On May 15, 2014, the US Court of Appeals for the Seventh Circuit held in Kathrein v. City of Evanston that an intervening decision can result in abandoning the law of the case, even where the intervening decision did not expressly overrule the original ruling (No. 12-2958, (7th Cir. May 15, 2014)).

Plaintiffs Michael and Victoria Kathrein claimed that the City of Evanston's Affordable Housing Demolition Tax violated the US and Illinois state constitutions. The tax requires property owners seeking to demolish any residential buildings to pay $10,000 per building or $3,000 per residential unit. After the sale of a residential property fell through because of the tax, the Kathreins brought suit in federal court. They claimed that the Tax Injunction Act (TIA), which forbids federal courts from interfering with the collection of any tax under state law if there is a remedy available in state court, was unconstitutional.

The district court initially granted the defendants' motion to dismiss, holding that the Kathreins were attempting to interfere with the collection of a state tax. On the case's first appeal, the Seventh Circuit reversed the district court in part, finding that the TIA did not apply because the demolition tax was a regulatory device rather than a tax within the meaning of the TIA.

However, before the district court could issue a decision on the remaining claims, the Seventh Circuit issued an en banc decision in Empress Casino Joliet Corp. v. Balmoral Racing Club, Inc. that rejected the approach used in the first appeal of this case to identify whether a payment under state law is a tax and set out a new bright-line test (651 F.3d 722 (7th Cir. 2011)). As a result, the defendants' quickly moved to dismiss the remaining claims, arguing that Empress Casino was an intervening change in the law that allowed the district court to depart from the Seventh Circuit's earlier decision. The district court agreed and dismissed the remaining claims. The Kathreins appealed once again, arguing that the Seventh Circuit's original decision still governed.

The Seventh Circuit affirmed the district court's dismissal. The court looked to the law of the case doctrine, which provides that a ruling in the earlier phase of litigation controls the later phases unless a good reason is shown for its departure, and found that the intervening change in law underlying the decision in Empress Casino provided ample good reason to depart from the law of the case here. Although the intervening decision neither expressly overruled the original ruling nor came from the US Supreme Court, Empress Casino was "flatly inconsistent" with the prior decision. The district court therefore correctly abandoned the law of the case.