City of Columbia v. Spectra Commc'ns Grp., LLC
| Docket Number | ED 109769 |
| Decision Date | 19 July 2022 |
| Citation | 652 S.W.3d 356 |
| Parties | CITY OF COLUMBIA, et al., Respondents, v. SPECTRA COMMUNICATIONS GROUP, LLC, et al., Appellants. |
| Court | Missouri Court of Appeals |
Mark B. Ledlove, Timothy Beyer, One Metropolitan Square, 211 North Broadway, Jonathan B. Potts, Ste. 3600 St. Louis, Mo 63102, Adam S. Hochschild, P. O. Box 401, Plainfield, VT 05667, for appellants.
David A. Streubel, Margaret E. Meisel, 333 South Kirkwood Rd., Ste. 300, St. Louis, MO 63122, for respondents.
Introduction
Respondents City of Columbia and City of Joplin ("Cities") sued Appellants Spectra Communications Group, LLC, Embarq Missouri, Inc., CenturyLink Communications, LLC, and CenturyLink, Inc. (collectively, "CenturyLink") in the Circuit Court of St. Louis County for alleged violations of the Cities’ license tax ordinances. The circuit court granted partial summary judgment to the Cities on liability on all counts, ordered CenturyLink to provide a full accounting of its revenues and tax liability in each city, and assessed attorneys’ fees and expenses. After lengthy discovery disputes, the circuit court struck CenturyLink's pleadings related to damages as a sanction for CenturyLink's failure to comply with the court's orders. The circuit court's judgment awarded damages, interest, penalties, attorneys’ fees, and expenses of $53,802,060.70 to Columbia, and $1,153,678.23 to Joplin.
CenturyLink raises nine points on appeal. In Points I and II, CenturyLink argues the circuit court erred in granting partial summary judgment to the Cities because (1) the plain language of the license tax ordinances imposes a tax on revenue from only "local exchange service" from "telephones located within the city limits" of Columbia, and on receipts from only "exchange telephone service" sold to "consumers" within Joplin, rather than all revenue and receipts received by CenturyLink in each city; and (2) the Cities, by failing to show that all disputed revenues were taxable under the ordinances, did not demonstrate the absence of a genuine issue of material fact.
CenturyLink argues in Points III, IV, and V that the circuit court erred in awarding damages to the Cities because (1) the judgment erroneously declared that all revenue and receipts were taxable; (2) substantial evidence did not support the award because the Cities did not present evidence that their damages calculations complied with the terms of the ordinances; and (3) damages for unpaid taxes incurred before November 20, 2009 fell outside the applicable five-year statute of limitations and the statute was not tolled.
In Point VI, CenturyLink argues the circuit court abused its discretion in sanctioning CenturyLink because it engaged in good-faith attempts to comply with overbroad discovery requests, its actions did not prejudice the Cities, and the sanctions were extreme.
Finally, CenturyLink argues in Points VII, VIII, and IX that the circuit court abused its discretion in awarding the Cities attorneys’ fees and expenses because (1) the circuit court erroneously determined that CenturyLink's interpretation of the ordinances was unjustifiable; (2) the Cities lacked standing under Section 392.350;1 and (3) the award was unnecessary for purposes of discovery.
We affirm the judgment of the circuit court in part, reverse in part, and remand the case for further proceedings consistent with this opinion.
Facts and Procedural Background
License Tax Ordinances
The Cities’ license tax ordinances impose a tax on certain telephone services provided in the Cities. CenturyLink is a telephone company operating in the Cities and subject to the license taxes.
Columbia Code § 26-121(a) states:
Every person engaged in the business of supplying telephone service in the city for compensation for any purpose shall pay to the city a license tax in an amount equal to seven (7) per cent of the annual gross revenue received by such person for local exchange service from telephones located within the city limits.
Joplin City Code § 30-143 states:
In addition to any other taxes, payments or requirements required by law, a quarter-annual license fee of six percent of the gross receipts of each public utility from the sale of its services to consumers within the present or future boundaries of the city shall be paid.
Joplin's ordinance defines a "public utility" as "any person furnishing exchange telephone service." Id. at § 30-141.
O'Fallon Class Action Lawsuit and Aurora Decision
Two years before the Cities filed their petition, a separate class action lawsuit against CenturyLink was filed on May 10, 2012. See City of O'Fallon v. CenturyLink, Inc. , 491 S.W.3d 276, 278 (Mo. App. E.D. 2016). The lawsuit was brought on behalf of Missouri municipalities whose license taxes allegedly were not fully paid by CenturyLink. Id. Columbia and Joplin were putative class members until they requested exclusion from the lawsuit.
A similar lawsuit, City of Aurora v. Spectra Comms. Grp., LLC , also was brought in 2012 and culminated in a published opinion of the Supreme Court of Missouri. 592 S.W.3d 764 (Mo. banc 2019). The Aurora decision was published after the circuit court in the present case granted partial summary judgment to the Cities. In light of Aurora , CenturyLink moved to set aside the partial summary judgment and for reconsideration of discovery sanctions. The circuit court denied the motions.
Petition and Counterclaims
The Cities filed their eight-count petition on November 20, 2014. Counts I and II sought a declaratory judgment that CenturyLink failed to report and pay license taxes due under the ordinances and to enjoin CenturyLink from violating the ordinances. Counts III and IV sought an accounting to determine the nature and extent of gross revenue and receipts CenturyLink excluded from the license taxes. Counts V and VI sought damages in the amount of CenturyLink's underpayment of the license taxes. Counts VII and VIII sought damages and attorneys’ fees under Section 392.350 for CenturyLink's willful dereliction to pay license taxes.
CenturyLink filed an answer, affirmative defenses, and two counterclaims, one seeking a declaratory judgment that the Cities could not adopt an interpretation of their ordinances to tax CenturyLink's non-taxable revenue streams, and the other seeking attorneys’ fees.
Partial Summary Judgment
On June 30, 2016, the Cities moved for partial summary judgment on liability as to all counts. The Cities argued there was no genuine issue of material fact and it was well settled Missouri law that, in the context of a license tax, gross receipts mean all receipts, without exception. The Cities also argued that CenturyLink's violation of the ordinances was willful, warranting attorneys’ fees under Section 392.350. They noted that the Aurora circuit court previously had found that CenturyLink willfully excluded revenue from its calculations of other municipal license taxes.
CenturyLink filed a cross-motion for partial summary judgment. It argued the Cities’ claims were barred by the statute of limitations, which was not tolled by the Cities’ status as putative class members in O'Fallon . CenturyLink also argued the Cities were not entitled to attorneys’ fees because they could not establish willfulness as a matter of law, and the Cities lacked standing because they are not "persons" or "corporations" under Section 392.350.
The motions were extensively briefed, including CenturyLink's notice of supplemental authority of the Aurora circuit court's entry of judgment. CenturyLink argued the Aurora judgment rejected the Cities’ theory of liability.
In an order of June 8, 2017, the circuit court granted partial summary judgment on liability to the Cities on Counts I, II, III, IV, V, and VI. In its order, the circuit court held that the Cities’ ordinances required CenturyLink to pay license taxes on all gross revenue and receipts attributable to its business in the Cities. The court rejected CenturyLink's position that the license taxes and the gross revenue and receipts taxed were limited to "local exchange service" and "exchange telephone service." The court held that the Cities’ ordinances "tax, without exception, all of the gross receipts Defendants receive from providing telephone service in each city." The court further concluded that the applicable statute of limitations is five years, and that the Cities were entitled to sue despite that they were not "persons" or "corporations." The circuit court held that CenturyLink's withholding certain revenue and receipts when computing the license taxes was willful and the Cities were entitled to partial summary judgment on Counts VII and VIII.
For the same reasons, the court denied CenturyLink's motion for partial summary judgment. The court ordered CenturyLink to provide the Cities a full accounting of revenue received in each city, and of the license taxes paid, and ordered CenturyLink to pay the Cities their costs, including attorneys’ fees, pursuant to Sections 392.350, 488.472, and 527.100.
Discovery Disputes
The Cities filed a motion to enforce accounting shortly after the circuit court granted them partial summary judgment. CenturyLink opposed the Cities’ motion, arguing it already produced all relevant data and the pendency of Aurora required a stay of all proceedings.
On October 10, 2017, the circuit court granted the Cities’ motion. The court ordered CenturyLink to disclose the amount and source of all revenue attributable to its business in each of the Cities in a usable form that enabled the court and the parties to understand the data. The court also ordered CenturyLink to disclose all revenue that it had excluded from reporting and payment of taxes. The court enumerated revenue categories for which CenturyLink must provide data. The court also ordered CenturyLink to disclose revenue received...
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