City of Chi. v. StubHub, Inc.

• Decision Date: 06 October 2011
• Docket Number: No. 111127.,111127.
• Citation: 979 N.E.2d 844
• Parties: The CITY OF CHICAGO, Appellant, v. STUBHUB, INC., Appellee.
• Court: Illinois Supreme Court

979 N.E.2d 844

The CITY OF CHICAGO, Appellant,

v.STUBHUB, INC., Appellee.

No. 111127.

Supreme Court of Illinois.

Oct. 6, 2011.

Modified Upon Denial of Rehearing Nov. 26, 2012.

Mara S. Georges and Stephen R. Patton, Corporation Counsel, Chicago (Benna Ruth Solomon, Myriam Zreczny Kasper and Julian N. Henriques, Jr., of counsel), for appellant.

Roger H. Bickel, Michael J. Kelly and Jill C. Anderson, Freeborn & Peters LLP, and Stephen M. Shapiro, Michele L. Odorizzo, Timothy S. Bishop and James V. Hart, Mayer Brown LLP, all of Chicago, for appellee.

Anita Alvarez, State's Attorney, Chicago (Patrick T. Driscoll, Jr., Paul A. Castiglione, Jeffrey S. McCutchan and James S. Beligratis, assistant State's Attorneys, of counsel), for amicus curiae County of Cook.

Constantine L. Trela, Jr., and Bruce Braverman, Sidley Austin, LLP, Chicago, for amici curiae Ebay Inc. and The Netchoice Coalition.

Justice THEIS delivered the judgment of the court, with opinion.

¶ 1 This case comes before us on certification from the United States Court of Appeals for the Seventh Circuit. See Ill. S.Ct. R. 20 (eff. August 1, 1992). That court asked us to determine "whether municipalities may require electronic intermediaries to collect and remit amusement taxes on resold tickets." Our answer is no.

¶ 2 BACKGROUND

¶ 3 In 1923, the Illinois General Assembly passed the Ticket Scalping Act, which prohibited owners of public entertainment venues from selling admission tickets anywhere other than the venues' box offices. See 1923 Ill. Laws 322. In 1935, the legislature broadened that statute beyond venue owners, and outlawed the sale of such tickets for more than face value. See 1935 Ill. Laws 707. This statute remained unchanged until 1991, when the legislature rewrote it to provide an exception for ticket brokers, who could avoid any penalties for selling tickets above the box office price by meeting several requirements, including registering with the Secretary of State and paying all applicable state and local taxes. See Ill.Rev.Stat.1991, ch. 121 ½, ¶ 157.32. The legislature amended, and expanded upon, these requirements in 1995. See 720 ILCS 375/1.5 (West 1996).

¶ 4 That year, the City of Chicago also amended its municipal code to extend its existing amusement tax, which applied to admission fees for entertainment events in the city, to ticket resales. Under this amendment, "every reseller" was required to pay the amusement tax on "that portion of the ticket price that exceeds the amount that the reseller paid for the tickets." Chicago City Council, Journal of Proceedings, November 15, 1995, at 12016.

¶ 5 In 2002, the legislature amended the Auction License Act, requiring "Internet Auction Listing Services" either located in Illinois or dealing with persons or property located in Illinois to register with the state's Department of Financial and Professional Regulation. See 225 ILCS 407/10–27(b) (West 2010). This amendment brought online auctioneers under the same regulatory umbrella that covered more traditional auctioneers, but the amendment also recognized the significant differences between them. Specifically, the statute defined an internet auction listing service as a website or other interactive computer service that brings together prospective sellers and buyers of personal property, but "does not examine, set the price, or prepare the description of the personal property * * *, or in any way utilize the services of a natural person as an auctioneer." 225 ILCS 407/10–27(a)(1) (West 2010). The statute mandated that an internet auction listing service must certify that it "does not act as the agent of users who sell items on its website, and acts only as a venue for user transactions" ( 225 ILCS 407/10–27(c)(1) (West 2010)), and that it retains identification information on its users and their transactions, provides customer support for its users, and suspends users who engage in deliberate fraud. 225 ILCS 407/10–27(c)(2) to (6) (West 2010).

¶ 6 Shortly thereafter, as tickets to entertainment events began to appear on such websites, the legislature replaced the Ticket Scalping Act with the Ticket Sale and Resale Act (Act) ( 720 ILCS 375/0.01 et seq. (West 2010)). The new statute still prohibited the sale of tickets for more than face value, but contained more exceptions, including one for internet auction listing services, which featured extensive and detailed consumer protection measures. Section 1.5(c) provides:

"This Act does not apply to the sale of tickets of admission to a sporting event, theater, musical performance, or place of public entertainment or amusement of any kind for a price in excess of the printed box office ticket price by a reseller engaged in interstate or intrastate commerce on an Internet auction listing service duly registered with the Department of Financial and Professional Regulation under the Auction License Act and with the Office of the Secretary of State on a registration form provided by that Office. This subsection (c) applies to both sales through an online bid submission process and sales at a fixed price on the same website or interactive computer service as an Internet auction listing service registered with the Department of Financial and Professional Regulation.

This subsection (c) applies to resales described in this subsection only if the operator of the Internet auction listing service meets the following requirements:

(1) the operator maintains a listing of the names and addresses of its corporate officers;

(2) the operator is in compliance with all applicable federal, State, and local laws relating to ticket selling activities, and the operator's officers and directors have not been convicted of a violation of this Act within the preceding 12 months;

(3) the operator maintains, either itself or through an affiliate, a toll free number dedicated for consumer complaints;

(4) the operator provides consumer protections that include at a minimum:

(A) consumer protection guidelines;

(B) a standard refund policy that guarantees to all purchasers that it will provide and in fact provides a full refund of the amount paid by the purchaser (including, but not limited to, all fees, regardless of how characterized) if the following occurs:

(i) the ticketed event is cancelled and the purchaser returns the tickets to the seller or Internet auction listing service; however, reasonable delivery fees need not be refunded if the previously disclosed guarantee specifies that the fees will not be refunded if the event is cancelled;

(ii) the ticket received by the purchaser does not allow the purchaser to enter the ticketed event for reasons that may include, without limitation, that the ticket is counterfeit or that the ticket has been cancelled by the issuer due to non-payment, unless the ticket is cancelled due to an act or omission by such purchaser;

(iii) the ticket fails to conform to its description on the Internet auction listing service; or

(iv) the ticket seller willfully fails to send the ticket or tickets to the purchaser, or the ticket seller attempted to deliver the ticket or tickets to the purchaser in the manner required by the Internet auction listing service and the purchaser failed to receive the ticket or tickets; and

(C) standards of professional conduct;

(5) the operator has adopted an independent and disinterested dispute resolution procedure that allows resellers or purchasers to file complaints against the other and have those complaints mediated or resolved by a third party, and requires the resellers or purchasers to submit to the jurisdiction of the State of Illinois for complaints involving a ticketed event held in Illinois;

(6) the operator either:

(A) complies with all applicable requirements of the Retailers' Occupation Tax Act and collects and remits all applicable federal, State, and local taxes; or

(B) publishes a written notice on the website after the sale of one or more tickets that automatically informs the ticket reseller of the ticket reseller's potential legal obligation to pay any applicable local amusement tax in connection with the reseller's sale of tickets, and discloses to law enforcement or other government tax officials, without subpoena, the name, city, state, telephone number, e-mail address, user ID history, fraud complaints, and bidding and listing history of any specifically identified reseller or purchaser upon the receipt of a verified request from law enforcement or other government tax officials relating to a criminal investigation or alleged illegal activity; and

(7) the operator either:

(A) has established and maintains a consumer protection rebate fund in Illinois in an amount in excess of $100,000, which must be cash available for immediate disbursement for satisfaction of valid consumer complaints; or

(B) has obtained and maintains in force an errors and omissions insurance policy that provides at least $100,000 in coverage and proof that the policy has been filed with the Department of Financial and Professional Regulation." 720 ILCS 375/1.5(c) (West 2010).

¶ 7 StubHub, Inc., registered as an internet auction listing service in compliance with the Act. StubHub describes itself as "the world's largest online ticket marketplace" and operates a website or "platform" where users can buy and sell tickets to various events around the country. All users must register by providing personal information on the website. A user who wants to sell a ticket may list it on the website by submitting information about the event—the venue, date, time, and location of the ticket—as well as choosing a method and period for the sale, through a series of interactive prompts on the site. A user who wants to buy a ticket may then search for it on the site by the event, the date, or the venue. A prospective buyer and a prospective seller can communicate with each other only via the website. Once they have agreed upon a price, StubHub processes the sale, charging the buyer a service fee of 10% of that...