In the

United States Court of Appeals

For the Seventh Circuit

No. 09-3432

CITY OF CHICAGO, ILLINOIS,

Plaintiff-Appellant,

v.

STUBHUB!, INCORPORATED,

Defendant-Appellee.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 08 C 3284—Wayne R. Andersen, Judge.

ARGUED SEPTEMBER 8, 2010—DECIDED SEPTEMBER 29, 2010

Before EASTERBROOK, Chief Judge, and BAUER and

KANNE, Circuit Judges.

EASTERBROOK, Chief Judge. The resale of tickets to

sports, concerts, and other events usually is illegal in

Illinois, if the tickets fetch more than the original

price. 720 ILCS 375/1.5(a). Resale at a premium is

called scalping, and rules that forbid it even when the

events’ promoters are content to allow resale have puzzled economists. See Craig A. Depken, II, Another look at
2 No. 09-3432

anti-scalping laws: Theory and evidence, 130 Public Choice

55 (2006); Pascal Courty, Some Economics of Ticket Resale, 17

J. Econ. Perspectives 85 (Spring 2003); Stephen K. Happel

& Marianne M. Jennings, Assessing the Economic Rationale

and Legal Remedies for Ticket Scalping, 16 J. Legislation 1

(1989); Sherwin Rosen & Andrew M. Rosenfield, Ticket

Pricing, 40 J.L. & Econ. 351 (1997). Cf. United States v.

Mount, 966 F.2d 262 (7th Cir. 1992) (discussing one potential justification for restrictions on reselling tickets).

In 1991 Illinois authorized ticket brokers to resell

tickets at premium prices, 720 ILCS 375/1.5(b), if they

registered with the Illinois Secretary of State and collected all local taxes—for municipalities in Illinois tax

the selling price of tickets, see 65 ILCS 5/11-42-5, and want

to collect additional taxes on the difference between the

original selling price and any higher resale price. Since

1995 the City of Chicago has taken advantage of this

opportunity to tax the incremental price of resold tickets.

Chicago Municipal Code §4–156–020. The tax is 9% of

the original price, and a further 9% of any profit on a

ticket’s resale.

Illinois amended its scalping laws again in 2005, adding

a new subsection (c) to the Ticket Sale and Resale Act.

720 ILCS 375/1.5(c). This amendment allows an “Internet

auction listing service” to resell tickets, but it attaches

several conditions. One is that the auction service

register with both the Secretary of State and the Department of Financial and Professional Regulation. Another

is that the auction service either collect and remit

all required taxes or publish “a written notice on the
No. 09-3432 3

website after the sale of one or more tickets that automatically informs the ticket reseller of the ticket reseller’s

potential legal obligation to pay any applicable local

amusement tax in connection with the reseller’s sale

of tickets, and discloses to law enforcement or other

government tax officials, without subpoena, the name,

city, state, telephone number, e-mail address, user ID

history, fraud complaints, and bidding and listing

history of any specifically identified reseller or purchaser

upon the receipt of a verified request from law enforcement or other government tax officials relating to a criminal investigation or alleged illegal activity”. 720 ILCS

375/1.5(c)(6)(B).

StubHub!, which operates an Internet auction site, has

registered with the appropriate officials and permits its

clients to resell tickets to events in Illinois. It collects

commissions from both the seller (15% of the resale

price) and the buyer (10% of the resale price) but does not

collect taxes. Instead it provides each reseller and

buyer with the notice required by §1.5(c)(6)(B) and

stands ready to furnish taxing jurisdictions with the

information specified by that subsection. Chicago

does not think that it would be worthwhile to pursue

thousands of persons for a few dollars apiece; instead

it wants StubHub! and similar services to collect and

remit the taxes. (Even when the stakes are larger,

tracking down retail transactions and ensuring payment

can be difficult. See Hemi Group, LLC v. New York City,

130 S. Ct. 983 (2010).) Chicago’s ordinances have long

provided that sales agents must collect and remit its

amusement taxes; a recent amendment to §4–156–010 of
4 No. 09-3432

the Municipal Code says that a “reseller’s agent” means

“a person who, for consideration, resells a ticket on

behalf of the ticket’s owner or assists the owner in

reselling the ticket. The term includes but is not limited

to an auctioneer, a broker or a seller of tickets for amusements . . . and applies whether the ticket is resold by

bidding, consignment or otherwise, and whether the

ticket is resold in person, at a site on the Internet or

otherwise.”

Because StubHub! has taken the position that Illinois

law permits it to disregard municipal taxes, Chicago

filed this suit in state court seeking a judgment that

StubHub! is responsible for the amusement tax. StubHub!

removed the proceeding to federal court under the diversity jurisdiction. 28 U.S.C. §1332(a). A district judge

dismissed Chicago’s complaint under Fed. R. 12(b)(6). 622

F. Supp. 2d 699 (N.D. Ill. 2009). It held that, whether or

not the City has the authority to levy a tax on resales

and designate StubHub! as a “reseller’s agent,” the tax is

preempted by the Preemption Act, 65 ILCS 5/8–11–6a,

which prohibits home-rule municipalities from using

their authority to tax the “sale or purchase of tangible

or personal property” based on a percentage of the

sales price. An intermediate court in Illinois has stated

that tickets are “tangible personal property,” see Mr. B’s,

Inc. v. Chicago, 302 Ill. App. 3d 930, 935, 706 N.E.2d 1001,

1005–06 (1998), and the district judge thought this

dispositive. When sitting in diversity, a federal court

should follow the decision of an intermediate state appellate court “unless it is convinced by other persuasive

data that the highest court of the state would decide
No. 09-3432 5

otherwise.” West v. AT&T, 311 U.S. 223, 237 (1940). The

district judge did not think that any decision by the

Supreme Court of Illinois implies a contrary understanding of “tangible personal property.”

The parties’ briefs on appeal discuss at length whether

Chicago has the authority to tax the resale of tickets by

Internet auction services—and, if it does, whether that

authority is superseded by either the 2005 amendment

to the Ticket Sale and Resale Act or by the Preemption

Act. For reasons that we discuss later, we think it appropriate to ask the Supreme Court of Illinois to decide

whether Chicago may require StubHub! to collect

and remit the tax. Certification of a state-law issue is appropriate, however, only if that issue is dispositive.

StubHub! contends that federal law blocks Chicago

from imposing a tax on Internet auction sites, so we

address that possibility first.

StubHub! relies on two federal statutes: §230(e) of the

Communications Decency Act, 47 U.S.C. §230(c), and the

Internet Tax Freedom Act, 47 U.S.C. §151 note. Section

230’s title, “Protection for private blocking and screening

of offensive material”, does not suggest that it limits

taxes that have nothing to do with the content of any

speech (the City’s tax is the same whether the theater is

performing “South Pacific” or “Hair”). Subsection (c)’s

caption, “Protection for ‘Good Samaritan’ blocking and

screening of offensive material” bodes even less well

for StubHub!. But it nonetheless insists that the statutory text establishes a tax immunity. Subsection (c) provides:
6 No. 09-3432

(1) No provider or user of an interactive computer service shall be treated as the publisher or

speaker of any information provided by another

information content provider.

(2) No provider or user of an interactive computer service shall be held liable on account of—

(A) any action voluntarily taken in good faith

to restrict access to or availability of material

that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable,

whether or not such material is constitutionally protected; or

(B) any action taken to enable or make available to information content providers or

others the technical means to restrict access

to material described in paragraph (1).

StubHub! relies on subsection (c)(1). As earlier decisions

in this circuit establish, subsection (c)(1) does not create

an “immunity” of any kind. See Doe v. GTE Corp., 347

F.3d 655, 660 (7th Cir. 2003); Chicago Lawyers’ Committee

for Civil Rights Under Law, Inc. v. craigslist, Inc., 519 F.3d

666, 669–71 (7th Cir. 2008). It limits who may be called

the publisher of information that appears online. That

might matter to liability for defamation, obscenity, or

copyright infringement. But Chicago’s amusement tax

does not depend on who “publishes” any information or

is a “speaker”. Section 230(c) is irrelevant.

The title of the Internet Tax Freedom Act is more promising. As with most statutes, however, the details are
No. 09-3432 7

more complex than the title portends. The statute does not

create “tax freedom” for transactions on the Internet

but instead forbids “[m]ultiple or discriminatory taxes

on electronic commerce.” Section 1101(a). These are

defined terms. Section 1105(6) says that a “multiple” tax

means two states taxing the same thing without a tax

credit. There is only one tax on tickets for events in Chicago (the location of the event ensures that no other

municipality can levy a tax). Section 1106(C) drives that

point home by stating that sales and use taxes on

“tangible personal property” are valid even if they otherwise would be called “multiple” taxes. So if, as a matter

of Illinois law, tickets are “tangible personal property”,

the rule against multiple taxes would not apply even

if there were multiple taxes (which there aren’t).

Section 1105(2)(B)(ii) defines a tax as “discriminatory”

if “a provider of Internet access service or online

services is deemed to be the agent of a remote seller for

determining tax collection obligations solely as a result

of—(I) the display of a remote seller’s information or

content on the out-of-State computer server of a provider

of Internet access service or online services; or (II) the

processing of orders through the out-of-State computer

server of a provider of Internet access service or online

services.” (Emphasis added.) Chicago deems an electronic auction service to be a reseller’s agent, but not

“solely” because it displays information or processes

orders. Recall the definitional clause of Chicago’s ordinance: a reseller’s agent is “a person who, for consideration, resells a ticket on behalf of the ticket’s owner or

assists the owner in reselling the ticket. The term in-
8 No. 09-3432

cludes but is not limited to an auctioneer, a broker or a

seller of tickets for amusements . . . and applies whether

the ticket is resold by bidding, consignment or otherwise, and whether the ticket is resold in person, at a site

on the Internet or otherwise.” Chicago Municipal Code

§4–156–010. This says that the location and technology

of an auction must be ignored; it does not make anything turn on the role of a computer server or the provision of electronic services. Web sites such as craigslist

that list items for sale, after the fashion of classified ads

in newspapers, but do not participate in the resale transaction, are not resellers’ agents under Chicago’s ordinance

(and might possess a tax immunity under §1105(2)(B)(ii)

if they were). But intermediaries that take an active role

in staging an auction and exchanging goods for money,

as StubHub! does, are resellers’ agents no matter what

technology they employ. Because the ordinance applies

equally to ticket resales at physical auction houses, the

Chicago Board of Trade, and venues such as StubHub!, the

tax is not “discriminatory” under §1105(2)(B)(ii).

This conclusion brings us back to Illinois law. StubHub!

contends that Chicago’s tax is not within the City’s homerule powers because it acts as an occupation tax

when applied to electronic intermediaries. StubHub!

also maintains that the state’s decision not to label

electronic-commerce sites as “agents” in the 2005 legislation means that a municipality cannot deem them

so—even though none of the 2005 amendment’s language

forbids that designation. The argument, in other words,

is that although the legislative history of a federal

statute may be used only to resolve ambiguities in the
No. 09-3432 9

enacted text, see Puerto Rico Department of Consumer

Affairs v. ISLA Petroleum Corp., 485 U.S. 495 (1988), Illinois

would give the force of law to legislative history that

explains the absence of particular provisions in the legislation. Finally, StubHub! contends that we should

follow the conclusion of Mr. B’s that the legal incidence

of Chicago’s amusement tax is on the ticket, a bit of

“tangible personal property,” rather than, as the City

contends, on the ticket’s grant of a license to attend the

event. If Chicago placed a tax on patent royalties, that tax

would not be deemed one on the paper on which the

contract was written, even though the physical contract

is “tangible personal property.” Chicago maintains that

this is equally true of tickets.

The argument that the amusement tax is on the

physical ticket helped Chicago win Mr. B’s; Chicago

now regrets talking the court into that conclusion. It is not

a federal court’s job to extract a litigant from a hole dug

for itself in state litigation. But the Supreme Court of

Illinois is not bound by the appellate decision in Mr. B’s.

We’re not “bound” by it either—but we should not go

against it unless persuaded that the Supreme Court of

Illinois would disapprove it. The Supreme Court of

Illinois has never addressed any of the three principal

questions in dispute between the parties: whether the

tax works as an occupation tax, whether the history of

the 2005 amendment prevents Chicago from defining

Internet auction sites as resellers’ agents, and whether

the amusement tax is one on “tangible personal property.” The subject therefore is within the scope of Ill. S. Ct.

R. 20, which permits this court to certify determinative
10 No. 09-3432

issues for which “there are no controlling precedents” in

the Supreme Court of Illinois. The question whether

Chicago can tax the resale of tickets on electronic

auction sites also is important for all municipalities in

Illinois—and for the people who would be subject to

the tax if the City prevails.

Certification adds to the cost of litigation and may

delay its outcome. There are many web-based auction

sites. If this meant that a lot of similar cases were

under way in both state and federal court, there would

be little reason to certify one to the Supreme Court of

Illinois. We could make a decision, confident that any

error would be corrected by the state judiciary before

too much time had passed. As far as we can tell, however, the state judiciary will be unable to address this

subject unless we certify. There are only two pending

cases, both in federal court. (The other is Chicago v. eBay

Inc., No. 10-1144, which was argued in tandem with

the suit against StubHub!, and which we will hold in

abeyance pending the resolution of this proceeding.)

Both suits began in state court and were removed

under the diversity jurisdiction. Any similar suit likewise would be removable. (As far as we know, none of

the web-based auction sites is incorporated in Illinois or

has its principal place of business there.) This means that

the state judiciary may never have an opportunity to

resolve this dispute. The only way the federal judiciary

can be sure that it is applying authentic state law is to

certify the subject to state court.

We therefore respectfully request the Supreme Court

of Illinois to inform us whether municipalities may
No. 09-3432 11

require electronic intermediaries to collect and remit

amusement taxes on resold tickets. We phrase the question this way to ensure maximum flexibility for the

state judiciary, which may elect to address any of the

three sub-questions we have already identified, or may

conclude that some other issue altogether determines

the appropriate answer. The clerk of this court will transmit to the Supreme Court the appellate briefs and the

short record, and at the state court’s request will

transmit the full record.

9-29-10