3:05-cv-00840 | S.D. Ill. | Jul 12, 2006
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 1 of 19 Page ID #568
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
CITY OF FAIRVIEW HEIGHTS,
Plaintiff,
v.
ORBITZ, INC. et al.,
Defendants. No. 05-CV-840-DRH
MEMORANDUM AND ORDER
HERNDON, District Judge:
I. Introduction
Three motions are now before the Court: a motion to dismiss (Doc. 37)
filed by Defendants; a motion to remand (Doc. 54) filed by Plaintiff City of Fairview
Heights (“Plaintiff” or“City”); and a motion to file a surreply (Doc. 63) also filed by
Plaintiff.1 Plaintiff responds in opposition to Defendants’ motion to dismiss, as do
Defendants to Plaintiff’s motion to remand. (Docs. 55, 58.) For the reasons below,
the Court grants in part and denies in part Defendants’ motion to dismiss, denies
Plaintiff’s motion to remand, and denies Plaintiff’s motion to file a surreply.
II. Background
Plaintiff, an Illinois municipality, brings this suit on behalf of a putative
class of Illinois municipalities in order to redress Defendants’ failures to pay taxes
1
Defendants’ motion to dismiss was filed by all Defendants except one,
Maupintour Holding LLC, which later joined in the motion. (Doc. 51.)
Page 1 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 2 of 19 Page ID #569
allegedly owed to it and other putative class members. Plaintiff’s position, in a
nutshell, is that Defendants — owners and operators of Internet travel sites —
unlawfully neglected to pay the full amount of hotel taxes due and owing under city
ordinances. Plaintiff contends that Defendants accomplished this first by contracting
with hotels and motels to resell their hotel rooms to consumers (at higher rates), and
then by paying taxes only on the lower, contracted-for rates they paid to the hotels
and motels themselves, not the rates actually paid by consumers.
Plaintiff originally brought this action in St. Clair County, Illinois.
Defendants removed on November 28, 2005. (Doc. 1.) Plaintiff then petitioned the
Judicial Panel on Multidistrict Litigation (“MDL Panel”) to consolidate this matter
with three other cases pending elsewhere in federal courts. (Doc. 47.) That effort,
however, bore no fruit. Plaintiff’s four-count Complaint now consists of a claim for
a violation of Fairview Heights, Ill., Code § 36-2-2,2 a claim alleging an Illinois
Consumer Fraud and Deceptive Practices Act, 815 Ill. Comp. Stat. 505/01 et
seq. (“ICFA” or the “Act”) violation, a conversion claim, and a claim for unjust
enrichment. (Doc. 2.)
2
That provision provides as follows:
There is hereby levied and imposed a tax of five percent (5%) of the
rent charged for the privilege and use of renting a hotel or motel room
within the City of Fairview Heights, Illinois for each twenty-four (24)
hour period or any portion thereof for which a daily room charge is
made.
Fairview Heights, Ill., Code § 36-2-2 (emphasis in original).
Page 2 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 3 of 19 Page ID #570
III. Analysis
A. Plaintiff’s Motion to Remand
1. Standard
A defendant may remove a case only if a federal district court would
have original jurisdiction over the action. See 28 U.S.C. § 1441; Caterpillar Inc.
v. Williams, 482 U.S. 386" date_filed="1987-06-09" court="SCOTUS" case_name="Caterpillar Inc. v. Williams">482 U.S. 386, 392 (1987). Statutes providing for removal are
construed narrowly, and doubts about removal are resolved in favor of remand. Doe
v. Allied-Signal, Inc., 985 F.2d 908" date_filed="1993-02-09" court="7th Cir." case_name="Jane Doe v. Allied-Signal, Inc.">985 F.2d 908, 911 (7th Cir. 1993). The burden of
establishing jurisdiction in the federal courts falls on the party seeking removal. Id.
The Class Action Fairness Act (CAFA), which took effect on February 18,
2005, extends federal jurisdiction over class actions meeting certain prerequisites.
Relevant to this case is a provision, 28 U.S.C. § 1332(d)(4)(A), providing that a
district court must decline to exercise jurisdiction over class actions in which (1)
more than two-thirds of the proposed class members are citizens of the state in
which the action was originally filed; (2) at least one defendant is a defendant (a)
from whom significant relief is sought, (b) whose alleged conduct forms a significant
basis for the claims, and (c) who is a citizen of the state in which the action was
originally filed; and (3) the principal injuries resulting from the alleged conduct were
incurred in the state in which the action was originally filed, provided that “during
the 3-year period preceding the filing of that class action, no other class action has
been filed asserting the same or similar factual allegations against any of the
Page 3 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 4 of 19 Page ID #571
defendants on behalf of the same or other persons.” 28 U.S.C. § 1332(d)(4)(A).
2. Plaintiff’s Motion
The parties’ dispute centers on the latter provision above.3 In Plaintiff’s
view, remand is appropriate here because no class action was filed in the three-year
window preceding this case asserting the same or similar factual allegations against
any Defendant. Defendants disagree. They point to a 2004 California state-court
case (hereinafter referred to as “City of Los Angeles”4) that, from their perspective,
not only contains exactly the same defendants as this case does, but also asserts
nearly identical claims.
The Court finds that 28 U.S.C. § 1332(d)(4)(A)(ii) is triggered here by
City of Los Angeles, and thus that remand is inappropriate. For that subsection to
foreclose remand, each of its three requirements must be satisfied: (1) within a three-
year window, (2) no class action may have been filed asserting the same or similar
factual allegations, (3) against any Defendant. 28 U.S.C. § 1332(d)(4)(A)(ii). City
of Los Angeles satisfies each element. That case involves the exact same defendants
3
The parties do not contest that the other elements of 28 U.S.C. §
1332(d)(4)(A) are satisfied here.
4
That case is styled City of Los Angeles, California, on behalf of itself and
all others similarly situated v. Hotels.com, L.P; Hotels.com GP, LLC; Hotwire,
Inc.; CheapTickets, Inc.; Cendant Travel Distribution Services Group, Inc.;
Expedia, Inc.; Internetwork Publishing Corp. (d/b/a Lodging.com); Lowest
Fare.com, Inc.; Maupintour Holding, LLC; Orbitz, Inc.; Orbitz, LLC;
priceline.com, Inc.; Site59.com, LLC; Travelocity.com, Inc.; Travelocity.com, L.P.;
Travelweb, LLC; Travelnow.com, Inc.; and Does 1 though 100, inclusive, Case No.
BC326693 (“City of Los Angeles”), and was filed in Los Angles Superior Court on
December 30, 2004. (Doc. 58, Ex. B.)
Page 4 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 5 of 19 Page ID #572
as here, was filed in 2004, within the three-year window, and contains not only
similar factual allegations, but in some places identical wording and structure to
Plaintiff’s Complaint. (See Doc. 58, Ex. B.) Paragraph twenty-four of the instant
Complaint, which both introduces and lays the substantive foundation for Plaintiff’s
allegations, for example, is nearly identical to paragraph twenty-five of the Second
Amended Complaint in City of Los Angeles, which performs the same functions.5
(Docs. 2, 58, Ex. B.) The core allegations themselves, further, are almost exactly the
same. Plaintiff here seeks redress for Defendants’ alleged failures to remit taxes
based on the rates paid by consumers, rather than the “wholesale” rates Defendants
negotiated with hotel operators. The plaintiffs in City of Los Angeles sought the same
5
In the City of Los Angeles complaint, paragraph twenty-five reads as
follows:
Defendants are online sellers and/or online resellers of hotel rooms to
the general public. Defendants have sold hotel rooms to the public and
collected transient occupancy taxes on those rooms, but have failed to
pay the full taxes due and owing to Plaintiff and Plaintiff Class members
on these transactions.
(Doc. 58, Ex. B, ¶ 25.) In the instant Complaint, the above language is altered, but
only slightly:
Defendants, and each of them, are on-line sellers and/or resellers of
hotel rooms to the general public. Defendants have sold hotel rooms to
the public and collected taxes on those rooms, but have failed to pay the
taxes due and owing to Plaintiff and other class members on these
transactions.
(Doc. 2, ¶ 24.)
Page 5 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 6 of 19 Page ID #573
thing.6 (Compare Doc. 2, ¶¶ 26-27 with Doc. 58, Ex. B., ¶ 26.)
In opposition, Plaintiff declines to address these similarities. Instead,
it makes a rather specious two-part argument: First, it claims that since both City of
Los Angeles and the cases previously up for consolidation seek unpaid hotel-
occupancy taxes, there are no differences between them. Then, it claims that because
Defendants argued against consolidation before the MDL Panel, 28 U.S.C. §
1332(d)(4)(A)(ii) forecloses federal jurisdiction in this case.
This reasoning is flawed, for three reasons. First and foremost, the case
6
In City of Los Angeles, for example, the plaintiff alleged that:
After the hotel accommodations were provided by the hotel to the
consumer, the hotel invoiced Defendant for the hotel accommodations,
including separately stated transient occupancy taxes for the pertinent
taxing municipality where the hotel was located, measured by the
agreed-upon amount charged by the hotel operator to Defendant. This
was incorrect and improper, as a matter of law. As more fully alleged
in paragraph 28, infra, each Defendant was required to collect and
remit transient occupancy taxes based upon the amounts actually
charged the consumers by Defendant for the hotel accommodations,
including any fees added by Defendant.
(Doc. 58, Ex. B, ¶ 26.) In this case, Plaintiff similarly alleges that:
Defendants, however, have failed to remit the proper tax amounts,
underpaying Plaintiff and other Class members for the taxes due and
owing them. Defendants contract with hotels for rooms and sell the
rooms to the members of the public, who actually occupancy [sic] the
rooms. Defendants charge and collect taxes from occupants based on
the marked up room rates, but only remit to Plaintiff and other Class
members tax amounts based on the lower, negotiated rates. Defendants
unlawfully retain the difference.
(Doc. 2, ¶ 27.)
Page 6 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 7 of 19 Page ID #574
that Defendants argue asserts similar claims is City of Los Angeles, not any of the
cases that were before the MDL Panel. This has been true since removal. (See Doc.
1, ¶ 10.) Plaintiff’s current attempt to equate the MDL cases with City of Los Angeles
— without so much as attempting to identify specific similarities between them — is
accordingly off base and irrelevant. In order for federal jurisdiction to exist, there
need only be one similar case filed in the preceding three years. See 28 U.S.C. §
1332(d)(4)(A)(ii). Here, Defendants argue that City of Los Angeles is such a case.
At least initially, therefore, the Court must examine only the allegations in that case
to determine whether remand is appropriate.
Second, even if the Court were to accept Plaintiff’s position that City of
Los Angles and the cases previously up for consolidation are functionally
interchangeable, Defendants’ statements to the MDL Panel concerning those cases
are of no consequence in this Court’s analysis. A district court’s determination of
whether it has subject matter jurisdiction over a case, after all, is made independent
of the parties’ arguments or positions. Gonzalez v. O’Connell, 355 F.3d 1010" date_filed="2004-01-21" court="7th Cir." case_name="Carlos Gonzalez v. Cynthia J. O'connell, District Director, Bureau of Immigration and Customs Enforcement, and United States of America">355 F.3d 1010,
1014 (7th Cir. 2004). It is the allegations in the complaints themselves, not what
the parties have to say about those allegations, that matters here.
Finally, even if the Court were to rely on Defendants’ statements to the
MDL Panel in evaluating its jurisdiction, there are different standards for
consolidation under 28 U.S.C. § 1407 and subject-matter jurisdiction under 28
U.S.C. § 1332(d)(4)(A)(ii). Because of these divergent standards, the fact that
Page 7 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 8 of 19 Page ID #575
Defendant argued against consolidation on the one hand and for subject matter
jurisdiction on the other is not necessarily inconsistent. The two standards, are, by
their plain language, quite clearly distinct; 28 U.S.C. § 1407 focuses on the question
of whether cases involve common fact issues, while 28 U.S.C. § 1332(d)(4)(A)(ii)
centers on whether allegations in cases are “the same or similar.” Plaintiff fails to
explain, or even address, why or how Defendants’ position before the MDL Panel
against consolidation under 28 U.S.C. § 1407 forecloses an argument for subject
matter jurisdiction under 28 U.S.C. § 1332(d)(4)(A)(ii).
Accordingly, the Court finds that Plaintiff’s motion to remand must be
denied.
B. Defendants’ Motion to Dismiss
1. Standard
When ruling on a motion to dismiss for lack of subject matter
jurisdiction under Federal Rule of Civil Procedure 12(b)(6), a court must accept
the complaint’s well-pleaded factual allegations as true and draw reasonable
inferences from those allegations in plaintiff’s favor. Transit Exp., Inc. v. Ettinger,
246 F.3d 1018" date_filed="2001-04-12" court="7th Cir." case_name="Transit Express v. Joel Ettinger">246 F.3d 1018, 1023 (7th Cir. 2001). The court must then determine “whether
relief is possible under any set of facts that could be established consistent with the
allegations.” Bartholet v. Reishauer A.G., 953 F.2d 1073" date_filed="1992-01-15" court="7th Cir." case_name="Emil J. Bartholet v. Reishauer A.G. (Zurich) and Reishauer Corporation (Elgin)">953 F.2d 1073, 1078 (7th Cir 1992)
(citing Conley v. Gibson, 355 U.S. 41" date_filed="1957-11-18" court="SCOTUS" case_name="Conley v. Gibson">355 U.S. 41, 45-46 (1957)). A motion to dismiss tests
the sufficiency of the complaint, not its merits. Gibson v. City of Chicago, 910
Page 8 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 9 of 19 Page ID #576
F.2d 1510, 1520 (7th Cir. 1990). A claim may be dismissed only if it is beyond
doubt that under no set of facts would a plaintiff’s allegations entitle her to relief.
Travel All over the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423" date_filed="1996-01-03" court="7th Cir." case_name="Travel All Over the World, Inc., and Ibrahim Y. Elgindy v. The Kingdom of Saudi Arabia and Saudi Arabian Airlines">73 F.3d 1423,
1429 (7th Cir. 1996). To survive a motion to dismiss, “[c]omplaints need not plead
facts and need not narrate events that correspond to each aspect of the applicable
legal rule.” Kolupa v. Roselle Park Dist., 438 F.3d 713" date_filed="2006-02-10" court="7th Cir." case_name="Christopher Kolupa v. Roselle Park District">438 F.3d 713, 715 (7th Cir. 2006).
2. Defendant’s Motion
In their Motion to Dismiss, Defendants take the position that all four of
Plaintiff’s Counts are improper and must be dismissed. Plaintiff disagrees. Below,
the Court considers whether Plaintiff’s Complaint makes out a claim as to each
Count.
i. Count I
Plaintiff’s Count I arises under Fairview Heights, Ill., Code § 36-2-2. In
pertinent part, that section provides that “[t]here is hereby levied and imposed a tax
a five percent (5%) of the rent charged for the privilege and use of renting a hotel or
motel room within the City of Fairview Heights, Illinois . . . .” Fairview Heights, Ill.,
Code § 36-2-2. It goes on to state that “[i]t shall be the duty of the owner of every
hotel or motel to secure said tax from the renter of the motel or hotel room, and to
pay-over to the City Collector or any authorized representative of the City said tax
under procedures prescribed by the City Collector, or as otherwise provided in this
Article.” Fairview Heights, Ill., Code § 36-2-3(C). An owner is defined as “any person
Page 9 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 10 of 19 Page ID #577
having an ownership interest in, conducting the operation of a hotel or motel room,
or receiving the consideration for the rental of such hotel or motel room.” Fairview
Heights, Ill., Code § 36-2-1(B). Defendants maintain that because (1) they do not
qualify as “owners” under section 36-2-1(B), (2) Plaintiff received all amounts due,
and (3) the tax is not enforceable, Count I must be dismissed.
a. “Owner”
To begin with, the Court finds that Plaintiff has sufficiently alleged that
Defendants are owners under Fairview Heights, Ill., Code § 36-2-1(B). That section
describes three categories of ownership: “having an ownership interest in,”
“conducting the operation of a hotel or motel room,” or “receiving consideration for
the rental of such hotel or motel room.” Fairview Heights, Ill., Code § 36-2-1(B).7 At
the very least, Plaintiff’s Complaint successfully alleges that Defendants fall into the
third, or “receiving consideration,” ownership category. As the Complaint states,
“Defendants, and each of them, are on-line sellers and/or on-line resellers of hotel
rooms to the general public.” (Doc. 2, ¶ 24.) It continues by asserting that
“Defendants contract with hotels from rooms and sell the rooms to the members of
the public, who actually occupancy [sic] the rooms” (id., ¶ 27), and further alleges
that consumers pay Defendants for the privilege of staying in the rooms. (Id., ¶¶ 24-
31.) This language, the Court finds, sufficiently alleges that in return for a monetary
7
“‘Owner’ means any person having an ownership interest in, conducting
the operation of a hotel or motel room, or receiving the consideration for the
rental of such hotel or motel room.” Fairview Heights, Ill., Code § 36-2-1(B)
(emphasis in original).
Page 10 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 11 of 19 Page ID #578
sum, Defendants grant consumers the privilege of renting hotel rooms. That is all
that is necessary under section 36-2-1(B). Fairview Heights, Ill., Code § 36-2-1(B).
In opposition, Defendants argue that because Plaintiff fails to allege that
they grant or promise to grant temporary possession of hotel or motel rooms, they
cannot be said to “receiv[e] consideration” for the rental of hotel rooms. Plaintiffs,
however, “need not plead facts; they need not plead law; they plead claims for relief.”
Doe v. Smith 429 F.3d 706" date_filed="2005-11-21" court="7th Cir." case_name="Jane Doe v. Jason Smith">429 F.3d 706, 708 (7th Cir. 2005). Federal-court pleadings,
further, are not required to allege facts corresponding to each element of a statute or
ordinance. Id. Because Plaintiff’s Complaint alleges that Defendants receive
consideration for renting hotel rooms, and because that is all the Ordinance requires
of ownership, the Complaint successfully alleges that Defendants are owners under
the Ordinance.8
b. Receipt of Amounts Due
8
Alternatively, the Complaint alleges that Defendants fall into the second, or
“conducting the operation of a hotel or motel room,” category of ownership. With
regard to that category, the Complaint states that Defendants “are the operators of
the hotels at the time the rent is paid.” (Doc. 2, ¶ 26.) If these words, as required,
are taken as true, they imply that Defendants are indeed owners under Fairview
Heights, Ill., Code § 36-2-1(B). In opposition, however, Defendants argue that
Plaintiff’s allegation is “conclusory” and also that it is contradicted by Plaintiff’s
other allegations that Defendants operate Internet travel cites, contract with hotels
for rooms, and sell rooms online. (Doc. 37, pp. 6-7.) The Court finds these
arguments seem unavailing. The mere fact that a plaintiff pleads a conclusion
rather than specific facts supporting that conclusion does not imply that a
complaint must be dismissed. See Kolupa v. Roselle Park Dist., 438 F.3d
713, 715 (7th Cir. 2006). Moreover, Plaintiff’s other allegations concerning
Defendants’ conduct do not necessarily contradict the allegation that Defendants
operate hotel rooms.
Page 11 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 12 of 19 Page ID #579
Defendants next argue that Count I must be dismissed because Plaintiff
“has received all taxes due and owing to it.” (Doc. 37, p. 9.) Under Fairview Heights,
Ill., Code § 36-2-2,“[t]he ultimate incidence of, and liability for payment of [the hotel]
tax is to be borne by the person who seeks the privilege of occupying the hotel or
motel room, said person hereinafter referred to as ‘renter’.” Fairview Heights, Ill.,
Code § 36-2-3(B) (emphasis in original). The amount subject to tax, further, is the
“rent charged for the privilege and use of renting a hotel room.” Fairview Heights, Ill.,
Code § 36-2-2. Plaintiff’s Complaint alleges that Defendants are resellers of hotel
rooms, which end up being occupied by consumers. (Doc. 2, ¶¶ 24-31.) Thus, in
arguing that the City has received all taxes owed, Defendants’ position is that even
though it is the consumer occupying the room who bears responsibility for paying the
tax under the Ordinance, the taxable amount is not the amount that consumer
actually pays, but is rather the lower, “net” rate paid by Defendants.
The Court must disagree. The provisions of the Fairview Heights City
Code are to be interpreted consistent with the intent of the Mayor and the City
Council. See Fairview Heights, Ill., Code § 1.05(1) (“All general provisions, terms,
phrases and expressions shall be liberally construed in order that the true intent of
the Mayor and City Council may be fully carried out.”). Section 36-2 is no exception.
That section identifies only one taxable amount, the “rent charged for the privilege
and use of renting a hotel room,” which is “to be borne by the person who seeks the
privilege or occupying the hotel or motel room.” Fairview Heights, Ill., Code §§ 36-2-
2, 36-2-3(B) (emphasis added). Given this language, and given the fact that Plaintiff
Page 12 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 13 of 19 Page ID #580
alleges that the consumers to whom Defendants resell rooms seek the privilege of
occupancy, it makes little sense to surmise, as Defendants do, that the Ordinance’s
drafters intended those consumers to pay tax only on what Plaintiff refers to as the
“net” cost of the room (i.e., the cost paid by Defendants).
What makes far more sense is that the drafters intended the room
occupant to pay tax on the amount she actually paid. A contrary holding, after all,
would open up a potentially gaping loophole: a hotel operator could simply
incorporate a shell entity or make some other similar arrangement, rent the hotel
rooms to that entity for a nominal amount, and then re-rent the rooms to consumers,
who would be taxed only on the nominal sum paid by the side entity to the operator.
This tactic — permissible under the continuation of Defendants’ logic — would place
the hotel operator at a competitive advantage, because it would either increase her
profit margins or lower the cost of her rooms relative to her competitors. However,
it would at the same time almost entirely eviscerate the Ordinance, and it cannot be
what the drafters had in mind. See Environmental Protection Agency v.
Pollution Control Bd., 426 N.E.2d 1264" date_filed="1981-09-30" court="Ill. App. Ct." case_name="Environmental Protection Agency v. Pollution Control Board">426 N.E.2d 1264, 1267, 100 Ill. App. 3d 735, 740 (Ill.
App. Ct. 1981). At the very least, the Court finds, it is not beyond doubt that
Plaintiff has received all taxes owed.
c. Enforceability of Section 36-2-2
Finally, Defendants contend that in any event, Count I must be
dismissed because Fairview Heights, Ill., Code § 36-2-2 is unenforceable. This
Page 13 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 14 of 19 Page ID #581
argument proceeds in two parts. First, Defendants maintain that the hotel tax in
question was passed under the City’s home rule taxation powers.9 Second, they
argue that because the City has elsewhere renounced its power to impose all home
rule taxes other than those relating to the sale of tangible personal property, section
36-2-2 is invalid. See Fairview Heights, Ill., Code § 36-1-1.10
The Court finds that it need not address the first issue — whether or not
the hotel tax was passed pursuant to the City’s home rule powers — above because
even assuming, arguendo, that section 36-2-2 is indeed a home rule tax that directly
conflicts with section 36-1-1's prohibition, Defendants have offered no citation,
9
Under the Illinois Constitution, home rule municipalities “may exercise
any power and perform any function pertaining to its government and affairs
including, but not limited to, the power to regulate for the protection of the public
health, safety, morals and welfare; to license; to tax; and to incur debt.” Ill. Const.
Art. VII, § 6(a). They may not, however, “license for revenue or impose taxes upon
or measured by income or earnings or upon occupations” unless authorized by
the Illinois General Assembly. Ill. Const. art. VII, § 6(e).
10
That section provides that:
The City of Fairview Heights, through its duly elected Corporate
Authorities, shall possess and exercise only those Home Rule powers
and functions that are necessary to impose a tax upon all persons
engaged in the business of selling tangible personal property other
than an item of tangible personal property titled or registered with an
agency of this State's government at retail in this City at a rate percent
of the gross receipts from such sales made in the course of such
business of making sales of service at a rate percent of the selling price
of any tangible personal property transferred by such serviceman as an
incident to a sale of service.
Fairview Heights, Ill., Code § 36-1-1 (emphasis added).
Page 14 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 15 of 19 Page ID #582
theory, or explanation as to why one provision of the City Code should be given more
credence than the other. Defendants fail to explain, that is, why a conflict between
sections 36-1-1 and 36-2-2 must be resolved by invalidating section 36-2-2, not the
other way around. It is true, as Defendants point out, that if adopted pursuant to the
City’s home rule powers, section 36-2-2 runs counter to section 36-1-1. But the
converse is also true. Either way, the Court faces a conflicting pair of City-Code
provisions, one (section 36-2) both creating a tax and providing a means to enforce
it (thus implying its enforceability), and the other (section 36-1-1) renouncing the
enforceability of the first. Defendants provide no theory as to why, under these
circumstances, either section should hold any more weight than the other. In the
absence of such argument, and given that the City Code itself provides little guidance
about what should happen if its provisions conflict,11 it is not beyond doubt, at this
time, that Plaintiff’s Complaint is insufficient.
Therefore, the Court finds that Count I cannot presently be dismissed.
11
The most directly applicable provision of the Code states as follows:
No new ordinance shall be construed to repeal a former ordinance,
whether such former ordinance is expressly repealed or not, as to any
offense committed against the former ordinance or as to any act done,
and penalty, forfeiture, or punishment incurred, or any right accrued,
or claim arising before the new ordinance takes effect, save only that the
proceedings thereafter shall conform so far as is practicable to the
ordinances in force at the time of such proceedings.
Fairview Heights, Ill., Code § 1.08. Neither party has offered information
concerning the temporal proximity of section 36-1-1's and section 36-2-2's
passage.
Page 15 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 16 of 19 Page ID #583
ii. Count II
In contrast, the Court finds that Count II — alleging an ICFA violation
— can readily be dismissed due to Plaintiff’s lack of standing. Under the ICFA, a
municipality is not a person capable of bringing suit. See 815 Ill. Comp. Stat. §
505/1(c);12 Board of Education v. A, C & S, 546 N.E.2d 580" date_filed="1989-10-25" court="Ill." case_name="Board of Education v. A, C and S, Inc.">546 N.E.2d 580, 599 (Ill. 1989)
(“The legislature is aware of how to include a body politic within the definition of
'person' or 'corporation,' and we believe that its failure to do so in the Consumer
Fraud Act shows an intent not to include them within the definition of persons who
may sue based on the Act.”). It is thus plain that Plaintiff — a city — lacks standing
to sue under the Act and that Count II cannot proceed.
iii. Counts III and IV
The Court also finds that Counts III and IV — alleging claims for
conversion and unjust enrichment — must be dismissed. As Illinois courts have
held, “[w]here a statute creates a new right unknown to the common law, and at the
same time gives a remedy for its enforcement, the remedy so prescribed is exclusive.”
Hicks v. Williams, 432 N.E.2d 1278" date_filed="1982-03-01" court="Ill. App. Ct." case_name="Hicks v. Williams">432 N.E.2d 1278, 1281 104 Ill. App. 3d 172 (Ill. App. Ct.
1982); see also Kosicki v. S.A. Healy Co., 44 N.E.2d 27" date_filed="1942-09-25" court="Ill." case_name="Kosicki v. S. A. Healy Co.">44 N.E.2d 27, 29, 380 Ill. 298 (Ill.
12
“The term ‘person’ includes any natural person or his legal representative,
partnership, corporation (domestic and foreign), company, trust, business entity
or association, and any agent, employee, salesman, partner, officer, director,
member, stockholder, associate, trustee or cestui que trust thereof.” 815 Ill.
Comp. Stat. § 505/1(c). “Unfair methods of competition and unfair or deceptive
acts or practices . . . in the conduct of any trade or commerce are hereby declared
unlawful whether any person has in fact been misled, deceived or damaged
thereby.” 815 Ill. Comp. Stat. § 505/2 (emphasis added).
Page 16 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 17 of 19 Page ID #584
1942), Rosewell v. John H. Nalback Eng’g Co., 691 N.E.2d 775" date_filed="1997-12-08" court="Ill. App. Ct." case_name="Rosewell v. John H. Nalback Engineering Co.">691 N.E.2d 775, 294 Ill. App.
3d 958 (Ill. App. Ct. 1997). Here, the City Ordinance does just those things; it both
creates a new right unknown to the common law (the right to a tax on hotel and
motel revenues) and provides a remedy for its enforcement, see Fairview Heights, Ill.,
Code § 36-2-6 (“Wherever any person shall fail to pay any tax as herein provided, the
Corporation Council [sic] shall, upon the request of the City Council [sic] bring or
cause to be brought an action to enforce the payment of said tax on behalf of the City
in any court of competent jurisdiction.”). Under Illinois law, that renders the remedy
exclusive. See Kosicki, 44 N.E.2d 27" date_filed="1942-09-25" court="Ill." case_name="Kosicki v. S. A. Healy Co.">44 N.E.2d at 29; Hicks, 432 N.E.2d 1278" date_filed="1982-03-01" court="Ill. App. Ct." case_name="Hicks v. Williams">432 N.E.2d at 1281.
Plaintiff, in opposition, argues that it should also be able to enforce its
right to hotel-tax revenues via actions for conversion and unjust enrichment because
those actions existed prior to the passage of the hotel tax. (Doc. 55.) The Court
declines to adopt this position. The right to payment of hotel taxes is not a common-
law right; rather, it was created when section 36-2 was passed. Section 36-2-6
provides the City with a complete remedy to enforce that right. Fairview Heights, Ill.,
Code § 36-2-6. Despite these facts, the City now seeks to obtain the same funds it
could otherwise obtain though section 36-2-6 via separate claims for conversion and
unjust enrichment. Under Illinois law, that is not proper. See Kosicki, 44 N.E.2d
at 29; Hicks, 432 N.E.2d 1278" date_filed="1982-03-01" court="Ill. App. Ct." case_name="Hicks v. Williams">432 N.E.2d at 1281. Plaintiff’s separate conversion and unjust-
enrichment claims in Counts III and IV do not complement its section 36-2 claim in
Count I; rather, all three claims seek the same pile of money. (See Doc. 2.)
Page 17 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 18 of 19 Page ID #585
Accordingly, the additional common-law remedies of conversion and unjust
enrichment are unavailable to Plaintiff in this instance.13 See Kosicki, 44 N.E.2d
at 29; Hicks, 432 N.E.2d 1278" date_filed="1982-03-01" court="Ill. App. Ct." case_name="Hicks v. Williams">432 N.E.2d at 1281; contrast Jackson v. Callan Pub'lg, Inc., 826
N.E.2d 413, 356 Ill. App. 3d 326" date_filed="2005-02-28" court="Ill. App. Ct." case_name="Jackson v. Callan Publishing, Inc.">356 Ill. App. 3d 326 (Ill. App. Ct. 2005) (addressing a scenario in
which plaintiffs sought to enforce an already-existing right to sue for breach of
fiduciary duty).
C. Motion to File Surreply
Finally, Plaintiff moves to file a surreply due to its assertion that
Defendants’ reply “contained new arguments and authorities not in their opening
memorandum.” (Doc. 63.) The Court denies this motion. Plaintiff, to begin with,
neglects to identify the new arguments Defendants allegedly make. Local Rule 7.1(c),
moreover, is crystal clear: “[u]nder no circumstances will sur-reply briefs be
accepted.” With this rule in mind, the Court cannot grant Plaintiff’s motion.
IV. Conclusion
Therefore, for the foregoing reasons the Court DENIES Plaintiff’s Motion
to Remand. (Doc. 54.) Further, the Court GRANTS in part and DENIES in part
Defendants’ Motion to Dismiss (Doc. 37), DENYING Defendants’ motion as to Count
I of Plaintiff’s Complaint and GRANTING the motion as to Counts II, III, and IV.
13
Were consumers suing Defendants here instead of the City, naturally, it
would be a different story. Here, however, the City sues entirely to recover the
same funds it claims are due under section 36-2. (See Doc. 2.) Independent of
that section, Plaintiff asserts no right to these funds. (Id.)
Page 18 of 19
Case 3:05-cv-00840-DRH-DGW Document 65 Filed 07/12/06 Page 19 of 19 Page ID #586
Further, the Court DENIES Plaintiff’s motion to file a surreply. (Doc. 63.)
IT IS SO ORDERED.
Signed this 12th day of July, 2006.
/s/ David RHerndon
United States District Judge
Page 19 of 19