FILED: ERIE COUNTY CLERK 01/30/ :20 PM INDEX NO /2017 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 01/30/2017

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1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF ERIE In the Matter of the Application of LEVEL 3 COMMUNICATIONS, LLC, -2gainst- Petitioner, ERIE COUNTY, CITY OF BUFFALO, CITY OF LACKAWANNA, EDEN CENTRAL SCHOOL DISTRICT, LAKE SHORE CENTRAL SCHOOL DISTRICT, and NORTH COLLINS CENTRAL SCHOOL DISTRICT, : Index No.: : NOTICE OF PETITION Respondents, For A Judgment Under Article 78 of the Civil Practice Law and Rules. PLEASE TAKE NOTICE that upon the annexed Petition of Level 3 Communications, LLC ("Level 3"), verified on January 25, 2017, and the exhibits annexed thereto, the accompanying affirmation of John G, Nicolich, dated January 27, 2017, and the exhibits annexed thereto, and the accompanying memorandum of law, Level 3 will move this Court, at the Courthouse located at the Erie County Court Building, 25 Delaware Avenue, Buffalo, New York 14202, at 9:30 A.M. on April 17, 2017, or at such place, date, and time scheduled by the justice assigned to this proceeding, for judgment, pursuant to Section 3001 and Article 78 of the New York State Civil Practice Law and Rules ("CPLR"): (a) Declaring that Level 3's fiber optic cables and inclosures therefor ("Fiber Optic Installations") located on private rights of way in Erie County are not real property taxable under the Real Property Tax Law ("RPTL"); _1/ of 18

2 (b) Annulling determinations by respondents Erie County, Eden Central School District, Lake Shore Central School District, and North Collins Central School District denying Level 3's Applications for Refund and Credit of Real Property Taxes ("Applications") pursuant to Section 556 of the RPTL relating to its Fiber Optic Installations located on private rights of way in Erie County; (c) Ordering respondents Erie County, Eden Central School District, Lake Shore Central School District, and North Collins Central School District (1) to approve Level 3's Applications that were denied by these tax-levying bodies, and (2) to provide refunds to Level 3 of the real property taxes that each respondent received for the tax periods in issue based on the erroneous assessments of Level 3's Fiber Optic Installations, with interest from the dates nf payments made by or on behalf of Level 3; (d) Ordering respondents City of Buffalo and City of Lackawanna (I) to determine and approve Level 3's Applications relating to assessments of Fiber Optic Installations, and (2) to provide refunds to Level 3 of the real property taxes that these respondents received for the tax periods in issue based on the erroneous assessments of Level 3's Fiber Optic Installations, with interest from the dates of payments made by or on behalf of Level 3; and (e) For costs and disbursements of this proceeding, and such other relief as this Court may deem just and proper / of 18

3 PLEASE TAKE FURTHER NOTICE that pursuant to CPLR 7804(c), answering papers, if any, must be served so as to be received by the undersigned at least five (5) days prior to the return date. Dated: New York, New York January 30, 2017 ING M YUZEK GAINEN CARROLL & BERTOLOTTI, LLP TO: Erie County 95 Franklin Street Buffalo, NY City of Buffalo 65 Niagara Square Buffalo, NY City of Lackawanna City Hall 714 Ridge Road Lackawanna, NY Eden Central School District 3150 Schoolview Road Eden, NY Lake Shore Central School District 959 Beach Road Angola, NY North Collins Central School District 2045 School Street North Collins, NY By: John G. Nicolich Roger Cukras Attorneys for Petitioner Level 3 Communications, LLC 250 Park Avenue New York, New York (212) _1/ of 18

4 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF ERIE In the Matter of the Application of LEVEL 3 COMMUNICATIONS, LLC, -against- Pe itioner, ERIE COUNTY, CITY OF BUFFALO, CITY OF LACKAWANNA, EDEN CENTRAL SCHOOL DISTRICT, LAKE SHORE CENTRAL SCHOOL DISTRICT, and NORTH COLLINS CENTRAL SCHOOL DISTRICT, : Index No.: VERIFIED PETITION Respondents, For a Judgment Under Article 78 of the Civil Practice Law and Rules. Petitioner, by its attorneys, Ingram Yuzek Gainen Carroll & Bertolotti, LLP, for its Verified Petition asserting claims under Section 3001 and Article 78 of the New York Civil Practice Law and Rules ("CPLR"), alleges as follows: 1. Petitioner Level 3 Communications, LLC ("Level 3") brings this proceeding to address the improper and illegal assessment and collection of real property taxes imposed with respect to Level 3's fiber optic cables and inclosures therefor ("Fiber Optic Installations") at numerous locations on private rights of way in Erie County. As described below, courts have issued conflicting determinations as to whether Level 3's fiber optic cables on private property fall within the definition of taxable real property under Section 102(12) of the New York Real Property Tax Law ("RPTL"). Level 3 contends that the real property tax assessments of Level / of 18

5 3's Fiber Optic Installations are based on an "unlawful entry" under RPTL 550(7)(c), and that Level 3 is entitled to refunds of taxes under Article 5 of the RPTL. 2. After paying real property taxes levied with respect to the Fiber Optic Installations, Level 3 submitted Applications for Refund and Credit of Real Property Taxes pursuant to RPTL 556 (the "Applications") to the Erie County Director of Real Property Tax Services, Joseph L. Maciejewski (the "County Director"). Level 3's Applications requested refunds or credits with respect to real property taxes assessed on Level 3's Fiber Optic Installations by respondents Erie County, City of Buffalo, City of Lackawanna, Eden Central School District, Lake Shore Central School District, and North Collins Central School District ("Respondents") on the ground that Respondents' assessments were based on an "unlawful entry" under RPTL 550(7). 3. As described below, upon information and belief, the County Director referred each of Level 3's Applications to the appropriate tax levying body for determination, with a recommendation to deny the Applications. Level 3 recently received determinations denying many of the Applications but Level 3 did not receive determinations of Applications that Level 3 submitted for taxes assessed by respondents City of Buffalo and City of Lackawanna. 4. Level 3 accordingly brings this proceeding for the following relief: a. For a declaratory judgment, pursuant to CPLR 3001, declaring that Level 3's Fiber Optic Installations on private rights of way in Erie County are not real property taxable under the RPTL; b. For judgment, pursuant to CPLR 7806, annulling the determinations by respondents Erie County, Eden Central School District, Lake Shore Central School District, and North Collins Central School District denying Level 3's Applications on the ground that those _1/ of 18

6 determinations were affected by an error of law because the assessments of Level 3's Fiber Optic Installations, which are not taxable real property under the RPTL, were based on an unlawful entry; c. For judgment, pursuant to CPLR 7806, ordering respondents Erie County, Eden Central School District, Lake Shore Central School District, and North Collins Central School District (1) to approve Level 3's Applications that were denied by these tax levying bodies, and (2) to refund to Level 3 the real property taxes paid to these respondents for the tax periods in issue, with interest from the dates of payments made by or on behalf of Level 3; and d. For judgment, pursuant to CPLR 7806, ordering respondents City of Buffalo and City of Lackawanna (1) to determine and approve Level 3's undetermined Applications, and (2) to refund to Level 3 the real property taxes paid to these respondents for the tax periods in issue, with interest from the dates of payments made by or on behalf of Level 3; and e. For costs and disbursements of this proceeding, and such other relief as this Court may deem just and proper. A. Parties And Background 5. Petitioner Level 3 is a limited liability company organized under the laws of the State of Delaware, is duly authorized to do business in the New York State, and has its executive offices at 1025 Eldorado Boulevard, Broomfield, Colorado. Level 3 provides telecommunications services to customers in New York State and other locations, is not a company subject to regulation by the New York State Public Service Commission, and accordingly is not a "telephone company" as defined in RPTL 102(12)(d) _1/ of 18

7 6. Upon information and belief, respondent Erie County is a governmental entity created under the Laws of the State of New York, is duly authorized to levy and collect real property taxes, and has received certain of the real property taxes at issue herein. 7. Upon information and belief, respondent City of Buffalo is a political subdivision of the State of New York, is duly authorized to levy and collect real property taxes, and has received certain of the real property taxes at issue herein. 8. Upon information and belief, respondent City of Lackawanna is a political subdivision of the State of New York, is duly authorized to levy and collect real property taxes, and has received certain of the real property taxes at issue herein. 9. Upon information and belief, respondent Eden Central School District is a school district created under the Laws of the State of New York, is duly authorized to levy and collect real property taxes, and has received certain of the real property taxes at issue herein. 10. Upon information and belief, respondent Lake Shore Central School District is a school district created under the Laws of the State of New York, is duly authorized to levy and collect real property taxes, and has received certain of the real property taxes at issue herein. 11. Upon information and belief, respondent North Collins Central School District is a school district created under the Laws of the State of New York, is duly authorized to levy and collect real property taxes, and has received certain of the real property taxes at issue herein. B. Background 12. Level 3 is the owner of the Fiber Optic Installations, which are comprised of (a) fiber optic cables used to provide telecommunications services, and (b) conduit within which the fiber optic cables are enclosed. Level 3's Fiber Optic Installations are placed on private rights of way at various locations within Erie County _1/ of 18

8 13. The fiber optics cables within the Fiber Optic Installations are electrical insulators made of glass or plastic fibers that transmit signals by way of modulated light waves, do not conduct electricity, and are not electrical conductors. 14. The conduits which enclose the fiber optic cables in the Fiber Optic Installations are not inclosures for electrical conductors because the fiber optic cables enclosed by the conduits are not electrical conductors. 15. Level 3's Fiber Optic Installations are used for the transmission of various types of telecommunicat ons services, information, and data, including the transmission of news or entertainment radio, television or cable television signals for immediate, delayed or ultimate exhibition to the public. 16. For tax periods between 2015 and 2016, Level 3's Fiber Optic Installations were included on the assessment rolls for real property located within Erie County (the "Assessments"). 17. Respondents collectively levied and/or collected in excess of $61,000 in real property taxes relating to the Fiber Optic Installations as a result of the Assessments for the periods in issue. 18. The Assessments were unlawful because the Fiber Optic Installations are personal property that is excluded from real property taxation, and each of the Assessments was based on an "unlawful entry" under RPTL 550(7) because the assessors for each taxing jurisdiction have no authority to assess real property tax against personal property. 19. In particular, the Fiber Optic Installations are not within the statutory definition of taxable real property because the Fiber Optic Installations do not constitute "lines, wires, poles, supports [or] inclosures for electrical conductors upon, above [or] underground" under RPTL / of 18

9 102(12)(i), and because the definition of real property in RPTL 102(12)(i) expressly does not include "property used in the transmission of news or entertainment radio, television or cable television signals for immediate, delayed or ultimate exhibition to the public." 20. On May 3, 2012, the Appellate Division of the First Department issued an opinion finding that Level 3's "fiber optic cables are electrical insulators which transmit light impulses and do not conduit electricity." The Appellate Division according held that "[Once the cables at issue are not 'for electrical conductors' they cannot be assessed under" RPTL 102(12)(i). Matters of RCN NY Communications, LLC and Level 3 Communications, LLC v. Tax Commn. of City of New York, 95 A.D.3d 456, 457 (1st Dep't), lv denied, 20 N.Y.3d 855 (2012). 21. After the Court of Appeals denied leave to appeal in Matter of RCN, Level 3 and certain of its affiliates sought to obtain corrections of tax rolls and refunds of taxes in other jurisdictions in the State of New York that assessed real property tax with respect to Level 3's fiber optic properties on private rights of way. 22. In and after June 2013, Level 3 and certain of its affiliates filed applications for correction of tax rolls and for refunds of taxes with the county directors of real property tax services of a number of counties in the State of New York, including Chautauqua County, Clinton County, and Erie County. C. Level 3's Original Applications Challenging Assessments Of Its Fiber Optic Installations 23. On or about June 3, 2013, Level 3 and its affiliate, Broadwing Communications, LLC ("Broadwing"), by undersigned counsel, mailed to County Director Maciejewski applications for correction of errors and for refunds on Form RP-556-b concerning Fiber Optic Installations in Erie County that had been assessed by Respondents and certain other tax levying bodies (the "Original Applications") _1/ of 18

10 24. The Original Applications, each titled "Application for Correction of Multiple- Parcel Errors," sought correction of the tax roll and refunds of taxes paid for the 2010, 2011, and 2012 tax years on grounds that the challenged tax assessments were made upon personal property -- i.e., fiber optic cables and inclosures therefor located on private rights of way in Erie County. The Original Applications also alleged that the assessments were based on an "unlawful entry" under RPTL 550(7)(c) because the assessor had no authority to assess personal property. 25. On or about January 30, 2014, the County Director mailed to undersigned counsel determinations of tax levying bodies denying virtually all of the Original Applications that Level 3 and Broadwing had filed with the County Director. Level 3 and Broadwing did not receive written determinations of the remaining Original Applications. 26. On May 14, 2014, Level 3 and Broadwing commenced a proceeding in this Court under Article 78 of the CPLR, captioned Matter of Level 3 Communications, LLC v. Erie County, Index No , which was assigned to Honorable Timothy J. Walker (the "Prior Proceeding"). In the Prior Proceeding, Level 3 and Broadwing requested, inter alia, an order (a) annulling the determinations denying the Original Applications, and (b) requiring the tax levying bodies to grant the Original Applications. 27. In a decision and order dated November 3, 2014, Justice Walker dismissed Level 3's and Broadwing's petition in the Prior Proceeding on two grounds: (a) the Fiber Optic Installations are taxable as "equipment for the distribution of... light" under RPTL 102(12)(f); and (b) Level 3 and Broadwing had not paid the taxes in issue under protest. Level 3 and Broadwing appealed Justice Walker's order dated November 3, 2014 to the Appellate Division, Fourth Judicial Department _ / of 18

11 28. Before the Fourth Department ruled on the appeal of Level 3 and Broadwing, the Clinton County Supreme Court and the Chautauqua County Supreme Court issued decisions and orders that adopted the reasoning in Justice Walker's November 3, 2014 decision and order and held that Level 3's Fiber Optic Installations in those counties are equipment for the distribution of light and therefore are taxable as real property under RPTL 102(12)(f). 29. Subsequently, on October 3, 2015, the Fourth Department reversed Justice Walker's order in the Prior Proceeding, granted the petition for annulment of the determinations denying the Original Applications, and remitted the matter for reconsideration by the tax levying bodies, including "whether the taxes that petitioners paid may be recovered despite the lack of protest by them and whether the fiber optic cables at issue constitute taxable real property within the meaning of the RPTL." Level 3 Communications, LLC v. Erie County, 132 A.D.3d 1271 (4th Dep't 2015), lv denied, 2016 NY Slip Op (2016). 30. Subsequently, the Third Department modified the decision and order that had been issued by the Clinton County Supreme Court and declared that Level 3's "fiber optic installations are not real property taxable under RPTL 102(12)." Matter of Level 3 Communications, LLC v. C'linton County, 144 A.D.3d 115, 120 (3d Dep't 2016). Level 3 also is currently appealing the order that was entered in the proceeding that Level 3 commenced in Chautauqua County to challenge the assessments of its Fiber Optic Installations by tax levying bodies in that county. Level 3's appeal in that proceeding was argued to the Fourth Department on December 1, D. Level 3's Applications At Issue In This Proceeding 31. By letter dated February 9, 2016, Level 3 submitted to County Director Maciejewski applications for refunds and credit of taxes for tax periods between 2015 and / of 18

12 on Form RP-556 (defined above as the "Applications"). Copies of the Applications, with Level 3's transmittal letter dated February 9, 2016, are annexed as Exhibit A. 32. Level 3's Applications requested refunds or credits of taxes assessed by and paid to Respondents Erie County, City of Lackawanna, Eden Central School District, Lake Shore Central School District, and North Collins Central School District. The Applications were signed on behalf of Level 3 by Lisa Akins, Level 3's Director of Tax, and the addendum to each Form RP-556 Application represented that "the assessments in issue were made on Applicant's fiber optic cables and inclosures therefor located on private rights of way," that "Applicant's fiber optic cables and the inclosures therefor are not taxable as real property under New York law," and that taxes "were assessed on the properties in issue based on an 'unlawful entry.' 33. As detailed on Exhibit B to this Petition, and as set forth in the Applications, Level 3 paid more than $61,000 in real property taxes with respect to the Fiber Optic Installations for the tax years in issue. 34. Level 3 submitted the Applications to County Director Maciejewski pursuant to RPTL 556, which provides that tax levying bodies may provide refunds of taxes where an application for refunds "is made within three years from the annexation of the warrant for such tax." 35. Upon information and belief, the County Director submitted the Applications and his recommendation for denial of the Applications to Respondents on or about September l 5, By letter dated October 6, 2016 the County Director provided Level 3 with copies of Applications that had been denied on October 2, 2016 by Erie County, Eden Central School District, Lake Shore Central School District, and North Collins Central School District on the _1/ of 18

13 ground that "Fiber optic cable is taxable." Copies of those denied Applications with the October 6, 2016 letter from the County Director are annexed as Exhibit C. 37. As of the date of this Petition, Level 3 has not received determinations of its Applications on Form RP-556 that were submitted to the County Director for taxes assessed by Respondents City of Buffalo and City of Lackawanna. FIRST CAUSE OF ACTION (Declaration That Level 3's Fiber Optic Installations Are Not Real Property) 38. Level 3 repeats and realleges the preceding paragraphs of this Petition as if fully set forth here. 39. Level 3's Fiber Optic Installations were entered on the tax rolls for real property located within Erie County for tax periods from 2015 to Respondents have collectively received from Level 3 more than $61,000 in real property taxes levied with respect to the Fiber Optic Installations for the tax periods in issue. 41. The Fiber Optic Installations do not constitute real property under RPTL 102(12). The Fiber Optic installations are therefore not taxable as real property under New York law, and the Assessments of the Fiber Optic Installations were based on an unlawful entry under RPTL 550(7). 42. A justiciable controversy exists between the parties as to whether or not the Fiber Optic Installations are taxable as real property under New York law. 43. Level 3 is entitled to a declaration that the Fiber Optic Installations do not constitute property that is taxable as real property under the RPTL / of 18

14 SECOND CAUSE OF ACTION (Annulling Determinations Denying Refund Applications) 44. Level 3 repeats and realleges the preceding paragraphs of this Petition as if fully set forth herein. 45. The Fiber Optic Installations do not constitute real property under RPTL 102(12), and the Fiber Optic Installations are accordingly not subject to taxation as real property under New York law. 46. Respondents Erie County, Eden Central School District, Lake Shore Central School District, and North Collins Central School District have wrongfully denied Level 3's Applications with respect to the assessments of the Fiber Optic Installations for the tax periods in issue. 47. The determinations denying Level 3's Applications should be armulled on the ground that those determinations were affected by an error of law because Level 3's Fiber Optic Installations are not real property that is taxable under the RPTL 102(12). THIRD CAUSE OF ACTION (Writ of Mandamus Compelling Erie County, Eden Central School District, Lake Shore Central School District, And North Collins Central School District To Approve Applications And To Refund Taxes) 48. Level 3 repeats and realleges the preceding paragraphs of this Petition as if fully set forth herein. 49. The Fiber Optic Installations do not constitute real property within the meaning of RPTL 102(12), and the Fiber Optic Installations are accordingly not subject to taxation as real property under New York law _1/ of 18

15 50. Respondents Erie County, Eden Central School District, Lake Shore Central School District, and North Collins Central School District have wrongfully denied Level 3's Applications with respect to the assessments of the Fiber Optic Installations for the tax years in issue. 51. The determinations denying Level 3's Applications were affected by an error of law because the Fiber Optic Installations are personal property, and are not taxable real property. 52. Level 3 is entitled to a writ of mandamus ordering Respondents Erie County, Eden Central School District, Lake Shore Central School District, and North Collins Central School District to comply with their statutory obligations by (a) approving Level 3's Applications, and (b) providing for refunds to Level 3 of the real property taxes assessed against Level 3's Fiber Optic Installations for the tax years in issue. FOURTH CAUSE OF ACTION (Writ Of Mandamus Compelling City Of Buffalo And City of Lackawanna School To Determine And Approve Level 3's Applications And To Refund Taxes) 53. Level 3 repeats and realleges the preceding paragraphs of this Petition as if fully set forth herein. 54. The Fiber Optic Installations do not constitute real property within the meaning of RPTL 102(12), and the Fiber Optic Installations are therefore not subject to taxation as real property under New York law. 55. Upon information and belief, Respondents City of Buffalo and City of Lackawanna have not yet issued determinations either approving or rejecting the Applications that Level 3 filed with the County Director seeking refunds of taxes assessed on Level 3's Fiber Optic Installations _ l/ of 18

16 56. Under RPTL 556, following receipt of a written report from the County Director concerning Level 3's Applications, Respondents City of Buffalo and City of Lackawanna were required to take action thereon by (a) either approving or rejecting the Applications, (b) providing Level 3 with mailed notice of the rejection of any of the Applications, and (c) providing for refunds of real property taxes to Level 3 with respect to approved Applications. 57. Respondents City of Buffalo and City of Lackawanna failed to comply with duties enjoined upon them by RPTL 556 because these Respondents (a) have not taken action to either approve or reject Level 3's Applications; (b) have not approved Level 3's Applications; and (c) have failed to provide refunds to Level 3 for the real property taxes assessed against Level 3's Fiber Optics Installations for the tax periods in issue. 58. Level 3 is entitled to a writ of mandamus (a) compelling City of Buffalo and City of Lackawanna to determine and approve Level 3's Applications and, (b) compelling City of Buffalo and City of Lackawanna to provide for refunds to Level 3 of the real property taxes assessed against Level 3's Fiber Optic Installations for the tax periods in issue. WHEREFORE, Level 3 respectfully requests that this Court award judgment as follows: (a) Declaring that Level 3's Fiber Optic Installations on private rights of way in Erie County are not real property taxable under the RPTL; (b) Annulling the determinations by Respondents Erie County, Eden Central School District, Lake Shore Central School District, and North Collins Central School District denying Level 3's Applications; (c) Ordering Respondents Erie County, Eden Central School District, Lake Shore Central School District, and North Collins Central School District (1) to approve Level 3's Applications that were denied by these Respondents, and (2) to provide refunds to Level 3 of the / of 18

17 real property taxes that each Respondent received for the tax periods in issue based on the erroneous assessments of Level 3's Fiber Optic Installations, with interest from the dates of payments made by or on behalf of Level 3; (d) Ordering respondents City of Buffalo and City of Lackawanna (1) to determine and approve Level 3's Applications that have not yet been determined by these Respondents, and (2) to provide refunds to Level 3 of the real property taxes that these Respondents received for the tax periods in issue based on the erroneous assessments of Level 3's Fiber Optic Installations, with interest from the dates of payments made by or on behalf of Level 3; and (e) For costs and disbursements of this proceeding, and such other and further relief as the Court deems just and proper. Dated: New York, New York January 25, 2017 INGRAM YUZEIC GA1NEN CARROLL & BERTOLOTTI, LLP / John G. Nicolich Roger Cukras Attorheys for Petitioner Level 3 Communications, LLC 250 Park Avenue New York, New York (212) jnicolich@ingramllp.com _1/ of 18

18 VERIFICATION STATE OF COLORADO COUNTY OF BROOMFIELD ).ss. : The undersigned, Douglas A. Richards, being duly sworn, states that he is the Senior Vice President - Tax for the Petitioner in the above-entitled proceeding; that he has read the foregoing Petition; and that the contents are true to his knowledge, except as to those matters which are alleged upon information and belief, which he believes to be true. Sworn to before me this 'day of January, 2017 DOUGE AS A. OCT ARDS Notar Public HIRLEY WELCH NOTARY PUBLIC STATE OF COLORADO NOTARY ID # Y COMMISSION EXPIRES _1/ of 18