City of O'Fallon v. CenturyLink, Inc.

• Decision Date: 14 March 2013
• Docket Number: Case No. 4:12CV1124SNLJ.
• Citation: 930 F.Supp.2d 1035
• Parties: CITY OF O'FALLON, MO., et. al., Plaintiffs, v. CENTURYLINK, INC., et. al., Defendants.
• Court: U.S. District Court — Eastern District of Missouri

930 F.Supp.2d 1035

CITY OF O'FALLON, MO., et. al., Plaintiffs,

v.CENTURYLINK, INC., et. al., Defendants.

Case No. 4:12CV1124SNLJ.

United States District Court,

E.D. Missouri,

Eastern Division.

March 14, 2013.

Douglas R. Sprong, John W. Hoffman, Korein Tillery LLC, St. Louis, MO, for Plaintiffs.

Jeffrey S. Russell, Mark B. Leadlove, John Griffin, James R. Wyrsch, Bryan Cave LLP, Stephen R. Clark, Timothy J. McFarlin, Clark Law Firm, LLC, St. Louis, MO, for Defendants.

MEMORANDUM

STEPHEN N. LIMBAUGH, JR., District Judge.

Plaintiffs originally filed this putative class lawsuit in the Circuit Court of St. Louis County, Missouri. On or about June 21, 2012 defendants removed the case to federal court wherein it was assigned to this Court. This matter is before the Court on the plaintiffs' motion to remand [16], filed July 17, 2012. All responsive pleadings have now been filed and the matter is ripe for disposition.

The plaintiffs, individually and on behalf of the putative class, filed suit in the Circuit Court of St. Louis County, Missouri seeking to impose business license taxes on defendants in connection with the defendants' provision of telephone services in certain Missouri municipalities. Plaintiffs allege that they are lawful municipal corporations and cities located in the State of Missouri that have adopted ordinances which impose a license tax upon companies engaged in the business of supplying telephone services within their respective cities. They allege that although the defendants pay license taxes pursuant to these subject ordinances, plaintiffs contend that the defendants do not pay the required taxes on gross receipts derived from exchange access, interexchange access, special access, interconnection facilities and equipment for use, toll or long-distance, reciprocal compensation arrangements, Federal Universal Service Fund surcharges, State Universal Service Fund surcharges, end user common line charges, intrastate telephone services, and other sources. Petition [4], ¶¶ 15, 30. Plaintiffs further allege that the defendants, while engaging in the business of supplying telephone services in the plaintiffs' territories (as well as other Missouri municipalities), and within the meaning of the plaintiffs' and other municipalities' license tax ordinances, and have derived gross receipts from such business during the preceding five (5) years, have failed to pay the required license taxes on gross receipts derived from such business during the preceding five (5) years. Petition [4], ¶¶ 25, 30.

Plaintiffs further seek to represent a class of “all Missouri cities or other political subdivisions which have adopted an ordinance in effect that imposes a business or occupational license tax on any person engaged in the business of supplying or furnishing telephone service (including exchange telephone service) in the city or political subdivision, or who is otherwise engaged in a telephone business therein.” Petition [4], ¶ 13. Plaintiffs allege that the proposed class “should include at least 40 Missouri municipalities.” Petition [4], ¶ 14. Finally, plaintiffs seek a declaration that their (and other municipalities') license tax ordinances apply to the subject gross receipts and an injunction requiring defendants to pay taxes on these receipts.

On June 21, 2012 defendants filed their Notice of Removal asserting federal original jurisdiction pursuant to the Class Action Fairness Act of 2005 (CAFA). Defendants contend that the requirements of CAFA have been met in that there is minimal diversity, the amount in controversy exceeds $5 million in the aggregate, and the action involves at least one hundred (100) or more class members.

Plaintiffs contend that the Court should remand this action because the defendants have failed to demonstrate that this action involves at least 100 class members, and/or that the amount in controversy exceeds $5 million. Plaintiffs further contend, in the alternative, that the Court should remand because the nexus of the lawsuit is a “local controversy” within the meaning of 28 U.S.C. § 1332(d)(4)(A); an exception to CAFA jurisdiction. Finally, again in the alternative, the plaintiffs argue that the Court should abstain from exercising its original federal jurisdiction pursuant to the legal principles of federalism and comity.

After careful consideration of the parties' pleadings, exhibits, and relevant caselaw, the Court will grant the motion to remand.

CAFA—Governing Jurisdictional Standards

Under CAFA, federal district courts have original jurisdiction over class actions where there is 1) minimal diversity of citizenship among the parties; 2) there are at least 100 class members; and 3) the amount in controversy exceeds $5 million. 28 U.S.C. § 1332(d)(2), (d)(5); Hargis v. Access Capital Funding, LLC., 674 F.3d 783, 788–89 (8th Cir.2012); Westerfeld v. Indep. Processing, LLC, 621 F.3d 819, 822 (8th Cir.2010); Boegeman v. Bank Star, 2012 WL 4793739, *2 (E.D.Mo. October 9, 2012). A defendant seeking to remove on CAFA grounds must establish by a preponderance of the evidence each of the three (3) jurisdictional elements. Rolwing v. Nestle Holdings, Inc., 666 F.3d 1069, 1071 (8th Cir.2012); Bell v. Hershey Co., 557 F.3d 953, 957 (8th Cir.2009); Hewitt II v. Gerber Products Co., 2012 WL 5410753, *7 (W.D.Ark. November 6, 2012). If the removing party meets this burden, then the party seeking remand must establish to a legal certainty that the requirements for CAFA jurisdiction have not been met. Rolwing, at 1069citingBell, at 959.

However, even if the removing party establishes by a preponderance of the evidence the jurisdictional requirements under CAFA, and the party seeking remand fails to successfully demonstrate, pursuant to a legal certainty, that the jurisdictional requirements under CAFA have not been met, removal may still be thwarted. Congress has established two (2) mandatory exceptions to federal jurisdiction under CAFA: the “home-state” and “local controversy” exceptions. Westerfeld, at 821.

Finally, the Court is bound to consider only jurisdictional facts present at the time of removal, and not those occurring subsequently. Rolwing, at 1073. Furthermore, the enactment of CAFA did not alter the traditional rule that the plaintiff is the “master of the complaint,” and as such, jurisdictional facts must be considered in light of the allegations as contained in the plaintiff's complaint at the time of removal. Hargis, at 789–90;Bell, at 956.

CAFA—100 Class Members Requirement

Plaintiffs, in their complaint, define the class as “all Missouri cities or other political subdivisions which have adopted an ordinance in effect that imposes a business or occupational license tax on any person engaged in the business of supplying or furnishing telephone service (including exchange telephone service) in the city or political subdivision, or who is otherwise engaged in a telephone business therein.” Petition [4], ¶ 13. Plaintiffs further contend that the class claims include “whether said license tax ordinances apply to the gross receipts derived by the Defendants from exchange access, interexchange access, special access, interconnection facilities and equipment for use, toll or long-distance, reciprocal compensation arrangements, Federal Universal Service Fund (‘FUSF’) surcharges, State Universal Service Fund (‘SUSF’) surcharges, End User Common Line (‘EUCL’) charges, intrastate telephone services, and other sources.” Petition [4], ¶ 15. Furthermore, plaintiffs contend that the class claims include demands upon the defendants to pay the subject license taxes for the preceding five (5) years and the defendants refused to do so. Petition [4], ¶¶ 18, 25, 26. Finally, the plaintiffs assert that the proposed class should “include at least 40 Missouri municipalities ...” Petition [4], ¶ 14. Although this is a vague number and possibly could number 100 or more class members, the burden is upon the defendants, as the removing party, to demonstrate this “possibility” by a preponderance of the evidence. Defendants have failed to carry this burden.

In addressing the putative class number requirement in their Notice of Removal [1], defendants simply state the following:

Moreover, in 2011, the CenturyLink-related entities identified in the Complaint remitted some form of municipal franchise fees or business license taxes to approximately 200 Missouri municipalities.

Defendants' Notice of Removal [1], ¶ 19. The Declaration of Kiran Seshagiri [3] is the only cited exhibit in support of this statement.

Firstly, nowhere in the plaintiffs' complaint is there any mention of, reference to, or claim involving city or municipal ordinances requiring the defendants to pay a “franchise fee.” Plaintiffs' claims are entirely limited to ordinances requiring the payment of “business license taxes” based upon the defendants' alleged gross receipts from certain name sources and not paid for the preceding five (5) years.¹ Secondly, nowhere in the Seshagiri Declaration is there any mention whatsoever about this case involving at least 200 Missouri municipalities. Class size is not addressed at all in the Seshagiri Declaration.

In an effort to bolster its class size argument, defendants next contend that they can show “at least sixty more potential class members” by virtue of a “map of the State of Missouri identifying the ‘incumbent’ local exchange carriers serving each geographic territory.” Defendants' Response [18], pg. 3, Exhibit A.

Once again, this “evidence” falls short of carrying defendants' burden regarding CAFA's numerosity requirement. Plaintiffs' class specifically embraces 1) all Missouri cities and/or political subdivisions; 2) which have adopted ordinances; 3) that impose a business or occupational tax on entities engaged in the business of providing telephone services within the identified class member's boundaries. All Exhibit A shows are the municipalities or cities in which the...