City of Aurora v. Spectra Commc'ns Grp., LLC

Decision Date24 December 2019
Docket NumberNo. SC 96276,SC 96276
Citation592 S.W.3d 764
Parties CITY OF AURORA, Missouri, et al., Respondents/Cross-Appellants, v. SPECTRA COMMUNICATIONS GROUP, LLC, d/b/a/ CenturyLink, et al., Appellants/Cross-Respondents.
CourtMissouri Supreme Court

CenturyLink was represented by Timothy R. Beyer of Bryan Cave LLP in Denver, Colorado, (303) 861-7000, and Mark B. Leadlove and Jonathan B. Potts of Bryan Cave LLP in St. Louis, (314) 259-2000.

The cities were represented by David A. Streubel, Margaret C. Eveker and Daniel G. Vogel of Cunningham, Vogel & Rost PC in St. Louis, (314) 446-0800.

Patricia Breckenridge, Judge

The cities of Aurora, Cameron, Oak Grove, and Wentzville (collectively, "the Cities")1 filed an action for declaratory judgment and injunctive relief against CenturyLink, Inc. f/k/a CenturyTel, Inc., and its subsidiaries.2 In their petition, the Cities alleged CenturyLink failed to pay all license taxes owed under the Cities’ respective ordinances since 2000. The Cities also alleged CenturyLink failed to enter into right-of-way user agreements under Cameron’s and Wentzville’s respective ordinances and failed to pay Cameron’s linear foot fees. The trial court entered two partial summary judgments in favor of the Cities on the issue of liability, and the case proceeded to trial on the limited issue of damages resulting from CenturyLink’s delinquent and unpaid taxes to the Cities. After trial, the court entered a final judgment for the Cities and awarded damages for unpaid license taxes. The trial court also awarded the Cities attorney fees, prejudgment interest, and postjudgment interest.

CenturyLink and the Cities filed cross-appeals. CenturyLink raises nine points on appeal. The Cities raise eight points on cross-appeal. The trial court’s judgment is affirmed in all respects except for the following:

The trial court erred in awarding prejudgment interest to Aurora, Cameron, and Oak Grove pursuant to section 408.0203 because the more specific provisions in sections 71.625.2, RSMo 2012, 144.170, and 32.065 govern interest on the delinquent payment of license taxes. The trial court further erred in awarding prejudgment interest to Wentzville pursuant to its municipal ordinance because the rate of interest in its ordinance conflicts with the rate of interest provided by statutes. The trial court also erred in awarding attorney fees to Aurora, Cameron, and Oak Grove. The record does not support the trial court’s finding that CenturyLink’s failure to pay the Cities’ license taxes was willful pursuant to sections 392.350 and 488.472. Likewise, the record does not reflect any special or unusual circumstances justifying an award of attorney fees pursuant to section 527.100 or the trial court’s equitable powers. Accordingly, the award of attorney fees to Aurora, Cameron, and Oak Grove is reversed. CenturyLink, however, did not challenge the trial court’s award of attorney fees pursuant to Wentzville’s municipal code. Consequently, the attorney fees awarded to Wentzville must be affirmed.

The cause is remanded. On remand, the trial court must calculate prejudgment interest in accordance with this opinion, determine what portion it’s attorney fee award may be properly apportioned to Wentzville, and determine Wentzville’s attorney fees on appeal.

I. Factual and Procedural Background

In 2012, the Cities brought a declaratory judgment action against CenturyLink alleging it had failed to pay all of the required license taxes owed under the Cities’ respective ordinances. The Cities further alleged CenturyLink failed to enter into right-of-way user agreements with Cameron and Wentzville and failed to pay Cameron linear foot fees under Cameron’s right-of-way ordinance.

CenturyLink denied failing to pay all taxes and linear foot fees due under the Cities’ respective ordinances. CenturyLink also denied being required to enter into right-of-way user agreements with Cameron and Wentzville. In its answer, CenturyLink asserted several affirmative defenses, including that the Cities’ claims were barred to the extent they sought to collect tax on certain services and revenue streams beyond those permitted by the Cities’ respective ordinances. CenturyLink further asserted that the grandfathered political subdivision provision under section 67.1846.1 permitting linear foot fee ordinances existing prior to May 1, 2001, was a constitutionally invalid special law and that Cameron’s and Wentzville’s user permits or agreements created impermissible mandatory franchises for use of the public rights-of-way.4

The Cities subsequently filed a motion for partial summary judgment alleging all sources of revenue received by CenturyLink constituted gross receipts for purposes of calculating license taxes. The motion further alleged CenturyLink was required to comply with Cameron’s and Wentzville’s right-of-way ordinances. In opposing the motion, CenturyLink asserted the Cities were attempting to tax telecommunication services beyond those derived from the Cities. CenturyLink further contended Cameron and Wentzville were prohibited from requiring telecommunication companies such as CenturyLink to enter into right-of-way agreements, which it asserted were constituted mandatory franchise agreements prohibited under section 67.1842.

On April 17, 2014, the trial court entered partial summary judgment in the Cities’ favor. The trial court found CenturyLink failed to pay taxes as required under the Cities’ respective license tax ordinances on four types of revenue: (1) license tax pass through; (2) vertical and optional calling services; (3) end-user common-line charge and subscriber line charge; and (4) federal and state universal service funds. The trial court then awarded the damages from such revenues as were calculable and ordered an accounting as to the other identified revenues.

The trial court also concluded that Cameron’s right-of-way code is valid and enforceable and ordered CenturyLink to enter into a use permit agreement with Cameron. It further ordered CenturyLink to pay $138,914.04 in linear foot fees plus interest. The trial court similarly concluded Wentzville’s right-of-way code is valid and enforceable and ordered CenturyLink to enter into a right-of-way use agreement with Wentzville.

Finally, the trial court concluded the Cities were entitled to summary judgment on their claims that CenturyLink’s failure to fully report all of its gross receipts was unlawful and subjected the Cities to undue and unreasonable prejudice under section 392.200, RSMo Supp. 2012. The trial court further found CenturyLink’s "unlawful actions" were willful under section 392.350 and ordered CenturyLink to pay attorney fees pursuant to sections 392.350, 488.472, and 527.100.

In 2015, the Cities filed their second motion for partial summary judgment in which they alleged their respective ordinances required CenturyLink to pay license taxes on all gross receipts. The Cities further alleged they were entitled to back taxes, interest, and penalties from CenturyLink for delinquent or underpaid taxes. In response, CenturyLink asserted the Cities’ interpretation of their ordinances was unconstitutional because the Cities could not recover taxes for services furnished beyond their municipal boundaries. CenturyLink also contended the Cities failed to establish, as a matter of law, that their ordinances applied to the disputed types of revenue in the Cities.

On April 6, 2016, the trial court entered an order granting partial summary judgment in the Cities’ favor. It found CenturyLink was liable for license taxes to each city for all revenue it received "in that City." It further concluded CenturyLink was in the business of furnishing exchange telephone service in Aurora and Cameron and supplying telephone service in Oak Grove and Wentzville. The order stated CenturyLink "must pay license taxes in each City on all revenues in such City specified in the Court’s Order June 2, 2014 and all other revenue in such City."

The June 2, 2014 order was entered after the Cities filed a motion to compel CenturyLink to disclose documentation pertaining to revenues received by CenturyLink from business or operations in each city. The trial court ordered CenturyLink to disclose all attributable revenue relating to each city and listed 29 different categories of revenue, including carrier access and interstate services.

In 2016, the case proceeded to trial on the limited issue of damages. The Cities called their expert witness to testify about his damages calculations, which included all types of the disputed forms of revenue. CenturyLink called several witnesses to testify about which revenue sources were derived from services furnished in the Cities. CenturyLink also introduced exhibit U2, which summarized the various revenue streams but excluded carrier access revenues from all the Cities and interstate service revenue from Wentzville. Exhibit U2 also credited CenturyLink for payments it had made under protest pursuant to section 139.031, RSMo Supp. 2012. CenturyLink began paying the Cities their license taxes under protest after the Cities filed suit. Those protest actions remained pending at the time of trial.

The Cities objected to testimony from CenturyLink’s witnesses regarding which revenue streams were derived from services in the Cities on grounds that the April 6, 2016 partial grant of summary judgment had already determined that all revenue sources were taxable under the Cities’ respective ordinances. The Cities further objected to exhibit U2 on the ground CenturyLink had failed to provide them with the underlying documentation allegedly summarized in the exhibit. The trial court overruled the Cities’ objections.

On February 23, 2017, the trial court entered its final judgment in which it found a five-year statute of limitations applied to the Cities’ claims and declared the tax base under Aurora’s, Cameron’s, and Oak Grove’s respective license...

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