Wisconsin Bell, Inc. v. Wisconsin Dept. of Revenue, 90-2247

• Decision Date: 25 July 1991
• Docket Number: No. 90-2247,90-2247
• Citation: 473 N.W.2d 587,164 Wis.2d 138
• Parties: WISCONSIN BELL, INC., American Telephone & Telegraph Co., and AT & T Communications of Wisconsin, Inc., Plaintiffs-Appellants, d v. WISCONSIN DEPARTMENT OF REVENUE, and Mark D. Bugher, Defendants-Respondents.
• Court: Wisconsin Court of Appeals

Page 587

473 N.W.2d 587

164 Wis.2d 138

WISCONSIN BELL, INC., American Telephone & Telegraph Co., and AT & T Communications of Wisconsin, Inc., Plaintiffs-Appellants, ^d v. WISCONSIN DEPARTMENT OF REVENUE, and Mark D. Bugher,

Defendants-Respondents.

No. 90-2247.

Court of Appeals of Wisconsin.

Argued June 13, 1991.

Opinion Released July 25, 1991.

Opinion Filed July 25, 1991.

Robert A. Schnur, Michael, Best & Friedrich, Milwaukee, for plaintiffs-appellants.

James E. Doyle, Atty. Gen., and Gerald S. Wilcox, Asst. Atty. Gen., for defendants-respondents.

Before EICH, C.J., and DYKMAN and SUNDBY, JJ.

EICH, Chief Judge.

Wisconsin Bell, Inc., American Telephone & Telegraph Company and AT & T Communications of Wisconsin, Inc. (collectively "Bell"), appeal from an order dismissing their action for declaratory judgment. They had sought a judgment declaring that certain billing and collection services provided by Bell to the AT & T companies were not subject to the Wisconsin sales tax. The trial court dismissed the action in deference to the administrative remedy available to the plaintiffs before the Department of Revenue under sec. 227.41(1), Stats. ¹

The dispositive issue is whether the trial court abused its discretion when it dismissed Bell's action "in deference" to the department's declaratory ruling authority. While the trial court did not specifically frame the issue as such, it is a question of primary jurisdiction. We conclude that the court's action was a proper exercise of discretion and we affirm the order. ²

The facts are undisputed and may be simply stated. AT & T provides interstate and long-distance telephone service to residents of Wisconsin. Bell is the "local" telephone company providing intrastate service in many areas of the state. Pursuant to an agreement with AT & T, Bell bills and collects the charges due AT & T for the long distance services AT & T provides to Wisconsin customers.

In 1988, the department published a statement in a tax "newsletter" indicating its belief that fees Bell charges AT & T for providing the long-distance billing and collection services were subject to the Wisconsin sales tax as "telephone services" under sec. 77.52(2)(a)4, Stats. ³ The statement was not fact-specific.

Despite the newsletter statement, the department has not assessed Bell for sales tax on the gross receipts from its billing and collection services, nor has Bell paid any such taxes.

In 1990, plaintiffs brought this action in circuit court seeking a declaration that Bell's billing and collection activities were not "telephone (or telecommunications) services" within the meaning of the statute. The department moved to dismiss on grounds that the court cannot acquire subject matter jurisdiction until the commission first rules on the matter and that the controversy is thus not ripe for adjudication. Alternatively, the department argued that the court should defer to the commission under the primary jurisdiction doctrine.

The trial court granted the motion. It rejected the commission's "initial jurisdiction" and "exclusive jurisdiction" arguments. It held, however, that it could not rule on the controversy until the case had gone through the department. Noting that the plaintiffs could seek a declaratory ruling from the department under sec. 227.41(1), Stats., the court concluded that it would "in its discretion defer to the [department's] expertise" and dismissed the action, leaving the plaintiffs to their declaratory relief remedies before the department and commission.

While the trial court referred in its decision to cases requiring parties to exhaust administrative remedies before seeking relief in court--a rule not really applicable here ⁴--it also cited State ex rel. Terry v. Traeger, 60 Wis.2d 490, 499, 211 N.W.2d 4, 9 (1973), for the "primary jurisdiction rule" that "where an administrative remedy is provided by statute, relief should first be sought from the administrative agency ... before bringing the matter to the court." The rule is really not one of power or jurisdiction; it is "a matter of comity between the agency and the courts." Id.

The purpose of the primary jurisdiction rule is "to promote proper relations between the courts and administrative agencies." Sawejka, 56 Wis.2d at 79-80, 201 N.W.2d at 533. The rule recognizes the expertise and policy-making functions of administrative agencies and asks the trial court to consider whether judicial or administrative action in the particular matter "would best serve the ends of justice." Id., 56 Wis.2d at 80, 201 N.W.2d at 533, quoting Wisconsin Collectors Ass'n v. Thorp Finance Corp., 32 Wis.2d 36, 45, 145 N.W.2d 33, 37 (1966). Thus, where an issue presented to the court involves fact-finding or policymaking within the agency's field of expertise or administration--such as the application of a law administered by the agency to a specific set of facts--"the agency should be given the first review unless there is some valid reason for the court to intervene and exercise its jurisdiction." Beal v. First Fed. Sav. & Loan Ass'n of Madison, 90 Wis.2d 171, 198, 279 N.W.2d 693, 705 (1979). On the other hand, where the primary issue is one of law where the agency, even given its experience and expertise, would be in no better position than the court to decide it, "the court may properly choose in its discretion to entertain the proceedings." Wisconsin Collectors, 32 Wis.2d at 45, 145 N.W.2d at 37.

Where questions of primary jurisdiction are involved and the trial court has declined to exercise its jurisdiction, "the question on review is whether the court has abused its discretion." Browne v. Milwaukee Bd. of School Directors, 83 Wis.2d 316, 328, 265 N.W.2d 559, 564 (1978). Such discretion "should [be] exercise[d] ... with an understanding that the legislature has created the agency in order to afford a systematic method of fact-finding and policy-making and that the agency's jurisdiction should be given priority in the absence of a valid reason for judicial intervention." Id. at 329, 265 N.W.2d at 565, quoting Wisconsin Collectors, 32 Wis.2d at 45, 145 N.W.2d at 37.

Bell suggests that there are four valid reasons for judicial intervention in this case:

(i) the discretionary character of the administrative remedy available under [sec.] 227.41(1); (ii) the absence of a properly defined procedure for pursuing a declaratory ruling from the Department and for appealing it, if necessary; (iii) the futility of pursuing a declaratory ruling in light of the Department's announcements regarding the taxability of billing and collection services; and (iv) the fact that the substantive issue on which the court below was asked to rule involves a question of statutory interpretation and not a determination of complex factual issues.

As to the first, Bell complains that because sec. 227.41(1), Stats., says that the agency "may" issue a declaratory ruling upon petition, there is no guarantee that the department will actually rule on the issue. We agree with the department that the discretionary nature of the administrative remedy does not require the court to accept the case under the primary jurisdiction rule. Indeed, the supreme court in Sawejka had no difficulty sustaining the trial court's decision to defer to the tax agency under similar facts and the same "discretionary" declaratory judgment procedure. ⁵

Bell's assertion that the trial court erred in not asserting its jurisdiction because the procedures for seeking and appealing an agency declaratory ruling under sec. 227.41, Stats., are "poorly defined" is similarly unavailing. The statute outlines the form a petition for a ruling should take and states where and how it should be filed. Secs. 227.41(2) and (3). It also requires the agency to act upon the petition within a reasonable time after receipt and specifically provides that the agency's ruling...