Court Opinion

ID: 4210309
Source: CourtListenerOpinion
Date Created: 2017-10-10 15:11:26.463242+00
Date Added: 2024-06-11T14:41:35.208560
License: Public Domain

MAINE	SUPREME	JUDICIAL	COURT	                                                            Reporter	of	Decisions	
Decision:	 2017	ME	204	
Docket:	   BCD-17-15	
Argued:	   September	12,	2017	             	        	        	        	       	
Decided:	  October	10,	2017	
                                                                                                                 	
Panel:	        SAUFLEY	C.J.,	and	ALEXANDER,	MEAD,	GORMAN,	JABAR,	HJELM,	and	HUMPHREY,	JJ.	
	
	
                                  STATE	OF	MAINE	et	al.	
                                            	
                                           v.	
                                            	
                            BIDDEFORD	INTERNET	CORPORATION	
	
	
ALEXANDER,	J.	

          [¶1]	 	 Biddeford	 Internet	 Corporation,	 doing	 business	 as	 Great	 Works	

Internet	(GWI),	appeals,	and	the	State	of	Maine	and	the	ConnectME	Authority	

cross-appeal,	 from	 an	 amended	 judgment	 entered	 in	 the	 Business	 and	

Consumer	Docket	(Horton,	J.)	awarding	the	State	and	the	Authority	$406,852	

in	unpaid	fees	pursuant	to	35-A	M.R.S.	§	9216	(2014).1		On	appeal,	all	parties	

argue	 that	 the	 court	 erred	 by	 concluding	 that	 the	 section	 9216	 assessment	

was	a	valid	business	excise	tax.		GWI	contends	that	the	assessment	constitutes	

either	an	invalid	business	excise	tax	or	an	unconstitutional	property	tax.		The	

    1	 	 Title	 35-A	 M.R.S.	 §	 9216	 was	 enacted	 by	 P.L.	 2009,	 ch.	 612,	 §	 10	 (emergency,	 effective	

Apr.	6,	2010)	 (codified	 at	 35-A	 M.R.S.	 §	 9216	 (2014)),	 and	 has	 since	 been	 amended	 by	 P.L.	 2015,	
ch.	151,	§§	1-2,	and	ch.	284,	§	10	(effective	Oct.	15,	2015)	(codified	at	35-A	M.R.S.	§	9216	(2016)).		
Unless	 otherwise	 noted,	 references	 to	 section	 9216	 in	 this	 opinion	 are	 to	 the	 statute	 as	 originally	
enacted	and	in	effect	from	April	6,	2010,	to	October	14,	2015.	
2	

State	and	the	Authority	contend	that	the	assessment	is	not	a	tax	but	rather	a	

fee.2		We	agree	with	the	State	and	the	Authority	that	the	Legislature	properly	

characterized	 this	 assessment	 as	 a	 fee,	 and,	 with	 that	 clarification,	 we	 affirm	

the	judgment.	

                                            I.		CASE	HISTORY	

          [¶2]		After	a	non-jury	trial,	the	court	made	the	following	findings,	which	

are	supported	by	competent	evidence	in	the	record.	

          [¶3]		The	Legislature	established	the	Authority	“to	stimulate	investment	

in	 advanced	 communications	 technology	 infrastructure”	 and	 to	 expand	 the	

availability	of	broadband	service	in	unserved	or	underserved	areas	in	Maine.		

P.L.	2005,	ch.	665,	§	3	(effective	Aug.	23,	2006)	(codified	at	35-A	M.R.S.	§	9203	

(2014));	see	also	35-A	M.R.S.	§§	9202,	9202-A,	9204	(2014).3	

          [¶4]	 	 In	 2009,	 private	 telecommunications	 service	 providers	 began	

meeting	with	representatives	of	the	State,	including	the	Authority,	to	address	

the	 lack	 of	 broadband	 capacity	 in	 Maine.	 	 Broadband	 involves	 the	

     2	
      	 The	 parties	 make	 additional	 arguments	 in	 their	 appeals.	 	 GWI	 challenges	 the	 court’s	
determination	that	the	State	and	the	Authority	had	standing	to	bring	an	action	to	collect	the	unpaid	
fees	and	argues	that	section	9216	violates	its	rights	to	due	process	and	equal	protection.		The	State	
contends	 that	 GWI	 lacks	 standing	 to	 assert	 its	 equal	 protection	 claim.	 	 We	 are	 not	 persuaded	 by	
these	arguments	and	do	not	address	them	further.	

     3	 	 These	 statutes	 have	 since	 been	 amended,	 or	 repealed	 and	 replaced,	 by	 P.L.	 2015,	 ch.	 284,	

§§	2-7	(effective	Oct.	15,	2015)	(codified	at	35-A	M.R.S.	§	9202	to	9204-A	(2016)).	
                                                                                       3	

transmission	 of	 data—generally	 associated	 with	 the	 internet—through	 both	

fiber	 optic	 and	 digital	 subscriber	 line	 (DSL)	 technology,	 among	 other	 means.		

Fiber	 optic	 transmission	 is	 currently	 the	 fastest	 means	 of	 data	 transmission	

and	 is	 accomplished	 via	 optical	 fiber	 cable,	 which	 is	 essentially	 a	 group	 of	

plastic	or	glass	strands	that	can	carry	light	pulses	to	transmit	data.		The	term	

“dark	fiber”	applies	to	the	unlit	fiber	optic	strands	within	a	cable.		Dark	fiber	

providers	 lease	 or	 sell	 strands	 of	 dark	 fiber	 to	 telecommunications	 service	

providers	 who	 then	 use,	 “light,”	 the	 strands	 to	 transmit	 data	 for	 their	

customers.	

      [¶5]		During	the	meetings	involving	the	State,	the	Authority,	and	private	

telecommunications	 service	 providers,	 an	 initiative,	 called	 the	 “Three	 Ring	

Binder,”	 was	 developed	 to	 serve	 as	 a	 new	 route	 for	 fiber	 optic	 cable	 in	

unserved	and	underserved	areas.		The	purpose	of	the	project	was	to	put	dark	

fiber	in	areas	where	there	was	no	dark	fiber	at	all.	

      [¶6]	 	 GWI,	 one	 of	 the	 telecommunications	 service	 providers	 that	

participated	 in	 the	 meetings,	 applied	 for	 a	 federal	 grant	 to	 subsidize	

construction	of	the	Three	Ring	Binder.		The	application	required	GWI	to	assign	

the	 project	 to	 a	 new	 entity,	 Maine	 Fiber	 Company,	 Inc.,	 that	 would	 own	 the	

Three	Ring	Binder	and	be	responsible	for	its	construction.		Maine	Fiber	would	
4	

make	 the	 Three	 Ring	 Binder	 available	 on	 an	 “open	 access”	 basis	 so	 that	 any	

telecommunications	 service	 provider	 could	 purchase	 or	 lease	 dark	 fiber	 to	

extend	service	to	its	residential	or	business	customers.	

        [¶7]	 	 The	 grant	 was	 approved	 in	 December	 2009	 in	 the	 amount	 of	

$25,402,904.4	 	 The	 grant	 required	 GWI	 to	 transfer	 the	 right	 to	 receive	 the	

funds	 to	 Maine	 Fiber	 and	 required	 Maine	 Fiber	 to	 complete	 construction	 of	

the	Three	Ring	Binder	within	three	years.		Maine	Fiber	now	holds	title	to	the	

Three	 Ring	 Binder,	 which	 was	 completed	 in	 2012,	 and	 is	 a	 “dark	 fiber	

provider”	 within	 the	 meaning	 of	 35-A	 M.R.S.	 §	102(4-A)	 (2014)	 and	 section	

9216.	

        [¶8]		When	Maine	Fiber	was	created,	it	lacked	legal	authority	to	attach	

dark	 fiber	 and	 equipment	 to	 utility	 poles	 that	 were	 owned	 by	 other	 entities	

and	to	construct	the	Three	Ring	Binder	within	public	rights	of	way.		Because	

of	 the	 narrow	 timeline	 for	 completion	 of	 the	 project,	 emergency	 legislation	

was	 introduced	 to	 provide	 Maine	 Fiber	 the	 necessary	 authority	 to	 build	 the	

Three	Ring	Binder.		See	L.D.	1778	(124th	Legis.	2009).	

	       [¶9]	 	 In	 February	 2010,	 the	 Legislature	 held	 a	 public	 hearing	 at	 which	

GWI,	Maine	Fiber,	and	the	Authority	testified	in	favor	of	L.D.	1778.		FairPoint	

     4		The	grant	provided	eighty	percent	of	the	cost	for	construction	but	required	a	twenty	percent	

match	from	private	individuals	or	entities.	
                                                                                     5	

Communications,	 the	 largest	 provider	 of	 dark	 fiber	 and	 telephone	 service	 in	

Maine,	 opposed	 the	 legislation,	 asserting	 that	 the	 Three	 Ring	 Binder	 would	

overbuild	 the	 existing	 network.	 	 A	 working	 group	 was	 formed	 to	 reach	 a	

compromise	that	would	be	agreeable	to	both	sides.	

	     [¶10]	 	 The	 resulting	 compromise	 granted	 pole	 attachment	 rights	 and	

the	 right	 to	 construct	 within	 the	 public	 rights	 of	 way	 to	 Maine	 Fiber	 and	

authorized	 a	 dedicated	 broadband	 sustainability	 fund,	 supported	 by	 a	

broadband	 sustainability	 fee	 (BSF)	 to	 be	 collected	 from	 users	 of	 the	 Three	

Ring	Binder.		The	purpose	of	the	BSF	was	two-fold:	to	support	improvements	

to	 expand	 broadband	 access,	 and	 to	 reduce	 the	 competitive	 advantage	 to	

those	 utilizing	 federally	 supported	 dark	 fiber	 over	 those	 who	 had	 expanded	

broadband	and	dark	fiber	access	using	private	resources.		Although	GWI	was	

not	part	of	the	working	group,	it	did	not	oppose	the	agreement	reached.	

      [¶11]	 	 The	 Legislature	 amended	 L.D.	 1778,	 which	 was	 later	 codified	 at	

35-A	 M.R.S.	 §	9216.	 	 See	 House	 Amend.	 B	 to	 Comm.	 Amend.	 A	 to	 L.D.	 1778,	

No.	H-807	(124th	Legis.	2009).	

      [¶12]	 	 Section	 9216(2)	 imposed	 the	 BSF	 on	 any	 entity	 that	 leased,	

purchased,	or	otherwise	obtained	federally	supported	dark	fiber	from	Maine	

Fiber.		See	35-A	M.R.S.	§	102(4-B)	(2014).		Maine	Fiber	was	required	to	collect	
6	

the	 BSF	 from	 those	 entities	 and	 to	 remit	 the	 collected	 amounts	 to	 the	

Authority.		Id.	§	9216(3).		The	Authority	was	required	to	deposit	five	percent	

of	the	funds	received	into	the	ConnectME	Fund,	which	was	used	to	support	its	

activities	 pursuant	 to	 sections	 9204	 and	 9216.	 	 Id.	 §	 9216(4)(A).	 	 The	

remaining	 ninety-five	 percent	 was	 deposited	 into	 the	 broadband	

sustainability	fund.		Id.	§	9216(4)(B).		Pursuant	to	the	statute,	certain	carriers,	

including	 FairPoint,	 received	 a	 right	 of	 first	 refusal	 to	 use	 the	 broadband	

sustainability	fund	to	finance	the	deployment	of	broadband	infrastructure	in	

unserved	 or	 underserved	 areas	 within	 the	 carrier’s	 service	 territory.	 	 Id.	

§	9216(6).	 	 Any	 remaining	 money	 in	 the	 broadband	 sustainability	 fund	 was	

then	transferred	to	the	ConnectME	Fund.		Id.	

      [¶13]	 	 In	 2015,	 the	 Legislature	 repealed	 the	 statute	 creating	 the	 BSF,	

which	 otherwise	 would	 have	 expired	 on	 December	 31,	 2017.	 	 See	 P.L.	 2015,	

ch.	 151,	 §§	 1-2	 (effective	 Oct.	15,	 2015)	 (codified	 at	 35-A	 M.R.S.	 §	9216	

(2016)).	

      [¶14]		Since	2010,	GWI	has	accessed	and	utilized	dark	fiber	in	the	Three	

Ring	Binder.		The	terms	under	which	Maine	Fiber	granted	GWI	access	to	the	

Three	 Ring	 Binder	 were	 stated	 in	 a	 series	 of	 Dark	 Fiber	 Use	 Agreements	

(DFUAs).		In	the	parties’	original	DFUA,	GWI	expressly	agreed	that	it	“shall	be	
                                                                                                       7	

responsible	for	any	taxes	or	fees	.	.	.	including	.	.	.	the	‘broadband	sustainability	

fee.’”	 	 Although	 GWI	 and	 Maine	 Fiber	 amended	 the	 DFUA	 several	 times	 and	

later	entered	into	a	Dark	Fiber	Use	and	Settlement	Agreement,	the	provision	

regarding	GWI’s	responsibility	for	paying	any	taxes	or	fees,	including	the	BSF,	

remained	intact.	

         [¶15]		From	approximately	May	2010	until	May	2012,	while	the	Three	

Ring	 Binder	 was	 being	 constructed,	 GWI	 paid	 approximately	 $15,000	 of	 the	

BSF	to	Maine	Fiber.		GWI	then	stopped	paying	the	BSF	but	did	not	reduce	the	

fees	 charged	 to	 its	 customers	 to	 reflect	 the	 amount	 it	 saved	 by	 the	

nonpayment	of	the	BSF.		Calculated	from	when	GWI	stopped	paying	the	BSF	in	

June	2012	until	the	statute’s	repeal	in	October	2015,	the	total	amount	of	fees	

collected	but	not	paid	by	GWI	was	$406,852.5	

         [¶16]	 	 On	 September	 9,	 2014,	 the	 State	 and	 the	 Authority	 filed	 a	

complaint	against	GWI	in	the	Superior	Court	(Kennebec	County)	to	collect	the	

unpaid	 fees.	 	 The	 case	 was	 subsequently	 transferred	 to	 the	 Business	 and	

Consumer	Docket.		The	court	held	a	non-jury	trial	on	April	27-28,	2016.	

         [¶17]		By	a	judgment	entered	on	October	5,	2016,	the	court	awarded	the	

State	and	the	Authority	$406,852	in	unpaid	fees,	concluding	that	the	State	and	

    5		 Maine	 Fiber	 billed	 the	 BSF	 to	 every	 entity—approximately	 two	 dozen	 broadband	 service	
providers—that	 purchased,	 leased,	 or	 licensed	 dark	 fiber	 from	 Maine	 Fiber	 as	 required	 by	 the	
statute,	but	GWI	was	the	only	entity	that	did	not	pay	the	BSF	as	required.	
8	

the	 Authority	 had	 standing	 to	 sue	 GWI	 directly,	 that	 section	 9216	 did	 not	

violate	 GWI’s	 constitutional	 rights	 to	 due	 process	 and	 equal	 protection,	 and	

that	the	BSF	was	a	valid	business	excise	tax	rather	than	a	fee.	

       [¶18]	 	 GWI	 timely	 filed	 motions	 for	 additional	 findings	 of	 fact	 and	 to	

alter	or	amend	the	judgment.		See	M.R.	Civ.	P.	52(b),	59(e).		After	a	hearing,	the	

court	issued	an	amended	decision	and	judgment,	but	otherwise	denied	GWI’s	

motions.		GWI	appealed,	and	the	State	and	the	Authority	cross-appealed.	

       [¶19]	 	 GWI	 argues	 that,	 while	 the	 court	 correctly	 determined	 that	 the	

BSF	is	a	tax	rather	than	a	fee,	the	court	erred	in	concluding	that	the	BSF	is	a	

valid	business	excise	tax	rather	than	a	property	tax	that	violates	Me.	Const.	art	

IX,	 §	8.	 	 The	 State	 and	 the	 Authority	 agree	 with	 the	 court’s	 award,	 but	 argue	

that	the	court	erred	in	concluding	that	the	BSF	is	a	tax	rather	than	a	fee.	

                                 II.		LEGAL	ANALYSIS	

	      [¶20]	 	 We	 review	 questions	 of	 law	 de	 novo.	 	 Blue	 Yonder,	 LLC	 v.	

State	Tax	Assessor,	2011	ME	49,	¶	7,	17	A.3d	667.		“Because	both	a	fee	and	a	

tax	raise	monies	for	governmental	use,	the	distinction	between	the	two	is	one	

of	 purpose	 and	 of	 degree	 of	 particularity.”	 	 Butler	 v.	 Supreme	 Judicial	 Court,	

611	A.2d	987,	990	(Me.	1992).		When	determining	whether	an	assessment	is	a	

fee	or	a	tax,	we	consider	four	factors:	(1)	whether	the	primary	purpose	is	to	
                                                                                        9	

raise	 revenue	 or	 to	 further	 regulatory	 goals,	 (2)	 whether	 the	 assessment	 is	

paid	in	exchange	for	benefits	not	received	by	the	general	public,	(3)	whether	

the	 assessment	 is	 voluntary,	 and	 (4)	 whether	 the	 assessment	 is	 a	 fair	

approximation	of	the	cost	to	the	government	and	 of	the	benefit	to	the	 party.		

See	 id.;	 City	 of	 Lewiston	 v.	 Gladu,	 2012	 ME	 42,	 ¶¶	 12-26,	 40	A.3d	 964.	 	 In	

reviewing	an	assessment,	we	will	respect	the	Legislature’s	characterization	of	

an	assessment,	unless	that	characterization	is	inconsistent	with	the	law.	

	     [¶21]	 	 Regarding	 the	 first	 factor,	 we	 have	 recognized	 that	 fees	 can	 be	

used	 to	 fund	 the	 construction	 of	 capital	 improvements	 and	 infrastructure	

when	 that	 construction	 supports	 recognized	 regulatory	 goals.	 	 See	 Gladu,	

2012	ME	42,	 ¶¶	15-16,	 40	A.3d	 964.	 	 Here,	 section	 9216	 required	 that	

ninety-five	percent	of	the	BSFs	remitted	to	the	Authority	be	deposited	into	the	

broadband	sustainability	fund	to	support	the	regulatory	goal	of	expansion	of	

broadband	infrastructure	into	unserved	and	underserved	areas.		Thus,	nearly	

all	 of	 the	 collected	 fees	 were	 used	 to	 further	 the	 specific	 regulatory	 goals	

defined	in	section	9202-A	and	to	carry	out	the	Authority’s	regulatory	duties	as	

defined	in	section	9204(2).	

      [¶22]		As	to	the	second	factor,	the	BSF	provided	both	direct	and	indirect	

benefits	 to	 GWI	 as	 a	 user	 of	 the	 Three	 Ring	 Binder.	 	 The	 expansion	 of	
10	

broadband	 infrastructure	 funded	 by	 the	 BSF	 benefitted	 GWI	 by	 providing	

access	 to	 more	 potential	 customers	 of	 its	 services.	 	 See	 Gladu,	 2012	ME	 42,	

¶	12,	 40	 A.3d	 964	 (“[A]lthough	 some	 jurisdictions	 have	 held	 that	 benefits	

must	 be	 direct	 and	 exclusive[,]	 the	 trend	 seems	 to	 be	 in	 favor	 of	 upholding	

fees	that	confer	intangible	benefits	on	both	those	who	are	assessed	and	those	

who	are	not.”	(alteration	omitted)).		Furthermore,	GWI	requested	and	Maine	

Fiber	agreed	to	build	the	initial	segments	of	the	Three	Ring	Binder	in	locations	

that	 would	 benefit	 GWI’s	 important	 commercial	 customers—a	 request	 that	

uniquely	benefited	GWI.	

       [¶23]	 	 Turning	 to	 the	 third	 factor,	 we	 observed	 in	 Butler	 that	 fees	 are	

voluntary	 “in	 the	 sense	 that	 an	 individual	 may	 avoid	 the	 charge	 by	 choosing	

not	to	utilize	the	service.”		611	A.2d	at	990.		In	Gladu,	we	also	stated	that	“[t]he	

fact	 that	 the	 costs	 of	 avoiding	 [an]	 assessment	 are	 quite	 high	 does	 not	 make	

the	assessment	involuntary.”		2012	ME	42,	¶	23,	40	A.3d	964.		Here,	the	Three	

Ring	Binder	was	available	on	an	open	access	basis,	and	GWI’s	decision	to	use	

it	was	voluntary.	

	      [¶24]		Finally,	an	assessment	need	be	only	a	“fair	approximation”	of	the	

respective	cost	to	the	government	or	the	benefit	to	the	party	to	be	considered	

a	 fee.	 	 Id.	 ¶	 24.	 	 Here,	 only	 five	 percent	 of	 the	 collected	 fees	 were	 used	 to	
                                                                                      11	

defray	the	costs	incurred	by	the	Authority	in	implementing	section	9216,	but	

in	 return	 GWI	 and	 its	 customers	 received	 significant	 tangible	 and	 intangible	

benefits	from	the	BSF.	

      [¶25]		After	evaluating	all	four	factors,	we	conclude	that	the	Legislature	

properly	 characterized	 the	 BSF	 as	 a	 fee	 and	 not	 a	 tax.	 	 Accordingly,	 the	

arguments	 advanced	 by	 GWI	 asserting	 that	 the	 BSF	 is	 a	 tax	 fail,	 as	 do	 GWI’s	

arguments	that	there	is	some	inequity	in	utilizing	the	BSF	to	support	further	

broadband	 expansion	 and	 to	 level	 the	 playing	 field	 with	 providers	 that	 have	

supported	 broadband	 expansion	 with	 their	 own	 and	 their	 customers’	

resources	rather	than	relying	on	the	federal	subsidy.		Although	the	trial	court	

erred	 in	 concluding	 that	 the	 assessment	 was	 a	 tax,	 the	 error	 is	 harmless	

because,	 whatever	 the	 assessment	 may	 be	 called,	 GWI	 is	 required	 to	 pay	 it.		

Therefore,	 after	 recognizing	 that	 the	 assessment	 is	 a	 fee,	 we	 affirm	 the	

decision	of	the	Superior	Court	awarding	the	State	and	the	Authority	$406,852	

in	unpaid	fees,	plus	interest	and	costs.	

      The	entry	is:	

                    Judgment	affirmed.	
	
	     	      	      	      	      	
	
	                          	
12	

David	P.	Silk,	Esq.,	Benjamin	M.	Leoni,	Esq.	(orally),	and	Rebecca	Gray	Klotzle,	
Esq.,	 Curtis	 Thaxter	 LLC,	 Portland,	 for	 appellant	 Biddeford	 Internet	
Corporation	
	
Janet	 T.	 Mills,	 Attorney	 General,	 and	 Thomas	 A.	 Knowlton,	 Asst.	 Atty.	 Gen.	
(orally),	Office	of	the	Attorney	General,	Augusta,	for	cross-appellants	State	of	
Maine	and	ConnectME	Authority	
	
	
Business	and	Consumer	Docket	docket	number	CV-2014-56	
FOR	CLERK	REFERENCE	ONLY