Boles v. City of St. Louis

690 S.W.3d 592

Mark BOLES, et al., Respondent/Cross-Appellant,

v.CITY OF ST. LOUIS, et al., Appellant.

No. ED 111495

Missouri Court of Appeals, Eastern District, SPECIAL DIVISION.

Filed: May 28, 2024

Appeal from the Circuit Court of the City of St. Louis, Honorable Jason M. Sengheiser, Judge

FOR APPELLANT: Michael A. Garvin, City Counselor’s Office, 1200 Market Street, City Hall Room 314, St. Louis, Missouri 63103, Zachary R. McMichael, David H. Luce, Capes, Sokol, Goodman & Sarachan, P.C., 8182 Maryland Avenue, 15^th Floor, St. Louis, Missouri 63105.

FOR RESPONDENT: W. Bevis Schock, 7777 Bonhomme Avenue, Suite 1300, Clayton, Missouri 63105, Mark C. Milton, 11004 Manchester Road, St. Louis, Missouri 63122.

Michael S. Wright, Judge

Introduction

This consolidated appeal must determine the meaning of the City of St. Louis’ Earnings Tax Ordinance § 5.22.020 ("Earnings Tax Ordinance" or "Ordinance"), which imposes a one percent tax on "[s]alaries, wages, commissions and other compensation earned after July 31, 1959, by nonresident individuals of the City for work done or services performed or rendered in the City[.]"¹ The parties contest whether the earnings tax should be assessed when non- residents work remotely outside of the City for their City-based employers.² Appellants Gregory F.X. Daly (the "City Tax Collector"), in his official capacity as the Collector of Revenue for the City of St. Louis, and the City of St. Louis ("City") (collectively, "Collectors") appeal from a final judgment entered on March 30, 2023, incorporating a January 2022 order and a January 2023 order and judgment, in which the trial court granted, in part, Respondents’ – Mark Boles, Nicholas Oar, Kos Semonski, Christian E. Stein, II, Marc S. Kolaks, and Raymond T. Jaeger (collectively, "Employees") – summary judgment motion.

Collectors raise two points on appeal. In Point I, Collectors contend the trial court erred in interpreting the Ordinance because its reading violates the rules of statutory construction, In Point II, Collectors argue the trial court erred because they are entitled to judgment as a matter of law in that the undisputed facts show Employees rendered services in the City, and therefore, the remote work at issue is subject to the earnings tax.

Employees cross-appeal and assert seven claims of error. The cross-appeal challenges the trial court’s March 30, 2023 final judgment incorporating the January 2023 summary judgment order and judgment, and parts of the January 2022 order dismissing all but two claims asserted in their Second Amended Petition. In Points I–V, Employees argue the trial court erred in dismissing the counts in which they sought class action certification under § 139.031 ("Refund Statute") and, alternatively, under 42 U.S.C. § 1983 ("§ 1983").³ In Point VI, Employees argue the trial court erred in partially granting Collectors’ summary judgment motion as to Count IX because Collectors violated the Hancock Amendment when they began taxing remote work, which was not previously taxed and, in effect, broadened the definition of the tax base. In Point VII, Employees contend the trial court erred in denying their motion for attorneys’ fees because this case falls within the special-circum-stances and the balancing-of-the-benefits exceptions to the American Rule.

This Court holds the Earnings Tax Ordinance’s language is clear and unambiguous, and the remote work done and/or services at issue were not performed or rendered in the City. Thus, Employees were not liable for the earnings tax. for the days they worked remotely outside of the City and are entitled to refunds. This Court holds Employees’ cross-appeal claims of error are without merit.

Accordingly, the trial court’s judgment is affirmed.

Factual and Procedural Background

The Missouri Legislature enacted the Earnings Tax Statute, codified in § 92.111.2(2), and enabled the City to enact the Ordinance in 1959.⁴ The Ordinance authorizes the City to impose a one percent tax on "[s]alaries, wages, commissions and other compensation earned .. by nonresident individuals of the City for work done or services performed or rendered in the City[.]" Collectors are the named parties responsible for collecting the earnings tax. Employees are nonresidents of the City who worked for Citybased employers in 2020 and 2021, either on-site at their employers’ premises in the City or remotely outside of the City. Regardless of the work model Employees chose, Collectors assessed the earnings tax against Employees, and they either paid their respective taxes under protest or the earnings tax was automatically withheld from their paychecks.⁵ Employees then submitted refund requests for the number of days they worked remotely outside of the City for each calendar year.⁶ In 2020 and 2021, the City Tax Collector denied Employees’ requests for refunds for remote work performed outside of the City, with the exception of requests for work done while traveling for business purposes for their respective City-based employers.⁷

Employees sued Collectors seeking refunds for the earnings tax paid for days they worked remotely outside of the City. The case proceeded on Employees’ Second Amended Petition, which asserted the following claims: declaratory judgment seeking to interpret the Ordinance (Count I); declaratory judgment determining the final date to submit an application for refunds of earnings tax paid by nonresidents for days working remotely (Count II); refunds under the Refund Statute (Count III); in the alternative, relief under § 1983 (Counts IV–VII); in the alternative, preliminary and permanent injunctive relief requiring Collectors to stop instructing employers to violate the law (Count VIII); and declaratory relief under the Hancock Amendment (Count IX). Employees also sought class action certification under the Refund Statute, or in the alternative, under § 1983.

Collectors moved to dismiss Employees’ Second Amended Petition. On January 3, 2022, the trial court granted Collectors’ motion in part and dismissed Counts I, II, and IV-VIII, which left pending Counts III (refunds under the Refund Statute) and IX (declaratory relief under the Hancock Amendment). As to the class action certification, the trial court found "class action relief is unavailable under the Refund Statute." As to Employees’ § 1983 claims, the trial court did not directly address whether the class action certification was available under § 1983, but instead found the Refund Statute provides Employees with an adequate remedy, and therefore, relief under § 1983 was unavailable.

The parties then filed cross-motions for summary judgment on the remaining counts. On January 19, 2023, the trial court granted each of the summary judgment motions in part. Finding in Employees’ favor on Count III, the trial court found the Ordinance’s language was clear and unambiguous, and the remote work and/or services at issue were not rendered in the City. Thus, the trial court determined the nonresident Employees were not liable for the earnings tax for the days they worked remotely outside of the City and were entitled to their refunds. As to Count IX, the trial court found in Collectors’ favor, concluding they did not violate the Hancock Amendment because the earnings tax, since its enactment, has taxed the same property – earnings – and all that changed was the City Tax Collector’s application of the Ordinance. The trial court explained that "in order to constitute a violation of the Hancock Amendment, the broadening of the definition of the base of an existing tax must have been done by legislative function."

Employees moved to amend the January 19, 2023 order and judgment and sought attorneys’ fees. On March 30, 2023, the trial court denied both motions, reiterated its findings from the January 3, 2022 order and the January 19, 2023 order and judgment, and entered a final judgment disposing of all claims against all parties.

[1] This appeal follows.⁸

COLLECTORS’ APPEAL

Discussion

Points I & II

Collectors raise two points on appeal which this Court addresses together. In Point I, Collectors argue the trial court erred in interpreting the meaning of the phrase "services … rendered in the City" in the Earnings Tax Ordinance to mean "services … done in the City" because such an interpretation violates the rules of statutory construction. In Point II, Collectors argue the trial court erred because they are entitled to judgment as a matter of law in that the undisputed facts presented under Rule 74.04(c) show Employees rendered services in the City and, therefore, the remote work at issue was subject to the earnings tax. This Court holds the Ordinance’s language is clear and unambiguous, and the work done or services performed or rendered remotely by Employees outside of the City are not subject to the earnings tax. Therefore, Collectors are not entitled to judgment as a matter of law.

Standard of Review

[2] This Court reviews the trial court’s grant of summary judgment de novo. Lisle v. Meyer Elec. Co., Inc., 667 S.W.3d 100, 103 (Mo. banc 2023). "Summary judgment will be affirmed when the moving party has established a right to judgment as a matter of law on the basis of facts as to which there is no genuine dispute." Id. (quoting Holmes v. Steelman, 624 S.W.3d 144, 149 (Mo. banc 2021)). "In determining whether a party has established a right to judgment, ‘issues of statutory interpretation are questions of law reviewed de novo.’" Id. (quoting Holmes, 624 S.W.3d at 148).

A. Interpreting the Earnings Tax Ordinance

[3] The Earnings Tax Ordinance- imposes a one percent tax on earnings of "nonresident individuals of the City for work done or services performed or rendered in the City[.]" The parties contest the meaning of the phrase "services … rendered in the City" and whether the Ordinance’s language authorizes Collectors to impose the earnings tax when nonresidents of the City work remotely outside of the City.

[4-10] "In...