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Getto v. City of Chicago





Appeal from the Circuit Court of Cook County, the Hon. Donald J. O'Brien, Judge, presiding.


Rehearing denied October 19, 1981.

This case presents the second interlocutory appeal filed by the Illinois Bell Telephone Company (Bell) and the city of Chicago arising out of a class action suit brought against both parties in July of 1977 by Charles A. Getto. In this suit, filed on behalf of Getto and all persons similarly situated, the plaintiff challenged the method employed by the defendants in calculating the city's municipal message tax. This ordinance imposed a tax "upon all persons engaged in the business of transmitting messages by means of electricity at the rate of five per cent of the gross receipts from such business" originating within the corporate boundaries of the city of Chicago. In calculating the message tax, the defendants interpreted the term "gross receipts," upon which the tax was based, to include the total amount of income received through customer billing and other customer sources as well as the 5% message tax on these receipts.

This manner of taxation, it was argued, resulted in an illegal "tax on a tax." The burden of the tax was then passed on to Bell's customers pursuant to section 36(a) of the Public Utilities Act (Ill. Rev. Stat. 1977, ch. 111 2/3, par. 36(a)), which permits utilities subject to a municipal message tax to collect, as an additional charge from their customers, an amount equal to the tax paid or any part of the tax. This section also allows the utility to impose an additional service charge of 3% of the message tax on each subscriber to cover costs of accounting.

On December 19, 1978, the circuit court of Cook County held that the plaintiff, "for himself and on behalf of all other persons similarly situated," had standing to challenge the validity of the city's message tax; that the court and not the Illinois Commerce Commission had jurisdiction over the parties and subject matter of the case; and that the defendants' interpretation of "gross receipts" resulted in an "additional charge to Bell's customers [which was] unauthorized, illegal, irrational, unreasonably burdensome and oppressive to the plaintiff and the class he represents." Based on this the court allowed the plaintiff to maintain a class action. The court also entered a preliminary injunction ordering Bell to "set aside and segregate" that portion of the message tax receipts which exceeded the authorized 5% rate, as well as that portion of the accounting charge which had been erroneously imposed. As part of its order the court directed that any amount which should erroneously be collected contrary to the injunction should be deposited in a special protest fund to be administered and maintained by the court.

The defendants then filed their first interlocutory appeal in the appellate court under Rule 307(a) (73 Ill.2d R. 307(a)), and this court granted direct appeal here under Rule 302(b) (73 Ill.2d R. 302(b)). In Getto v. City of Chicago (1979), 77 Ill.2d 346 (Getto I), this court held that since the actual burden of the message tax was borne by Bell's customers, the plaintiff class had standing to bring suit; that considering the limits on the Illinois Commerce Commission's statutory authority to provide an adequate remedy, the plaintiff was not required to exhaust his administrative remedies; that the circuit court and not the Commission had jurisdiction over the dispute; and finally that the defendants' construing the term "gross receipts" to include the municipal message tax was "erroneous." The portion of the order of the circuit court appealed from was affirmed, and the cause was remanded for further proceedings.

Upon remandment to the circuit court, the plaintiff moved for and was given leave to join 105 additional municipalities and four other telephone companies as parties defendant. The plaintiff also filed six motions with the court requesting that the preliminary injunction issued on December 19, 1978, be made permanent; that the court appoint a trustee to take custody and control of the special protest fund; that a new definition of the class members in the suit, tendered by the plaintiff, be certified by the court; that the city of Chicago and Bell comply with all pending discovery requests; that the court appoint an accounting firm to conduct an audit of all message tax returns filed by Bell with the city since December 1, 1955, which was when the message tax ordinance was enacted; and that the court grant whatever further relief might be appropriate.

Both Bell and the city filed objections to these motions. The plaintiff later withdrew his motion seeking a redefinition and certification of the class and instead maintained that the class as certified by the court in its December 19 order was adequate. Bell filed an objection to this certification of the class.

On February 13, 1980, the circuit court ordered that the defendants be permanently enjoined from collecting that portion of the message tax in excess of the authorized rate; that the class be in effect recertified, thereby overruling Bell's objection; and that all parties comply with pending discovery orders. The court also appointed a trustee and an attorney for the trustee in order to administer the special protest fund. Bell was ordered to turn over to the trustee all overcharges collected under the city's message tax after July 18, 1967, that had not been previously deposited by the city with the trustee, including Bell's excess collection charges for accounting costs. This order adhered to the definition of the plaintiff class, which included all customers of Bell residing in Chicago and making utility payments since July 18, 1967. The court reserved ruling with respect to the appointment of an accounting firm for the purpose of conducting an audit and also with respect to the certification of subclasses involving the 105 municipalities and four other telephone companies joined as parties defendant. Upon denial of Bell's motion to modify this order, both Bell and the city filed notices of interlocutory appeal (73 Ill.2d R. 307(a)). Subsequent to these filings the plaintiff and both defendants filed motions for direct appeal to this court which we granted. (73 Ill.2d R. 302(b).) Briefs amici curiae have been filed in behalf of several utilities and municipalities.

The defendants first argue that the court's order allowing what they claim is "retroactive" relief from July 18, 1967, should be reversed. This argument is premised upon the size of the class as defined and certified by the court in its December 19 order and later in its order of February 13. The plaintiff class in these orders was defined as "[a]ll customers of Illinois Bell Telephone Company located or residing, in the City of Chicago, who during the period of ten years next before filing of the complaint herein on July 18, 1977, have paid to Bell a charge for the City's message tax in excess of the 5% rate authorized by law and who have accordingly been overcharged in the collection charge made by Bell during said period."

The defendants argue that between December of 1955 and July of 1977, when Getto filed suit, all utility payments to Bell were made without protest and that thereby any recovery is barred under what is described as the voluntary-payment doctrine. As a result, it is contended that any recovery should be limited to the excess taxes paid by the plaintiff after the class action was filed in 1977.

The plaintiff, in response to this, first asserts that the issue of class certification was decided in Getto I and therefore is res judicata. In the alternative, he contends that the voluntary-payment doctrine does not apply since he did not have knowledge of all the necessary facts to support a finding that these prior payments were voluntary. Further he says that such payments were made under compulsion because of the threat of termination of his phone service, which, he argues, would also prevent application of the voluntary-tax-payment doctrine.

We first consider the plaintiff's claim that the question pertaining to the period for the recovery of refunds, that is, the period between July 18, 1967, and July 18, 1977, is res judicata. A review of the arguments made in Getto I and the opinion show that while the maintenance of the suit as a class action was contested in the trial court, that issue was neither raised nor decided on the appeal. Contrary to the plaintiff's position, that part of Getto I which held that the class had standing to file suit did not also affirm the trial court's certification of the class. The interlocutory appeal filed by the defendants challenged only the issuance of the preliminary injunction, and involved the questions of standing and the trial court's authority to exercise jurisdiction in the dispute. In discussing these issues as well as whether the defendants had correctly defined the term "gross receipts," this court did not have to consider the question of whether the class was properly defined and certified.

We are not convinced by the plaintiff's argument that this issue should have been raised on appeal in Getto I and that by their failure to do so the defendants are barred from raising the question of retroactive claims for refunds in this appeal. The preliminary injunction issued by the court granted prospective relief only and did not require, as did the permanent injunction issued after Getto I, that excess payments since July 18, 1967, be deposited by Bell in the protest fund. Since the preliminary injunction only prohibited, prospectively, excessive collections by the defendants and did not involve the right to file the retroactive claims as described, the defendants were, of course, not obligated to raise that question in their first interlocutory appeal under Rule 307(a).

Too, the defendants were not entitled to challenge the circuit court's certification of the class when they filed their interlocutory appeal in Getto I. Our procedural rules affecting class action suits and interlocutory appeals are patterned on comparable Federal rules. Section 57.3 of the Civil Practice Act (Ill. Rev. Stat. 1979, ch. 110, par. 57.3), which closely follows Rule 23(c)(1) of the Federal Rules of Civil Procedure, provides that "[a]s soon as practicable after the commencement of an action brought as a class action, the court shall determine by order whether it may be maintained and describe those whom the court finds to be members of the class. * * *" This section also states, however, that "[t]his order may be conditional and may be amended before a decision on the merits." Federal courts>, in interpreting procedural rules for class action and interlocutory appeals, have held that a party is not entitled to take an interlocutory appeal from a trial court order defining and certifying the class or from a determination as to whether the suit may or may not proceed as a class aciton since either order is always subject to ...

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