592 S.W.3d 764
Mo.2019Background
- Four Missouri cities (Aurora, Cameron, Oak Grove, Wentzville) sued CenturyLink subsidiaries claiming unpaid municipal license taxes, failure to sign right-of-way user agreements (Cameron, Wentzville), and unpaid linear-foot fees (Cameron). Trial court granted partial summary judgments for the cities on liability for many revenue categories and ordered user agreements and linear-foot payments.
- The case proceeded to a bench trial limited to damages; the court awarded damages using CenturyLink’s Exhibit U2, credited payments made under protest, and awarded prejudgment and postjudgment interest and attorney fees to the cities.
- CenturyLink appealed and the cities cross-appealed. The Supreme Court of Missouri reviewed (exclusive jurisdiction because CenturyLink challenged section 67.1846).
- The Court upheld (inter alia) that section 67.1846.1’s grandfathering of pre‑May 1, 2001 linear‑foot ordinances is constitutional (rational basis), affirmed award of Cameron’s linear‑foot fees, and sustained requirement that CenturyLink enter user agreements where ordinances required them.
- The Court reversed portions of the judgment: (1) prejudgment interest awards to Aurora/Cameron/Oak Grove under general statute were ordered recalculated under the specific tax statutes (and Wentzville’s municipal interest ordinance conflicted with state law); (2) attorney‑fee awards to Aurora, Cameron, and Oak Grove were reversed because the record did not support a finding of willfulness or other special circumstances; Wentzville’s fee award (under its municipal code) was affirmed. The cause was remanded for recalculation and apportionment.
Issues
| Issue | Plaintiff's Argument (Cities) | Defendant's Argument (CenturyLink) | Held |
|---|---|---|---|
| Constitutionality of §67.1846.1 (grandfather clause for linear‑foot fees) | Clause preserves revenue and reliance interests of cities that lawfully enacted fees before 5/1/2001 | Clause is a facially special law (closed‑ended class) and unconstitutional | Clause is constitutional; rational basis exists to protect preexisting local revenue reliance |
| Cameron’s linear‑foot fees (basis/amount) | Fees authorized by §67.1846 and enforceable | Fees must be based on actual substantiated costs (§67.1840.2(1)) | Fees affirmed; §67.1840.2(1) governs permit fees, not linear‑foot user fees under §67.1846 |
| Requirement to execute right‑of‑way user agreements | Cities can require user agreements under ordinances | Such agreements are illegal mandatory franchises in violation of §67.1842.1(4) | Trial court did not err ordering agreements; CenturyLink failed to show the agreements were forbidden "franchises" |
| Scope of municipal license taxes (what revenue is taxable "in" a city) | Ordinances tax all gross receipts "derived from" furnishing telephone service within the city | Many revenue categories (carrier access, interstate, certain other streams) are not "in" the city and not taxable | Ordinances construed to tax revenue derived from services in the city; carrier access (all cities) and interstate revenue (Wentzville) were held not taxable as not derived in the city |
| Applicability of 3‑year vs 5‑year statute of limitations | §71.625.2 incorporates §144.220.3 -> three years | Five‑year limitation (§516.120) applies to municipal tax suits | Five‑year statute applies; §144.220.3 governs administrative assessment timing, not commencement of suit |
| Prejudgment/postjudgment interest rate | Cities sought statutory 9% (general) or Wentzville municipal rate | CenturyLink urged interest governed by more specific tax statutes (§71.625.2, §144.170, §32.065) and Dept. of Revenue rates | Court: specific tax interest statute controls; award under §408.020 reversed for Aurora/Cameron/Oak Grove and Wentzville’s municipal rate conflicted with state law — all must be recalculated under tax statutes (rates changed over time) |
| Attorney fees (statutory and equitable bases) | Fees appropriate under §§392.350, 488.472, 527.100 and equity because CenturyLink acted willfully and discovery misconduct | CenturyLink argued it had legal grounds to challenge tax scope; not willful or special misconduct | Fee awards to Aurora, Cameron, Oak Grove reversed — record did not show willfulness or special circumstances; Wentzville’s municipal‑code fees affirmed (not challenged) |
Key Cases Cited
- City of Normandy v. Greitens, 518 S.W.3d 183 (Mo. banc 2017) (discussed prior special‑law analyses and burden shifting)
- City of DeSoto v. Nixon, 476 S.W.3d 282 (Mo. banc 2016) (application of closed‑ended/open‑ended special‑law tests)
- Blaske v. Smith & Entzeroth, Inc., 821 S.W.2d 822 (Mo. banc 1991) (special‑law test analogy to rational‑basis review)
- ITT Commercial Fin. Corp. v. Mid‑Am. Marine Supply Corp., 854 S.W.2d 371 (Mo. banc 1993) (movant’s burden on summary judgment; must disprove affirmative defenses)
- Senn v. Commerce‑Manchester Bank, 603 S.W.2d 551 (Mo. banc 1980) (statutory change in interest rate applies prospectively from effective date)
- De Paul Hosp. Sch. of Nursing, Inc. v. Sw. Bell Tel. Co., 539 S.W.2d 542 (Mo. App. 1976) (willfulness for attorney‑fee awards where utility acted arbitrarily and discriminatorily)
- Ludwigs v. City of Kan. City, 487 S.W.2d 519 (Mo. 1972) (definition of gross receipts as entire receipts without deduction)