Tracfone, Inc. v. City of Renton

547 P.3d 902

TRACFONE, INC., Appellant,

v.CITY OF RENTON, Respondent.

No. 85094-6-I

Court of Appeals of Washington, Division 1.

Filed April 29, 2024

Honorable Matthew Segal, Judge.

Scott M. Edwards, Taylor Washburn, Grant Steven Degginger, Lane Powell PC, 1420 5th Ave., Ste. 4200, Seattle, WA, 98101-2375, for Appellant.

Kari L. Sand, Julia Norwood, Ogden Murphy Wallace, PLLC, 701 5th Ave., Ste. 5600, Seattle, WA, 98104-7045, for Respondent.

Andrea Lynn Bradford, Julia Patricia Doherty, P. Stephen Dijulio, Lee R. Marchisio, Adrian Urquhart Winder, Foster Garvey PC, 1111 3rd Av.e Ste. 3000, Seattle, WA, 98101-3296, for Amicus Curiae on behalf of Washington State Association of Municipal Attorneys.

PUBLISHED OPINION

Díaz, J.

¶ 1 TracFone Wireless, Inc. ("TracFone") sells pre-paid airtime purchased from third-party cellular networks to individual customers and retailers. TracFone appeals the trial court’s order of summary judgment affirming an administrative decision that its business is subject to the City of Renton’s ("Renton") municipal utility tax. TracFone argues it was error (1) to consider declarations from two Renton witnesses, (2) to hold TracFone was a "telephone business" under RCW 35A.82.060, and (3) to hold TracFone’s wholesale sales were not subject to the "resale" tax exemption within RCW 35A.82.060(1). Finding no reversible error, we affirm.

I. BACKGROUND

¶ 2 In TracFone’s own words, it "buys wireless airtime from network carriers, then resells this airtime on a prepaid basis at retail (to consumers) and at wholesale (to retailers and distributors[).]" In a nutshell, it sells "prepaid wireless airtime" cards.

¶ 3 Starting in 2011, Renton hired Taxpayer Recovery Services ("TRS") to audit TracFone to determine its liability under Renton’s municipal utility tax. The audit period covered January 1, 2007 through October 31, 2017. TRS completed the audit in 2017, but it recommended that Renton wait to issue its utility tax assessment until the outcome of a Missouri state court appeal in TracFone v. City of Springfield, 557 S.W.3d 439 (Mo. Ct. App. 2018). Following the conclusion of City of Springfield in 2019, Renton assessed TracFone for utility tax on both its consumer and wholesale sales.

¶ 4 TracFone appealed the tax assessment to Renton’s hearing examiner. Both TracFone and Renton moved for summary judgment. The hearing examiner granted summary judgment for Renton and ruled that both TracFone’s consumer and wholesale sales were properly subjected to Renton’s utility tax. The hearing examiner issued a final decision in May 2021.¹

¶ 5 In June 2021, TracFone petitioned the King County Superior Court for a writ of review of the hearing examiner’s decision. In February 2023, the superior court affirmed the hearing examiner’s decision to grant summary judgment. TracFone now appeals.

II. ANALYSIS

A. Writs of Review and Motions for Summary Judgment

[1–3] ¶ 6 There are two classes of writs, constitutional and statutory. Dep’t of Corr. v. Barnett, 24 Wash. App. 2d 961, 966, 522 P.3d 52 (2022). To obtain a statutory writ of review under RCW 7.16.040, "the petitioner must show (1) that an inferior tribunal (2) exercising judicial functions (3) exceeded its jurisdiction or acted illegally, and (4) there is no adequate remedy at law." Id. (quoting Wash. Pub. Emps. Ass’n v. Wash. Pers. Res. Bd., 91 Wash. App. 640, 646, 959 P.2d 143 (1998)). A litigant may show that the lower tribunal "acted illegally" by establishing prejudicial "errors of law." Wash. Pub. Emps. Ass’n, 91 Wash. App. at 653-54, 959 P.2d 143. Relief is not limited to "only acts that violated procedural requirements[.]" Id. Such an interpretation "would render the phrase [‘acting illegally’] superfluous" as it would "merely describe the conduct already encompassed within the statutes’ phrases ‘exceeded jurisdiction’ or ‘erroneous or void proceeding.’ " Id. (quoting RCW 7.16.040).

[4] ¶ 7 Under Renton’s ordinance, the hearing examiner’s decision is "subject to review by either party under the provision of RCW 7.16.040," i.e., the statutory writ of review process. Renton Municipal Code ("RMC") 5-26-19. Further, this court has consistently held that a writ of review is the proper means to appeal a municipal hearing examiner’s determination on tax issues. Foss Maritime Co. v. City of Seattle, 107 Wash. App. 669, 672, 27 P.3d 1228 (2001); see Wedbush Secs., Inc. v. City of Seattle, 189 Wash. App. 360, 363-64, 358 P.3d 422 (2015); see also City of Seattle v. T-Mobile W. Corp., 199 Wash. App. 79, 82, 397 P.3d 931 (2017). Thus, TracFone’s petition for a statutory writ of review is properly before this court.

[5] ¶ 8 The parties’ briefing, however, incorrectly frames their analysis as a review of the superior court. "On appeal of a writ of review, this court reviews the challenged administrative decision on the record of the administrative tribunal, not of the superior court operating in its appellate capacity."² Nichols v. Seattle Hous. Auth., 171 Wash. App. 897, 904, 288 P.3d 403 (2012).

[6] ¶ 9 As this is an appeal of the hearing examiner’s order granting summary judgment, we review de novo whether "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." CR 56(c); see Ranger Ins. Co. v. Pierce County, 164 Wash.2d 545, 552, 192 P.3d 886 (2008).

[7, 8] ¶ 10 A "material fact" is one upon which the outcome of the litigation depends. Jacobsen v. State, 89 Wash.2d 104, 108, 569 P.2d 1152 (1977). "A genuine issue of material fact exists where reasonable minds could differ on the facts controlling the outcome of the litigation." Ranger Ins. Co., 164 Wash.2d at 552, 192 P.3d 886. We view all facts and reasonable inferences in the light most favorable to the nonmoving party. Eicon Constr,, Inc. v. E. Wash. Univ., 174 Wash.2d 157, 164, 273 P.3d 965 (2012).

[9] ¶ 11 Washington courts employ a two-step burden-shifting analysis for summary judgment motions. First, the "party moving for summary judgment bears the initial burden of showing that there is no disputed issue of material fact." Haley v. Amazon.com Servs., LLC, 25 Wash. App. 2d 207, 216, 522 P.3d 80 (2022). Second, the "burden then shifts to the nonmoving party to present evidence that an issue of material fact remains." Id. Stated otherwise, summary judgment gauges whether the nonmoving party has met their "burden of production to create an issue" of material fact. Rice v. Offshore Systems, Inc., 167 Wash. App. 77, 89, 272 P.3d 865 (2012).

[10, 11] ¶ 12 The " function of a summary judgment proceeding, or a judgment on the pleadings is to determine whether or not a genuine issue of fact exists, not to determine issues of fact.’ " Haley, 25 Wash. App. 2d at 217, 522 P.3d 80 (quoting State ex rel. Zempel v. Twitchell, 59 Wash.2d 419, 425, 367 P.2d 985 (1962)). As such, the reviewing body "may not weigh the evidence, assess credibility, consider the likelihood that the evidence will prove true, or otherwise resolve issues of material fact." If findings of fact are made, the reviewing body "must specify which facts exist without contention and which remain in controversy." Id. at 234, 522 P.3d 80 (citing CR 56(d)).

[12] ¶ 13 As a preliminary note, the hearing examiner in this matter appears to have made numerous improper factual findings in granting summary Judgment. For example, the hearing examiner appeared to weigh numerous factual "factors" between TracFone and Renton’s respective positions on the RCW 35A.82.060(1) resale exemption. Even so, "[w]hen the trial court does make findings of fact without following the procedures dictated in CR 56(d), its findings are nullities." Id. at 235, 522 P.3d 80. Stated otherwise, because we review orders on summary judgment de novo, such "findings of fact are superfluous in summary judgment proceedings and carry no weight on appeal." Hamilton v. Huggins, 70 Wash. App. 842, 848, 855 P.2d 1216 (1993).

B. The Use of Renton’s Two Expert Declarations

[13] ¶ 14 We begin with the propriety of the evidence which was before the hearing examiner. TracFone argues the superior court³ erred by basing its findings on legally deficient declarations of two of Renton’s witnesses. TracFone alleges these two witnesses constituted the "near-exclusive basis" of the court’s findings. We disagree.

¶ 15 The first witness, Garth Ashpaugh, has experience within the telecommunications industry but has not worked directly with TracFone and, thus according to TracFone, has no personal knowledge for his statements, in violation of ER 602. The second witness, Nate Malone, worked for Renton in various tax-related roles beginning in 2017 but did not work on TracFone’s audit and, thus according to TracFone, his statements also lacked appropriate foundation. If true, reliance on these declarations normally may violate CR 56(e)’s requirement that "[s]upporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein." This argument, however, is unpersuasive for two general reasons.

¶ 16 First, in proceedings before Renton’s hearing examiner, "[technical rules of evidence will not be applied." RMC 4-8-100(G)(3)(f)(ii).⁴ Instead, "[t]he key requirements for evidence will be relevance and reliability. Relevant and reliable evidence will be admitted if it possesses probative value commonly accepted by reasonable persons in the conduct of their affairs." Id.; see, e.g., RCW 34.05.461(4) (laying out a similar standard in Administrative Procedure Act matters). And ultimately, the core obligation of the RMC hearing examiner is to ensure that "the appellant taxpayer and the Administrator shall have the opportunity to be heard and to introduce evidence relevant...