Iwan Ries & Co. v. City of Chi.

• Decision Date: 20 December 2018
• Docket Number: No. 1-17-0875,1-17-0875
• Parties: IWAN RIES & CO., an Illinois Corporation; Cigar Association of America, Inc., a New York Corporation; Illinois Association of Wholesale Distributors, an Illinois Corporation; Illinois Retail Merchants Association, an Illinois Corporation; International Premium Cigar and Pipe Retailers Association, a New York Corporation; National Association of Tobacco Outlets, Inc., a Minnesota Corporation; and Arangold Corporation, d/b/a Arango Cigar Co., an Illinois Corporation, Plaintiffs-Appellees, v. The CITY OF CHICAGO and Erin Keane, in Her Capacity as the Comptroller of the Department of Finance Within the City of Chicago, Illinois, Defendants-Appellants.
• Court: United States Appellate Court of Illinois

2018 IL App (1st) 170875

123 N.E.3d 508

428 Ill.Dec. 779

IWAN RIES & CO., an Illinois Corporation; Cigar Association of America, Inc., a New York Corporation; Illinois Association of Wholesale Distributors, an Illinois Corporation; Illinois Retail Merchants Association, an Illinois Corporation; International Premium Cigar and Pipe Retailers Association, a New York Corporation; National Association of Tobacco Outlets, Inc., a Minnesota Corporation; and Arangold Corporation, d/b/a Arango Cigar Co., an Illinois Corporation, Plaintiffs-Appellees,

v.The CITY OF CHICAGO and Erin Keane, in Her Capacity as the Comptroller of the Department of Finance Within the City of Chicago, Illinois, Defendants-Appellants.

No. 1-17-0875

Appellate Court of Illinois, First District, FOURTH DIVISION.

December 20, 2018

Edward N. Siskel, Corporation Counsel, of Chicago (Benna Ruth Solomon, Myriam Zreczny Kasper, and Irina Y. Dmitrieva, Assistant Corporation Counsel, of counsel), for appellants.

Stanley R. Kaminski, Amy E. McCracken, and Elinor H. Murárová, of Duane Morris LLP, of Chicago, for appellees.

JUSTICE REYES delivered the judgment of the court, with opinion.

¶ 1 The instant appeal arises from the circuit court's grant of partial summary judgment in favor of plaintiffs, Iwan Ries & Co.; Cigar Association of America, Inc.; Illinois Association of Wholesale Distributors; Illinois Retail Merchants Association; International Premium Cigar and Pipe Retailers Association; National Association of Tobacco Outlets, Inc.; and Arangold Corporation d/b/a Arango Cigar Co., which operated to strike down the City of Chicago Other Tobacco Products Tax Ordinance (ordinance) (Chicago Municipal Code § 3-49 (added Mar. 16, 2016) ). The circuit court found that the City of Chicago's home rule authority to enact the ordinance was preempted by section 8-11-6a(2) of the Illinois Municipal Code (Municipal Code) ( 65 ILCS 5/8-11-6a(2) (West 2016) ). Defendants, the City of Chicago and Erin Keane in her capacity as the Comptroller of the Department of Finance (collectively the City), appeal, and for the reasons that follow, we reverse the judgment of the circuit court.

¶ 2 BACKGROUND

¶ 3 The center of the dispute in this matter is the ordinance enacted by the Chicago City Council on March 16, 2016, which created flat taxes on units of non-cigarette tobacco products including smoking tobacco, smokeless tobacco, pipe tobacco, little cigars, and large cigars sold and used within Chicago. Chicago Municipal Code § 3-49-30 (added Mar. 16, 2016).

¶ 4 Plaintiffs filed a verified complaint for declaratory judgment and injunctive relief on May 26, 2016, requesting the circuit court declare the ordinance unconstitutional pursuant to article VII, section 6(g), of the Illinois Constitution and to permanently enjoin its enforcement. Ill. Const. 1970, art. VII, § 6 (g). Plaintiffs maintained that the City's home rule power to tax non-cigarette tobacco products was preempted by section 8-11-6a(2) of the Municipal Code ( 65 ILCS 5/8-11-6a(2) (West 2016) ), which provides that "a home rule municipality that has not imposed a tax based on the number of units of cigarettes or tobacco products before July 1, 1993, shall not impose such a tax after that date." Plaintiffs alleged that the City could not impose this new tax on non-cigarette products because it had previously taxed only cigarettes (not non-cigarette products) before July 1, 1993.

¶ 5 Subsequently, plaintiffs filed a three-count amended complaint for declaratory and injunctive relief: count I sought a declaratory judgment that the ordinance was unauthorized because it was preempted by section 8-11-6a(2) of the Municipal Code; count II sought a permanent injunction; and count III sought a declaratory judgment and permanent injunction as to other regulatory provisions not at issue in this appeal that imposed price floors for non-cigarette tobacco products, prohibited the use of coupons, and imposed minimum packaging requirements for certain tobacco products.

¶ 6 Thereafter, the parties filed cross-motions for partial summary judgment on counts I and II of the amended complaint, addressing the sole issue of whether section 8-11-6a(2) of the Municipal Code preempts the City's home rule authority to impose the ordinance. The parties were in agreement that the City had in place, as of July 1, 1993, a tax on cigarettes. Plaintiffs maintained that the plain language of section 8-11-6a(2) of the Municipal Code only allowed a home rule authority to enact a tax on "tobacco products" if such a tax was in existence prior to July 1, 1993. Because the City had not enacted a tax on the other tobacco products as listed in the ordinance, they could not do so now. In response, the City maintained that it was not preempted from enacting the ordinance because it was merely required to have a tax in place before July 1, 1993, on either cigarettes or "tobacco products."

¶ 7 After the matter was fully briefed and argued, the circuit court ruled that section 8-11-6a(2) of the Municipal Code preempted the City's authority to enact the ordinance and thus granted plaintiffs' motion for partial summary judgment and denied the City's motion. Thereafter, the circuit court entered an order pursuant to Illinois Supreme Court Rule 304(a) (eff. Mar. 8, 2016). This appeal followed.

¶ 8 ANALYSIS

¶ 9 This appeal requires us to determine whether or not section 8-11-6a(2) of the Municipal Code ( 65 ILCS 5/8-11-6a(2) (West 2016) ) preempts the City's home rule authority to enact the ordinance that taxes tobacco products other than cigarettes. See Chicago Municipal Code § 3-49-020 (added Mar. 16, 2016) (specifically excluding from its definition of "[o]ther [t]obacco [p]roducts" cigarettes, electronic cigarettes, and liquid nicotine products).

¶ 10 The City contends that the ordinance is a valid exercise of its home rule authority. The City maintains that because it had imposed a tax on cigarettes prior to July 1, 1993, it falls within the exception of section 8-11-6a(2) of the Municipal Code, which it contends must be read to provide for a tax on either cigarettes or non-cigarette tobacco products prior to July 1, 1993. 65 ILCS 5/8-11-6a(2) (West 2016). The City reasons that because it taxed cigarettes, a tax within the category of cigarettes or non-cigarette tobacco products, prior to July 1, 1993, the ordinance is valid. The City concedes that no tax on "tobacco products" other than cigarettes had been implemented prior to July 1, 1993.

¶ 11 In response, plaintiffs contend that section 8-11-6a(2) unambiguously provides that the City, a home rule municipality, cannot impose a tax on tobacco products unless the municipality imposed such a tax prior to July 1, 1993. According to plaintiffs, the use of the phrase "such a tax" in section 8-11-6a(2) refers to a tax on either "cigarettes or tobacco products." Id. Plaintiffs reason that, because "such a tax" is a singular modifier, it can only be referring to a separate tax on cigarettes or a separate tax on other tobacco products. Plaintiffs maintain that because the City did not impose a tax on tobacco products prior to July 1, 1993, the City is precluded from enacting the ordinance.

¶ 12 We first set forth our standard of review. This matter comes before us after the disposition of cross-motions for summary judgment. Summary judgment is appropriate when the pleadings, depositions, admissions and affidavits, viewed in a light most favorable to the nonmovant, fail to establish that a genuine issue of material fact exists, thereby entitling the moving party to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2016); Fox v. Seiden , 2016 IL App (1st) 141984, ¶ 12, 403 Ill.Dec. 368, 53 N.E.3d 1005. When, as here, parties file cross-motions for summary judgment, they agree that no genuine issues of material fact exist and they invite the court to decide the case as a matter of law based on the record. Casey's Marketing Co. v. Hamer , 2016 IL App (1st) 143485, ¶ 11, 401 Ill.Dec. 842, 51 N.E.3d 35. We review a circuit court's decision to grant summary judgment de novo . Illinois Tool Works Inc. v. Travelers Casualty & Surety Co. , 2015 IL App (1st) 132350, ¶ 8, 389 Ill.Dec. 331, 26 N.E.3d 421. As the principal issue we are asked to resolve necessarily involves matters of statutory construction, we also observe our review in that regard is de novo . Stasko v. City of Chicago , 2013 IL App (1st) 120265, ¶ 31, 375 Ill.Dec. 664, 997 N.E.2d 975. De novo consideration means we perform the same analysis that a trial judge would perform. Midwest Gaming & Entertainment, LLC v. County of Cook , 2015 IL App (1st) 142786, ¶ 46, 395 Ill.Dec. 819, 39 N.E.3d 286.

¶ 13 To determine whether or not the City's home rule authority to enact the ordinance is preempted by section 8-11-6a(2), we must necessarily begin by discussing our constitution and the power it grants to home rule units. The relationship between our state and local governments was aptly recounted by our supreme court in City of Chicago v. StubHub, Inc. , 2011 IL 111127, 366 Ill.Dec. 43, 979 N.E.2d 844 :

"Under the 1870 Illinois Constitution, the balance of power between our state and local governments was heavily weighted toward the state. The 1970 Illinois Constitution drastically altered that balance, giving local governments more autonomy. Schillerstrom Homes, Inc. v. City of Naperville , 198 Ill. 2d 281, 286-87, 260 Ill.Dec. 835, 762 N.E.2d 494 (2001) ; City of Evanston v. Create, Inc. , 85 Ill. 2d 101, 107, 51 Ill.Dec. 688, 421 N.E.2d 196 (1981) (quoting 4 Record of Proceedings, Sixth Illinois Constitutional Convention 3024). Municipalities now enjoy ‘the broadest powers possible’ ( Scadron v. City of Des Plaines , 153 Ill. 2d 164, 174, 180 Ill.Dec. 77, 606 N.E.2d 1154 (1992) ) under the Constitution." Id. ¶ 18.

The court went on to explain that section 6(a) of article VII, "gives municipalities any powers pertaining to their governments and affairs, including the power to...