Bellsouth v. Cobb County and the 9-1-1 Act: Taxation Without a Right of Action
| Publication year | 2020 |
Bellsouth v. Cobb County and the 9-1-1 Act: Taxation Without a Right of Action
Davis Lackey
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The State of Georgia has long recognized the importance of providing emergency services for its citizens. The on-call availability of medical services in our communities is a vital resource for those in need. The Georgia Legislature enacted the Emergency Telephone Number "911" Service Act of 1977 (9-1-1 Act or Act),1 which streamlined the emergency services phone number into a single, three-digit emergency number that would effectively reduce response time.2 Specifically, the Georgia General Assembly was concerned with the existence of too many phone numbers for emergency services throughout the state.3 In 2005, the Georgia General Assembly amended the Act that generated a comprehensive plan that funds counties' and local governments' emergency services.4 The new, uniform, state—wide system placed a duty on service providers to bill, collect, and remit funds to local municipalities in order to provide reliable emergency services to
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Georgia citizens.5 Essentially, the service providers would charge one's account on a monthly basis under the statute.6 Upon collection of the funds, the service providers would remit the money to the local governments to offset their costs of providing emergency services.7 Until recently, there has been no litigation concerning the Act.
In 2010, The Georgia Court of Appeals in Fulton County v. T-Mobile South, LLC8 first addressed the 9-1-1 charge under the Act.9 The court wrangled in Georgia case law as well as other persuasive authority to precisely attack the issue. Dissecting the main factors discussed in the case, the court ultimately concluded that the charge under the Act was a tax.10 The T-Mobile opinion is a raw depiction of the court scuffling with the case of first impression. As a result, the T-Mobile decision built a platform for other courts, including the Georgia Supreme Court, to stand on when faced with the challenging issues of taxation and statutory schemes.
On February 18, 2019, Bellsouth Telecommunications, LLC v. Cobb County11 was decided by the Georgia Supreme Court.12 The court reversed the court of appeals and the trial court, holding that the charge under the act is a tax and that Gwinnett and Cobb Counties (the Counties) did not have a right of action against the service providers.13 Because the charge was ruled a tax, the Counties were barred from pursuing any common law remedies for negligence, fraud, or breach of
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fiduciary duty.14 Interestingly, the Georgia Supreme Court relied on many of the cases cited in the T-Mobile decision,15 continuing to construct a stronger framework regarding the taxation issue under the Act.
Gwinnett and Cobb Counties brought their suit against Bellsouth Telecommunications, LLC and Earthlink, Inc., Earthlink, LLC, Deltacom, LLC, and Business Telecomm, LLC ("the telephone companies").16 The Counties alleged that the telephone companies did not bill, and therefore not collect, enough 9-1-1 charges under the statute.17 Specifically, the Counties alleged that the defendants did not charge two classes of customers, estimating damages of more than $38.9 million.18 Further, the Counties alleged in their complaints that they should have been able to recover the funds through common law theories of recovery (breach of fiduciary duty, fraud, and negligence) even though the Act did not explicitly state a recovery action directly against the service providers.19 The telephone companies argue that the 9-1-1 charge under the act is a tax and that the Counties are precluded from collecting the money.20
At trial, the telephone companies moved to dismiss the complaints for two reasons. First, the companies argued that the Counties did not have a right to enforce a collection action against the service providers because it was not expressly stated in the statute. Secondly, the companies argued that the charge under the 9-1-1 Act is a tax, distinguished from a fee, and thus, the Counties were barred from pursuing any claim under common law remedies. The trial court denied the motion and concluded that the charge is a fee, not a tax. Further, the trial court found that the Counties had an implied right of action when the statute was read in conjunction with o.C.G.A. § 51-1-621 and O.C.G.A. § 51-1-8,22 meaning the Counties could pursue their claim.23
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Upon interlocutory review, the Georgia Court of Appeals ruled that the trial court erred by finding that the Act furnished an implied right of action for violating the statute.24 However, the court of appeals ruled that the Counties were still allowed to pursue their claim against the service providers under O.C.G.A. § 51-1-6 and O.C.G.A. § 51-1-8 for violating the 9-1-1 Act.25 The court of appeals vacated the trial court's ruling regarding the charge not being defined as a tax, and remanded for further consideration on the issue.26
The Georgia Supreme Court granted certiorari to decide whether the charge under the Act was a fee or a tax, and whether the Counties could pursue common law remedies or an implied right of action, depending on the court's answer to the former issue.27 The court concluded that the charge was in fact a tax.28 Moreover, the court concluded that the 9-1-1 Act did not give the Counties a right of action to pursue a collection action against the telephone companies.29
A. Brief History of the 9-1-1 Act Litigation and T-Mobile: Case of First Impression
In 1977, the General Assembly passed the Emergency Telephone Number 9-1-1 Service Act, which established "a cohesive state-wide emergency telephone number 9-1-1 system that [] provide[d] citizens with rapid, direct access to public safety agencies by dialing telephone number 9-1-1."30 This Act allows local governments to offset the costs of the 9-1-1 services it provides by "impos[ing] a monthly 9-1-1 charge upon each telephone service."31 The 9-1-1 Act defines "telephone
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service" as "any method by which a 9-1-1 emergency call is delivered to a public safety answering point."32
The 9-1-1 Act requires telephone users to pay a monthly charge to the companies (acting as the intermediary in the statutory scheme) in which the telephone companies remit the charges to local governments that operate 9-1-1 centers and dispatch services.33 At the time this suit was filed, customers could be billed for the 9-1-1 charge at a maximum of $1.50 for each subscription per telephone service provided.34 Specifically, the Act states:
Each service supplier shall, on behalf of the local government, collect the 9-1-1 charge from those telephone subscribers to whom it provides telephone service in the area served by the emergency 9-1-1 system. As part of its normal billing process, the service supplier shall collect the 9-1-1 charge for each month a telephone service is in service, and it shall list the 9-1-1 charge as a separate entry on each bill.35
Even though the 9-1-1 Act was enacted in 1977, very few cases have addressed issues distinguishing taxes and fees during the legislation's tenure. However, the case of first impression, Fulton County v. T-Mobile South, LLC,36 laid out the court of appeals's rationale and set up a foundation for future cases involving the 9-1-1 Act.
In T-Mobile, the same statutory scheme was in play involving three parties: telephone subscribers, service providers, and the local government.37 The Act defined "telephone subscriber" as "a person or entity to whom local exchange telephone service or wireless service . . . is provided and in return for which the person or entity is billed on a monthly basis."38 The "service supplier" collects the 9-1-1 charge and remits the money to the local government.39 In this case, however, T-Mobile did not bill those who purchase the "prepaid" wireless service monthly, because those individuals pay for all their minutes upfront.40
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Therefore, T-Mobile did not need to distribute the 9-1-1 charges for the "prepaid" customers. T-Mobile paid $101,618.66 on behalf of the prepaid customers during the refund period out of their own pocket. Consequently, T-Mobile filed a claim for a refund arguing that the 9-1-1 charges were taxes.41 The pivotal issue in the case was whether the charges under the 9-1-1 Act are classified as a tax under Georgia law.42
B. Analyzing Georgia Supreme Court Case Law
Understanding that this issue was a question of first impression, the Georgia Court of Appeals relied on Georgia Supreme Court precedent and analyzed primary mandatory authority.43 The court first analyzed Gunby v. Yates,44 which involved the allocation of charges on marriage licenses.45 In Gunby, the Ordinary of Catoosa County, Harold Yates, allegedly sold 2,760 marriage licenses and failed to remit the $1.00 charge for each marriage license sold as required by the statute at issue.46 The court in Gunby defined a "tax" as "an enforced contribution exacted pursuant to legislative authority for the purpose of raising revenue to be used for public or governmental purposes, and not as payment for a special privilege or a service rendered."47 Contrastingly, a "fee" was defined as "a charge fixed by law as compensation" for services rendered.48 The court in Gunby held that, "the collection of this [money] was not for the purpose of compensating . . . for a service rendered, but was for the purpose of raising revenue for the expenses of operating the retirement board and paying benefits . . . , and it is therefore a tax and not a fee."49
The court in T-Mobile next analyzed Luke v. Department of Natural Resources,50 which considered whether the charges for participation in the Underground Storage Tank Trust Fund (Fund)51 constituted a tax.52 The court in Luke, relying on Gunby, concluded that—because the owner or...
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