911 Surcharge Litigation

Cities, counties and municipalities are frequently required to provide 911 emergency services to their citizens. In recent years, 911 services have been upgraded to provide computerized 911 services, including call tracing, GPS capabilities (which enable 911 dispatch to locate the caller), the capability to contact 911 via text message, and other technological enhancements. All these services are essential and life-saving, but come at substantial cost.

To finance the cost of providing 911 services (which total billions of dollars nationwide), cities, counties and municipalities frequently impose a surcharge on landline and wireless telephone service. Such 911 surcharges are calculated as a set fee per telephone number or telephone line (including wireless lines and “Voice of Internet Protocol” lines, or telephone access provided using Internet service). These surcharges have been instrumental in providing a means for cities, counties and municipalities to finance the significant cost of providing 911 emergency services.

However, the telephone service providers have not been collecting near enough to finance the cost of 911 emergency services — leaving a multibillion dollar deficit Collecting the surcharge is contrary to the interests of telephone service providers because doing so could potentially negatively affect their relationships with their customers. Indeed, certain telephone service providers have declined to collect the correct 911 surcharge, and/ or have turned a blind eye against customers’ failure to pay it, to appear more attractive than competitors who have been collecting the surcharge. Further, telephone service provides have advised customers how to decrease the number of lines they use — and, thus, their 911 surcharges. The cities, counties and

municipalities are the ultimate losers in this competitive game between telephone service providers, because far less than the full amount of the 911 surcharge due is collected – leading to deficits in funding, and local governments having to dip into their own pockets to fund 911 services.

As just a small example of the telephone service providers’ failure to comply with their statutory obligations, George Maragos, Comptroller of Nassau County, released a report entitled “Limited Review of E911 Emergency Telephone System Surcharge Revenues.” This report provided a review of the 911 Surcharge revenues received in Nassau County from Verizon on landline, VoIP, and wireless carriers during 2012–2014.

Nassau County Audit Report Findings

Verizon owes the County $466,916 because it failed to pay part of the monthly surcharge on phone bills due to the County. The review noted that from the period 2011

through 2014, Verizon improperly deducted an amount ranging from 1% to 3% beyond the 2% administrative fee permitted by law.

E911 surcharge revenue from eight communications carriers totaling over $85,600 was not accrued in 2014 at year end.

Most communications service providers were not providing the County with annual accountings of the surcharge amounts billed and collected and with the names and addresses of customers who have refused or failed to pay the surcharge, as both NYS County Law and the Nassau County Administrative Code provide for. In addition, the Police Department has not established written procedures for the E911 surcharge revenue collection process.

To remedy these violations, several cities, counties and municipalities, with the help of counsel, have brought lawsuits against the telephone service providers based upon their failure to collect the 911 surcharge as required, as well as their fraud in misrepresenting that they have collected the full amount of the 911 surcharge due when they clearly have not. For example, several counties in Tennessee brought suit against AT&T Tennessee alleging, for example that the defendant telephone company — to reduce costs, offer lower prices, and obtain more customers — engaged in a covert practice of omitting fees mandated by Tennessee statute. See Hamilton County Emergency Communications District v. AT&T Tennessee, No. 1:11-cv- 00330. The District Court dismissed the action, ruling (i) that there was no private right of action under the Tennessee statute, meaning the legislature did not intend that individuals, cities, towns or municipalities could bring suit under it, and (ii) that AT&T did not engage in knowing wrongdoing. But the Sixth Circuit reversed, noting that the counties were clearly the

intended beneficiaries of the 911 law, and that therewas no government enforcement mechanism for the911 surcharge, implying that it was up to “privateattorneys general” — such as the plaintiff counties –to enforce the law. The Sixth Circuit also held that the Counties’ allegations of misrepresentations by thetelephone service providers — including regarding, for example, the number of telephone lines assessed andbilled, and the number of telephone lines omitted andnot billed — stated a claim for fraud.

This groundbreaking decision by the Sixth Circuithas paved the way for other cities, counties andmunicipalities to bring similar actions. For example,Gwinnett and Cobb County, Georgia filed lawsuits instate and federal court alleging 15 phone providers failed to collect millions in fees from customers to supportthe counties’ 911 systems. Other cities, counties andmunicipalities, with the help of experienced counsel,can bring similar actions against their relevant serviceprovides, and recover potentially hundreds of millionsin uncollected 911 surcharges owed.