United States District Court, Northern District of Illinois, E.D
July 13, 1971
SAM E. ROSE ET AL., PLAINTIFFS,
AMERICAN AIRLINES, INC., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Napoli, District Judge.
MEMORANDUM OPINION AND ORDER
This is a class action challenging the constitutionality of the
Airport and Airway Revenue Act of 1970, 84 Stat. 236 et seq.,
P.L. 91-258 (May 21, 1970). The Act imposes an 8 percent tax on
domestic flights and a $3.00 per ticket tax on international
flights originating in the United States. Included in the Act is
a requirement that the price of a ticket shall show the total
paid for the transportation without the taxes being separately
shown. Under the original Act, listing the tax separately was a
misdemeanor punishable by a fine of not more than $100.00.
In the second count of their complaint the plaintiffs challenge
certain rates approved by the Civil Aeronautics Board (C.A.B.) at
about the time of the promulgation of the Act. These new rates
allow the airlines to round up to the next highest dollar the
price of the transportation plus the 8 percent tax. Plaintiffs
complain that there was insufficient notice before approval of
the new rates and that the new rates are "unavoidably and
integrally intertwined" with the allegedly invalid tax.
The plaintiffs' prayer asks that the allegedly deceptive and
hidden taxes be declared unconstitutional, that the airlines be
enjoined from collecting the tax, and that the Secretary of the
Treasury be enjoined from distributing the fund thus far
collected. Plaintiffs also request that the new airline rates be
declared null and void and that funds improperly collected on the
basis of the invalid rates be returned to the public.
The action is currently before the court on the motion of the
United States to dismiss. The government's motion attacks several
distinct aspects of plaintiffs' claim. First it is asserted that
26 U.S.C. § 7421(a) bars the court from granting the injunctive
relief sought herein.
(a) Tax. — Except as provided in sections 6212(a) and
(c), 6213(a), and 7426(a) and (b)(1), no suit for
the purpose of restraining the assessment or
collection of any tax shall be maintained in any
court by any person, whether or not such person is
the person against whom such tax was assessed.
The Supreme Court in Enochs v. Williams Packing & Nav. Co.,
370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962) delineated the
purview of section 7421(a) by stating that a federal district
court could not enjoin the collection of a tax unless it could be
shown that under the most liberal view of the law and the facts
the tax was invalid and, in addition, the person seeking to
enjoin the tax could establish that he has no adequate remedy at
The court has scrutinized the materials presented in this cause
and has determined that under the Enoch test the court is
barred from granting injunctive relief in the instant suit. Under
the most liberal view of the law and the facts it is by no means
certain that the tax is invalid. That portion of the Airport and
Airway Revenue Act, upon which plaintiffs' claim of
unconstitutionality rests, has been amended; i.e. section 7275
has been changed so that the tax is no longer required to be
concealed. Public Law 91-680, 91st Congress, 2d Session, on
January 12, 1971. Given this amendment, and taking the most
liberal view of the law and facts, it is certainly possible that
the United States will be able to establish the validity of the
underlying tax. Further, even if the amendment had not been made,
under the severability clause of the Internal Revenue Code of
1954, 26 U.S.C. § 7852(a), the allegedly improper aspect of the
Airport and Airway Revenue Act could be struck down without
affecting the underlying tax. United States v. Jackson,
390 U.S. 570, 585, 88 S.Ct. 1209, 20 L.Ed.2d 138 (1968). In consonance
with the foregoing, then, this court finds that it is barred by
26 U.S.C. § 7421 from granting the injunctive relief requested in
The next point raised by the government is that the claim for
refund brought on behalf of the class is insufficient in that
only the named plaintiffs have filed individual claims for tax
refunds as required by 26 U.S.C. § 7422(a). The recent case of
Agron v. Illinois Bell Telephone Co., 319 F. Supp. 418 (N.D.Ill.
1970) has held that sec. 7422(a) requires that before suit for
refund can be filed in the federal court a claim must have been
duly filed with the Secretary and that this requirement applies
individually to all members of a class. The court concurs with
the holding in Agron and accordingly the claims of the class
for refund are stricken for failure to comply with
26 U.S.C. § 7422(a).
Next the government points out that the court has no
jurisdiction to enter declaratory judgment in a suit with respect
to federal taxes. 28 U.S.C. § 2201 provides as follows:
Creation of remedy. — In a case of actual
controversy within its jurisdiction, except with
respect to Federal taxes, any court of the United
States, upon the filing of an appropriate pleading,
may declare the rights and other legal relations of
any interested party seeking such a declaration,
whether or not further relief is or could be sought.
Any such declaration shall have the force and effect
of a final judgment or decree and shall be reviewable
as such. (Emphasis added.)
The court is persuaded, and the plaintiffs in their brief do not
really disagree, that declaratory judgment can not be had in this
action under 28 U.S.C. § 2201.
Next the government claims that David M. Kennedy, Secretary of
the Treasury, should be dismissed because this suit is basically
one for a tax refund and that as such only the sovereign and
not individual officers of government can be sued. The court
agrees with the government's general statement of law but the
facts of this case do not fit into the simple mold suggested by
the United States. The plaintiffs pray that the Secretary be
enjoined from distributing from the Airport and Airways Trust
Fund the monies collected via the allegedly unconstitutional tax.
In this circumstance the exception to the general rule barring
suits against individual government officers comes into play. The
Supreme Court in Larson v. Domestic and Foreign Corp.,
337 U.S. 682, 702, 69 S.Ct. 1457, 93 L.Ed. 1628 (1949) stated that suits
against officers of the sovereign can be maintained if the
officer is attempting to exercise powers that are
constitutionally void. In the instant case the government's
motion to dismiss the Secretary must be denied pending a further
determination of whether the powers sought to be exercised by the
Secretary are constitutionally denied to him.
Finally, the court finds that it is without jurisdiction to
adjudicate plaintiffs' claims against the C.A.B. as set out in
count two. Congress has decreed that the problems of rate making
are to be handled in the first instance by the C.A.B. and that
challenges to these rates are to be directed to the proper
appellate court and not to the United States District Court.
Plaintiffs maintain that this court can consider the air fare
rates because they are bound up with an alleged invalid tax. This
point is not well taken. Plaintiffs' argument can be made in the
context of the congressionally established procedure for the
review of airline rates.
In sum it is the order of this court that plaintiffs' prayer,
in so far as it seeks to enjoin the collection of the tax in
question, be stricken, that the class action aspects of this suit
be dismissed, that the C.A.B. be dismissed as a party, and that
the government's motion to dismiss David M. Kennedy, Secretary of
the Treasury, be denied.
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