Opinion handed down January 17,
2012
The city of Winchester and its collector
(Winchester) filed a class action against Charter Communications, Inc.; Charter
Communications, LLC; and Charter Fiberlink – Missouri, LLC (Charter) to enforce
the collection of certain telecommunications business taxes. The circuit court dismissed Winchester’s
claims based on Revised Statutes of Missouri § 71.675, which prohibited cities
from participating as class representatives in such suits. Winchester then sought a writ of mandamus
from the Supreme Court of Missouri in order to compel the circuit court to
vacate its order. Winchester argued that
it met the requirements for serving as a class representative under Missouri
Supreme Court Rule 52.08, and that the legislature impermissibly changed the
requirements set out in that rule by enacting § 71.675. The court found that because the Missouri
Constitution mandates that the legislature can only amend a procedural rule of
the court when a statute is limited to that purpose and mentions the procedural
rule by name, and because § 71.675 did not do either, the statute was void.
I.
Facts and Holding
Winchester filed suit against Charter in
2010 on behalf of itself and other similarly-situated Missouri municipal
corporations and political subdivisions,[2] requesting a declaratory judgment
that Charter and other telecommunications providers must conform to municipal
ordinances subjecting them to a license tax on gross receipts from fees and
services arising out of their operations.[3]
Winchester also sought an order compelling Charter to pay all such
license taxes owed to the class.[4]
Charter moved to strike these allegations under Revised Statutes of
Missouri § 71.675.[5] The trial court
held that this statute relates to the substantive issue of standing instead of
the procedural issue of fulfilling the requirements for being a class
representative, and so granted Charter’s motion to strike.[6] Winchester subsequently moved for mandamus in
the Supreme Court of Missouri.[7]
The Supreme Court of Missouri found that
Rules of Civil Procedure 41 to 101 are promulgated by the court pursuant to
article V, section 5 of the Missouri Constitution.[8] Further, Rule 41.02 specifically provides
that these rules “supersede all statutes and existing court rules inconsistent
therewith.”[9] However, the court
explained that section 5 of the Missouri Constitution also allows the
legislature to modify these rules by providing that “[a]ny rule may be annulled
or amended in whole or in part by a law limited to the purpose.”[10] The court observed that the constitution in
no way limits the power of the General Assembly, as long as it follows the
prescribed constitutional procedure. For a statute to be considered “limited to the
purpose” of amending or annulling a rule, it “must refer expressly to the rule”
and be limited to the purpose of amending or annulling it.[11]
The court affirmed that these principles
control the question whether the restriction in § 71.675 on the right of cities
to sue telecommunications companies was constitutional.[12] Winchester contended that it was not
constitutional because it did not specifically amend Rule 52.08 as required.[13] Charter did not dispute the law regarding
how the legislature may amend a procedural rule of the supreme court.[14] Instead, Charter argued that § 71.675 was
substantive rather than procedural, in that it stripped cities of standing to
represent a class when suing telecommunications companies for taxes.[15] Charter posited that because the court’s
rules “shall not change substantive rights,” § 71.675 was a substantive law
concerned with standing that must overcome Rule 52.08.[16]
The court stated that Charter’s argument
was meritless because standing requires that “the parties seeking relief . . .
have some personal interest at stake in the dispute”[17] that is “legally
protectable.”[18] The court confirmed
that “a legally protectable interest exists if the plaintiff is affected
directly and adversely by the challenged action or if the plaintiff’s interest
is conferred statutorily.”[19] The court
found that Winchester and other similarly situated cities have a legally
protectable interest in recovering taxes allegedly owed to them, which confers
standing on them.[20] The court
recognized that even § 71.675 itself provided such because cities would not be
able to sue under that statute if they did not have standing.[21] Therefore, the court found that what the
statute actually claims to deprive cities of is not their personal stake in the
dispute or their standing to sue, but rather their right to do so as a
representative of other municipalities in suits against telecommunications
companies.[22] Thus, the majority found
that despite Charter’s arguments and those of the dissent, this matter does not
concern standing but instead the power to sue in a representative capacity.[23]
The court further emphasized the
distinction between substantive and procedural law, in that substantive law
relates to the rights and duties giving rise to the cause of action, while
procedural law is the machinery used for carrying on the suit.[24] Statutes only concerned “with the means by
which the parties may assert their underlying rights,” but not otherwise
prescribing “the nature or the extent of the underlying rights,” are
procedural.[25] As such, because §
71.675 directed the machinery to be used for bringing the suit and the means by
which cities may declare their rights, the court found that § 71.675 was
procedural.[26]
Next, the court addressed Winchester’s
arguments regarding the constitutionality of § 71.675.[27] The majority found that the statute amended
Rule 52.08(a) by tacking on an additional requirement to those already set
forth for being a class representative.[28]
In addition to requiring a class representative to show that it has typical
claims and defenses and that it will fairly and adequately represent the class,
§ 71.675 excluded representatives if a city or town where the defendant was a
telecommunications company.[29] The
court found that such an amendment to Rule 52.08(a) would be valid except the
General Assembly did not follow the rule-amending procedures specifically laid
out by the constitution by failing to expressly mention the rule or its intent
to amend it.[30] Because “Supreme Court
rules govern over contradictory statutes in procedural matters unless the
General Assembly specifically annuls or amends the rules in a bill limited to
that purpose,”[31] the court found that Rule 52.08 governs whether Winchester
may serve as a class representative.[32]
Thus, the majority held that the trial
court exceeded its authority in dismissing Winchester’s class allegations and
issued a permanent writ of mandamus.[33]
In Justice William Ray Price Jr.’s
dissent, he observed that defining the authority and responsibilities of
Missouri municipalities has traditionally been a power of the legislature.[34] The legislature originally gave cities and
towns the power to sue,[35] but the legislature also limited the exercise of
that power in § 71.675.[36] While
Justice Price agreed with the principal opinion in that court rules supersede
contradictory procedural statutes, he redefined the question in this case as
being “whether § 71.675 [was] a valid exercise in legislative control over the
substantive powers of Missouri’s cities and towns or an intrusion into the
separate powers of the courts to control the procedures followed in litigation.”[37] He reasoned that § 71.675 did not interfere
with the function of Rule 52.08 because it only forbade cities and towns the
substantive power of serving as a class representative.[38] As such, Justice Price would not have held
that § 71.675 violated article V, section 5 of the Missouri Constitution.[39]
II.
Legal Background
At issue in this case was whether
Revised Statutes of Missouri § 71.675 violated article V, section 5 of the
Missouri Constitution in its amendment of Supreme Court Rule 52.08, dealing
with class actions.
Section 71.675 was included in House
Bill 209, which was passed in 2005.[40] The
supreme court found in this case that the bill was not limited to the purpose
of amending Rule 52.08, but instead contained eighteen provisions amending
various other statutes and laws.[41] Some
of these other provisions favoring telecommunications companies were
invalidated by the supreme court in City of Springfield v.
Sprint Spectrum, L.P.[42] In
that case, the City of Springfield filed suit against a telecommunications provider
in order to collect gross receipt taxes on its wireless service pursuant to a city
ordinance.[43] The supreme court held
that a statute contained in House Bill 209 that imposed a five percent cap on
municipal business license taxes on telecommunications companies for certain
cities was an unconstitutional special law.[44]
Because the court found that this statute was nonseverable from the Municipal
Telecommunications Business License Tax Simplification Act, the court struck
down that entire Act.[45]
In addition, the present case is not the
first time the court has struck down statutes it found specifically in
contradiction with the requirements of article V, section 5.[46] In State ex rel. K.C. v. Gant,
at issue was Rule 127.05, which permitted a minor or the minor’s guardian to a
hearing if certain requirements were met.[47]
The legislature passed a bill purporting to grant the juvenile court
discretion whether to hold the hearing.[48]
Yet, that law was not enclosed in a bill limited to the purpose of
amending that rule, nor did the bill explicitly refer to the rule.[49] Also, in State v. Reese,[50]
the court held that a rule governing the procedures for substitution of a
deceased party overcame a conflicting statute regarding the same issue because
“[t]he General Assembly [had] not passed a law limited to the purpose of
annulling or amending” the rule in question.[51] The conflicting statutory provision was
instead contained in legislation revising numerous previous statutes related to
trusts and estates, which made no mention of the supreme court rule.[52]
However, the General Assembly has also
in the past specifically complied with article V, section 5.[53] In 1984, the legislature enacted a law “to
amend supreme court rule 54.22 . . . relating to process, return or proof of
service.”[54] That law referred to the
rule it was amending in particular and was narrowed to that purpose in that it
contained only a statement that Rule 54.22 was being amended and the language
of the new rule.[55]
III.
Comment
Based on the premise that Missouri law
governing the requirements of being a class representative is procedural, it is
clear the legislature did not follow the constitutionally-prescribed method of
amending Rule 52.08 here. However, the
majority and dissent disagreed over the issue whether the law setting forth how
to serve as a class representative was actually substantive or procedural in
nature. The Supreme Court of Missouri
has recognized and consistently affirmed that “[a]ll of the authorities hold
that a ‘substantive law is that part of the law which creates, defines and
regulates rights as opposed to [procedural] law, which prescribes the method of
enforcing rights or obtaining redress for their invasion.’”[56]
Thus, in first determining that the law
at issue simply governs the power to sue as a class representative rather than
the substantive matter of standing, the majority could construe that such law was
procedural. Once it was announced that
the law was procedural, the majority was then able to conclude that the legislature’s
attempt to add to the supreme court rule in question was unconstitutional. Perhaps the majority was motivated to find
the law to be procedural here because, as previously mentioned, the supreme
court has appeared hostile toward other statutes in H.B. 209 that favor the
telecommunications industry.[57]
- Jackie Whipple
[1] No. SC91631 (Mo. Jan. 17, 2012) (en
banc), available at http://www.courts.mo.gov/file.jsp?id=51955. The West Reporter citation is State ex rel.
Collector of Winchester v. Jamison, 357 S.W.3d 589 (Mo. 2012) (en banc).
[2] According to Winchester, those
similarly situated entities are: “[A]ll cities or other political subdivisions
[that] have adopted an ordinance in effect that imposes a business or
occupational license tax on any person engaged in the business of supplying or
furnishing telephone service.” Id. at 2
n.4.
[3] Id. at 2-3. Specifically, Winchester alleged that Charter
failed to pay license taxes on gross receipts derived from exchange access,
interexchange access, special access, interconnection facilities and equipment for use, toll or long-distance, reciprocal compensation
arrangements, Federal Universal Service Fund surcharges, State Universal
Service Fund surcharges, End User Common Line charges, intrastate telephone
service and other sources. Id. at 3 n.5. Gross receipts are “all receipts from the
retail sale of telecommunications service taxable under section 144.020 and
from any retail customer now or hereafter exempt from the state sales tax.” Mo. Rev. Stat. § 92.083.1(1) (2009).
[4] Winchester, No. SC91631, slip op. at
3.
[5] Id.
The statute states in relevant part: “Notwithstanding any other
provision of law to the contrary, no city or town shall bring any action in
federal or state court in this state as a representative member of a class to
enforce or collect any business license tax imposed on a telecommunications
company. A city or town may,
individually or as a single plaintiff in a multiple-plaintiff lawsuit, bring an
action in federal or state court in this state to enforce or collect any
business license tax imposed on a telecommunications company.” Mo. Rev. Stat. § 71.675.1 (2009).
[6] Winchester, No. SC91631, slip op. at
3.
[7] Id.
[8] Id. at 4. That section of the constitution provides:
“The supreme court may establish rules relating to practice, procedure and
pleading for all courts and administrative tribunals, which shall have the
force and effect of law.” Mo. Const. art. V, § 5.
[9] Winchester, No. SC91631, slip op. at
5.
[10] Id. (citing Mo. Const. art. V, § 5).
[11] Id. (citing State ex rel. K.C. v.
Gant, 661 S.W.2d 483, 485 (Mo. 1983) (en banc)).
[12] Id. at 6-7.
[13] Id. at 7. That rule, which is denominated “Class
Actions,” specifically delineates the requirements and qualifications for
filing class action lawsuits: “One or more members of a class may sue or be
sued as parties on behalf of all only if (1) the class is so numerous that
joinder of all members is impracticable, (2) there are questions of law or fact
common to the class, (3) the claims or defenses of the representative parties
are typical of the claims or defenses of the class, and (4) the representative
parties will fairly and adequately protect the interests of the class.” Mo. Sup. Ct. R. 52.08(a).
[14] Winchester, No. SC91631, slip op.
at 8.
[15] Id.
[16] Id. (citing Mo. Const. art. V, §
5).
[17] Winchester, No. SC91631, slip op.
at 9 (citing Ste. Genevieve Sch. Dist. R-II v. Bd. of Alderman of the City of
Ste. Genevieve, 66 S.W.3d 6, 10 (Mo. 2002) (en banc)).
[18] Id. (citing Battlefield Fire
Protection Dist. v. City of Springfield, 941 S.W.2d 491, 492 (Mo. 1997) (en
banc)).
[19] Id. (citing Battlefield Fire
Protection Dist., 941 S.W.2d at 492).
[20] Id.
[21] Id.
[22] Id.
[23] Id. at 9-10.
[24] Id. at 10 (citing Wilkes v. Mo.
Highway and Transp. Comm’n, 762 S.W.2d 27, 28 (Mo. 1988) (en banc)).
[25] Id. (citing State ex rel. K.C. v.
Gant, 661 S.W.2d 483, 485 (Mo. 1983) (en banc)).
[26] Id.
[27] Id. at 7.
[28] Id.
[29] Id.
[30] Id. at 7-8.
[31] Id. at 8 (citing Ostermueller v.
Potter, 868 S.W.2d 110, 111 (Mo. 1993) (en banc)).
[32] Id.
[33] Id. at 10-11.
[34] Id. at 12 (Price, J., dissenting).
[35] Id. (Price, J., dissenting). Mo. Rev. Stat. § 65.260 states that “[e]ach
township, as a body corporate, shall have power and capacity … [t]o sue and be
sued, in the manner provided by the laws of this state.”
[36] Id. (Price, J., dissenting).
[37] Id. at 14 (Price, J., dissenting).
[38] Id. (Price, J., dissenting).
[39] Id. at 15 (Price, J., dissenting).
[40] Id. at 8 (citing Act of July 14,
2005, enacting H.B. 209, 93rd Gen. Assem., 1st Reg. Sess. (Mo. 2005); 2005 Mo.
Laws 429-41).
[41] Id.
[42] 203 S.W.3d 177 (Mo. 2006) (en
banc).
[43] Id. at 180.
[44] Id. at 182-83.
[45] Id. at 187-88.
[46] Id. at 5-6.
[47] Id. at 6.
[48] Id. (citing Act of June 17, 1980,
enacting S.B. 512, 80th Gen. Assem., 2d Reg. Sess. (Mo. 1980); 1980 Mo. Laws
331-37).
[49] Id.
[50] 920 S.W.2d 94 (Mo. 1996) (en banc).
[51] Winchester, No. SC91631, slip op.
at 6 (citing Reese, 920 S.W.2d. at 95-6).
[52] Id. (citing Act of July 14, 1983,
enacting S.B. 44 and 45, 82d Gen. Assem., 1st Reg. Sess. (Mo. 1983); 1983 Mo.
Laws 804-906).
[53] Id. at 5.
[54] Id. (citing Act of June 7, 1984,
enacting H.B. 947, 82d Gen. Assem., 2d Reg. Sess. (Mo. 1984); 1984 Mo. Laws
792).
[55] Id.
[56] Maurizi v. W. Coal & Mining
Co., 11 S.W.2d 268, 392 (Mo. 1928) (en banc).
[57]
See City of Springfield v. Sprint Spectrum, L.P., 203 S.W.3d 177 (Mo. 2006) (en
banc).
