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Village of Arlington Heights v. Regional Transportation Authority

decided: July 9, 1981.

VILLAGE OF ARLINGTON HEIGHTS, ETC., ET AL., PLAINTIFFS-APPELLANTS,
v.
REGIONAL TRANSPORTATION AUTHORITY, ETC., ET AL., DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 79 C 4606 -- Prentice H. Marshall, Judge .

Before Swygert,*fn* Senior Circuit Judge, Fairchild,*fn** Circuit Judge, and Jameson, Senior District Judge.**fn**

Author: Swygert

This case concerns a constitutional attack upon an Illinois statute giving a public transportation authority power to levy unequal taxes among the geographic regions within its jurisdiction. The district court dismissed the action for lack of jurisdiction. We affirm.

I

Plaintiffs, the Villages of Arlington Heights, Northfield, and Palatine, the City of Evanston, and nine individuals, instituted this action against the Regional Transportation Authority (RTA) and its directors and the Illinois Department of Revenue and its director challenging the constitutionality of certain tax ordinances enacted by the RTA and the statute authorizing the enactment of those ordinances. The plaintiff-municipalities are all municipal corporations located in Cook County, Illinois within the territorial boundaries of the RTA. The individual plaintiffs are residents and taxpayers of Arlington Heights. The RTA, a corporation created by state statute, is responsible for providing public transportation within its geographic boundaries, which include the Illinois counties of Cook, DuPage, Kane, Lake, McHenry, and Will. The Illinois Department of Revenue is responsible for collecting and disbursing RTA taxes.

The statute in question, Ill.Rev.Stat.1979, Ch. 1112/3, § 704.03, as amended, authorized the RTA to impose a "Retailers' Occupation Tax upon all persons engaged in the business of selling tangible personal property at retail in the metropolitan region at a rate not to exceed 1% of the gross receipts from such sales made in the course of such business within the County of Cook and 1/4% of the gross receipts from such sales made in the course of such business within the Counties of DuPage, Kane, Lake, McHenry and Will."*fn1 The statute further empowered the RTA to impose a Service Occupation Tax on the sales of services and a Use Tax, both at the same rate as the Retailers' Occupation Tax. On September 24, 1979, the Board of Directors of the RTA voted to impose the Retailers' Occupation, Service Occupation, and Use Taxes as authorized by the statute.

Plaintiffs instituted this action on November 2, 1979, alleging that the state statute and the RTA ordinance violated the equal protection and due process clauses of the Fourteenth Amendment, the Civil Rights Act of 1871, 42 U.S.C. § 1983, and the Illinois Constitution; they sought injunctive and declaratory relief. The complaint alleged that the transportation services available in DuPage, Kane, Lake, McHenry, and Will counties are the same as those available to plaintiffs within Cook County but outside the City of Chicago, yet plaintiffs had to pay a sales tax 3/4% higher than the tax paid by others similarly situated in the surrounding counties. The district court held that as to the individual plaintiffs, 28 U.S.C. § 1341*fn2 prevented the federal court from entertaining jurisdiction over the action because "plaintiffs as the ultimate payers of the taxes challenged have a plain, speedy and efficient remedy in the state courts of Illinois." Regarding the plaintiff-municipalities, the court concluded that it had no jurisdiction over their federal claims because, as creatures of the state, they could not challenge the validity of a state statute under the Fourteenth Amendment. The Village of Arlington Heights, the City of Evanston, and the individual plaintiffs appeal.

II

On appeal, the individual plaintiffs contend that section 1341 does not bar this action because they have no state court remedy; according to plaintiffs, Illinois law prohibits an action challenging a tax by a third party who does not directly pay the tax at issue.*fn3 We cannot agree with plaintiffs' interpretation of the relevant Illinois cases.

In Getto v. City of Chicago, 77 Ill.2d 346, 33 Ill.Dec. 155, 396 N.E.2d 544 (1979), plaintiff, a consumer, filed a class action alleging that the City of Chicago and Illinois Bell Telephone Company had collected taxes in excess of the amount they were statutorily authorized to collect. The defendants argued that plaintiff lacked standing because the tax was passed on by Bell to its customers in the form of additional charges.*fn4 The Illinois Supreme Court disagreed: "Clearly Bell's subscribers, who have fully borne the burden of the city's message tax, have "a personal claim, status or right which is capable of being affected' ... and thus have standing to bring this action." Id. at 355-56, 33 Ill.Dec. at 159, 396 N.E.2d at 548 (quoting Underground Contractors Ass'n v. City of Chicago, 66 Ill.2d 371, 376, 5 Ill.Dec. 827, 830, 362 N.E.2d 298, 301 (1977)). Accord, Commonwealth Edison Co. v. Community Unit School District, 44 Ill.App.3d 665, 670, 3 Ill.Dec. 290, 293-94, 358 N.E.2d 688, 691-92 (1976) ("it is not necessary that a party must be the initial taxpayer in order to challenge the constitutionality of a tax"); Adler v. Illinois Commerce Commission, 52 Ill.App.3d 167, 172, 10 Ill.Dec. 14, 18, 367 N.E.2d 402, 406 (1977).*fn5 See also Crane Construction Co. v. Symons Clamp & Mfg. Co., 25 Ill.2d 521, 185 N.E.2d 139 (1962).

It is clear in the case at bar that the individual plaintiffs, who ultimately bear the burden of the tax, have a real interest in the case and are adversely affected by the imposition of the sales tax. Under Illinois law, they would have standing to challenge the validity of the tax; thus, plaintiffs have a "plain, speedy and efficient remedy" in the Illinois courts. We therefore find that the district court correctly held that this action is barred by section 1341.

III

The district court held that although the plaintiff-municipalities have no state court remedy, they cannot challenge the validity of a state statute under the Fourteenth Amendment because they are "creatures and instrumentalities of the state." The court relied on Williams v. Mayor & City Council of Baltimore, 289 U.S. 36, 53 S. Ct. 431, 77 L. Ed. 1015 (1933), and City of Newark v. State of New Jersey, 262 U.S. 192, 43 S. Ct. 539, 67 L. Ed. 943 (1923). In City of Newark, the Supreme Court held that "(a) City cannot invoke the protection of the Fourteenth Amendment against the State." Id. at 196, 43 S. Ct. at 540. That principle is well established in the federal courts. See City of New York v. Richardson, 473 F.2d 923, 929 (2d Cir.), cert. denied, 412 U.S. 950, 93 S. Ct. 3012, 37 L. Ed. 2d 1002 (1973) ("Political subdivisions of a state may not challenge the validity of a state statute under the Fourteenth Amendment"); Lindsay v. Wyman, 372 F. Supp. 1360, 1366 (S.D.N.Y.), aff'd without opinion sub nom. Beame v. Lavine, 419 U.S. 806, 95 S. Ct. 21, 42 L. Ed. 2d 35 (1974); City of South Lake Tahoe v. California Tahoe Regional Planning Agency, 625 F.2d 231, 233 (9th Cir.), cert. denied, 449 U.S. 1039, 101 S. Ct. 619, 66 L. Ed. 2d 502 (1980); Appling County v. Municipal Electric Authority of Georgia, 621 F.2d 1301, 1308-09 (5th Cir.), cert. denied, 449 U.S. 1015, 101 S. Ct. 574, 66 L. Ed. 2d 474 (1980); City of Safety Harbor v. Birchfield, 529 F.2d 1251, 1254-55 (5th Cir. 1976).*fn6

The municipalities contend that under the home-rule provisions of the 1970 Illinois Constitution they are no longer creatures of the state legislature but derive their powers directly from the Constitution; therefore, they reason, the decisions holding that municipalities could not challenge the acts of their creator are not applicable. The ...


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