MOBILE SOUTH LLC USA v. KENTUCKY COMMERCIAL MOBILE RADIO SERVICE EMERGENCY TELECOMMUNICATIONS BOARD 911 (2025)

After years of paying statutory service fees to cover the costs of extending 911 emergency services to mobile telephone users, T-Mobile sought a refund based on this Court's decision in Virgin Mobile ¹ that the statute did not apply to prepaid cellular customers. When the Commercial Mobile Radio Emergency Service Telecommunications Board denied its request, T-Mobile filed this action in Franklin Circuit Court. The trial court concluded that T-Mobile was not entitled to a refund, having failed to meet the common law refund requirement effectuated in Inland Container Corporation v. Mason County, 6 S.W.3d 374, 377 (Ky. 1999).

The Court of Appeals affirmed, and T-Mobile sought discretionary review in this Court. After granting discretionary review, considering oral arguments, and carefully reviewing the record, we affirm the Court of Appeals.

FACTS AND PROCEDURAL HISTORY

In response to the growing popularity of cell phones, in 1998 the Kentucky General Assembly created the Commercial Mobile Radio Service (CMRS) Emergency Telecommunications Board (the Board).² To cover the costs associated with extending 911 emergency services to mobile telephone users, which undoubtedly serves the important public purpose of protecting citizens during emergencies, Kentucky Revised Statute (KRS) 65.7629(3) directed the Board to collect a CMRS service charge of $0.70 per month per CMRS connection. Cellular providers, like T-Mobile and Virgin Mobile, were deemed collection agents for the CMRS fund and the statute mandated that each cellular provider:

shall, as part of the provider's normal monthly billing process, collect the CMRS service charges levied upon CMRS connections under KRS 65.7629(3) from each CMRS connection to whom the billing provider provides CMRS. Each billing provider shall list the CMRS service charge as a separate entry on each bill which includes a CMRS service charge.

KRS 65.7635(1) (effective to July 11, 2006).³ Therefore, cellular providers listed the service charge as a separate entry on each monthly bill sent to their customers.

The statutory service charges clearly applied to customers who had traditional, pay-after-use contracts with their cellular providers. However, cellular providers began to question whether they were required to remit the monthly service charges for prepaid users. Prepaid cellular customers did not receive monthly bills from their cell phone provider; instead, they purchased minutes of cellular service from retail stores as needed. Due to the lack of a monthly bill, prepaid providers lacked the sole statutory mechanism—the “normal monthly billing process”—for collecting service charges from these customers.

Despite the statute's reliance on monthly bills as the mechanism of collection, the Board advised prepaid providers, including T-Mobile and Virgin Mobile, of its position that they were nonetheless required to remit the service charges on behalf of their prepaid customers. The Board instructed prepaid providers to calculate the service charges by multiplying their total number of active prepaid lines for each month by the $0.70 service charge. Relying on the Board's instructions, T-Mobile and Virgin Mobile remitted the service charges for prepaid customers for several years. However, in May 2005, T-Mobile and Virgin Mobile concluded that the CMRS statutes did not apply to prepaid cellular services and stopped paying fees for their prepaid customers to the Board.

In 2006, the General Assembly amended the CMRS statutes to explicitly include prepaid users as subject to the service fee. T-Mobile contends that from January 2003 to May 2005, it remitted payment for $612,460.78 in service charges for prepaid cellular services to the Board. It did not explicitly collect the service charge from prepaid customers and instead paid those amounts from its own funds. Therefore, on November 22, 2006, T-Mobile attempted to obtain a refund of the service charges it paid under the pre-2006 statutes. The Board denied the refund request and claimed that the 2006 statutory amendments merely clarified that the CMRS statutes applied to prepaid customers all along. The Board stated that T-Mobile was “[i]n no event ․ in any way entitled to a refund” and requested that it begin remitting the appropriate fees and any back charges owed, threatening legal action if T-Mobile failed to do so.

In 2009, T-Mobile again requested a refund and when the Board denied that request, T-Mobile filed suit against the Board in Franklin Circuit Court seeking a declaratory judgment and common law refund, i.e., a non-statutory refund of monies paid but not due to the state. The Franklin Circuit Court abated the T-Mobile litigation, pending the outcome of a related matter, Virgin Mobile, 448 S.W.3d at 243. The Virgin Mobile Court held that the prior version of the CMRS statutes did not apply to prepaid cellular services because providers did not send monthly bills to prepaid customers, which is the sole statutory mechanism for collecting fees.⁴ However, the Court determined that Virgin Mobile wrongly engaged in self-help recoupment of the fees, and rejected Virgin Mobile's claim that it was entitled to a common law refund. In dicta, the Court hypothesized that had Virgin Mobile paid its CMRS obligations when due, and timely filed an action for a refund, the cited equities and principles may have favored Virgin Mobile's position.

After the Virgin Mobile decision, both T-Mobile and the Board filed motions for summary judgment on the single issue of whether T-Mobile is entitled to a common law refund. The Franklin Circuit Court granted summary judgment in favor of the Board and held that T-Mobile was not entitled to a common law refund. The trial court was not persuaded by T-Mobile's citation to the dicta in Virgin Mobile and declined to interpret the Court's hypothetical as an intent to validate all common law refund claims that arose in connection with other parties’ remittance of service charges for prepaid wireless services. Additionally, the trial court reasoned that T-Mobile did not meet the requirements of a common law refund, as articulated in Inland Container, 6 S.W.3d at 377, because the statute was not invalid, and T-Mobile paid the fees voluntarily. The trial court explained that T-Mobile did not face any specific fine, imprisonment, or burdensome penalty if they did not pay the service charges, rendering the payments voluntary. T-Mobile had the choice to pay a service charge it believed to be improper or not pay the fee and seek a legal determination of whether the fee was improper, and it chose the former option. The trial court also held that the Board did not engage in misrepresentation. As such, T-Mobile could not satisfy the requirements for a common law refund.

The Court of Appeals affirmed the trial court and held that T-Mobile could not show that the payments were involuntary because they were not collectible by summary process of fine or imprisonment, citing Great Atlantic & Pacific Tea Company v. City of Lexington, 256 Ky. 595, 76 S.W.2d 894 (1934), and Spalding v. City of Lebanon, 156 Ky. 37, 160 S.W. 751, 752 (1913). Further, T-Mobile could not show actual, intentional misrepresentation. Therefore, the trial court did not err in concluding that T-Mobile was not entitled to a common law refund.

T-Mobile appealed. After granting discretionary review, considering oral arguments, and carefully reviewing the record, we affirm the Court of Appeals.

ANALYSIS

The sole issue in this case is whether T-Mobile is entitled to a common law refund of service charges it previously paid for its prepaid cellular customers to the Board prior to the 2006 statutory amendment.⁵ The trial court granted summary judgment in favor of the Board. On appeal, we review a summary judgment de novo. Shelton v. Ky. Easter Seals Soc'y, Inc., 413 S.W.3d 901, 905 (Ky. 2013). We consider whether the trial court “correctly determined that there were no genuine issues of material fact and that the moving party was entitled to judgment as a matter of law.” Fluke Corp. v. LeMaster, 306 S.W.3d 55, 59 (Ky. 2010) (quoting Lach v. Man O'War, LLC, 256 S.W.3d 563, 567 (Ky. 2008)).

I. Virgin Mobile does not dictate whether T-Mobile is entitled to a common law refund.

Preliminarily, we must address T-Mobile's contention that this Court, in Virgin Mobile, previously recognized a right to a common law refund for payments made by mistake to the Board when properly pursued. In that case, Virgin Mobile, like T-Mobile, offered prepaid cellular services and those users never received a monthly bill, leaving Virgin Mobile with no possible means to collect the service charge using the statutorily-prescribed monthly billing method. 448 S.W.3d at 244. Under its assumption that it was responsible for collecting service charges for prepaid customers, Virgin Mobile estimated its customers would have owed approximately $287,000 in service charges, and then paid that amount from its own revenue to the Board. Id.

By 2005, Virgin Mobile concluded that it was not obligated to pay the service charges for its prepaid services and requested the Board refund it $287,000, representing the total amount of service charges it paid between 1999 and May 2005 for prepaid customers. Id. at 244-45. After the Board failed to respond, Virgin Mobile engaged in self-help by withholding presently due service charges until it had recouped the amount it paid before the 2006 amendments to the CMRS statutes. Id. at 245. The Board filed suit in Jefferson Circuit Court seeking to recover all fees owed from 1999 through May 2005, during which Virgin Mobile paid no service charges. Id.

The Jefferson Circuit Court entered summary judgment against Virgin Mobile in the amount of $547,945, which consisted of the amount Virgin Mobile recouped from current collections, as well as an additional $261,000 in service charges that accrued between May 2005, when Virgin Mobile voluntarily ceased making payments, and July 2006, when the statutory amendment specifically assessing the service charge for prepaid users took effect, plus interest. Id. at 246. On appeal, this Court definitively held that the pre-2006 version of the statutes did not apply to prepaid cellular providers because they did not send customers monthly bills, which was the sole statutory mechanism for collecting the service charges. Id. at 248-49.

The Court acknowledged Virgin Mobile's contention it was entitled to a refund under common law principles and the following principle from City of Covington v. Powell:

[i]t may now be regarded as well settled in this State that when money has been paid through a clear and palpable mistake of law or fact, essentially affecting the rights of the parties, which in law, honor, or conscience was not due and payable, and which ought not to be retained by the party to whom it was paid, it may be recovered back.

59 Ky. 226, 228 (1859). While the Court noted it did not disagree with the cited principle, or other cases cited by Virgin Mobile, it explicitly stated that it found “them inapplicable ․ because they all involve the right to a refund, which as noted above, is not the issue here.” 448 S.W.3d at 251. Rather, the issue was whether Virgin Mobile was entitled to recoup the purportedly incorrectly paid service charges by withholding later amounts due to the Board.

Ultimately, the Court reasoned that Virgin Mobile wrongly engaged in self-help recoupment of the pre-2006 amendment fees and then further noted:

Had Virgin paid those obligations when due, and in a timely fashion filed an action for a refund of the funds it had mistakenly thought it owed, the cited principles and the equities they embody may have favored Virgin's position. But that is not the case before us.

Id. (Emphasis added). The Court explained that it made no difference that when Virgin Mobile finally resumed making payments, it paid the fees from its own revenue rather than collecting charges from its customers. Id. As to the post-2006 amendment charges, the Court held that Virgin Mobile owed the Board the full amount, reasoning that, under the amended statutes, Virgin Mobile's customers owed those funds and Virgin Mobile was obligated to collect and remit those service charges to the Board.

In this case, T-Mobile did not improperly engage in self-help to recoup funds it erroneously paid to the Board, which distinguishes T-Mobile's case from Virgin Mobile. Nonetheless, we disagree with T-Mobile that the Virgin Mobile Court held that prepaid providers are entitled to a refund of service charges remitted before the July 2006 amendments simply because they seek a remedy in a timely fashion. In Virgin Mobile, the Court noted a hypothetical question in dicta that introduced the possibility that the equities might be different if Virgin Mobile had not engaged in self-help and instead sought a different legal remedy. The Court explicitly stated, “that is not the case before us” and used conditional verbs (e.g., “[h]ad Virgin paid those obligations,” and “may have favored Virgin's position”). Id.

Virgin Mobile is applicable to this case only because it conclusively held that the pre-July 2006 version of the CMRS statutes did not require prepaid providers to collect service charges from prepaid customers. Importantly, the Virgin Mobile Court was not tasked with determining whether Virgin Mobile was entitled to a refund. The Court merely stated Virgin Mobile may have been entitled to a refund had it sought one and if certain prerequisites were satisfied. “[T]he issue before the Court is not, as Virgin posits, whether it is entitled to a refund of money paid by mistake.” Id.; see also id. (“[T]he right to a refund ․ is not the issue here. Virgin does not assert these principles in support of an action for a refund of money mistakenly paid between 2002 and May 2005. Instead, Virgin is asserting them as a justification for its underpayment of the CMRS obligations that came due after July 12, 2006.”). Thus, Virgin Mobile does not speak definitively to the issue presented here, i.e., whether a provider might be entitled to a common law refund of incorrectly paid service charges.

Because the Court's hypotheses about what Virgin Mobile could have done differently were impertinent to the issues before it, those statements were dicta and merely advisory. Contrary to T-Mobile's position here, the abstract possibility of a refund referenced in Virgin Mobile is not enough. In any case, the law must still be applied to the facts. Here, application of the law to these facts leads us to conclude that T-Mobile is not entitled to a common law refund.

II. Inland Container provides the controlling test for determining the availability of a common law refund.

In 1999, this Court explicitly articulated a rule for common law refunds in Inland Container, 6 S.W.3d at 377. Generally, common law authorizes a refund when (1) the statute or regulation is invalid and the payments were submitted involuntarily, or (2) the relevant government authority has engaged in misrepresentation. The principles delineated in Inland Container have long existed in this state, and have developed over time, dating back over 160 years ago.

As noted by the Court of Appeals, one principle ultimately leading to the establishment of the common law refund rule in Inland Container was contemplated in City of Covington v. Powell, 59 Ky. 226 (1859). In that case, plaintiffs sued after they paid taxes based upon an illegal assessment made by the city. Id. at 228. The plaintiffs also asserted that they believed the assessment was both legal and collectible at the time it was paid. Id. The city countered that the plaintiffs made the payments voluntarily, and enjoyed the benefits of improvements to the city made using funds from the assessment. Id. at 228-29. The Court explained that

[i]t may be now regarded as well settled in this State that when money has been paid through a clear and palpable mistake of law or fact, essentially affecting the rights of the parties, which, in law, honor, or conscience, was not due and payable, and which ought not to be retained by the party to whom it was paid, it may be recovered back.

Id. at 228. Ultimately the Court contemplated that the city tax at issue was illegal and invalid, and ordered that the money improperly collected be restored. Id. at 232.

Based on these principles, T-Mobile asserts it is entitled to a refund under City of Covington. But T-Mobile points to no authority suggesting that the City of Covington’s articulation of the principle, without more, governs claims for a common law refund. Indeed, our recent articulation of the common law refund test in Inland Container clearly holds to the contrary.

Furthermore, City of Covington is part of the line of cases that developed our present-day common law refund principles. The principle from City of Covington—that money paid through palpable mistake of law or fact, which is not actually due and payable, should not be retained by the party to whom it was paid and may be recovered—fails to express a complete test for common law refunds.

T-Mobile also fails to acknowledge the other parts of the City of Covington opinion that are in line with the current common law refund test as delineated in Inland Container. For example, City of Covington recognized that the assessment in question was invalid. 59 Ky. at 228. The Court also recognized the current common law requirement that the payment be made involuntarily, stating “that money thus voluntarily paid by one who knows he is not bound to pay, can not be recovered back.” Id. at 229.

Next, T-Mobile argues that Inland Container was a tax case, therefore it cannot be applied here because the service charge is not a tax, but a fee.⁶ Instead, it proposes that City of Covington controls because it governs the refund of fees. As the Court of Appeals explained, many cases applying what was later synthesized as the common law refund rule in Inland Container concerned fees, not taxes.

For example, Spalding, 160 S.W. at 752, involved a refund of license fees paid to sell soft drinks at drug stores. There the Court explained that the rule allowing possible recovery of payments made based on mistake of law or fact had been modified when applied to governmental entities collecting undue payments to only permit refunds of involuntary payments. Id. at 753. Ultimately, the Court indicated the money was recoverable because the ordinance was invalid, the payment was involuntary, and the appellants received no consideration for their payments. Id. at 753-54. Both the invalid authority and involuntary payment requirements are consistent with the more recent Inland Container test for common law refunds.

Later, in Great Atlantic, 76 S.W.2d at 895-96, a city clerk instructed a grocery store company that there was a special license required to sell cigarettes in stores. The clerk collected the license payment and deposited it into the city treasury, but later returned the payment and advised the company that there was no license payment required to sell cigarettes in grocery stores. Id. at 894. The high Court concluded that the grocery company was entitled to a refund because of actual misrepresentation by city officials, paired with evidence that the payments were involuntary. Id. at 895-96. The Court explained that the payment was compulsory because it was “collectible by summary process or fine and imprisonment.” Id. at 896. See also Ziedman & Pollie v. City of Ashland, 244 Ky. 279, 50 S.W.2d 557, 560 (1932) (holding that illegal license fees paid voluntarily may not be recovered, but if paid under compulsion, i.e., they are collectible by summary process of fine or imprisonment, they may be recovered; when taxes can be collected by suit only, and are voluntarily paid, they may not be recovered); Fecheimer v. City of Louisville, 84 Ky. 306, 2 S.W. 65, 67 (1886) (appellants entitled to recover a license tax paid under an invalid city ordinance. The Court also stated that “[w]hether the amount of money paid in this case is called a tax or license is immaterial.”).

In short, there are analogous requirements for common law refunds of both taxes and fees. Therefore, T-Mobile's distinction between taxes and fees is immaterial and the Inland Container test nevertheless applies.

III. T-Mobile cannot satisfy the common law refund test.

The last question to resolve is whether T-Mobile is entitled to a common law refund of service charges remitted on behalf of its prepaid customers prior to the 2006 statutory amendments, given our holding in Virgin Mobile that the pre-2006 statutes did not require payment of such charges. A common law refund is available when (1) the statute or regulation is invalid and the payments were submitted involuntarily, or (2) the relevant government authority has engaged in misrepresentation. Inland Container, 6 S.W.3d at 377.

First, T-Mobile cannot show that it paid the service charges involuntarily. T-Mobile argues that its payment to the Board was involuntary because the Board threatened legal action for any unpaid service charges. However, a payment is only involuntary if it is “collectible by summary process or fine and imprisonment.” Great Atlantic, 76 S.W.2d at 896. Returning to Spalding, appellants sought to recover license fees paid to the city to be able to sell soft drinks in their pharmacy. 160 S.W. at 752. In that case, a local ordinance required a license to sell soft drinks and failure to comply was punishable by fine and even arrest. Id. Upon realizing that the local ordinance authorizing collection of the license fee was invalid, Spalding sought a refund. Id.

The Court held that the payment must be involuntary, i.e., collectible by summary process or imprisonment, for appellants to be entitled to a refund. Id. at 753. The Court explicitly stated that “[w]hen taxes can be collected by suit only, and are voluntarily paid, an action to recover them cannot be maintained.” Id. Additionally, the Court deemed the ordinance under which the licenses fees were paid to be invalid. Id. at 754. As such, the appellant was entitled to a refund. Id. Thus, the Court determined that a common law refund of the license fee was authorized because the appellant demonstrated that there was invalid authority for requiring the payment and the payment was involuntary.

In City of Morganfield v. Wathen, 202 Ky. 641, 261 S.W. 12, 15 (1924), the Court reiterated that “a payment is voluntary when it can be enforced only by suit.” The key to the determination of voluntariness is whether the party has an opportunity to challenge the charge before paying it. When

a party is entitled to a day in court, and can litigate the demand about to be enforced against him, but instead of doing so, voluntarily pays it, he is without remedy. When he can plead and make his defense, a payment made under protest will be regarded as voluntary, or if he has an option either to litigate the question or submit to the demand and pay the money, in all such cases there is no compulsion, and relief will be denied.

City of Louisville v. Anderson, 79 Ky. 334, 344 (1881). See also Louisville & N.R. v. Commonwealth, 89 Ky. 531, 12 S.W. 1064, 1065 (1890) (where taxpayer has “the opportunity to contest the demand in court, and ․ does not choose to do so, and voluntarily pays it, he is remediless.”).

Here, the Board's only means of collecting the service charges is a suit for nonpayment. KRS 65.7635(5) provides that “[c]ollection actions may be initiated by the state, on behalf of the board, in the Franklin Circuit Court or any other court of competent jurisdiction[.]” The Board has no access to summary proceedings, nor could jail time or fines result from a failure to collect and remit the service charge. Furthermore, the facts here establish that no fines were threatened or levied, and the Board made no threats of imprisonment for failure to pay the service charges. T-Mobile is a sophisticated business entity with access to significant legal resources and ultimately made a business decision to pay the service charges. T-Mobile could have, at any time prior to paying the service charges, filed a declaratory action to challenge the validity of the service charge, but chose not to do so.

We are likewise unpersuaded by T-Mobile's argument that the threat of an imposition of attorney's fees rendered its payments involuntary, particularly considering the lengthy nature of this litigation. However, under the statute, the attorney's fees would only be awarded to the prevailing party. The fear of imposition of attorney's fees certainly does not rise to the same level of compulsion as facing summary process or fines and imprisonment.

T-Mobile also relies on Barnes v. Stearns Coal & Lumber Co., 295 Ky. 812, 175 S.W.2d 498, 499 (1943), which it suggests allows a refund whenever a fee is mistakenly paid into an administrative fund regardless of whether the payment was voluntary. In that case, employers were required to pay into the Unemployment Insurance Fund. If an employer's reserve account maintained a certain amount at the end of the year, the employer received a discounted rate for the next year's required payment to the fund. Id. Stearns Coal & Lumber made a payment and included an explanation that the payment was a “[v]oluntary contribution ․ to raise Employers Reserve account to 10% of 1940 payroll thereby effecting a .9% reduction in the rate of 1941 tax.” Id. It was later determined that their reserve account contained sufficient funds without the payment. Id. However, the Kentucky Unemployment Compensation Commission refused to refund the money. Id.

Our predecessor Court held that Stearns was entitled to a refund, relying on the pronouncement in Great Atlantic that municipal license fees are viewed less strictly than state fees and taxes, and that payments to the Unemployment Insurance Fund are materially different than city licenses, and “afford[ ] greater reason[s] for recognizing the right to obtain a refund of money paid to the fund by mistake.” Id. at 500. Additionally, refunds of the contributions were expressly statutorily authorized. Id.

Barnes is distinguishable from the case before us. Importantly, the CMRS statutes do not contain a refund provision. Additionally, there is no indication that T-Mobile remitted the service fees conditionally, much less that it identified the payments as “voluntary.” Further, the funds at issue in Barnes were much different than the service fees in question here. In Barnes, the money in the unemployment insurance fund was dormant, “to be used when necessity ar[ose,]” and would “not be disbursed for a long time, perhaps never.” Id. at 501.

Based on the foregoing, we conclude that the service charges were not paid involuntarily. Because the service charge payments were not involuntary, T-Mobile cannot satisfy the first Inland Container scenario that would warrant a common law refund so we need not address the issue of whether the service charges were valid.⁷

Further, the Board did not make any misrepresentations to T-Mobile sufficient to support its claim for a common law refund. A refund based on misrepresentation requires “actual misrepresentation.” Great Atlantic, 76 S.W.2d at 895. The pre-amendment CMRS statutes clearly required the payment of service fees, and there was merely a debate over whether prepaid cellular service providers were subject to such requirement. In Great Atlantic, the Court allowed a refund based on misrepresentation because an agent of the city, charged with the duty of issuing licenses, misrepresented to a grocery store that it was required to pay a fee to sell cigarettes. Id. at 896. Then, the city concealed the fact that it had no right to receive the money. Id.

Here, though the Board's interpretation that the service charge applies to all cellular users was ultimately incorrect, it was nonetheless reasonable given that the statute did not speak directly to the issue of prepaid users. In its communications with T-Mobile, it merely stated “[t]he position of the CMRS Board [ ] that pre-paid cellular plans are fully covered by the statute.” Such an assertion is a far cry from the types of actual or constructive fraud found to warrant a common law refund. Cf. id. (Finding common law refund due where (1) clerk affirmatively represented to plaintiff that tax applied; (2) plaintiff was also advised of penalties for nonpayment; (3) the plaintiff justifiably relied on those representations, and (4) the governmental authority later concealed the fact it was not entitled to the payments).

Here, the Board simply offered its interpretation of the law, and of course T-Mobile was free to challenge that interpretation in court without fine, imprisonment, or other compelling summary process. As such, the Board's representation here, couched in terms of simply offering interpretation of the law, also did not result in any justifiable reliance on that representation. Cf. id. (sustaining common law refund claim where “[t]he circumstances and nature of the transaction and the position of the respective parties towards each other was such as justified the appellant in reposing trust and confidence in the representations of the city[.]”). Nor is there any evidence the Board did not have a good faith belief in the correctness of its position, or that it actively attempted to conceal its error. It plainly was a reasonable interpretation of a statute created to fund an important public safety function that was significantly transformed by the advent of cell phones. Put simply, misrepresentation requires more than a disagreement about the interpretation of a law, and thus we perceive no actual or constructive misrepresentation sufficient to support a claim for a common law refund.

CONCLUSION

For the reasons set forth above, we affirm the opinion of the Court of Appeals.

Respectfully, I dissent from the majority opinion's conclusion that T-Mobile is not entitled to a common law refund of the money it paid to the Kentucky Commercial Mobile Radio Services Emergency Telecommunications Board (the Board) for service charges that were never due the Board. I would reverse and remand for T-Mobile to receive a refund.

If I overpay my federal income tax, I expect a refund. If my laundry service incorrectly double bills me for my laundry, I expect a refund. If my supplier inadvertently adds another zero on the amount due and I pay it, I expect a refund. It offends my sense of fair play to allow the Board to retain money that was never due to it on the basis that T-Mobile “voluntarily” paid such fees.

Our prior opinion in Virgin Mobile U.S.A., L.P v. Commonwealth ex rel. Commercial Mobile Radio Serv. Telecomm. Bd., 448 S.W.3d 241, 246-49 (Ky. 2014), conclusively established that prior to July 2006, when the amended version of KRS 65.7635 went into effect, mobile phone service providers: (1) were not required to collect the 911 service charge from their pre-paid mobile phone customers; and (2) were not required to pay the 911 service charge themselves on behalf of their pre-paid mobile phone customers. This is binding precedent and certainly invalidates the Board's position that T-Mobile was required to pay this fee for its pre-paid mobile phone customers.

Virgin Mobile did not, however, resolve the issue of whether these fees should be deemed a tax. It did though conclude that the refund provision of KRS 134.580 did not apply because any contribution to the CMRS fund “was not money paid into the State Treasury.” Virgin Mobile, 448 S.W.3d at 251.

Virgin Mobile argued that a refund should be due it for its overpayment under the “common law principles” provided in City of Covington v. Powell, 59 Ky. 226 (1859), but we found that self-help was not authorized.

City of Covington provided:

It may now be regarded as well settled in this State that when money has been paid through a clear and palpable mistake of law or fact, essentially affecting the rights of the parties, which in law, honor, or conscience was not due and payable, and which ought not to be retained by the party to whom it was paid, it may be recovered back.

Id. at 228. In considering that authority, we stated that “[w]e do not disagree with the venerable principle cited in City of Covington or in the other cases relied upon by Virgin. We find them inapplicable here because they all involve the right to a refund, which as noted above, is not the issue here.” Virgin Mobile, 448 S.W.3d at 251. We then observed that “[h]ad Virgin paid those obligations when due, and in a timely fashion filed an action for a refund of the funds it had mistakenly thought it owed, the cited principles and the equities they embody may have favored Virgin's position. But that is not the case before us.” Id.

I agree that this dicta from Virgin Mobile is not binding upon us, but the spirit of this pronouncement from City of Covington should be. I do not disagree with the application of the test provided in Inland Container Corp. v. Mason Cty., 6 S.W.3d 374, 377 (Ky. 1999), as summarized by the majority as stating: “A common law refund is available when (1)[(a)] the statute or regulation is invalid and [(b)] the payments were submitted involuntarily, or (2) the relevant government authority has engaged in misrepresentation.” (Emphasis added). What I do disagree with is the majority's interpretation that this test precludes T-Mobile from obtaining a refund for funds that we have conclusively ruled it had no legal obligation to pay.

The majority opinion's rigid application of the case law examining the availability of a common law refund ignores essential facts which would provide for a refund under either prong of the Inland Container test:

The first prong requires that T-Mobile establish that the statute is invalid, and its payments were submitted involuntarily. Regarding (1)(a) whether the statute is invalid: Virgin Mobile conclusively determined that prepaid mobile phone service providers were not required to pay this fee as they could not collect it from their pre-paid customers through the monthly bill structure and were not required to pay it themselves. Therefore, this statute is invalid as applied to require T-Mobile to directly pay the 911 service charge to the Board on behalf of its pre-paid customers. T-Mobile paid this fee, based on “a clear and palpable mistake of law or fact, essentially affecting the rights of the parties, which in law, honor, or conscience was not due and payable, and which ought not to be retained by the party to whom it was paid” and, thus, “it may be recovered back.” City of Covington, 59 Ky. at 228.

Regarding (1)(b) whether the payments were submitted involuntarily, I would rely on the ordinary definition of “involuntary” as meaning: “Not resulting from a free and unrestrained choice; contrary to one's will; esp., coerced ․ Occurring despite one's desires to the contrary .” Involuntary, BLACK'S LAW DICTIONARY (12th ed. 2024) (first and third definition).

Clearly, T-Mobile did not want to pay amounts that it did not believe were due to the Board, but acted to avoid the harmful consequences that would result from it failing to pay, namely the costs associated with being sued by the Board, which would include damage to its corporate credit rating and the cost of mounting a defense. It is inherently unjust to term a payment “voluntary” just because individuals or entities are not subject to a summary procedure depriving them of property. Payment of the 911 fee under the threat of being subject to an onerous litigation process is hardly “voluntarily.”

It is also not reasonable to expect a mobile phone carrier to preemptively challenge an agency's interpretation of a statute while refusing to pay the Board such funds. We must remember that such a challenge would have taken place during a period when it was still believed that the Chevron doctrine ⁸ required deference to the Board's interpretation of the statute.

Prior to Chevron being overruled by the United States Supreme Court's decision in Loper Bright Enters. v. Raimondo, 603 U.S. 369, 412, 144 S.Ct. 2244, 219 L.Ed.2d 832 (2024), we consistently interpreted the Chevron doctrine as requiring our courts to defer to an agency's reasonable interpretation of its enabling statutes if the statutory language was ambiguous. Ky. Occupational Safety and Health Review Comm'n v. Estill Cty. Fiscal Court, 503 S.W.3d 924, 927-28 (Ky. 2016). Therefore, T-Mobile certainly had reason to believe that the Board's interpretation was entitled to deference by our courts, regardless of whether it was the most logical reading of the statute where the issue of whether and how the service fee should be collected from pre-paid mobile phone customers was not addressed by the language of the statute.

While City of Covington also acknowledged that money voluntarily paid cannot be recovered back, it explained that money is voluntarily paid when the one paying it “knows he is not bound to pay[.]” 59 Ky. at 229. I conclude that this is a much more reasonable interpretation. KRS 65.7635(5) provides for collection actions to be initiated by the state for the outstanding charges, reasonable costs, and attorney fees against the prevailing party. Having to defend against such an action is indeed “a burdensome penalty” for “failure to pay” as acknowledged in Inland Container, 6 S.W.3d at 378 (quoting City of Louisville v. Louisville Taxicab and Transfer Co., 238 S.W.2d 121, 124 (Ky. 1951)). We acknowledged in Virgin Mobile that City of Covington remains good law. Accordingly, I would hold that both parts of the first prong of the Inland Container test were satisfied; this would qualify T-Mobile for a refund.

I additionally conclude that T-Mobile qualifies for a refund under the second and alternative prong of the Inland Container test. Regarding (2), whether the relevant government agency has engaged in misrepresentation: The Board repeatedly asserted that its position was definitively the correct interpretation, and in support of its position threatened T-Mobile with litigation to collect such funds if not remitted when it had already followed through on such threats against other pre-paid mobile phone service providers by initiating lawsuits against them. See, e.g., Ky. Commercial Mobile Radio Serv. Emergency Telecomm. Bd. v. TracFone Wireless, Inc., 712 F.3d 905 (6th Cir. 2013). I agree with T-Mobile that the Board repeatedly mispresented the law and it should not matter whether its misrepresentations were reasonable or malicious and known to be false. The result was the same for T-Mobile; it paid monthly, year after year, vast sums of money because the Board represented that it had to pay or the legal process would be brought to bear against it, when it was undoubtedly aware of the deference due the Board in its interpretation of the statute. This is an additional and alternative basis under which T-Mobile qualifies for a refund.

Letting the Board retain T-Mobile's money under these circumstances seems too much like condoning theft. Accordingly, I would reverse and remand.

FOOTNOTES

1.   Virgin Mobile U.S.A., L.P v. Commonwealth ex rel. Com. Mobile Radio Serv. Telecomm. Bd., 448 S.W.3d 241, 243 (Ky. 2014).

2.   The General Assembly has renamed the CMRS Board to the Kentucky 911 Services Board, effective July 15, 2016.

3.   This quoted language appeared in the pre-2006 version of KRS 65.7635(1). This statute has since been amended.

4.   The 2006 statutory amendment added specific procedures for collection of the service charges from prepaid users.

5.   Preliminarily, the trial court determined that part of T-Mobile's refund claim was time barred by the statute of limitations. T-Mobile filed this action in Franklin Circuit Court on August 21, 2009. The trial court applied a five-year statute of limitations pursuant to KRS 413.120 and held that a refund of any amounts remitted by T-Mobile prior to August 21, 2004 was time barred. Because this Court holds that T-Mobile was not entitled to a refund, the application of the statute of limitations to determine the maximum amount of a refund available is immaterial.

6.   In a previous appeal in this matter, the Court of Appeals concluded the service charges are a fee rather than a tax. T-Mobile S. LLC v. Ky. Com. Mobile Radio Serv. Emergency Telecomm. Bd., 2022-CA-0191-MR, 2023 WL 3260971, at *1 (Ky. App. May 5, 2023), review granted (Oct. 18, 2023), not to be published. We do not consider the propriety of that ruling here as no party presents a challenge to it.

7.   The Virgin Mobile Court did not technically declare invalid then-applicable statutes requiring the payment of service fees. Instead, it determined that the statutes did not require prepaid service providers to collect or remit the service charges to the Board. In any event, even if the statute were invalid, T-Mobile cannot demonstrate that the payments were made involuntarily because they were not collectible by summary process of fine or imprisonment.

8.   Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).

OPINION OF THE COURT BY JUSTICE BISIG

All sitting. Lambert, C.J.; Conley, Goodwine, Keller, Nickell, JJ., concur. Thompson, J., dissents by separate opinion.