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06/26/96 MIDLAND HOTEL CORPORATION v. DIRECTOR

June 26, 1996

MIDLAND HOTEL CORPORATION, INDIVIDUALLY AND ON BEHALF OF ALL PERSONS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
v.
DIRECTOR OF EMPLOYMENT SECURITY, LYNN Q. DOHERTY, AND ILLINOIS DEPARTMENT OF EMPLOYMENT SECURITY, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County. No. 89 CH 2474. Honorable Lester D. Foreman, Judge Presiding.

Released for Publication August 13, 1996.

The Honorable Justice Cerda delivered the opinion of the court: Greiman, J., Concurs. Tully, P.j., Dissenting.

The opinion of the court was delivered by: Cerda

JUSTICE CERDA delivered the opinion of the court:

This case involves the determination and assessment of Illinois unemployment insurance taxes on the Midland Hotel. It is an appeal from a section 2-619 dismissal (735 ILCS 2/619 (West 1992)) of an amended class action complaint by plaintiff, Midland Hotel, for declaratory judgment, injunctive relief, accounting, and damages.

In its amended complaint, Midland Hotel claimed that defendants, the Director of Employment Security and the Illinois Department of Employment Security (IDES), are engaged in an ongoing course of conduct that violates the Illinois Unemployment Insurance Act (820 ILCS 405/100 et seq. (West 1992))(Act), which is administered by IDES. The trial court dismissed Midland Hotel's complaint with prejudice on the basis that the complaint was an improper collateral attack on a final administrative review decision, which is the sole remedy available, and that Midland Hotel failed to exhaust its administrative remedies.

On appeal, Midland Hotel asserts that its complaint was dismissed erroneously on the basis of (1) res judicata and collateral estoppel; and (2) the exhaustion of administrative remedies doctrine. We affirm.

As an employer, Midland Hotel is required to pay contributions into a fund reserved solely for the payment of unemployment benefits due to a lack of job opportunities. 820 ILCS 405/1400 (West 1992). IDES has the duty of computing the rate employers must pay. 820 ILCS 405/1500 through 1510 (West 1992). That rate is calculated by dividing the unemployment insurance benefit wages paid to the employer's former employees ("benefit wages") by the total taxable wages reported by the employer ("wages on which"), multiplied by the State-experience factor, with a surcharge added when applicable. Northern Trust Co. v. Bernardi, 115 Ill. 2d 354, 357-58, 504 N.E.2d 89, 105 Ill. Dec. 220 (1987). After computing the rate, IDES informs the employer of its assigned rate on a yearly basis (820 ILCS 405/1509 (West 1992)), but can later revise those rates (820 ILCS 405/2200 (West 1992)). Contributions are due and payable on a quarterly basis. 820 ILCS 405/1400 (West 1992).

Midland Hotel claims that it has always paid its unemployment insurance tax promptly and fully in accordance with the rates IDES assigned. IDES does not contest that assertion. In 1986, IDES notified Midland Hotel, through a "Notice of Determination and Assessment and Demand for Payment," that it owed unpaid contributions due to IDES's retroactive revisions of Midland Hotel's contribution rate. The IDES claim was retroactive to 1981 and demanded interest computed at two percent per month also retroactive to 1981. In 1989, IDES made a final decision upholding its 1986 determination and assessment.

Midland filed a class action complaint for injunction, accounting and other relief on March 29, 1989, against the Director of Employment Security. The class was composed of employing units, employers, and taxpayers subject to contributions under the Unemployment Insurance Act. 820 ILCS 405/100-3200 (West 1992). The complaint alleged that the Director violated the Act when she made a final decision affirming her March 26, 1986, determination and assessment of unemployment insurance contributions from Midland from 1981 through 1985.

In the chancery complaint, Midland alleged that the Director violated (a) section 2207 of the Act when she issued the 1986 determination and assessment by the way she calculated interest owed on the contributions; (b) section 2207 of the Act by making claims for contributions that were time-barred; (c) the Act by the method in which she calculated the contributions claimed in the 1986 determination and assessment; and (d) section 2200 of the Act by the manner in which she provided notice of the 1986 determination and assessment.

On the same date that Midland filed its chancery complaint, it also filed a complaint requesting administrative review of the Director's final decision affirming her March 1986 determination and assessment. Midland alleged identical violations of the Act in the administrative review complaint as were alleged in the chancery complaint. A few months later, Midland filed an amended chancery complaint. The same violations of the Act were alleged. However, this time each count of the chancery complaint added a new paragraph which claimed that the Director's continuing violation of the Act "exceeds and has exceeded all authority and constitutes unlawful and unauthorized assertion of authority and jurisdiction."

In 1990 in the administrative review action, the circuit court entered an order stating the court having heard oral arguments, read the briefs and the record, ordered that the decision of the Director was affirmed as it was neither contrary to law nor against the manifest weight of the evidence. Midland filed a notice of appeal in the administrative review action, but later voluntarily dismissed its appeal. In 1994, the circuit court dismissed the chancery complaint on the basis that administrative review was Midland's sole remedy and because the chancery action (filed on the same day as the administrative review case) was an improper collateral attack against an administrative review decision. The dismissal was under section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 1992)).

In a section 2-619 motion to dismiss, only the legal sufficiency of the complaint is at issue. Hermitage Corp. v. Contractors Adjustment Co., 166 Ill. 2d 72, 85, 651 N.E.2d 1132, 209 Ill. Dec. 684 (1995); Kubian v. Alexian Bros. Medical Center, 272 Ill. App. 3d 246, 249, 651 N.E.2d 231, 209 Ill. Dec. 303 (1995). On appeal, the dismissal is considered de novo because the motion does not require the trial court to weigh facts or determine credibility. Kedzie & 103rd Currency Exchange, Inc. v. Hodge, 156 Ill. 2d 112, 116, 619 N.E.2d 732, 189 Ill. Dec. 31 (1993); Kubian, 272 Ill. App. 3d at 249, 651 N.E.2d 231. The court of review must decide whether dismissal was proper as a matter of law. Kedzie & 103rd Currency Exchange, Inc. 156 Ill. 2d at 117, 619 N.E.2d 732.

Initially, we determine that res judicata and collateral estoppel both apply to Midland Hotel's class action claims involving the quarters involved in ...


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