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Home / Featured / Award to cities in license-tax class suit upheld on appeal

Award to cities in license-tax class suit upheld on appeal

The Missouri Court of Appeals Eastern District on July 26 upheld a $39 million judgment in favor of a large group of Missouri municipalities who alleged that Charter Communications had excluded revenue from the cities’ taxes.

In a lawsuit initially filed in 2010, a class of cities led by the city of Winchester alleged that Charter and related companies had failed to pay the business license taxes those cities impose on telephone service providers doing business in their jurisdictions. 

The litigation went on for more than a decade. St. Louis County Judge Michael T. Jamison issued the final award in January 2021, following a finding in 2017 that Charter was liable for much of the disputed revenue as well as a bench trial in 2019 to determine damages.

Missouri Lawyers Media ranked the award, which included approximately $29 million in damages and $10 million in interest and attorneys’ fees, as the largest plaintiffs’ judgment of 2021.

Charter argued that the cities’ taxing ordinances were pre-empted by federal law. But Judge James M. Dowd, writing for the Eastern District, said the federal statutes included exceptions that specifically permitted the kinds of ordinances at issue in the case.

Charter also had argued that the voice over internet protocol, or VoIP, technology it uses to deliver the phone service was an “information service” not subject to the tax. But the court said the general wording of the ordinances encompassed such technology. 

“The Missouri legislature and the Class Members here should not be required to update their laws every time a new form of technology is introduced by telephone companies,” Dowd wrote. Chief Judge Michael E. Gardner and Judge Lisa P. Page concurred.

The telecom company also claimed that a class action suit was inappropriate due to the varying language of each city’s laws. But Dowd said it was clear that Jamison, who retired during the course of the case but remained on as a special judge through its conclusion, had made a “Herculean effort” to take those differences into account. 

“Frankly, this case was a class action in name only,” Dowd wrote. “Given the trial court’s obvious familiarity with the contents of each city’s individual ordinance, the court essentially treated the case as an ordinary civil case with 124 individual plaintiffs.”

The case is City of Winchester v. Charter Communications Inc., ED109513.