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Bellsouth Telecommunications, LLC v. Cobb County

Supreme Court of Georgia

February 18, 2019


          Peterson, Justice.

         Cobb and Gwinnett Counties have sued telephone companies for their failure to collect and remit to the Counties a charge imposed on subscribers to offset the cost of 911 services. The telephone companies have raised various defenses to the Counties' suits, including that the 911 charge is a tax that the Counties are not allowed to collect by a lawsuit like this one. The trial court rejected that argument and allowed the cases to proceed, but the Court of Appeals vacated that aspect of the trial court's ruling and remanded because further development of the record was needed to determine whether the charge is a tax. We conclude, however, that the charge is a tax regardless of more factual development, and we conclude that the Counties lack legal authority to collect that tax in this lawsuit. We reverse.

         This case finds its roots in the Georgia Emergency Telephone 911 Service Act, OCGA § 46-5-120 et seq. ("the 911 Act"), originally enacted in 1977, see Ga. L. 1977, p. 1040.[1] The 911 Act's purpose was to establish a statewide 911 system. OCGA § 46-5-121 (a). The statute authorizes local governments operating a 911 system to impose a monthly 911 charge ("the 911 charge") on each telephone service that is or would be served by the 911 system.[2] OCGA § 46-5-133 (a). The version of the statute in effect when this litigation was filed capped the charge at $1.50 per month, per telephone service provided. OCGA § 46-5-134 (a) (1) (A) (2012).[3]

         Telephone companies are intermediaries in the statutory scheme. The statute provides that "[e]ach service supplier shall, on behalf of the local government, collect the 9-1-1 charge from those telephone subscribers . . . ." OCGA § 46-5-134 (a) (1) (B). Telephone companies are entitled to retain an administrative fee on amounts collected. OCGA § 46-5-134 (d) (1). At the time this lawsuit was filed, the statute provided that local governments could initiate a "collection action." OCGA § 46-5-134 (b) (2012). Although the statute did not provide expressly against whom that collection action could be brought, in that same subsection it provided that "[e]very telephone subscriber in the area served by the emergency 9-1-1 system shall be liable for the 9-1-1 charges and the wireless enhanced 9-1-1 charges . . . until it has been paid to the service supplier" and that "[a] service supplier shall have no obligation to take any legal action to enforce the collection of the 9-1-1 charge or wireless enhanced 9-1-1 charge." Id. The statute also provided that local governments could audit the telephone companies with respect to the collection and remittance of the 911 charge. See OCGA § 46-5-134 (d) (4) (2012).[4]

         The Counties sued Bellsouth Telecommunications, LLC and Earthlink, Inc., Earthlink, LLC, Deltacom, LLC, and Business Telecomm, LLC (collectively, "the Telephone Companies") in two separate complaints. The complaints as amended allege that the Telephone Companies had underbilled two classes of customers.[5] Together the two complaints claim estimated damages of more than $38.9 million, allege violations of the 911 Act and common-law theories of recovery (including breach of fiduciary duty, fraud, and negligence), and seek to enforce the 911 Act's audit provision.

         The Telephone Companies moved to dismiss the Counties' complaints, arguing that the Counties do not have a right of action to enforce the 911 Act. The Telephone Companies also argued that a common-law claim was not available because the 911 Act imposes a tax, and a common-law action for recovery of taxes does not lie where a statute provides remedies for collections of taxes that do not include an action at law. The trial court denied the motion. It held that the 911 charge is a fee, not a tax, and that the 911 Act, read in conjunction with OCGA §§ 51-1-6 and 51-1-8, [6] provided the Counties with a right of action. The court also rejected the Telephone Companies' other arguments as to the Counties' common-law claims.

         On interlocutory review, the Court of Appeals affirmed in part, reversed in part, and vacated in part. Bellsouth Telecomm., LLC v. Cobb County, 342 Ga.App. 323, 323-324 (802 S.E.2d 686) (2017). The Court of Appeals held that the trial court erred in finding that the 911 Act provided an implied right of action for a violation of the statute. Id. at 326-328 (1). But the Court of Appeals agreed that OCGA §§ 51-1-6 and 51-1-8 allow the Counties to pursue claims against the Telephone Companies based on the companies' failure to comply with the 911 Act. Id. at 328-330 (2). The Court of Appeals vacated the trial court's finding that the 911 charge is a fee as a matter of law, remanding for further consideration of that issue following development of a record as to whether the Counties provide a 911 service that differs from that of other counties. Id. at 330-333 (3).[7]

         We granted the Telephone Companies' petition for certiorari, directing the parties to address several questions, including whether the 911 charge is more properly characterized as a tax or a fee. We conclude that the charge is a tax, and that the 911 Act does not give the Counties a right of action to collect that tax from the Telephone Companies. We reverse the Court of Appeals and remand with instructions for the Court of Appeals to direct the trial court to dismiss the Counties' actions.

         1. "A tax is 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." Gunby v. Yates, 214 Ga. 17, 19 (102 SE 548) (1958); see also McLeod v. Columbia County, 278 Ga. 242, 244 (2) (599 S.E.2d 152) (2004) ("A charge is generally not a tax if its object and purpose is to provide compensation for services rendered."). Generally, we have considered four criteria in considering whether a charge is a tax, which we have defined as: (1) a means for the government to raise general revenue based on the payer's ability to pay (i.e., income or ownership of property), without regard to direct benefits that may inure to the payer or to the property taxed; (2) mandatory; (3) not related to the payer's contribution to the burden on government; and (4) not resulting in a "special benefit" to the payer different from those to whom the charge does not apply. See McLeod, 278 Ga. at 244-245 (2); see also Homewood Village, LLC v. Unified Govt. of Athens-Clarke County, 292 Ga. 514, 515 (1) (739 S.E.2d 316) (2013).[8] In contrast, fees are a charge for a particular service provided, based on the payer's contribution to the problem. McLeod, 278 Ga. at 244 (2).

         Applying the four factors set forth above, we conclude that the 911 charge is a tax as a matter of law. First, as the Counties note, it is true that the 911 Act restricts the use of the funds to pay specific communications costs enumerated in the statute. See OCGA §§ 46-5-122 (11), OCGA 46-5-134 (f); OCGA 46-5-134.2 (j) (4) (2019); see also OCGA § 46-5-134.2 (j) (5) (2012). But although the 911 charge raises funds for a dedicated purpose, it is assessed based on the extent to which a person or business subscribes to telephone service, not the extent to which a person can or in fact does summon emergency services. It is not charged to persons who have access to phone service paid for by someone else, such as a house phone in a hospital lobby or a homeless shelter. And the assessment does not depend on whether a person actually calls 911. Moreover, requiring a governmental charge to be deposited in a special purpose fund does not make it not a tax. See Gunby, 214 Ga. at 20 (charge for marriage licenses deposited in a restricted purpose retirement fund is a tax). Many charges explicitly labeled as taxes are restricted to a particular purpose. See Ga. Const. Art. III, Sec. IX, Par. VI (setting forth various exceptions to the rule that "no appropriation shall allocate to any object the proceeds of any particular tax or fund or a part or percentage thereof"); Ga. Const. Art. VIII, Sec. VI, Par. I (b) (local school taxes); OCGA § 48-8-121 (a) (1) (Special Purpose Local Option Sales Taxes).[9]

         The Counties next argue that the 911 charge is not mandatory because people may opt to not receive telephone service and avoid the charge. But the charge is mandatory in the way we have used that term in determining whether something is a tax.[10] In considering whether a charge is mandatory for this purpose, we have considered not whether someone may theoretically continue to live a lawful existence without using a particular service at all, but whether someone may obtain that service by way of an alternate route that avoids paying the charge. See McLeod, 278 Ga. at 245 (2) (utility charge not a tax because property owners could reduce the amount of the charge by creating and maintaining private stormwater management systems, and ordinance did not permit imposition of a lien directly against the property of those who fail to pay the charge); Luke v. Ga. Dept. of Natural Resources, 270 Ga. 647, 648 (1) (513 S.E.2d 728) (1999) (fee for participation in underground storage tank trust fund not a tax given that storage tank owner may demonstrate evidence of financial responsibility as required by statute by means other than participation in fund). Here, people cannot opt out of the emergency services system by subscribing to an alternative phone service, so the charge is mandatory.

         Although the Counties suggest that we have held that a charge - in particular, a solid waste disposal charge - may be a fee even where a payer is bound to pay it despite declining the service provided, the case they cite did not address that question. See Mesteller v. Gwinnett County, 292 Ga. 675, 678 (4) (740 S.E.2d 605) (2013) (rejecting property owner's argument that solid waste fee is an unlawful tax because garbage collection services were carried out by private companies, because Court previously has held such charges are not taxes). And our prior decisions deeming garbage collection charges to be fees, not taxes, also do not discuss property owners' ability to opt out of the services. See Levetan v. Lanier Worldwide, Inc., 265 Ga. 323, 324-325 (2) (454 S.E.2d 504) (1995) (sanitation assessments are not taxes within meaning of state Constitution and thus need not be collected by county tax commissioner); Crestlawn Memorial Park, Inc. v. City of Atlanta, 235 Ga. 194 (219 S.E.2d 122) (1975) (sanitary assessment not a tax for which plaintiff could obtain an exemption for the cemetery he operated; Court noted finding that leaves falling into street from cemetery property are cleaned up by the city but did not discuss plaintiff's ability to opt out of city sanitation services).[11]

         Finally, there is no relationship between the obligation to pay the charge and the burden the payer places on emergency services systems in Georgia, and those who pay the charge receive no special access to emergency services. A person who pays the charge year after year might well never make a 911 call on the associated telephone line, while another person may use a public phone or borrowed phone to summon emergency services (or others may summon emergency services on their behalf) on a regular basis. Although a person with active telephone service may be able to dial 911 more easily than one who does not, emergency services are available to all within a given emergency services area.[12] Moreover, a visitor to the state can easily dial 911 and summon emergency service on her cell phone (or a public or borrowed phone), even though she is not subject to the charge. See Fulton County v. T-Mobile South, LLC, 305 Ga.App. 466, 471 (2) (699 S.E.2d 802) (2010) ("Here, those who pay the [911] charge - whether T-Mobile or its customers - receive no benefit not received by the general public, because all members of the public may access the [911] system. As such, the charge is a tax."). Thus, we conclude based on the relevant factors that the 911 charge is a tax.[13]

         The Counties argued before the Court of Appeals that, even if they must show that those who pay the 911 charge receive a "special benefit" in order for it to be a fee, they would be able to show as much when evidence is presented at the summary judgment or trial stages of the case. Specifically, the Counties argued that 911 services vary from county to county, such that those who do not have a wireless telephone or landline billing address within one of the Counties cannot take advantage of certain "enhanced" services, such as the dispatcher having near-immediate access to the location of the caller. Thus, they argued, visitors to the Counties and those whose telephone billing address is not within one of the Counties' service areas do not receive the same benefit as those who do pay a 911 charge to one of the Counties. Based on these arguments, the Court of Appeals concluded that further discovery was required to resolve the question of whether the 911 charge is a tax or a fee.[14]Bellsouth Telecomm., 342 Ga.App. at 332-333 (3). But this frames the benefit at issue wrongly. At the time this lawsuit was filed, the 911 Act capped the 911 charge at $1.50 statewide, irrespective of the level of service provided in a particular county. OCGA § 46-5-134 (a) (1) (A) (2012). And the Act specifically provides that a 911 charge imposed by a local government "must be uniform" and "may not vary according to the type of telephone service used[.]" OCGA § 46-5-133 (a). The ...

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