Rose v. American Airlines, Inc.

Decision Date13 July 1971
Docket NumberNo. 70 C 1844.,70 C 1844.
Citation331 F. Supp. 77
PartiesSam E. ROSE et al., Plaintiffs, v. AMERICAN AIRLINES, INC., et al., Defendants.
CourtU.S. District Court — Northern District of Illinois

Leo J. Spivack, Chicago, Ill., and Lawrence Weiner, for plaintiffs.

H. Templeton Brown, Bryson P. Burnham, J. Stanley Stroud, Lee Abrams, Mayer, Brown & Platt, Chicago, Ill., Thomas H. Boerschinger, Tax Division, Department of Justice, Washington, D. C., for defendants.

MEMORANDUM OPINION AND ORDER

NAPOLI, District Judge.

This is a class action challenging the constitutionality of the Airport and Airway Revenue Act of 1970, 84 Stat. 236 et seq., P.L. 91-258 (May 21, 1970). The Act imposes an 8 percent tax on domestic flights and a $3.00 per ticket tax on international flights originating in the United States. Included in the Act is a requirement that the price of a ticket shall show the total paid for the transportation without the taxes being separately shown. Under the original Act, listing the tax separately was a misdemeanor punishable by a fine of not more than $100.00.

In the second count of their complaint the plaintiffs challenge certain rates approved by the Civil Aeronautics Board (C.A.B.) at about the time of the promulgation of the Act. These new rates allow the airlines to round up to the next highest dollar the price of the transportation plus the 8 percent tax. Plaintiffs complain that there was insufficient notice before approval of the new rates and that the new rates are "unavoidably and integrally intertwined" with the allegedly invalid tax.

The plaintiffs' prayer asks that the allegedly deceptive and hidden taxes be declared unconstitutional, that the airlines be enjoined from collecting the tax, and that the Secretary of the Treasury be enjoined from distributing the fund thus far collected. Plaintiffs also request that the new airline rates be declared null and void and that funds improperly collected on the basis of the invalid rates be returned to the public.

The action is currently before the court on the motion of the United States to dismiss. The government's motion attacks several distinct aspects of plaintiffs' claim. First it is asserted that 26 U.S.C. § 7421(a) bars the court from granting the injunctive relief sought herein.

(a) Tax.—Except as provided in sections 6212(a) and (c), 6213(a), and 7426(a) and (b) (1), no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.

The Supreme Court in Enochs v. Williams Packing & Nav. Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962) delineated the purview of section 7421(a) by stating that a federal district court could not enjoin the collection of a tax unless it could be shown that under the most liberal view of the law and the facts the tax was invalid and, in addition, the person seeking to enjoin the tax could establish that he has no adequate remedy at law.

The court has scrutinized the materials presented in this cause and has determined that under the Enoch test the court is barred from granting injunctive relief in the instant suit. Under the most liberal view of the law and the facts it is by no means certain that the tax is invalid. That portion of the Airport and Airway Revenue Act, upon which plaintiffs' claim of unconstitutionality rests, has been amended; i.e. section 7275 has been changed so that the tax is no longer required to be concealed. Public Law 91-680, 91st Congress, 2d Session, on January 12, 1971. Given this amendment, and taking the most liberal view of the law and facts, it is certainly possible that the United States will be able to establish the validity of the underlying tax. Further, even if the amendment had not been made, under the severability clause of the Internal Revenue Code of 1954, 26 U.S.C. § 7852(a), the allegedly improper aspect of the Airport and Airway Revenue Act could be struck down without affecting the underlying tax. United States v. Jackson, 390 U.S. 570, 585, 88 S.Ct. 1209, 20 L.Ed.2d 138 (1968). In consonance with the foregoing, then, this court finds that it is barred by 26 U.S. C. § 7421 from granting the injunctive relief requested in this action.

The next point raised by the government is that the claim for refund brought on behalf of the class is insufficient in that only the named plaintiffs have filed individual claims for tax refunds as required by 26 U.S.C. § 7422(a). The recent case of Agron v. Illinois Bell...

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  • DuPont Glore Forgan Inc. v. American Tel. & Tel. Co.
    • United States
    • U.S. District Court — Southern District of New York
    • March 23, 1977
    ...in the Northern District of Illinois. Econ, Inc. v. Illinois Bell Telephone Co., 351 F.Supp. 1087 (N.D.Ill.1972); Rose v. American Airlines, Inc., 331 F.Supp. 77 (N.D.Ill.1971); Agron v. Illinois Bell Telephone Co., 325 F.Supp. 487 (N.D.Ill. 1970), aff'd in part and rev'd in part, 449 F.2d ......

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