expression. As a result, an alderman's alleged power over payphone providers is only slightly more constitutionally troubling (as far as censorship is concerned) than a mayor's control over a soda machine vendor, if at all. We therefore conclude that the censorship risks alleged here do not justify permitting a facial challenge.
Plaintiffs also argue that the ordinances are facially invalid because the City is discriminating against public payphones in its efforts to combat criminal activity. In the process, the City is reducing the number of public payphones available and discriminating against the free speech rights of (1) people who need to communicate when walking about the city, (2) those who need to communicate while driving, and (3) people who are too poor to buy their own phones and instead rely on public payphones. This danger, however, has nothing to do with censorship, but merely with the First Amendment dangers inherent in limiting the quantum of payphones in the city. Because these allegations do not raise the danger of "chill," they likewise do not warrant resort to the extraordinary measure of a facial challenge. Accordingly, we grant the City's motion to dismiss Count I.
2. Count II - Equal Protection
At bottom, plaintiffs' equal protection argument runs something like this: in an effort to generate revenue, the City is (as a general matter) denying zoning exceptions to public payphone operators who would like to install and maintain phones on private property (from which the City will receive no income), while at the same time entering into franchise agreements with public payphone operators who seek to install payphones on the public way (from which the City will receive a portion of the proceeds). For example, the City is denying (and revoking) exceptions for payphones on private property while entering into franchise agreements on adjacent public property. Additionally, City officials are discriminating against plaintiffs by removing even their compliant phones on private property, leaving intact other noncompliant payphones (owned by companies that have entered into franchise agreements with the City) in the same location. According to plaintiffs, this conduct violates their equal protection rights.
In seeking to dismiss Count II, the City contends that plaintiffs have failed to allege that they are being discriminated against based on their membership in a particular group and that they have failed to allege denial of a right, privilege or immunity guaranteed by the Constitution. In fact, plaintiffs have failed to define the class to which they belong and the manner in which that class is being subject to discriminatory treatment. Plaintiffs' allegations that the City is discriminating against payphones located on private property in favor of payphones located on the public way misses the mark, since it is not the payphones that are bringing suit, but their owners. These owners, in turn, do not fall into neat groups of those who are maintaining payphones exclusively on private property and those who install payphones on the public way. Instead, it is clear from the complaint that many companies operate payphones on both public and private property.
However, giving the complaint a liberal, indeed a generous, reading, we can discern the outlines of a cognizable class with a more limited claim than that outlined (dimly) in plaintiffs' briefs. Plaintiffs have alleged that the City has removed phones owned by their operators that had either received exceptions or which were on appeal, while leaving intact illegal phones located on private property and owned by providers who also have franchises. Cmplt. at PP 46 & 47. Because plaintiffs have alleged that the City is purposefully discriminating against them in favor of other similarly situated payphone operators based on their refusal to enter into franchise agreements, they have stated an equal protection claim.
3. Count III - Due Process
Defendants seek to dismiss plaintiffs' substantive and procedural due process claims, arguing (1) that the ordinances are immune to substantive due process attack because they are rational on their face, (2) that plaintiffs' procedural due process challenge must fail because they have failed to identify a property interest, and (3) that no due process challenge lies because adequate state law remedies are available. We address these arguments in turn.
(a) Substantive Due Process
Plaintiffs assert that the twin ordinances violate their substantive due process rights because they have no deterrent effect on crime and are simply irrational.
See Coniston Corp. v. Village of Hoffman Estates, 844 F.2d 461, 467 (7th Cir. 1988) (to violate substantive due process, legislation must be arbitrary and irrational). In assailing plaintiffs' substantive due process claim, the City contends that its ordinances are obviously rational:
The ordinances seek to target "problem phones" based on community input and aldermanic recommendations. That some phones, due to local traffic and residential patterns and other social factors, are more problematic than others, and are therefore removed, demonstrates the narrow tailoring of the ordinance, not its irrationality.
Defendant's Memorandum in Support of Motion to Dismiss at 7-8. As is evident from the parties' arguments, this issue cannot be resolved on a motion to dismiss, but must be addressed on its merits. We therefore deny the City's motion to dismiss the substantive due process claims contained in Count III.
(b) Procedural Due Process
Plaintiffs claim that the Zoning Ordinance violates their due process rights because the Zoning Administrator can deny zoning exceptions without a hearing and in practice relies solely upon the recommendation of the affected alderman. The City attacks these claims on the grounds that plaintiffs have failed to allege a protectable property interest and that, in any event, adequate state law remedies are available to plaintiffs. We need not dwell on the former contention, since it is evident that the plaintiffs have a property interest in their right to enter into agreements to place payphones on private property and to maintain phones on those locations where they have in fact obtained such agreements.
As for the City's latter assertion, plaintiffs' ability to bring these claims in federal court does not turn upon the availability of adequate state law remedies. Here, plaintiffs challenge the legislation itself. See Zinermon v. Burch, 494 U.S. 113, 110 S. Ct. 975, 108 L. Ed. 2d 100 (1990). Under prevailing jurisprudence, the availability of an adequate post-deprivation remedy is only relevant if pre-deprivation process is unavailable or impracticable, such as in situations where the deprivation is the result of random, negligent, or unauthorized conduct. See e.g., Parratt v. Taylor, 451 U.S. 527, 68 L. Ed. 2d 420, 101 S. Ct. 1908 (1981). Plaintiffs allegations however, describe a scenario where the actions complained of are authorized by statute and additional pre-deprivation process would be possible.
Because plaintiffs' allegations contest the authorized procedure, the City's motion to dismiss these claims is denied.
The City's point is better taken, however, with respect to plaintiffs' allegations that the ordinances violate procedural due process because, in practice, (1) the Zoning Administrator and Director of Revenue have not abided by the procedures set forth in the Zoning Ordinance when evaluating exception applications and (2) the Zoning Administrator and Director of Revenue have removed payphones that were in compliance with the ordinances and/or payphones that had been granted exceptions or were under appeal. In short, plaintiffs allege that city officials have purposefully abrogated the statute. When an official behaves in a random and unauthorized manner during the course of established pre-deprivation procedures, as alleged here, such conduct may, or may not, fall within the rule of Parratt and warrant consideration of the available state remedies. Where the alleged violation is properly considered to be random or unauthorized, additional pre-deprivation procedure would be irrelevant, and courts should consider the availability of adequate post-deprivation remedies before permitting a due process claim to go forward. See, Easter House v. Felder, 910 F.2d 1387, 1398-1405 (7th Cir. 1990) (conduct of high-level officials during pre-deprivation process was random and unauthorized, thus falling within Parratt and warranting consideration of available state remedies), cert. denied, 498 U.S. 1067, 112 L. Ed. 2d 846, 111 S. Ct. 783 (1991). On the other hand, where the wrong is effectively authorized, then the pre-deprivation process is at issue and the court need not evaluate the post-deprivation options available to plaintiff. See Zinermon, 494 U.S. 113, 110 S. Ct. 975, 108 L. Ed. 2d 100 (consideration of post-deprivation remedies unnecessary because, although wrongful, conduct of high-level officials during pre-deprivation procedures was foreseeable and subject to further safeguards and could therefore not be considered "random" or "unauthorized" within the meaning of Parratt)
As alleged, the facts here are more similar to Zinermon than to Easter House. In both Zinermon and the case at hand, the official who allegedly behaved wrongfully was vested with the power to deprive the plaintiffs of the property at stake. As such, the charged deprivation was foreseeable, occurred at a predictable juncture, and could not be said to be "unauthorized." Moreover, additional procedural safeguards might have been employed by the government actor to prevent just the sort of deprivation alleged. We therefore conclude that, on the facts as alleged, the violations may well be found to be authorized. Accordingly, Zinermon governs and we need not consider the availability of post-deprivation remedies at this juncture. This portion of Count III therefore survives.
4. Count IV - Commerce Clause
The United States Constitution provides that "Congress shall have Power. . . to regulate Commerce with foreign Nations, and among the several States. . . ." U.S. CONST., Art. I, § 8, cl. 3. In addition, the Commerce Clause implicitly confines the states' power to burden interstate commerce. See, e.g., Oregon Waste Systems v. Despt. of Env. Quality, U.S. , 114 S. Ct. 1345, 1349, 128 L. Ed. 2d 13 (1994). Accordingly, the "dormant" Commerce Clause prohibits a state or local statute [that] regulates evenhandedly to effectuate a legitimate local public interest" if it imposes a burden on interstate commerce that is "clearly excessive in relation to the putative local benefits." Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S. Ct. 844, 25 L. Ed. 2d 174 (1970).
The City seeks to dismiss plaintiffs' Commerce Clause claim, arguing that "the few interstate calls that might have been placed on plaintiffs' phones had they not been removed will presumably be placed on other phones," and therefore the ordinances have virtually no effect on interstate commerce."
Defendants' Memorandum in Support of Motion to Dismiss at 13. Plaintiffs have alleged that roughly 5% of calls placed from their phones are interstate and that a still larger percentage affect interstate commerce. Whether these calls will simply be transferred to other phones, however, is a fact question not properly before us on this motion to dismiss. Moreover, because the remainder of the Pike analysis is fact-intensive, dismissal of this claim is otherwise inappropriate. We therefore deny the City's motion to dismiss Count IV.
5. Count V - Takings Clause
In Count V of their complaint, plaintiffs assert that the City's seizure of their payphones pursuant to unconstitutional ordinances constitute unlawful takings under the Fifth Amendment, which provides that ". . . nor shall private property be taken for public use, without just compensation." U.S. CONST. amend. V. The City contends that plaintiffs have failed to state a claim, since the City is obviously empowered to remove property which violates local ordinances and, more importantly, the City gave plaintiffs notice of its intention to remove the unauthorized phones, providing them with an opportunity avoid seizure. The City thus argues that its actions no more constitute unlawful takings than do seizures of cars parked in tow zones. Finally, the City maintains that, because it is simply storing the seized payphones in a warehouse, there has been no taking for public use, as required for a claim to fall within the ambit of the Takings Clause.
Although the City's arguments largely miss the point, they are understandable in light of the plaintiffs' inadequate pleading. In their complaint, plaintiffs neglect to articulate what property has been "taken" -- whether the phones themselves or the plaintiffs' interest in placing their phones on the private property locations at issue. Likewise, plaintiffs fail to identify the legal theory under which they believe they can prevail -- whether this is a physical or regulatory taking, and, if the latter, whether the ordinances should be analyzed under the Supreme Court's zoning, licensing, or other, rubric. While we are not inclined to plead their case for them, it is clear from the totality of the complaint that plaintiffs may be able to present some set of facts under which they could succeed under the takings clause. Indeed, "[a] zoning law effects a taking if (1) it does not substantially advance a legitimate governmental interest; or (2) it denies an owner economically viable use of his land." Outdoor Systems, Inc. v. City of Mesa, 997 F.2d 604 (9th Cir. 1993) (citing Agins v. City of Tiburon, 447 U.S. 255, 260, 100 S. Ct. 2138, 2141, 65 L. Ed. 2d 106 (1980)). Accordingly, despite plaintiffs' impressionistic pleading, and notwithstanding the obviously uphill battle they will have to wage in order to establish a taking under any legal theory, we deny the City's motion to dismiss Count V.
6. Count VI - Illegal Taxation
The Illinois Constitution provides that home rule units, like Chicago, "shall only have the power that the General Assembly may provide by law. . . to license for revenue or impose taxes upon or measured by income or earnings or upon occupations." Ill. CONST. Art. 7, § 6(e). The General Assembly, in turn, has passed both the Municipal Telecommunications Excise tax, 65 ILCS 5/8-11-17, and the Municipal Telecommunications Carrier tax, 65 ILCS 5/8-11-2, generally limiting municipalities to taxing telecommunications carriers at a rate of 5% of gross receipts or gross charges received within city limits. In Count VI, plaintiffs allege that the Franchise Ordinance violates these acts because it has required franchisees to pay far more than 5% of their revenues to the City.
Although the City maintains that the Franchise Ordinance does not constitute a tax, it argues that if the Ordinance is a tax, as plaintiffs implicitly allege, then the Tax Injunction Act, 28 U.S.C. § 1341, precludes us from exercising jurisdiction over Count VI. The Tax Injunction Act (the "Act") provides that "district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such state." Id. Because the plaintiffs clearly seek to enjoin the application of the Franchise Ordinance, the only question is whether the legislation constitutes a tax.
It is well settled that "federal law controls as to the definition of what is a tax to which the Tax Injunction Act applies." Diginet, Inc. v. Western Union ATS, 845 F. Supp. 1237, 1240 (N.D. Ill. 1994). Notwithstanding the City's position, we conclude that the Franchise Ordinance constitutes a tax.
As written, one of the Franchise Ordinance's seven stated purposes is "to generate revenue for the City." Title 10-28-265(b)(7). Moreover, plaintiffs allege that "pursuant to the Franchise Ordinance and the Franchise Agreement drafted by the City, no payphone provider may operate public payphones on the public way unless the payphone provider pays the City a commission based on the gross revenue of the intrastate and interstate calls made from any pay telephone placed on the public way." Cmplt. at P 41.
It is axiomatic that "[a] characteristic of a tax is that it is imposed for revenue-raising purposes." Id. Moreover, courts have held that franchise fees based on a percentage of revenues constitute taxes. See, e.g., Diginet, Inc. v. Western Union ATS, Inc., 958 F.2d 1388, 1399 (7th Cir. 1992) ("Diginet II") ("if [a franchise fee] is calculated not just to recover a cost imposed on the municipality or its residents but to generate revenues that the municipality can use to offset unrelated costs or confer unrelated benefits, it is a tax, whatever its nominal designation," and thus the franchise fee at issue, which charged a percentage of revenues, was a tax.); Keleher v. New England Telephone & Telegraph Co., 947 F.2d 547, 548-49 (2d Cir. 1991) (charge of 2 1/2% of gross revenues of any utility company using and occupying city streets equalled a tax); Yakima Valley Cablevision, Inc. v. F.C.C., 254 U.S. App. D.C. 28, 794 F.2d 737, 740-41, 744 & n. 24 (D.C. Cir. 1986) (cable franchise fees of 3-5% of gross revenues constituted a tax); Robinson Protective Alarm Co. v. City of Philadelphia, 581 F.2d 371, 372 (3d Cir. 1978) (charge of 5% of gross earnings for central alarm station companies to use underground wires to transmit their signals amounted to tax). Here, there is no dispute that the City seeks to generate revenue by means of the Franchise Ordinance. (Indeed, this allegation is central to plaintiffs' equal protection claim.) Additionally, plaintiffs allege that the City routinely receives franchise fees of roughly 33% of payphone providers' revenues -- an amount obviously in excess of the money needed to recover regulatory costs. Accordingly, on the facts as pleaded, we resolve that the Franchise Ordinance constitutes a tax. See Diginet, 845 F. Supp. 1237 (faced with similar facts, court found franchise fee to be tax and held that it lacked jurisdiction). That said, we lack jurisdiction to consider Count VI and it is dismissed.
7. Count VII -§ 1983
On the assumption that Counts I through V would be dismissed, the City sought to dismiss plaintiffs' § 1983 claim on the theory that it could not survive without a constitutional violation. Because several of plaintiffs' constitutional claims are going forward, Count VII likewise endures.
B. Preliminary Injunction
To prevail on a motion for a preliminary injunction, a plaintiff must demonstrate that (1) he has no adequate remedy at law, (2) he will suffer irreparable harm without the injunction, (3) he is likely to succeed on the merits, (4) the balance of harms to the parties weighs in his favor, and (5) the public interest will be better served by having the injunction issue. See Roland Machinery Co. v. Dresser Industries, Inc., 749 F.2d 380, 386-388 (7th Cir. 1984). In seeking a preliminary injunction, plaintiffs rely primarily on their First Amendment and illegal taxation claims. Consequently, our dismissal of these claims substantially weakens plaintiffs' request for immediate injunctive relief. This reality, coupled with the fact that plaintiffs face significant hurdles in prevailing on their remaining constitutional claims, persuades us to deny plaintiffs' motion for a preliminary injunction. See U.S. Rural Electric Convenience Cooperative, 922 F.2d 429, 432 (7th Cir. 1991) (plaintiff must satisfy every element in order to receive a preliminary injunction).
For the foregoing reasons we deny plaintiffs' motion for a preliminary injunction and grant in part and deny in part defendants' motion to dismiss. It is so ordered.
MARVIN E. ASPEN
United States District Judge