CHICAGO - A federal judge has shut down, for now, an attempt by O'Reilly's Auto Parts to sue the city of Harvey for ordering their location in the south Chicago suburb closed in an alleged dispute over the store's business license in an attempt to force the auto parts retailer to pay back due property taxes owed by their landlord.
On May 14, U.S. District Judge Manish Shah dismissed O'Reilly's federal lawsuit against the city.
The legal dispute dates to last summer, when O'Reilly first challenged the city's determination that the store was allegedly operating without a valid business license.
According to court documents, O'Reilly has operated a store in Harvey since 2014, leasing a storefront in a strip mall at 14921 Dixie Highway, owned by a landlord identified as Harvey Shopping Center LLC.
According to Illinois state business records, Harvey Shopping Center LLC is managed by Rodeo Capital Inc., a Los Angeles based real estate investment company holding billions of dollars worth of commercial properties and loans across the U.S.
According to court documents, Harvey Shopping Center LLC has been involved in "an ongoing dispute with Harvey over delinquent property taxes."
According to court documents, the shopping center owner claims it does not owe the city property taxes "under an agreement it had with Harvey." The landlord is currently embroiled in a legal action against the city of Harvey over that point.
However, while that dispute is ongoing, O'Reilly claims the city has moved to attempt to extract at least some of the alleged unpaid property taxes from the landlord's tenants, using the shop's business license as leverage.
According to court documents, the city last summer demanded O'Reilly pay a "$20,000 fine" over their landlord's allegedly delinquent property taxes. When O'Reilly refused, the city then refused to approve O'Reilly's new business license, asserting they owed unpaid taxes.
The city then barricaded O'Reilly's store and posted a police officer outside the store to prevent anyone from accessing the store.
O'Reilly sued, asserting the city had acted illegally. Judge Shah ordered the city to remove the barricades and police presence. But the city responded by issuing a cease and desist order, declaring the city had ordered the store closed for "violation of the City of Harvey's Municipal Code."
At an administrative hearing over the citation concerning the business license, a city hearing officer ruled the city did not act unconstitutionally and ordered O'Reilly to pay fines of $2,500 per day dating back to September 2024, when the retailer was first told by the city that its business license was not being renewed over "property taxes."
O'Reilly last December formally appealed that administrative ruling to Cook County Circuit Court, asserting the decision was unjust and renewing its arguments that the city was violating its constitutional rights.
That lawsuit remains pending in Cook County court, according to online dockets.
However, as they filed their appeal in Cook County, O'Reilly continued its lawsuit against the city in federal court. That action sought a judgment declaring Harvey's actions concerning its business license and threat of massive accumulated fines over the landlord's outstanding property taxes amounted to an illegal and unconstitutional attempt to force them to pay a tax debt they legally don't owe.
"O’Reilly is operating its Store as a Tenant. It has no responsibility to pay property taxes for the Property where its Store stands – either as owner or under its lease with the Landlord," O'Reilly wrote in a filing in support of its request for an injunction.
"Yet Harvey’s ordinance makes no distinction between O’Reilly and its Landlord; it authorizes revocation of O’Reilly’s business license – resulting in $2,500 daily fines – based on circumstances it has no ability to control."
They further asserted their rights to due process were violated by a biased hearing before a city administrative hearing officer who sided with the city.
In response, Harvey asserted its actions to deny O'Reilly a business license to attempt to force the retailer to pay its landlord's taxes did not violate the Constitution, because the action is the city's only realistic means of extracting the taxes from someone while the dispute with the landlord drags on.
O'Reilly "is an $8 billion a year business who is arguing that it should be able to operate on a property that has not paid real estate taxes for over 10 years, depriving one of Illinois’ most depressed communities of sorely needed tax revenues," attorneys for Harvey wrote in a brief filed in federal court.
"... O’Reilly may be held liable irrespective of its ability to control the behavior of another party. While O’Reilly may be comfortable in the fact that no one will ever foreclose upon the shopping center property, as no one will assume over a decade’s worth of unpaid property taxes, the only means that the City has to receive any property taxes on properties such as this is to target the tenants who lease tax delinquent property in an effort to discourage them from doing so.
"This is no more unfair than sanctioning a vehicle owner for crimes committed by a permissive user or a tenant for crimes committed by an out-of-control family member or guest, each of whom likely have less culpability than O’Reilly has here," the city argued.
But Harvey also argued the case should be tossed because intervention from a federal court would be premature in this situation, as O'Reilly is continuing to pursue its appeal of the administrative hearing officer's ruling in state court.
In his ruling, Judge Shah said that particular reasoning should hold sway.
At this point, Shah said O'Reilly has not provided enough evidence to back its claims that it faced an unfair hearing before a biased administrative hearing officer.
"... The burden falls on O’Reilly to provide facts that are 'sufficiently developed to allow the court to make a realistic assessment of whether the potential for bias is sufficient to warrant a federal court to step in to protect the plaintiff’s procedural due process rights,'" Shah wrote, citing legal precedent concerning claims similar to O'Reilly's.
"While I take O’Reilly’s well-pleaded allegations as true and construe them in its favor, O’Reilly has failed to allege specific facts to support a reasonable inference of bad faith and harassment."
So, Shah said the continuing action in state court, and its potential to still give O'Reilly the relief it seeks, should block O'Reilly from pursuing its constitutional claims in federal court, at this point.
O'Reilly is represented by attorneys Joseph R. Marconi, Carlos A. Vera and Adam J. Sedia, of the firm of Johnson & Bell, of Chicago.
Harvey is represented by the attorneys of Robert P. Hoban III and Maulik Sharma, of Ancel Glink, of Chicago.