Tri-State Coach Lines, Inc. v. Metropolitan Pier & Exposition Authority

Citation: Not availableDocket: 1-98-3322

Court: Appellate Court of Illinois; June 30, 2000; Illinois; State Appellate Court

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Plaintiffs Tri-State Coach Lines, Inc. and certified members of Class B(1) and Class B(2) appeal a summary judgment from the circuit court that favored the Metropolitan Pier and Exposition Authority (MPEA) in a class action lawsuit. The plaintiffs sought a declaration on the legality of MPEA's airport departure tax on their ground transportation services, claiming it violated section 14505(2) of the Interstate Commerce Commission Termination Act of 1995, which prohibits certain state and local taxes on interstate travel. MPEA cross-appeals the same judgment favoring Class A. 

The case stems from the Illinois General Assembly’s 1992 enactment of Public Act 87-733, which authorized a $1 billion expansion of McCormick Place and allowed MPEA to issue bonds for financing. To repay these bonds, MPEA was granted the authority to impose local taxes, including an occupation tax on ground transportation services. The MPEA Airport Departure Tax Ordinance, effective January 1, 1993, established specific tax rates for various categories of ground transportation providers departing from Chicago's commercial service airports: $2 for taxis/livery vehicles, $9 to $27 for vans/buses depending on passenger capacity, and $1 per passenger for regulated bus/van services. The court ultimately affirmed in part and reversed in part the previous ruling.

Shortly after its implementation, the airport departure tax faced two constitutional challenges. In **Allegro Services, Ltd. v. Metropolitan Pier and Exposition Authority**, the Illinois Supreme Court ruled that the tax did not violate the equal protection clause, the interstate commerce clause, or the uniformity clause concerning suburban and out-of-state operators. Similarly, in **Terry v. Metropolitan Pier and Exposition Authority**, the appellate court dismissed comparable claims from vehicle operators taxed for transporting passengers into Chicago. On February 7, 1996, the current plaintiffs, ground transportation operators using buses, taxis, or livery services from Chicago's O'Hare and Midway Airports to destinations in Illinois, northern Indiana, and southern Wisconsin, filed a class action lawsuit. They challenged the airport departure tax based on a statutory provision from the **Interstate Commerce Commission Termination Act of 1995 (ICCTA)**, specifically Section 14505(2), which prohibits state and local taxation on the transportation of passengers in interstate commerce by motor carriers. The plaintiffs argued that both proposed classes—those transporting passengers to destinations outside Illinois and those with prearranged transportation as part of an interstate air journey—are engaged in interstate commerce, and thus the departure tax is invalid under the ICCTA. They sought a court order to declare the tax invalid and to restrain the Metropolitan Pier and Exposition Authority (MPEA) from collecting it.

MPEA contended that section 14505 of the legislative history only preempts state and local taxation of tickets for interstate bus travel, affecting a limited portion of the plaintiffs' ground transportation operations taxed under the Ordinance. MPEA filed a motion for judgment on the pleadings regarding proposed Class B, which the trial court granted, ruling that plaintiffs failed to state a cause of action for Class B but did for Class A. The court determined that section 14505(2) prohibits airport departure taxes for flights beyond Illinois but allows such taxes for flights within the state. The ruling on Class B was later vacated to allow for summary judgment. The trial court then certified Class A (operators providing transport from O'Hare and Midway to northern Indiana and southern Wisconsin) and Class B, which was further divided into B(1) for prearranged transportation within Illinois and B(2) for those traveling on through tickets under a service agreement. Cross-motions for summary judgment were filed, resulting in the court ruling in favor of plaintiffs for Class A and in favor of MPEA for Class B. An appeal ensued, prompting a review of whether the plaintiffs' action should have been dismissed for lack of jurisdiction due to failure to exhaust administrative remedies. The supreme court established that in tax cases, declaratory judgment relief is not available if an adequate statutory remedy exists, reinforcing that judicial scrutiny is not warranted when administrative review is an option under the Administrative Review Law.

The exhaustion doctrine requires that parties fully utilize available administrative remedies before seeking judicial review, promoting fact development, agency expertise, and potentially resolving issues without court intervention. The Administrative Review Law governs judicial reviews of final agency decisions, prohibiting alternate review methods unless specified by the enabling statute. In this case, the MPEA Act did not explicitly adopt this law, and the related Ordinance requires plaintiffs to wait for determinations from the MPEA collector. However, exceptions to the exhaustion requirement exist, particularly when constitutional challenges are made against statutes or ordinances. Plaintiffs argue that the MPEA's airport departure tax violates federal law under the ICCTA, claiming a facial challenge based on preemption. The MPEA acknowledges the tax's imposition but contests the plaintiffs' legal conclusions. The court supports the plaintiffs' position, stating that federal law can preempt state law if it obstructs federal objectives, as outlined in the Supremacy Clause of the U.S. Constitution.

Plaintiffs are not required to exhaust administrative remedies prior to judicial review because they are challenging the facial validity of the Ordinance based on a constitutional preemption claim, unlike the plaintiffs in Silver Fox Limousine v. City of Chicago, who contested an application of a tax and were required to exhaust such remedies. Relevant case law indicates that claims asserting facial invalidity do not necessitate administrative exhaustion. An exception to the exhaustion doctrine applies when no factual disputes or agency expertise are involved, allowing the court to interpret statutory and case law directly. The plaintiffs' complaint presents a pure legal issue, thus permitting the court to address it without the need for agency fact-finding.

Plaintiffs argue that the trial court incorrectly granted summary judgment against Class B, which comprises operators transporting airline passengers from O'Hare and Midway. They assert that section 14505(2) of the ICCTA expressly preempts state or local taxation of transportation for passengers traveling in interstate commerce. Plaintiffs contend that any taxi, livery, or bus ride prearranged in connection with an interstate flight constitutes travel in interstate commerce, regardless of its destination within Illinois. Therefore, they claim that the airport departure tax levied on Class B is prohibited under this section because the prearranged ground transportation remains interstate in nature, even when occurring within Illinois.

MPEA contends that the trial court correctly upheld the airport departure tax concerning Class B, arguing that the interstate travel by passengers transported by Class B does not qualify as "motor carrier" travel under section 14505(2) of the ICCTA, as it is conducted by airplane. MPEA asserts that Class B's ground transportation trips within Illinois are solely intrastate. Consequently, section 14505(2), which pertains exclusively to interstate motor carrier transportation, does not apply to Class B's services. Furthermore, MPEA claims that neither the ICCTA nor its legislative history supports the plaintiffs' argument that prearranged rides are exempt from the statute's limitations on state taxes for transportation across state lines.

Summary judgment is deemed appropriate when the documentation demonstrates no genuine material fact issue and the moving party is entitled to judgment as a matter of law. In instances of cross-motions for summary judgment, the parties agree that only legal questions remain for the court to decide based on the existing record, with the appellate review standard being de novo. The ICCTA was enacted by Congress to dissolve the Interstate Commerce Commission and reform transportation regulation. It delegated many regulatory responsibilities to the Department of Transportation and established limits on federal authority regarding motor carrier transportation, particularly concerning activities that do not cross state lines. Section 14505 prohibits states from imposing taxes on various aspects of passenger transportation in interstate commerce by motor carrier.

The court's task is to interpret section 14505(2) within the context of the ICCTA, beginning with the statute’s language to determine legislative intent. If the language is ambiguous, the court may consider legislative history and other extrinsic aids for further clarification.

A crucial rule of statutory interpretation is that when a section of an act has two conflicting meanings, the interpretation that aligns with the overall purpose of the act should be favored. The supreme court has emphasized that understanding the statute's underlying policies is essential, particularly when the language is unclear. The legislature is presumed to have had a specific intent in drafting the statute, aiming for coherence among its parts. If a statute can be read in two ways—one supporting its purpose and the other undermining it—the interpretation that furthers the statute's goals should be chosen. 

In this case, section 14505(2) is deemed ambiguous due to its dual reasonable interpretations. Plaintiffs assert that "interstate commerce" refers to "continuity of transit," arguing that traveling by airplane interstate allows subsequent intrastate travel by motor carrier to be considered interstate, thus exempting it from local taxes. Conversely, the MPEA interprets the section as prohibiting state and local taxes only on trips across state lines by motor carrier, contending that no such interstate travel occurs when passengers are transported within Illinois from airports. Both interpretations are valid, indicating the need to examine the legislative history and context to clarify the intent behind section 14505(2).

Section 14505 was enacted to prevent states or their political subdivisions from taxing bus tickets for interstate travel, responding to the Supreme Court's decision in *Oklahoma Tax Comm'n v. Jefferson Lines, Inc.*, which allowed such taxation. The House and Conference Reports clarify that this provision aims to override the Jefferson Lines ruling, which had diverged from the precedent set in *Central Greyhound Lines, Inc. v. Mealey*, where a similar tax was deemed unconstitutional due to its unapportioned nature. Both cases involved taxes on the total value of interstate bus tickets without accounting for the portion of the trip occurring in other states, leading to an unfair burden on interstate transportation. The *Jefferson Lines* court upheld the Oklahoma tax, asserting it did not unduly burden interstate commerce or risk multiple taxation, thus enabling states to levy taxes on the full price of interstate travel tickets. This shift in legal interpretation prompted Congress to enact section 14505, aligning bus ticket taxation with the treatment of airline tickets.

Congress aimed to prevent states from taxing interstate bus fares through section 14505, focusing on ensuring that states do not impose disproportionate sales taxes on bus tickets for travel that minimally connects to the originating state. This provision targets the issue of states taxing the full price of interstate tickets despite limited contact. Section 14505 does not extend to intrastate travel or to Class B operators, who transport passengers within Illinois after interstate flights. The trial court's summary judgment against Class B and in favor of MPEA was deemed correct.

In MPEA's cross-appeal, it argued that the trial court wrongly granted summary judgment for Class A, asserting that section 14505(2) does not prevent states from taxing commercial motor carrier departures from airports, even if destinations are in other states. MPEA contended that legislative intent was to limit disproportionate taxation on interstate bus tickets only, while plaintiffs claimed that section 14505(2) prohibits local taxes on transportation for passengers crossing state lines. However, the legislative history indicates that Congress intended to address specific issues related to multistate bus travel, which does not apply to the airport departure tax affecting Class B operators providing intrastate services.

The primary issue at hand is whether Congress intended for section 14505 to preempt state and local taxes related to travel services provided by Class A members, specifically regarding transportation from O'Hare or Midway airports to destinations outside Illinois. The preemption doctrine, based on the supremacy clause of the U.S. Constitution, allows federal law to override state laws. Courts must assess whether state regulation aligns with the overall purpose of the federal statute. If the objectives of federal and state laws differ, preemption does not occur. A presumption exists against federal preemption, particularly in matters of state responsibility such as local taxation, and Congress must express its intent to preempt clearly within the statute’s language.

In this case, upon examining section 14505 in context, it is concluded that Congress did not intend to preempt the airport departure tax imposed on transportation services by Class A members. The purpose of section 14505 is to prevent excessive taxation on interstate bus ticket purchases, while the Illinois airport departure tax aims to finance improvements at McCormick Place. The nature of the trips covered by the airport tax differs significantly from the interstate bus trips considered in earlier Supreme Court cases, indicating that the federal and state purposes do not conflict and thus, no federal preemption is warranted.

Congress enacted section 14505 to mitigate the issues identified in the Supreme Court's decision in Jefferson Lines, specifically concerning the imposition of disproportionate sales taxes by states on interstate bus tickets. Such taxes could arise when a state where tickets are purchased taxed the entire fare, even if the bus trip had minimal connection to that state. However, the airport departure tax at issue does not present a similar risk, as it is levied on commercial motor carriers, particularly Class B, which have significant connections and benefits derived from Illinois.

The legal framework indicates that the airport departure tax is not a tax on interstate passenger transportation, but rather a tax on the departure of commercial vehicles from airports like O'Hare and Midway. This distinction is vital as it falls outside the prohibition set by section 14505(2) against taxing the transportation of passengers in interstate commerce. There is no explicit congressional intent evident in the statute to preempt state or local taxes on such departures, a contrast to other sections of the ICCTA that clearly prohibit certain state regulations and taxes related to transportation.

Additionally, Congress has expressly exempted certain services from federal regulation, including taxicab services and motor carrier transportation incidental to aircraft transportation. This historical context underscores that Congress intended to leave the regulation of taxicab services largely to the states, indicating a deliberate choice to allow local control over specific transportation-related taxes.

The operation of taxicabs is classified as a local business, as established in Buck v. California, which upheld a California ordinance mandating taxi drivers to pay an annual fee for a driver's permit, despite their interstate operations. The court reasoned that the transportation of passengers across state or international borders is closely tied to local business activities. Consequently, Congress did not indicate an intent to alter this principle with the enactment of section 14505 of the ICCTA. The "taxicab service" exemption under section 13506(a)(2) allows for the imposition of an airport departure tax on Class A taxicab and livery services from O'Hare and Midway airports to northern Indiana and southern Wisconsin.

Further, section 13506(a)(8)(A) exempts from federal regulation passenger transportation by motor vehicle that is incidental to air transportation. The precedent set in National Bus Traffic Ass'n v. U.S. concluded that trips from airports to surrounding states are incidental to air travel, characterizing them as minor adjuncts necessary for completing the journey. This rationale applies to trips from O'Hare and Midway to locations beyond Illinois, reinforcing that such ground transportation is incidental to air travel and thus not covered by section 14505.

Additionally, the Chicago metropolitan area, extending into Wisconsin and Indiana, relies on O'Hare and Midway as primary airports. The trips from these airports to nearby destinations facilitate access for residents, aligning with Congress's intent to exempt these trips from ICCTA jurisdiction. Regulatory guidance from the Department of Transportation further supports this exemption for motor carrier departures from O'Hare to northwest Indiana.

Section 14505(2) does not preempt the Ordinance imposing an airport departure tax on both Class A and Class B motor carriers. The analysis of the text, structure, and legislative history of section 14505, along with related provisions in the ICCTA, demonstrates a lack of congressional intent to preempt such taxes on motor carrier departures from airports, including those servicing out-of-state communities. The trial court's conclusion that the airport departure tax on Class A violates section 14505(2) is deemed erroneous. Consequently, the circuit court's order granting summary judgment in favor of the MPEA regarding Class B is affirmed, while the judgment in favor of the plaintiffs concerning Class A is reversed. Judges Cahill and Wolfson concur with this decision. Further footnotes clarify definitions and legal references, including the Administrative Review Law's incorporation in various subsections of the MPEA Act and the scope of the statutory incidental to air exemption for passenger transportation within a specified radius of airports.