Judicial Rulings

Illinois Supreme Court

Telephone tax
In a split decision, the Illinois Supreme Court ruled October 19 that Illinois Bell Telephone's Chicago customers have been billed for more than needed by the phone company to cover the city's message tax of 5 percent on gross receipts. The problem was that, with the approval of the Illinois Commerce Commission, the tax was passed on to customers based on a computation for gross receipts that included the 5 percent tax to be paid by Bell plus the accounting costs borne by Bell to collect what was charged to the customer.

Charles A. Getto, a Chicago attorney, had discovered the "double tax" on his telephone bills and filed a class action suit against Illinois Bell and the city of Chicago. Cook County Circuit Court Judge Nathan M. Cohne issued a preliminary injunction last December, ordering Bell to set aside "that portion of the municipal message tax charge which exceeded 5% of 'gross receipts'" and that part of the additional charge for collection and accounting costs passed on to the customers. Bell appealed directly to the Illinois Supreme Court.

The high court affirmed the circuit court's decision and returned the case there to resolve the refund issues.

Getto appears to be a classic case of a company passing costs on to its customers. The high court said that the company was wrong in its method of billing customers.

The Illinois Municipal Code allows utilities to charge customers "an additional charge equal to the sum of (1) an amount equal to such municipal tax ... (2) 3 percent of such tax ... to cover costs of accounting, and (3) an amount equal to the increase in taxes . . . ." When the law went on the books, the Illinois Commerce Commission approved a formula for computing the additional charges for the city messenger tax. In this case, Bell wound up passing on charges of 6.5 percent of gross receipts to cover the tax of 5 percent of gross receipts.

Getto alleged that Bell's method did not fit the statutory definition, "was capable of being compounded to infinity," and was irrational and deprived the plaintiff of due process.

Bell argued that its computation was legal because, in the words of the court, the defendants construed the definition of gross receipts "to include not only customer billings . . . but also all taxes assessed on those billings, including the municipal tax itself."

Bell also argued that Getto had no right to sue because the city taxed the company, not the customers. And they argued Getto should have taken the case to the Illinois Commerce Commission, rather than the courts.

The high court ruled in favor of Getto, citing a rule established by precedent: "If there is any doubt in their [taxing laws'] application they will be construed most strongly against the government and in favor of the taxpayer." The majority opinion, written by Justice Joseph H. Goldenhersh, went on to state: "Although the tax was levied upon Bell, it was passed on to the subscriber, and no liability was incurred on Bell's part until payment was actually received."

On the second point, the majority said, "The sole issue presented here is one of statutory interpretation, and there is no question which requires the Commerce Commission's expertise."

In the dissenting opinion by Justices Robert C. Underwood and Howard C. Ryan, they said the Commerce Commission could have settled the dispute and that the case should not have come before the court until this and other remedies were exhausted.

Excessive legal fees
The Illinois Supreme Court October 19 censured Chicago attorney Luis Kutner for charging an "excessive" $5,000 fee in a routine battery case that never went to court. Kutner, who has practiced nearly 50 years, is widely known for international and civil rights work. The high court heard the case, In re Luis Kutner, because the Attorney Registration and Disciplinary Commission had recommended censure.

The case stemmed from Kutner's 1973 agreement to represent Warren Fisher of Glencoe on battery charges resulting from a family disturbance. When the case came to court, Kutner sent another attorney to represent Fisher, advising Fisher not to mention Kutner's fee. However, the complainant, Fisher's sister-in-law, dropped the charges before the trial began and the case was dismissed. Fisher asked Kutner to refund $4,000. Kutner offered to refund $1,000.

The Attorney Registration and Disciplinary Commission said Kutner spent five to six hours on the case and the usual fee for a routine battery case is $750 to $1,250, with part of the fee returned if the case does not go to trial.

The high court said Kutner's fee was "not only excessive, but unconscionable."

Answering the argument that fixed fees are subject to contract law and disputes should be settled in court, the court said, "where-'there is an unconscionable fee fixed in an attorney-client agreement, the matter is subject to action by the Attorney Registration and Disciplinary Commission." The court also acknowledged the Illinois State and Chicago bar associations' Code of Professional Responsibility: "Although such canons of ethics may not be binding on this court, 'they constitute a safe guide for professional conduct and an attorney may be disciplined for not observing them.'"

Insurance liability and
interspousal immunity
The Illinois Supreme Court ruled October 19 that a driver's family has the right to damages from an insurance company when the driver's coverage will not include his family. However, the dissenting opinion argues the high court has reinterpreted the state's interspousal immunity law, and thus usurped "the authority of the legislature."

In the case, Allslale Insurance Company v. Helen F. Elkins, the high court upheld the First District Appellate Court which had overturned the Cook County Circuit Court.

The case stemmed from injuries that the wife and a daughter received in an auto accident while the husband, Dorsey Elkins, was driving. Elkins' liability coverage with Allstate would not include injuries to family members. Thus, Elkins technically was an uninsured motorist as far as his wife and daughter were concerned.

Mrs. Elkins and her daughter filed a claim, but Allstate refused to pay. An arbitrator awarded Mrs. Elkins $18,500 and the daughter $1,300 in damages. However, Allstate took the case to court before the arbitrator reached a decision.

Allstate contended that Mrs. Elkins did not have the right to damages because the state interspousal immunity law bars one spouse from suing the other. Mrs. Elkins argued she did have the right because interspousal immunity applies only when one spouse is suing the other, not a third party, acting on his behalf.

The high court agreed with Mrs. Elkins.

In the majority opinion, Justice Joseph H. Goldenhersh said the state's interspousal immunity law does not "destroy the cause of action of the injured spouse, but [confers] immunity on the tortfeasor spouse . . . ."

Dissenting, Justices Howard C. Ryan and Robert C. Underwood said the high court has interpreted interspousal immunity to mean neither spouse could sue for damages at all. "The majority opinion does not . . . suggest why [that] construction placed upon the statute should now be abandoned after a 20-year history of acceptance," Ryan said.

December 1979/ Illinois Issues/ 27

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