APL-2014-00152 d New York County Clerk’s Index No. 103917/11 Court of Appeals STATE OF NEW YORK PEOPLE OF THE STATE OF NEW YORK, by Eric T. Schneiderman, Attorney General for the State of New York, and STATE OF NEW YORK, ex rel. EMPIRE STATE VENTURES, LLC, Plaintiffs-Respondents, —against— SPRINT NEXTEL CORP., SPRINT SPECTRUM L.P., NEXTEL OF NEW YORK, INC., and NEXTEL PARTNERS OF UPSTATE NEW YORK, INC., Defendants-Appellants. RECORD ON APPEAL ERIC T. SCHNEIDERMAN E. LEO MILONAS ATTORNEY GENERAL FOR THE DAVID G. KEYKO STATE OF NEW YORK PILLSBURY WINTHROP SHAW 120 Broadway, 25th Floor PITTMAN LLP New York, New York 10271 1540 Broadway Telephone: (212) 416-8020 New York, New York 10036 Facsimile: (212) 416-8962 Telephone: (212) 858-1000 Facsimile: (212) 858-1500 Attorney for Plaintiffs-Respondents Of Counsel: DANE H. BUTSWINKAS* DAVID S. BLATT* KANNON K. SHANMUGAM* KENNETH J. BROWN* WILLIAMS & CONNOLLY LLP 725 Twelfth Street, N.W. Washington, DC 20005 Telephone: (202) 434-5000 Facsimile: (202) 434-5029 Attorneys for Defendants-Appellants *(pro hac admission pending) TABLE OF CONTENTS PAGE Statement Pursuant to CPLR 5531 ........................................ iii Order of the Appellate Division, First Department Granting Leave to Appeal to the New York State Court of Appeals, dated June 12, 2014 ................................................... v Decision and Order of the Appellate Division, First Department, dated February 27, 2014, with Notice of Entry ........................ vi Defendants’ Pre-Argument Statement, dated July 23, 2013 .................. 1 Defendants’ Notice of Appeal, dated July 23, 2013 ......................... 7 Decision and Order Appealed From, dated June 27, 2013, with Notice of Entry .................................................. 9 Defendants’ Notice of Motion to Dismiss Plaintiff’s Complaint, dated June 14, 2012 .................................................. 25 Memorandum of Law in Support of Defendants’ Motion to Dismiss, dated June 14, 2012 .................................................. 27 Affirmation of E. Leo Milonas, for Defendants, in Support of Motion to Dismiss Plaintiff’s Complaint, dated June 12, 2012 ................. 58 Exhibit A to Milonas Affirmation— Complaint ........................................................... 59 Plaintiff the State of New York’s Memorandum of Law in Opposition to Sprint’s Motion to Dismiss, dated July 19, 2012 .................... 89 Appendix to Memorandum— McKinney’s Tax Law § 1105 ....................................... 120 ii PAGE Reply in Support of Defendants’ Motion to Dismiss, dated August 7, 2012 ............................................................... 126 Letter from Randall M. Fox, Esq. to the Honorable O. Peter Sherwood, dated November 8, 2012, with Attachment ................ 181 Letter from E. Leo Milonas, Esq. to the Honorable O. Peter Sherwood, dated November 15, 2012 ................................ 1 96 Letter from Randall M. Fox, Esq. to the Honorable O. Peter Sherwood, dated November 15, 2012 ................................ 1 98 Letter from Randall M. Fox, Esq. to the Honorable O. Peter Sherwood, dated June 5, 2013, with Attachment ...................... 201 Certification Pursuant to CPLR § 2105 ................................... 208 Certification Pursuant to CPLR § 2105, dated August 29, 2014 ............ 209 iii Statement Pursuant to CPLR 5531 [pp. iii - iv] STATEMENT PURSUANT TO CPLR § 5531 COURT OF APPEALS STATE OF NEW YORK ________________________________________________ PEOPLE OF THE STATE OF NEW YORK, by Eric T. Schneiderman, Attorney General for the State of New York, and STATE OF NEW YORK, ex rel. Empire State Ventures, LLC, Plaintiffs-Respondents, APL-2014-00152 —against— SPRINT NEXTEL CORP., SPRINT SPECTRUM L.P., NEXTEL OF NEW YORK, INC., and NEXTEL PARTNERS OF UPSTATE NEW YORK, INC., Defendants-Appellants. ________________________________________________ 1. The index number of the case is 103917/2011. 2. The full names of the original parties are as set forth in the caption above. On or about July 10, 2013, in connection with a transaction involving SoftBank Corporation, Sprint Nextel Corporation was renamed “Sprint Communications, Inc.” and is now a wholly-owned subsidiary of Sprint Corporation. The names of the other three defendants remain unchanged. 3. The action was commenced in Supreme Court, New York County. 4. Empire State Ventures, LLC initially commenced this action as a qui tam action on or about March 31, 2011 by service of summons and complaint. The Attorney General of the State of New York served a superseding complaint on or about April 19, 2012. Defendants served their notice of motion to dismiss on or about June 14, 2012, and their answer and defenses on July 23, 2013. 5. This case arises out of a qui tam action initially commenced by Empire State Ventures, LLC pursuant to the New York False Claims Act, N.Y. State Fin. Law § 189, alleging that Defendants failed to collect or pay sales tax on receipts from the sale of certain wireless telephone services. On April 19, 2012, the Attorney General for the State of New York filed a superseding complaint asserting four causes of action. The first cause of action iv purports to be for violation of § 189(1)(g) of the New York False Claims Act based on an allegation that Defendants knowingly made, used, or caused to be made or used, false records or statements material to an obligation to pay or transmit money or property to the state and local governments. The second cause of action purports to be for violation of § 189(1)(c) of the New York False Claims Act for allegedly conspiring to commit a violation of § 189(1)(g) of the New York False Claims Act. The third cause of action purports to be for allegedly persistent fraudulent or illegal acts in violation of § 63(12) of the Executive Law. The fourth cause of action purports to be for violation of Article 28 of the Tax Law for allegedly failing to collect or pay New York sales taxes on receipts from the sale of certain wireless telephone services. The Attorney General for the State of New York seeks damages, penalties and injunctive relief, among other forms of relief. 6. This appeal is from the Decision and Order of the Honorable O. Peter Sherwood, entered on July 1, 2013, to the extent that it denied Defendants’ motion to dismiss, and the Decision and Order of the Appellate Division, First Department, entered on February 27, 2014, affirming that Decision and Order. 7. The appeal is on a full reproduced record. v Order of the Appellate Division, First Department Granting Leave to Appeal to the New York State Court of Appeals, dated June 12, 2014 At a Term of the Appellate Division of the Supreme Court held in and for the First Judicial Department in the County of New York on June 12, 2014. Present: Hon. Angela M. Mazzarelli, Justice Presiding, Rolando T. Acosta Diane T. Renwick Helen E. Freedman Sallie Manzanet-Daniels, Justices. ---------------------------------------X The People of the State of New York, Eric T. Schneiderman, etc., et al., Plaintiffs-Respondents, M-1653 -against- Index No. 103917/11 Sprint Nextel Corp., et al., Defendants-Appellants. - - - - - - - - - - - - Broadband Tax Institute and Council of State Taxation, Amici Curiae. ---------------------------------------X Defendants-appellants having moved for leave to appeal to the Court of Appeals from the decision and order of this Court entered on February 27, 2014 (Appeal No. 11848), Now, upon reading and filing the papers with respect to the motion, and due deliberation having been had thereon, It is ordered that the motion is granted, and this Court, pursuant to CPLR 5713, certifies that the following question of law, decisive of the correctness of its determination, has arisen, which in its opinion ought to be reviewed by the Court of Appeals: "Was the order of the Supreme Court, as affirmed by the this Court, properly made?" This Court further certifies that its determination was made as a matter of law and not in the exercise of discretion. (See M-1692, decided simultaneously herewith.) ENTER: _____________________ CLERK vi Decision and Order of the Appellate Division, First Department, dated February 27, 2014, with Notice of Entry [pp. v(cid:73) - (cid:73)(cid:88)] STATE OF NEW YORK - SUPREME COURT COUNTY OF NEW YORK PEOPLE OF THE STATE OF NEW YORK, by Eric T. Schneiderman, Attorney General for the State of New York, and STATE OF NEW YORK, ex reI. EMPIRE STATE VENTURES, LLC, Index No. 103917/11 Plaintiffs-Respondents, -against- NOTICE OF ENTRY SPRINT NEXTEL CORP., SPRINT SPECTRUM L.P., NEXTEL OF NEW YORK, INC., and NEXTEL PARTNERS OF UPSTATE NEW YORK, INC., Defendants-Appellants. PLEASE TAKE NOTICE that the attached Decision and Order is a true and correct copy of the Decision and Order entered in the Office of the Clerk of the Supreme Court, Appellate Division, First Department on the 27th day of February, 2014. Dated: March 3, 2014 New York, NY ERIC T. SCHNEIDERMAN Attorney General of the State of New York 120 Broadway, 25th Floor N~, =lO~~l BY:---,,~==--=- ~ ____ ____ Brian A. Sutherland Assistant Solicitor General vii TO: E. Leo Milonas David G. Keyko Pillsbury Winthrop Shaw Pittman LLP 1540 Broadway New York, New York 10036 Reproduced on Recycled Paper viii Mazzarelli, J . P., Acosta , Renwick, Freedman, Manzanet - Daniel s , JJ. 11848 The People of t he State of Index 103917/11 New Yor k, Eric T. Schnei derman, etc ., et al ., Plaintiffs- Respondents, - against- Sprint Nextel Corp. , et al . , Defendants-Appellants . Broadband Tax Institute and Council of State Taxation, Amici Curiae . Williams & Connolly LLP, Washington, DC (Kannon K. Shanmugam of the bar s of the State of Kansas and Dist r i ct of Col umbia, admitted pro hac vice, of counsel ), for appellants . Eric T. Schneiderman, Attorney General, New York (Brian A. Sutherland of counsel) , for respondents . Morrison & Foerster LLP, New York (R. Gregory Roberts of counsel) , for Broadband Tax Instit ut e, amicus curiae . McDermott will & Emery LLP, New York (Arthur R. Rosen of counsel) , for Council of State Taxation, ami cus curiae . Order, Supreme Court , New York County (0 . Peter Sherwood, J . ) , entered Jul y 1, 2013, which denied defendants ' moti on t o dismiss the complaint i n its entirety, unani mously affirmed, without costs . The court properly denied t he motion to dismiss the complaint in its entirety. Plaintiffs' complaint adequately alleges t hat defendants violated New York' s False Claims Act (St ate Finance Law 76 ix § 189 [l J [g]) , Executive Law § 63 (12) and Article 28 of the Tax Law by knowingly making false statements material to an obligation to pay sales tax pursuant to Tax Law § 1105 (b) (2) . Contrary to defendants' interpretation, the Tax Law provision is not preempted by the Federal Mobile Telecommunications Sourcing Act (4 USC 116 et seq.). The court also properly rejected defendants' argument that t he New York False Claims Act with respect to statements made under the Tax Law should not be given its stated retroactive effect . Defendants fail to show that the Act' s sanction of civil penalt es, including treble damages, is so punitive in nat ure and effect as t o have its retroacti ve effect barred by the Ex Post Facto Clause (US Const , art I , § 10) . THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: FEBRUARY 27, 2014 DEPUTY CLERK 77