City of Chicago v. Holland

• Decision Date: 19 June 2003
• Docket Number: No. 90585.,90585.
• Citation: 795 N.E.2d 240,206 Ill.2d 480,276 Ill.Dec. 887
• Parties: The CITY OF CHICAGO, Appellee, v. William G. HOLLAND, Auditor General of the State of Illinois, Appellant.
• Court: Illinois Supreme Court

795 N.E.2d 240

206 Ill.2d 480

276 Ill.Dec. 887

The CITY OF CHICAGO, Appellee, v. William G. HOLLAND, Auditor General of the State of Illinois, Appellant.

No. 90585.

Supreme Court of Illinois.

June 19, 2003.

James E. Ryan, Attorney General, Springfield (Joel D. Bertocchi, Solicitor General, and Don R. Sampen, Assistant Attorney General, Chicago, of counsel), for appellant.

Mara S. Georges, Corporation Counsel, Chicago (Lawrence Rosenthal, Benna Ruth Solomon and Mardell Nereim, of counsel), for appellee.

Justice RARICK delivered the opinion of the court:

In 1995 the General Assembly amended section 3-1 of the Illinois State Auditing Act (Auditing Act) (30 ILCS 5/3-1 (West 2000)) to include a provision directing the Auditor General of the State of Illinois to conduct a compliance and management audit of the City of Chicago (City) and any other entity regarding the operation of O'Hare International Airport (O'Hare), Midway Airport (Midway), and Merrill C. Meigs Field (Meigs) (collectively, the airports). When the Auditor General attempted perform an audit under authority of that amendment, the City sought declaratory and injunctive relief in the circuit court of Cook County to prevent the audit from proceeding. On the parties' respective cross-motions for summary judgment, the trial court entered judgment for the City and against the Auditor General, holding that the amendment violated article VIII, section 3, of the Illinois Constitution of 1970 (Ill. Const.1970, art. VIII, § 3). The Auditor General now appeals. Because the circuit court's judgment declared a statute of the State of Illinois invalid, the appeal was taken directly to our court. 134 Ill.2d R. 302(a). For the reasons that follow, we affirm. Article VIII, section 3(b), of the Illinois Constitution of 1970 (Ill. Const.1970, art. VIII, § 3(b)) provides that the Auditor General "shall conduct the audit of public funds of the State" and "shall make additional reports and investigations as directed by the General Assembly." The General Assembly has implemented the mandates of article VIII, section 3, through enactment of the Illinois State Auditing Act (30 ILCS 5/1-1 et seq. (West 2000)). 30 ILCS 5/1-2(a) (West 2000). That statute was amended in 1995 to include the following new section:

"As soon as practical after the effective date of this amendatory Act of 1995, the Auditor General shall conduct a compliance and management audit of the City of Chicago and any other entity with regard to the operation of Chicago O'Hare International Airport, Chicago Midway Airport and Merrill C. Meigs Field. The audit shall include, but not be limited to, an examination of revenues, expenses, and transfers of funds; purchasing and contracting policies and practices; staffing levels; and hiring practices and procedures. When completed, the audit required by this paragraph shall be distributed in accordance with Section 3-14." Pub. Act 89-386, eff. August 18, 1995 (amending 30 ILCS 5/3-1 (West 1994)).

Following enactment of the amendment, the Auditor General notified the City that an audit would be conducted in accordance with the statute's provisions. The Auditor General's office subsequently solicited proposals for furnishing expert professional services to conduct the audit. A proposal submitted by the firm of KPMG Peat Marwick LLP (KPMG) was ultimately selected by the Auditor General.

When the auditing process commenced, the City filed this action against the Auditor General in the circuit court of Cook County. The City's complaint, as amended, was in four counts. Counts I and II took issue with the scope of the audit. The City asserted that under the 1995 amendment to the Auditing Act and article VIII, section 3, of the Illinois Constitution (Ill. Const.1970, art. VIII, § 3), the Auditor General's authority was limited to audits of public funds of the state. The City complained, however, that the audit of its airports would go beyond public funds of the state and would also include examinations of the use of nonstate funds at the airports and management operations or activities at the airports that are financed by nonstate funds.

In count I of its amended complaint, the City alleged that to the extent the audit embraced expenditures and operations that were not financed by public funds of the state, it was unlawful under both the 1995 amendment to the Auditing Act and article VIII, section 3, of the Constitution. Count II asserted, in the alternative, that if the 1995 amendment to the Auditing Act could be construed as allowing the Auditor General to conduct a general audit that was not restricted to the use of public funds of the state or to the management of governmental activities financed with public funds of the state, the amendment would still be unconstitutional under article VIII, section 3, of the Illinois Constitution. Count III, in turn, alleged that even if the 1995 amendment to the Auditing Act were read to permit an audit of the use of nonstate funds in connection with the operations of the City's airports and even if such an audit did not contravene article VIII, section 3, of the Illinois Constitution, the 1995 amendment would violate the prohibition in article IV, section 13, of the Illinois Constitution (Ill. Const.1970, art. IV, § 13) against special legislation.

Count IV of the City's amended complaint raised no constitutional claims. It took issue only with KPMG, the firm retained by the Auditor General, to conduct the audit. The City claimed that KPMG had performed or was performing services for the City and was under legal, contractual and ethical duties to maintain the confidentiality of information it had obtained from the City in the course of providing those services. The City asserted that use of KPMG to perform the audit of the airports would "violate applicable provisions of Illinois law and applicable ethical rules and would be inconsistent with the legal and contractual rights of the City."

For its relief, the City requested a judgment declaring: (1) that the Auditor General's authority under the 1995 amendment to the Auditing Act is limited to an examination of the use of public funds of the state by the City in connection with its airport operations; (2) that article VIII, section 3(b), of the Illinois Constitution does not authorize the General Assembly to direct the Auditor General to audit the use of nonstate funds at Chicago airports; and (3) that if the 1995 amendment to the Auditing Act were interpreted to require a general audit of the use of funds in connection with the operation of Chicago's airports, including funds that do not qualify as public funds of the state, it would contravene article IV, section 13's prohibition against special legislation. The City further requested issuance of an injunction barring the Auditor General from proceeding with his audit of the City's airports and prohibiting him from using KPMG to conduct the audit.

The Auditor General answered the City's amended complaint and asserted a counterclaim based on the City's failure to comply with a subpoena issued in connection with the audit of the City's airports. It subsequently filed a motion to dismiss count IV of the City's amended complaint, which challenged the use of KPMG, on the grounds that the Auditor General's contract with the firm had expired and KPMG would therefore not be involved with the audit of the airports. The circuit court granted that motion and dismissed count IV. The propriety of that action has not been challenged and is not an issue in this appeal.

The litigation continued over the next several years. Following conferences between the parties and the circuit court, the court entered an order in December of 1999 staying any further discovery pending resolution of any issues the parties wished to raise by way of cross-motions for summary judgment. In March of 2000, the Auditor General filed a motion pursuant to section 2-1005 of the Code of Civil Procedure (735 ILCS 5/2-1005 (West 2000)) asking the circuit court to enter summary judgment denying the relief sought by the City in its amended complaint and granting enforcement of the audit-related subpoena as sought in the Auditor General's counterclaim. The following month, the City filed a cross-motion seeking entry of summary judgment in its favor on counts I through III of its amended complaint and against the Auditor General on his counterclaim.

In support of their respective motions, the parties submitted voluminous documentation concerning the funding of the City's airports. The parties prepared and filed additional legal memoranda, and a hearing on the summary judgment motions was conducted on June 27, 2000. Based upon the evidence, the law and the arguments presented to it, the circuit court entered an order declaring that the Auditor General's constitutional and statutory authority to conduct audits extends only to public funds of the state. In the case of the City's airports, the court held "public funds of the State" consist solely of those funds directly disbursed by the state to the airports. Accordingly, the court concluded that when carrying out the audit mandated by the 1995 amendment to the Auditing Act, the Auditor General must limit himself to such funds. Based on these conclusions, the court denied the Auditor General's motion for summary judgment and granted the cross-motion for summary judgment filed by the City.

The Auditor General subsequently moved for rehearing and clarification. That motion resulted in entry of an additional order by the circuit court. The court's new order, dated October 13, included an express holding that the 1995 amendment to the Auditing Act is unconstitutional because it impermissibly broadened the Auditor General's authority. Having declared the 1995 amendment invalid on that basis, the court ruled that it had no need to address the additional argument that the amendment violated the prohibition against...