because otherwise a court that lacked jurisdiction could strong-arm a party to litigate the subject, decide in favor of its own power, and thus block any review of its adjudicatory competence."
- noting that a motion to dismiss that raises a sovereign immunity defense is properly brought un der Rule 12(b)(6), not Rule 12(b)(1)
- interpreting United States Fidelity to apply chiefly to immunity from suit defenses that would strip a court of proper subject-matter jurisdiction
Written by the judges who cited it.
The opinion
ILANA DIAMOND ROVNER, Circuit Judge,
dissenting.
The majority holds that a claim of sovereign immunity litigated in a prior action can *391 not be relitigated in a later action. That is not, however, what happened here. The claims before us today were never litigated in United States v. Hynes, 20 F.3d 1437 (7th Cir.1994) (en banc), and in fact some arguably arose only after Hynes . The majority employs the legal fiction that all claims arising from a single transaction are one claim to assert that the government has already argued immunity and cannot do so again. Because I do not think United States v. United States Fidelity & Guaranty Co., 309 U.S. 506 , 60 S.Ct. 653 , 84 L.Ed. 894 (1940) (“USF&G”), supports that holding, I respectfully dissent.
A very brief recitation of the facts is necessary. In Hynes , the U.S. Government (“Government”) brought a declaratory judgment action seeking to preclude Cook County from imposing, assessing, or collecting taxes on real property owned by the Government. The complaint acknowledged that interest and penalties were being imposed as well as taxes, but requested relief only from taxes. Cook County did not file a counterclaim seeking the taxes, interest, or penalties, choosing instead to pursue such judgments in the state court. We rejected the Government’s claim of immunity in Hynes in an en banc decision. Cook County obtained judgments in state court against the Government for interest and penalties and orders of tax sale for those properties. The Government did not appear in those state court actions and did not consent to jurisdiction. The Government subsequently filed the declaratory judgment action which underlies this appeal, seeking injunctive and declaratory relief from interest, penalties and tax sales based on principles of sovereign immunity.
At issue before this Court today is whether the failure of the Government to challenge the interest, penalties and tax sales in Hynes precludes it from raising the defense of sovereign immunity now. Generally, under the doctrine of res judicata, a prior judgment has preclusive effect over claims that were actually raised or could have been raised in the prior proceeding. Claims that “could have been raised” include those that arose out of the same transaction as the claims that were raised. Although some of the claims in the instant case possibly could not have been raised in Hynes , 1 I will assume for purposes of this dissent that all claims raised here could have been raised in Hynes . None of the claims in the present case, however, were actually litigated in Hynes . The general rule of preclusion is subject to exceptions, one of which is set forth in USF&G and which applies in this case.
In USF&G, the Supreme Court held that collateral estoppel did not preclude the Government from raising a sovereign immunity defense to a royalties claim that had been actually decided in a prior case brought by the Government. 309 U.S. 506 , 60 S.Ct. 653 , 84 L.Ed. 894 . In the earlier action, the Government had not presented any sovereign immunity defense, and the court had decided the royalties claim adversely to the Government. Id. at 510 , 60 S.Ct. 653 The Government subsequently brought another action, and a party argued that the Government was collaterally estopped from challenging the first decision. Id. at 511 , 60 S.Ct. 653 . The Court held, however, that the immunity of the United States cannot be waived by the action of government officials — specifically, by the failure of those officials to raise the sovereign immunity defense in the preceding action. Id. at 513-14 , 60 S.Ct. 653 . That was because consent to be sued could only be granted by Congress. Id. at 514 , 60 S.Ct. 653 . The Court further held that “[t]he reasons for the conclusion that this immunity may not be waived govern likewise the question of res judicata.... Consent alone gives jurisdiction to adjudge against a sovereign. Absent that consent, the attempted exercise of judicial power is void.” Id. at 514 , 60 S.Ct. 653 . When faced with the “collision between the desirable principle that rights may be adequately vindicated through a single trial of an issue and the sovereign right of immunity from suit ... [w]e are of the opinion ... the doctrine of immunity should prevail.” Id. at 514-15 , 60 S.Ct. 653 . The Court explicitly stated that the “desirability for complete settlement of all issues between parties must *392 ... yield to the principle of immunity.” Id. at 513 , 60 S.Ct. 653 . 2
We are presented with a similar situation in this case. The Government in this case failed to raise any challenge regarding interest, penalties, and tax sales in Hynes . As in USF&G, however, the failure of the Government to raise a sovereign immunity claim cannot waive the Government’s immunity. The principles of res judicata that would prevent the Government from raising immunity now cannot control where there is a clash between the immunity interest and the desire for finality of judgments. Id. at 513-14, 60 S.Ct. 653 . Arguably, this case is even stronger than USF&G, because there the royalties claim was actually decided by the Court while the government stood mute regarding its immunity rights. In this case, no court has addressed the claims regarding interest, penalties, and tax sales, 3 and the interest in finality of judgments is presumably weaker.
Ultimately, the majority refuses to distinguish between claims actually litigated and those that could have been raised, holding that they are all one claim. Because they are considered one claim, the majority asserts that the government cannot litigate an immunity claim and then bring a subsequent action asserting a second immunity claim. Moreover, from this premise the majority expresses the fear that the Government could raise its attacks on a judgment piecemeal. This is not, however, a challenge to the obligation to pay taxes, which was decided in Hynes . If the Government unveiled a “new” immunity challenge to the taxes, such as is envisioned in the majority opinion, then a different result might be required. USF&G does not necessarily require that the Government be allowed to argue its immunity defense multiple times. The Supreme Court hinted as much in Durfee v. Duke, 375 U.S. 106 , 84 S.Ct. 242 , 11 L.Ed.2d 186 (1963):
To be sure, the general rule of finality of jurisdictional determinations is not without exceptions. Doctrines of federal pre-emption or sovereign immunity may in some contexts be controlling. Kalb v. Feuerstein, 308 U.S. 433 , 60 S.Ct. 343 , 84 L.Ed. 370 ; United States v. United States Fidelity & Guaranty Co., 309 U.S. 506 , 60 S.Ct. 653 , 84 L.Ed. 894 . [ 12 ]
375 U.S. at 114 , 84 S.Ct. 242 (emphasis added).
The claims in the present case, however, were not actually argued in Hynes . We are instead presented with an immunity challenge regarding claims that arguably could (and should) have been presented in Hynes but were not. This is not a second bite at the tax decision. It is a first bite at penalties, interest, and tax sales. The only question is whether the failure of the Government attorneys to raise it in the prior case can preclude the Government from now asserting immunity to those subsequent state court judgments. USF&G establishes that the failure of a government official to assert an immunity claim that could have been made does not preclude the Government’s later assertion of that claim. The right of immunity supersedes the interest in adjudication of all related issues in a single case. Just as the Government officials could not consent to waive immunity by failing to raise the immunity defense in USF&G, they could not consent to waive immunity by failing to raise the *393 interest, penalties and tax sales claims in this case. Although I am dismayed by the protracted approach taken by the Government, I am constrained by USF&G to conclude that the Government is not precluded from pursuing the claims in this case. If USF&G is to be reconsidered or limited, that remains the province of the Supreme Court. Because I agree with the district court’s conclusions on the merits, I would affirm the decision of the district court.
. For instance, the government challenges the computation of interest and penalties that occurred after Hynes , and challenges post-Hynes tax sales.
. The majority dismisses USF&G by characterizing the holding as based on principles of subject matter jurisdiction rather than sovereign immunity. A plain reading of that case suggests otherwise. See, e.g., Wright and Miller, Federal Practice and Procedures § 4429 (stating that USF&G was not based on jurisdiction but rather "[t]he decision rested solely on tire ground of sovereign immunity and the doctrine that sovereign immunity cannot be waived.”). Moreover, I cannot agree that "it overstates the strength of sovereign immunity to analogize it to lack of jurisdiction,” with the former being of less weight than the latter. See Maj. Op. at 388-89. The principle of sovereign immunity has been afforded much more protection — and respect — by the courts than the majority would afford it here.
. It is to be noted, however, that in neither of these cases had the jurisdictional issues been actually litigated in the first forum.
. And in fact, the government often retains immunity from interest even if it consents to waive immunity regarding the underlying judgment. See Library of Congress v. Shaw, 478 U.S. 310 , 106 S.Ct. 2957 , 92 L.Ed.2d 250 (1986). As in this case, the immunity analysis may be very different regarding the two.