Appeal from the Circuit Court of the 12th Judicial Circuit, Will County, Illinois Honorable Barbara Petrungaro, Judge, Presiding. No. 09-CH-112
The opinion of the court was delivered by: Presiding Justice Carter
PRESIDING JUSTICE CARTER delivered the judgment of the court, with opinion. Justice Lytton and Schmidt concurred in the judgment, with opinion.
Plaintiffs, four state-licensed riverboat casinos (the casinos), brought suit against the State Treasurer and the Illinois Racing Board (collectively referred to as the state defendants) challenging the constitutionality of Public Act 95-1008 (Pub. Act 95-1008, §10 (eff. Dec. 15, 2008)), which required the casinos to pay 3% of their adjusted gross receipts (AGR) into a fund to be distributed to the state's horse racing tracks. Four owners of horse racing tracks in this state and the Illinois Harness Horsemen's Association (collectively referred to as the racetracks) were allowed to intervene in the suit. The state defendants and the racetracks filed motions to dismiss the complaint pursuant to sections 2-615 and 2-619 of the Code of Civil Procedure (735 ILCS 5/2-615, 2-619 (West 2008)). The trial court granted the motions to dismiss. The casinos appeal.
In December of 2008, the governor signed Public Act 95-1008 (the 2008 Act) into law. The Act required that the riverboat casinos of the state pay 3% of their AGR into the Horse Racing Equity Trust Fund on a daily basis for a three-year period to be distributed to the horse racing tracks in the state for various specified purposes. Pub. Act 95-1008, §10 (eff. Dec. 15, 2008) (amending 230 ILCS 10/7 (West 2006)). Casinos with 2004 AGR under $200 million were exempt from the tax. Pub. Act 95-1008, §10 (eff. Dec. 15, 2008) (amending 230 ILCS 10/7 (West 2006)). In passing the Act, the legislature found that riverboat gambling had damaged the horse racing industry in the state by luring away gambling dollars and that the 3% tax was necessary to reverse the damage. See Pub. Act 95-1008, §1 (eff. Dec. 15, 2008). Of the nine riverboat casinos in the state, only four had AGR in excess of $200 million in 2004 or in 2007. Those casinos, the plaintiffs in the present case, were all located in the upper portion of the state. The remaining five riverboat casinos, which were located downstate, did not have AGR in excess of $200 million in 2004 or in 2007.
In January of 2009, the casinos filed a complaint for declaratory and injunctive relief, challenging the constitutionality of the 2008 Act. The casinos sought a declaration that the Act was unconstitutional and a permanent injunction against the imposition or collection of the 3% tax. The casinos paid the tax under protest pursuant to the State Officers and Employees Money Disposition Act (30 ILCS 230/2(a) (West 2008)). The state defendants were named as defendants in the complaint and the racetracks were allowed to intervene.
The initial complaint in this case was later amended. The amended complaint (hereinafter referred to as the complaint) alleged, among other things, that the 2008 Act violated the uniformity clause of the Illinois Constitution (Ill. Const. 1970, art. IX, §2) in that there was no real and substantial difference between the casinos that were required to pay the 3% tax and those that were not. The casinos alleged further that the classification could not be based upon neutral principles, such as the ability to pay the tax, because the legislature used the 2004 AGR to create the classification for the 2008 Act, despite the legislature's knowledge that circumstances had significantly changed and that the casinos were facing a large decline in AGR due to a smoking ban and poor economic conditions. The complaint noted that the 2008 Act was the second time that the legislature imposed a 3% tax on the casinos to subsidize the racetracks. In 2006, the legislature passed Public Act 94-804 (the 2006 Act), which imposed a 3% tax on the riverboat casinos of the state, whose 2004 AGR was over $200 million, to be paid on a daily basis for a two-year period. Pub. Act 94-804, §1(5) (eff. May 26, 2006) (amending 230 ILCS 10/7 (West 2004)). The 2008 Act was essentially identical to the 2006 Act. The casinos previously challenged the constitutionality of the 2006 Act and alleged in that case, among other things, that the 2006 Act violated the uniformity clause. The trial court found that the 2006 Act was unconstitutional. The supreme court reversed the trial court, however, and found that the use of 2004 AGR was reasonable and that the 2006 Act did not violate the uniformity clause. See Empress Casino Joliet Corp. v. Giannoulias, 231 Ill. 2d 62, 78-80 (2008) (Empress I).
The state defendants and the racetracks filed motions to dismiss the complaint pursuant to sections 2-615 and 2-619, alleging collectively that the casinos were barred by the holding in Empress I from raising the same uniformity-clause challenge to the 2008 Act and that there was no legal merit to the casinos' uniformity-clause challenge. The trial court granted the motions to dismiss on the basis of collateral estoppel. It was not quite clear from the trial court's order, however, whether the trial court granted dismissal pursuant to section 2-615, section 2-619, or both. The casinos appealed.
On appeal, the casinos argue that the trial court erred in granting the motions to dismiss their complaint for declaratory and injunctive relief. The casinos assert that their complaint was sufficient to establish that the tax classification contained in the Act is arbitrary and unreasonable and that it violates the uniformity clause of the Illinois Constitution. The state defendants and the racetracks collectively argue that the trial court's ruling was proper and should be affirmed, either on the merits or on the basis of collateral estoppel.*fn1
A motion to dismiss filed pursuant to either section 2-615 or section 2-619 of the Code of Civil Procedure admits all well-pled facts in the complaint and the reasonable inferences to be drawn from those facts. In re Chicago Flood Litigation, 176 Ill. 2d 179, 184 (1997). When ruling upon either type of motion to dismiss, the trial court must interpret all pleadings and supporting documents in the light most favorable to the nonmoving party. Chicago Flood Litigation, 176 Ill. 2d at 189. A trial court's ruling granting either type of motion to dismiss is subject to de novo review on appeal (Chicago Flood Litigation, 176 Ill. 2d at 189) and may be affirmed on any basis supported by the record (Material Service Corp. v. Department of Revenue, 98 Ill. 2d 382, 387 (1983)).
The constitutionality of a statute is also subject to de novo review on appeal. Empress I, 231 Ill. 2d at 69. " 'Statutes bear a presumption of constitutionality, and broad latitude is afforded to legislative classifications for taxing purposes.' " Empress I, 231 Ill. 2d at 69 (quoting Allegro Services, Ltd. v. Metropolitan Pier & Exposition Authority, 172 Ill. 2d 243, 250 (1996)). A party challenging a nonproperty tax classification has the burden to rebut the presumption of constitutionality and to clearly establish that the statute is unconstitutional by showing that the statute is arbitrary or unreasonable. Empress I, ...