Phone Recovery Servs., LLC v. Qwest Corp., A17-0078

919 N.W.2d 315

PHONE RECOVERY SERVICES, LLC, for itself and on behalf of the State of Minnesota, Appellant,

v.QWEST CORPORATION, a Colorado company, et al., Respondents,Citizens Telecommunications Company of Minnesota, LLC, a Delaware company, et al., Respondents,Telephone and Data Systems, Inc., et al., Respondents,Pine Island Telephone Company, et al., Respondents,

Level 3 Communications, LLC, a Delaware company, et al., Respondents,

Onvoy, LLC, et al., Respondents,

Bandwidth.com CLEC, LLC, a Delaware company, et al., Respondents,

MCC Telephony of Minnesota, LLC, a Delaware company, et al., Respondents,

Jaguar Communications, Inc., et al., Respondents,

Windstream Holdings, Inc., et al., Respondents,

XO Communications, LLC, et al., Respondents,

AT&T Corporation, et al., Respondents.

A17-0078

Supreme Court of Minnesota.

Filed: October 31, 2018

Katherine S. Barrett Wiik, Eric J. Magnuson, Gary L. Wilson, Troy F. Tatting, Geoffrey H. Kozen, Robins Kaplan LLP, Minneapolis, Minnesota, for appellant.

Misty Smith Kelley, Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., Chattanooga, Tennessee; and

Thomas H. Boyd, William A. McNab, David M. Aafedt, Winthrop & Weinstine, P.A., Minneapolis, Minnesota, for respondents Qwest Corporation, et al.

Robert Cattanach, Bryan C. Keane, Dorsey & Whitney, LLP, Minneapolis, Minnesota, for respondents Citizens Telecommunications Company of Minnesota, LLC, et al.

Curtis D. Smith, Richard J. Johnson, Moss & Barnett, P.A., Minneapolis, Minnesota, for respondents Telephone and Data Systems, Inc., et al.

Michael J. Ahern, Edward B. Magarian, Dorsey & Whitney LLP, Minneapolis, Minnesota, for respondents Pine Island Telephone Company, et al.

Thomas R. Muck, Aron J. Frakes, Fredrikson & Byron, P.A., Minneapolis, Minnesota, for respondents Level 3 Communications, LLC, et al.

David G. Parry, Kadee J. Anderson, Stinson Leonard Street LLP, Minneapolis, Minnesota, for respondents Onvoy, LLC, et al.

Gregory R. Merz, Gray Plant Mooty, Minneapolis, Minnesota, for respondents Bandwidth.com CLEC, LLC, et al.

Philip R. Schenkenberg, Claire V.J. Joseph, Briggs & Morgan, Minneapolis, Minnesota, for respondents MCC Telephony of Minnesota LC, et al.

Monte A. Mills, Mark L. Johnson, Greene Espel PLLP, Minneapolis, Minnesota, for respondents Windstream Holdings, Inc., et al.

Wayne E. Reames, Belin McCormick, P.C., Des Moines, Iowa, for respondents XO Communications, LLC, et al.

Karla M. Vehrs, Ballard Spahr LLP, Minneapolis, Minnesota, for respondents AT&T Corporation, et al.

Walter A. Pickhardt, Faegre Baker Daniels LLP, Minneapolis, Minnesota, for amicus curiae Council on State Taxation.

Kirsten E. Donaldson, Jonathan G. Cedarbaum, Mark Jia, Wilmer Cutler Pickering Hale & Dorr, LLP, Washington, D.C., for amicus curiae Chamber of Commerce of the United States of America.

CHUTICH, J., took no part in the consideration or decision of this case.

THISSEN, J., not having been a member of this court at the time of submission, took no part in the consideration or decision of this case.

OPINION

ANDERSON, Justice.

Appellant Phone Recovery Services, LLC initiated a qui tam action under the Minnesota False Claims Act, Minn. Stat. § 15C.02 (2016) (MFCA), alleging that respondents have intentionally failed to pay fees and surcharges due to the State and imposed by statute for 911 services, the Telecommunications Access Minnesota (TAM) program, and the Telephone Assistance Plan (TAP) program. Because the MFCA does not allow qui tam actions based on "claims, records, or statements made under portions of Minnesota Statutes relating to taxation," Minn. Stat. § 15C.03 (2016), respondents jointly moved for dismissal, asserting that the 911, TAM, and TAP charges are all taxes and therefore appellant failed to state a claim as a matter of law. The district court granted respondents’ motion and the court of appeals affirmed. Phone Recovery Servs., LLC ex rel. State v. Qwest Corp. , 901 N.W.2d 185, 199 (Minn. App. 2017). We affirm.

FACTS

The fees and surcharges that are the subject of this litigation under the MFCA are all creatures of statute. Minnesota Statutes § 403.11 (2016) establishes a "fee" for the State’s 911 emergency system. This fee is set, within statutory limits, by the Commissioner of Public Safety. Minn. Stat. § 403.11, subd. 1(c). The TAM charge and the TAP surcharge, also subject to statutory limits, are established by the Public Utilities Commission.¹ Minn. Stat. §§ 237.52, subd. 2(a), .70, subd. 6 (2016). Telecommunications carriers, the respondents in this litigation, are required to collect all three of these surcharges from their customers and turn the proceeds over to the Commissioner of Public Safety.² Minn. Stat. § 237.49 (2016). Telecommunications carriers also are required to report to the State the number of "access" lines subject to these surcharges. See Minn. Stat. § 403.11, subd. 6 ; Minn. R. 7817.0900, subp. 3 (2017).

Phone Recovery Services, a New Jersey corporation, brought an action in May 2014, alleging that respondents had violated the reverse-false-claims provisions of the MFCA. The reverse-false-claims provisions impose liability for (1) "[having] possession, custody, or control of property or money used, or to be used, by the state or a political subdivision and knowingly deliver[ing] or caus[ing] to be delivered less than all of that money or property," (2) "knowingly mak[ing] or us[ing], or caus[ing] to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the state or a political subdivision," or (3) "knowingly conceal[ing] or knowingly and improperly avoid[ing] or decreas[ing] an obligation to pay or transmit money or property to the state or a political subdivision."³ Minn. Stat. § 15C.02(a)(4), (7). Specifically, Phone Recovery Services alleged that respondents had knowingly, intentionally, deliberately, or recklessly under-collected the 911, TAM, and TAP surcharges from their customers, and thus underpaid the amounts owed to the State.

Phone Recovery Services filed a complaint, under seal, in Ramsey County District Court. After the Attorney General declined to intervene, the district court unsealed the complaint and ordered Phone Recovery Services to pursue the litigation on behalf of the State.⁴ Respondents moved to dismiss. As relevant here, respondents argued that, because the surcharges are taxes, the MFCA tax bar applied, see Minn. Stat. § 15C.03 (excluding a claim "made under portions of Minnesota Statutes relating to taxation"), and Phone Recovery Services’ complaint must be dismissed for failure to state a claim, see Minn. R. Civ. P. 12.02(e) (providing for dismissal for failure to state a claim upon which relief can be granted). The district court agreed, applying the statutory definition of "tax" provided by Minn. Stat. § 645.44, subd. 19 (2016) to the surcharges. Accordingly, the district court concluded that Minn. Stat. §§ 237.52, .70, and 403.11 are "[s]tatutes relating to taxation" for purposes of the tax-bar provision in Minn. Stat. § 15C.03 and dismissed the complaint with prejudice.

The court of appeals agreed that the 911, TAM, and TAP surcharges are taxes by statutory definition and ultimately concluded that the claim brought by Phone Recovery Services was prohibited by the tax bar provided in the MFCA. Phone Recovery Servs. , 901 N.W.2d at 198–99. We granted review.

ANALYSIS

We are presented with a question of statutory interpretation; specifically, does the tax bar set out in Minn. Stat. § 15C.03 as part of the MFCA apply to surcharges collected by telecommunications carriers and remitted to the State? We review the interpretation of statutes de novo. Cocchiarella v. Driggs , 884 N.W.2d 621, 624 (Minn. 2016).

I.

We begin our analysis with the MFCA. This Act permits, under certain circumstances, a plaintiff to bring a private cause of action to collect funds due to the State. See Minn. Stat. § 15C.05 (2016). If these claims are successfully prosecuted, the plaintiff is allowed to retain some of the proceeds of the litigation and the balance of the recovery is remitted to the State. See Minn. Stat. § 15C.13 (2016). A false claims action can be a direct claim in which the allegation is that a defendant wrongfully secured monies from the State. Alternatively, as here, in a "reverse" MFCA complaint, the plaintiff alleges that the defendant did not turn over all monies due to the State. See Minn. Stat. § 15C.02(a)(4), (7).

But not all private causes of action under the MCFA are permitted. The MFCA "tax bar" precludes actions if the defendant’s allegedly false claim stems from "portions of Minnesota Statutes relating to taxation." Minn. Stat. § 15C.03. The MFCA does not define the phrase "relating to taxation." See Minn. Stat. §§ 15C.01, 15C.03. When a statute does not define a term or phrase, we first consider the plain meaning of that language. See 500, LLC v. City of Minneapolis , 837 N.W.2d 287, 290–91 (Minn. 2013) ("In the absence of statutory definitions , we give words and phrases their plain and ordinary meanings." (emphasis added) ).

We have previously defined "relating to" as "to stand in some relation; to have bearing or concern; to pertain; refer; to bring into association with or connection with." Id . at 291 (quoting Morales v. Trans World Airlines, Inc. , 504 U.S. 374, 383, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992) ). With respect to the term "taxation," the court of appeals looked to several dictionary definitions, including "the levying of tax," "the action of taxing," "the imposition of taxes," "the fact of being taxed," and "[a]n assessed amount of tax." Phone Recovery Servs. , 901 N.W.2d at 197 (internal citations omitted) (alteration in original). Based on dictionary definitions of "relating to" and "taxation," the court of appeals concluded that "[a] statute is one ‘relating to taxation’ ... if the statute has a connection, relation, or reference to or concerns the imposition of a tax, the amount assessed as tax, or the...