Village of Bedford Park et al v. Expedia WA et al
Filing
210
MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 6/4/2015: For the reasons stated in the accompanying Memorandum Opinion and Order, the Court concludes that the exhaustion defense is not viable as to the claims of the named plaintiffs. The case is set for a status hearing on June 15, 2015 at 9:30 a.m. (mk)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
VILLAGE OF BEDFORD PARK, et al.,
Plaintiffs,
vs.
EXPEDIA, INC. (WA), et al.,
Defendants.
)
)
)
)
)
)
)
)
)
Case No. 13 C 5633
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
Fourteen Illinois municipalities have sued a number of online travel companies
for unpaid taxes.1 Plaintiffs allege that the defendants failed to remit taxes owed under
their municipal hotel tax ordinances. Defendants removed the case to federal court on
the basis of the Class Action Fairness Act, 28 U.S.C. §§ 1332(d) & 1453. In October
2014, plaintiffs moved for class certification on behalf of a putative class of 276
municipalities. The Court denied that motion. In that decision, the Court noted that it
was unpersuaded by plaintiffs' arguments that the issue of administrative exhaustion did
not preclude class certification. See Vill. of Bedford Park v. Expedia, Inc., No. 13 C
5633, 2015 WL 94851, at *9 (N.D. Ill. Jan. 6, 2015). The Court did not rule on the
merits of the exhaustion issue, however, because it had already denied class
certification on other grounds. Plaintiffs then filed a motion to clarify whether the Court
1
The Court assumes familiarity with the factual background provided in its earlier
decisions. See Vill. of Bedford Park v. Expedia, Inc., No. 13 C 5633, 2014 WL 983129,
at *1 (N.D. Ill. March 13, 2014); Vill. of Bedford Park, 2015 WL 94851, at *1.
had decided the exhaustion defense on the merits. The Court denied this motion as
well, saying (again) that it had not decided the merits of the issue, but ordered briefing
on the viability of the exhaustion defense.
Defendants have "offered to waive their exhaustion affirmative defense as to the
fourteen named [p]laintiffs so long as they do not re-move for class certification." Defs.'
Mem. in Supp. of the Viability of their Exhaustion Defense at 2. Plaintiffs have
indicated, however, that their decision to re-move for class certification will turn on the
viability of the exhaustion defense. In addition, defendants' waiver of the defense is
conditional. For these reasons, the viability of the defense is a live issue, so the Court
will rule on its merits to provide direction in this litigation.
In Illinois, "[u]nder the doctrine of exhaustion of remedies . . . a party must first
pursue all administrative remedies provided for by the statute before turning to a review
in the courts." Emp'rs Mut. Cos. v. Skilling, 163 Ill. 2d 284, 288, 644 N.E.2d 1163, 1165
(1994). The doctrine only applies, however, when "the administrative agency has
exclusive jurisdiction to hear the action." Id. at 288, 644 N.E.2d at 1166. To "vest
exclusive jurisdiction in an administrative agency," the legislature "must do so explicitly."
Id. at 287, 644 N.E.2d at 1165. In other words, the statute must expressly state that the
agency's jurisdiction is exclusive; anything less will not divest the courts of jurisdiction.
Compare id. (holding that "[t]he Workers' Compensation Act's pronouncement that '[a]ll
questions arising under this Act shall be determined by the Commission' is insufficient to
divest the circuit courts of jurisdiction"), with People ex rel. Madigan v. Burge, 2014 IL
115635, ¶¶ 20-21, 18 N.E.3d 14, 19-20 (2014) (holding that the Pension Code's
pronouncement that the Retirement Board of the Policemen's Annuity and Benefit Fund
2
of Chicago "shall have exclusive original jurisdiction in all matters relating to or affecting
the fund" divested courts of jurisdiction (emphasis added)), and Vill. of S. Elgin v. Waste
Mgmt. of Ill., Inc., 348 Ill. App. 3d 929, 935, 810 N.E.2d 658, 665-66 (2004) (holding that
the Environmental Protection Act's pronouncement that "approval procedures, criteria
and appeal procedures provided for in this Act for new pollution control facilities shall be
the exclusive siting procedures and rules and appeal procedures for facilities subject to
such procedures" divested courts of jurisdiction (emphasis added)).
Both parties say that the fourteen municipal ordinances currently at issue and the
Local Taxpayer Bill of Rights Act do not confer exclusive jurisdiction on the
administrative agencies. See Defs.' Mem. in Supp. of the Viability of their Exhaustion
Defense at 6-7; Pls.' Br. in Opp'n to Defs.' Mem. in Supp. of the Viability of their
Exhaustion Defense at 3-8. Based on its reading of the ordinances, the Court agrees.
Thus, under Skilling, the exhaustion defense is inapplicable to the fourteen named
plaintiffs in this case.
Defendants assert that "where . . . a statute requires exhaustion but does not
strip the courts of original jurisdiction, exhaustion of administrative remedies is an
affirmative defense." Defs.' Mem. in Supp. of the Viability of their Exhaustion Defense
at 6-7. Put another way, defendants contend that when the courts have concurrent
jurisdiction with an administrative agency, exhaustion is still required but is not a
jurisdictional requirement (just as filing the complaint within the statute of limitations is
required but does not affect a court's jurisdiction). This argument was directly
addressed in Skilling. There, the defendant argued that "even if the circuit court and
[Industrial] Commission have concurrent jurisdiction, the exhaustion of remedies
3
doctrine applies and the coverage issue must remain before the Commission." Skilling,
163 Ill. 2d at 287, 644 N.E.2d at 1165. The Illinois Supreme Court flatly rejected this
argument, holding that when the agency and the courts "have concurrent jurisdiction,
the doctrine of exhaustion of remedies is inapplicable . . . ." Id.
Despite Skilling's unequivocal language, defendants argue that their exhaustion
defense remains viable. Although they do not identify any case holding that exhaustion
is required when the courts have concurrent jurisdiction, they point to three cases in
which the Illinois Supreme Court has stated that exhaustion of administrative remedies
is an affirmative defense that can be waived. The Court understands defendants'
argument as follows: If exhaustion is required only when the administrative agency has
exclusive jurisdiction, then exhaustion is concomitant with subject matter jurisdiction.
See Wolinsky v. Kadison, 2013 IL App (1st) 111186, ¶ 34, 987 N.E.2d 971, 978 (2013)
("The issue of exhaustion of remedies presents a question of subject matter
jurisdiction."). But subject matter jurisdiction cannot be waived. See People v. Bailey,
2014 IL 115459, ¶ 14, 4 N.E.3d 474, 478 (2013). Thus, if exhaustion is an affirmative
defense that can be waived, defendants suggest, exhaustion must also be required
when the courts have concurrent jurisdiction.
Putting aside whether this reasoning makes any sense on its own terms,
defendants' argument is premised on a misreading of the case law. The foundational
case is People v. Fiorini, 143 Ill. 2d 318, 574 N.E.2d 612 (1991); see also Hawthorne v.
Vill. of Olympia Fields, 204 Ill. 2d 243, 254, 790 N.E.2d 832, 840 (2003) (citing Fiorini);
Millennium Park Joint Venture, LLC v. Houlihan, 241 Ill. 2d 281, 302, 948 N.E.2d 1, 14
(2010) (citing Hawthorne). As defendants note, the court in Fiorini held that the
4
defendants' "fail[ure] to raise an affirmative defense regarding the failure to exhaust
administrative remedies . . . constitutes a waiver by them of the issue." Fiorini, 143 Ill.
2d at 337, 574 N.E.2d at 619. But the court also recognized the rule that was later
articulated in Skilling, noting that "even assuming . . . that the issue is properly before
this court . . . concurrent jurisdiction exists in the circuit court and the proper
administrative agency for actions alleging violations of the [Environmental Protection]
Act." Id. at 337-38, 574 N.E.2d at 619. For this reason, the court concluded, the
plaintiff "ha[d] the discretion to initiate actions in the circuit court, without regard to
whether actions seeking administrative review have been brought before an
administrative agency . . . ." Id. Thus, even though Fiorini describes exhaustion as an
affirmative defense that can be waived, it does not undercut Skilling's conclusion that
exhaustion is unnecessary when courts have concurrent jurisdiction. Indeed, one year
later, the Illinois Supreme Court revisited Fiorini in People v. NL Indus., 152 Ill. 2d 82,
93, 604 N.E.2d 349, 353 (1992). After briefly discussing Fiorini, the court observed that
"[t]he exhaustion of remedies doctrine is applied only where the agency has exclusive
jurisdiction to hear the action." Id. at 95-96, 604 N.E.2d at 354. Because the "courts
possessed concurrent jurisdiction" over the cause of action, the court held that "the
complaint [had been] improperly dismissed" on exhaustion grounds. Id. at 96, 604
N.E.2d at 355.2
2
As stated above, defendants have not identified any case holding that exhaustion is a
viable affirmative defense when the courts have concurrent jurisdiction. The two other
cases cited by defendants rejected the exhaustion defense based on the fact that (a)
the claim was not subject to the Administrative Review Law, and (b) there was an
exception to exhaustion doctrine; waiver was mentioned as a third reason for rejecting
the defense. See Hawthorne, 204 Ill. 2d at 253-54, 790 N.E.2d at 839-40; Millennium
Park, 241 Ill. 2d at 295-304; 948 N.E.2d at 10-15. These cases do not suggest that
5
The Court acknowledges that the law here may be seen as difficult to reconcile.
The most likely explanation for the seeming paradox—that is, the Illinois Supreme
Court's pronouncements in different cases that exhaustion is both jurisdictional and that
it is an affirmative defense that can be waived—is that Fiorini conflated exhaustion and
primary jurisdiction, two doctrines that are "often confused." NL Indus., 152 Ill. 2d at 96,
604 N.E.2d at 354. Fiorini predated NL Industries, where the Illinois Supreme Court set
out to "clarify the use of the terms 'primary jurisdiction' and 'exhaustion of remedies.'"
Id. at 95, 604 N.E.2d at 354. The court explained in NL Industries that whereas "[t]he
exhaustion of remedies doctrine is applied only where the agency has exclusive
jurisdiction to hear an action," the doctrine of primary jurisdiction "only applies when a
court has either original or concurrent jurisdiction over the subject matter of the dispute."
Id. at 95-96, 604 N.E.2d at 354. Moreover, "[d]espite the name, the doctrine of primary
jurisdiction does not involve jurisdictional questions," but is instead "a common law
doctrine used to coordinate administrative and judicial decisionmaking." Price v. Philip
Morris, Inc., 219 Ill. 2d 182, 343, 848 N.E.2d 1, 92 (2005). Thus, primary jurisdiction,
unlike exhaustion, "is an issue that can be waived or forfeited." Id. at 345, 848 N.E.2d
at 94.
Whatever the origin of the apparent paradox, the Illinois Supreme Court has
spoken clearly and consistently on the issue raised in this motion, and it has said
unequivocally that exhaustion of administrative remedies is not required when the
courts have concurrent jurisdiction. Because concurrent jurisdiction exists in the
present context, exhaustion is not a prerequisite to suit.
exhaustion is required when the courts have concurrent jurisdiction. Indeed, concurrent
jurisdiction is not mentioned at all.
6
The only remaining question, then, is whether the doctrine of primary jurisdiction
mandates or counsels in favor of referring this dispute to the municipal tax agencies.
"The doctrine of primary jurisdiction provides that where a court has jurisdiction over a
matter, it should in some instances stay the judicial proceedings pending referral of a
controversy, or some portion of it, to an administrative agency." Skilling, 163 Ill. 2d at
288, 644 N.E.2d at 1165. "A matter should be referred to an administrative agency
when it has a specialized or technical expertise that would help resolve the controversy,
or when there is a need for uniform administrative standards." Id. at 288-89, 644 N.E.2d
at 1166. In general, questions of law should not be referred to an administrative
agency. Id. at 299, 644 N.E.2d at 1166. Finally, "[p]rimary-jurisdiction arguments, even
if successful, almost never lead to dismissal but lead only to a stay of consideration by
the court." NL Indus., 152 Ill. 2d 82 at 95, 604 N.E.2d at 354.
Neither party argues that the doctrine of primary jurisdiction should lead the
Court to refer the parties' dispute to the municipal tax agencies, and the Court sees no
reason to do so. The main issue in this case is whether the municipal tax ordinances
apply to the defendants. The parties' dispute therefore centers around a question of
law. No special administrative or technical expertise is required to resolve this question.
Referring this case to the municipal tax agencies now would only cause "needless
litigation, expense and delay." Skilling, 163 Ill. 2d at 289, 644 N.E.2d at 1165.
In sum, the Court holds that neither the exhaustion doctrine nor the doctrine of
primary jurisdiction applies to the fourteen named plaintiffs. Because the Court has not
reviewed the ordinances of the 276 putative class members, it cannot determine
whether the exhaustion doctrine would apply to them. If the plaintiffs re-move for class
7
certificat
tion, and de
efendants decide to ra
d
aise exhaus
stion as an argument a
against
predomi
inance, the Court will expect defe
e
endants to iidentify any ordinance that they
y
es
y
contend vest exclusive jurisdic
ction in the municipal t agency Absent a showing th
tax
y.
hat
the exha
austion defe
ense is viab as to so
ble
ome of the p
putative cla members, it will no
ass
ot
pose a barrier to class certifica
b
ation.
onclusion
Co
For the foreg
F
going reaso
ons, the Co conclud that the exhaustion defense i
ourt
des
e
is
not viable as to the claims of the named plaintiffs. T case is set for a s
e
t
The
s
status hearing
a
on June 15, 2015 at 9:30 a.m.
___
__________
_________
__________
____
MATTH
HEW F. KEN
NNELLY
United S
States Distr Judge
rict
5
Date: June 4, 2015
8
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?