Henderson v. City of Chicago Dept. of Business Affairs and Consumer Protection

2023 IL App (1st) 221705-U

• Court: Appellate Court of Illinois
• Decided: October 20, 2023
• Docket: 1-22-1705
• Status: Unpublished

Opinion

2023 IL App (1st) 221705-U

No. 1-22-1705

Order filed October 20, 2023

FIFTH DIVISION

NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the limited circumstances allowed under Rule 23(e)(1).

IN THE APPELLATE COURT OF ILLINOIS FIRST JUDICIAL DISTRICT

JOSH HENDERSON, ) Appeal from the ) Circuit Court of Plaintiff-Appellee, ) Cook County. ) v. ) No. 21 CH 05932 ) CITY OF CHICAGO DEPARTMENT OF ) Hon. Anna M. Loftus BUSINESS AFFAIRS AND CONSUMER ) Judge presiding. PROTECTION and MAYOR’S LICENSE ) DISCIPLINE COMMISSION, ) ) Defendant-Appellant. )

PRESIDING JUSTICE MITCHELL delivered the judgment of the court. Justice Mikva and Justice Lyle concurred in the judgment.

ORDER

¶1 Held: The commissioner of the Department of Business Affairs and Consumer Protection did not commit clear error by denying plaintiff a commissioner’s adjustment to register two shared housing units, and the commissioner’s failure to tender the final decision within the time provided by the ordinance did not render the decision invalid.

¶2 Josh Henderson, pro se, appeals the Department of Business Affairs and Consumer

Protection commissioner’s denial of his application for a commissioner’s adjustment to allow for

two additional shared housing units within a four-unit residential building. Henderson raises the No. 1-22-1705

following issues: (i) whether the commissioner clearly erred in denying his application for an

adjustment because the hearing officer improperly weighed the evidence presented; (ii) whether

the delay in tendering the commissioner’s report renders the decision void; (iii) whether Chicago

Municipal Code Section 4-14-100 is unconstitutionally vague, an unconstitutional invasion of

privacy, and an unreasonable property seizure; and (iv) whether Chicago Municipal Code Section

4-14-60(g) unconstitutionally levies excessive fines and authorizes warrantless searches. We

affirm.

¶3 I. BACKGROUND

¶4 Josh Henderson owns two multi-unit properties in Chicago, one in which he lives, and the

other, which is the subject of this appeal, at 1151 W. Waveland Avenue. Henderson applied to

register unit 1 of 1151 W. Waveland as a “shared housing unit” with the Department of Business

Affairs and Consumer Protection, so he could list it as a short-term rental on Airbnb. The

commissioner of the Department denied Henderson’s application because the Chicago Municipal

Code prohibits registering shared housing units that are not the host’s primary residence.

Henderson applied for a commissioner’s adjustment, which requires a petitioner to demonstrate

that the unit will alleviate an extraordinary burden predicated on unique and unusual

circumstances. Citing lost costs and rents lingering from the COVID-19 pandemic, Henderson

received a commissioner’s adjustment as to unit 1 and was permitted to list the unit as an Airbnb.

¶5 After receiving the adjustment, Henderson then applied to register two more units at 1151

W. Waveland, unit 2 and the garden unit. The commissioner denied these applications, and

Henderson again applied for commissioner’s adjustments as to both, presenting largely the same

evidence of the lingering effects of COVID-19 on his business. The commissioner denied these

adjustments, and Henderson appealed to the Mayor’s Licensing Discipline Commission. After a

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hearing, the commissioner affirmed the denials, finding Henderson had not demonstrated unique

and unusual circumstances that created an extraordinary burden the adjustment would remedy.

¶6 Henderson sought administrative review from the circuit court. Henderson argued that

because he presented identical evidence for all three applications, the decision to deny his latter

applications where his former was granted demonstrates that the ordinance conferring authority

upon the commissioner to make such determinations is unconstitutionally vague and leads to

arbitrary results. Henderson also challenges the commissioner’s weighing of the evidence and

alleges that the commissioner tendered the decision 14 days later than prescribed by the ordinance,

in violation of his constitutional rights. The circuit court affirmed the commissioner’s decision.

Henderson timely appealed. Ill. S. Ct. R. 303 (eff. July 1, 2017).

¶7 II. ANALYSIS

¶8 Henderson provides much in the way of argument yet little in the way of supporting legal

authority. Between the two briefs Henderson submitted, there appears to be only a single citation

to case law: Grayned v. City of Rockford, 408 U.S. 104 (1972). Henderson cites the Supreme

Court’s policy considerations for voiding an unconstitutionally vague statute. Otherwise,

Henderson argues multiple provisions of the Chicago Municipal Code violate state and federal

constitutions, with reference to specific sections, but without supporting law or legal analysis.

Henderson also asserts that his fourteenth amendment due process rights were violated when the

hearing officer improperly relied on specific evidence in making her determination, and that the

commissioner submitted the final decision 44 days after the hearing, in violation of Chicago

Municipal Code section 4-14-100(c), and the state and federal constitutions. U.S. Const., amend.

XIV; Ill. Const. 1970, art. I, § 2.

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¶9 The City contends that this appeal should be dismissed for Henderson’s failure to cite legal

authority. Ill. S. Ct. R. 341(h)(7). Alternatively, the City argues that Henderson’s constitutional

claims must fail for lack of standing. On the merits, the City argues that the commissioner’s denial

of Henderson’s application was not clearly erroneous, because the commissioner properly

determined an adjustment was not warranted, and the late tendering of the decision is not a basis

for reversal.

¶ 10 Section 4-14 of the Chicago Municipal Code concerns shared housing units, defined in the

code as small dwelling units rented for transient occupancy (e.g., Airbnbs). Chicago Municipal

Code § 4-14-010 (amended May 25, 2022). Section 4-14-060(e) makes it unlawful to advertise or

rent a shared housing unit in a two-to-four unit building unless such unit is the host’s primary

residence. Chicago Municipal Code § 4-14-060(e) (amended March 24, 2021). This primary

residence rule will not apply to bar a host from listing or renting their unit if they apply for and

receive a commissioner’s adjustment as provided for in Section 4-14-100. Chicago Municipal

Code § 4-14-100 (added June 22, 2016). If a host’s application is denied, they may request a

hearing to present “written submissions, witness testimony, argument, and documents regarding

the application.” § 4-14-100(c). The commissioner reviews applications for adjustments

considering many factors, nine of which are listed in the ordinance “by way of example and not

limitation.” § 4-14-100(a)(2). Factors may include the number of units in the building subject to

the adjustment, the degree the adjustment varies from the prevailing statutory limitations, and

economic hardship to the applicant resulting from denial. Id. An adjustment may only be approved

if the commissioner concludes that it would “eliminate an extraordinary burden on the applicant

in light of unique and unusual circumstances,” and the shared housing unit “would not

detrimentally impact the health, safety, or general welfare of the surrounding property owners or

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general public.” Id. The commissioner is directed to provide a decision within 30 days of the

conclusion of the hearing, which is final for purposes of judicial review. § 4-14-100(c). Section 4-

14-030(c) provides that shared housing units deemed ineligible must be removed from listing

platforms, like Airbnb, and failure to comply will result in a fine of $5000 per occurrence, where

each day of noncompliance constitutes an occurrence. Chicago Municipal Code § 4-14-030(c)

(amended March 24, 2021).

¶ 11 If the statute conferring power on an administrative agency adopts the Illinois

Administrative Review Law, its provisions govern every action to review that agency’s decisions.

Dubin v. Personnel Board of City of Chicago, 128 Ill. 2d 490, 497 (1989). Section 4-14 of the

Chicago Municipal Code does not adopt nor incorporate the Administrative Review Law, and

therefore parties may seek administrative review through a writ of certiorari in the circuit court.

Id. at 498. Though styled as a complaint for administrative review, the circuit court treated

Henderson’s pleading as the appropriate writ of certiorari.

¶ 12 Review under a writ of certiorari are virtually the same as under the Administrative

Review Law, and we therefore review the determination of the agency, and not the circuit court

below. Id.; Landers v. Chicago Housing Authority, 404 Ill. App. 3d 568, 571 (2010). The burden

of proof is on the plaintiff in administrative proceedings. Marconi v. Chicago Heights Police

Pension Board, 225 Ill. 2d 497, 532-33 (2006). The applicable standard of review on appeal

depends on whether the question presented is one of law, fact, or a mixed question of both law and

fact. AFM Messenger Service, Inc. v. Department of Employment Security, 198 Ill. 2d 380, 390

(2001). The commissioner’s factual findings are deemed prima facie true and correct and will not

be overturned unless they are against the manifest weight of the evidence. Cinkus v. Village of

Stickney Municipal Officers Electoral Board, 228 Ill. 2d 200, 210 (2008). Questions of law are

5 No. 1-22-1705

reviewed de novo, and mixed questions of fact and law are reviewed under a clearly erroneous

standard. Id. at 210-11. A decision is clearly erroneous when the reviewing court is “left with the

definite and firm conviction that a mistake has been committed.” (Internal quotation marks

omitted.) Id. at 211 (quoting AFM Messenger, 198 Ill. 2d at 395). This appeal presents a mixed

question of fact and law, where the issue is whether the rule of law was properly applied to the

established facts. Cinkus, 228 Ill. 2d at 211.

¶ 13 Henderson argues that the commissioner improperly relied on certain evidence in denying

his application. In paragraph 7 of the report, the commissioner found that Henderson had failed to

establish the requisite unique or unusual circumstances necessary to qualify for an adjustment. In

support of this finding, the commissioner referenced evidence Henderson presented of businesses,

restaurants, and hotels in the vicinity of the 1151 W. Waveland property which created a greater

burden on the neighborhood than his Airbnbs. The commissioner also referenced Henderson’s

testimony regarding a new construction in the area creating a burden on the neighborhood. Lastly,

the commissioner relied on Henderson’s testimony that he was not opposed to long-term rentals

in the subject units. The commissioner’s decision was based on the “totality of the exhibits and

arguments” presented at the hearing.

¶ 14 Henderson asserts that the evidence referenced in paragraph 7 was not presented to

establish the financial burden factor, even though, he claims, that was the only basis for the denial

of his application. Henderson argues that the commissioner’s declaration that the “totality” of the

evidence supports the conclusion is no replacement for a specific recitation of what evidence

actually underlies the decision.

¶ 15 Henderson’s argument assumes that the commissioner was required to address each

individual factor listed in the adjustment provision and refute the evidence presented as to each

6 No. 1-22-1705

factor independently. In reality, this section provides factors the commissioner “may consider,”

which are included “by way of example and not limitation.” (Emphasis added.) § 4-14-100(a)(2).

The commissioner is not required to consider every factor and may consider additional factors

raised by the evidence before her on the particular facts of the case. The ordinance provides the

primary question for the commissioner to consider:

“Such an adjustment may be approved only if, based on a review of relevant factors,

the commissioner concludes that such an adjustment would eliminate an extraordinary

burden on the applicant in light of unique or unusual circumstances and would not

detrimentally impact the health, safety, or general welfare of surrounding property owners

or the general public.” Id.

It was appropriate for the commissioner to consider evidence of the neighborhood’s condition in

coming to this conclusion. The commissioner’s determination that Henderson did not establish

unique or unusual circumstances was not clearly erroneous on the facts presented in paragraph 7.

To the extent Henderson seeks a specific explanation that addresses the financial hardship factor,

he need only look to paragraph 6 of the report, where the commissioner concluded that “acquiring

equity, lost rent, tenants failing to pay, building maintenance, and lost revenue are ordinary and

regular considerations and did not constitute unique or unusual circumstances[.]” It was within the

commissioner’s discretion to deny Henderson’s application on any and all of the evidence

presented, and the decision to do so was not clearly erroneous.

¶ 16 Henderson argues that considering testimony directed at one factor when adjudicating a

different factor deprived him of procedural due process under the fourteenth amendment. U.S.

Const., amend. XIV. To comport with procedural due process, administrative proceedings must

provide a party with “a meaningful procedure to assert his claim before the deprivation or

7 No. 1-22-1705

impairment of a property right.” Snow v. Chicago Transit Authority, 2022 IL App (1st) 201217,

¶ 54 (citing Mathews v. Eldridge, 424 U.S. 319, 348-49 (1976)). A court will not find a deprivation

of procedural due process absent a showing of substantial prejudice. See Stratton v. Wenona

Community Unit District No. 1, 133 Ill. 2d 413, 435 (1990). Henderson fully presented evidence

to support his claim before the commissioner; due process does not require the commissioner

weigh that evidence favorably to the petitioner, or even in the manner he would prefer. Henderson

received all the procedural due process to which he was entitled.

¶ 17 Henderson next argues that the commissioner violated the adjustment provision when the

final decision was released 44 days after the hearing, instead of 30 days, as specified in the

ordinance. Pertinent here is the phrase “The commissioner shall, within thirty days of the

conclusion of the hearing, tender a decision ***.” (Emphasis added) § 4-14-100(c). As the circuit

court correctly noted, wherever the term “shall” appears in Title 4 of the Chicago Municipal Code,

it is to be “construed as merely directory rather than mandatory.” Chicago Municipal Code § 4-

14-280(b). The distinction between mandatory and directory statutory language “simply denotes

whether the failure to comply with a particular procedural step will or will not have the effect of

invalidating the governmental action to which the procedural requirement relates.” (Internal

quotation marks omitted.) In re M.I., 2013 IL 113776, ¶ 16 (quoting People v. Robinson, 217 Ill. 2d

43, 51-52 (2005)). Section 4-4-280(b) further states that failure to comply with such directory

language will not “result in any loss of jurisdiction by the Commissioner.” § 4-4-280(b). Therefore,

the commissioner’s failure to tender the final decision within 30 days does not necessitate reversal.

¶ 18 The foregoing issues are dispositive of this appeal. However, Henderson also challenged

the constitutionality of the relevant ordinances for the first time in his writ of certiorari before the

circuit court. Generally, issues or defenses not raised before the administrative agency will not be

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considered for the first time on administrative review. Carpetland U.S.A., Inc. v. Illinois

Department of Employment Security, 201 Ill. 2d 351, 396-97 (2002). Though an administrative

agency lacks the authority to invalidate a statute on constitutional grounds or question its validity,

asserting such a challenge on the record provides all parties an opportunity to present evidence to

support or refute the challenge. Texaco-Cities Service Pipeline Co. v. McGaw, 182 Ill. 2d 262,

278-79 (1998). Administrative review is confined to the evidence offered before the agency, and

therefore a party’s right to question the validity of a statute is subject to forfeiture if such a right is

not exercised during the administrative proceedings. Carpetland, 201 Ill. 2d at 397. Henderson’s

claims are forfeit for not being raised in the administrative proceedings. Nevertheless, we briefly

address each in turn.

¶ 19 Henderson argues that the adjustment provision and the provision setting fines are

unconstitutional. § 4-14-100; Chicago Municipal Code § 4-14-30(c) 1. Specifically, Henderson

claims the adjustment provision is unconstitutional for three reasons: (i) the provision fails to

clarify what qualifies as a financial burden, rendering the provision unconstitutionally vague and

open to arbitrary enforcement; (ii) the requirement to demonstrate a financial burden works an

unconstitutional invasion of an applicant’s privacy by implying a need to share sensitive and

personal information; and (iii) the denial of his application would result in his losing equitable

interest in his property, which he claims is an unreasonable property seizure. Henderson argues

that the fine provision is unconstitutional because it imposes excessive fines in violation of state

and federal constitutions. U.S. Const., amend. VIII; Ill. Const. 1970, art. I, § 6. The City argues in

response that Henderson lacks standing to bring these constitutional claims because even if he

1 Henderson cites this provision as Section 4-14-060(g), though his argument makes clear he intends to challenge the provision in Section 4-14-030(c). Section 4-14-060(g) was removed in 2020 by the Chicago City Council, and its provisions concerning penalty fines are now found in Section 4-14-030(c). Chi. City Clerk J. Proc. 20303, 20307 (September 9, 2020). 9 No. 1-22-1705

were successful in striking the challenged provisions, the primary residence rule would bar the

relief he seeks: approval of his shared housing unit registration.

¶ 20 To establish standing in Illinois, a party must claim an injury that is “(i) distinct and

palpable; (ii) fairly traceable to the defendant’s actions; and (iii) substantially likely to be prevented

or redressed by the grant of the requested relief.” Glisson v. City of Marion, 188 Ill. 2d 211, 221

(1999). This court has previously considered standing based on the provisions at issue here. See

Mendez v. City of Chicago, 2023 IL App (1st) 211513. In Mendez, the plaintiffs made similar

arguments challenging the constitutionality of the adjustment provision on vagueness grounds. Id.

¶ 4. Specifically, like Henderson, the plaintiffs contended that the criteria in the ordinance provided

no objective guidance to the commissioner when granting adjustments. Id. ¶ 22. In examining the

ordinance and its legislative history in detail, Mendez concluded that the primary residence rule is

severable from the adjustment provision. Id. ¶ 27 (“[T]he primary residence rule and its narrow

exception are not so mutually connected *** that the city would not have passed the former without

the latter. [Citations.] In short, they are severable.”). As a result, even if those plaintiffs, and

Henderson here, succeeded in striking the challenged provisions, the provision preventing them

from obtaining relief would remain. Id. (citing Village of Chatham v. County of Sangamon, 216

Ill. 2d 402, 423 (2005)). Because Henderson’s claimed injury cannot “be prevented or redressed

by the grant of the requested relief,” he lacks standing to bring his constitutional challenges to the

ordinances. Glisson, 188 Ill. 2d at 221.

¶ 21 Henderson claims the primary residence rule is satisfied because he lives next door to the

subject property, but Henderson misinterprets the factor which addresses the degree to which the

sought adjustment “varies from the prevailing limitations.” § 4-14-100(a)(2). The prevailing

limitations are the statutory restrictions imposed by the Code; in this case, the limit on the number

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of shared housing units in a building that is not one’s primary residence. For a two-to-four-unit

building, that limitation is zero, meaning that without an adjustment, a host is allowed zero shared

housing units. Henderson’s first application sought an adjustment that varied from that prevailing

limitation by one. On the facts presented, the commissioner concluded Henderson had presented

evidence of unique and unusual circumstances sufficient to justify a deviation from the limitation,

zero to one. On his subsequent applications, because he had already been granted an adjustment,

Henderson’s sought adjustments substantially varied from the prevailing limitation, allowing three

units where the limit was zero. Moreover, the ordinance defines a primary residence as “the

dwelling where a person lives on a daily basis at least 245 days in the applicable calendar year.”

§ 4-14-010. As Henderson emphasizes that he does not live at 1151 W. Waveland and instead lives

next door, the subject property is not his primary residence, and in the absence of an adjustment,

he is not permitted the shared housing units he seeks to register.

¶ 22 Henderson also raises a facial challenge against the adjustment provision, arguing its lack

of delineated numerical guidelines, and the implication that businesses may need to provide

sensitive or personal information to demonstrate a financial burden, violate the privacy clause of

the Illinois Constitution. Ill. Const. 1970, art. I, § 6. The decision to include or omit numerical

guidelines is a legislative decision made by the Chicago City Council. Henderson does not explain

what, if any, documents or information he considers too intrusive to have provided to the

commissioner, and the ordinance does not require applicants to provide any documentation at all.

The petitioner bears the burden of proof and may choose to support their application with whatever

documents they wish. Marconi, 225 Ill. 2d at 532. An ordinance is only facially unconstitutional

if no circumstances exist where it may be valid, Napleton v. Village of Hinsdale, 229 Ill. 2d 296,

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306 (2008), and Henderson has not carried the burden of establishing the ordinance is

unconstitutional even as applied to him.

¶ 23 Henderson next argues that the adjustment provision is unconstitutional, as applied,

because the denial of his application would result in his losing equity in the property, constituting

an unreasonable property seizure under state and federal constitutions. Ill. Const. 1970, art. I, § 6;

U.S. Const., amend. XIV. “[T]he privilege of every citizen to use his property according to his

own will is both a liberty and a property right.” Napleton, 229 Ill. 2d at 310 (quoting Western

Theological Seminary v. City of Evanston, 325 Ill. 511, 521 (1927)). However, such a right gives

way to the local exercise of police power in enacting restrictions for the protection of the “health,

comfort, safety, and welfare of society.” Id. (quoting Booth v. People, 186 Ill. 43, 48-49 (1900)).

A city’s exercise of its police power in this way is subject to rational basis scrutiny. Id. at 315.

Henderson’s right to use his property as he wishes, including his right to earn and retain equity,

are therefore subject to regulations rationally related to a legitimate purpose. Id. at 314; see also

Hannifin Corp. v. City of Berwyn, 1 Ill. 2d 28, 35 (1953). Because the ordinance works to limit the

number of shared housing units in the city to reduce the burden or nuisance they may impose upon

neighboring residents, and the ordinance is a rational means to achieve that end, the denial of

Henderson’s application for a commissioner’s adjustment did not violate his constitutional rights.

¶ 24 Henderson claims that the $5000 fines for not removing unregistered rental listings are

disproportionate to the offense and therefore violate the federal constitution. U.S. Const., amend.

VIII; § 4-14-030(c). Henderson presented no evidence before the commissioner that he had ever

been fined under this provision, and therefore lacks standing to bring the challenge. Glisson, 188

Ill. 2d at 221 (“[S]tanding requires some injury in fact to a legally cognizable interest ***.”).

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¶ 25 Henderson’s final constitutional contention is that efforts by the commissioner and the

department to discover noncompliant rental listings constitute warrantless searches. Ill. Const.

1970, art. I, § 6. Henderson does not cite any ordinance and does not allege he has been the target

of any warrantless searches, but alleges that, to enforce section 4-14, municipal employees would

be required to conduct electronic searches to locate offending listings. Because Henderson seems

to be challenging the constitutionality of the Department’s method of enforcing the ordinance, and

that method, whatever it may be, is not before us on this appeal, this argument is forfeited.

¶ 26 III. CONCLUSION

¶ 27 For the foregoing reasons, the decision of the commissioner of the Department of Business

Affairs and Consumer Protection is affirmed.

¶ 28 Affirmed.