Metropolis Theater Company, Plffs. In Err. v. City of Chicago and Ernest J. Magerstadt

Background

The dispute involves a group of Chicago theaters and the city of Chicago. The city’s ordinance divides places of amusement into twenty-one classes and puts theatrical, vaudeville, variety, and similar shows in the first class. The law sets annual license fees by the highest ticket price charged: $1,000 if any seat costs $1 or more; $400 if over 50 cents but under $1; and lower fees for lower prices. The theater owners sued, arguing the $1,000 fee for theaters that charge $1 violates the Fourteenth Amendment because the fee does not correspond to seating capacity or actual revenue. The record shows wide variation in seating, ticket prices by seat, and receipts among theaters, and details of prior licensing and business investments are described in the complaint.

Reasoning

The core question was whether using ticket price to place theaters in a high-fee category is an unfair, arbitrary classification. The Court explained that ticket price is naturally related to a theater’s success and revenue and that the distinction theaters themselves make between higher- and lower-priced seats is not artificial. The opinion stresses that legislatures have wide latitude in classifying businesses and that only measures that are palpably arbitrary violate the Fourteenth Amendment. Applying that standard, the Court found the pricing-based distinction not so arbitrary as to be unconstitutional and affirmed the judgment.

Real world impact

The decision allows cities to continue setting license fees tied to ticket prices rather than seating counts or exact revenues. Theaters that charge higher admission may face much larger annual fees even when seating capacity or total receipts differ. The ruling upholds broad local authority to use practical business distinctions when designing tax and license systems.