Chicago Health Clubs, Inc. v. Picur

• Decision Date: 20 June 1988
• Docket Number: No. 65386,65386
• Citation: 124 Ill.Dec. 87,528 N.E.2d 978,124 Ill.2d 1
• Parties: , 124 Ill.Dec. 87 CHICAGO HEALTH CLUBS, INC., et al., Appellants, v. Ronald PICUR, Comptroller of the City of Chicago, et al., Appellees.
• Court: Illinois Supreme Court

Page 978

528 N.E.2d 978

124 Ill.2d 1, 124 Ill.Dec. 87

CHICAGO HEALTH CLUBS, INC., et al., Appellants, v. Ronald PICUR, Comptroller of the City of Chicago, et al., Appellees.

No. 65386.

Supreme Court of Illinois.

June 20, 1988.

Rehearing Denied Oct. 3, 1988.

Michael L. Sklar, Frances H. Krasnow, Robert Radasevich, William J. Popper, Neal Gerber Eisenberg & Lurie, William Goldberg, Holleb & Coff, Chicago, for appellees.

Judson H. Miner, Corp. Counsel of the City of Chicago, Chicago, for appellants; Ruth M. Moscovitch, Chief Asst. Corp. Counsel, Lynn K. Mitchell, Asst. Corp. Counsel, of counsel.

Justice CUNNINGHAM delivered the opinion of the court:

Plaintiffs, Chicago Health Clubs, Inc., Chicago Health Clubs Fair Lady, Inc., Exercise Centers of Chicago, Inc., River City Fitness Center, Inc., Downtown Court Club, Inc., Pro's Gym and Nautilus, Inc., Lakeshore Centre Management Company d/b/a Lakeshore Centre, Charles Vavrus d/b/a Charlie Club, Tennis Corporation of America, Women's Workout World, Inc., Women's Workout World II, Inc., Central World, Inc., The River Club, Inc. d/b/a The River Club, Hyde Park Athletic Club, Inc., Combined Fitness Centre-LaSalle, Inc., Combined Fitness Centre-Randolph, Inc., Combined Fitness Centre-Northbrook, Inc., and Patricia Stanis (an individual duespaying member of a health club in Chicago), brought this suit in the circuit court of Cook County on January 9, 1986, against defendants, the City of Chicago (city) and certain officials, namely, Ronald Picur, comptroller, Cecil A. Partee, treasurer, and Charles Sawyer, director of revenue. In their complaint, plaintiffs challenged the constitutionality of the December 23, 1985, amendment to the Chicago Amusement Tax Ordinance (Chicago Municipal Code §§ 104 through 104-8 (1985)), and sought declaratory and permanent injunctive relief.

Defendants filed a motion to dismiss the complaint for failure to state a cause of action. Plaintiffs then filed an amended complaint, and also filed a motion for a preliminary injunction. Defendants let their motion to dismiss the original complaint stand as a basis for dismissing the amended complaint, but filed an additional motion to strike portions of plaintiffs' reply brief, and a motion to strike plaintiffs' exhibits. The court denied the defendants' motions and held that the amendment to the ordinance was an unlawful occupation tax in violation of article VII, section 6(e)(2), of the Illinois Constitution (Ill. Const.1970, art. VII, § 6(e)(2)), and was unconstitutionally vague in that it violated plaintiffs' rights to due process under the Illinois and United States Constitutions. In addition, the circuit court granted a preliminary injunction preventing defendants from enforcing the December 23, 1985, amendment. The circuit court expressly found that there was no just reason to delay appeal of these rulings.

The appellate court, with one justice dissenting, held that the December 23, 1985, amendment to the Chicago Amusement Tax (Chicago Municipal Code §§ 104-1 through 104-8 (1985)) was constitutional in all respects (155 Ill.App.3d 482, 108 Ill.Dec. 431, 508 N.E.2d 742) and therefore found that the circuit court erred in denying the motion to dismiss and granting the preliminary injunction. We granted plaintiffs' petition for leave to appeal (107 Ill.2d R. 315).

I. Summary of Amendment and Related Provisions

In 1947 the City of Chicago enacted an amusement tax ordinance which imposed a tax on organizers, sponsors and promoters of various enumerated spectator and participatory events. In 1980 the ordinance was amended to shift the tax from the providers to their patrons. (Chicago Municipal Code §§ 104-1 through 104-2 (1980).) Since then, the Chicago Amusement Tax Ordinance has provided for a tax upon the patrons of amusements located within the city. The city taxes the privilege of witnessing, viewing or participating in such amusements.

On December 23, 1985, the city amended this ordinance, and it is this amendment which the plaintiffs challenge. The ordinance was amended to include racquetball and health clubs as follows:

"[A]ny entertainment or recreational activity offered for the public participation or on a membership or other basis including but not limited to racquetball or health clubs, carnivals, amusement park rides and games, bowling, billiard and pool games, dancing, tennis, racquetball, swimming, weightlifting, body building or similar activities." (Emphasis added.)

This amendment thus adds health clubs and racquetball clubs to the list of "amusements" for purposes of the Amusement Tax Ordinance. While this case was pending in the circuit court the city, on February 26, 1986, passed a related amendment which brought "social and eating clubs" within the definition of "amusement" and also reduced from 4% to 2% the tax rate to be paid by members and guests of health, social and eating clubs (Chicago Municipal Code §§ 104-1 through 104-2.1 (1986)). The February 26, 1986, amendment was challenged by the Chicago Athletic Club (Chicago Athletic Club v. City of Chicago, No. 86 CH 3116) in the circuit court of Cook County. In that case an agreed order was entered exempting social and eating clubs from the amusement tax, in effect holding that social and eating clubs are not "amusements" within the meaning of the amusement tax. This latter amendment is not in issue here and further references to an amendment will be to the December 23, 1985, amendment.

In addition to adding racquetball and health clubs to the list of amusements, the amendment at issue here makes the owners, managers, and operators of amusements the collectors for and on behalf of the city. They are responsible for collecting the tax, keeping accurate records of the moneys collected, and remitting the tax collected to the city. Furthermore, the ordinance subjects them (owners, managers or operators) to penalties and interest for failing to perform these duties. That is, the provider remains liable to pay the taxes if the patron fails or refuses to pay.

II. Motion to Dismiss

Regarding the section 2-615 motion to dismiss for failure to state a cause of action (Ill.Rev.Stat.1985, ch. 110, par. 2-615), we note that defendants sought therein to have the complaint dismissed both because the challenged ordinance was constitutional and because of numerous asserted technical pleading deficiencies. The verified facts alleged in the complaint must be taken as true and correct for the purpose of the motion to dismiss (Ogle v. Fuiten (1984), 102 Ill.2d 356, 360, 80 Ill.Dec. 772, 466 N.E.2d 224; Cross v. Wells Fargo Alarm Services (1980), 82 Ill.2d 313, 317-18, 45 Ill.Dec. 121, 412 N.E.2d 472), including allegations contained within the exhibits attached to the complaint (Mineral Resources, Inc. v. Classic Coal Corp. (1983), 115 Ill.App.3d 114, 119, 70 Ill.Dec. 906, 450 N.E.2d 379). Having reviewed the complaint, we believe that the circuit court properly rejected the numerous technical pleading challenges which defendants asserted in the motion.

In denying the motion, however, the circuit court also found that, as alleged in the complaint and the motion for preliminary injunction, the amended ordinance was unconstitutional. We shall address these constitutional questions when discussing the preliminary injunction.

III. Preliminary Injunction

When a circuit court is determining the propriety of a preliminary injunction, it must consider whether the plaintiff is likely to succeed on the merits, and whether the plaintiff's rights will be irreparably harmed if this equitable form of relief is not immediately granted. (See, e.g., Central Building & Cleaning Co. v. Vodnansky (1980), 84 Ill.App.3d 586, 40 Ill.Dec. 331, 406 N.E.2d 32.) On appeal from the grant or denial of a preliminary injunction an appellate court is to consider whether the circuit court abused its sound discretion in evaluating these considerations and granting or denying the preliminary injunction. Best Coin-Op, Inc. v. Old Willow Falls Condominium Association (1983), 120 Ill.App.3d 830, 76 Ill.Dec. 344, 458 N.E.2d 998.

When moving for a preliminary injunction in the instant case, the plaintiffs asserted that they were likely to succeed on the merits, that no adequate remedy at law existed, and that if a preliminary injunction were not immediately granted they would suffer irreparable harm. In appealing the grant of the preliminary injunction and the denial of the motion to dismiss, defendants argued only the likelihood of success on the merits, i.e., they focused on the constitutionality of the amendment. Before this court as well, the parties have likewise concentrated on the question of whether the ordinance is constitutional. Therefore, we, too, focus on this question, rather than on an evaluation of the risk of irreparable harm and inadequacy of a legal remedy, in deciding whether the preliminary injunction was appropriate.

A brief summary of the parties' contentions on the constitutionality of the amendment will facilitate a discussion of the individual constitutional issues. Defendants submit that the amendment was properly enacted pursuant to the city's home rule power. Plaintiffs contend that the amendment is an "occupation tax" which, according to article VII, section 6(e), of the Illinois Constitution of 1970 (Ill. Const.1970, art. VII, § 6(e)), a home rule unit cannot enact absent the General Assembly's authorization. Defendants deny this and further argue that, even assuming, arguendo, that the tax is an occupation tax, it is nevertheless valid because the General Assembly has expressly authorized it in section 11--42--5 of the Illinois Municipal Code (Ill.Rev.Stat.1985, ch. 24, par. 11--42--5), which provides in pertinent part that "the corporate authorities of each municipality may * * * tax * * * amusements and may * * * tax * * * all places for * * * amusement." Plaintiffs deny that the tax can properly be deemed either an...