Class action certified on Kentucky gross revenue tax

Adding to the list of post-Wal-Mart class action decisions, the Western District of Kentucky has certified a class of Windstream customers in Kentucky who were charged flow-through taxes and surcharges by Windstream.  Bowers v. Windstream Kentucky East LLC, W.D. Ky., No. 3:09-cv-00440-JGH (Oct 11, 2011).

Windstream provides telephone, cable, and internet services to customers all across Kentucky.  In Bowers, Plaintiffs alleged violations of state and federal telecommunications laws arising from Defendants' flow-through to customers of the “Kentucky Gross Revenue Tax” (“GRT”) in the form of the “Kentucky Gross Receipts Surcharge” (“GRS”).  The GRT is a tax imposed on telecommunications carriers and Defendants sought to recover their payments of the tax through the GRS.
The Court sustained Plaintiffs' motion for class certification pursuant to Rules 23(b)(3) (the damages class), but denied the motion as to Rule 23(b)(2) certification (the injunction/declaratory judgment class).

Despite a passing reference to the Supreme Court’s commonality finding in Wal-Mart, the Court held that “[a]lthough customers subscribe to varying services offered by Defendants, and the resolution of these issues may thus reveal a disparity in class members' entitled relief, common issues will nonetheless resolve and advance the entire class litigation.” Id.  

Likewise, regarding typicality, Defendants argued that that typicality was absent because Plaintiffs could not prove the claims of other Windstream customers by virtue of proving their own.  But the Court again refused to accept Defendants’ argument, finding that “adjudication of Plaintiffs' legal theories will resolve other Class members' issues.”  Id.

The Court then proceeded with certification under Rule 23(b)(3).  Although the Court noted that predominance is “far more demanding” than the commonality requirement, it found that “differences within a class are not necessarily fatal.”  Id. Even if there was “a need for individualized damages determinations” certification, the Court noted that bifurcation of liability and damages was an available option.  Id.

However, the Court was receptive to Defendants’ arguments on the issue of a Rule 23(b)(2) class.   Because Plaintiffs sought only damages as relief, and because a separate hearing regarding damages would likely be necessary, Rule 23(b)(2) certification was denied. 

You can find the full decision here.

Kentucky Class Action Law