CenturyLink wins appeal of underpaid taxes in Columbia and Joplin

CenturyLink’s nine-point appeal of a judgment in favor of two Missouri cities received a mostly favorable review from the Missouri Court of Appeals Eastern District.

In the July 19 opinion, Judge Cristian M. Stevens reviewed an underlying circuit court opinion and affirmed in part, reversed in part and remanded it with instructions on determining taxes owed to the cities of Columbia and Joplin.

David A. Streubel of Cunningham, Vogel & Rost in St. Louis is an attorney for the cities. He did not respond to an email requesting comment.

In 2014, the cities sued communications companies including Spectra Communications Group, Embarq Missouri, CenturyLink Communications and CenturyLink Inc., collectively referred to as CenturyLink in court. The cities alleged that CenturyLink had violated license tax ordinances.

CenturyLink entities are involved in at least seven other ongoing disputes in Benton County, Boone County, Clay County, Kansas City, Marion Hannibal County and St. Louis County. Dismissed disputes in case.net involving these entities date back to the early 2000s.

Mark B. Leadlove of Bryan Cave Leighton Paisner is an attorney for CenturyLink. He did not respond to a call requesting comment by press time.

In 2012, two years before filing this lawsuit, the two cities had been putative class members in a separate class action lawsuit, City of O’Fallon v. CenturyLink, Inc., which alleged CenturyLink had not fully paid license taxes in various municipalities. Columbia and Joplin later requested to be excluded from the lawsuit.

In the case at issue, St. Louis County Circuit Court granted partial summary judgment on liability for all six counts, and ordered CenturyLink to submit its revenues and tax liability in each city as well as assessed attorney fees and expenses. On appeal, CenturyLink later contested this partial summary judgment.

That same year, the Missouri Supreme Court ruled on City of Aurora v. Spectra Communications Group, which concluded that a circuit court properly accounted for the city’s language used in its license tax ordinances, reviewed evidence of where the revenue came from and determined some revenue sources were not taxable.

Aurora prompted CenturyLink in the case against Columbia and Joplin to request that the partial summary judgment and discovery requests be set aside. The circuit court denied the motions.

After discovery disputes, the circuit court struck CenturyLink’s damages-related pleadings to sanction it for failing to comply with court orders. Columbia was awarded $53,802,060 while Joplin was owed $1,153,678 in damages, interest, penalties, attorneys’ fees and expenses.

CenturyLink also contested the sanction and awards for damages, attorneys’ fees and expenses on appeal.

Thanks to the Aurora ruling, the Eastern District ordered the circuit court to determine which of CenturyLink’s revenue streams were taxable based on the language of each city’s ordinances.

“To the extent the Cities acknowledge the qualifying language, they effectively urge us to ignore it by construing the ordinances to render all revenue, derived from any business not entirely outside the Cities, taxable,” Stevens wrote. “But this Court’s role is to interpret the law, not to amend it.”

Judges Sherri B. Sullivan and Kurt S. Odenwald concurred.

The opinion noted that facts still to be determined include which of CenturyLink’s services were local exchange services, which services were from telephones within Columbia’s city limits, which services were sold to customers in Joplin, and which of CenturyLink’s gross revenue and receipts are taxable.

As a result, the Eastern District reversed the partial summary judgment in favor of the cities and its resulting judgment and awards.

CenturyLink also contested the judgment’s damages because the cities’ involvement in the O’Fallon class action did not suspend the statute of limitations. Though this was moot, the Eastern District denied this point.

“Putative membership in a Missouri class action lawsuit tolls the statute of limitations,” Stevens wrote.

On the appeal of court sanctions on CenturyLink’s pleadings regarding damages, the Eastern District also agreed with CenturyLink.

“It should go without saying that a party may not refuse to comply with a circuit court’s discovery order because it is convinced the order is objectionable, even if upon later review the order proves to have been objectionable,” Stevens wrote.

In its reversal of the sanctions, the Eastern District stated that it did not believe further sanctions against CenturyLink’s past non-compliance would be required, though future non-compliance is possible.

The court also noted that regarding attorneys’ fees, this case shadowed Aurora, because the cities claimed an attorneys’ fees award was necessitated by CenturyLink intentionally underpaying and underreporting license taxes with the understanding that this is illegal.

The Eastern District stated that in both cases, the cities were mistaken in their claims that all revenue had to be counted in the gross revenue and receipts that factor into license taxes.

“Because that premise was incorrect, the Aurora court reversed the award of attorneys’ fees,” Stevens wrote. “We likewise are compelled to reverse the award of attorneys’ fees and expenses…”

The case is City of Columbia et al. v. Spectra Communications Group et al., ED109769.