JIMMY'S GRILLE OF DEWEY BEACH, LLC, BOTTLE TAPROOM, INC., COCONUTS-WATERFRONT, INC., DEWEY BEACH LIQUORS, INC., NOBEACH, INC., and RUSTY RUDDER, LLC, individually and on behalf of all those similarly situated, Plaintiffs,
TOWN OF DEWEY BEACH, DIANE HANSON, as Mayor of the Town of Dewey Beach, JOY HOWELL, as Commissioner of the Town of Dewey Beach, COURTNEY RIORDAN, as Commissioner of the Town of Dewey Beach, ANNA LEGATES, as Commissioner of the Town of Dewey Beach, and GARY MAULER, as Commissioner of the Town of Dewey Beach, Defendants.
Date Submitted: September 11, 2013
Stephen W. Spence, Stephen A. Spence, and Aaron C. Baker, of PHILLIPS, GOLDMAN & SPENCE, P.A., Wilmington, Delaware, Attorneys for Plaintiffs.
William E. Manning and Richard A. Forsten, of SAUL EWING LLP, Wilmington, Delaware, Attorneys for Defendants.
GLASSCOCK, Vice Chancellor.
The power to tax involves, as Chief Justice Marshall famously observed, the power to destroy. Relying on such concerns, the Plaintiffs here—business owners in Dewey Beach—insist that a general grant of authority to a town from the State, no matter how broad or explicit, is insufficient to convey a power to tax. However, while grants of taxing authority must be strictly construed, nothing prevents the General Assembly from delegating taxing power to inferior jurisdictions in this State, where such is its intent, as part of a general grant of authority. Having received the broadest plenary authority from the State in a town charter that does not contain language suggesting that the General Assembly otherwise meant to exclude the power to tax, the Town of Dewey Beach has the authority to levy a business license tax, and relief from exercise of that authority must come through the ballot, not this bench.
In this matter, various business establishments operating in the Town of Dewey Beach—specifically, Jimmy's Grille of Dewey Beach, LLC, Bottle Taproom, Inc., Coconuts-Waterfront, Inc., Dewey Beach Liquors, Inc., Nobeach, Inc., and Rusty Rudder, LLC (the "Plaintiffs")—contest the annual business license fee imposed by the Town of Dewey Beach (the "Town, " or "Dewey Beach"). The Plaintiffs argue that this licensing fee is effectively a tax—a tax that the Town lacks the authority to impose. In addition, the Plaintiffs contend that even if the Town does have the requisite taxing authority, it has breached Section 21(d) of its Charter, as no referendum was held to approve the tax at issue. Because I find that the Town has the power to impose a business license tax on the Plaintiffs, and that no referendum was required under the terms of the Charter, I grant the Defendants' Motion to Dismiss.
The Town's Charter grants the Town Commissioners the "authority to grant licenses and impose fees for licenses, issue permits, and regulate any activity within the corporate limits . . . ." In December 1993, the Town adopted a business license fee program pursuant to Town Ordinance No. 280 and codified in Chapter 117, Article I of the Town Code. The stated purpose of such a program is "to protect and preserve the safety, health, peace, cleanliness, good order and welfare of the Town of Dewey Beach and its citizens." The Town Code states, in relevant part, that "[n]o person shall conduct or engage in any trade, business or occupation within the Town for which a license is required without first having obtained a license therefor and having paid the license fee prescribed." The license fee imposed is "related to the investigation, regulation and enforcement of said license activities."
Between 2007 and 2013, revenues from the Town's business license fee program were approximately $1 million. During this period, the Town has purportedly failed to conduct any annual inspections or investigations of the at least fifty entities that are subject to the Town's business license program. The Plaintiffs sent a letter to the Town, asking for a reduction in business license fee rates "to a level reasonable in light of the actual costs of regulating those businesses." However, according to the Plaintiffs, "[t]he Town has failed and refused to reduce or refund any business license fee paid by [the] Plaintiffs."
On February 26, 2013, the Plaintiffs filed a Verified Class Action Complaint (the "Complaint"), contesting all fees imposed between 2007 and 2013. The Plaintiffs argue that, since the license fee collected is unrelated to the cost of "investigation, regulation, and enforcement, " this fee is in fact a business license tax, that the Town lacks the power to impose such a tax, and that even if the Town has the authority to tax the Plaintiffs, the Town has breached its Charter by not first holding a referendum. The Plaintiffs seek declaratory and injunctive relief, as well as an accounting, and an order granting them a refund of fees paid between 2007 and 2013.
The Defendants—the Town, Mayor Diane Hanson, and Commissioners Joy Howell, Courtney Riordan, Anna Legates, and Gary Mauler—have moved to dismiss the Plaintiffs' Complaint. The Defendants have conceded, for purposes of their Motion only, that the business license fee imposed on the Plaintiffs should be construed as a tax. Because, according to the Defendants, to impose such a tax is within the Town's authority, this matter should be dismissed. For the reasons that follow, I grant the Defendants' Motion to Dismiss.
II. STANDARD OF REVIEW
A motion to dismiss pursuant to Court of Chancery Rule 12(b)(6) "will be granted if there are no reasonably conceivable circumstances that would entitle the [plaintiff] to recover." In considering the motion before me, I must "draw all reasonable inferences in favor of the [p]laintiff, and accept all well pled factual allegations as true." In addition to considering those facts alleged in the Plaintiffs' Complaint, I consider the Town Charter and Town Code, which the Plaintiffs have incorporated into their Complaint by reference.
This Motion to Dismiss involves a matter of statutory interpretation. It is well-settled under Delaware law that, if the statutory language at issue is "unambiguous, then there is no room for judicial interpretation and the plain meaning of the statutory language controls." However, if the language at issue is ambiguous, i.e. "if it is susceptible of two reasonable interpretations or if a literal reading of its terms would lead to an unreasonable or absurd result not contemplated by the legislature, " then the motion to dismiss must be denied.When construing a grant of authority from the legislature to an inferior unit of government purporting to convey a power to tax, such a grant must be strictly construed, with ambiguity ...