Satellink of Chicago, Inc. v. City of Chicago, 86-2772

• Decision Date: 29 March 1988
• Docket Number: No. 86-2772,86-2772
• Citation: 119 Ill.Dec. 545,523 N.E.2d 13,168 Ill.App.3d 689
• Parties: , 119 Ill.Dec. 545 SATELLINK OF CHICAGO, INC., Plaintiff-Appellee, Cross-Appellant, v. The CITY OF CHICAGO and Charles Sawyer, Defendants-Appellants, Cross-Appellees.
• Court: United States Appellate Court of Illinois

Page 13

523 N.E.2d 13

168 Ill.App.3d 689, 119 Ill.Dec. 545

SATELLINK OF CHICAGO, INC., Plaintiff-Appellee, Cross-Appellant, v. The CITY OF CHICAGO and Charles Sawyer Defendants-Appellants, Cross-Appellees.

No. 86-2772.

Appellate Court of Illinois First District, Second Division.

March 29, 1988.

Judson H. Miner, Corp. Counsel of the City of Chicago (Ruth M. Moscovitch, Chief Asst. Corp. Counsel and Sharon Baldwin, Asst. Corp. Counsel, of counsel), for defendant-appellant, cross-appellee City of Chicago.

James J. Casey, A. Benjamin Goldgar, Keck, Mahin & Cate, Chicago, for plaintiff-appellee, cross-appellant.

Presiding Justice HARTMAN delivered the opinion of the court:

Summary judgment was entered for plaintiff invalidating an amendment of the Chicago Amusement Tax ("the amendment") affecting "transmission or broadcast of programs by means of wire, radiowaves, microwaves * * * by subscription television service," which defendants appeal. Plaintiff cross-appeals denial of attorney fees. The issues raised for review include whether: (1) the amendment denied plaintiff the equal protection of the law; and (2) the circuit court improperly denied attorney fees to plaintiff. Other issues raised need not be considered in light of our determination of the appeal.

Plaintiff, Satellink of Chicago, Inc. ("Satellink"), installs and operates satellite master antenna television ("SMATV") systems for high-rise apartment buildings and provides television programming to residents of such buildings who subscribe and pay a fee. Satellink uses a central dish antenna that receives television signals from a fixed orbit geostationary satellite. Satellite antennas may be located at the building site or signals may be received by microwave through small receiving antennas on top of the building. The signal is thereafter distributed by wire to resident subscribers. All plaintiff's equipment and operations are located within Chicago.

As of November 30, 1985, plaintiff provided service to 1461 subscribers at 27 buildings within the City of Chicago, who received VHF channels 2, 5, 7, 9 and 11 and UHF channels 22, 26 and 32; only some also received UHF channels 60 and 66. Additionally eight cable stations were available through five different service packages. Package fees ranged from $11.95 to $31.90 per month. During the year ending June 30, 1985, plaintiff's gross income of $584,825.98 included $335,437.78 from subscription and installation fees for programming and $249,388.20 from installation and maintenance of master antenna systems.

The amusement tax ordinance was amended effective March 3, 1985 (Chicago Municipal Code, ch. 104, sec. 104-1 (1984-85)) and reads, in part, as follows:

"(3) any transmission or broadcast of programs by means of wire, radiowaves, microwaves or otherwise for public entertainment, including but not limited to transmissions or broadcasts by subscription television service, but excluding any such transmission or broadcast offered by any entity with whom the City has entered into or enters into a franchise agreement with respect to such transmissions or broadcasts."

The purpose of the amendment was "to provide for an expansion of the tax to subscription and cable television." (Journal of Proceedings of the City Council of the City of Chicago 13845 (February 20, 1985), 12270 (December 31, 1984).) The 4% admission fee tax is imposed on patrons of amusements to be collected by amusement operators. (Chicago Municipal Code, ch. 104, secs. 104-2, 104-3 (1984).) Only cable systems are franchised by the city (Chicago Municipal Code, ch. 113.1, secs. 113.1-2, 113.1-4 (1984)), which pay a 5% gross receipts fee. Chicago Municipal Code, ch. 113.1, sec. 113.1-17A (1984).

Plaintiff's verified complaint, seeking declaratory and injunctive relief against defendants City of Chicago and Charles Sawyer, acting director of the Department of Revenue, alleged: the amendment of the ordinance was preempted by federal legislation and regulations, constituted an impermissible tax on interstate commerce, a violation of freedom of speech, a denial of equal protection, a violation of the Illinois Antitrust Act (Ill.Rev.Stat.1985, ch. 38, par. 60-3(3)), an unreasonable classification in defiance of article IX, section 2 of the Illinois Constitution and a tax on income or earnings and on occupations violating article VII, section 6(e) of the Illinois Constitution. All federal claims were filed under 42 U.S.C. sec. 1983 (1982). In addition, plaintiff sought attorney fees under 42 U.S.C. sec. 1988 (1982).

Plaintiff's motion for a preliminary injunction and defendants' motion to strike and dismiss every count of the complaint were both denied by the circuit court except for the dismissal of the antitrust count of the complaint, count V. Defendants filed a verified answer on September 26, 1985.

Following discovery, both sides filed motions for summary judgment. On June 20, 1986, the circuit court granted summary judgment to plaintiff on count III on the basis of a first amendment violation, declared the amendment discriminatory on its face since it excluded cable operations with a franchise; and found that plaintiff's protected speech had been burdened by a revenue measure lacking an overriding governmental interest.

On September 18, 1986, the circuit court denied defendants' motion to reconsider and rejected plaintiff's motion for attorney fees. Defendants appeal the grant of summary judgment to plaintiff and plaintiff cross-appeals the denial of attorney fees.

I.

The present case is controlled by application of equal protection analysis, in connection with first amendment interests. (See Carey v. Brown (1980), 447 U.S. 455, 461-63, 100 S.Ct. 2286, 2290-91, 65 L.Ed.2d 263; Police Department v. Mosley (1972), 408 U.S. 92, 94-95, 92 S.Ct. 2286, 2289-90, 33 L.Ed.2d 212; Chicago Tribune Co. v. Village of Downers Grove (1987), 155 Ill.App.3d 265, 271-72, 108 Ill.Dec. 278, 508 N.E.2d 439.) Although decided by the circuit court upon first amendment principles, judgment may be affirmed upon any ground warranted, whether relied upon by the circuit court or its reasoning was correct. Bell v. Louisville & Nashville R.R. Co. (1985), 106 Ill.2d 135, 148, 88 Ill.Dec. 69, 478 N.E.2d 384; Material Service Corp. v. Department of Revenue (1983), 98 Ill.2d 382, 387, 75 Ill.Dec. 219, 457 N.E.2d 9; Kohls v. Maryland Casualty Co. (1986), 144 Ill.App.3d 642, 645, 98 Ill.Dec. 847, 494 N.E.2d 1174.

Defendants assert the amendment can withstand an equal protection challenge since its classifications are reasonable and do not violate article IX, section 2 of the Illinois Constitution which provides (Ill. art. IX, sec. 2):

"In any law classifying the subjects or objects of non-property taxes or fees, the classes shall be reasonable and the subjects and objects within each class shall be taxed uniformly. Exemptions, deductions, credits, refunds and other allowances shall be reasonable."

Defendants contend that legislative bodies have broad powers to classify and that since franchised cable television providers pay 5% of their gross receipts as a franchise fee, they reasonably may be exempted from the 4% admission fee tax that plaintiff must pay. Plaintiff insists that a fundamental right is involved requiring close scrutiny and that the amendment is not rationally related to a legitimate governmental interest.

When a fundamental right or suspect class is involved, a challenged statute must be shown to promote a compelling state interest. (Illinois Housing Development Authority v. Van Meter (1980), 82 Ill.2d 116, 119-20, 45 Ill.Dec. 18, 412 N.E.2d 151; Kaltsas v. City of North Chicago (1987), 160 Ill.App.3d 302, 306, 112 Ill.Dec. 24, 513 N.E.2d 438.) A classification must also have a rational relationship to a legitimate governmental interest. (City of New Orleans v. Dukes (1976), 427 U.S. 297, 303, 96 S.Ct. 2513, 2516, 49 L.Ed.2d 511; Chicago National League Ball Club, Inc. v. Thompson (1985), 108 Ill.2d 357, 368, 91 Ill.Dec. 610, 483 N.E.2d 1245.) Persons similarly situated should be treated alike, however, in the absence of a fundamental right or suspect class a legislature may differentiate between those similarly situated provided that a rational basis exists for so doing. (Jenkins v. Wu (1984), 102 Ill.2d 468, 477, 82 Ill.Dec. 382, 468 N.E.2d 1162; People v. Watson (1987), 118 Ill.2d 62, 66-67, 112 Ill.Dec. 701, 514 N.E.2d 167.) A municipal ordinance must satisfy the same requirement of reasonableness as a legislative statute. Chicago National League Ball Club, Inc. v. Thompson, 108 Ill.2d at 371, 91 Ill.Dec. 610, 483 N.E.2d 1245.

Legislative bodies possess broad discretion in reasonable classification for taxation purposes. (Lehnhausen v. Lake Shore Auto Parts Co. (1973), 410 U.S. 356, 359-60, 93 S.Ct. 1001, 1003-04, 35 L.Ed.2d 351; Madden v. Kentucky (1940), 309 U.S. 83, 87, 60 S.Ct. 406, 407, 84 L.Ed. 590; Chicago Tribune Co. v. Johnson (1985), 106 Ill.2d 63, 71, 87 Ill.Dec. 505, 477 N.E.2d 482, appeal dismissed (1985), 474 U.S. 915, 106 S.Ct. 241, 88 L.Ed.2d 250.) Equal protection does not require identical tax treatment. (Searle Pharmaceuticals, Inc. v. Department of Revenue (1987), 117 Ill.2d 454, 465, 111 Ill.Dec. 603, 512 N.E.2d 1240.) There is a presumption of legislative tax classification validity. Williams v. City of Chicago (1977), 66 Ill.2d 423, 432, 6 Ill.Dec. 208, 362 N.E.2d 1030, cert. denied (1977), 434 U.S. 924, 98 S.Ct. 402, 54 L.Ed.2d 282. Notwithstanding the foregoing principles, a discriminatory tax law cannot be upheld if the classification involved is altogether illusory. (F.S. Royster Guano Co. v. Virginia (1920), 253 U.S. 412, 415, 40 S.Ct. 560, 561, 64 L.Ed. 989.) Reasonable tax classifications must be based upon real and substantial differences between those taxed and not taxed. ( Chicago Tribune Co. v. Johnson, 106 Ill.2d at 71-72, 87 Ill.Dec. 505, 477 N.E.2d 482; Fiorito v. Jones (1968), 39 Ill.2d 531,...