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Hanig v. City of Winner: CIVIL PROCEEDURE - no error finding suit barred by res judicata by state court mandamus suit

*THE HONORABLE JOHN A. JARVEY, United States District Judge for the
Southern District of Iowa, sitting by designation.
United States Court of Appeals
No. 07-2022
Tony Hanig, *
Plaintiff - Appellant, *
* Appeal from the United States
v. * District Court for the
* District of South Dakota.
City of Winner, South Dakota, *
Defendant - Appellee. *
Submitted: January 14, 2008
Filed: June 4, 2008
Before LOKEN, Chief Judge, MURPHY, Circuit Judge, and JARVEY,* District
LOKEN, Chief Judge.
Tony Hanig applied to the City of Winner, South Dakota, for a liquor license
for a proposed restaurant and lounge. The City Council unanimously denied the
application after a public hearing at which a city building inspector advised that
Hanigs site plan was inadequate and Hanig said he was not sure whether he would
employ exotic dancers at the lounge. Hanig applied in state court for a writ of
mandamus. The trial court denied relief, but the Supreme Court of South Dakota
1Hanig asserts that the South Dakota Supreme Courts decision conclusively
established the Citys 1983 liability. However, that Courts majority opinion, like
the parties briefs, cited only state court decisions, and Article VI, 2, of the South
Dakota Constitution contains an independent due process guarantee.
2The HONORABLE LAWRENCE L. PIERSOL, United States District Judge
for the District of South Dakota.
reversed, concluding that the Council had violated Hanigs due process right to a fair
and impartial hearing because one Council member worked for a restaurant in Winner,
and she neither recused nor abstained from voting after her employer expressed
concern about Hanigs application. The Supreme Court remanded, instructing the trial
court to issue a writ compelling the City Council to grant Hanig a second hearing.
Hanig v. City of Winner, 692 N.W.2d 202 (S.D. 2005).
On remand, Hanig did not pursue a second hearing, and his mandamus
application was dismissed, without objection, on the Citys motion to dismiss for lack
of prosecution. Instead, Hanig filed this action under 42 U.S.C. 1983 seeking
damages and attorneys fees for the Citys violation of his federal constitutional right
to procedural due process.1 The district court2 held the action barred by the doctrine
of res judicata because Hanig could have sought damages in his state court mandamus
action. Hanig appeals. We affirm.
Under the Full Faith and Credit Statute, 28 U.S.C. 1738, federal courts in
1983 actions must give preclusive effect to state-court judgments whenever the
courts of the State from which the judgments emerged would do so. Allen v.
McCurry, 449 U.S. 90, 96 (1980). Thus, the issue we must decide turns on the South
Dakota law of issue and claim preclusion. See Medvick v. City of University City,
995 F.2d 857, 858 (8th Cir.), cert. denied, 510 U.S. 976 (1993). We review the
district courts interpretation of South Dakota law de novo. Roeder v. Metropolitan
Ins. & Annuity Co., 236 F.3d 433, 436 (8th Cir. 2001).
Under South Dakota law, res judicata bars an attempt to relitigate a prior
determined cause of action . . . . The test for determining if both causes of action are
the same is a query into whether the wrong sought to be redressed is the same in both
actions. Bank of Hoven v. Rausch, 449 N.W.2d 263, 266 (S.D. 1989). When the
second action seeks redress for the same wrong, res judicata bars relitigation of a
claim or an issue actually litigated or which could have been properly raised and
determined in a prior action. Black Hills Jewelry Mfg. Co. v. Felco Jewel Indus.,
Inc., 336 N.W.2d 153, 157 (S.D. 1983) (emphasis omitted). Like the district court,
we have no doubt that the Supreme Court of South Dakota would hold that the
differences between mandamus and 1983 actions are insufficient to prevent res
judicata from barring 1983 damage claims that could have been raised in a prior
mandamus action. See Wozniak v. County of DuPage, 845 F.2d 677, 681 (7th Cir.
1988) (applying Illinois law).
Even a cursory glance at Hanigs federal complaint shows that he is seeking
redress for the same alleged wrong that was the subject of the state court mandamus
proceedings. Indeed, the complaint alleged that the federal court should accord the
Supreme Court of South Dakotas decision controlling effect on the issue of the
Citys liability. The only difference is that, having abandoned his claim for
mandamus relief in state court, Hanig now seeks money damages. Damage claims
would seem to fall within the res judicata bar of the prior action because South Dakota
law expressly authorized Hanig to seek money damages in the mandamus proceeding.
See S.D. Codified Laws 21-29-12; Brown v. City of Yankton, 434 N.W.2d 376
(S.D. 1989). However, Hanig argues that the damage claims are not precluded
because his damages were unascertainable when he applied for the writ of mandamus.
This contention requires a closer look at the mandamus relief he sought in state court
and the injuries alleged in this action.
In his federal complaint, Hanig alleged that another bar opened in direct
competition with [his] proposed establishment while he appealed the denial of
mandamus relief to the South Dakota Supreme Court. Therefore, he alleged, the
Citys due process violation caused damages that included lost profits, lost business
revenue, lost business opportunity, [and] loss of income. These damage claims have
as their unstated premise the notion that Hanig was entitled to a liquor license.
Indeed, that was his initial claim in state court -- he applied for a writ of mandamus
3In his reply brief, Hanig relies heavily on Creek v. Village of Westhaven, 80
F.3d 186, 190 (7th Cir. 1996), where the court stated in holding the second suit not
barred: You cannot split a claim into a request for damages and a request for
injunction and litigate each in a separate suit. . . . provided that you can obtain both
forms of relief in one suit. Creek is factually distinguishable for two reasons. First,
when the injunctive relief was granted in Creek, plaintiff could not estimate his full
damages because he did not know when he would, at last, obtain the permit. Id.
Here, on the other hand, Hanigs full damages from the delay in obtaining a liquor
license would have been known at the time he was granted mandamus relief
compelling the City to issue the license. Second, unlike this case, the damage claims
in Creek were based in part on alleged wrongful acts committed after the first suit.
that would compel the City to issue him a license. That claim, if successful, would
have entitled him to seek an award of damages under S.D. Codified Laws 21-29-12
for injuries caused by the delay in securing the judicially-compelled license. Although
the amount of damages caused by the on-going delay was unknown when he applied
for this writ, the fact that he was damaged by the denial of a liquor license was known,
and it is not uncommon to defer the question of damages until the right to mandamus
relief has been established, as in Brown, 434 N.W.2d at 377, and in Hillcrest Terrace
Corp. v. Rapid City, 23 N.W.2d 793 (S.D. 1946). See generally Nationwide Corp. v.
N.W. Natl Life Ins. Co., 87 N.W.2d 671, 686 (Minn. 1958).
However, Hanig abandoned his claim for a judicially-compelled license when
he amended the mandamus application to seek only a writ compelling the City to grant
him a second hearing. Any damages that could have been sought had the first claim
been successful were abandoned as well. Accordingly, res judicata bars these damage
claims.3 We further note that these claims are frivolous because the mandamus relief
Hanig obtained -- a second hearing -- would not entitle him to damages premised upon
the grant of a liquor license application he then abandoned.
There remain the claims for damages flowing from the mandamus relief Hanig
did obtain -- a second hearing on his liquor license application. As alleged in his
federal complaint, these damages included the constitutional violations themselves,
attorneys fees in vindicating his rights . . . damage to reputation, emotional distress,
and other consequential damages. These damages were known and ascertainable
when the Supreme Court of South Dakota remanded the mandamus proceedings, and
Hanig clearly could have sought damages as part of his relief in the trial court. See
S.D. Codified Laws 15-6-54(c) (every final judgment shall grant the relief to which
the party in whose favor it is rendered is entitled, even if the party has not demanded
such relief in his pleadings). Yet rather than seek an award of damages after the
Supreme Court of South Dakota established his right to mandamus relief, Hanig filed
a Response in the trial court stating that he did not object to the Citys motion to
dismiss the mandamus proceedings, explaining that the renewed license was not
worth getting because, by the time he was awarded a fair and impartial hearing,
another bar opened right next to where Hanig wanted to use his liquor license. In
these circumstances, a clearer case of damage claims that could have been raised, but
instead were abandoned, is hard to imagine. Therefore, res judicata bars these claims
as well.
In his reply brief, Hanig complains that the City should not be permitted to rely
on res judicata because it failed to plead this affirmative defense and explicitly
disclaimed the doctrines applicability. However, the district court properly invoked
res judicata to avoid unnecessary judicial waste and then gave Hanig ample
opportunity to argue the issue. Arizona v. California, 530 U.S. 392, 412 (2000)
(quotations omitted); see Bechtold v. City of Rosemount, 104 F.3d 1062, 1068 (8th
Cir. 1997) (affirming on res judicata grounds sua sponte).
The judgment of the district court is affirmed.


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