Phone Recovery Servs., LLC v. Qwest Corp.

• Decision Date: 07 August 2017
• Docket Number: A17-0078.
• Citation: 901 N.W.2d 185
• Court: Minnesota Court of Appeals
• Parties: PHONE RECOVERY SERVICES, LLC, for itself and ON BEHALF OF the STATE of Minnesota, Appellant, v. QWEST CORPORATION, a Colorado company, et al., Respondents, Citizens Telecommunications Company of Minnesota, LLC, a Delaware company, et al., Respondents, Telephone and Data Systems, Inc., et al., Respondents, Pine Island Telephone Company, et al., Respondents, Level 3 Communications, LLC, a Delaware company, et al., Respondents, Onvoy, LLC, et al., Respondents, Bandwidth.com CLEC, LLC, a Delaware company, et al., Respondents, MCC Telephony of Minnesota, LLC, a Delaware company, et al., Respondents, Jaguar Communications, Inc., et al., Respondents, Windstream Holdings, Inc., et al., Respondents, XO Communications, LLC, et al., Respondents, AT & T Corporation, et al., Respondents.

901 N.W.2d 185

PHONE RECOVERY SERVICES, LLC, for itself and ON BEHALF OF the STATE of Minnesota, Appellant,

v.QWEST CORPORATION, a Colorado company, et al., Respondents, Citizens Telecommunications Company of Minnesota, LLC, a Delaware company, et al., Respondents, Telephone and Data Systems, Inc., et al., Respondents, Pine Island Telephone Company, et al., Respondents, Level 3 Communications, LLC, a Delaware company, et al., Respondents, Onvoy, LLC, et al., Respondents, Bandwidth.com CLEC, LLC, a Delaware company, et al., Respondents, MCC Telephony of Minnesota, LLC, a Delaware company, et al., Respondents, Jaguar Communications, Inc., et al., Respondents, Windstream Holdings, Inc., et al., Respondents, XO Communications, LLC, et al., Respondents, AT & T Corporation, et al., Respondents.

A17-0078.

Court of Appeals of Minnesota.

Filed August 7, 2017

Review Granted October 25, 2017

Katherine S. Barrett Wiik, Gary L. Wilson, Troy F. Tatting, Geoffrey H. Kozen, Robins Kaplan LLP, Minneapolis, Minnesota (for appellant).

Thomas H. Boyd, William A. McNab, David M. Aafedt, Winthrop & Weinstine, P.A., Minneapolis, Minnesota; and Misty Smith Kelley (pro hac vice), Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., Chattanooga, Tennessee (for respondents Qwest Corporation, et al.).

Robert Cattanach, Bryan C. Keane, Dorsey & Whitney, LLP, Minneapolis, Minnesota (for respondents Citizens Telecommunications Company of Minnesota, LLC, et al.).

Curtis D. Smith, Richard J. Johnson, Moss & Barnett, P.A., Minneapolis, Minnesota (for respondents Telephone and Data Systems, Inc., et al.).

Michael J. Ahern, Edward B. Magarian, Dorsey & Whitney LLP, Minneapolis, Minnesota (for respondents Pine Island Telephone Company, et al.).

Thomas R. Muck, Aron J. Frakes, Emily A. Unger, Fredrikson & Byron, P.A., Minneapolis, Minnesota; and Megan Thibert-Ind (pro hac vice), McDermott Will & Emery, LLP, Chicago, Illinois (for respondents Level 3 Communications, LLC, et al.).

David G. Parry, Kadee J. Anderson, Stinson Leonard Street LLP, Minneapolis, Minnesota (for respondents Onvoy, LLC, et al.).

Gregory R. Merz, Gray Plant Mooty, Minneapolis, Minnesota (for respondents Bandwidth.com CLEC, LLC, et al.).

Monte A. Mills, Mark L. Johnson, Greene Espel PLLP, Minneapolis, Minnesota (for respondents Windstream Holdings, Inc., et al.).

Wayne E. Reames, Belin McCormick, P.C., Des Moines, Iowa (for respondents XO Communications, LLC, et al.).

Karla M. Vehrs, Lindquist & Vennum, Minneapolis, Minnesota (for respondents AT & T Corporation, et al.).

Considered and decided by Cleary, Chief Judge; Johnson, Judge; and Reilly, Judge.

OPINION

CLEARY, Chief Judge

On appeal from the entry of judgment, appellant Phone Recovery Services LLC argues that the district court erred by relying on Minn. Stat. § 15C.03 in dismissing the amended complaint. Because the 911, TAM, and TAP charges are taxes, and because the statutes that require the collection and remittance of those charges are "[s]tatutes relating to taxation," we affirm.

FACTS

In May 2014, appellant filed a complaint under seal and initiated a qui tam action pursuant to the Minnesota False Claims Act (MFCA), Minn. Stat. §§ 15C.01 -.16 (2016).¹ In its complaint, appellant alleged that respondents, telecommunications service providers, undercharged their customers with respect to one or more of the following state statutory charges: (1) 911 charges; (2) TAM charges; and (3) TAP charges. Appellant alleged that respondents underpaid the charges to the state by: (1) failing to collect and remit the charges; (2) misclassifying services, including voice-over-internet-protocol (VoIP) services, as a service with lower charges; and (3) failing to charge and remit the correct amount when providing customers with channelized services. The district court sealed the complaint and the state conducted an investigation. In September 2015, the state declined to intervene in the action. In October 2015, the district court ordered that the complaint be unsealed. Appellant thereafter filed and served an amended complaint, in which it alleged that respondents violated Minn. Stat. § 15C.02(a) and were liable to the state for

a. Knowingly, intentionally, deliberately, and/or recklessly making or using, or causing to be made or used, false records or statements material to their obligations to pay 911, TAM, and TAP fees to the State; and/or

b. Knowingly, intentionally, deliberately, and/or recklessly concealing or knowingly and improperly avoiding or decreasing their obligations to pay or transmit 911, TAM, and TAP fees to the State.

Respondents moved to dismiss appellant's amended complaint pursuant to Minn. R. Civ. P. 12.02(e). Following a hearing, the district court concluded that appellant's claims were barred by Minn. Stat. § 15C.03 and dismissed the amended complaint under rule 12.02(e). Judgment was entered on November 22, 2016.

ISSUE

Did the district court err by relying on Minn. Stat. § 15C.03 in dismissing appellant's amended complaint?

ANALYSIS

An appellate court's "review of a district court's decision to grant a motion to dismiss is ... de novo." Cocchiarella v. Driggs , 884 N.W.2d 621, 624 (Minn. 2016).

In this review, an appellate court must "consider only the facts alleged in the complaint, accepting those facts as true and [construing] all reasonable inferences in favor of the nonmoving party." Id. (alteration in original) (quotation omitted). To determine whether the district court erred by granting respondents' joint motion to dismiss, we must limit our consideration to the facts alleged in the amended complaint, accept those facts as true, and construe all reasonable inferences in favor of appellant.

Appellant initiated a qui tam action under the MFCA, which imposes civil liability on a person who wrongfully acquires money or property from the state or a political subdivision, or wrongfully avoids an obligation to transmit money or property to the state or a political subdivision. Minn. Stat. § 15C.02(a). A person who violates the MFCA is liable to the state or political subdivision for a civil penalty, plus up to three times the amount of damages that the state or political subdivision sustained because of the violation.² Minn. Stat. § 15C.02(a) - (b) (providing that a violator may be liable for double or treble damages depending on the circumstances). But the tax bar of the MFCA, Minn. Stat. § 15C.03, prohibits MFCA claims based on tax violations. That section provides that the MFCA "does not apply to claims, records, or statements made under portions of the Minnesota Statutes relating to taxation." Minn. Stat. § 15C.03.

Here, the district court concluded that the 911, TAM, and TAP charges were taxes and relied on the MFCA tax bar in dismissing appellant's claims. Appellant argues that the district court erred because: (1) the 911, TAM, and TAP charges are not taxes; (2) the statutes that require service providers to collect and remit the 911, TAM, and TAP charges, Minn. Stat. §§ 237.52 ; .70; 403.11 (2016),³ are not "[s]tatutes relating to taxation" for purposes of the tax bar; and (3) applying the tax bar to appellant's claims nullifies the reverse-false-claims provisions of the MFCA, contrary to the legislature's intent.

I. The 911, TAM, and TAP Charges Are Taxes.

We first address appellant's argument that the 911, TAM, and TAP charges are fees rather than taxes. To determine whether the charges are taxes or fees, we must engage in statutory interpretation. Statutory interpretation presents a question of law, which appellate courts review de novo. Staab v. Diocese of St. Cloud , 853 N.W.2d 713, 716 (Minn. 2014). "The goal of statutory interpretation is to effectuate the intent of the Legislature." Id. ; accord Minn. Stat. § 645.16 (2016). If the legislature's intent is clear from the statute's language, appellate courts apply the statute according to its plain meaning. State v. Haywood , 886 N.W.2d 485, 488 (Minn. 2016). "But if a statute is susceptible to more than one reasonable interpretation ... [appellate courts] will consider other factors to ascertain the Legislature's intent." Staab , 853 N.W.2d at 717. Generally, when the legislature has statutorily defined a term, we are guided by that definition. Wayzata Nissan, LLC v. Nissan N. Am., Inc. , 875 N.W.2d 279, 286 (Minn. 2016). However, we will decline to apply the statutory definition when doing so would violate our principles of statutory interpretation. Id. ; see State v. Rick , 835 N.W.2d 478, 483 (Minn. 2013) (declining to apply a statutory definition where its application would violate the canon against surplusage and the rules of grammar).

Minn. Stat. § 403.11 establishes the 911 charge and provides that an "[e]mergency telecommunications service fee" is assessed on customers who purchase telecommunications access lines that can be used to make 911 calls. Minn. Stat. § 403.11, subd. 1(a). This fee is based on the number of telephone lines, or their equivalents, and is used to cover the costs of the emergency telecommunications system. Id. The amount of the fee is established by the commissioner of public safety, with the approval of the commissioner of management and budget. Id. , subd. 1(c). Telecommunications service providers are required to collect the monthly fee from customers and remit the collected amount to the commissioner of public safety. Minn. Stat. §§ 403.02, subd. 10 ; .11, subd. 1(d) (2016). The collected fees are deposited into the 911 emergency telecommunications service account and are used to offset the costs of the 911 emergency telecommunications program. Minn. Stat. § 403.11, subd. 1(a), (d). "Money remaining in the ... account after all other obligations are paid ... is carried forward ... and may be appropriated ... to provide financial assistance to counties for the improvement of local emergency telecommunications services." Id. , subd. 1(b).

The TAM charge is established by Minn. Stat. § 237.52. The TAM program provides devices and services...