Court Opinion

ID: 9399230
Source: CourtListenerOpinion
Date Created: 2023-06-02 15:09:16.47058+00
Date Added: 2024-06-11T17:18:48.800631
License: Public Domain

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Downs Racing, L.P.,                               :
d/b/a Mohegan Sun Poconos,                        :
f/k/a Mohegan Sun at Pocono Downs,                :
                        Appellant                 :
                                                  :
                       v.                         :   No. 942 C.D. 2021
                                                  :   SUBMITTED: August 19, 2022
Luzerne County,                                   :
Luzerne County Treasurer,                         :
Luzerne County Division of Budget                 :
and Finance                                       :

BEFORE:        HONORABLE PATRICIA A. McCULLOUGH, Judge
               HONORABLE ELLEN CEISLER, Judge
               HONORABLE BONNIE BRIGANCE LEADBETTER, Senior Judge

OPINION BY
SENIOR JUDGE LEADBETTER                                                 FILED: June 2, 2023

               Before this Court for disposition are procedural issues preceding
resolution of the issue of whether complimentary hotel rooms are taxable under the
Third Class County Convention Center Authority Act (Act).1 The parties are Downs
Racing, L.P., d/b/a Mohegan Sun Poconos, f/k/a Mohegan Sun at Pocono Downs
(Taxpayer), and Luzerne County, Luzerne County Treasurer, and Luzerne County
Division of Budget and Finance (collectively, the County). Taxpayer appeals from
that part of the order of the Court of Common Pleas of Luzerne County directing
Taxpayer to join the Luzerne County Convention Center Authority (the Authority)
as a party to the tax appeal.2 In addition, we consider the County’s application to

    1
      Act of August 9, 1955, as amended, added by the Act of November 3, 1999, P.L. 461, 16
P.S. §§ 2399.1 - 2399.23.
    2
      In the order, the trial court also denied the County’s motion to dismiss the tax appeal for lack
of subject matter jurisdiction.
quash the above-captioned appeal. We deny the County’s application to quash,
reverse the trial court’s order, and remand for further proceedings.
               The pertinent background is as follows. Pursuant to Section 2399.4 of
the Act,3 the County established the Authority. 16 P.S. § 2399.4. Section 2399.23(a)
of the Act4 permits the County to impose a hotel room rental tax to fund the operation
and management of convention centers. 16 P.S. § 2399.23(a). Specifically, “the
county in which the convention center is located is authorized to impose an excise
tax on the consideration received by each operator of a hotel within the market area
from each transaction of renting a room or rooms to accommodate transients.” Id.
“Eighty per centum of revenues to be received from [the hotel room rental] taxes
imposed pursuant to this section shall be annually deposited in the special fund
required under subsection (d) for the use of the authority for convention center
purposes.” 16 P.S. § 2399.23(c). Twenty percent of those taxes are to be deposited
in a tourist promotion agency fund to be used for promoting tourism. Id.
               In 1996, the County enacted a Hotel Room Rental Tax Ordinance,
imposing a five percent excise tax on all hotels within the County. Pursuant thereto:

               Every operator shall transmit to the Treasurer, on or before
               the twenty-fifth (25th) day of each month, a return for the
               month preceding the month in which the return is made,
               which return shall report the amount of consideration
               received for the transactions during the month for which
               the return is made, the amount of tax due from the operator
               for that month, and such other information as the Treasurer
               may require.

(May 22, 1996 Ord., ¶ E.4 at 9; Reproduced R. “R.R.” at 114a.)

   3
       Section 2399.4 was added by the Act of November 3, 1999, P.L. 461.
   4
       Section 2399.23 was added by the Act of November 3, 1999, P.L. 461.

                                              2
             In 2018, the County’s Division Head for Budget and Finance
determined that Taxpayer was delinquent in remitting hotel room rental taxes on
complimentary rooms provided to patrons and that Taxpayer owed $1,368,081.71.
(Oct. 5, 2018 Assessment at 1; R.R. at 31a.) Following Taxpayer’s appeal and a
November 2018 hearing, the Division Head affirmed the assessment. (Aug. 25, 2020
Determination at 1; R.R. at 41a.) Taxpayer’s statutory appeal to the trial court
followed.
             In the trial court, the County filed a motion to dismiss Taxpayer’s
statutory appeal for lack of subject matter jurisdiction, arguing that the Authority,
which never sought to intervene, was a necessary and indispensable party to the
action. The trial court denied the motion, directing Taxpayer to join the Authority
as a party. Taxpayer’s appeal of the trial court’s interlocutory order followed. In
this Court, the County filed an application to quash the above-captioned appeal. We
directed that the application be considered with the merits of the appeal.
                                          I.
             We first address the County’s application to quash.          Pursuant to
Pennsylvania Rule of Appellate Procedure 313(a), “[a]n appeal may be taken as of
right from a collateral order of a trial court . . . .” Pa.R.A.P. 313(a). A collateral
order is defined as “an order separable from and collateral to the main cause of action
where the right involved is too important to be denied review and the question
presented is such that if review is postponed until final judgment in the case, the
claim will be irreparably lost.” Pa.R.A.P. 313(b). All three criteria must be satisfied
in order for the doctrine to apply and the doctrine must be narrowly construed in
order to avoid piecemeal determinations and protracted litigation. Commonwealth
v. Blystone, 119 A.3d 306, 312 (Pa. 2015).

                                          3
             The County argues that the trial court’s order does not constitute a
collateral order because it neither implicates any of Taxpayer’s rights or interests
that would go unprotected without an immediate appeal nor concerns any purported
claims that would be irreparably lost if review were postponed until final judgment.
The County maintains that the matter is important only to the parties and is not one
deeply rooted in public policy. In addition, the County asserts that the order involves
only the rights and interests of the Authority, an entity separate from and unrelated
to Taxpayer. Further, the County argues that the Authority’s inclusion in the case
would have no impact on Taxpayer’s ability to appeal the taxability of
complimentary rooms.
             The County’s application to quash is without merit. In fact, some of its
arguments support the applicability of the collateral order doctrine. As the County
acknowledges, the legal issue of whether the Authority is a necessary and
indispensable party to the tax appeal is separate and distinct from the main cause of
action pertaining to the propriety of the County’s tax assessment on complimentary
hotel rooms. In the tax appeal, Taxpayer argues that the County has no basis to
impose hotel room rental tax on unoccupied rooms or those provided free of charge
to guests for which Taxpayer allegedly receives no consideration. Resolution of this
issue will entail interpreting the Act and the Ordinance, with special attention to the
word “consideration.” On the other hand, the issue of whether the Authority is a
necessary and indispensable party to the tax appeal pertains to whether it has a right
or interest related to the claim, whether that right or interest is essential to the merits
of the issue, and whether justice can be served without violating its due process
rights. Mechanicsburg Area Sch. Dist. v. Kline, 431 A.2d 953, 956 (Pa. 1981).
Given the analysis necessary for ascertaining the depth and breadth of the

                                            4
Authority’s right or interest, the issue of whether the Authority is a necessary and
indispensable party is separate and collateral from the tax appeal. Hence, the first
criterion necessary for applicability of the collateral order doctrine is satisfied.
               As for the order implicating a right too important to be denied review,
there is a right to litigate against only those persons having a direct, immediate, and
substantial interest in the litigation. In other words, standing is not limited to the
party initiating the claim.5 “It is fundamental that an action at law requires a person
or entity which has the right to bring the action, and a person or entity against which
the action can be maintained.” Marzella v. King, 389 A.2d 659, 661 (Pa. Super.
1978) [quoting Thompson v. Peck, 181 A. 597, 598 (Pa. 1935)]. “In Pennsylvania,
the doctrine of standing is a judicially-created tool intended to ‘winnow out’ litigants
with no direct interest in the matter, and to otherwise protect against improper
parties.” In the Int. of K.N.L., 284 A.3d 121, 136 (Pa. 2022) (citation omitted).
               Further, in seeking to join the Authority as a party, the County is
attempting to imbue the Authority with rights that neither its enabling legislation nor
the Ordinance authorize.            The Ordinance and its implementing regulations
specifically vest the County with the power to administer and assess the tax as well

    5
       The County incorrectly focuses on the individual or entity initiating the legal action as
support for its argument that Taxpayer initiated the present case. While it is true that Taxpayer is
the appellant in this Court, the County initiated this matter by issuing an assessment. (Oct. 5, 2018
Assessment; R.R. at 31a.) In the absence of any notification requirement, the County neither
included nor notified the Authority of the assessment. Subsequently, Taxpayer as the impacted
party exercised its right to appeal from the County’s administrative determination. (Oct. 12, 2018
Taxpayer’s Appeal/Appl. for a Hr’g; R.R. at 38a.) When the County affirmed its determination,
it once again did not notify the Authority. In any event, when Taxpayer appealed to the trial court,
Taxpayer was not initiating an action. (Sept. 11, 2020 Taxpayer’s Appeal to Trial Ct.; R.R. at 4a.)
Instead, it was appealing a determination from the County, which had initiated the action via the
administrative process.

                                                 5
as to enforce the Ordinance.6 Consequently, the Authority would have no standing
to litigate or to relitigate any claim against Taxpayer after completion of the tax

    6
       The implementing regulations require each hotel operator to register with the County
Treasurer and “obtain from the County Treasurer a certificate of authorization evidencing his
authority to collect the occupancy tax . . . .” (County of Luzerne, Hotel Room Rental Tax Ord.
Regs., Section D.; R.R. at 25a.) Each operator shall be required to transmit a return to the County
Treasurer each month. (Id., Section G.2.; R.R. at 27a.) “Every operator, at the time of filing every
return . . . shall compute and pay to the County Treasurer the taxes collected by him and due to the
County during the period for which the report is made.” (Id., Section G.4.; R.R. at 27a.) In the
event of a failure to pay, the regulations detail the process for determination and assessment of the
tax. In pertinent part, they provide:

               H. Failure to Collect and Report Tax, Determination of Tax by
               County Treasurer
                       If any . . . operator shall fail to register with the County
               Treasurer or shall fail or refuse to collect the hotel room rental tax
               or any portion thereof . . . , the County Treasurer shall proceed . . .
               to obtain facts and information on which to base his estimate of the
               tax due. As soon as the County Treasurer shall procure such tax and
               information as he is able to obtain upon which to base the
               assessment of any tax imposed . . . , the County Treasurer shall
               proceed to determine and assess against such operator the tax
               provided for by [the Ordinance] as well as lawful interest. In the
               event such determination is made, the County Treasurer shall give a
               notice of the amount so assessed by serving it personally or by
               depositing it in the United States mail, postage prepaid, addressed
               to the operator so assessed . . . . Such operator may within ten (10)
               days . . . make application in writing to the County Treasurer for a
               hearing on the amount assessed. . . . At such hearing, the operator
               may appear and offer evidence why such specified tax, interest and
               penalties should not be so fixed. After such hearing, the Treasurer
               shall determine the proper tax to be remitted and shall thereafter give
               written notice to the person in the manner described herein of such
               determination . . . . The amount determined to be due shall be
               payable after thirty (30) days unless an appeal is taken.
               I. Appeal
                    Any . . . operator aggrieved by any decision of the County
             Treasurer . . . may appeal to the Court of Common Pleas of Luzerne
(Footnote continued on next page…)

                                                 6
assessment appeal. Compare Pa. Sch. Bds. Ass’n v. Com. Ass’n of Sch. Adm’rs,
Teamsters Local 502, 696 A.2d 859, 868-69 (Pa. Cmwlth. 1997) (an indispensable
party is one whose “power or duty to enforce, implement or administer” would be
infringed by a judgment); York-Adams Cnty. Constables Ass’n v. Ct. of Common
Pleas of York Cnty., 474 A.2d 79, 81 (Pa. Cmwlth. 1984) (an indispensable party is
one for whom the judgment may impair rights or interfere with statutory duties).
Accordingly, the County is the sole appropriate appellee in this tax assessment
appeal.
                 Moreover, the correct calculation, imposition, and collection of hotel
room rental taxes under the Act is an important right to the people of Luzerne County
and this Commonwealth. In Section 2399.2 of the Act, the General Assembly
copiously set forth its legislative findings as to the importance of encouraging the
development of convention centers and the creation of third class county convention
center authorities as justification for the imposition of the tax.7 Echoing the Act, the

                 County . . . and said operator shall file a notice of the appeal with
                 the County Treasurer within thirty days after perfection of the same.

(Id., Sections H. and I.; R.R. at 27a-28a.)
    7
        In pertinent part, Section 2399.2 of the Act provides:
                         (a) It is hereby determined and declared as a matter of
                 legislative finding:
                         (1) That the health, safety and general welfare of the people
                 of this Commonwealth are directly dependent upon the continual
                 encouragement, development, growth and expansion of business,
                 industry, commerce and tourism within this Commonwealth.
                        (2) That unemployment, the spread of indigency and the
                 heavy burden of public assistance and unemployment compensation
                 can be avoided by the promotion, attraction, stimulation,
                 development and expansion of business, industry, commerce and
                 tourism in this Commonwealth.
(Footnote continued on next page…)

                                                  7
                      (3) That development of convention centers is appropriate
              within the redevelopment assistance eligible area of a third class
              county and that the attraction of business to this Commonwealth as
              a result of such development is an important factor in the continual
              encouragement, promotion, attraction, stimulation, development,
              growth and expansion of business, industry, commerce and tourism
              within the county seat, the surrounding counties and this
              Commonwealth as a whole.
                     (4) That the purpose of a convention center should be the
              promotion, attraction, stimulation, development and expansion of
              business, industry, commerce and tourism in the county seat, the
              surrounding counties and this Commonwealth as a whole.
                     (5) That the development of a convention center will
              provide benefits to the hotel industry throughout the entire area of
              the county where the center is developed.
                      (6) That the development of a convention center will also
              provide benefits to the restaurant and entertainment industries
              throughout the entire county where the center is located, to all other
              businesses and individuals benefited by the attraction of major
              conventions and tourists, to other individual businesses whose
              livelihood is dependent on major conventions and tourists and to the
              general public.
                       (7) That the need for and promotion of the type of facility
              which will provide significant benefits to the general public will
              require the expenditure of public money and that it is therefore
              appropriate to authorize a county to impose and collect a tax
              applicable within the entire territorial limits of the county to
              facilitate the development of a convention facility and the promotion
              of tourism within the county.
                      (8) That, to promote the development of convention centers
              within this Commonwealth, it is necessary to provide additional and
              flexible means of developing, constructing, designing, managing,
              financing and operating convention centers.
                     (9) That an important aspect of the development of
              convention centers should be the removal and redevelopment of
              blighted areas.
                    (b) It is hereby declared to be the policy of the
             Commonwealth to promote the health, safety, employment, business
(Footnote continued on next page…)

                                                8
County in the Ordinance imposing the tax referenced the public purpose of
convention centers and their benefit to County taxpayers. (May 22, 1996 Ord. at 1;
R.R. at 106a.) Consequently, to the extent that the hotel room rental taxes support
the legislative purpose and goals of such endeavors, determining how such taxes are
to be imposed in the situation at hand invokes a right too important to be denied
review. In fact, resolution of this issue has statewide implications.
              Finally, Taxpayer’s right to proceed in litigation against only those
parties with standing would be irreparably lost if it were required to engage in
litigation with an entity without a legal interest in the proceedings. Accordingly, the
trial court’s order directing joinder is separable from and collateral to the main cause
of action—the tax appeal. As such, the order is subject to immediate appeal.
                                                II.
              Turning to the merits, Taxpayer maintains that the trial court erred in
determining that the Authority was a necessary and indispensable party to the tax
appeal. As noted, determining whether a party is necessary and indispensable
invokes the following considerations: (1) whether the absent party has a right or
interest related to the claim; (2) whether that right or interest is essential to the merits

              opportunities and general welfare of the people of this
              Commonwealth by providing for the creation of third class county
              convention center authorities which shall exist and operate as
              public instrumentalities of the Commonwealth for the public
              purpose of promoting, attracting, stimulating, developing and
              expanding business, industry, commerce and tourism in this
              Commonwealth. This purpose is hereby declared to be a public
              purpose supporting the enactment of all provisions of this
              subdivision for which public money may be spent and taxes may be
              imposed.

    16 P.S. § 2399.2(a)-(b) (emphasis added).

                                                9
of the issue; and (3) whether justice can be served without violating the absent
party’s due process rights. Kline, 431 A.2d at 956.
             In the present case, after the County calculates, levies, and collects the
hotel room rental tax, the Authority as the absent party has the right to spend eighty
percent of the revenues received from the taxes imposed for convention center
purposes. 16 P.S. § 2399.23(c). Specifically, once the treasurer for the County
deposits the revenues into a special fund, the Authority shall use expenditures from
the fund for the following purposes:

                    (1) Projected annual debt service or lease payments
             of the convention center authority.
                    (2) Costs associated with financing, constructing,
             improving, maintaining, furnishing, fixturing and
             equipping the convention center.
                    (3) Costs associated with the development of the
             convention center, including, but not limited to, design,
             engineering and feasibility costs.
                    (4) Costs associated with the operation and
             management of the convention center.
                    (5) Costs associated with promoting, marketing and
             otherwise encouraging use of the convention center.
                    (6) General purposes of the convention center.

16 P.S. § 2399.23(e)(1)-(6). Consequently, the Authority has a right or interest
related to the County’s claim. However, the Authority’s right or interest is not
essential to the merits of the issue.
             In concluding that the Authority is not a necessary or indispensable
party, we are guided by our Supreme Court’s holding in Kline. In Kline, the
Mechanicsburg Area School District sought to enjoin various state officials from
paying the final installment of school subsidies for the 1977-78 school year due to

                                         10
an alleged error in calculating the taxable income to be attributed to the district.
Because correcting the error could result in an increase of the total subsidy for that
district, the state officials argued that all other school districts were indispensable
parties in that their respective subsidies might be reduced if the district prevailed.
However, the Court ruled that all other school districts were not indispensable parties
and that their due process rights were not infringed by non-joinder. The Court held
that they had a right “to receive the benefit of the use of correct process by state
officials,” rather than a vested right to receive “a fixed or determined sum of money.”
431 A.2d at 957. In other words, even if the subsidy ceiling were reached and all
other school districts were affected by the recalculation, they would still not be
indispensable because their rights were not essential to the merits of the issue of
correct computation. Id. at 957-58.
                Here, the Authority merely has the right to spend a portion of the tax
proceeds once collected—it does not have a right to a fixed or determined sum of
money. The Authority’s right or interest in eighty percent of the revenues received
from the hotel room rental taxes imposed is analogous to all other school districts’
right to the benefit of state officials’ use of the correct process at issue in Kline. In
that regard, the Authority has the right to receive the benefit of the County’s correct
process in the calculation, levying, and collection of the hotel room rental tax.
However, the Authority as a “downstream recipient of a share of tax revenue”8
simply lacks the requisite legal interest, i.e., one that is essential to the merits of the
tax claim litigation.

    8
        (Taxpayer’s Reply Br. at 11.)

                                            11
             Accordingly, we deny the County’s application to quash, reverse the
trial court’s order, and remand for further proceedings consistent with the foregoing
opinion.

                                       _____________________________________
                                       BONNIE BRIGANCE LEADBETTER,
                                       President Judge Emerita

                                         12
       IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Downs Racing, L.P.,                       :
d/b/a Mohegan Sun Poconos,                :
f/k/a Mohegan Sun at Pocono Downs,        :
                        Appellant         :
                                          :
                 v.                       :   No. 942 C.D. 2021
                                          :
Luzerne County,                           :
Luzerne County Treasurer,                 :
Luzerne County Division of Budget         :
and Finance                               :

                                    ORDER

           AND NOW, this 2nd day of June, 2023, the order of the Court of
Common Pleas of Luzerne County is hereby REVERSED.                   The case is
REMANDED for further proceedings consistent with the foregoing opinion.
           Further, the application to quash the above-captioned appeal filed by
Luzerne County, Luzerne County Treasurer, and Luzerne County Division of
Budget and Finance is hereby DENIED.
           Jurisdiction relinquished.

                                        _____________________________________
                                        BONNIE BRIGANCE LEADBETTER,
                                        President Judge Emerita