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Phone Recovery Services, LLC v. Qwest Corp.

Court of Appeals of Minnesota

August 7, 2017

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.

         Ramsey County District Court File No. 62-CV-14-3768

          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.

         SYLLABUS

         I. The 911, Telecommunications Access Minnesota (TAM), and Telephone Access Plan (TAP) charges are taxes.

         II. For purposes of Minn. Stat. § 15C.03 (2016), a statute is one "relating to taxation" if it has a connection, relation, or reference to or concerns the imposition of a tax, the amount assessed as tax, or the revenue gained from taxes.

          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 ...


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