Madison County Communications District v. Centurylink, Inc.

Filing 55

MEMORANDUM OPINION. Signed by Judge Inge P Johnson on 12/20/12. (ASL)

FILED
2012 Dec-20 PM 02:02
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
NORTHEASTERN DIVISION
MADISON COUNTY
COMMUNICATIONS DISTRICT,
Plaintiff,

)
)

vs.
CENTURYLINK, INC., et al.,
Defendants.

)
CV 12-J-1768-NE

)
)

Memorandum Opinion
Pending before the court is defendant CenturyTel Service Group, LLC’s (CSG)
motion to dismiss and brief in support (doc. 32), plaintiff Madison County
Communications District’s (MCCD) opposition thereto (doc. 51), and defendant’s
reply (doc. 54). Having considered the motion, response, reply, and all other
pleadings filed to date, the court finds as follows:
Factual Background1
Alabama enacted the Alabama Emergency Telephone Services Act (“ ETSA”)
of 1984 to establish Emergency Communications Districts (ECD) and local
emergency telephone service. See Ala. Code §§ 11-98-5, 11-98-5.1. Plaintiff,
Madison County Communications District, is an ECD under the ETSA. Amended
Complaint (doc. 24) ¶ 1. The ETSA provides funding for ECDs by assessing a charge

1

“[W]hen ruling on a defendant’s motion to dismiss, a judge must accept as true all of the
factual allegations contained in the complaint,” therefore, the facts presented here, unless
otherwise noted, are taken from the Amended Complaint (doc. 24). See Erickson v. Pardus, 551
U.S. 89, 94 (2007).

on telephone services. See Ala. Code § 11-98-5.1(c). Plaintiff brought this suit on
behalf of itself and similarly situated state and local entities that collect taxes or fees
for 911 services. (Id.) ¶ 5.
CenturyTel Service Group, LLC (“CSG”) is a wholly-owned subsidiary of
CenturyLink, Inc (CenturyLink). (Id.) ¶ 9. CSG is organized under the laws of
Louisiana with its principal place of business in Louisiana. (Id.) CSG is a
CenturyLink “service company,” meaning that it provides management-type services
(such as accounting and billing) to other subsidiaries of CenturyLink, including
CenturyLink subsidiaries that provide local telephone exchange service in Madison
County, Alabama. (Id.) In addition, CSG manages and controls the billing,
collection and remittance of 911 Charges on behalf of the CenturyLink subsidiaries
that provide local telephone exchange service in other states in which CenturyLink
does business. (Id.)
STANDARD OF REVIEW
In reviewing a motion to dismiss, the court must “accept the allegations of the
complaint as true and construe them ‘in the light most favorable to the plaintiff.’”
Simmons v. Sonyika, 394 F.3d 1335, 1338 (11th Cir. 2004) (citing Hill v. White, 321
F.3d 1334, 1335 (11th Cir. 2003)). A motion to dismiss is granted “only when the
movant demonstrates ‘beyond doubt that the plaintiff can prove no set of facts in
2

support of his claim which would entitle him to relief.’” Sonyika, 394 F.3d at 1338
(citing Spain v. Brown & Williamson Tobacco Corp., 363 F.3d 1183, 1187 (11th Cir.
2004)); See also Erickson v. Pardus, 551 U.S. 89, 94 (2007) (“when ruling on a
defendant’s motion to dismiss, a judge must accept as true all of the factual
allegations contained in the complaint”); Jackson v. Okaloosa County, Fla., 21 F.3d
1531, 1534 (11th Cir. 1994) (same).
While the complaint need not contain “detailed factual allegations,” Twombly,
550 U.S. at 555, it does have to set forth “enough facts to state a claim to relief that
is plausible on its face.” Id. at 570. “A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). “The plausibility standard is not akin to a ‘probability requirement,’ but it
asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.
To satisfy the pleading requirements of the Federal Rules of Civil Procedure,
a complaint must contain a short and plain statement showing an entitlement to relief,
and must “give the defendant fair notice of what the plaintiff’s claim is and the
grounds upon which it rests.” Twombly, 550 U.S. at 555 (citing Swierkiewicz v.
Sorema N.A., 534 U.S. 506, 512 (2002)). “While a complaint attacked by a Rule
12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s
3

obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than
labels and conclusions, and a formulaic recitation of the elements of a cause of action
will not do.” Id. (internal citations omitted).
Legal Analysis
I. CSG is not a “Service Supplier” under the ETSA
The ETSA imposes a duty on “service suppliers” to bill and collect 911 charges
from telephone service users and then to remit those 911 charges to the District. See
Ala. Code § 11-98-1, et seq. The ETSA defines a “service supplier” as “[a]ny person
providing exchange telephone service to any service user throughout the county or
municipality.” Ala. Code § 11-98-1(7). Plaintiff claims that CSG is a “service
supplier” because CSG serves a critical role in “providing exchange telephone
service” to service users in Madison County. CSG argues that it does not fit within
this definition and, therefore, cannot be liable.
Statutory definitions such as the one found in § 11-98-1 must be scrupulously
followed, and courts may not stray from or expand upon those definitions. Ex parte
M.D.C., 39 So. 3d 1117, 1121 (Ala. 2009) (“legislative definitions are binding on the
court”); Ex parte Birmingham Bd. of Educ., 45 So. 3d 764, 770 (Ala. 2009) (courts
must give effect to legislature’s defined terms, and may not rewrite statutory
definitions through judicial construction); McWhorter v. State Bd. of Reg. for Prof.
4

Eng., 359 So. 2d 769, 773 (Ala. 1978) (“It is well recognized that when the
Legislature defines the language it uses, its definition is binding upon the courts, even
though this definition does not coincide with the ordinary meaning of the words
used.”). Additionally, as a statute creating new rights and duties that did not exist in
common law, the Alabama 911 statute must be strictly construed. Golden Gate Nat.
Senior Care v. Roser, 94 So. 3d 365, 369 (Ala. 2012) (“statutory remedies for rights
unknown to the common law are to be strictly construed”).
The statute clearly imposes a duty to collect 911 service charges on any
“person providing exchange telephone service to any service user throughout the
county or municipality.” Ala. Code §§ 11-98-1 and -5. MCCD specifically alleges
that:
CSG is a CenturyLink “service company,” meaning that it provides
management-type services (such as accounting and billing) to other
subsidiaries of [CenturyLink], including [CenturyLink] subsidiaries that
provide local telephone exchange service in Madison County, Alabama.
In addition, CSG manages and controls the billing, collection and
remittance of 911 Charges on behalf of the [CenturyLink] subsidiaries
that provide local telephone exchange service in Madison County,
Alabama and throughout most, if not all, of the 37 states in which
CenturyLink does business.
Amended Complaint (doc. 24) ¶ 9. The question is whether CSG is a service supplier
with a duty to collect MCCD’s 911 fees under the Alabama statute. MCCD has not
alleged that CSG provides “exchange telephone service to any service user,”
5

however, MCCD has acknowleged CSG as a provider of accounting and billing
services. To find that the providing of accounting and billing services is equivalent
to providing exchange telephone service would subject any accounting firm,
management consultant, or law firm that contracts with a telephone service provider
would qualify as a “service supplier” under the Alabama 911 Act. There is no
support for such a strained reading of the Alabama statute and the court declines to
adopt it. The court, therefore, finds that CSG is not a “ person providing exchange
telephone service to any service user throughout the county or municipality” under
Alabama Code § 11-98-1(7).
II. The assumed duty doctrine is not applicable
MCCD next asserts the assumed duty (or voluntary undertaking) doctrine,
arguing CSG can be held liable if it voluntarily assumed other companies’ 911 fee
statutory duties. MCCD’s reliance on the assumed duty doctrine is misplaced. The
assumed duty doctrine comes from Section 324A of the Restatement (Second) of
Torts (1965), which Alabama adopted in 1971. Commercial Union Ins. v. DeShazo,
845 So. 2d 766, 769 (Ala. 2002) (noting Alabama first adopted Section 324A in
Beasley v. MacDonald Eng., 249 So. 2d 844 (1971)). Section 324A is also known as
the “Good Samaritan” rule. Beasley, 249 So. 2d at 847. The doctrine applies only to
tort claims for physical injury or property damage; it does not apply to claims like
6

MCCD’s that seek to recover for purely economic loss. See Commerical Union, 845
So. 2d at 769. Physical harm refers to bodily injuries or physical damage to property,
and does not include solely financial loss. Restatement (Second) of Torts § 7(3).
III. There are no grounds for piercing the corporate veil
MCCD argues because CSG provides various contract administrative services
to other CenturyLink subsidiaries, CenturyLink and all 271 subsidiaries are operated
as a “single business enterprise.” MCCD argues because of this “single business
enterprise,” the Court may disregard the corporate form.
The Alabama Supreme Court has held that there are only three “extraordinary”
ways under Alabama law to pierce a corporate veil to hold a parent corporation liable
for the acts of its subsidiary: (1) inadequacy of capital; (2) fraudulent purpose in
conception or operation of the business; and (3) operation of the corporation as an
instrumentality or alter ego. Messick v. Moring, 514 So. 2d 892, 894 (Ala. 1987)
(setting forth three ways to pierce); Gilbert v. James Russell Motors, 812 So. 2d 1269,
1273 (Ala. Ct. App. 2001) (noting the Supreme Court in Messick set forth the only
three ways to pierce the corporate veil under Alabama law). MCCD has not alleged
inadequacy of capital or fraudulent purpose, and therefore must plead facts showing
that the two Madison County telephone companies are “mere instrumentalities or alter
egos” of CSG. Significantly, MCCD makes no allegation that CSG, CenturyLink, or
7

any of the subsidiaries ever disregarded the corporate form or failed to observe
corporate boundaries in dealings with each other. There are no allegations that any
entity failed to maintain its corporate existence, neglected to keep separate corporate
and accounting records, or used assets or employees of other entities as their own
regardless of corporate boundaries.
The court notes that generally the corporate veil cannot be pierced horizontally
between sibling corporations for liability purposes.

See, e.g., Momentive

Performance Materials v. AstoCosmos Metallurgical, 2011 WL 6219531 at *9 (N.D.
N.Y. Dec. 3, 2011) (granting motion to dismiss because plaintiff was impermissibly
attempting to horizontally pierce between sister corporations); Minno v. Pro-Fab,
Inc., 905 N.E.2d 613, 614 (Ohio 2009) (“a plaintiff cannot pierce the veil of one
corporation to [impose liability] on its sister corporation”); SEC v. Hickey, 322 F.3d
1123, 1128 (9th Cir. 2003) (rejecting horizontal piercing claim because “[o]wnership
is a prerequisite to alter ego liability, and not a mere factor or guideline.”).
The reason for this rule is simple: “veil-piercing is intended to get at the owners
of a corporation.” Momentive, 2011 WL 6219531 at * 9. Veil piercing is an equitable
rule, based on the premise that because the owner of the corporation (whether
individual or entity) is the one that benefits from the limited liability of the corporate
form, the owner runs the risk of losing that benefit if he misuses or abuses that
8

corporate form. Minno, 905 N.E.2d at 617. Sister corporations do not benefit from
the corporate form of their siblings, and therefore are not subject to corporate veil
piercing. Without some evidence of ownership interest, the “complete domination
and control” element of the alter ego test can never be met. Id.
The court finds that MCCD has not made sufficient allegations of inadequacy
of capital; fraudulent purpose in conception or operation of the business; and/or
operation of the corporation as an instrumentality or alter ego to support piercing the
corporate veil of CSG. Additionally, even if MCCD had made such allegations, CSG
does not own the entities operating in Alabama and horizontally piercing the
corporate veil between sibling corporations for liability purposes is not allowed.
MCCD cannot, therefore, state a claim against CSG based on a veil piercing or alter
ego theory.
Conclusion
Plaintiff has failed to demonstrate that CSG is a “service provider” under
the Alabama ETSA and therefore cannot state a claim against CSG for failing to
collect 911 fees under the ETSA. Plaintiff has also failed to establish a prima
facie case for piercing the corporate veil. Defendant’s motion is therefore due to
be granted.
Having considered the foregoing, the court is of the opinion that the motion
9

to dismiss (doc. 32) is due to be GRANTED.
The court shall so do by Separate Order.
DONE and ORDERED this 20th day of December 2012.

INGE PRYTZ JOHNSON
U.S. DISTRICT JUDGE

10