Kentucky Commercial Mobile Radio Service Emergency Telecommunications Board v. Tracfone Wireless, Inc. , 712 F.3d 905 ( 2013 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 13a0095p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
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COMMONWEALTH OF KENTUCKY
EMERGENCY TELECOMMUNICATIONS BOARD, --
COMMERCIAL MOBILE RADIO SERVICE
Plaintiff-Appellee/Cross-Appellant, -
Nos. 11-6215/6300
,
>
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v.
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TRACFONE WIRELESS, INC.
Defendant-Appellant/Cross-Appellee. N
Appeal from the United States District Court
for the Western District of Kentucky at Louisville.
No. 3:08-cv-660—John G. Heyburn, II, District Judge.
Argued: October 12, 2012
Decided and Filed: April 5, 2013
Before: KEITH, MARTIN, and ROGERS, Circuit Judges.
_________________
COUNSEL
ARGUED: E. Joshua Rosenkranz, ORRICK, HERRINGTON & SUTCLIFFE LLP,
New York, New York, for Appellant/Cross-Appellee. Jonathan David Goldberg,
GOLDBERG & SIMPSON, Prospect, Kentucky, for Appellee/Cross-Appellant.
ON BRIEF: E. Joshua Rosenkranz, ORRICK, HERRINGTON & SUTCLIFFE LLP,
New York, New York, Sheryl G. Snyder, Thomas Patrick O’Brien, III, Cory J. Skolnick,
FROST BROWN TODD LLC, Louisville, Kentucky, for Appellant/Cross-Appellee.
Jonathan David Goldberg, Jan M. West, Jennifer K. Luhrs, GOLDBERG & SIMPSON,
Prospect, Kentucky, for Appellee/Cross-Appellant. Mark Allen Loyd, John K. Bush,
BINGHAM GREENEBAUM DOLL, Louisville, Kentucky, for Amicus Curiae.
1
Nos. 11-6215/6300 Commonwealth of Kentucky Commercial v. Page 2
TracFone Wireless, Inc.
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OPINION
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DAMON J. KEITH, Circuit Judge. This appeal involves a dispute between
TracFone Wireless, Inc. (“TracFone”)—which provides prepaid wireless phone service
primarily through third-party retailers—and the Commercial Mobile Radio Service
Emergency Telecommunications Board (“CMRS Board” or “the Board”)—an entity
created by the Kentucky General Assembly to develop an emergency 911 system for
wireless customers in Kentucky. The Board initiated this suit to collect unpaid fees from
TracFone. The parties dispute the applicability and interpretation of a Kentucky statute
and its amendments which require wireless phone providers to collect emergency 911
fees on behalf of the Commonwealth of Kentucky. The district court ruled in favor of
the Board with respect to the interpretation of the statute and amendments but declined
to award the Board prejudgment interest on TracFone’s unpaid fees. TracFone appeals
the district court’s decisions as to the applicability and interpretation of the statute and
the amendments. The Board cross-appeals the district court’s denial of an award of
prejudgment interest on the unpaid fees. For the reasons that follow, we AFFIRM the
district court’s judgment.
FACTUAL BACKGROUND
This case involves the applicability of a Kentucky statutory scheme to the
prepaid wireless phone service provider, TracFone. Wireless phone services are
typically billed one of two ways, using either a prepaid or a postpaid system. Postpaid
billing is the traditional way wireless phone companies collect fees. With a postpaid
billing method, the customer enters into an agreement to pay a specific price for a
specific amount of minutes each month. The customer receives a monthly bill for the
services she used during the preceding month. If the customer uses more minutes than
she originally thought she would, there is an additional charge that is applied to the bill.
With a prepaid billing method, on the other hand, the customer pays in advance for a
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TracFone Wireless, Inc.
specific number of minutes to be used. Typically a prepaid service user does not receive
a monthly bill and cannot use additional minutes unless she pays for them in advance.
TracFone provides a national prepaid wireless service. It does not have its own
calling network. It purchases the right to use other companies’ networks. In turn, it sells
prepaid minutes on those networks. TracFone sells most of its services through third-
party retailers. A typical customer would go to a store like Wal-Mart, buy a phone, and
then contact TracFone to activate the phone and the prepaid minutes. When a customer
contacts TracFone for activation, the customer provides her zip code. Following
activation, TracFone does not monitor the use of the service or the amount of minutes
used. If a customer runs out of minutes, she can go to a third-party retailer and buy a
new calling card to load minutes onto the phone.
The statutory scheme at issue was created in response to a mandate from the
Federal Communications Commission (FCC) to ensure that wireless phone users have
access to emergency 911 services. See generally In re Revision of the Comm’n Rules to
Ensure Compatability with Enhanced 911 Emergency Calling Sys., 11 FCC Rcd. 18,676
(1996). The 1996 FCC Order sought to allow any wireless phone user to have access
to enhanced 911 services. The enhanced service allows a phone user to dial 911 from
her cell phone and be connected to the emergency dispatch system that is closest to her
actual location at the time of the call, independent of her home address.
The CMRS Act of 1998
In 1998 the Kentucky General Assembly enacted the CMRS Act, codified in the
Kentucky Revised Statutes §§ 65.7621–7643, to develop the Commonwealth’s enhanced
wireless 911 service. The 1998 CMRS Act created the CMRS Fund to pay for the
creation and maintenance of the 911 system. The 1998 Act imposed a monthly seventy-
cent fee on all wireless customers. The statute, KRS § 65.7635 required wireless
providers to collect that fee from their customers and remit the money to the CRMS
Board. The statutory language stated:
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TracFone Wireless, Inc.
(1) Each CMRS provider shall act as a collection agent for the CMRS
fund and shall, as part of the provider’s normal monthly billing process,
collect the CMRS service charges levied upon CMRS connections under
KRS 65.7629(3) from each CMRS connection to whom the billing
provider provides CMRS. Each billing provider shall list the CMRS
service charge as a separate entry on each bill which includes a CMRS
service charge. If a CMRS provider receives a partial payment for a
monthly bill from a CMRS customer, the provider shall first apply the
payment against the amount the CMRS customer owes the CMRS
provider.
(2) A CMRS provider has no obligation to take any legal action to
enforce the collection of the CMRS service charges for which any CMRS
customer is billed. Collection actions to enforce the collection of the
CMRS service charge against any CMRS customer may, however, be
initiated by the state, on behalf of the board, in the Circuit Court of the
county where the bill for CMRS service is regularly delivered, and the
reasonable costs and attorneys’ fees which are incurred in connection
with any such collection action may be awarded by the court to the
prevailing party in the action.
(3) State and local taxes shall not apply to CMRS service charges.
(4) To reimburse itself for the cost of collecting and remitting the CMRS
service charge, each CMRS provider may deduct and retain from the
CMRS service charges it collects during each calendar month an amount
not to exceed one and one-half percent (1.5%) of the gross aggregate
amount of CMRS service charges it collected that month.
(5) All CMRS service charges imposed under KRS 65.7621 to 65.7643
collected by each CMRS provider, less the administrative fee described
in subsection (4) of this section, are due and payable to the board
monthly and shall be remitted on or before sixty (60) days after the end
of the calendar month. Collection actions may be initiated by the state,
on behalf of the board, in the Franklin Circuit Court or any other court
of competent jurisdiction, and the reasonable costs and attorneys’ fees
which are incurred in connection with any such collection action may be
awarded by the court to the prevailing party in the action.
KRS § 65.7635 (1999).
In 1999, TracFone began selling its services in Kentucky. TracFone remitted the
911 service fees to the CMRS Board from the time it brought its business to Kentucky,
until November 2003. In November 2003, TracFone notified the Board that it would no
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TracFone Wireless, Inc.
longer remit the fees, in part because another state had interpreted a similar statute as
inapplicable to prepaid providers. The Board insisted that TracFone was required to
remit the fees.
The 2006 Amendments
In 2004, the Board began lobbying the legislature to clarify the statute’s method
for fee collection. In 2006, the Kentucky legislature passed amendments (“2006
Amendments”) to the CMRS Act. The amended statutory language now reads as
follows:
(1) Each CMRS provider shall act as a collection agent for the CMRS
fund. From its customers, the provider shall, as part of the provider’s
billing process, collect the CMRS service charges levied upon CMRS
connections under KRS 65.7629(3) from each CMRS connection to
whom the billing provider provides CMRS. Each billing provider shall
list the CMRS service charge as a separate entry on each bill which
includes a CMRS service charge. If a CMRS provider receives a partial
payment for a monthly bill from a CMRS customer, the provider shall
first apply the payment against the amount the CMRS customer owes the
CMRS provider. For CMRS customers who purchase CMRS services on
a prepaid basis, the CMRS service charge shall be determined according
to one (1) of the following methodologies as elected by the CMRS
provider:
(a) The CMRS provider shall collect, on a monthly basis, the
CMRS service charge specified in KRS 65.7629(3) from
each active customer whose account balance is equal to
or greater than the amount of service charge; or
(b) The CMRS provider shall divide its total earned prepaid
wireless telephone revenue received with respect to its
prepaid customers in the Commonwealth within the
monthly 911 emergency telephone service reporting
period by fifty dollars ($50), multiply the quotient by the
service charge amount, and pay the resulting amount to
the board; or
(c) In the case of CMRS providers that do not have the
ability to access or debit end user accounts, and do not
have retail contact with the end-user or purchaser of
prepaid wireless airtime, the CMRS service charge and
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TracFone Wireless, Inc.
collection methodology may be determined by
administrative regulations promulgated by the board to
collect the service charge from such end users.
(2) A CMRS provider has no obligation to take any legal action to
enforce the collection of the CMRS service charges for which any CMRS
customer is billed. Collection actions to enforce the collection of the
CMRS service charge against any CMRS customer may, however, be
initiated by the state, on behalf of the board, in the Circuit Court of the
county where the bill for CMRS service is regularly delivered, and the
reasonable costs and attorneys’ fees which are incurred in connection
with any such collection action may be awarded by the court to the
prevailing party in the action.
(3) State and local taxes shall not apply to CMRS service charges.
(4) To reimburse itself for the cost of collecting and remitting the CMRS
service charge, each CMRS provider may deduct and retain from the
CMRS service charges it collects during each calendar month an amount
not to exceed one and one-half percent (1.5%) of the gross aggregate
amount of CMRS service charges it collected that month.
(5) All CMRS service charges imposed under KRS 65.7621 to 65.7643
collected by each CMRS provider, less the administrative fee described
in subsection (4) of this section, are due and payable to the board
monthly and shall be remitted on or before sixty (60) days after the end
of the calendar month. Collection actions may be initiated by the state,
on behalf of the board, in the Franklin Circuit Court or any other court
of competent jurisdiction, and the reasonable costs and attorneys’ fees
which are incurred in connection with any such collection action may be
awarded by the court to the prevailing party in the action.
KRS § 65.7635 (2007).
In light of the clarification regarding prepaid providers, TracFone elected
“Option C” as its collection method. TracFone requested an administrative rule that
would allow the retailer to collect the fee on its phones. TracFone’s request was
denied.1 Prior to the present suit, TracFone did not remit any fees under the 2006
Amendments. However, once the suit was filed, TracFone began remitting fees for its
1
The Board did not respond to TracFone’s request for a promulgation until the middle of the
litigation in the district court—following the district court’s August 18, 2010 Memorandum Opinion and
prior to the district court’s July 1, 2011 Memorandum Opinion.
Nos. 11-6215/6300 Commonwealth of Kentucky Commercial v. Page 7
TracFone Wireless, Inc.
customers who purchase services directly from TracFone. It did not pay fees for
customers who purchased through third-party retailers. TracFone is the only prepaid
provider that has refused to remit fees under the 2006 Amendments.
PROCEDURAL BACKGROUND
On October 14, 2008, the CMRS Board filed suit against TracFone in the
Jefferson County Circuit Court of Kentucky to recover unpaid enhanced 911 fees.
TracFone removed the case to the Western District of Kentucky on December 18, 2008
and filed a counterclaim against the Board seeking reimbursement for the funds it paid
to the Board prior to November 2003. The parties filed two sets of cross-motions for
summary judgment, upon which the court ruled. There are three district court opinions
upon which this appeal is grounded.
On August 18, 2010, the district court issued a Memorandum Opinion concluding
that the 1998 Act was applicable to prepaid providers. It also ruled that the Board owed
TracFone a response as to the method of collection under the 2006 amendments pursuant
to its selection of Option C. In response to the district court’s order, the Board notified
TracFone that it would not be issuing a promulgation under Option C of the 2006
amendments and advised TracFone that it was to collect fees under Option A instead.
On July 1, 2011, the district court issued a second Memorandum Opinion, finding
that the Board acted in its discretion when declining to issue a promulgation under
Option C and that TracFone had the authority granted by the 2006 Amendments to select
either Option A or B following the Board’s denial. The district court also ruled that
TracFone was liable for fees under the 2006 Amendments from the effective date of the
amendments.
On September 8, 2011, the district court entered a third Memorandum Opinon
and final judgment in the case. In the final opinion, the district court ordered that the
Board was entitled to unpaid fees. TracFone was also ordered to pay the prevailing
party—the Board—attorney fees, and costs, but the district court denied the Board’s
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TracFone Wireless, Inc.
request for prejudgment interest on the unremitted fees. The timely cross-appeals in this
case followed.
STANDARD OF REVIEW
We review an order granting summary judgment de novo, construing the
evidence and drawing all reasonable inferences in favor of the non-moving party.
Ireland v. Tunis, 113 F.3d 1435, 1440 (6th Cir. 1997). Summary judgment is proper if,
after viewing the evidence that way, there are no genuine issues of material fact, and the
moving party is entitled to judgment as a matter of law. Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 586–87 (1986); Fed. R. Civ. P. 56(a). The moving
party has “the burden of showing the absence of a genuine issue as to any material fact.”
Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970).
For questions concerning an award of prejudgment interest, the district court’s
award is reviewed for an abuse of discretion. Poundstone v. Patriot Coal Co., 485 F.3d
891, 895 (6th Cir. 2007). “As applied to pre[-]judgment interest, a district court abuses
its discretion if it declines to award prejudgment interest that is mandatory under state
law.” Ventas, Inc. v. HCP, Inc., 647 F.3d 291, 328 (6th Cir. 2011).
DISCUSSION
This case involves TracFone’s appeal of the district court’s interpretation of the
1998 CMRS Act and its 2006 Amendments, as well as the Board’s appeal of the district
court’s order denying an award of prejudgment interest for the fees owed by TracFone.
When sitting in diversity, federal courts are required to apply the substantive law
of the states in which they reside. Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938). On
questions of state law, this Court is bound by the rulings of the state supreme court.
Bradley v. Gen. Motors Corp., 512 F.2d 602, 604–05 (6th Cir. 1975). “When there is
no state law construing a state statute, a federal court must predict how the state’s
highest court would interpret the statute.” United States v. Simpson, 520 F.3d 531, 535
(6th Cir. 2008). In the absence of any state supreme court precedent, a state’s appellate
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TracFone Wireless, Inc.
court decisions are the best authority. Id. at 536. Kentucky state law controls this
action.
A. 1998 Act
TracFone appeals the district court’s interpretation of the 1998 Act as applying
to prepaid wireless phone providers. TracFone argues that, contrary to the district
court’s findings, the plain language of the statute does not apply to it. Upon de novo
review, we hold that the 1998 Act applies to TracFone and other prepaid providers.
The interpretation of the 1998 Act is purely a state law issue. The Kentucky
Supreme Court has not yet interpreted this statute. The Kentucky Court of Appeals,
however, has considered the application of the 1998 Act to prepaid providers, in Virgin
Mobile USA, L.P. v. Commonwealth ex rel. CMRS Board, --- S.W.3d ---, Nos. 2010-CA-
001185-MR & 2010-CA-001266-MR, 2012 WL 2470136 (Ky. Ct. App. Jun. 29, 2012),
reh’g denied, Aug. 23, 2012. Thus, this case provides the best predictive insight
regarding the 1998 Act.2
“We must begin by analyzing the plain language of statute.” Commonwealth v.
Derringer, 386 S.W.3d 123, 127 (Ky. 2012). “One of the fundamental maxims of
statutory construction is that an act is to be read as a whole.” Popplewell’s Alligator
Dock No. 1, Inc. v. Revenue Cabinet, 133 S.W.3d 456, 465 (Ky. 2004) (internal citations
and quotations omitted).
The statutory text that is in dispute with respect to the 1998 Act states:
Each CMRS provider shall act as a collection agent for the CMRS fund
and shall, as part of the provider’s normal monthly billing process,
collect the CMRS service charges levied upon CMRS connections under
KRS 65.7629(3) from each CMRS connection to whom the billing
2
The Kentucky Court of Appeals has noted that its decision in Virgin Mobile is slated for
publication, but its holding is still under consideration in the Kentucky courts. The appellants in Virgin
Mobile filed a motion for discretionary review to the Supreme Court of Kentucky on September 24, 2012,
and it remains under consideration as of the date of publication of this opinion. While the Kentucky Court
of Appeals opinion is not binding on this Court, it is persuasive authority we consider. United States v.
Simpson, 520 F.3d 531, 535 (6th Cir. 2008).
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TracFone Wireless, Inc.
provider provides CMRS. Each billing provider shall list the CMRS
service charge as a separate entry on each bill which includes a CMRS
service charge. If a CMRS provider receives a partial payment for a
monthly bill from a CMRS customer, the provider shall first apply the
payment against the amount the CMRS customer owes the CMRS
provider.
KRS § 65.7635(1). TracFone attacks the applicability of the statute on many
fronts—each of which is addressed below.
It is undisputed that the 1998 Act applies to “CMRS providers.” TracFone,
however, argues that it is not a “CMRS provider” within the meaning of the statute.
TracFone argues that the language stating that a “CMRS provider shall act as a
collection agent for the CMRS fund” should be interpreted as requiring the fee to be
collected by the person who sells the service to the end user. TracFone would like this
Court to interpret the third-party retailer to be the “CMRS provider.” There is no basis
for such an interpretation.
The 1998 Act defines a “CMRS provider” as a “person or entity who provides
CMRS to an end user, including resellers.” KRS § 65.7621(9) (1999). TracFone is
unquestionably a “CMRS provider” within the meaning of the statute and pursuant to
Kentucky law. All parties agree that the end user is the customer who uses the phone
service. While the retailer acts as a middleman, it cannot be said that a retailer is the
“provider” of the service. As the district court noted, a customer who purchases a
TracFone product contacts TracFone to activate the service, and TracFone supplies the
coverage. TracFone is the company that provides such service to the end user, “whether
those services are purchased directly from [TracFone] or through a third-party retailer
and then subsequently activated by [TracFone].” Virgin Mobile, 2012 WL 2470136, at
*10. Such an interpretation of the plain language of the statute is supported by the
purpose of the 1998 Act, which was to comply with the FCC’s mandate that all wireless
phone users have access to enhanced 911 service. There is no indication that the
mandate was intended to exclude customers that subscribe to prepaid services.
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TracFone Wireless, Inc.
Despite the clear language of the statute that all CMRS providers “shall” collect
the service charge, TracFone contests the applicability of the statute on the basis that it
does not have a “monthly billing process,” as mentioned in the statute. TracFone
concludes that the 1998 Act, therefore, does not apply to prepaid providers, like itself.
The statutory language at issue with respect to the billing method is as follows:
Each CMRS provider . . . shall, as part of the provider’s normal monthly
billing process, collect the CMRS service charges levied upon CMRS
connections under KRS 65.7629(3) from each CMRS connection to
whom the billing provider provides CMRS.
KRS § 65.7635(1).
TracFone is correct that the statute speaks to a possible collection method
through a traditional billing system. Nevertheless, the mandate that each CMRS
provider collect fees is not diminished based on the mention of a billing method. While
the billing language offers one possible method, there is no indication that the billing
language has a limiting effect in applicability to CMRS providers. The statute clearly
applies to “each CMRS provider.” In no part of the statute is there an indication that
prepaid CMRS providers were intended to be treated differently than postpaid CMRS
providers. It is not the responsibility of the legislature to contemplate all of the possible
billing methods of CMRS providers to collect the fee when it has made a clear directive
that the statute applies to all providers equally. While TracFone’s argument is well-
intended, there is no ambiguity in understanding all CMRS providers shall collect the
fee.
TracFone’s final argument is that the 2006 amendments, which specifically
added language regarding prepaid providers, is evidence that the 1998 Act was never
intended to apply to prepaid providers. Contrary to TracFone’s argument, prepaid
providers have been required to collect the fees since the passage of the 1998 Act. As
noted by the district court, the amended language regarding prepaid providers simply
changed the fee collection method included in the statute. It did not change the
requirement that all CMRS providers collect the enhanced 911 fee. Both versions of the
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TracFone Wireless, Inc.
statute—the 1998 Act and the 2006 amendments—state that “[e]ach CMRS provider
shall act as a collection agent for the CMRS fund.” TracFone continues to be a “CMRS
provider” under both versions of the statute. Therefore, the “general obligation of all
CMRS providers to collect fees remained unchanged.” Commonwealth of Kentucky
Commercial Mobile Radio Serv. Emergency Telecomms. Bd. v. TracFone Wireless, 735
F. Supp. 2d 713, 724 (W.D. Ky. 2010).
Much of TracFone’s appeal hinges on its argument that the 1998 statute is
ambiguous and that it is too difficult to comply with the statute. We are not persuaded
by such arguments. First, we do not find any ambiguity in the statute as to the 1998
Act’s applicability to TracFone. To the extent that TracFone argues difficulty in
collecting the fees, we are unpersuaded considering the fact that TracFone had collected
and paid the fees until 2003. Because the plain language of the 1998 Act required that
all CMRS providers pay the enhanced 911 fees and because TracFone is a CMRS
provider, the 1998 Act requires TracFone to collect the service fees from its Kentucky
customers.
B. 2006 Amendments
In 2006, the Kentucky Legislature amended the 1998 Act in order to clarify the
method by which prepaid providers are required to collect emergency service fees. See
KRS § 65.7635 (2007). The amended statute provided collection methods for prepaid
service providers, which are “elected by the CMRS provider.” It also allowed a possible
custom collection method if the Board exercised its discretion to issue an administrative
regulation (“Option C”). Id. TracFone argues on appeal that it was not obligated to pay
fees following the 2006 Amendments until the Board issued regulations authorized by
the amended statute in Option C. We disagree. Not only was TracFone obligated to pay
the fees, but it was obligated to do so starting on the effective date of the amendments.
The revised statute provided possible fee collection methods for prepaid service
providers, as elected by the CMRS provider:
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[Option A] The CMRS provider shall collect, on a monthly basis, the
CMRS service charge specified in KRS 65.7629(3) from
each active customer whose account balance is equal to
or greater than the amount of service charge; or
[Option B] The CMRS provider shall divide its total earned prepaid
wireless telephone revenue received with respect to its
prepaid customers in the Commonwealth within the
monthly 911 emergency telephone service reporting
period by fifty dollars ($50), multiply the quotient by the
service charge amount, and pay the resulting amount to
the board; or
[Option C] In the case of CMRS providers that do not have the
ability to access or debit end user accounts, and do not
have retail contact with the end-user or purchaser of
prepaid wireless airtime, the CMRS service charge and
collection methodology may be determined by
administrative regulations promulgated by the board to
collect the service charge from such end users.
Id. Following the passage of the 2006 amendments, TracFone chose Option C as its
collection method. The Board denied TracFone’s request for promulgation of a
regulation under Option C. TracFone ultimately selected Option B as its collection
method.3
The district court held that TracFone was required to remit fees from the effective
date of the statute, regardless of what method it chose. TracFone’s argument on appeal
is that it was not required to collect the fees until the Board informed it of the collection
method under Option C—the option TracFone chose initially.
The district court was correct that TracFone was required to remit fees to the
Board for the period beginning with the enactment of the 2006 amendments. The district
court concluded that TracFone had the ability to select Option C immediately after the
Act’s passage. While we agree with the district court’s conclusion that the TracFone is
3
Initially the Board declined to promulgate a regulation under Option C and ordered TracFone
to collect the fees pursuant to Option A’s methodology. TracFone, instead, chose Option B—a choice that
was upheld by the district court. On appeal, the Board does not take issue with TracFone’s election of
Option B.
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TracFone Wireless, Inc.
required to remit fees from the effective date of the 2006 Amendments, we do not agree
that Option C was a selectable option.
The amendments indeed gave providers a choice of methodologies for collection;
there were, however, only two possible choices—Option A or Option B. The statutory
language in Options A and B clearly use the word “shall” to refer to the fee collection
methodology to be used by a CMRS provider. KRS § 65.7635. Option A states that the
“CMRS provider shall collect . . . .” Option B states that the “CMRS provider shall
divide . . . .” Id. This language mandates the CMRS provider to act. Option C, on the
other hand, permits the Board, in its discretion, to act. The statute does not state that the
Board “shall” promulgate a regulation; it states that “the CMRS service charge and
collection methodology may be determined by administrative regulations.” Id. Because
Option C had no methodology attached, this “option” was not then—and is not now—a
methodology choice available to providers.
The permissive language in Option C that the fee “may be determined by
administrative regulations promulgated by the board . . . .,” does not impose a
requirement on the Board. Ky. Rev. Stat. Ann. § 65.7635. The Board chose not to
create a collection methodology even when TracFone requested one. Without the Board
exercising its discretion to promulgate a regulation, there is no collection methodology
contained in Option C as it is written. It was within the Board’s discretion to decide to
issue or decline to issue a regulation upon TracFone’s request. The Board did not act
contrary to the statute’s requirements nor to the legislature’s intent in opting not to issue
Option C rules or regulations, and TracFone is, therefore, liable for service fees owed
from the effective date of the 2006 Amendments.
If TracFone had a duty to collect under the 1998 Act, which provided no useful
guidance as to how to collect the service fees, it certainly had a duty to collect fees under
the 2006 amendments, which offered new, more viable options for straightforward
compliance. It would be absurd to hold that the statute—which was intended to close
the “loophole” that had previously benefitted TracFone—for the first time excused
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TracFone Wireless, Inc.
TracFone from its duty to collect. See Exec. Branch Ethics Comm’n v. Stephens, 92
S.W.3d 69, 73 (Ky. 2002) (“If there is any doubt from the language used by the
legislature as to the intent and purpose of the law, then courts in interpreting the statute
should avoid a construction which would be unreasonable and absurd in preference to
one which is reasonable, rational, sensible and intelligent.”).
Despite the fact that the statute unambiguously applied to TracFone and that
TracFone and its customers have benefitted from the enhanced 911 services, TracFone
argues that it should not have to pay the fees it has owed since the effective date of the
2006 amendments. TracFone attempts to frame the order to pay as an impermissible
retroactive application of a statute. We reject such a characterization. A statute is
applicable to regulated parties beginning at its effective date—not at the moment a party
is ordered to comply with its unmet obligations thereunder. Because TracFone was
undoubtedly on notice that it had a duty to collect fees under the 2006 Amendments, it
is responsible for remitting those fees now to the Board.
For the foregoing reasons, the district court’s judgment as to the award of fees
owed under the 2006 amendments is affirmed, as is the award of attorneys’ fees to the
Board. See Ky. Rev. Stat. Ann. § 65.7635(5) (allowing an award of attorneys’ fees to
the prevailing party in a collection action under the CMRS Act). The CMRS Board was
entitled to attorneys’ fees as the prevailing party in the litigation; therefore, the district
court did not abuse its discretion in awarding the fees. See Imwalle v. Reliance Med.
Prods., Inc., 515 F.3d 531, 551 (6th Cir. 2008) (reviewing an order granting attorneys’
fees for an abuse of discretion).
C. Prejudgment Interest
The CMRS Board appeals the district court’s order denying prejudgment interest
on damages owed as a result of TracFone’s failure to remit 911 service charges.
Because the district court has not abused its discretion, we affirm the district court’s
judgment.
Nos. 11-6215/6300 Commonwealth of Kentucky Commercial v. Page 16
TracFone Wireless, Inc.
The Board argues that the district court erred in two ways. First, the Board
argues that the fees owed by TracFone were liquidated, or for a definite amount, and
under Kentucky law, if an amount is liquidated, a party is entitled to prejudgment
interest as a matter of law. Nucor Corp. v. Gen. Elec. Co., 812 S.W.2d 136, 141 (Ky.
1991) (“When damages are ‘liquidated,’ prejudgment interest follows as a matter of
course.”). The district court held that neither the pre-2006 nor post-2006 fees were
“liquidated.” We agree.
The district court correctly reasoned that the method of calculating the fees under
the 1998 Act has always been in doubt, citing its August 18, 2010 Memorandum
Opinion about the applicability of the 1998 Act to TracFone as evidence of the dispute.
The district court also reasoned that the fees under the 2006 Amendments were similarly
unliquidated because the proper collection method—which would have determined the
exact fee due—was not identified until the district court’s final judgment. In fact, each
of the collection methods available would have resulted in a different fee amount. The
district court, therefore, did not abuse its discretion in finding that the fees owed were
unliquidated.
The Board’s alternative argument is that the district court abused its discretion
by failing to award prejudgment interest for equitable reasons. Kentucky courts rarely
award prejudgment interest on unliquidated claims on equitable grounds. See Meridian
Citizens Mut. Ins. Co. v. Horton, No. 5:08-CV-302-KKC, 2010 WL 1253084, at *9
(W.D. Ky. Mar. 25, 2010). Courts consider a variety of relevant factors when
determining whether to grant prejudgment interest on equitable grounds. They routinely
deny prejudgment interest where the defendant “in good faith, disputed its liability.”
Owensboro Mercy Health Sys. v. Payne, 24 S.W.3d 675, 679 (Ky. Ct. App. 2000); see
also Meridian Citizens, 2010 WL 1253084, at *9 (finding that “allegations of bad faith
are often involved” in the rare cases where prejudgment interest is granted for
unliquidated claims). Here, the district court determined that TracFone had “reasonable
grounds for believing that its actions were reasonable.” We agree. The district court
acted within its discretion in denying the award of interest.
Nos. 11-6215/6300 Commonwealth of Kentucky Commercial v. Page 17
TracFone Wireless, Inc.
CONCLUSION
For the foregoing reasons, we AFFIRM Judge Heyburn’s judgment.