Appendix — Evans v. City of Chicago

ey

931372 FEB 2 2 199

OFFICE Or }He CLeNK

No.

IN THE ah

Supreme Court of the United States

OCTOBER TERM, 1993

SYLVIA EVANS, et al., Petitioners,

Vv.

CITY OF CHICAGO, Respondent.

BERTHA BALARK, et al., Petitioners,

V.

CITY OF CHICAGO, Respondent.

Petition for Writ of Certiorari to the United

States Court of Appeals for the Seventh Circuit

APPENDIX TO THE

PETITION FOR WRIT OF CERTIORARI

JOHN BERNARD CASHION EDWARD T. STEIN

Counsel of Record Counsel of Record

33 N. LaSalle Street 225 W. Washington Street

Suite 2500 Suite 2350

Chicago, Illinois 60602 Chicago, Illinois 60606

(312) 368-0191 (312) 220-0600

Attorney for Attorney for

EVANS Petitioners BALARK Petitioners

Midwest Law Printing Co., Chicago 60611, (312) 321-0220

TABLE OF CONTENTS

PAGE

En Banc opinion (Evans III) 11/24/93 ......... 1

Evans panel opinion 6/3/93 ...............0005- 24

District Court Order modifying Consent Decree . . 51

Transcript of District Court reinstating Consent

I a che ChE NbhaU odd vbeeeerees Fikies 52

Evans II opinion 4/27/89... 2.2.2.0... eee eee 72

Consent Decree 5/31/84 ............ccccecccces 93

Evans I opinion 9/27/82 ...............0.000e 108

Order on Rehearing En Banc 8/19/93 .......... 133

Judgment En Banc 11/24/93 ................... 135

District Court Order vacating Consent Decree

NE dee das lvacueceses ceed cicudanc weeds 136

Docket entry of District Court Order vacating Con-

ee SN ha ob-cvaeecuweeetdedesetacceus, 139

District Court Order partially reinstating Consent

BE WUE hci seuuedbaddvdsetencanues. 140

District Court Order (docket ertry) denying Defen-

dants’ Motion to Reconsider 9/4/91 ......... 142

Partial Transcript of Judge Grady’s ruling in the

damages portion 10/22/87 .................. 143

IN THE

Supreme Court of the United States

OCTOBER TERM, 1993

SYLVIA EVANS, et al., Petitioners,

v.

CITY OF CHICAGO, Respondent.

BERTHA BALARK, et al., Petitioners,

v.

CITY OF CHICAGO, Respondent.

Petition for Writ of Certiorari to the United

States Court of Appeals for the Seventh Circuit

APPENDIX TO THE

PETITION FOR WRIT OF CERTIORARI

App. 1

IN THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

No. 91-3277

SYLVIA EVANS, Administrator of the Estate

of Andrew Evans, et ad.,

Plaintiffs-Appellees,

Vv.

City or CHICAGO,

Defendant-Appellant.

Appeal from the United States District Court

for the Northern District of [linois, Eastern Division

Nos. 77 © 4119, 79 C 1939, 79 C 2493—John F. Grady, Judge

ARGUED SEPTEMBER 8, 1993—DecipED NovemMBer 24, 1993

Before POSNER, Chief Judge, and CUMMINGS, BAUER,

CUDAHY, CorrEY, FLAUM, EASTERBROOK, RIPPLE, MANION,

KANNE, and RovNerR, Circuit Judges.

EASTERBROOK, Circuit Judge. Now 16 years oid, this

case is making its third appearance in this court—and the

parties’ current dispute arises out of the conflicting deci-

sions of the first two panels. We meet in banc to con-

sider whether a district court should require a unit of

state or local government to abide by a consent decree

that does not serve any federal interest. The answer is

No, and the injunction based on the parties’ agreement

therefore must be vacated.

i a

App. 2

During the late 1970s and early 1980s, the rate of in-

terest Chicago paid on judgments (6% per annum for mu-

nicipal governments, 735 ILCS 5/2-1303) was substantial-

ly less than the market cost of credit. Judgment debtors

had every reason to postpone payment as long as this im-

balance persisted. Instead of borrowing in the market at

15%, or raising taxes, Chicago borrowed from its judg-

ment creditors. It paid tort judgments of $1,000 or less,

and all contract judgments, quickly. The City Council did

not appropriate funds sufficient to pay other judgments

in the year the courts entered them. By 1979 plaintiffs

without the political clout to jump the queue had to wait

on average 47 months for payment. An active secondary

market in judgments against Chicago developed. About

80% of judgment holders sold in this market, accepting

a discount of approximately 25% off the face value of their

awards. Evans v. Chicago, 689 F.2d 1286, 1290 (7th Cir.

1982) (Evans J).

Suits challenging Chicago’s delay in payment were filed,

certified as class actions, and consolidated. By summary

judgment the district court held that Chicago’s practice

of paying small judgments quickly while deferring pay-

ment of larger ones violated the due process and equal

protection clauses of the fourteenth amendment: due proc-

ess because it deprived judgment creditors of a “prop-

erty” interest in immediate payment created by state law,

and equal protection because there was no rational basis

for distinguishing large from small awards. A panel of this

court affirmed the portion of the judgment that rested

on the equal protection clause, id. at 1299-1300, while

vacating the due process aspect as premature. Jd. at 1296-

99. Dicta in the opinion strongly imply that the City de-

prived the plaintiffs of due process of law. Jd. at 1297-98.

On remand the district judge told the parties and their

lawyers that the combination of his opinion and ours con-

demned Chicago’s practices en toto. He directed the par-

ties to negotiate appropriate relief. They complied, and

App. 3

the judge approved a consent decree eliminating the

distinction between large and small judgments, requiring

all judgments to be paid in order of their entry, and pro-

viding that the Mayor n.ust ask the City Council to ap-

propriate enough money to pay all judgments promptly.

The litigants could not agree whether the plaintiffs were

entitled to damages for delay in payment. The district

court concluded that they were, under the equal protec-

tion clause—both the plaintiffs and the district court deem-

ing the due process theory surplusage in light of the equal

protection holding. Another panel of this court reversed,

overruling Evans I. 873 F.2d 1007 (7th Cir. 1989) (Evans

II). The second panel (with the acquiescence of the full

court, see id. at 1008 n.*) concluded that the City had a

rational basis, if only administrative convenience and the

placation of the more numerous holders of small awards,

to pay little judgments before big ones. Jd. at 1015-18.

The second panel wrapped up: “The district judge ad-

vanced some worthy ideas, but they are for the City’s

self-determination, and will not be imposed by this court.

It is regrettable that this matter which has lingered so

long now takes a new and possibly unexpected turn, but

what we now view as error must be arrested even at so

late a date. Improvements in this situation are better left

to the state and municipal governments.” Jd. at 1017-18.

Chicago then asked the district court to vacate the in-

junction and return the subject to “the City’s self-deter-

mination’’. Interest rates have changed; today the legal

rate ——- the market rate, so Chicago would pay

promptly even if the injunction were not in force. Still,

it wants to redeem its governmental powers, now in hock

in a district court. The motion invoked Fed. R. Civ. P.

60(bX5), which permits a court to modify a judgment when

“a prior judgment upon which it is based has been re-

versed or otherwise vacated, or it is no longer equitable

that the judgment should have prospective application’.

Evans I, which led to the settlement, was gone; the City

added that in its view it is also “no longer equitable” that

a judgment affecting its legislative functions remain in

ee

“a

App. 4

force when the judgment does not serve a federal interest.

Rule 60(bX5) applies to consent decrees as well as to other

judgments. Rufo v. Inmates of Suffolk County Jail, 112

S. Ct. 748, 757 (1992). Recognizing that the decree’s foun-

dation had been washed away, the district court set it

aside. Rufo, which holds that consent decrees regulating

the conduct of state or local governments may be modified

more freely than those entered by private litigants, sup-

ports this disposition.

On motion for reconsideration, however, the district

judge reversed course. He observed that Evans II ad-

dressed only the plaintiffs’ equal protection theory—for

the plaintiffs had not urged the panel te affirm the award

of damages on due process grounds. 873 F.2d at 1012 n.11,

1018 n.15. Because Evans I/ did not bear on the due proc-

ess theory, there had not been any change of law affect-

ing this aspect of the plaintiffs’ case. When Chicago

agreed to pay judgments faster, the district court be-

lieved, it was settling the due process claim along with

the equal protection claim. The district judge therefore

revised the injunction to delete only so much of the relief

as Evans II had expressly held inappropriate. The sole

So satisfying that description was the portion for-

idding Chicago to distinguish judgments according to

size. Deleting that element was nugatory because of the

separate provision compelling the City to pay judgments

promptly and strictly in order of their entry. Stuck ex-

actly where it was before Evans II, Chicago asks us to

annul the consent decree and the injunction implementing

it.

II

No one doubts that Rufo and Rule 60(bX5) entitle Chi-

cago to relief to the extent the decree rests on the equal

protection theory. The injunction intrudes on the internal

operations of the City, telling the Mayor what items must

be in the annua! budget. Evans I] rightly said that, al-

though changes may be beneficent, the political rather

than the judicial process is responsible for the subject.

App. 5

Governments may undertake to do more than the Con-

stitution requires. Rufo, 112 S. Ct. at 760-63; see also

Firefighters v. Cleveland, 478 U.S. 501, 525 (1986). If there

were something to the due process theory (a big if, dis-

cussed in Part III below), a decision removing all but this

one theory would leave room for settlement, as the dis-

trict court said. The initial problem with its decision,

however, is that Chicago did not settle any aspect of the

merits. It litigated the merits to the nines and settled

only the details of relief.

Rule 60(bX5) calls on the court to ascertain whether a

judgment is “based”’ on some earlier decision. This con-

sent decree is ‘“‘based’’ on Evans I rather than an inde-

pendent compromise of the due process claim. Plaintiffs

wanted money. The City refused to pay, and after issuing

an injunction the district judge held a trial on damages.

Chicago appealed from an adverse decision, leading to

Evans II. If the consent decree really represented a com-

promise of the merits—even of the due process theory

alone—there could not have been an Evans IJ. Yet on

appeal in Evans II the plaintiffs did not contend that the

merits had been compromised; it was plain to all that the

merits (and damages) were still in dispute. All that had

been compromised was prospective relief. Chicago “agreed”’

to do what Evans I implied that it must do. ‘ ‘Consent’

that is no more than knuckling under to the inevitable

is more like an adjudication than a contract.’’ People Who

Care v. Rockford Board of Education, 961 F.2d 1335, 1338

(7th Cir. 1992), quoted in United States v. Chicago, 978

F.2d 325, 333 (7th Cir. 1992).

Before accepting the parties’ agreement, the district

judge made clear his view that Evans I (and his own prior

decision) resolved the merits, leaving for decision only

issues about relief. If Evans I condemned the City’s ap-

proach to paying judgments, the parties had no need to

settle the due process claim. After a decision on one claim

resolves the case, neither judge nor litigants needs to ad-

dress additional legal theories. The district judge told the

parties in no uncertain terms that Evans I resolved the

App. 6

merits, and that nothing remained but to select the appro-

priate relief. When Chicago bridled, the judge announced

from the bench on October 26, 1983:

Now, I have got to have an order from the City and

the plaintiffs. I have got to have an agreed order that

will bind the City to pass a budget sufficient to pay

tort judgments.

* * *

If by November 25th, approximately a month from

now, I do not have in my hands an agreed order that

calls upon the City and requires the City to budget

ponent an amount sufficient to pay tort judgments

along the lines which we have been discussing in

great detail at our recent and not so recent confer-

ences in chambers, then I am going to go ahead and

enter my own order.

* * *

I see no need for any further conferences with coun-

sel that go to basic philosophy or go to what I have

been saying this afternoon. If there is some mechan-

ical thing you want to talk about that I can help you

with, I will be happy to sit down, but just to rehash

this question about whether we are going to do some-

thing in this case that the Court of Appeals ordered

done a long time ago, the time for discussion has

passed.

The judge believed that Evans I dictated what to do, but

not how. Mechanical details remained for decision. And

the details of prospective relief are all the parties com-

promised. The merits were not settled. They were liti-

gated, twice. The City lost in Evans I and won the re-

match in Evans I].

Let us suppose, however, that this understanding is in-

accurate. The question remains whether in the language

of Rule 60(bX5) “it is no longer equitable that the judg-

a

App. 7

ment should have prospective application”. The district

court treated this case the same way it would if the defen-

dant were a private merchant that had agreed to sell the

plaintiff a ton of steel: a contract’s a contract, and pacta

sunt servanda. Yet this is no ordinary contract. First,

it requires continuing supervision by the district court.

Judges need a good reason, one in addition to the parties’

say so, before diverting attention from other business in

this fashion. System Federation v. Wright, 364 U.S. 642,

651 (1961) (“The parties cannot, by giving each other con-

sideration, purchase from a court of equity a continuing

injunction.”’); Firefighters v. Cleveland, 478 U.S. at 525

(A “federal court is more than ‘a recorder of contracts’

from whom parties can purchase injunctions.”’). Second,

the decree entangles an arm of federal government in the

administration of another sovereign, monitoring the budget-

ary decisions of a Mayor and City Council rather than

enforcing strictly legal rights. Again such a step may be

taken with justification, cf. Missowri v. Jenkins, 495 U.S.

33 (1990), but the parties’ consent is not automatically

sufficient.

Especially not when one of “the parties” did not con-

sent. This is the third, and most potent, objection to the

district court’s approach. “Chicago” did not reach a settle-

ment with the plaintiffs. The consent decree was entered

in 1984. Negotiations were conducted on Chicago’s behalf

by its corporation counsel, who we may suppose acted

with the approval of Harold Washington, then Chicago’s

mayor. Although the decree purports to last for all time—

and the district court’s decision refusing to vacate the de-

cree even after Evans II reflects a belief that the commit-

ments ought to run perpetually—democracy does not per-

mit public officials to bind the polity forever. What one

City Council enacts, another may repeal; what one mayor

decrees during his four-year term, another may revoke.

Today’s lawmakers have just as much power to set public

policy as did their predecessors. “Chicago” speaks through

its elected representatives, and the people are free to

upset even the most enlightened policies of earlier times.

App. 8

The current mayor wants to be free of his predecessor’s

commitment, concluding that more flexibility over budgets

will promote the public welfare. People of good will could

be on either side of this disagreement; each mayor may

have correctly perceived the needs of the moment.

Governments are in this respect unlike corporations or

other contracting parties. A corporate board of directors

may enter into commitments that continue after new di-

rectors take office; a legislature may not. True, govern-

ments may form contracts (for example, to build a new

road or repay a loan) and must keep these commitments

by virtue of the contract clause of the Constitution, Art. I,

§10, cl. 1. See United States Trust Co. v. New Jersey,

431 U.S. 1 (1977). But temporary officeholders may not

contract away the basic powers of government to enact

laws—or in this case to adopt budgets—in the same way

natural persons may make enduring promises about their

own future behavior. Wilbur v. United States, 281 U.S.

206, 217 (1930); Stone v. Mississippi, 101 U.S. 814, 817-18

(1879); Charles River Bridge Co. v. Warren Bridge Co.,

36 U.S. 420 (1837). Why then should things differ if the

parties choose not the device of a seal (or even of a stat-

ute) but the imprimatur of a district judge? See Michael

W. McConnell, Why Hold Elections? Using Consent De-

crees to Insulate Policies from Political Change, 1987 U.

Chi. Legal Forum 295; cf. Peter M. Shane, Federal Policy

Making by Consent Decree: An Analysis of Agency and

Judicial Discretion, id. at 241, 269 n.105.

Consent alone is insufficient to support a commitment

by a public official that ties the hands of his successor.

Accord, League of United Latin American Citizens v.

Clements, 999 F.2d 831, 846 (5th Cir. 1993) (in banc)

(“Courts must be especially cautious when parties seek

to achieve by consent decree what they cannot achieve

by their own authority. Consent is not enough when liti-

gants seek to grant themselves powers they do not hold

outside of court.”’); United States v. Miami, 664 F.2d 435,

440 (11th Cir. 1981) (in banc). Thus the answer to the

question “‘why should consent decrees be enforced when

App. 9

contracts out of court are not?” must concentrate on legal

rules that shape the parties’ agreement. A promise by

a public official is of limited utility when only the official’s

word supports the commitment. A consent decree may

be—under System Federation must be—based on more

than consent. It depends on rules of law that govern the

public official’s conduct. “ (TJhe District Court’s author-

ity to adopt a consent decree comes only from the statute

which the decree is intended to enforce,’ not from the par-

ties’ consent to the decree.” Firefighters v. Stotts, 467

U.S. 561, 576 n.9 (1984), quoting from System Federation,

364 U.S. at 651. A state official’s promise to follow a rule

of federal law retains its force because of the continuing

effect of the law, which the state cannot alter. And a set-

tlement of a dispute about the meaning of that law may

be enforced if the agreement compromises genuine uncer-

tainties, for then the public official actually may be en-

hancing or preserving the powers of the democratic branch

(by avoiding a worse outcome after trial) rather than

ceding the powers of the government.

This method of justifying the implementation of consent

decrees implies, however, that the court must ensure that

there is a substantial federal claim, not only when the

decree is entered but also when it is enforced, and that

the obligations imposed by the decree rest on this rule

of federal law rather than the bare consent of the office-

holder. When making these inquiries, courts are bound

by principles of federalism (and by the fundamental differ-

ences between judicial and political branches of govern-

ment) to preserve the maximum leeway for democratic

governance. Over the last decade a series of decisions in

this circuit has emphasized the dist: ict court’s responsibil-

ity to identify the rule of federal 1aw supporting a con-

sent decree binding the political arms of government, and

the corresponding obligation to permit new public officials

to set their own policy within the limits established by

federal law. We mention only a sample of these cases,

beginning with another decision by the full court.

App. 10

As part of a settlement of litigation protesting investiga-

tions calculated to stifle dissident groups, the Department

of Justice promised to continue using a set of investiga-

tory eee specified in guidelines developed by Attor-

ney General Levi in 1976. In 1983 Attorney General Smith

promulgated a new set of guidelines, which like the Levi

guidelines fully complied with all constitutional require-

ments but which differed from the Levi guidelines in re-

spects the plaintiffs deemed material. Relying on the con-

sent decree, the district court forbade implementation of

the Smith guidelines to the extent they differed from the

Levi poses men This court held, however, that despite

one Administration’s promise, Attorneys General are en-

titled to reach, and implement, different conclusions about

appropriate investigative techniques, so long as the new

rules adhere to all legal norms. Alliance to End Repres-

sion v. Chicago, 742 F.2d 1007 (7th Cir. 1984) (in banc).

Although the case involved interpretation rather than

modification of the decree, the court emphasized the im-

portance of allowing the political branches of government

to reach, and update, independent conclusions about law

enforcement techniques. Doubts were to be resolved in

favor of leeway for the political branches: “We doubt that

in agreeing to the consent decree the Justice Department

tied its hands to such an extent; for if it did, it was

trifling with the public safety . . . and maybe even vio-

lating the President’s constitutional obligation to ‘take

Care that the Laws be faithfully executed.’ ” 742 F.2d

at 1014. “And what did [it] get in return for abandoning

that duty, if that is what it did? [The plaintiffs] would

not have gotten a broader injunction if they had pressed

the case to trial and won than they got in the consent

decree. . . . The decree as it stands is a remarkable judi-

cial intervention in vital executive functions; a proper

decree formulated after a trial would not have been more

Draconian.” Jd. at 1015. Such considerations led the court

to infer that the executive branch had not contracted

away its powers after all. See also id. at 1020. Pretty much

the same approach—with the same result of permitting

App. 11

the political branches of government to go on formulating

new policies—was applied in White v. Roughton, 689 F.2d

118 (7th Cir. 1982) (permitting a town to enact new wel-

fare legislation, although an earlier consent decree seemed

to commit it to a different program in perpetuity, when

the due process clause of the Constitution did not lock

the town into the choice expressed in the decree). Cf. Sec-

retary of Labor v. Fitzsimmons, 805 F.2d 682, 695-97 (7th

Cir. 1986) (in banc).

Consider, too, a dispute about using consent decrees to

affect the budget. In order to induce Chicago to agree

to a school desegregation remedy, the federal government

promised financial aid. According to the consent decree,

the United States would give Chicago priority in the allo-

cation of available funds. A new Administration in Wash-

ington allocated Chicago less than it believed the agree-

ment required, and six years of litigation ensued. We final-

ly concluded that the consent decree should not be read

to require automatic funding, or to compel the President

to seek additional appropriations, but only to require the

Secretary of Education to exercise discretion in good faith

within a range preserved by statutes and regulations.

United States v. Board of Education, 799 F.2d 281 (7th

Cir. 1986). We adopted this reading in substantial measure

because of concern that judges should not take control

of the budgetavy process even with the consent of the

parties—and we were reluctant to enforce even such a

limited commitment except for the fact that the federal

government’s promise induced Chicago to undertake a

program otherwise beyond its means, a p that pro-

tected the constitutional rights of children. Take away the

detrimental reliance, and the bona fide constitutional

claim, and there would have been little support for even

the modest control of budgetary priorities reflected in that

decree. See 799 F.2d at 297-98. In today’s case, by con-

trast, the decree governs the size and allocation of the

City’s budget, did not engender reliance, and does not pro-

tect anyone’s constitutional rights.

a

App. 12

Let us turn to a few cases about the entry of consent

decrees. Electoral fraud has been a persistent blemish on

the political system of Chicago. The Board of Election

Commissioners agreed to resolve constitutional litigation

by adopting a new regulatory system, including different

dates for registration and canvasses, that it believed

would reduce the amount of fraud. We held that entry

of such a decree would be improvident, because regula-

tion of election procedures should be left to the political

process unless a particular procedure is essential to cure

an ongoing violation of federal law, and because “{a] fed-

eral court must preserve the appropriate relation between

state and national power.” Kasper v. Board of Election

Commissioners, 814 F.2d 332, 340 (7th Cir. 1987). And

we reminded the public officials of Chicago who tried to

enter into this consent decree: “The Commissioners are

agents, not principals; they need their principals’ approval

to alter the terms of their agency. An alteration of the

[state’s] statutory scheme may not be based on consent

alone; it depends on an exercise of federal power, which

in turn depends on a violation of federal law. The district

court therefore properly insisted on a demonstration of

at least a probable violation of that law as a condition

to the entry of this decree.” Jd. at 342. See also Dunn

v. Carey, 808 F.2d 555, 559-60 (7th Cir. 1986); Duran v.

Elrod, 760 F.2d 756 (7th Cir. 1985). Finding no probable

violation of federal law that would be rectified by the par-

ties’ agreement, this court held that there was no basis

for entering a consent decree. People Who Care v. Rock-

ford Board of Education, 961 F.2d 1335 (7th Cir. 1992),

similarly insists that the litigants establish a probable

violation cf federal law before the court may enter a con-

sent decree that affects the rights of third parties. That

is a fair description of the consent decree in our case, for

a binding promise to pay all tort judgments promptly af-

fects the allocation of the budget. Someone else must wait

for payment; alternatively the City must raise taxes (or

cut back on other things, such as police or education) to

pay all creditors immediately. In any of these cases the

Sn

App. 13

decree affects strangers’ interests. See Larry Kramer,

Consent Decrees and the Rights of Third Parties, 87 Mich.

L. Rev. 321 (1988).

All of these cases illustrate the principle we recognize

today: entry and continued enforcement of a consent de-

cree regulating the operation of a governmental body de-

nd on the existence of a substantial claim under federal

aw. Unless there is such a claim, the consent decree is

no more than a contract, whose enforcement cannot be

supported by the diversity jurisdiction and that has in

court no more force than it would have outside of court.

Accord, League of United Latin American Citizens, 999

F.2d at 847. Cf. Rizzo v. Goode, 423 U.S. 362, 379-80

(1976). Prospective enforcement therefore is “inequitable”

within the meaning of Rule 60(bX5).

Evans I identifies two federal claims: one, under the

equal protection clause, which it adjudicated in plaintiffs’

favor, and another, under the due process clause, on which

it reserved judgment. The decree was properly supported

when the district court entered the injunction in 1984. But

Evans II properly overruled the equal protection holding

of Evans I, and there can be little doubt that Evans [/

would have repulsed a due process argument had the

plaintiffs presented it for decision. The two lines of argu-

ment were conceived as complements, and the conclusion

of Evans II that budgeting to pay tort judgments is a

subject for political rather than judicial decision under-

mines all of plaintiffs’ theories.

At the time of Evans /, plaintiffs’ due process theory

was that tort judgments are “property” and that state

law calls for prompt payment. Failure to follow state law

thus deprived them of the “property” right in prompt

ayment. Deferring payment indeed is problematic under

Hlinois law, which requires partial payment if full pay-

ment is postponed. 745 ILCS 10/9-104. But litigants ag-

grieved by Chicago's failure to adhere to state law must

take their claims to state court. Kasper, 814 F.2d at 340.

The Constitution does not authorize federal judges to super-

intend state and local governments’ compliance with their

App. 14

own laws. Nordlinger v. Hahn, 112 S. Ct. 2326, 2335 n.8

(1992); id. at 2339-41 (Thomas, J., concurring); DeShaney

v. Winnebago County Department of Social Services, 489

U.S. 189, 202 (1989); Snowden v. Hughes, 321 U.S. 1, 11

(1944); Archie v. Racine, 847 F.2d 1211, 1215-18 (7th Cir.

1988) (in banc). Quite the contrary, principles of respect

for a coordinate sovereign (and in some cases the eleventh

amendment) mean that federal courts should refrain from

adjudicating claims under state law, whether raised direct-

ly or whether used as the springboards for other theories.

“{I}t is difficult to think of a greater intrusion on state

sovereignty than when a federal court instructs state offi-

cials on how to conform their conduct to state law.” Penn-

hurst State School & Hospital v. Halderman, 465 U.S.

89, 106 (1984). State law may create property interests

that give rise to federal procedural entitlements, see

Archie, 847 F.2d at 1217, but establishing a budget is a

legislative rather than a person-specific decision. A govern-

ment need not offer individual hearings before adopting

legislation with widespread effects. Atkins v. Parker, 472

U.S. 115, 129-31 (1985).

Instead of contending that the due process clause re-

quires state and local governments to follow their own

law, plaintiffs might contend that the disparity between

the statutory 6% rate of interest and the market rate of

interest means that delay diminishes the value of the

judgments, violating the due process clause or, more ac-

curately, the takings clause applied to the states through

the due process clause. Chicago, Burlington & Quincy

R.R. v. Chicago, 166 U.S. 226 (1897). These arguments,

too, belong in state court, which may compensate litigants

for the erosion in the value of their judgments. William-

son County Regional Planning Commission v. Hamilton

Bank, 473 U.S. 172 (1985); Gamble v. Eau Claire Coun-

ty, No. 91-2499 (7th Cir. Sept. 22, 1993).

Recasting the due process argument as an objection to

erosion of a judgment’s value during delay encounters ad-

ditional obstacles. State and local law determines the dam-

ages awarded in tort litigation under these legal systems.

App. 15

There would be no constitutional obstacle to a rule say-

ing, for example, that the court shall calculate the income

the plaintiff lost because of the defendant’s tort and award

80% of that amount as damages. Workers’ compensation

systems use this principle, and many other rules of law

limit the damages recoverable in tort. Limitations on the

damages recoverable from state and local governments in

tort litigation are common. If a state may reduce the

award directly, it may do so indirectly by computing dam-

ages at 100% of loss and deferring payment while interest

accrues at less than the market rate.

If the statutory interest rate matches the market rate,

judgment holders receive full compensation for delay and

can sell judgments in the secondary market for their face

value, just as people buy and sell 30-year municipal bonds.

A court that would not dream of declaring, on constitu-

tional grounds, that a 6% post-judgment interest rate is

unconstitutionally low or that a cap on awards in tort

cases violates the due process clause has no greater war-

rant for declaring that the judgment debtor is taking too

long to pay; the calculation of the award, the interest rate,

and the delay in payment are three facets of the same

thing. (The post-judgment rate of interest in Illinois is 6%

if the defendant is a unit of local government and 9%

otherwise. 735 ILCS 5/2-1303. This difference does not

pose any problem under the due process clause, and plain-

tiffs do not bother to contest it.)

Federal law excluding municipalities from involuntary

bankruptcy, 11 U.S.C. §904, may make cities more able

(and thus more willing) to defer payment, but a decision

by Congress to limit the scope of federal remedies does

not justify stretching the due process clause. Some other

elements of national law may bear on Chicago’s budgetary

decisions. State and local governments do not determine

the level of damages in cases arising under federal law,

which implies a correspondingly uced entitlement to

diminish the value of these awards by delay. Chicago’s

payment of contract before tort judgments may disfavor

_

App. 16

holders of federal judgments (most federal judgments

against municipalities rest on 42 U.S.C. §1983 and other

civil rights statutes), which might offend the supremacy

clause of the Constitution. And if Chic pays interest

on federal judgments at the local rate rather than the fed-

eral coupon issue yield equivalent rate, see 28 U.S.C.

§1961(a), then Chicago is in hot water under federal stat-

utory law. Cf. Evans 1/1, 873 F.2d at 1011 n.7. Plaintiffs

do not pursue any of these claims based on the difference

between federal and state judgments, however, and the

difference could not support the full scope of the relief

awarded in this case.

To the objection that our approach interferes with the

settlement of litigation, we have two replies. First, settle-

ment is not an end in itself. It is a means of resolving

disputes harmoniously. Many things are more important:

preserving democratic governance, separating the judicial

and political spheres, respecting state autonomy in the

absence of a federal rule. These interests may elude a

hectored district judge, eager to reach the next case in

the queue, but to the political society whose long-term

good the judge serves they are vital. Settlements pur-

chased at the cost of putting the court in control of state

and local budgets come at too high a cost. Second, the

premise is incorrect. Attempts to enforce this consent

decree have not produced the peace that settlement brings.

There have been 16 years of noisome litigation. See also

United States v. Board of Education, 799 F.2d at 288-89,

296-98. Politics is unruly and often unpleasant; judicial

regulation of political affairs does not end the conflict but

only shifts the venue.

Recognizing that a substantial federal claim must under-

gird a consent decree does not make plaintiffs less will-

ing to settle: the decree still provides relief, which may

be tailored more closely to the parties’ circumstances than

a remedy of the judge’s devising could be. Plaintiffs’ alter-

native remains a trial, at which they might lose every-

thing or obtain less suitable relief. From defendants’ per-

spective, the approach we have taken actually may make

—————————

App. 17

settlement more rather than less attractive. Knowledge

that a change in the course of judicial decisions permits

modification or withdrawal of the decree may e a re-

sponsible public official more willing to consent to relief

based on the state of the law at the time. Public office-

holders whose objectives included ensuring that their

policies outlast the terms to which they had been elected

will have less reason to settle, but, as we have explained,

this is not a proper inducement to resolve litigation.

District judges need a substantial measure of discretion

to deal with consent decrees, and with discretion comes

deferential appellate review. Nothing in our discussion is

poe 0 to detract from these principles. What we have

emphasized is a rule of law that the district judges must

take into account when deciding which settlements to ac-

cept, and when to vacate consent decrees. Unless there

is a substantial claim under federal law, the district judge

should not enter or continue to enforce a consent decree

affecting the operation of a governmental body. The dis-

trict court did not find that after Evans II plaintiffs have

a substantial claim under the due process clause, and any

such finding would have been legally erroneous. Thus the

consent decree must be vacated, and the City’s budgetary

decisions restored to the political process.

REVERSED

RipeLe, Circuit Judge, concurring.

I concur in the judgment of the court. The plurality

opinion writes more broadly than is necessary to decide

the case before us, and I believe that it would be pru-

dent for the court to wait until another day when those

issues are presented more starkly and more fully than

they have been in this case. For the present, it is suffi-

cient to conclude that this court’s decision in Evans v.

City of Chicago, 873 F.2d 1007 (7th Cir. 1989) (Evans 11),

changed the prevailing law to such a degree as to make

App. 18

further enforcement of the consent decree by the district

court ——— under the standards set forth by the

Supreme Court in Rufo v. Inmates of the —— Count

Jail, 112 S. Ct. 748, 762-64 (1992). Although Evans II ad-

dressed only the equal protection issue, that was the only

issue tendered to the court on appeal by the plaintiffs.

Certainly, as the plurality opinion points out, the merits

of the due process argument, as presented in earlier

stages of the litigation, could not have survived the

holding of Evans IJ had it been presented for decision

by the plaintiffs. Indeed, given the history of this litiga-

tion, it is fair to say that it did not survive. See Evans

II, 873 F.2d at 1012 n.11. On this basis, I concur in the

judgment of the court.

CuDAHY, Circuit Judge, with whom CumMMINGS and

ROVNER, Circuit Judges, join, dissenting.

The plurality opinion flatly rejects the previously unar-

guable truth that “a deal is a deal’ or, more elegantly,

pacta sunt servanda. The plurality’s assertion that Chi-

cago in 1984 did not settle any aspect of the merits of

this dispute is simply and transparently wrong. Pl. Op.

at 6. Any number of sophistical efforts to distinguish

municipalities from corporations and to invoke the shib-

boleths of democracy and federalism do not change the

basic fact that a contract has been repudiated with the

blessing of this court. The City’s promises in 1984 are

apparently no longer binding in 1994. The City’s promise

in 1984 was merely to pay some of its debts promptly. I

am unable to see this as a significant assault on federalism

or democracy.

The plurality seems to have backwards what was settled

in 1984. It says the merits were not settled—only the re-

lief. But by its plain terms the consent decree purported

to settle the merits both of the equal protection and of

the due process claims. The Consent Decree states unam-

, —

App. 19

biguously that the “parties intend this Consent Decree

to fully and finally resolve the budgetary and equitable

aspect of the Plaintiff's class complaint, reserving only

plaintiff's claim for damages and claims for attorney’s

fees.”” Consent Decree at 8. The Consent Decree later in-

dicates that it is “a final and total settlement of all claims

(that the plaintiffs] now have or may have in the future,

arising either directly or indirectly out of [the Illinois

Code], as well as under the United States and Illinois

Constitutions, except for claims for damages and attorneys

fees.” Id. at 10. The merits were therefore settled, while

the relief was left to further litigation, ultimately resulting

in Evans II. The plurality seems to be saying that the

merits were not settled because Judge Grady pressed the

parties to reach a settlement. Somehow, the one ?;

tion does not follow from the other. In any event, I do

not understand the City to be complaining that its arm

was twisted.

At the time the settlement was reached in 1984, the

City had litigated the equal protection claim and lost. The

due process claim, on the other hand, was set aside by

this court (although our dicta certainly indicated that the

claim was colorable). Hence, if anything was settled under

the 1984 decree, it was certainly the due process claim.

With its explication of the transitory ee of settle-

ments with municipalities (e.g. a Harold Washington deal

certainly could not bind Richard Daley), Pl. Op. at 7-13,

the plurality has put in grave doubt the value of these

devices for dispute resolution. In fact, the plurality opin-

ion effectively deprives state and local governments of the

ability to enter into enforceable consent decrees. If courts

refused to enforce contractual agreements, “people would

be reluctant to enter into contracts and the process of

economic exchange would be retarded.” Anthony T. Kron-

man & Richard A. Posner, The Economics of Contract

Law 4 (1979). Where courts are unavailable to enforce

promises, those who seek to make binding promises are

forced to seek some other, and typically more costly,

means of enforcement. See John Umbeck, A Theory of

App. 20

Contract Choice and the California Gold Rush, 20 J.L.

& Econ. 421 (1978).

Here, there is an obvious candidate to replace a regime

of contract law. A district court, recognizing that consent

decrees are of doubtful and declining enforceability, would

likely issue a permanent injunction, rather than have the

city negotiate a (meaningless) consent decree.

The plurality correctly points out that cities may form

contracts to build a new road or repay a loan, but insists

that governments cannot contract away their power to

enact legislation. Pl. Op. at 8. The Consent Decree falls

into the latter category, the plurality contends, because

it interferes with Chicago’s ability to adopt a budget. This

assertion simply proves too much, for even a city’s agree-

ment to build a road interferes with the city’s budgetary

process, since a subsequent administration is surely re-

quired to honor the bonds that its predecessor sold to

finance the construction. Moreover, the agreement we are

concerned with here involves an application of constitu-

tional law—something we should think not open to tinker-

ing even by a democratic process. If, as the plurality con-

tends, the word of an elected official is less worthy of

trust than almost anyone else’s, governmental bodies will

simply have to be coerced into compliance instead of invited

to make voluntary agreements. It is difficult to understand

how this result furthers the ends of federalism.

The plurality is insistent that there is no federal interest

in maintenance of the consent decree to the extent that

it is based on due process. While the Supreme Court has

yet to vacate a consent decree on the grounds that there

is an insufficient federal interest, it has suggested that

the Constitution implicitly imposes such a limitation on the

equitable powers of the federal courts. See Rizzo v. Goode,

423 U.S. 362 (1976); Allan Effron, Note, Federalism and Fed-

eral Consent Decrees Against State Governmental Entities,

88 Colum. L. Rev. 1796 (1988). See also yy of United

Latin American Citizens v. Clements, 999 F.2d 831, 898,

900 (5th Cir. 1993) (Politz, J. dissenting & King, J. dissent-

ing) (consent decree settling parties’ dispute should be en-

forced).

App. 21

In any event, in the case before us there certainly is

a federal interest of the highest importance. That interest

is, of course, in the enforcement of the Constitution. The

facts here, as recited by the plurality, involve tort judg-

ment creditors who had enough political clout to “jump

the queue” and receive payment first. This practice alone

may violate three or four constitution2! provisions. In ad-

dition, the original due process claim recognized by the

district court in 1981 and affirmed in dicta by this court,

Evans v. City of Chicago, 689 F.2d 1286, 1296-99 (7th Cir.

1982) (‘Evans I’’), is at least colorable. There is thus a

clear federal interest in enforcing the decree. In enforc-

ing the Constitution, federal courts are not meddling in

parochial matters lying outside their sphere of responsibil-

ity. Nor are they encroaching on the prerogatives of the

state. They are instead serving the preeminent function

for which they were established. See generally Marbury

v. Madison, 5 U.S. (1 Cranch) 137, 178 (1803) (ensuring

the supremacy of the Constitution is “of the very essence

of judicial duty’’).

The due process claim here as analyzed in our 1982 deci-

sion Evans I, 689 F.2d at 1296-98, rested in part on a

purported property interest in unpaid tort judgments

created by an Illinois statute. Apparently the financial

practices of the City violated state law as well as, argu-

ably, the Constitution. It is therefore difficult for me to

see how the consent decree has offended federalism and

democracy. So far as I am aware, no effort has been made

to amend the state statutes which, we are told, intruded

so onerously on the City’s independeice.

Finally, I am astonished by the plurality’s suggestion

that we have announced a “rule of law” for the future

guidance of district courts. Pl. Op. at 17. Here, of course,

we are violating the basic principle of strong deference

to the district court in its construction of its own consent

decrees. It does not seem to me that we are announcing

a rule of law. It is more like a rule of anarchy. The

solemn promises of governments bind only for the day.

App. 22

They are not to be taken seriously with the turnover of

city fathers (not to mention the advent of new faces on

the federal courts).

I therefore respectfully dissent.

FLAUM, Circuit Judge, with whom KANNE, Circuit Judge,

joins, dissenting.

I dissent. Although I share the majority’s wariness of

federal involvement in matters of local governance, I can-

not discern any change in legal or factual circumstance

since the entry of the consent decree in this case that

justifies setting it aside in toto.

The original litigation and subsequent decree were bot-

tomed on separate legal theories, equal protection and due

process. This Court repudiated the et protection theory

in Evans II, but the due process theory was left intact.

Perhaps the majority is correct in speculating that the

Evans II court was in no mood to sustain the due proc-

ess claim had it the opportunity to pass on it. However,

I think it is a wiser practice to limit what we take from

a case to what it in fact says, and not to attribute to cases

enumbral holdings about wholly distinct and undecided

egal theories.

In my opinion a colorable due process theory supported

at least part of this decree when it was entered in 1984,

and nothing in Evans II or any other case since alters

that conclusion. The district court, intimately familiar with

the decree and its foundations, understood the precise im-

port of Evans II and acted well within its discretion in

modifying the decree accordingly. I also see no inequity

at this time in continued enforcement of the decree. Chi-

cago does not complain that compliance has now become

onerous and, indeed, even indicates its intention, with or

without the decree, to continue to pay tort judgments

promptly.

For these reasons, I respectfully dissent.

ce

App. 23

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

App. 24

IN THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

No. 91-3277

SYLVIA Evans, Administrator

of the Estate of ANDREW EVANS,

Deceased,

and

BERTHA BALARK, DANA BALARK,

ANNE BALARK, and DANE BALARK,

by themselves and for all

others similarly situated,

Plaintiffs-Appellees,

v.

City or CHIcaco, a municipal

corporation,

Defendant-Appellant.

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

Nos. 77 C 4119, 79 C 1939, 79 C 2493—John F. Grady, Judge.

ARGUED SEPTEMBER 30, 1992—DecipEp JUNE 3, 1993

Before CuDAHY and EASTERBROOK, Circuit Judges, and

LEE, District Judge.

1 The Honorable William C. Lee, United States District Judge

for the Northern District of Indiana, is sitting by designation.

App. 25

LEE, District Judge. This is an appeal from a district

court order reinstating and modifying a consent decree.

Procedural Background

This case began on November 4, 1977, when plaintiff

Sylvia Evans filed suit under 42 U.S.C. $1983 against of-

ficers of the City of Chicago. In this suit, Evans claimed

that the City’s practice of paying small tort judgments

before large ones regardless of the dates on which the

judgments were entered, and the City’s practice of delay-

ing payment of large tort judgments, violated the Equal

Protection and Due Process clauses of the United States

Constitution. The City of Chicago was later added as a

defendant, and the case was certified as a class action on

January 2, 1980. On May 14, 1979, plaintiffs Bertha Balark,

Dana Balark, Anne Balark, and Dane Balark filed suit un-

der 42 U.S.C. §1983 against the City of Chicago and cer-

tain of its officers asserting similar violations. The Balark

case was certified as a class action on August 15, 1980.

On June 18, 1979, plaintiff Curtis Collum also filed suit

under 42 U.S.C. §1983 against the City of Chicago and

certain of its officers, asserting similar violations of the

United States Constitution. The Collwm case was also cer-

tified as a class action on August 15, 1980. On January

28, 1981, the district court consolidated these cases. How-

ever, the Collum class is not a party to this appeal.

The class certified in Evans consisted of persons holding

large judgments against the City who not been paid

within the first two fiscal years after the entry of their

judgments. Evans v. City of Chicago, 689 F.2d 1286, 1290

n. 6 (7th Cir. 1982; (“Evans I’). The class certified in

Balark consisted of persons holding large unpaid judg-

ments against the City, which judgments were less than

two years old. Jd. at 1291 n. 7.

On January 28, 1981, the district court entered partial

summary judgment in favor of the Evans and Balark

plaintiff classes and against the defendant City of Chicago,

and certified its order for immediate appeal under Rule

App. 26

5A(b) of the Federal Rules of Civil Procedure. The district

court’s order (1) directed the City to pay all members of

the Evans class immediately; (2) declared that Ill. Rev.

Stat. ch. 85 para. 9-104(b) (1981), violated the Due Pro-

cess clause of the United States Constitution;? (3) specified

procedural safeguards to be followed before the City could

properly pay judgments in installments; (4) ordered small

judgments along with judgments over $1000 to be paid in

the order in which they were entered; (5) declared that Ill.

Rev. Stat. ch. 24, para. 8-1-16 (1981), violated the Equal

Protection clause of the United States Constitution; (6)

reserved the question of attorney’s fees; and (7) certified

the order for immediate appeal under Rule 54(b). The City

of Chicago filed a timely notice of appeal from the district

court’s judgment.

This Court affirmed the district court’s judgment on

September 27, 1982, stating as follows:

The defendants contend that the City’s practice of

paying tort judgments of $1,000 or less before tort

2 The 1981 statute provided:

(a) If a local public entity does not pay a tort judgment or

settlement during the fiscal year in which it becomes final and

if, in the opinion of its governing body, the unpaid amount

of the tort judgment is not too great to be paid out of reve-

nues for the ensuing fiscal year, the governing body shall pay

the balance of the judgment during the ensuing year.

(b) If the local public entity does not pay the tort judgment

or settlement during the fiscal year when it becomes final and

its governing body is of the opinion that the unpaid amount

of the judgment or settlement is so great that undue hard-

ship will arise if the entire amount is paid out of the revenues

for the ensuing fiscal year, the governing body shall pay the

judgment or settlement, with interest thereon, in not more

than 10 annual installments. Each payment shall be of an equal

rtion of the principal of the tort judgment or settlement.

e governing body, in its discretion, may prepay any one or

more installments or any part of an installment.

Ill. Rev. Stat. ch. 85, para. 9-104 (1981). Effective November 25,

1986, paragraph 9-104 was amended by P.A. 84-1431.

Pi diticce

App. 27

judgments in excess of $1,000 related rationally to

the City’s attempt to reduce litigation and interest

costs by encouraging quick settlements for $1,000 or

less without interest in a large amount of nuisance

litigation. The explanation does not survive exami-

nation for two reasons. First, the City’s practice in-

cluded immediate payment of fully litigated claims

which resulted in judgments of $1,000 or less. Second,

the practice did not reduce interest costs since inter-

est accumulated on the sum of the unpaid judgments.

The priority given smaller judgments did not reduce

that total. Nor does the payment of many small judg-

ments before an equal amount due on large judgments

allow the City more effectively to manage its yearly

appropriations and limit the City’s debt. We discern

no rational basis for the City’s challenged classifica-

tion. See Zobel v. Williams, ___. U.S. , 102

S.Ct. 2309, 2311, 72 L. Ed.2d 672 (1982). The district

court correctly held the practice and IIl.Rev.Stat., ch.

24, § 8-1-16, Boss as the statute incorporates. the

practice, unconstitutional. (Footnote omitted.)

Evans I, 689 F.2d at 1299-1300.

With respect to the due process challenge to paragraph

9-104(b), this Court ruled that:

Upon review of the relevant statutes and decisions,

we agree with the district court that under Illinois

law, if the City has not invoked § 9-104(b) before the

end of the fiscal year following the year in which the

tort judgment became final, the tort judgment holder

may legitimately claim entitlement to immediate pay-

ment. Thus, at least in that situation, the right to

immediate payment of a tort judgment against a mu-

nicipal corporation becomes a property right under

Illinois law.

* * *

The record discloses that the governing body of the

City never determined that undue hardship would arise

if the entire amount of unpaid judgments were paid

App. 28

out of revenues for the fiscal year following the fiscal

year in which the judgments became final. Further-

more, the City never subjected the named plaintiffs

or any class member to the installment plan method

of payment permitted by IIl.Rev.Stat., ch. 85, § 9-104(b).

Nor did the City ever tell the named plaintiffs or any

class member that it would implement such a plan.

Thus cond wager 9 had no standing to attack the con-

stitutionality of that provision. Blum v. Yaretsky,

ine ; , 102 S.Ct. 2777, 2783, 73 L.Ed.

2d 534 (1982); Alabama State Federation of Labor v.

McAdory, 325 U.S. 450, 65 S.Ct. 1384, 89 L.Ed. 1725

(1945). Because the district court improperly reached

this issue, we vacate paragraph four of the district

court’s January 28, 1981 order, which declared III.

Rev.Stat., ch. 85, § 9-104(b) unconstitutional and set

forth the minimum procedural safeguards that due

process requires before the City may decide to pay

a judgment in installments over ten years. In vacat-

ing this portion of the court’s order, we, of course,

express no opinion about the constitutionality of the

statute or the appropriateness of the order’s proce-

dural safeguards.

Id. at 1297, 1299.

The case returned to the district court for further pro-

ceedings. Subsequently, the parties entered into negotia-

tions and on May 30, 1984, Judge Grady approved a con-

sent decree. This decree stated in part:

III.

PURPOSES OF CONSENT DECREE

1. The parties state that they are entering into

this Consent Decree for the purpose of avoiding the

further expense of protracted litigation over the mat-

ters resolved and decided by this Consent Decree.

The parties intend this Consent Decree to fully and

finally resolve the budgetary and equitable aspects

of Plaintiffs’ class complaint, reserving only plaintiffs’

App. 29

claims for damages and claims for attorneys’ fees. All

equitable and legal rights of the plaintiffs are merged

into this Consent Decree uiiless otherwise specified.

5. In consideration of the execution of this Consent

Decree, the Defendants, CITY OF CHICAGO, et al.,

and the Plaintiffs as class representatives, hereby

covenant and agree to abide by the Terms of Settle-

ment described in this Consent Decree, thereby fully

settling all matters decided therein. The parties, as

indicated by the signatures of their counsel below, who

are acting with express authority from their respec-

tive clients, have determined to finally settle Plain-

tiffs’ claims as described herein by entry of this con-

sent decree subject only to notice to the class and

hearing on January 9, 1983 to determine whether the

proposed settlement as provided by this Consent De-

cree should be approved by the court under Rule

23(e) of the Federal Rules of Civil Procedure.

IV.

TERMS OF SETTLEMENT

1. In consideration of the execution of this Con-

sent Decree and the Release herein contained, and

in consideration of the dismissal of this lawsuit in all

respects, with prejudice and without costs and/or at-

torneys’ fees, against Defendants CLARK BURRUS,

Defendant DANIEL GRIM and Defendant WILLIAM

QUINLAN, individually and as past Comptrollers and

Corporation Counsel, ively, of the City of Chi-

cago, Defendant CITY OF CHICAGO hereby cove-

nants and agrees to do the things and perform the

acts described herein, at the time and in the man-

ner set forth in this Decree, all of which shall be sub-

ject to the conditions set forth herein.

*x* * *

3. Plaintiffs understand, upon advice of counsel,

and agree that except as otherwise provided herein,

this Decree is a final and total settlement of all claims

App. 30

they now have or may have in the future, arising

either directly or indirectly out of or related to III.

Rev. Stat. 1981, ch. 85 §9-104 and Ill. Rev. Stat. 1981,

ch. 24 §8-1-16, as well as under the United States

and Illinois Constitutions, except for claims for dam-

ages and attorneys fees, as hereinafter specified; and

that such finality is applicable to the defendants, the

City of Chicago, and its officers, agents and employees.

* * *

5. The Defendant CITY OF CHICAGO, its agents,

servants and employees are permanently enjoined

from paying final judgments other than by the date

of their entry by a court of competent jurisdiction.

* * *

7. For fiscal 1984, the Defendant CITY OF CHI-

CAGO shall appropriate an amount which is expected

to be sufficient to satisfy payment of all final judg-

ments which remain unpaid as of December 31, 1983,

plus payment of one-half of the estimated liability of

the CITY OF CHICAGO for payment of judgments

to become final in 1984. In no event shall Defendant

CITY OF CHICAGO appropriate less than Thirteen

Million Five Hundred usand ($13,500,000) Dollars

for the payment of judgments in 1984.

8. For fiscal 1985, the CITY OF CHICAGO shall

appropriate an amount which is e to be suf-

ficient to — yment of the “anticipated lia-

bility” of the CITY OF CHICAGO for fiscal 1985.

In no event shall defendant CITY OF CHICAGO ap-

gy: less than Twelve Million ($12,000,000) Dol-

ars for the payment of judgments in 1985.

9. For all subsequent fiscal years, the Defendant

CITY OF CHICAGO shall submit to the City Coun-

cil a request for an appropriation of monies sufficient

to a ent of the full “anticipated liability”

of the CI OF CHICAGO for payment of fede

ments for the ensuing fiscal year.

App. 31

10. Process of tort judgments entered against the

CITY OF CHICAGO, its agents, servants and em-

es thereafter, shall be administered in the

ollowing manner:

*_ * *

(f) Payment of j nt creditors from the date

of entry of this r until May 31, 1985 shall be

made when funds become available for payment.

Sums budgeted for 1984 and 1985 shall be made

available for disbursement in ten (10) monthl

installments for each month from March t

December of that year.

11. ee of tort judgments entered against the

CITY OF CHICAGO, its agents, servants and em-

ployees beginning June 1, 1985 and for subsequent

years thereafter shall be processed in the following

manner:

(d) ... Effective June 1, 1985, the Office of -he

Comptroller shall issue a check in payment of

judgments within forty-five (45) days of receipt

of all executed documents.

12. In the event that all funds allocated for the

payment of tort judgments have been exhausted, the

time restrictions of 10 with respect to pay-

ment of tort judgments shall be suspended until such

funds become available. All other provisions in Yd

graph 10 shall remain in full force and effect. n

additional allocated funds become available for pay-

ment of tort judgments, all judgments due to be paid

during the suspension period for which the proper

documentation has been provided shall be paid im-

mediately.

After the entry of the Consent Decree, trial commenced

in the district court on the damages issue. At trial, the

oe introduced a new theory of equal protection lia-

ility, arguing that the City irrationally chose to delay

payment of tort judgments while paying other types of

judgments (such as contract claims) immediately. Plaintiffs

App. 32

also reasserted their due process argument. The district

court found in favor of the plaintiffs on their new equal

rotection claim, but did not address the due process claim.

inal judgment was entered against the City of Chicago

on November 23, 1987. Again, the City of Chicago ap-

pealed to this Court, and on April 27, 1989, we reversed

the district court and also reversed our ruling in Evans

I. Evans v. City of Chicago, 873 F.2d 1007, 1012-13 (7th

Cir. 1989) (“Evans II”). We explained our reversal of

Evans I as follows:

[I}t is clear that the classification system set up by

the City [for paying judgments] should not be struck

down by this court. The City offered a number of

reasons for its classification system. Most importantly,

at the second trial the City ed that paying off

smaller judgments early satisfied more claimants;

without such a bifurcation of payments, all tort judg-

ment creditors would have experienced lengthy de-

lays. The district court found that the purpose of

satisfying more claimants was invalid. However, we

find nothing to indicate that such a goal is imper-

missible. The purpose behind a government enact-

ment need not be laudatory—to pass constitutional

muster, the purpose must simply be legitimate. If the

court can hypothesize plausible reasons for legislation

that are within the legitimate of a government,

nothing else is required to validate the governmen-

tal classification and it does not matter whether the

reasons advanced actually motivated the legislative

action. United States R.R. Retirement Bd. v. Fritz,

449 U.S. 166, 179, 101 S.Ct. 453, 461, 66 L.Ed.2d 368

(1980). Vicious or irrational discrimination violates the

equal protection clause. Jackson v. City of Joliet, 715

F.24 1200, 1203 (7th Cir. 1983), cert. denied, 465 U.S.

1049, 104 S.Ct. 1325, 79 L.Ed.2d 720 (1984). No such

discrimination is evident in this case. At worst, the

City is merely attempting to satisfy as many individ-

ual claimants as possible with the limited revenues

available. The City’s practice of paying small tort

—_——

App. 33

judgments in advance of larger ones does not violate

the equal protection rights of the holders of large tort

judgments. This court’s finding in Evans / that the

City’s practice violated equal protection was clearly

erroneous and must be reversed. '

Evans II, 873 F.2d at 1016.

With respect to the plaintiffs’ new equal protection the-

ory, we held that:

In reviewing this holding by the district court [that

the City’s differentiation between tort and nontort

judgments was irrational], we must again apply the

rational basis test of equal protection to the City’s

practice. Under this standard, the City’s budgetary

scheme does bear some rational relationship to legiti-

mate state ends. The City’s practice of charging judg.

ments incurred by enterprise funds to those funds

seems rationally related to the concept of such a fund—

a self-sustaining or breakeven operation supported by

its users. Charging departmental budgets for contract

damages conforms to the normal accounting practice

of matching expenditures to the appropriate entity

that incurred the liability. Similar rational reasons ex-

ist for charging personnel damages to the involved

department. The 395 Fund is by law a special reve-

nue fund and can only be used for its defined pur-

pose.

The district court found fault with this system and

while it may not be perfect, we do not believe that

it sinks to the level of being irrational.

Id. at 1017. 3

Once again the case returned to the district court, where

the plaintiffs’ motions for attorney’s fees were,wending.

The plaintiffs argued to the district court that, despite

their defeat in Evans II, they were still the “prevailing

parties” for purposes of the attorney fee provision of 42

U.S.C. §1988, as they had prevailed in negotiating a con-

sent decree which remained in effect. Plaintiffs’ argument

prompted the City to move to vacate the consent decree

App. 34

under Rule 60(bX5) of the Federal Rules of Civil Proce-

dure. The district court granted the City’s motion to va-

cate the consent decree on October 31, 1990 and also de-

nied plaintiffs’ petition for attorney’s fees.

On November 28, 1990, the plaintiffs moved for recon-

sideration and on July 25, 1991, the district court, in a>

bench ruling, reversed its earlier ruling vacating the con-

sent decree and granted in part the motion for reconsid-

eration. Judge Grady explained the basis for his reversal

as follows:

These statements which I have just quoted from

my order vacating the consent decree were based

upon a misinterpretation of the facts of this case and

a misapprehension as to the timing of certain critical

events. I emphasized in my order vacating the con-

sent decree that the Court of Appeals in Evans II

had said that the due process issue had not survived

in the case to the point of the decision in Evans II;

namely, 1989. Evans II said nothing whatever about

what the status of the due process claim was back

in 1984 at the time the consent decree was negotiated

and agreed to by the parties except to say in several

places that the due process questions considered in

Evans I were not before the Court in Evans II.

Evans I had not decided the question of whether the

City’s customary delay in the payment of judgments

was a violation of due process. That question was ex-

plicitly left open by Evans I. It was not decided by

Evans II as is made abundantly clear by Footnotes

8, 11, and 15 of Evans II.

In saying, as I unfortunately did in my order va-

cating the consent decree, that all legal underpinning

for the consent decree had been eliminated by Evans

II, I was overlooking the fact that the language in

Evans II about the elimination of the due process

issue from the case was not addressed to the situa-

tion that existed at the time of the entry of the con-

sent decree.

Transcript of July 25, 1991 hearing at 9-10.

App. 35

On August 2, 1992, Judge Grady entered an “Order

Modifying Consent Decree’”’ which stated:

The court having granted in part and denied in part

the motion of the defendant City of Chicago to mod-

ify the Consent Decree of May 31, 1984, the said de-

cree is hereby modified as follows: Nothing in the

Consent Decree shall require the defendant City of

Chicago to pay a final tort judgment under $1,000.00

in any particular order.

On August 8, 1991 the City moved the district court to

reconsider its order. On September 9, 1991, the district

court denied the City’s motion for reconsideration, and

on September 30, 1991, the City of Chicago filed its notice

of appeal.

Standard of Review

In a case involving a Rule 60(bX5) request to modify

or vacate a consent decree, the standard of judicial re-

view is deferential. Duran v. Elrod, 760 F.2d 756, 761

(7th Cir. 1985). Thus, the district court’s determination

may be reversed only upon an abuse of discretion and

appellate review is limited. Reinsurance Co. v. Adminis-

tratia Asigorarilor, 902 F.2d 1275, 1277 (7th Cir. 1990);

Tolliver v. Northrop Corp., 786 F.2d 316, 318 (7th Cir.

1986).

Discussion

Appellant City of Chicago contends that, pursuant to

Rule 60(bX5), the consent decree should be modified to

respond fully to changes in legal and factual circumstances.

The City argues that it changed its practices, as memo-

rialized in the consent decree, to conform with the law

as announced in Evans I, and now that this Court has

repudiated Evans I the consent decree should be vacated

as it is clear that no part of the City’s former practices

violates the equal protection clause.

App. 36

Rule 60(bX5) of the Federal Rules of Civil Procedure

provides in relevant part:

On motion and upon such terms as are just, the court

may relieve a party or a party’s legal representative

from a final judgment, order, or proceeding for the

following reasons: . . . (5) the judgment has been

satisfied, released, or discharged, or a prior judgment

upon which it is based has been reversed or other-

wise vacated, or it is no longer equitable that the

judgment should have prospective application ... .

The Supreme Court, in Rufo v. Inmates of Suffolk County

Jail, 112 S.Ct. 748, 758 (1992), recently reinforced its hold-

ing in Railway Employes v. Wright, 364 U.S. 642, 647-48

(1961), that: “There is . . . no dispute but that a sound

judicial discretion may call for the modification of the

terms of an injunctive decree if the circumstances, whether

of law or fact, obtaining at the time of its issuance have

changed, or new ones have since arisen.”

The City contends that the legal circumstances in this

case have changed. Specifically, the City asserts that the

judgment upon which the consent decree was based,

Evans I, has been overruled by this Court in Evans II.

Plaintiffs, however, claim that Evans II only reversed the

equal protection holding of Evans I, and the consent

decree was based on the alleged due process violations

as well as the equal protection violations. The record is

clear that the due process issues were not before this

Court in Evans IJ, but were completely settled by the

parties after Evans I was decided and prior to the City’s

appeal of the district court’s ruling in favor of plaintiffs

on their new equal protection claim. Although the due pro-

cess issues were before this Court in Evans I, we declined

to address the issues due to the plaintiffs’ lack of stand-

ing to raise the issues. It is clear that we did not rule

on the due process issues, and thus had no ruling to re-

verse on this point in Evans II. Likewise, it is clear that

both parties agreed to settle the due process issues, as

ainda

App. 37

set forth in detail in the consent decree.* Therefore, the

City’s assertion that the judgment upon which the con-

sent decree was based has been reversed is not complete-

ly correct as there was no judgment on the due process

issues. The Court understands the City’s point that since

it lost on the equal protection claim, it feit it had no choice

but to settle the case. Nevertheless, the City did have

a choice in how it structured the settlement and it could

have reserved some or all of the due process issues for

further litigation. The City lost on the equal protection

claim, predicted it would lose on the due process claims

if it pursued the matter, and decided the wisest course

was to enter into the consent decree. At the time the con-

sent decree was entered into no one could have very well

predicted that, as a result of additional evidence before

the district court during the trial on damages, the equal

protection holding would be appealed and reversed. As a

result, although the City is bound by the decree, it is no

longer obligated to pay damages to several large classes

of plaintiffs since the damages award, based on the equal

protection holdings, was reversed in Evans I1.*

This Court can find no competent basis for vacating the

decree in its entirety and finds that Judge Grady’s modifi-

cation of the decree is a proper resolution of the conflict

arising out of this Court’s reversal of the equal protec-

tion holdings. Although the City argues that Ill. Rev. Stat.

ch. 85, para. 9-104(a) can withstand both substantive and

3 At oral argument, the Court queried whether the agreement

the parties entered into was a consent decree or, rather, simply

an agreement on relief after a judgment on the merits. Counsel

for both parties assured the Court that the agreement was indeed

a consent decree. After further considering the issue, the court

agrees that the document is a consent decree since there was not

a judgment on the merits on the due process claims. The due pro-

cess claims were settled in the consent decree.

4 Neither party appealed the district court’s finding that it need

not reach the question of whether plaintiffs were entitled to dam-

ages based upon a due process violation.

App. 38

procedural due process challenges, the constitutionality of

§9-104(a) is not properly before this Court. Furthermore,

the City cannot now litigate an issue that was subsumed

in the consent decree, which the City agreed was final

and applicable to it. Money Store, Inc. v. Harriscorp Fi-

nance, Inc., 885 F.2d 369 (7th Cir. 1989).

The City argues that the district court erred in modi-

fying the consent decree to reflect the narrowest possi-

ble reading of this Court’s prior decisions. However, as

discussed above, in the absence of a judgment on the due

process issues, the district court had no other choice. The

district court correctly granted relief from the consent de-

cree to the extent that Evans II overruled Evans I on

the equal protection holding.

The City also condemns the district court’s decision by

stating that a federal judgment still has effect even though

it has not been shown that any law has ever been vio-

lated. The Court observes that this is true in most cases

that settle. Most judgments arising from settlements are

based on the agreement of the parties and not on a show-

ing that a law has been violated. The purpose of a set-

tlement agreement, or a consent decree, is to end a case

without having to go through the trouble and expense of

deciding whether a law has been violated. If the City had

entered a consent decree prior to any litigation, thereby

aborting the birth of Evans I and its siblings, the City

would remain bound by the decree, absent a substantial

change in legal or factual circumstances, even though it

may later have believed that it unwisely entered into the

decree. The City further complains that, by refusing to

vacate the consent decree, the district court penalized it

for having agreed to the entry of the decree rather than

proceeding with litigation. Yet this is true in every case

that settles—one party is being penalized in the sense that

there is always the chance that one side can completely

win their case if litigation continues.

Although we agree that consent decrees should be modi-

fied or vacated when the circumstances so warrant, we

App. 39

are mindful of the teaching of our Supreme Court in Rufo,

112 S.Ct. at 760, that “Rule 60(bX5) provides that a par-

ty may obtain relief from a court order when ‘it is no

longer equitable that the judgment should have prospec-

tive application,’ not when it is no longer convenient to

live with the terms of a consent decree.” Further, “‘a

party seeking modification of a consent decree bears the

burden of establishing that a significant change in circum-

stances warrants revision of the decree” and then “the

court should consider whether the proposed modification

is suitably tailored to the changed circumstance.” Id. In

the present case, the significant change in circumstances

was a legal change rather than a factual change. The legal

change was the ruling that the City’s practice of paying

tort judgments less than $1000 prior to judgments over

$1000 did not violate the equal protection clause. The dis-

trict court modified the decree to provide that the City

could pay a tort judgment under $1000 in any order it

wished. This modification is clearly suitably tailored to the

changed circumstance. It is worth noting that Judge Grady

gave the parties ample opportunity to submit an agreed

upon proposed order modifying the decree. The City was

apparently unable to reach an agreement and should not

now complain so loudly that Judge Grady’s modification

is too narrow. Further, although the City is bound to the

due process aspects of the consent decree, the procedures

the City must follow in paying judgments have not been

adjudged to be illegal. This is in keeping with the Supreme

Court’s ruling that a decree modification must not “create

or perpetuate a constitutional violation.” Rufo, 112 S.Ct.

at 763. Rufo further held that:

A proposed modification should not strive to re-

write a consent decree so that it conforms to the con-

stitutional floor. Once a court has determined that

changed circumstances warrant a modification in a

consent decree, the focus should be on whether the

proposed modification is tailored to resolve the prob-

lems created by the change in circumstances. A court

should do no more, for a consent decree is a final

App. 40

judgment that may be reopened only to the extent

that equity requires. The court should not “turn aside

to inquire whether some of [the provisions of the de-

cree] upon separate as distinguished from joint action

could have been opposed with success if the defen-

dants had offered opposition.” Swift, 286 U.S., at 116-

117, 52 S.Ct., at 463.

Id. at 764.

The City suggests to the Court that “to encourage set-

tlements, a court considering changes in legal circumstances

should construe them to be far-reaching changes, and thus

grant relief from consent decrees freely,” and that “‘to

allocate the risk of future changes in the law to the ob-

ligor under a consent decree, without realistic hope of

relief, is to discourage potential obligors from entering into

settlements in the first instance.” The City is grossly

overstating the case. First of all, it would be an extremely

poor judicial policy to freely grant relief from consent de-

crees and certainly would not encourage settlements. Sec-

ondly, there has been no change in the law to which the

City has not been granted relief. The decree has already

been modified to account for the change in the law and

the City has been relieved from paying damages.

The City relies on the following passage from Rufo in

support of its argument that the federal courts should re-

linquish control over the management of the City’s fisc:

Within these constraints, the public interest and “{cJon-

siderations based on the allocation of powers within

our federal system,” Dowell, 498 U.S., at ___, 111

S.Ct., at 632, require that the district court defer to

local government administrators, who have the “pri-

mary responsibility for elucidating, assessing, and

solving” the problems of institutional reform, to re-

solve the intricacies of implementing a decree modifi-

cation. Brown v. Board of Education, 349 U.S. 294,

at 299, 75 S.Ct. 753 at 755-756, 99 L.Ed. 1083 (1955).

See also Missouri v. Jenkins, 495 U.S. 33, __., 110

S. Ct. 1651, , 109 L.Ed.2d 31 (1990); Milliken II,

App. 41

433 U.S., at 281, 97 S.Ct., at 2757. (Footnote omitted.)

Although state and local officers in charge of insti-

tutional litigation may agree to do more than that

which is minimally required by the Constitution to

settle a case and avoid further litigation, a court

should surely keep the public interest in mind in rul-

ing on a request to modify based on a change in con-

ditions making it substantially more onerous to abide

by the decree. To refuse modification of a decree is

to bind all future officers of the state, regardless of

their view of the necessity of relief from one or more

provisions of a decree that might not have been en-

tered had the matter been litigated to its conclusion.

Id.

It is clear to this Court that to continue to require the

City to abide by the terms of the consent decree will not

work a hardship on the City. The City admits that it has

fully complied with the consent decree for eight years and

has no intention of reverting to its prior practices, as it

does not wish to ever again pay more post-judgment in-

terest on its tort judgments than is absolutely necessary.

The City argues that the interests of the taxpayers of

the City of Chicago should also be considered in deter-

mining where the public interest lies, and their interests

may not always dictate immediate payment. The City seems

to have forgotten that the consent decree is very flexi-

ble and provides that:

6. Nothing in this decree is intended to prevent

the parties to a suit from entering into a structured

settlement, or a final settlement which assumes peri-

odic payment of sums of money over a period of time

established by the settlement, provided that such set-

tlement is in good faith compliance with the terms

of this Consent Decree and subject to the approval

of the court before whom the case is pending.

*x* * *

12. In the event that all funds allocated for the

payment of tort judgments have been exhausted, the

App. 42

time restrictions of paragraph 10 with respect to pay-

ment of tort judgments shall be suspended until such

funds become available. All other provisions in para-

graph 10 shall remain in full force and effect. When

additional allocated funds become available for pay-

ment of tort judgments, all judgments due to be paid

during the suspension period for which the proper

documentation has been provided shall be paid imme-

diately.

This flexibility fatally undermines the City’s argument

that the decree should be vacated because it robs the local

government of necessary flexibility. For example, pursuant

to Paragraph 6 above, if the City cannot afford to imme-

diately pay a judgment in full, it may settle for whatever

the judgment holder is willing to accept, such as higher

interest. This alternative is certainly more justifiable than

expecting the judgment holder to settle for less than he

is entitled to (Gif he sells his judgment at a discount) or

forego payment for years.

The City has suggested that if the Court finds vacatur

of the decree unwarranted, the Court should remand the

case back to the district court for a decision on the merits

of the due process claims. The Court rejects this sugges-

tion for two reasons. First, this case has been in Judge

Grady’s court since November of 1977 and Judge Grady

has conscientiously managed the case since that time. A

review of the record in this case proves without a doubt

that Judge Grady understands the case better than any-

one else. His order modifying the decree conforms with

the law, and while it may be argued until the end of time

that Evans II could be read more broadly than Judge

Grady chose to read it, by no stretch of the imagination

can his decision be held to be an abuse of discretion. Sec-

ond, a remand is likely to give rise to Evans IV, and pos-

sibly to Evans V, if plaintiffs continue to pursue their

claim for attorney fees. Simply stated, this case should

come to an end as soon as possible.

Accordingly, for all the foregoing reasons, the District

Court’s opinion is hereby AFFIRMED.

App. 43

EASTERBROOK, Circuit Judge, dissenting. In 1982 we

held that the sequence in which Chicago paid tort judg-

ments against it violated the equal protection clause of

the fourteenth amendment. On remand in 1983 the par-

ties agreed on the prospective relief required by that deci-

sion but not on damages. On appeal from the damages

judgment in 1989, we overruled our 1982 opinion. Chicago

asked to be relieved of the prospective relief as well, now

that its foundation is gone. A majority of this third panel

holds that Chicago is forever bound to carry out relief

designed to implement our overruled decision. This car-

ries respect for the dead hand of the past altogether too

far. Having admitted in 1989 our mistake of 1982, we

should relieve the parties of the consequences.

I

During the late 1970s and early 1980s, the rate of in-

terest Chicago paid on judgments (6% per annum for mu-

nicipal governments, Ill. Rev. Stat. ch. 110 42-1303) was

substantially less than the cost of voluntary credit. Judg-

ment debtors had every reason to postpone payment as

long as this imbalance persisted. Instead of borrowing in

the market at 15%, or raising taxes, Chicago borrowed

from its judgment creditors. It paid tort judgments of

$1,000 or less, and all contract judgments, quickly. Any

plaintiff “lucky” enough to recover more in tort litiga-

tion could whistle for his money. By 1979 plaintiffs with-

out the political clout to jump the queue had to wait on

average 47 months for payment. An active secondary mar-

ket in judgments against Chicago developed. About 80%

of judgment holders sold in this market, accepting a dis-

count of approximately 25% off the face value of their

awards. Evans v. Chicago, 689 F.2d 1286, 1290 (7th Cir.

1982) (Evans I).

The district court held that Chicago’s practice of pay-

ing small judgments quickly while deferring payment of

larger tort judgments violated the due process and equal

protection clauses of the fourteenth amendment: due pro-

App. 44

cess because it deprived judgment holders of a “proper-

ty” interest in immediate payment created by state law,

and equal protection because there was no rational basis

for distinguishing large from small awards. A panel of this

court affirmed the portion of the judgment that rested

on the equal protection clause, id. at 1299-1300, while

vacating the due process aspect as premature, id. at 1296-

99. Dicta in the opinion strongly imply that the City de-

prived the plaintiffs of due process of law, id. at 1297-98.

On remand the parties proposed, and the district court

approved, a consent decree eliminating the distinction be-

tween large and small judgments, requiring all judgments

to be paid in order of their entry, and providing that the

Mayor must ask the City Council to appropriate enough

money to pay all judgments promptly. The litigants could

not agree whether the plaintiffs were entitled to damages

for delay in payment. The district court concluded that

they were, under the equal protection clause—both the

plaintiffs and the district court deeming the due process

theory surplusage in light of the equal protection holding.

Another panel of this court reversed, overruling Evans I.

873 F.2d 1007 (7th Cir. 1989) (Evans ID). The second

panel (with the acquiescence of the full court, see id. at

1008 n. *) concluded that the City had a rational basis,

if only administrative convenience and the placation of the

more numerous holders of small awards, to pay little judg-

ments before big ones. Jd. at 1015-18. The second panel

wrapped up: “The district judge advanced some worthy

ideas, but they are for the City’s self-determination, and

will not be imposed by this court. It is regrettable that

this matter which has lingered so long now takes a new

and possibly unexpected turn, but what we now view as

error must be arrested even at so late a date. Improve-

ments in this situation are better left to the state and

municipal governments.” Jd. at 1017-18.

Delay in paying judgments is no different in principle

and in consequence from a low interest rate on judgments.

If the statutory interest rate matches the market rate,

judgment holders receive full compensation for delay and

App. 45

can sell judgments in the secondary market for their face

value, just as people buy and sell 30-year municipal bonds.

A court that would not dream of declaring, on constitu-

tional grounds, that a 6% post-judgment interest rate is

“too low” has no greater business declaring that the judg-

ment debtor is taking “‘tco long” to pay; the interest rate

and the delay in payment are two facets of the same thing.

Chicago’s practice has its legal problems, to be sure.

Illinois law appears to forbid a city to put off its creditors

as Chicago did. Ill. Rev. Stat. ch. 85 49-104. Chicago’s pay-

ment of contract before tort judgments may disfavor holders

of federal judgments (most federal judgments against mu-

nicipalities rest on 42 U.S.C. §1983 and other civil rights

statutes), which may offend the supremacy clause of the

Constitution. And if Chicago pays interest on federal judg-

ments at the local rate rather than the federal coupon

issue yield equivalent rate, see 28 U.S.C. §1961(a), then

Chicago is in hot water under federal statutory law. Cf.

Evans II, 873 F.2d at 1011 n.7. But none of this has any-

thing to do with the due process and equal protection

clauses, notwithstanding the intimations in Evans I that

by violating state law Chicago violated the due process

clause. See Snowden v. Hughes, 321 U.S. 1, 11 (1944);

Archie v. Racine, 847 F.2d 1211, 1215-18 (7th Cir. 1988)

(in banc).

Taking us up on the proposition in Evans I] that “{ijm-

provements in this situation are better left to the state

and municipal governments’, Chicago asked the district

judge to vacate the injunction requiring sequential pay-

ment of judgments and compelling the Mayor’s budget to

include the funds for their prompt satisfaction. Rule 60(bX5)

of the Rules of Civil Procedure speaks directly to the situ-

ation, permitting relief from judgment when “a prior judg-

ment upon which it is based has been reversed or other-

wise vacated”. The injunction was based on Evans I,

which has been overruled. Interest rates too have changed;

today the legal rate approximates the market rate, so Chi-

cago pays promptly. Still, it wants to redeem its govern-

mental powers, now in hock in a district court.

App. 46

Judge Grady, who has presided over this case since its

inception, refused to vacate the decree. He conceded that

Evans II pulled the rug out from under the equal pro-

tection theory. But, the judge observed, Evans II did not

address the due process theory, deeming it abandoned,

873 F.2d at 1012 n.11, 1018 n.15. The consent decree did

not specify a legal foundation and therefore did not rule

out the possibility that Chicago was compromising the due

process claim rather than yielding to the equal protection

holding of Evans I. So after making a trivial change in

the decree the judge reiterated that the City remains

obliged to pay all judgments in order, and quickly. (The

change the judge made, knocking out the portion of the

decree forbidding Chicago to distinguish judgments accord-

ing to size, is nugatory because of the separate provision

in the injunction compelling the City to pay judgments

strictly in order of their entry.)

II

Chicago has prevailed on the merits of this case, and

still it loses. An injunction intrudes into the internal opera-

tions of the City, telling the Mayor what items must be

in the annual budget. Evans II said bluntly that, although

changes may be beneficent, the political rather vnan the

judicial process is responsible for the subject. The district

court nonetheless held, and a majority of this third panel

agrees, that the judicial compulsion may continue. How can

this be? Recently the Supreme Court told district judges

that they must reexamine consent decrees when changes

in the legal landscape erode their footings. Rufo v. In-

mates of Suffolk County Jail, 112 S. Ct. 748 (1992). Here

we have not a change in legal doctrine with uncertain ef-

fects on the case at hand, but the overruling of the decision

in this very case. The decree was founded on a blunder

committed by this court. Evans I has been overruled, yet

through the injunction Evans I lives on.

If the plaintiffs’ due process claim really were indepen-

dent of their equal protection claim, and if the parties

App. 47

really settled the case rather than settling their disagree-

ment about the injunctive relief to which Evans I entitled

the plaintiffs, then there would be reason to think the

consent decree Rufo-proof. The majority never discusses

the first of these conditions, and it addresses the second

only in a footnote. Footnote 3 asks whether the injunction

was based on a consent decree; answering “yes,” my col-

leagues think the inquiry over. Yet the question is not

whether there was a “consent decree.” Surely there was.

The question is what aspects of the decree rest on the

parties’ consent rather than Evans I. No one believes that

the decree settled “the case.” Plaintiffs wanted damages.

The City refused to pay, and after issuing an injunction

the district judge held a trial on damages. Chicago ap-

pealed from an adverse decision, leading to Evans II. No,

there was no global settlement. What issues, then, did

the parties compromise? All the decree addresses is pro-

spective relief. And this is all the parties settled—the re-

lief, not the merits. Chicago “agreed” to do what Evans I

implied that it must do. “ ‘Consent’ that is no more than

knuckling under to the inevitable is more like an adjudica-

tion than a contract.” People Who Care v. Rockford Board

of Education, 961 F.2d 1335, 1338 (7th Cir. 1992), quoted

in United States v. Chicago, 978 F.2d 325, 333 (7th Cir.

1992). Once again consider the significance of Evans II.

If the parties indeed compromised the merits, what was

the City doing asking us to overrule Evans I? Plaintiffs

did not contend that through the consent decree Chicago

bargained away its right to challenge the legal foundations

of their position. If, as Evans II demonstrates, there has

been no settlement of the merits, then nothing inhibits

the court from erasing all vestiges of Evans I.

All that remains is the possibility that the due process

theory is independent of the equal protection theory, so

that Evans II does not undermine one sufficient theory

for relief—a theory on which the parties may have reached

a compromise. It makes sense to understand the decree

as a settlement of a due process claim only if that claim

supported additional relief, for otherwise it was super-

App. 48

fluous. If Evans I sufficed to condemn the City’s approach

to paying judgments, the parties had no need to settle

the due process claim. They could ignore it—because the

judge was legally bound to ignore it! Once a decision on

one claim resolves the case, a judge has no business under

Article III of the Constitution issuing advisory opinions

about additional legal theories. If the judge would not,

could not, adjudicate a claim, and would award identical

relief with or without that claim, it is foolish to treat a

consent decree as resolving or resting on, let alone set-

tling, that claim.

Judge Grady told the parties in no uncertain terms that

Evans I resolved the merits, and that nothing remained

but to select the appropriate relief. When Chicago bridled,

the judge announced from the bench on October 26, 1983:

Now, I have got to have an order from the City and

the plaintiffs. I have got to have an agreed order that

will bind the City to pass a budget sufficient to pay

tort judgments.

* * *

If by November 25th, approximately a month from

now, I do not have in my hands an agreed order that

calls upon the City and requires the City to budget

annually an amount sufficient to pay tort judgments

along the lines which we have been discussing in great

detail at our recent and not so recent conferences in

chambers, then I am going to go ahead and enter

my own order.

* * *

I see no need for any further conferences with coun-

sel that go to basic philosophy or go to what I have

been saying this afternoon. If there is some mechani-

cal thing you want to talk about that I can help you

with, I will be happy to sit down, but just to rehash

this question about whether we are going to do some-

thing in this case that the Court of Appeals ordered

done a long time ago, the time for discussion has

passed.

App. 49

Judge Grady unequivocally told the parties that Evans I

compelled Chicago to appropriate the money to pay all

judgments promptly—that Evans I dictated what to do,

but not how. Only mechanical details remained for deci-

sion. And the details of prospective relief are all the par-

ties compromised. The merits were not settled. Thev were

litigated, twice. The City lost in Evans I and wun the

rematch in Evans I].

Plaintiffs themselves saw things that way until recent-

ly. During the trial on damages, plaintiffs jettisoned their

due process theory. When Chicago appealed from the award

of damages, plaintiffs did not urge the due process theory

in defense of their judgment. That is why we remarked

in Evans I] that the “due process claim has not survived

to this stage of the litigation.” 873 F.2d at 1018 n.15. At

oral argument before this third panel, counsel for the

plaintiffs said that he let the due process theory drop

because it was redundant.

If neither plaintiffs nor the district court attached any

independent significance to the due process theory, if both

believed that Evans I compelled Chicago to pay all tort

judgments promptly, then it is unwarranted for us to pro-

claim that Chicago, unbeknownst to its own officials, “set-

tled” this fugitive claim in 1983, putting the injunction

beyond recall.

Lightning bolts of this kind disserve principles of fed-

eralism and in the long run work against the interests

of the judicial system itself. In the future, prudent counsel

will insist on litigating stray issues, lest an appellate court

a decade later declare that in recognizing that a claim no

longer mattered counsel sabotaged his client’s rights. Or

perhaps counsel will lard consent decrees with reserva-

tions and provisos, “clarifying”? what is being settled and

what is not, even though nothing then is in need of clari-

fication. Worst of all, we might induce counsel to refuse

to compromise on relief, lest such compromises be deemed

to include the merits. Can you imagine Judge Grady’s re-

action if on November 25, 1983, Chicago’s lawyers had

App. 50

told him that the City was refusing to accept relief of

any kind, because it feared that this step would keep the

Mayor and City Council in shackles if the law should change

in the future?

Counsel seeking to maximize the City’s ability to capi-

talize on legal developments might have done one of these

things. Whatever the penalty for counsel’s drafting choices

should be, it is not a perpetual transfer of budgetary powers

from state and local government to federal court. In treat-

ing this consent decree the same way they would treat

the compromise of 2 private dispute over a contract to

deliver two tons of rhubarb, the majority not only per-

petuates the error of Evans I but also offends principles

separating political from judicial roles in government.

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

App. 51

[Dated August 2, 1991]

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

SYLVIA EVANS, et al.,

‘ Plaintiffs, No. 77 C 4119

CITY OF CHICAGO, et al.,

Defendants.

BERTHA BALARK, et al.,

Diaz a "

:. Plaintiffs, No. 79 C 1939

CITY OF CHICAGO, et al.,

Defendants.

CURTIS CULLUM, et al.,

:. Plaintiffs, No. 79 C 2493

CITY OF CHICAGO, et al.,

Defendants. Consolidated Cases

ORDER MODIFYING CONSENT DECREE

The court having granted in part and denied in part

the motion of the defendant City of Chicago to modify

the Consent Decree of May 31, 1984, the said decree is

hereby modified as follows: Nothing in the Consent Decree

shall require the defendant City of Chicago to pay a final

tort judgment under $1,000.00 in any particular order.

DATED: August 2, 1991

ENTER: /s/ JOHN F. GRADY

United States District Judge

App. 52

(1) IN THE

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

Chicago, Illinois — July 25, 1991 — 2:40 p.m.

SYLVIA EVANS, et al.,

er

Me t S, T ar ‘

. Plaintiffs No. 77 C 4119

CITY OF CHICAGO, et al.,

Defendants.

BERTHA BALARK, et al.,

laintiffs, — a

v. Plaintiff No. 79 C 1939

CITY OF CHICAGO, et al.,

Defendants.

CURTIS COLLUM, et al..

nd

v. Plaintiffs, No. 79 C 2493

CiTy OF CHICAGO, et al.,

Defendants.

TRANSCRIPT OF PROCEEDINGS

BEFORE THE HONORABLE JOHN F. GRADY

* Numbers in brackets refer to the Court Reporter’s original

pagination of the Transcript of Proceedings.

APPEARANCES:

For the Plaintiffs:

MR. EDWARD T. STEIN

201 North Wells Street

Suite 1900

Chicago, Illinois 60606

MR. JOHN CASHION

33 North LaSalle Street

Suite 2500

Chicago, Illinois 60602

[2] For the Defendants:

CITY OF CHICAGO

180 North LaSalle Street

Room 704

Chicago, Illinois 60601, by

MR. BENNETT W. LASKO,

MS. RUTH MOSCOVITCH

Assistant Corporation Counsel

[3] (The following proceedings were had in open court:)

THE CLERK: 77C 4119 and related cases, Evans v.

Bilandic, for ruling.

THE COURT: Good afternoon, counsel.

MR. CASHION: Good afternoon.

MR. STEIN: Good afternoon, your Honor; Edward Stein

for the Balark and Collum plaintiffs.

MR. CASHION: John Cashion for the Evans class plain-

tiffs.

MS. MOSCOVITCH: Ruth Moscovitch and Bennett Lasko

on behalf of the City of Chicago.

THE COURT: Good afternoon.

If you will be seated, I will give you my ruling.

The motion currently before the Court is plaintiffs’ mo-

tion to reconsider various orders I entered on October

31, 1990, which were docketed on November 2, 1990. The

App. 54

plaintiffs’ motion will be granted in part and denied in

part.

I will begin my remarks by discussing the holding of

the Court of Appeals in what we have come to call Evans

I, 689 F.2d 1286 (1982). That decision of the Court of Ap-

peals affirmed my holding that the practice of the City

of Chicago of paying judgments less than $1,000 ahead

of those that were in excess of $1,000 was a denial of

equal protection of the law to those judgment creditors

whose judgments exceeded $1,000.

I have reached certain other matters in my ruling prior

[4] to the first appeal, but the Court of Appeals reversed

those rulings and held that it had been premature for me

to address the constitutionality of a certain statue the

State of Illinois upon which the City had not isiwe to

justify its practices. More precisely, the Court of Ap>eals

held that the plaintiffs lacked standing to challenge that

statute on due process grounds.

The important thing for today’s purposes is that the hold-

ing of Evans I was that it was a denial of equal protec-

tion for the City to pay judgments of less than $1,000

ahead of those which were in excess of that amount. Some

seven years later in Evans II, 873 F.2d 1007 (1989), the

Court of Appeals overruled this holding of Evans I.

Quoting from 1018 of Evans II, the Court concluded:

“Our decision in Evans I was clearly erroneous in

its conclusion that the City’s practice of prioritizing

tort judgments under $1,000 denied the plaintiffs the

equal protection of the laws. To that extent, we over-

rule Evans I.”

Now, between Evans I and Evans II, certain proceed-

ings took place in this Court after the remand in Evans I.

The case had been remanded for further proceedings, and

we had a trial on damages. At the damages trial, the

plaintiffs argued that not only the City’s practice of prior-

App. 55

itizing judgments less than [5] $1,000 was a violation of

equal protection but that certain other practices of the

City were also a violation of equal protection. Specifical-

ly, the plaintiffs argued, and I agreed with the plaintiffs,

that the practice of paying non-tort judgments in a man-

ner that was preferential, at least as far as time was con-

cerned, to, the payment of tort judgments was a viola-

tion of equal protection.

I also agreed with the plaintiffs that the chronic failure

of the City to budget sufficient money for the payment

of tort judgments within a reasonable period of time con-

stituted a denial of equal protection since that failure

resulted in tort judgments being treated differently than

similarly situated judgments that were not based on torts

or at least were not payable out of the tort judgment

fund.

I then awarded damages to the plaintiffs based upon

what I regarded as the law of the case concerning the

prioritization of the $1,000-and-under judgments and these

two additional theories concerning the denial of equal pro-

tection. All of my rulings were based on equal protection

grounds. I discussed due process considerations at length

but specifically refrained from basing my decision on due

process grounds.

An appeal was taken from the damages judgment, and

this resulted in Evans II. As I have indicated, Evans II

overruled Evans I to the extent that Evans I had held

that the prioritization of under-$1,000 judgments was a

violation of [6] equal protection.

The Evans II Court went further, however, and also

reversed my decision in the damages trial that failure to

pay all judgment creditors, tort or not tort, in a single

order violated equal protection. The Court at page 1018

stated in its conclusion:

App. 56

‘We find that the City’s failure to establish a single

order of payment of all judgment creditors did not

violate equal protection. Therefore, the decision of the

District Court is reversed.”

So there were two parts to the Evans II holding. First

was an overruling of the equal protection holding of Evans

I, and the second part of Evans II was a reversal of the

new equal protection holdings I had made at the damages

trial. The net result of Evans II was to eliminate any

equal protection argument that the plaintiffs had in regard

to the City’s practices concerning the payment of judg-

ments.

The conclusion that I have quoted at page 1018 of Evans

I] does not specifically reverse my finding that the chronic

underbudgeting was a violation of equal protection. How-

ever, it seems to me that Evans II must be read as re-

versing that holding.

At page 1617 the Court stated:

“Likewise, the District Court’s holding that the equal

protection clause demands that the City raise more

tax [7] revenue to meet all obligations promptly is

not warranted under the rational basis test.”

And then further down on the page:

“The City’s alleged failure to raise adequate revenue

to quickly meet all its tort judgment obligations does

not violate equal protection.”

So I read Evans II as holding that there is no equal

protection ground upon which the City can be compelled

to budget adequate amounts of money to pay tort judg-

ments within any period of time the Court might hold

is required.

The reason we are here this afternoon and have been

wrestling with the continuing problems of this case for

the last two years is that between Evans I and Evans II,

App. 57

the parties negotiated a consent decree. The Court en-

tered that consent decree on May 31, 1984, some two

years prior to Evans II. After Evans II, the City filed

a motion to vacate the consent decree. That motion was

filed on November 28, 1989.

The motion at page 3 recites the grounds:

“This request is based on two grounds under Rule

60(bX5):

a. The decree was based on a Court of Appeals deci-

sion which has since been reversed;

b. It is no longer equitable that the judgment have

prospective application.”’

At page 4 of the motion, the City stated:

[8] “At the time this Court entered the consent decree,

the parties and the Court were under the belief that

the duties created by the consent decree were consti-

tutionally mandated as decided by the Court of Ap-

peals in Evans I, which at that time was the law of

this case.”

The parties briefed the motion to vacate, and after con-

sidering the respective arguments, I entered one of the

orders the plaintiffs have moved to reconsider; namely,

the order of October 31, 1990, vacating the consent decree.

In opposing the motion to vacate, the plaintiffs had ar-

gued that Evans II had done nothing to affect their due

process argument and that the consent decree should be

regarded as based upon the due process arguments which

had not been affected by Evans II.

At page 3 of my order granting the motion to vacate,

I stated as follows:

“While this may be true, it appears that the due

process holding of Evans I has not survived Evans

II. See Evans II at 1018, note 15, stating that be-

cause this Court did not base its decision in the dam-

age trial on due process grounds and neither party

App. 58

raised the question of due process in the Evans II

appeal, ‘the due process claim has not survived to

this stage of the litigation.’ ”

[9] “Thus,” I continue, “it appears that all legal under-

pinning for the consent decree has been eliminated

by Evans II. We agree with defendant that this case

falls squarely within the language of Rule 60(bX5) in

that the consent decree was based on a judgment,

Evans I, that has now been overruled.”

Further down on page 3, I concluded:

‘There is no doubt in the Court’s mind that the City

would never have consented to the decree had it not

felt constrained to do so by the decision of the Court

of Appeals in Evans I.”

These statements that I have just quoted from my or-

der vacating the consent decree were based upon a mis-

interpretation of the facts of this case and a misapprehen-

sion as to the timing of certain critical events. I empha-

sized in my order vacating the consent decree that the

Court of Appeals in Evans II had said that the due proc-

ess issue had not survived in the case to the point of the

decision in Evans IJ; namely, 1989. Evans II said nothing

whatever about what the status of the due process claim

was back in 1984 at the time the consent decree was

negotiated and agreed to by the parties except to say in

several places that the due process questions considered

in Evans I were not before the Court in Evans II. Evans

I had not decided the question of whether the City’s cus-

tomary delay in the payment of judgments was a viola-

tion of due process. That question was [10] explicitly left

open by Evans I. It was not decided by Evans II as is

made abundantly clear by Footnotes 8, ll, and 15 of

Evans II.

In saying, as I unfortunately did in my order vacating

the consent decree, that all legal underpinning for the con-

App. 59

sent decree had been eliminated by Evans II, I was over-

looking the fact that the language in Evans II about the

elimination of the due process issue from the case was

not addressed to the situation that existed at the time

of the entry of the consent decree.

Looking at the consent decree itself, paragraph nine on

page 7 reads as follows:

“On January 28, 1981, the District Court entered par-

tial summary judgment in favor of the plaintiffs, rul-

ing that the alleged policies and practices of the

defendants, as herein described, deprived plaintiffs

of due process and equal protection of the law. Evans

v. City of Chicago, supra.

That order was affirmed on appeal! as to the equal

protection claim, Evans v. City of Chicago, 689 F.2d

1286 (7th Circuit 1982). The claim regarding the depri-

vation of due process of law was remanded to the

District Court for further proceedings.”’

So here we have the parties themselves describing the

situation that existed at the time of the consent decree:

[11] “The claim regarding the deprivation of due process

of law was remanded to the District Court for fur-

ther proceedings.”

I turn now to the specific language of Rule 60 upon

which the City relies. Rule 60(b) states that, “‘on motion

and upon such terms as are just, the court may relieve

a party or a party’s legal representative from a final judg-

ment, order, or proceeding for the following reasons.’’ And

reason number five, as applies to this case, or at least

is involved in the arguments of the parties in this case,

is “a prior judgment upon which it;” namely, the judg-

ment, “is based has been reversed or otherwise vacated,

or it is no longer equitable that the judgment should have

prospective application.”’

App. 60

There are two parts to 60(bX5), one, the vacation of the

prior judgment and, two, the existence of circumstances

under which it is no longer equitable that the judgment

have prospective application. I will deal with each of those

in turn.

Is the consent decree based on a judgment which has

been reversed or otherwise vacated? The answer is yes,

in part. The equal protection holding of Evans I was the

law of the case as of the entry of the consent decree and,

I think, clearly entered into those considerations which

resulted in the consent decree. The consent decree itself

refers to Evans I and refers to the specific holding of

Evans I; namely, that the [12] preferential payment of

judgments under $1,000 was a denial of equal protection.

Nothing else in the consent decree is based upon a judg-

ment that has been reversed or otherwise vacated or

overruled.

Evans II did reverse my findings that paying different

kinds of judgments out of chronological order and chronic

failure to budget sufficient money constituted denials of

equal protection. However, those equal protection holdings

did not occur until long after the entry of the consent

decree and, as far as I can recall, had never been argued

to the Court or considered by the Court up to the time

of the entry of the consent decree. There is nothing in

the consent decree that reaches out for support to my

later holdings that these additional practices of the City

constituted denials of equal protection.

Evans II does not hold that those practices; namely, of

not paying judgments in chronological order and failing

to budget adequately, do not constitute denials of due

process. Not a word in Evans II so holds. That is a ques-

tion that was settled by the parties in the consent de-

cree. The due process questions left open by Evans I and

remanded by Evans I for consideration by this Court

App. 61

were resolved by the parties in the consent decree, and

the consent decree so states.

Paragraph nine says that issue was remanded for fur-

ther proceedings, and paragraph one of part three of the

[13] consent decree at page 8 says that the parties are

settling all matters left open with the exception of the

claims for damages and attorney’s fees.

The City argues that Evans II can be read as reject-

ing the rational basis test that would be the underpin-

ning of a due process claim just as much as it rejected

that same test or, rather, found that the City’s practices

did not violate that test under the equal protection claim.

It is true that in my decision in the damages trial, I ob-

served that the rational basis test appeared to be rele-

vant to both an equal protection and a due process analy-

sis. And it may be that in light of Evans II the Seventh

Circuit, if confronted with the due process questions to-

day, would say that no violation of due process is involved

because there is a rational basis for the City’s practices

of paying, for instance, contract judgments ahead of tort

judgments, or personnel judgments ahead of judgments

payable out of the tort judgment fund, and a rational basis

for the failure to budget enough money to pay tort judg-

ments within a reasonable time.

The point is, I believe, that that holding has nov yet

been made. Rule 60(b) talks about a judgment that has

been reversed or otherwise vacated. There is nothing in

Evans II that reverses, vacates, or overrules any due

process holding of any kind. So it seems to me clear that

the City does not qualify for relief under the first por-

tion of the Rule 60(bX5). [14] Nothing upon which the con-

sent decree is based has been overruled with the excep-

tion of the equal protection holding of Evans I.

During the time that the Court has had the plaintiffs’

motion for reconsideration under advisement, we have con-

App. 62

ducted hearings on the question of what motivated the

City to enter into the consent decree. The Court has

heard testimony of present and former City employees

and testimony about what was in the minds of the Mayor

and his aide, who are now deceased. At the most recent

argument on the motion to reconsider, counsel for the

City asserted that all of this evidence is irrelevant and

that the Court should be guided exclusively by the deci-

sions in Evans I, Evans II, and the language of the con-

sent decree itself.

After considerable reflection, I have come to agree with

that point of view. The effort to reconstruct what was

in the minds of people back in 1984, seven years ago,

some of whom are now deceased, is a difficult project at

best. I think the Court can find its most reliable guide-

posts in this case by looking at the documents the City

urges me to consider exclusively. There is a decision of

the United States Supreme Court which, I think, contains

some wisdom which is helpful to us in the present circum-

stances. The case is United States v. Armour & Company,

402 US 673, decided in 1971. The case involved the inter-

pretation of a consent decree that had been [15] entered

in 1920 in which Armour & Company had bound itself

to refrain from various practices which the government

had alleged would constitute violations of the antitrust

laws.

The issue before the Court in 1971, 51 years later, was

whether a certain relationship that Armour had entered

into with Greyhound Corporation constituted a violation

of that consent decree. The government contended that

the Armour/Greyhound relationship did violate the con-

sent decree, and Armour contended that it did not.

The Supreme Court concluded that while it is understand-

able that the government would want the language of the

consent decree to apply to the practice under scrutiny,

App. 63

or the relationship under scrutiny, and, had it thought of

the particular circumstance, may well have insisted that

the consent decree cover such a relationship, the fact was

that the language of the consent decree simply did not

fit the relationship that Armour had with Greyhound, and,

therefore, the Court held that there was no violation of

the consent decree. That is by way of general background.

The language of the Court that I find helpful is the fol-

lowing at pages 681 to 682. The government was argu-

ing that what Armour was doing with Greyhound was

frustrating the purpose of the consent decree, and the

Court said the following:

“This argument would have great force if addressed

to a Court that had the responsibility for formulating

[16] original relief in this case, after the factual and legal

issues raised by the pleadings had been litigated. It

might be a persuasive argument for modifying the

original decree, after full litigation, on a claim that

unforeseen circumstances now made additional relief

desirable to prevent the evils aimed at by the original

complaint. Here, however, where we deal with the

construction of an existing consent decree, such an

argument is out of place. Consent decrees are entered

into by parties to a case after careful negotiation has

produced agreement on their precise terms. The par-

ties waive their right to litigate the issues involved

in the case and thus save themselves the time, ex-

pense, and inevitable risk of litigation. Naturally, the

agreement reached normally embodies a compromise;

in exchange for the saving of cost and elimination of

risk, the parties each give up something they might

have won had they proceeded with the litigation.

Thus the decree itself cannot be said to have a pur-

pose; rather the parties have purposes, generally op-

posed to each other, and the resultant decree em-

App. 64

bodies as much of those opposing purposes as the

respective parties have the bargaining power and skill

to achieve.

For these reasons, the stepe—of—a—consent decree

must [17] be discerned within its four corners and

not by reference to what might satisfy the purposes

of one of the parties to it. Because the defendant has,

by the decree, waived his right to litigate the issues

raised, a right guaranteed to him by the Due Proc-

ess Clause, the condition upon which he has given

that waiver must be respected, and the instrument

must be construed as it is written and not as it might

have been written had the plaintiff established his

factual claims and iegal theories in litigation.”

I find that language instructive in two respects. First,

it admonishes us to construe the decree within its four

corners and not attempt to discern the probably oppos-

ing purposes of the parties when they entered into it. The

second lesson we learn from the Armour case is that a

party who has entered into a consent decree should be

held to its bargain and should not be permitted to vary

the consent decree or escape from its obligations by using

some theory it chose not to litigate and chose, rather, to

compromise.

In that latter connection, it is significant that the Court

put emphasis upon what Armour, in this case I think the

plaintiffs, had given up by the consent decree; namely,

its right to litigate the issue of whether the kind of rela-

tionship it had with Greyhound would be a violation of

the antitrust laws. In the instant case, the plaintiffs gave

up their right [18] to litigate the very issue that had been

remanded by the Court of Appeals in Evans I; namely,

whether the practices of the City in regard to the pay-

ment of judgments violated the due process clause. It

would be inequitable for this Court to say to the plain-

App. 65

tiffs that having given up their right to litigate the due

process issue and having had that surrender confirmed

by the express holding to that effect in Evans II, that

they now must forfeit the benefit of that bargain. That

would be inequitable, and that is why the second part of

Rule 60(bX5) provides no comfort whatever for the City.

There is no basis upon which this Court could hold that

it is no longer equitable that the judgment should have

prospective application.

Even on the matter resolved against plaintiffs by Evans

II, the equal protection argument on the under-$1,000

judgments, the language of Evans II provides no reason

for this Court to hold that continued enforcement of the

consent decree would be inequitable. At page 1015 of

Evans II, the Court of Appeals, referring to the $1,000

question, stated:

“The reasons presented by the City for the prac-

tice are by no means compelling,”’ and on the same

page stated that the City’s practice, “‘may not be a

civics textbook example of good government.”’

That does not sound to me like the description of a posi-

tion which cries out for equitable intervention.

Nonetheless, equity or not, the City does qualify for [19]

relief under the first portion of Rule 60(bX5), because

there is no question that the $1,000 holding of Evans I

has been overruled.

The City also refers the Court to Rule 60(bX6), which

provides that the Court may relieve a party from a judg-

ment for “any other reason justifying relief from the oper-

ation of the judgment.” That is a pretty broad commis-

sion, but there is nothing in the case which seems to me

to qualify as such another reason. The City argues that

the consent decree embodies obligations which could not

have been imposed upon the City under current law; name-

ly, under Evans II, and that it is, therefore, inequitable

App. 66

or somehow unjust to continue the consent decree in ef-

fect. This argument can only apply to the $1,000 judg-

ment holding of Evans I, which the Court concedes is no

longer the law, has been expressly overruled by Evans

II, and will be modified, but this argument of the City

does not apply to anything other than the $1,000 holding

of Evans I. The due process claims that were resolved

in the consent decree have not been declared not to be

the law.

I conclude that with the exception of the $1,000 judg-

ment aspect of the consent decree, there is no basis on

which the Court should grant relief to the City under

either Rule 60(bX5) or Rule 60(bX6).

I come now to the ordering portion of this decision. By

the way, I will prepare a short written order incorporat-

ing [20] these rulings. Plaintiffs’ motion to reconsider the

order of October 31, 1990, vacating the consent decree

is allowed in part and denied in part. The decree will be

modified to eliminate any requirement that there be no

distinction on the timing of payment of judgments under

and over $1,000. In all other respects, the order of Oc-

tober 31, 1990, is vacated, and the consent decree is re-

instated.

The consent decree will have to be modified so as to

take into account the specific holding of Evans II. Since

the language of the consent decree is the language of the

parties, I am inclined to allow them, at least in the first

instance, to formulate the appropriate language to effec-

tuate the necessary modification of the decree. This will,

of course, be without prejudice to the City’s position that

the entire decree should be vacated.

In the event the parties are unwilling or unable to reach

agreement as to the appropriate language of modification,

the Court will enter its own modifying order. If I were

to do it this afternoon, I would say something short and

App. 67

simple, such as nothing in the consent decree shall re-

quire the defendant to pay judgments under $1,000 and

judgments over $1,000 in any particular order. Now, the

reason I do not do that this afternoon is that I do not

want to get into a situation where a change in one sec-

tion of the decree could have unanticipated complications

for some other section of the decree, and that is [21] why

I would ask counsel to study the matter carefully and

come up with a suggestion that the Court can adopt.

The second order that I will enter today is that I will

vacate the order denying plaintiffs attorney’s fees. I am

not going to rule at this time on plaintiffs’ motion for at-

torney’s fees. That will be a major litigation all by itself.

I know that today’s order will be appealed, and I have

no idea whatever as to what the result on appeal might

be. It is only after 1 know whether or not plaintiffs have

prevailed in this case and, if so, to what extent, that I

can fix a fee pursuant to the statute. I have not previous-

ly ruled on a petition for fees for that reason, and I am

no more inclined now to undertake that possibly unneces-

sary work than I have been before. I realize, of course,

that plaintiffs’ attorneys would like to be paid, but I will

simply point out that any order of payment that I did

enter would be stayed pending appeal anyway. So there

is no prospect of immediate payment here, in any event.

Now, the third thing I am going to do today is to deny

the defendants’ motion for return of the $60,000 interim

fee payment made to Edward Stein. That matter, too, will

be held in abeyance, if you will, until final resolution of

the questions we have been addressing today. It may well

be that ultimately that relief will be something the City

would be entitled to, but it would be premature to ad-

dress that now.

Finally, I deny plaintiffs’ motion to reconsider the [22]

order of October 31, 1990, denying their motion for a rul-

App. 68

ing on the constitutionality of Illinois Revised Statutes,

Chapter 85, Section 909-104(a).

Now, what I would like to do is to set a date for you

to come in here with the results of your effort to formu-

late appropriate language of modification, and I would like

to do that within the next couple of weeks. Is there any

problem in that regard?

MR. CASHION: No.

MS. MOSCOVITCH: I was scheduled to be out of town-

it is not clear that I will be, but I was scheduled to be

out of town until August 19th. So if we could do it in

that week, there would be no danger that I would not

be able to be present. I know that is a little bit later

than your Honor would like.

THE COURT: That is all right.

MS. MOSCOVITCH: The other possibility—

THE COURT: It is just that 1 want to get this done

while it is fresh in everybody’s mind.

MS. MOSCOVITCH: Well, we could come in next week,

also.

THE COURT: Next week would be my preference.

Let’s get it done next week. How about—let’s see. This

is Thursday.

MS. MOSCOVITCH: If you could give us until Thurs-

day or Friday, that would give us an opportunity to have

people in the [23] comptroller’s office think this through.

THE COURT: Well, how about Friday, August 2, at

10:00 o’clock? Is that okay?

MS. MOSCOVITCH: Yes.

MR. STEIN: Yes.

THE COURT: All right. Now, is there anything I have

not addressed today that I should have addressed?

MR. CASHION: Could I just ask you on one procedural

point?

THE COURT: Yes.

App. 69

MR. CASHION: If we can agree on that language, can

we just send you the agreed order and then we don’t

have to show up on August 2nd?

THE COURT: Sure. Yes, that would be fine.

I might say, too, that I don’t think you have got any

kind of a final order here until that modifying order is

entered. So nobody gets prejudiced on an appeal situation.

Now, I am going to enter some of these orders right

away, but you have got 30 days to appeal. So I don’t

think there is any problem anyway.

MR. STEIN: Your Honor, there is one—maybe not a

problem but just a tricky point. The local rules of the Dis-

trict Court require attorney’s fees petitions to be filed

within 90 days after an order where, let’s say, they pre-

vailed. And I understand that you don’t want to rule—

you don’t want [24] us to file petitions and you don’t want

to rule on attorney’s fees until, say, the Seventh Circuit

has an opportunity or the parties agree to something. But

[ don’t want to be prejudiced as the plaintiff.

THE COURT: How about if I put in the order that I

am going to enter—

MR. STEIN: And continue.

THE COURT: —that the local rule requiring submission

of attorney’s fees petitions within 90 days shall be waived?

Does the City have any objection to that?

MS. MOSCOVITCH: No.

Let me make sure I am clear. Are you talking about

a fee for—a petition for fees for all of these proceedings?

MR. STEIN: Well, yes, our petition for fees with re-

spect to—up to and including the damage trial therein.

The petition for fees that I am talking about are these

petitions now. Now, I could do that. I could prepare the

petition and the time sheets if the Court wants and then

just not rule on it until later. Therefore, this—

App. 70

THE COURT: Did you ever go back and revise

MR. STEIN: Yes.

THE COURT: --your original ones in light of Evans IT?

MR. STEIN: I absolutely did, and I sorted it out the

way the Court wanted it sorted out.

THE COURT: Find, good.

[25] Well, then what they are talking about, Ms. Mosco

vitch, is the fees associated with this motion to vacate

the consent decree and these other matters.

MS. MOSCOVITCH: I have no problem. If you feel that

you can waive it, 1 have no problem with doing it that

way, or if they want to put it on file and we will just

agree that it is on file, whatever is easiest for them.

MR. STEIN: I could just file a motion for fees without

the time sheets, which would save me some time.

THE COURT: Well, except probably the rule—I have

not looked at the rule in a long time. It must provide

for the filing of more than that, doesn’t it?

MR. STEIN: I don’t remember.

THE COURT: I don’t know what it says.

MR. CASHION: I would suggest that we just not go

into the fee thing at all and concentrate on getting the

current things out of the way.

THE COURT: Oh, I understand, but Mr. Stein wants

to make sure that there is no waiver of fees by failing

to comply with the local rule. I think the local rule is

something I can suspend for any good reason, and cer-

tainly there is a good reason here.

MR. STEIN: I think in a footnote to your order revers-

ing the question of fees that Rule 45, local Rule 45, shall

not apply.

[26] THE COURT: This is local Rule 45?

MR. STEIN: I am 99 percent sure it is.

THE COURT: I will find out what it is. Okay, anything

else?

App. 71

MR. STEIN: Thank you very much, your Honor.

THE COURT: Thank you.

MS. MOSCOVITCH: Thank you very much.

MR. CASHION: Thank you.

(Which were all the proceedings had in the above

entitled cause on the day and date aforesaid.)

ro

App. 72

IN THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Nos. 87-3006 and 87-3085

SYLVIA EvANs, et al.,

Plaintiffs-Appellees,

CITY OF CHICAGO, et al.,

Defendants-A ppellants.

BERTHA BALARK, et al.,

Plaintiffs-Appellees,

CiTy OF CHICAGO, et al.,

Defendants-Appellants.

CurRTIS COLLuM, et al.,

Plaintiffs-Appellees,

Cross-Appellants,

CITY OF CHICAGO, et al.,

Defendants-Appellants,

Cross-Appellees.

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

Nos. 77 C 4419, 79 C 1939, and 79 C 2493—John F. Grady, Judge

ARGUED SEPTEMBER 8, 1988—DecIDED APRIL 27, 1989

App. 73

Before BAUER, Chief Judge, and Woop, Jr. and RIppLe,

Circuit Judges.*

Woop, JR., Circuit Judge. This is a consolidated class

action suit that has been in the courts for nearly a decade.

The three plaintiff classes sued the City of Chicago under

42 U.S.C. § 1983 claiming that the City’s delay in pay-

ing tort judgment claimants violated their civil rights. This

court originally dealt with this case over six years ago.

Evans v. City of Chicago, 689 F.2d 1286 (7th Cir. 1982)

(“Evans I’’). There we affirmed the district court’s find-

ing that Chicago’s practice was unconstitutional. The case

was remanded to the district court to sort out the ques-

tion of damages due to the parties. In district court, plain-

tiffs advanced another equal protection claim in addition

to the claim originally passed on by this court. The district

court found for the plaintiffs on both equal protection al-

legations and awarded damages. The City has appealed,

asking us not only to review the district court’s findings

but to also re-examine our own decision in Evans I.

I. FACTUAL BACKGROUND

Millions of dollars in court judgments are entered against

the City of Chicago (“the City’’) each year. The City’s

practice of delaying payment of some judgments is under

attack by three different plaintiff classes.

A. The Plaintiff Classes

Plaintiff Sylvia Evans settled her lawsuit against the

City for the wrongful death of Andrew Evans and a judg-

ment of $67,000 was entered against the City on January

30, 1976. After entry of her judgment, Evans learned that

the City had a policy of promptly paying (within thirty

* This opinion has been circulated among all judges of this court

in regular active service. No judge favored a rehearing en banc

on the question of overruling Evans v. City of Chicago, 689 F.2d

1286 (7th Cir. 1982). Circuit Rule 40(f).

App. 74

days) tort judgments under $1,000 while it delayed pay-

ing any tort judgments over $1,000 for a substantial time

period. When Evans learned that the City would delay

the payment of her judgment, she filed an action against

the City under 42 U.S.C. § 1983 claiming that her civil

rights had been violated by the delay. The action was cer-

tified as a class action under Fed. R. Civ. P. 23(bX3). The

Evans class includes tort judgment creditors holding judg-

ments larger than $1,000 against the City whose judg-

ment payments are more than one year overdue. '

Plaintiff Bertha Balark brought a civil rights action un-

der 42 U.S.C. § 1983 against six Chicago police officers

in 1977. The case was settled by the parties and a judg-

ment was entered by the United States District Court.

The judgment was to be paid by the City.2 Upon learning

that the City would delay paying her judgment, Balark

brought a separate class action under 42 U.S.C. § 1983.

The Balark class was certified and includes tort judgment

creditors holding judgments larger than $1,000 against the

City whose judgment payments are less than one year

1 The Evans class was defined as:

(ajll persons in whose favor a final tort judgment in excess

of $1,000 against the City of Chicago has been or will have

been entered commencing with the fiscal year 1972 and con-

tinuing to the date of the entry of final judgment in this case

and payment of whose judgment is overdue by reason of the

failure of the City of Chicago (a) to pay the judgment in full

in the fiscal year it was entered or in full during the ensuing

fiscal year in accordance with Ill. Rev. Stat. ch. 85, § 9-104(a)

or (b) to commence timely payment of installments on the judg-

ment pursuant to Ill. Rev. Stat. ch. 85, § 9-104(b) no later than

the end of the first fiscal year following the entry of judg-

ment. The class shall not include assignees or purchasers of

judgments nor those persons who assigned, factored or “dis-

counted” their judgments prior to full or partial payment by

the City of Chicago. Evans I, 689 F.2d at 1290-91 n.6.

2 Til. Rev. Stat. ch. 85, § 9-102.

App. 75

overdue.* The Evans and Balark actions were consoli-

dated on January 28, 1981.4

Plaintiff Curtis Collum entered into a settlement with

the City and four police officers who allegedly beat him.

Collum claims that at the time his judgment was entered,

it was the practice and custom of the City to delay pay-

ment of judgments from two to four years. As a result

of these delays, a market developed for the sale of judg-

ments against the City. Unwilling to wait to collect his

judgment from the City, Collum sold his judgment at a

discount. Collum filed this class action suit in 1979 under

3 The class was certified and defined as:

{ajll persons in whose favor a final tort judgment in excess

of $1,000.00 against the City of Chicago has been or will have

been entered commencing with fiscal year 1974 who have held

their judgments without full satisfaction thereof for a period

not greater than the end of the fiscal year following the year

in which the judgment was obtained. Evans /, 689 F.2d at

1291 n.7.

* During the time these federal lawsuits were proceeding, similar

actions had been filed in Illinois state court. In Nebel v. City of

Chicago, 53 Ill. App. 3d 890, 369 N.E.2d 74 (1977), the City’s prac-

tice of delaying payment of tort judgments was challenged. The

yarties settled the case in 1980, with the City agreeing to provide

9 million in each of the 1980, 1981, and 1982 annual Net to

pay tort judgment creditors. The City also agreed to appropriate

adequate funds in the future to pay all tort judgments and attor-

neys’ fees. This settlement was vacated and remanded by the IlIli-

nois Appellate Court. Waters v. City of Chicago, 95 Ill. App. 3d

919, 420 N.E.2d 599 (1981). The appellate court found that the set-

tlement’s provisions concerning trustee and attorneys’ fees did not

provide notice to the holders of judgments less than $1,000. /d.

at 925, 420 N.E.2d at 604. The settlement was later revised by

the trial court, but it was again vacated by the appellate court,

Waters v. City of Chicago, 111 Ill. App. 3d 51, 443 N.E.2d 759

(1982), which was still troubled by the manner of awarding attor-

neys’ fees. An issue of abstention was raised in the Evans / trial,

but this court held that it was inappropriate for the federal court

to abstain in this situation. Evans v. City of Chicago, 689 F.2d

1286, 1294-96 (7th Cir. 1982).

App. 76

42 U.S.C. § 1983 alleging that the delay violated equal

protection and due process. While the Evans and Balark

classes are made up of creditors who waited for the City

to pay their judgments, the Collum class is made up of

plaintiffs who assigned their judgments at a discount. The

class was certified under Fed. R. Civ. P. 23(bX3). The Col-

lum class includes tort judgment creditors holding judg-

ments larger than $1,000 against the City who assigned

their judgments at a discount knowing the City would

delay payment.® Plaintiffs in the Evans and Balark classes

are original judgment holders while the Collum plaintiffs

are assignors, since they assigned their judgments at a

discount. Eighty percent of judgment holders with judg-

ments over $1,000 sold their judgments. Purchasers bought

judgments at a discount and the amount of the discount

reflect a prediction of the delay in payment. All three

classes were consolidated at trial and on appeal.®

B. The City’s Practice

Under the budgetary scheme adopted by the City, judg-

ments levied against the City are paid out of different

city funds depending on the origin of the claim. At trial,

the City maintained that all tort and nontort judgments

arising from certain special enterprise activities (“enter-

prise judgments”) are paid from revenues generated by

the enterprises themselves. Such enterprises include the

Water Fund, the Sewer Fund, O’Hare Airport, Midway

5 The Collum class was defined as:

[ajll persons in whose favor a final tort judgment or settle-

ment in excess of $1,000.00 against the City of Chicago has

been entered and who, commencing with fiscal year 1974 as-

signed their tort judgments, at a discount, prior to full or par-

tial payment, in reliance upon defendant’s policy and practice

of delaying payments of judgments. Evans v. City of fhieen

522 F. Supp. 789, 807-08 (N.D. Ill. 1980).

* The Collum class was not a party to the appeal in Evans I.

App. 77

Airport, and the Chicago Skyway. These enterprises are

meant to be self-sustaining with user fees generating reve-

nue and are separated for accounting purposes from the

City’s general revenue funds. Judgments arising from rela-

tionships undertaken by the City (“contract judgments’’)

are paid from departmental funds. When a city depart-

ment enters a contract, the department’s budget is en-

cumbered for the maximum amount that could be due

under the contract. If a judgment is levied against the

City for breach of that contract, the judgment is paid out

of the encumbrance already on the books. The departmen-

tal appropriations that pay such contract judgments are

financed by general municipal taxes appropriated to the

City’s general corporate fund. Judgments arising out of

employment-related litigation are usually payable from the

personnel budgets of the affected departments.

All remaining judgments against the City (“tort judg-

ments’) are paid from the City’s Tort Judgment Fund,

also known as the “395 Fund.” Revenue for the 395 Fund

is raised through a separate property tax levy. This fund

is not part of the City’s general corporate fund.

Between 1972 and 1983, the period we are most con-

cerned with, the City normally paid enterprise judgments

and contract judgments within thirty to one hundred-fifty

days of presentment. However, this was not the case for

judgments paid out of the 395 Fund. The 395 Fund was

annually underfunded, resulting in the City’s inability to

pay off all tort judgments in a timely fashion. Tort judg-

ments of $1,000 or less were given priority and paid off

within approximately thirty days of presentment. Judg-

ments over $1,000 were paid off in the order they were

entered, but at a much delayed rate. The average delay

in payment of tort judgments over $1,000 ranged from

fifteen months to four years after the entry of final judg-

ment. Payment of some judgments apparently was de-

layed as long as nine years. The City pays interest at

the statutory 6% rate at the time it pays the judgment.

App. 78

lll. Rev. Stat. ch. 110, § 2-1303.7 The delay in paying tort

judgments stemmed from the City’s practice of levying

a Special property tax each year to pay judgments at an

amount that was far less than needed to pay the annual

tally of judgments. The City refused to apply any other

revenue to the payment of tort ,udgments.

(. Evans 7

Plaintiffs individually and collectively launched a number

of attacks on the City’s system of paying tort judgments.

In the first trial, the City’s distinction between judgment

creditors above or below $1,000 was alleged to be a viola

tion of the equal protection clause of the fourteenth amend

ment. Plaintiffs also alleged that the practice of delaying

Although the parties did not raise the issue, we have some con

cerns about the City’s handling of tort judgments entered by a

federal district court. The City’s policy of paying the 6% interest

rate mandated by Illinois law is correct for all judgments entered

prior to October 1, 1982. On that date, 28 U.S.C. § 1961 was

amended. The old language establishing interest on judgments

entered in a federal court at the rate set by state law was replaced

by language providing that judgment debtors pay interest at the

“coupon issue yield equivalent” of U.S. Treasury bills. 28 U.S.C.

§ 1961(a). This new rate of interest does not apply to judgments

entered before the effective date of the statute. Merit Ins. Co.

v. Leatherby Ins. Co., 728 F.2d 943, 944 (7th Cir.) (amended sec-

tion 1961 does not apply to judgments entered before October 1,

1982), cert. denied, 462 U.S. 918 (1984). See Litton Systems v.

AT&T, 746 F.2d 168, 175 (2d Cir.) (new rate not retroactive and

it does not apply to cases pending at that date on direct review),

cert. denied, 464 U.S. 1073 (1984); United States v. Dollay Rent

A Car Systems, Inc., 712 F.2d 938, 940 n.5 (4th Cir. 1983).

On judgments entered in federal district court after October 1,

1982, the City must pay the interest rate prescribed by 28 U.S.C.

$ 1961(a) and provide all relief ordered by the court. It is unclear

from the record whether the City has followed this rule. The cor-

rect rate of interest is an essential part of the relief granted by

a district court. When a judgment is entered by a federal district

court, the City must pay the proper amount of interest, regardless

of the limit set by state statute. See Travelers Ins. Co. v. Trans-

port Ins. Co., 846 F.2d 1048, 1053-54 (7th Cir. 1988).

i ia a iat st

App. 79

payment of judgments for up to four years deprived them

of due process.®

The district court, having certified the plaintiff classes,

consolidated the Evans and Balark cases. On plaintiff's

motion for partial summary judgment and immediate pay

ment, the district court ordered the City to pay imme

diately all judgments held by Evans class members plus

costs and interest, enjoined the City’s practice of paying

judgments of $1,000 or less before earlier-entered, larger

judgments, and declared the practice unconstitutional. The

court also declared that Ill. Rev. Stat. ch. 24, § &1-16 was

* Plaintiffs also challenged the constitutionality of Il]. Rev. Stat

ch. 85, § 9-104, which states:

(a) If a local public entity does not pay a tort judgment or

settlement during the fiscal year in which it becomes final and

if, in the opinion of its governing body, the unpaid amount

of the tort judgment is not too great to be paid out of reve

nues for the ensuing fiscal year, the governing body shall pay

the balance of the judgment during the ensuing fiscal year

(b) If the local public entity does not pay the tort judgment

or settlement during the fiscal year when it becomes final and

its governing body is of the opinion that the unpaid amount

of the judgment or settlement is so great that undue hardship

will arise if the entire amount is paid out of the revenues for

the ensuing fiscal year, the governing body shall pay the judg

ment or settlement, with interest thereon, in not more than

10 annual installments. Each payment shall be of an equal por

tion of the principal of the tort judgment or settlement. The

governing body, in its discretion, may prepay any one or more

installments or any part of an installment.

Ill. Rev. Stat. ch. 85, § 9-104, amended by P.A. 84-1431, Art. 1,

§ 2, 1986.

The district court did not hold § 9-104(a) facially unconstitutional

and the Evans | court therefore did not rule on that issue. Evans

I, 689 F.2d at 1291-92. The district court did find § 9-104(b) un-

constitutional and set forth the minimum procedures it found nec-

essary to guarantee due process. This court in Evans / vacated

that portion of the decision, finding that the district court im-

properly reached the issue. Hvans /, 689 F.2d at 1299. The con-

stitutionality of § 9-104 is not at issue on this appeal. This court

will follow the lead of the Evans / court and refrain from express-

ing any opinion on the constitutionality of the statute

App. 80

unconstitutional, to the extent that it authorized the prac-

tice.* The district court found that the City’s policy vio-

lated equal protection and deprived the plaintiffs of prop-

erty without due process.!°

On appeal, this court affirmed the district court’s finding

that the City’s practice of paying judgments out of order

was unconstitutional. The court in Evans I, applying the

rational basis test articulated in San Antonio Independent

School District v. Rodriguez, 411 U.S. 1 (1973), found that

the practice was a violation of equal protection.!! The hold-

° This statute allowed the City to levy a limited judgment tax

in addition to the maximum amounts authorized for all other taxes

and it exempted judgments of $1,000 or less from the requirement

that judgments be paid in the order in which they were obtained.

Evans I, 689 F.2d at 1299 n.16. On appeal, the Evans I] court

found that although the City’s practice did not originate with III.

Rev. Stat. ch 24, § 8-1-16, it was still unconstitutional insofar as

it incorporated the practice. Evans I, 689 F.2d at 1300.

0 The district court also declared the judgment final and appeal-

able under Fed. R. Civ. P. 54(b) and reserved the issue of attor-

neys’ fees. Evans I, 689 F.2d at 1291.

't The Evans I court also discussed whether the City’s practice

deprived the plaintiffs of property without due process. * soa I,

689 F.2d at 1396-99. The court concluded that Illinois law created

a right to prompt payment of a judgment in some circumstances.

The Evans I court found that:

(ujnder Illinois law, if the City has not invoked § 9-104(b) be-

fore the end of the fiscal year following the year in which the

tort judgment became final, the tort judgment holder may

legitimately claim entitlement to immediate payment. Thus,

at least in that situation, the right to immediate payment

of a tort judgment against a municipal corporation becomes

a property right under Illinois law.

Evans I, 689 F.2d at 1297.

Delaying payment after that time constituted a deprivation of

property for purposes of the fourteenth amendment. /d.

The importance of this due process finding is unclear. While the

Evans I court found a deprivation, see also Minton v. St. Ber-

nard Parish School Bd., 803 F.2d 129, 132 (5th Cir. 1986) (distin-

guishing Evans / since Illinois law creates specific property right);

(Footnote continued on following page)

App. 81

ing in Evans I applied only to the issue of paying tort

judgments assessed to the 395 Fund out of order. The

district court’s decision was affirmed? and the case was

sent back to iron out the question of damages and other

issues.

D. The Consent Decree

After this case was remanded to the district court, the

City negotiated a consent decree with the Evans and Balark

plaintiffs. The consent decree, entered on May 31, 1984,

governs the payment of tort judgments that remained un-

paid as of December 31, 1983 and the payment of future

judgments beginning in 1984. The decree was designed

to bring payment of judgments up to a current basis by

the end of 1985. The decree required that the City ap-

propriate sufficient funds annually to satisfy the City’s

anticipated tort liabilities. The decree also required the

City to pay its judgments in the order in which they are

entered. The decree expressly left open all claims to dam-

ages; by its terms it could not be used as evidence in the

trial. No judgments entered after December 31, 1984 were

at issue in the Evans I] trial.

E. Evans Il

This case returned to the district court in 1987, osten-

sibly for computation of damages. However, the plaintiffs

11 continued

Argento v. Village of Meirose Park, 838 F.2d 1483, 1491 (7th Cir.

1988) (Evans J stands for proposition that Chicago’s practice was

“deprivation of property without due process of law”), the focus

of Evans I and all subsequent litigation has been the alleged equal

protection violations. The Evans I//] district court found no due

process violations and the due process issue was not argued by

the parties on this appeal.

12 The Evans I court vacated the section of the district court’s

= that found Ill. Rev. Stat. ch. 85, § 9-104(b) unconstitutional.

yvans I, 689 F.2d at 1300.

App. 82

were not content with the liability established by this

court in Evans I and presented a new theory of liability

to the district court. The plaintiffs noted that enterprise and

contract judgments were paid in order while tort judgments

were delayed. Plaintiffs now argued that delaying the pay-

ment of tort judgments out of the 395 Fund while promptly

paying nontort judgments with other funds violated equal

protection.

The district court agreed and found that this system

constituted a separate equal protection violation. The dis-

trict court held that the City violated equal protection

by not paying all judgments in order, regardless of the

source of funding or the amount of the judgment. The

court found that the holders of tort judgments for amounts

greater than $1,000 were denied equal protection because

they suffered greater delays in the payment of their judg-

ments than did judgment creditors who held enterprise

judgments, contract judgments, judgments payable from

department personnel budgets, or judgment creditors who

held tort judgments of less than $1,000 and received prior-

ity payment from the 395 Fund. The City’s chronic under-

budgeting of the 395 Fund was in itself an equal protec-

tion violation and the district court stated that the City

must raise taxes to pay off judgment creditors. The dis-

trict court could find no rational basis for paying judg-

ments out of separate funds or for underfunding the 395

Fund. The district court dealt with whether paying tort

judgments under $1,000 before judgments over $1,000 vio-

lated equal protection by stating that this court’s holding

in Evans I was the law of the case.

The district court created a complicated system for com-

puting damages resulting from the equal protection viola-

tions. Evans and Balark plaintiffs would receive interest

on their judgments at a rate greater than the statutory

post-judgment rate of 6%. The interest would be computed

beginning on the sixty-first day after entry of the judg-

ment through the date the judgment was actually paid.

The interest rate is to be calculated pursuant to a for-

App. 83

mula stipulated by the parties that will yield a rate of

interest equal to “the difference between the statutory

rate of interest and the money that plaintiffs could have

earned with the funds had they had them when they should

have had them.” Collum plaintiffs were divided into two

groups based upon the length of the City’s delay in pay-

ing tort judgments at the time a given judgment was sold

at a discount. Collum plaintiffs who sold their judgments

during a time when the City was delaying payment by a

year or more were awarded damages equal to the amount

of their discount, prorated over the period beginning sixty

one days after the entry of judgment through the date of

payment to the assignee, plus interest at the stipulated

rate. Collum plaintiffs who assigned their judgments at

a time when the City was delaying payments by less than

a year were awarded damages on the same basis as the

Evans and Balark plaintiffs.

Final judgment was entered on November 23, 1987 and

the City filed a timely notice of appeal. The City asks

this court to re-examine its decision in Evans | and argues

that this case falls within a recognized exception to the

law of the case doctrine. The City also asks us to reverse

the Evans II district court’s new findings on equal pro-

tection. The Collum plaintiffs also filed a cross appeal,

claiming that the district court incorrectly calculated the

damages due their class members.

II. DISCUSSION

This case presents us with the unfortunate and difficult

task of re-examining an earlier decision of this court. We

must first examine the law of the case doctrine and deter-

mine its applicability to the present situation. This court’s

decision in Evans I must be analyzed to determine how

that opinion should affect this appeal. This court must also

review the district court findings of additional equal pro-

tection violations.

App. 84

A. The Law of the Case

The first issue is what effect we should give to this

court’s decision in Evans I. While that prior appeal did

not dispose of all the issues presented on this appeal, the

Evans I court did hold that the City’s practice of delay

ing payment of tort judgments over $1,000 violated equal

protection. This court has long held that “matters decided

on appeal become the law of the case to be followed in

all subsequent proceedings in the trial court and, on sec

ond appeal, in the appellate court, unless there is plain

error of law in the original decision."’ Kaku Nagano v

Brownell, 212 F.2d 262, 263 (7th Cir. 1954). The law of

the case doctrine “is a rule of practice, based on sound

policy that, when an issue is once litigated and decided,

that should be the end of the matter."’ Barrett v. Baylor,

457 F.2d 119, 123 (7th Cir. 1972) (citing United States v.

United States Smelting, Refining & Mining Co.,

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