In the
United States Court of Appeals
For the Seventh Circuit
No. 11-3111
C OUNCIL 31 OF THE A MERICAN F EDERATION OF S TATE,
C OUNTY AND M UNICIPAL E MPLOYEES, AFL-CIO,
Plaintiff-Appellant,
v.
P AT Q UINN, Governor of the State of Illinois, et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of Illinois.
No. 11-CV-03203—Sue E. Myerscough, Judge.
A RGUED F EBRUARY 24, 2012—D ECIDED M AY 17, 2012
Before M ANION and R OVNER, Circuit Judges, and
C OLEMAN, District Judge.
M ANION , Circuit Judge. The State of Illinois, facing a
“significant and unprecedented fiscal deficit,” has brokered
Hon. Sharon Johnson Coleman, of the Northern District of
Illinois, sitting by designation.
2 No. 11-3111
a series of compensation agreements with Council 31 of
the American Federation of State, County, and Municipal
Employees, AFL-CIO, the exclusive bargaining repre-
sentative for 40,000 state employees. In the agreements,
the parties trimmed several hundred million dollars
in fiscal years 2011 and 2012 by deferring employees’
general wage increases and instituting a voluntary fur-
lough program. Despite these cost-saving measures,
the fiscal year 2012 budget did not contain sufficient
appropriations for the deferred wage increases that
were due to employees of 14 state agencies. Accordingly,
the State instituted a pay freeze for those employees,
thereby repudiating the agreements that the parties had
previously reached. Council 31 then brought this suit
on behalf of itself and the affected employees, alleging
that the State’s actions violated the Contracts Clause
and the Equal Protection Clause of the U.S. Constitution,
and resulted in several violations of state law. Council 31
sought a preliminary injunction that would order the
State to pay the wage increases as they came due, and
the State filed a motion to dismiss all claims. The district
court denied Council 31’s motion for a preliminary in-
junction and granted the State’s motion to dismiss.
Council 31 has appealed and we now affirm.
I.
Council 31 is the longtime exclusive bargaining repre-
sentative for more than 40,000 Illinois state employees
in approximately 51 different departments and agencies.
Council 31’s latest series of collective bargaining agree-
No. 11-3111 3
ments with the State began on September 5, 2008, and runs
through June 20, 2012. The collective bargaining agree-
ments laid out the wages for affected employees in the
form of base pay rates, annual increases, step increases,
and longevity increases. The agreements also contained
a general wage increase schedule that set a 1.5% increase
effective January 1, 2009, a 2.5% increase effective July 1,
2009, a 2% increase effective January 1, 2010, a 2% increase
effective July 1, 2010, a 2% increase effective January 1,
2011, a 4% increase effective July 1, 2011, and a 1.25%
increase effective January 1, 2012.1
Facing the prospect of serious budgetary shortfalls
for fiscal years 2011 and 2012, representatives of the State
and Council 31 met in January 2010 to discuss potential
cost-saving measures. The parties produced a mediated
resolution which, in relevant part, limited the number
of layoffs the State could make in fiscal year 2011 in
exchange for a deferral of the general wage increases
due to the employees. Specifically, the parties agreed
to defer one-half of the 2% general wage increase due to
employees on July 1, 2010 to June 1, 2011, and also one-
half of the 2% general wage increase due on January 1, 2011
to June 1, 2011. This resolution saved the State more
than $300 million in fiscal year 2011.
The parties met again in the fall of 2010 to resolve
concerns about the impending budgetary shortfalls for
1
The State’s fiscal year runs from July 1 to June 30 each year.
Thus, the wage increases were scheduled to occur twice a
year throughout the life of the collective bargaining agreements.
4 No. 11-3111
fiscal year 2012. That meeting resulted in a cost-savings
agreement that specified a goal of $100 million in total
savings; the parties identified $50 million in cost-savings
measures and promised to continue to seek further com-
promises that would save an additional $50 million.
The biggest cost-savings measure laid out in the agree-
ment was the deferral of half of the 4% general wage
increase due to employees on July 1, 2011 to February 1,
2012. In exchange, the State agreed not to lay off any
employees or close any facilities during fiscal year 2012.
After this agreement, Governor Pat Quinn submitted
a proposed budget for fiscal year 2012 to the State
General Assembly that “sought to fully fund all collec-
tive bargaining contracts.” The budget that passed the
General Assembly, however, was markedly different:
that version of the budget did not contain the necessary
appropriation authority to implement the annual general
wage increases, step increases, and longevity increases
due under the collective bargaining agreements to the
employees of 14 state agencies.2 After cutting an addi-
tional $376 million from the budget by line-item veto,
2
Those agencies were the Criminal Justice Information Author-
ity, the Department of Corrections, the Deaf and Hard of
Hearing Commission, the Guardianship and Advocacy Com-
mission, the Historic Preservation Commission, the Human
Rights Commission, the Department of Human Rights, the
Department of Human Services, the Department of Juvenile
Justice, the Department of Labor, the Department of Natural
Resources, the Prisoner Review Board, the Department of
Public Health, and the Department of Revenue.
No. 11-3111 5
Governor Quinn approved a total budget of $33 billion
on June 30, 2011. Notably, Governor Quinn’s cuts made
via line-item veto did not affect any appropriations for
the employees’ pay increases; rather, the budget passed
by the General Assembly lacked the necessary appro-
priations for the pay increases. A memorandum from
the State’s Department of Central Management Services
Director Malcolm Weems that was issued on July 1, 2011,
the day after the budget became law, emphasized that
the funding shortfall was caused by the legislature, not
the Governor: “[T]he budget that was passed by the
General Assembly and sent to the Governor DOES NOT
contain appropriation authority to implement cost of
living adjustments, longevity enhancements or step
increases for employees covered by a collective bar-
gaining agreement in the [14 affected agencies].”
In the same July 1 memorandum, Director Weems
relayed the bad news that the State was instituting a
pay freeze on the employees of the 14 agencies: “[D]ue
to the absence of sufficient appropriations by the
General Assembly, the above listed agencies cannot
implement the FY12 increases.” This directive was sub-
sequently enacted in a set of Emergency Rules that
amended the State’s pay plan. 35 Ill. Reg. 11,657 (July 15,
2011). Those Emergency Rules were later made per-
manent and took effect on December 6, 2011. 35 Ill. Reg.
20,144 (Dec. 23, 2011). (Because there is no substantive
difference between the Emergency and Permanent
Rules, we will simply refer to them as the “Rules.”)
The pay freeze affected approximately 30,000 Coun-
cil 31-represented employees across the 14 agencies
6 No. 11-3111
and saved the State about $75 million. Council 31 argued
that there were several viable alternatives that the State
could have pursued to make up the lack of appropria-
tions for the 14 agencies. Those alternatives included
allocating some of the “hundreds of millions of dollars”
in unexpended appropriations from fiscal year 2011,
slowing the rate at which the State fills positions
that become vacant during fiscal year 2012 or even in-
stituting a hiring freeze on such positions, transferring
funds from other appropriations items for the affected
agencies, seeking legislative authority to use some of
the savings from the governor’s line-item vetoes, and
seeking supplemental appropriations from the General
Assembly.
But the State did not pursue any of those alternatives.
So, on July 8, 2011, Council 31, on behalf of itself and
its affected members, filed this suit against the State,
Governor Quinn, and Director Weems. Less than two
weeks later, Council 31 filed an amended complaint
that listed five claims. Counts I and II, brought under
42 U.S.C. § 1983, alleged that Governor Quinn and
Director Weems violated the Contracts Clause and
Equal Protection Clause of the U.S. Constitution, and
Counts III, IV, and V alleged state statutory and constitu-
tional claims.
On August 9, 2011, the defendants moved to dismiss
this suit for failure to state a claim as well as under the
Eleventh Amendment’s sovereign immunity protec-
tion. On August 19, 2011, Council 31 filed a motion for a
preliminary injunction to enforce its Contracts-Clause
No. 11-3111 7
claim by enjoining the Rules and thus requiring the State
to pay out wage increases as they came due. After sup-
plemental briefing and an evidentiary hearing, the
district court granted the defendants’ motion to dismiss
all claims and denied Council 31’s request for pre-
liminary injunctive relief. Specifically, the district court
noted that the Eleventh Amendment barred Council
31’s state-law claims against all defendants, and that
Council 31 could not bring its § 1983 claims against the
State; rather, such claims could be asserted only against
Governor Quinn and Director Weems in their official
capacities. The district court further held that the
Eleventh Amendment barred Council 31’s Contracts-
Clause claim against Governor Quinn and Director
Weems and, additionally, that the amended complaint
failed to adequately state either a Contracts-Clause
claim or an Equal Protection claim.
At the same time that this suit was unfolding, the
parties engaged in arbitration. On July 19, 2011, the
arbitrator found that the pay freeze violated the terms
of the collective bargaining agreements and ordered the
State immediately to pay the 2% wage increase that was
due on July 1, 2011 (recall, the collective bargaining
agreement originally provided for a 4% increase, but
the parties had negotiated a deferral of half of that
amount to a later date). The arbitrator further ordered
the State to continue to pay the increased wages, and
to make whole those employees who did not receive
the increased wages due on July 1. The State then
filed suit in the Circuit Court of Cook County to vacate
the arbitrator’s award; Council 31 counterclaimed for
8 No. 11-3111
enforcement of the award. State v. Am. Fed’n of State &
Mun. Emps., Council 31, No. 2011-CH-25352 (Cook Cnty.
Cir. Ct., Chancery Div. Mar. 15, 2012) (http://www.
cookcountyclerkofcourt.org).3 This state-court case re-
mains pending during Council 31’s present appeal taken
from the district court.
II.
The two claims at issue on appeal are Council 31’s
Contracts-Clause claim and its Equal Protection claim;
both are asserted against Governor Quinn and Director
Weems in their official capacities. Council 31 challenges
the district court’s holding that the Eleventh Amend-
ment barred Council 31’s Contracts-Clause claim against
Governor Quinn and Director Weems and that the
amended complaint failed to state either a Contracts-
Clause claim or an Equal Protection claim. In making
these arguments, Council 31 maintains that it is not
seeking monetary damages in this case; rather, it is
seeking injunctive relief on its Contracts-Clause claim
and declaratory judgment on both of its claims. We will
address the Eleventh Amendment issue first and then
move to whether the district court properly dismissed
3
There are two more actions also pending in Illinois state
court. Those actions—one brought by the State, one by Council
31—involve the State’s planned layoffs and facility closures.
But on this appeal Council 31’s federal challenges extend only
to the pay-freeze issue, and thus neither of these state-court
actions has any bearing on our case.
No. 11-3111 9
Council 31’s claims for failure to state a claim on which
relief may be granted.
A. Eleventh Amendment Sovereign Immunity
The district court held that the Eleventh Amendment
barred Council 31 from obtaining relief under its
Contracts-Clause claim and accordingly denied Council
31’s motion for a preliminary injunction. We review de
novo a district court’s dismissal of a plaintiff’s claim
on Eleventh Amendment grounds. Nanda v. Bd. of
Trustees, 303 F.3d 817, 821 (7th Cir. 2002) (citation omitted).
The Eleventh Amendment provides, “The Judicial
power of the United States shall not be construed to
extend to any suit in law or equity, commenced or prose-
cuted against one of the United States by Citizens of
another State, or by Citizens or Subjects of any Foreign
State.” U.S. C ONST. amend XI. Courts have construed this
provision broadly, holding that it confers “ ‘the sovereign
immunity that the States possessed before entering the
Union.’ ” Bd. of Regents v. Phoenix Int’l Software, Inc., 653
F.3d 448, 457 (7th Cir. 2011) (quoting College Sav. Bank v.
Fl. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666,
669 (1999)). This means that, although not explicitly
provided for in the text, “the Eleventh Amendment
guarantees that an ‘unconsenting State is immune
from suits brought in federal courts by her own citizens
as well as by citizens of another State.’ ” Id. (quoting
Edelman v. Jordan, 415 U.S. 651, 663 (1974)). As we
have noted elsewhere, “[i]f properly raised, the amend-
ment bars actions in federal court against a state, state
10 No. 11-3111
agencies, or state officials acting in their official capac-
ities.” Ind. Prot. & Advocacy Servs. v. Ind. Family & Soc. Servs.
Admin., 603 F.3d 365, 370 (7th Cir. 2010) (citing Edelman,
415 U.S. at 663). Here, there is no dispute that the de-
fendants, sued as state officials acting in their
official capacities, timely raised the Eleventh Amend-
ment defense.
But, even when properly raised, sovereign immunity
is not absolute immunity. There are three exceptions to
this defense that may subject a state to an action in
federal court: (1) where Congress, acting under its con-
stitutional authority conveyed by amendments passed
after the Eleventh Amendment (the most common
being the Fourteenth Amendment), abrogates a state’s
immunity from suit; (2) where the state itself consents to
being sued in federal court; and (3) under the doctrine
articulated by the Supreme Court in Ex parte Young, 209
U.S. 123 (1908). Id. at 371. Here, the first two exceptions
are not applicable so we need address only the third
exception—the Ex parte Young doctrine.
The Ex parte Young doctrine “allows private parties to
sue individual state officials for prospective relief to
enjoin ongoing violations of federal law.” MCI Telecomms.
Corp. v. Ill. Bell Tel. Co., 222 F.3d 323, 337 (7th Cir. 2000)
(citations omitted). There is a longstanding rationale
that underlies this doctrine: “[B]ecause an unconstitu-
tional legislative enactment is ‘void,’ a state official who
enforces that law ‘comes into conflict with the superior
authority of the Constitution,’ and therefore is ‘stripped
of his official or representative character and is sub-
No. 11-3111 11
jected in his person to the consequences of his indi-
vidual conduct.’ ” Va. Office for Prot. & Advocacy v. Stewart,
131 S. Ct. 1632, 1638 (2011) (quoting Ex parte Young, 209
U.S. at 159-60). To determine whether Governor Quinn
and Director Weems may be so stripped of the official
character of their positions, we “ ‘need only conduct a
straightforward inquiry into whether the complaint
alleges an ongoing violation of federal law and seeks
relief properly characterized as prospective.’ ” Ind. Prot. &
Advocacy Servs., 603 F.3d at 371 (quoting Verizon Md., Inc.
v. Pub. Serv. Comm’n of Md., 535 U.S. 635, 645 (2002)).
The first part of that inquiry—whether the complaint
alleges an ongoing violation of federal law—is readily
satisfied here: Council 31 alleges that the Rules put into
place by Governor Quinn and Director Weems violate the
Contracts Clause of the U.S. Constitution because those
Rules deny the affected employees their wage increases
due under the collective bargaining agreements (as modi-
fied by subsequent cost-savings agreements). But the
second part of the inquiry—whether the relief sought
is properly characterized as prospective—is problematic
for Council 31. To be clear, Council 31 seeks two forms
of relief under its Contracts-Clause claim: injunctive
relief from the Rules and a declaratory judgment that
the State’s actions violated the Contracts Clause. We
address both forms of relief in turn.
The Supreme Court has held that “Ex parte Young cannot
be used to obtain an injunction requiring the payment of
funds from the State’s treasury . . . or an order for specific
performance of a State’s contract.” Va. Office for Prot. &
12 No. 11-3111
Advocacy, 131 S. Ct. at 1639. True, prospective relief of
an ongoing federal violation will often require state
officials to dip into a state’s treasury to comply with a
court’s order. Edelman, 415 U.S. at 668. “Such an ancillary
effect on the state treasury is a permissible and often an
inevitable consequence of the principle announced in Ex
parte Young.” Id. Nevertheless, where a plaintiff’s request
for relief “would have an effect upon the state treasury
that is not merely ancillary but is the essence of the
relief sought,” it is barred by the Eleventh Amendment.
MSA Realty Corp. v. State, 990 F.2d 288, 293 (7th Cir. 1993).
Therefore, it is necessary to look not at the type of
relief sought, but the effect the relief would have on the
State if it were afforded to the plaintiff. In doing so,
we recount the case of MSA Realty, which bears a resem-
blance to our own. In that case, the plaintiff corporation
purchased all of the tax increment revenue bonds that
were issued by the Village of Buffalo Grove, Illinois. Id.
at 289. By law, the Village could only make the interest
and principal payments due on the bonds out of real
property and state and local sales tax increments—
amounts that were ultimately controlled by the State.
Id. Therefore, when the State General Assembly subse-
quently reduced the amount of tax increment revenues
that would be returned to municipalities, the Village
necessarily had to reduce the amount of payments that
the plaintiff corporation was owed on its bonds. See id.
at 289-90. The plaintiff sued, seeking a declaratory judg-
ment that the State’s reduction in tax increment rev-
enues constituted a violation of the Contracts Clause,
and also an injunction that would require the State to
No. 11-3111 13
return the full amount of tax increment revenues to the
Village of Buffalo Grove, which would in turn be able to
pay the debt service on its bonds. Id. at 290. The State
asserted an Eleventh Amendment defense to the plaintiff’s
claims. Id.
We addressed the plaintiff’s request for injunctive
relief by noting that “merely labeling the relief sought
as injunctive does not defeat the eleventh amendment
bar to suits that seek relief from the state treasury.” Id.
at 295. Rather, the inquiry must go deeper, and so we
concluded as follows:
[T]he eleventh amendment bars a claim for injunctive
relief such as [the plaintiff’s] that would require
direct payments by the state from its treasury for the
indirect benefit of a specific entity, or that seeks to
require state officials to carry out a task that only
the state can perform in its political capacity, such
as fulfilling promises made allegedly to [tax incre-
ment fund] districts such as the Village of Buffalo
Grove, or that seeks relief that cannot be considered
merely ancillary to achieving compliance with a
determination of a substantive federal constitutional
wrong.
Id. In addition, we rejected the plaintiff’s request for
declaratory judgment because such “relief should not
be awarded where the eleventh amendment bars an
award of monetary or injunctive relief; otherwise the
[declaratory] relief would operate as a means of avoiding
the amendment’s bar.” Id. The rationale for this
holding is sound: “For the federal court to declare that
defendants have violated the impairment of contracts
14 No. 11-3111
clause in the past would give [a plaintiff] a judgment
that would have res judicata effect in state court on
the issue of liability.” Id.
In this case, like the plaintiff in MSA Realty, Council 31
seeks an injunction that would result in payments being
made out of the State’s treasury. Council 31 attempts to
distinguish its requested injunctive relief from that
sought by the plaintiff in MSA Realty by pointing to the
fact that Council 31 seeks only to enjoin the Rules that
implemented the pay freeze; conversely, the plaintiff in
MSA Realty sought relief “through an order directing
the payment of certain funds out of the state treasury to
the Buffalo Grove [tax increment fund] district for the
ultimate benefit of [the plaintiff].” Id. at 292. In other
words, Council 31’s request for injunctive relief does not
specifically require the court to direct payment of funds
out of the State’s treasury, while the plaintiff in MSA
Realty did seek direct payment. This distinction is im-
material. Council 31’s argument ignores our holding
that “the eleventh amendment bars a claim for injunctive
relief . . . that would require direct payments by the state
from its treasury for the indirect benefit of a specific
entity.” Id. at 295. It does not matter that the injunction
in this case would preclude State officials from enforcing
the Rules without explicitly directing payment from the
State’s treasury; the effect of issuing the injunctive
relief Council 31 seeks in this case is the same as the
effect of the relief sought by the plaintiff in MSA Realty—
the injunction would force the defendants, acting in
their official capacities, to extract funds from the State’s
treasury for the ultimate benefit of the plaintiffs. There
No. 11-3111 15
is thus no question that the “essence of the relief sought”
is the payment of funds out of the treasury to the em-
ployees at the 14 state agencies whose budgets did not
contain sufficient appropriations to pay wage increases.
Id. at 293; see also Va. Office for Prot. & Advocacy, 131 S. Ct.
at 1639 (“Ex parte Young cannot be used to obtain an
injunction requiring the payment of funds from the
State’s treasury . . . .”). Accordingly, the injunctive relief
sought in this case does not have a “merely ancillary”
effect on the State’s treasury, the Ex parte Young doctrine
does not apply, and the Eleventh Amendment bars
Council 31’s request for an injunction under its Contracts-
Clause claim. MSA Realty Corp., 990 F.2d at 293.
We also observe that the defendants raised the
Eleventh Amendment defense against the entirety of
Council 31’s Contracts-Clause claim. This includes not
only Council 31’s request for a preliminary injunction
but also its request for declaratory judgment. But
neither the district court’s order nor the parties’ briefs
on appeal address the Eleventh Amendment’s applica-
tion to Council 31’s request for declaratory judgment.
Nevertheless, the reasoning of MSA Realty applies with
equal force here: “[D]eclaratory relief should not be
awarded where the eleventh amendment bars an award
of monetary or injunctive relief; otherwise the [declara-
tory] relief would operate as a means of avoiding the
amendment’s bar.” Id. at 295. Therefore, the Eleventh
Amendment bars all relief that Council 31 seeks under
its Contracts-Clause claim.
16 No. 11-3111
B. Failure to State a Claim
Council 31 also challenges the district court’s ruling
that it failed to adequately state either a Contracts-
Clause or an Equal Protection claim. We will address
each claim in turn.
We review de novo a district court’s dismissal of a
plaintiff’s claims for failure to state a claim on which
relief may be granted. Graczyk v. W. Publ’g Co., 660 F.3d
275, 278 (7th Cir. 2011) (citing Greenberger v. GEICO Gen.
Ins. Co., 631 F.3d 392, 399 (7th Cir. 2011)). Our focus at
this stage is on the complaint; we will construe all well-
pleaded alleged facts, and draw all reasonable inferences,
in a light most favorable to the plaintiff. Id. at 279. Al-
though “[t]he plaintiff need not . . . plead ‘detailed
factual allegations,’ ” Reynolds v. CB Sports Bar, Inc., 623
F.3d 1143, 1146 (7th Cir. 2010) (quoting Ashcroft v. Iqbal,
556 U.S. 662, 129 S. Ct. 1947, 1949 (2009)), “[t]o survive
a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.’ ” Iqbal, 129 S. Ct. at
1949 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)).
1. Contracts-Clause Claim
Even if the Eleventh Amendment did not bar Council
31’s Contracts-Clause claim, that claim would still fail
because Council 31 has not stated a cognizable claim. The
Contracts Clause of the U.S. Constitution provides that
“No state shall enter into any . . . Law impairing the
No. 11-3111 17
Obligation of Contracts . . . .” U.S. C ONST. art. I, § 10. To
succeed on a Contracts-Clause claim, a plaintiff must
demonstrate that a “change in state law has ‘operated as
a substantial impairment of a contractual relationship.’ ”
Gen. Motors Corp. v. Romein, 503 U.S. 183, 186 (1992)
(quoting Energy Reserves Grp., Inc. v. Kan. Power & Light
Co., 459 U.S. 200, 411 (1983); Allied Structural Steel Co.
v. Spannaus, 438 U.S. 234, 244 (1978)). This inquiry
requires the plaintiff to show (1) that there is a con-
tractual relationship, (2) that a change in law has
impaired that relationship, and (3) that the impairment
is substantial. Id.; see also Khan v. Gallitano, 180 F.3d 829,
832 (7th Cir. 1999). The parties dispute both aspects of
the second element (whether there has been a change in
law, and, if so, whether any change in law caused an
impairment of the contractual relationship) as well as
the third element (whether any impairment is substan-
tial). We need not wade into all of these disputes,
however, because we believe that the issue of impair-
ment settles the matter.4 And so we will address only
4
We recognize that, even if the Rules constituted a sub-
stantial impairment of the collective bargaining agreements,
the defendants may still be justified in acting as they did if
they can show that the Rules were “reasonable and necessary to
meet an important social problem.” E&E Hauling, Inc. v. Forest
Preserve Dist., 613 F.2d 675, 681 (7th Cir. 1980) (citing, inter alia,
Allied Structural Steel Co., 438 U.S. at 242-44). Here, the impor-
tant social problem that the State sought to fix by decreasing
appropriations to the 14 affected agencies was Illinois’s
(continued...)
18 No. 11-3111
whether there has been an impairment of the con-
tractual relationship in this case.
Council 31 argues that “[c]ourts find impairment
where, as here, the express terms of the labor agreement
create the right or benefit in question because one can
presume that the parties to a contract have relied heavily
on the explicit benefits set forth in that contract.” This
argument describes a classic breach of contract action.
But we have rejected the notion that a breach of contract
alone is enough to constitute a constitutional impair-
ment of a contractual obligation. Horwitz-Matthews, Inc. v.
City of Chicago, 78 F.3d 1248, 1250 (7th Cir. 1996). And
for good reason: “The essence . . . of a breach of contract
is that it triggers a duty to pay damages for the
reasonably foreseeable consequences of the breach. If
4
(...continued)
fiscal deficit. Council 31 contends that the Rules are not a
reasonable and necessary means to remedy this problem and
then offers a number of alternative courses of action. But
because “[a] state . . . reserve[s] broad power to adopt regula-
tions to protect the public without being concerned with
upsetting contractual obligations,” id., Council 31 must demon-
strate (or, at this stage of the case, plausibly allege) that at least
one of those alternatives is a more moderate course of action
than the Rules, and that the alternative would serve the
purpose of meeting the State’s fiscal needs equally well. See
U.S. Trust Co. of N.Y. v. New Jersey, 431 U.S. 1, 30-31 (1977). It
is doubtful that Council 31 has met that burden here; therefore,
we are inclined to defer to the State’s broad power to protect
its citizens.
No. 11-3111 19
the duty [to pay damages] is unimpaired, the obligation
of the contract cannot be said to have been impaired.”
Id. at 1251. So our inquiry does not focus on whether
Council 31 has adequately pleaded a breach of contract
claim (it most certainly has), but rather on “whether
[the State] . . . set up a defense that prevented [Council 31]
from obtaining damages, or some equivalent remedy,
for the breach.” Id.
Here, Council 31 argues only that the Rules constitute
an unconstitutional impairment of the collective bar-
gaining agreements. This argument can prevail only if
the Rules are a defense that the State has set up to
prevent Council 31 from obtaining damages for breach
of contract. And so we will briefly examine the State’s
defense in the aforementioned state court proceedings
to determine whether the Rules foreclose a remedy
for breach of contract.
It is clear that they do not. Indeed, Council 31 has
already prevailed at arbitration on its breach of contract
claim, and in the subsequent suit filed by the State in
state court to vacate the arbitration award, the State’s
defense is not predicated on the Rules. Rather, the
State’s defense is based on the application of Section 21 of
the Illinois Public Sector Relations Act, which states that
the negotiation of collective bargaining agreements is
“[s]ubject to the appropriation power of the employer
[which is the State].” 5 Ill. Comp. Stat. 315/21. Accordingly,
the State has argued that appropriations are a condition
precedent to the wage increases being paid. Because
plenary appropriation authority lies with the legislative
20 No. 11-3111
branch, the State asserts that the executive branch’s
hands are tied by the appropriations doled out by the
General Assembly and so the State cannot be held liable
for a breach of contract when, because of a lack of ap-
propriations, insufficient funds exist to fulfill a con-
tractual obligation.
This argument is consistent with the State’s rationale
for enacting the rules, as stated in Director Weems’s July 1
memorandum: “[D]ue to the absence of sufficient ap-
propriations by the General Assembly, the above listed
agencies cannot implement the FY12 increases.” In other
words, the Rules simply implemented a payment plan
that had been dictated by legislative fiat. Ultimately,
whether the State prevails in state court will not rest
on the court’s construction of the Rules, but rather on
the court’s application of Section 21 of the Illinois
Public Sector Relations Act—specifically, whether the
court accepts the State’s argument that Section 21 estab-
lishes the notion that appropriations are a condition
precedent to the State meeting its contractual obligations.
Thus, the Rules do not foreclose a remedy for breach
of contract, and no impairment of a contractual obliga-
tion exists. Council 31 has failed to state a cognizable
Contracts-Clause claim.
2. Equal Protection Claim
Finally, Council 31 argues that the district court erred
in holding that it failed to adequately state an Equal
Protection claim. The Fourteenth Amendment’s Equal
Protection Clause requires that “ ‘all persons similarly
situated . . . be treated alike.’ ” United States v. Brucker, 646
No. 11-3111 21
F.3d 1012, 1017 (7th Cir. 2011) (quoting United States v.
Nagel, 559 F.3d 756, 760 (7th Cir. 2009)). But Equal Protec-
tion claims are subject to different degrees of scrutiny
depending on the individual rights or the class of persons
at issue. As Council 31 acknowledges, “[t]he proper
level of scrutiny in this circumstance is the rational rela-
tionship test, for our case does not involve a fundamental
right, and there is no suspect class.” Discovery House, Inc.
v. Consol. City of Indianapolis, 319 F.3d 277, 282 (7th Cir.
2003). Under that standard, the applicable government
regulation will be upheld “ ‘if there is a rational relation-
ship between the disparity of treatment and some
legitimate governmental purpose.’ ” Brucker, 646 F.3d
at 1017 (emphasis in original) (quoting Smith v. City of
Chicago, 457 F.3d 643, 652 (7th Cir. 2006)).
Council 31 contends that, at this early stage of the
proceedings, it is improper to determine whether paying
raises to employees in some agencies but not to the
30,000 employees in the 14 affected agencies is rationally
related to a legitimate governmental purpose. Council 31
states that it is enough that it has pleaded an Equal Pro-
tection claim at this stage of the proceedings. Later on,
Council 31 argues, its claim will be tested against the
legitimate governmental purpose that the defendants
have proffered as their rationale for implementing
the Rules.
Council 31’s argument ignores the heavy burden a
plaintiff bears when asserting an Equal Protection claim
that is subject only to rational-basis scrutiny. As noted
above, the defendants must identify only “some” (in other
22 No. 11-3111
words, at least one) legitimate governmental purpose.
Stated another way, Council 31 must plausibly allege
that no reasonably conceivable set of facts supports the
pay freeze as a rational instrument of cost savings. See
Discovery House, Inc., 319 F.3d at 282. Here, the parties
agree that the State has encountered a fiscal crisis that
will cause the State to run out of money by the end
of the fiscal year. Instituting cost-savings measures is
unquestionably a legitimate governmental interest, par-
ticularly for a government in such dire fiscal straits. And
by Council 31’s own admission the State would save
approximately $75 million by implementing the pay
freeze. It is therefore evident that the Rules are a
rational method of contributing to the legitimate gov-
ernmental aim of cost savings. Accordingly, the dis-
trict court properly granted the defendants’ motion to
dismiss Council 31’s Equal Protection claim.
III.
The Eleventh Amendment bars Council 31’s Contracts-
Clause claim because the essence of the relief that it
seeks is the payment of funds out of the treasury.
Council 31 also failed to state a Contracts-Clause claim
because it did not adequately allege that the Rules uncon-
stitutionally impaired the collective bargaining agree-
ments. Finally, Council 31 failed to state an Equal Pro-
tection claim because there is a rational relationship
between the Rules and the legitimate governmental
purpose of cost savings. Because we hold that the
district court correctly dismissed both claims at issue,
No. 11-3111 23
we necessarily hold that the district court also correctly
denied Council 31’s motion for a preliminary injunction.
For these reasons, the district court is A FFIRMED.
5-17-12