Rock-Tenn Converting Company v. The City of Memphis ( 2014 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
August 12, 2014 Session
ROCK-TENN CONVERTING COMPANY, ET AL. V. THE CITY OF
MEMPHIS, ET AL.
Appeal from the Chancery Court for Shelby County
No. CH121497 Walter L. Evans, Chancellor
No. W2014-00626-COA-R3-CV - Filed September 9, 2014
The dispute in this case arises from a contract for recycling services entered into by the City
of Memphis and a recycling vendor. A competing recycling vendor and a citizen and
taxpayer of the City of Memphis filed a complaint for declaratory judgment seeking to void
the contract, on the ground that the contract was subject to the City of Memphis’s
competitive bidding procedure. The trial court determined that, because the City of Memphis
did not expend any monies in connection with its recycling contract, the contract was not
subject to competitive bidding. The trial court granted summary judgment to the City of
Memphis and its recycling vendor and this appeal followed. Discerning no error, we affirm
and remand.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
and Remanded
J. S TEVEN S TAFFORD, J., delivered the opinion of the Court, in which R ICHARD H. D INKINS,
J., and W. Michael Maloan, Sp. J., joined.
Waverly D. Crenshaw, Jr., and W. Travis Parham, Nashville, Tennessee, for the appellants,
Rock-Tenn Converting Company and Talisha Haynes.
Prince C. Chambliss, Jr., Felisa N. Cox, Robert F. Miller, Richard D. Bennett, Patrick G.
Walker, and Henry B. Talbot, Memphis, Tennessee, for the appellees, The City of Memphis
and FCR Tennessee, L.L.C.
OPINION
This case began on September 24, 2012 when Rock-Tenn Converting Company
(“Rock-Tenn”) and Talisha Haynes (together with Rock-Tenn, “Appellants”) filed a
complaint for declaratory judgment against the City of Memphis (“City”) and FCR
Tennessee, L.L.C. (“FCR,” and together with the City, “Appellees”). By their complaint,
Appellants asked the trial court to declare void a January 2012 amendment to the contract
that is the subject of this appeal.
Rock-Tenn is a provider of recycling services. Ms. Haynes is a Memphis resident and
taxpayer. The City is a home rule municipality as authorized by Article XI, section 9 of the
Constitution of the State of Tennessee (“Constitution”). The City operates under a private
charter within Shelby County, Tennessee. FCR is a provider of recycling services.
A municipality, such as the City, that has chosen to be governed by home rule is also
prescribed a procedure for amending its charter by Article 11, section 9 of the Tennessee
Constitution, which provides, in relevant part:
Any municipality may by ordinance submit to its qualified
voters in a general or special election the question: “Shall this
municipality adopt home rule?”
In the event of an affirmative vote by a majority of the qualified
voters voting thereon, and until the repeal thereof by the same
procedure, such municipality shall be a home rule municipality,
and the General Assembly shall act with respect to such home
rule municipality only by laws which are general in terms and
effect.
* * *
A charter or amendment may be proposed by ordinance of any
home rule municipality, by a charter commission provided for
by act of the General Assembly and elected by the qualified
voters of a home rule municipality voting thereon or, in the
absence of such act of the General Assembly, by a charter
commission of seven (7) members, chosen at large not more
often than once in two (2) years, in a municipal election
pursuant to petition for such election signed by qualified voters
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of a home rule municipality not less in number than ten (10%)
percent of those voting in the then most recent general
municipal election.
Pursuant to the foregoing section of the Constitution, in January 1964, the City
adopted home rule by Ordinance No. 1117. Charter Home Rule Amendment Ordinance 1852
was adopted in 1966. Ordinance 1852 grants the Mayor of the City of Memphis contracting
authority for the City. Section 14 of the Home Rule Amendment provides:
Be it further ordained, that the power to contract (other than by
franchise agreements) shall remain with the Mayor; however, all
contracts requiring disbursements of funds shall be limited in an
amount not in excess of that provided in the appropriate budget,
either operations or capital funds. In the event an expenditure
of extraordinary nature and not provided for shall appear to be
reasonable and in the public interest, a request may be submitted
by the Mayor and thereafter approved or rejected by the Council.
Article 7, section 51(1) of the City of Memphis Charter (the “Charter”) identifies the
types of contracts that must be competitively bid. This section of the Charter provides, in
pertinent part:
No contract involving an expenditure exceeding ten thousand
dollars ($10,000.00) shall be awarded or let to the lowest and
best bidder until after the advertisement by at least three
publications in a newspaper published and circulated in the City
of Memphis within the calendar week before the date fixed in
the advertisement upon which bids are to be received.
Section 51 of the Charter was amended by Home Rule Amendment Ordinance No.
4434 to allow the Memphis City Council to adjust the dollar amount for purchases requiring
newspaper advertisement for competitive bidding, discussed in detail, infra.
The Memphis City Code of Ordinances (“Code of Ordinances”) Section 5-4-8 is titled
“Purchase of goods and supplies;” it provides, in relevant part:
Sec. 5-4-8. Purchase of goods and supplies
C. 1. Notwithstanding any other provision of the
Charter or this Code, no contract for equipment,
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apparatus, material, supplies, goods or services
for the city involving more than $50,000.00 shall
be made except after the contract shall have been
advertised in a newspaper of daily circulation for
two consecutive days in the week preceding the
day on which the bids are to be received.
2. On any contract for equipment, apparatus,
materials or supplies involving more than
$25,000.00, but less than $50,000.00, the bid
procedure of the purchasing division of the City
of Memphis shall be used.
3. Under the bid procedure, when the items
sought are less than $25,000.00, the purchase may
be consummated by purchase order and approval
of the purchasing agent.
4. Notwithstanding any other provision of the
Charter or this Code, the discretionary amount
allowable and necessary for division purchases
shall be $5,000.00 with approval of the division
director.
5. If the items sought are in excess of $50,000.00,
then the purchase must be consummated by
written contract signed by the mayor.
On August 1, 1995, the City entered into a contract with FCR (the “Initial Contract”).
Under the Initial Contract, FCR agreed to operate and maintain Recycling Facilities (as
defined by the contract) within the City to process and dispose of Recycled Materials (as
defined by the contract). The term of the Initial Contract was for ten years, but it provided
for extensions of the initial term. The parties extended and amended the Initial Contract on
a number of occasions, most recently on January 9, 2012. The January 9, 2012 amendments
and extension provides for a contract expiration date of August 26, 2022.
The Initial Contract, at Article IV, section 4.1(a), included an agreed upon formula
concerning the payments to be made to the City as the customer:
Commencing with the first day of the first Billing Period
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subsequent to the Service Date, and for that and each Billing
Period thereafter, the City shall be paid a monthly Customer
Fee by the Company in accordance with this Article IV and
calculated as follows:
* * *
Monthly Customer Fee (CF) = ($50) X (RM).
(Emphasis added). The Initial Contract also provided that FCR would pay the City an
Annual Revenue Share equal to: (Average Revenue - $110) X .50 X RM y, where RM y = the
sum of RM m for the Billing Year.
FCR and the City entered into an amended contract in 1999 (“Amendment 1”).
Likewise, in 2002, the parties entered into another amended contract (“Amendment 2”).
Amended contracts were also entered into in 2003 (“Amendment 3”), 2007 (“Amendment
4”), 2009 (“Amendment 5”), and 2012 (“Amendment 6,” and together with the Initial
Contract, and Amendments 1, 2, 3, 4, and 5, “FCR Contracts”).
In addition to an extension of the contract term, Amendment 6 to the FCR Contracts
included substantial modifications of definitions, as well as of the provisions governing
Single Stream Recycling and the retrofitting by FCR of the Recycling Facilities to
accommodate Single Stream Recycling. Despite these substantive changes, Amendment 6
maintained the arrangement, whereby the City would receive payments from FCR. In other
words, Amendment 6 did not require the City to pay any funds to the recycling service.
Specifically, Section 4.1 of Amendment 6 modified the Customer Fee agreement as follows:
On the Single Stream Start-up Date, Section 4.1 of the
Agreement is hereby amended and restated in its entirety to read
as follows:
(a) Commencing with the first Billing Period subsequent to the
Single Stream Start-up Date and for each Billing Period
thereafter, if the ACR in such billing Period exceeds the then
Revenue Share Threshold, the Company shall pay to the City
a “Monthly Revenue Share” equal to:
(ACR–the then Revenue Share Threshold) X .6 X RM
For example, if in a Billing Period the then Revenue Share
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Threshold was $100, the ACR was $122 and the RM was 1,800,
the Monthly Revenue Share for such Billing Period would be:
($122–$100) X .6 X 1,800 =
$22 X .6 X 1,800 =
$23,760
If the ACR is below the then Revenue Share Threshold, the City
will not receive a Monthly Revenue Share and shall not pay
any supplemental processing fees.
The Company shall provide the City with a detailed calculation
of the ACR.
(b) If the ACR for any Billing Period is less than the then ACR
Minimum, the Lost Revenue in such Billing Period will be
calculated and carried forward on a cumulative basis. If and
when the ACR exceeds the then Revenue Share Threshold in
any Billing Period, the Company will retain for its own account
the Monthly Revenue Share that would otherwise be payable to
the City until there is no cumulative Lost Revenue, on a dollar-
for-dollar basis. At that time, the Monthly Revenue Share will
be paid to the City as otherwise called for in this Section 4.1.
(Emphases added). It is undisputed that, at no time during the term of the FCR Contracts,
has the City made any monetary payments to FCR associated with the recycling services
provided by FCR.1
After Appellants filed their complaint for declaratory judgment on September 24,
2012, the Appellees filed a motion to dismiss the complaint on November 26, 2012. The
motion to dismiss was denied by order entered on February 28, 2013. On March 7, 2013,
Appellees filed separate answers to the complaint.
On October 7, 2013, Appellants filed a motion for partial summary judgment, along
with a statement of undisputed material facts and memorandum of law in support thereof.
On December 10, 2013, Appellees filed separate motions for summary judgment. Also on
1
The record reveals that, when the City first contemplated a recycling program, it believed that it
would have to pay a vendor fee for this service. Because the City believed that it would have to pay money
to a vendor to accept its recycling waste, the City originally advertised and sought requests for proposals.
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December 10, 2013, Appellees filed a joint response to Appellants’ motion for partial
summary judgment, along with supporting documents.
The cross-motions for summary judgment were heard on February 11, 2014. By order
of February 25, 2014, the trial court denied the Appellants’ motion for summary judgment
and granted Appellees’ motion for summary judgment. As grounds for its holding, the trial
court’s order provides, in relevant part:
2) The primary question this Court has been asked by the parties
to determine is whether the contract at issue in this proceeding
involved an expenditure of funds as contemplated by the charter
of the City of Memphis and the relative ordinances. This Court
determines that the applicable City charter provisions and
ordinance do not require competitive bidding unless there has
been an expenditure of funds. The Court is of the opinion that
if it was the intent of the ordinance that all contracts would be
covered, then the City Council in its wisdom could make such
a determination and not just limit it to contracts involving
expenditures, but it could cover all contracts involving the City.
3) The Court is of the opinion that the term expenditure has a
common meaning. Where a word or term has a common
meaning, then the Court must interpret the same as it relates to
its commonality. The Court is of the opinion that the term
expenditure means the payment out of the resources of the City
for a service to be rendered. In this case the Court is of the
opinion that the contract at issue does not involve the payment
by the City of any resources from the City’s coffers for the
service that’s being rendered by FCR. Therefore, the Court is
of the opinion that the contract before the Court does not
involve the expenditure of funds and that the City and FCR are
entitled to summary judgment on that basis and Plaintiffs’
Motion for Partial Summary Judgment is denied for these same
reasons.
Appellants appeal. They raise three issues for review as stated in their brief:
1. Whether the trial court correctly determined that the City’s
delivering its recyclable waste to FCR for processing does not
constitute an expenditure as contemplated by the City Charter.
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2. Whether the trial court correctly determined that the Code of
Ordinances Sec[tion] 5-4-8 titled “Purchase of Goods and
Supplies” does not broaden the definition of expenditure as it
appears in the Memphis City Charter to include the delivery of
recyclable waste for processing by FCR.
3. Whether the trial court correctly determined that the Material
Amendment Doctrine does not apply to the contract at issue
because the contract was not required to be competitively bid.
This case was decided upon grant of summary judgment. A trial court's decision to
grant a motion for summary judgment presents a question of law. Our review is, therefore,
de novo with no presumption of correctness afforded to the trial court's determination. Bain
v. Wells, 936 S.W.2d 618, 622 (Tenn. 1997). This Court must make a fresh determination
that the requirements of Tenn. R. Civ. P. 56 have been satisfied. Abshure v. Methodist
Healthcare-Memphis Hosps., 325 S.W.3d 98, 103 (Tenn. 2010).
When a motion for summary judgment is made, the moving party has the burden of
showing that “there is no genuine issue as to any material fact and the moving party is
entitled to judgment as a matter of law.” Tenn. R. Civ. P. 56.04. According to the Tennessee
Legislature:
In motions for summary judgment in any civil action in
Tennessee, the moving party who does not bear the burden of
proof at trial shall prevail on its motion for summary judgment
if it:
(1) Submits affirmative evidence that negates an essential
element of the nonmoving party's claim; or
(2) Demonstrates to the court that the nonmoving party's
evidence is insufficient to establish an essential element of the
nonmoving party's claim.
Tenn. Code Ann. § 20-16-101 (effective on claims filed after July 1, 2011).
This appeal requires interpretation of the FCA Contracts as well as the various charter,
ordinance, code, and constitutional provisions set out above. In determining the proper
interpretation to be given to a legislative act, we must employ the rules of statutory
construction. The Tennessee Supreme Court recently reiterated the “familiar rules,” stating:
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Our role is to determine legislative intent and to effectuate
legislative purpose. [Lee Med., Inc. v. Beecher, 312 S.W.3d
515, 526 (Tenn. 2010)]; In re Estate of Tanner, 295 S.W.3d
610, 613 (Tenn. 2009). The text of the statute is of primary
importance, and the words must be given their natural and
ordinary meaning in the context in which they appear and in
light of the statute's general purpose. See Lee Med., Inc., 312
S.W.3d at 526; Hayes v. Gibson Cnty., 288 S.W.3d 334, 337
(Tenn. 2009); Waldschmidt v. Reassure Am. Life Ins. Co., 271
S.W.3d 173, 176 (Tenn. 2008). When the language of the statute
is clear and unambiguous, courts look no farther to ascertain its
meaning. See Lee Med., Inc., 312 S.W.3d at 527; Green v.
Green, 293 S.W.3d 493, 507 (Tenn. 2009). When necessary to
resolve a statutory ambiguity or conflict, courts may consider
matters beyond the statutory text, including public policy,
historical facts relevant to the enactment of the statute, the
background and purpose of the statute, and the entire statutory
scheme. Lee Med., Inc., 312 S .W.3d at 527–28. However, these
non-codified external sources “cannot provide a basis for
departing from clear codified statutory provisions.” Id. at 528.
Mills v. Fulmarque, 360 S.W.3d 362, 368 (Tenn. 2012).
Furthermore,
The Court has a duty to construe a statute so that no part will be
inoperative, superfluous, void or insignificant. The Court must
give effect to every word, phrase, clause, and sentence of the
Act in order to achieve the Legislature’s intent, and it must
construe a statute so that no section will destroy another.
[Mangrum v. Owens, 917 S.W.2d at 246; (quoting Worrall v.
Kroger Co., 545 S.W.2d 736, 738 (Tenn. 1977)) ] (citing City of
Caryville v. Campbell County, 660 S.W.2d 510, 512 (Tenn. Ct.
App. 1983); Tidwell v. Collins, 522 S.W.2d 674, 676 (Tenn.
1975)). The statute should be construed as a whole, and a
particular section should not be read in isolation of the
remainder of the statute. State ex rel. McGhee v. St. John, 837
S.W.2d 596, 604 (Tenn. 1992).
State ex rel. Working v. Costa, 216 S.W.3d 758, 769 (Tenn. Ct. App. 2006).
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Likewise,
When we interpret a contract, our role is to ascertain the
intention of the parties. Guiliano v. Cleo, Inc., 995 S.W.2d 88,
95 (Tenn. 1999). The intention of the parties is based on the
ordinary meaning of the language contained within the four
corners of the contract. Kiser v. Wolfe, 353 S.W.3d 741, 747
(Tenn. 2011); see Planters Gin Co. v. Fed. Compress &
Warehouse Co., 78 S.W.3d 885, 889–90 (Tenn. 2002). The
interpretation of a contract is a matter of law, which we review
de novo with no presumption of correctness. Barnes v. Barnes,
193 S.W.3d 495, 498 (Tenn. 2006).
84 Lumber Co. v. Smith, 356 S.W.3d 380, 382–83 (Tenn. 2011). Accordingly, it is
the Court’s function to interpret the contract as written according to its plain terms. Petty v.
Sloan, 277 S.W.2d 355 (Tenn. 1955). The language used in a contract must be taken and
understood in its plain, ordinary, and popular sense. Bob Pearsall Motors, Inc. v. Regal
Chrysler-Plymouth, Inc., 521 S.W.2d 578 (Tenn. 1975)). In construing contracts, the words
expressing the parties' intentions should be given the usual, natural, and ordinary meaning.
Ballard v. North Am. Life & Cas. Co., 667 S.W.2d 79 (Tenn. Ct. App. 1983). If the language
of a written instrument is unambiguous, the Court must interpret it as written rather than
according to the unexpressed intention of one of the parties. Sutton v. First Nat. Bank of
Crossville, 620 S.W.2d 526 (Tenn. Ct. App. 1981).
“Expenditures”
In their first two issues, the Appellants argue that the City violated the law and its own
competitive bidding requirements when, after entering into the Initial Contract with FCR in
1995, it entered into subsequent agreements, without competitively bidding the subsequent
agreements. The gravamen of Appellants’ argument is that the City’s agreement with FCR
required an “expenditure” so as to require competitive bidding under Article 7, section 51
of the Charter, see supra. As noted above, it is undisputed that the City has never paid any
monies to FCR under the FCR Contracts. Accordingly, in support of their argument that the
FCR Contracts are subject to competitive bidding procedures, Appellants offer two
definitions of expenditure to support their argument that expenditures involve more than the
payment of money. First, Appellants argue that an expenditure is “something expended, such
as time or money;” thus, Appellant’s definition of “expenditure” ostensibly seeks to define
that term as “anything a party to a contract receives in the course of performing the contract
that the party could possibly use to make a profit.” In addition, Appellants contend that
expenditure would include the “payment of cash or cash-equivalent.” Appellants then argue
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that the recyclable materials the City delivers to the FCR facility constitute “cash
equivalents.”
We first note that the Appellants have not provided this Court with any authority to
support their contention that recyclable materials constitute cash equivalents. This is,
perhaps, as our own research suggests, because there are no cases standing for that
proposition. Black’s Law Dictionary 245 (9th ed. 2009) defines a “cash equivalent” as “[a]
short-term security that is liquid enough to be considered equivalent to cash.” The Tennessee
Code also defines “cash equivalents,” for investment purposes, as “highly rated, highly liquid
and readily marketable investments or securities with a remaining term to maturity of one (1)
year or less, which includes money market funds. . . .” Tenn. Code Ann. § 56-3-302(7)(A).
Considering the Black’s Law Dictionary definition of “cash equivalent,” along with the
Legislature’s definition of that term elsewhere in the Tennessee Code, we are unable to adopt
Appellant’s argument that recyclable materials constitute “cash equivalents” such that the
City’s rendering of its recyclable to the FCA facility would constitute an “expenditure” under
the competitive bidding framework.
As noted above, Appellants’ champion a broad definition of “expenditure” to include
almost anything a party to a contract receives that it could possible use to make a profit.
While we concede that the dictionary definition of “expend” is quite broad, including the
expenditure of “time, money or physical effort, etc.,” see, e.g., Webster’s Dictionary of the
English Language 332 (1989), Black’s Law Dictionary 658 (9th ed. 2009), defines the term
“expenditure” more narrowly as “1. The act or process of paying out; disbursement. 2. A
sum paid out.” Although we concede that the terms “expend,” or “expenditure” may denote
a disbursement of something other than money, our goal is to find and enforce the intent of
the drafters of the City’s competitive bidding process. Consequently, we must read the term
(i.e., expenditure) in the context of the competitive bidding requirements contained in Article
7, section 51(1) of the Charter, supra. The Charter states, in relevant part that “[n]o contract
involving an expenditure exceeding ten thousand dollars ($10,000.00),” shall be entered
without the City engaging in the competitive bidding process. (Emphasis added). This
qualifying (or, more aptly, limiting) phrase, i.e., “exceeding ten thousand dollars,” indicates
that the drafters were concerned with monetary expenditures made by the City. Had the
drafters intended to apply the broadest definition of expenditure, they logically could have
drafted the Charter without including any limitation on or definition of the term. However,
because the drafters chose to describe expenditure in terms of monetary payments, we must
give force and effect to that fact in our interpretation.
Although we find no cases in our jurisdiction that are directly on point (i.e., that define
the term “expenditure” in the context of competitive bidding), we find guidance from two
cases from our sister states. In Danis Clarkco Landfill Co. v. Clark Cnty. Solid Waste
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Management District, 653 N.E.2d 646 (Ohio 1995), the Ohio Supreme Court addressed a
transaction similar to the one at issue in this appeal. In Danis, Clark County Ohio awarded
a recycling contract to Ogden Martin Systems, and a competing recycling contractor, Danis
Clarkco filed suit, arguing that the county had violated its competitive bidding statutes. Id.at 650–51. In Danis, Ogden Martin agreed to build and operate a waste disposal facility for
the use of county residents. As in our case, the recycling contractor, Ogden Martin, agreed
to pay the county a fee based on the tonnage of recycling materials it received. Id. at 650.
Similar to our Appellants’ argument, Danis argued that the contract amounted to an
expenditure of funds because of the value of the facility the county had agreed to construct.
Id. at 656. However, because the county was not required to make any monetary payments
to Ogden Martin, the Ohio Supreme Court held that “the anticipated contract simply did not
involve any monetary cost to the public or expenditure of public funds by the District.” Id.
at 655. Accordingly, the Ohio Supreme Court refused to find a violation of the bidding laws
where there was not an “expenditure” or payment of government funds. Id.Likewise, the Washington Supreme Court, in the case of Organization to Preserve
Agricultural Lands v. Adams County, 913 P.2d 793 (Wash. 1996), held that Adams County
was not required to seek competitive bids where the County entered into a mitigation
agreement with a vendor. The disputed agreement in Adams County, like the agreement at
issue here, provided that the county would open a solid waste disposal facility, and that the
vendor would provide the county “host fees” and other payments and free services. Id. at
797. Like our case, the Adams County vendor paid fees to the county, as opposed to the
county paying (or expending) funds to the vendor. The Washington Supreme Court
concluded that competitive bidding was not required for a contract involving payments to a
county and the acquisition of free goods and services because the contract involved no
expenditure on the part of the county. Id. at 806–07.
While we find the instant case analogous to both Danis and Adams County,
Appellants argue that the case should be governed by the New York Court of Appeals case
of Signacon Controls v. Mulroy, 298 N.E.2d 670 (N.Y. 1973). In Signacon, the New York
Court of Appeals addressed the question of whether a transaction between the County of
Onondaga and a private vendor constituted a gift or a contract, and whether the transactions
terms constituted an expenditure greater than one thousand dollars. Interstate, a private
vendor, offered to supply Onondaga County with a central fire alarm control center in
exchange for the ability to charge a fee for each connecting transmitter sold to a non-county
purchaser and Onondaga County’s agreement to promote such transmitters to non-county
purchasers. Id. at 671. The transaction was not competitively bid and the competitor sued to
enforce the competitive bidding statute. The New York court first held that the transaction
constituted a contract, rather than conditional gift. It then turned to the question of whether
the contract fell within the language of the competitive bidding statute, which required all
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purchase contracts involving one thousand dollars or more to be competitively bid. The court
determined that the contract should have been competitively bid because the contract’s terms
required Onondaga County to pay charges ranging between $1,525.00 and $1,820.00 for each
transmitter. Id. at 672–73. After reaching its decision on the merits of the underlying
contract, the Signacon Court briefly discussed the definition of “expenditure” in its effort
to distinguish the case from the case of Hauger v. Earl, 90 N.Y.S.2d 637 (Ny. App.
Div.1949), which the Signacon Court considered to be contradicting authority. Id. at
673–74. We do not find the holding in Signacon persuasive in this appeal. First, the
Signacon Court did not address the definition of “expenditure” except in dictum. See id. at
673. Regardless, the New York Court did not expand the definition of expenditure, but rather
explained that the definition of expenditure is based upon policy decisions regarding the
benefit of competitive bidding and the burden placed on the County in requiring such a
contract to be competitively bid. Furthermore, the holding in Signacon is based upon New
York law, which is not at issue, or controlling, in the instant appeal. Accordingly, we are not
persuaded by the reasoning in Signacon to reach the same result in this case.
Appellants further contend that a broader definition of expenditure is necessary to
protect against fraud, collusion, or favoritism. Specifically, Appellants suggest that this
Court “not lose sight of the context in which this dispute arises. Competitive bidding . . .
prevents collusion or fraud and guards against favoritism.” In the first instance, there is no
allegation of fraud or collusion in this case. Furthermore, the City, in its discretion, has
chosen to limit competitive bidding to only those contracts for services that involve an
“expenditure.” As previously discussed, in order to avoid unnecessarily expanding its
common, dictionary definition, we have concluded that the term “expenditure” must be
construed as requiring a monetary expenditure. See generally Myers v. AMISUB (SFH),
Inc., 382 S.W.3d 300, 311 (Tenn. 2012) (noting that dictionary definitions may be used to
determine how terms are “commonly defined”). It is not the purview of this Court to enlarge
legislative intent, nor do we engage in advisory opinions. “In an interlocutory appeal, as well
as in an appeal as of right, the appellate court considers only questions that were actually
adjudicated by the trial court.” Shaffer v. Memphis Airport Authority, Serv. Mgmt. Sys.,
Inc., No. W2012-00237-COA-R9-CV, 2013 WL 209309, at *4 (Tenn. Ct. App. Jan.18,
2013) (citing In re Estate of Boykin, 295 S .W.3d 632, 636 (Tenn. Ct. App. 2008) (“At the
appellate level, we are limited in authority to the adjudication of issues that are presented and
decided in the trial courts.”). “To do otherwise would render the interlocutory appeal a
request for an advisory opinion.” Shaffer, 2013 WL 209309, at *4.
Based upon the foregoing discussion, we decline to expand the definition of
“expenditure,” as used in the competitive bidding procedure, to include the City’s tendering
of recyclable materials to FCR.
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“Involving” more than $50,000.00
As an alternate argument, Appellants contend that because the FCR Contracts involve
more than $50,000.00, the FCR Contracts were subject to competitive bidding pursuant to
Ordinance Section 5-8-8(C)(1):
Notwithstanding any other provision of the Charter or this Code,
no contract for equipment, apparatus, material, supplies, goods
or services for the city involving more than $50,000.00 shall be
made except after the contract shall have been [competitively
bid].
(Emphasis added). Appellants argue that the Ordinance applies not only to contracts for
goods, but also to contracts for “material” and “services.” Thus, Appellants contend that
recycling services and the delivery of recyclable materials under the contract plainly fall
within the scope of the Ordinance. As correctly noted by Appellants, the foregoing
Ordinance does not contain the word “expenditure.” Appellants argue that this Ordinance
expanded Article 7, section 51(1) of the Charter to require competitive bidding of all
contracts, including not only revenue expenditure contracts, but also contracts that are
revenue generating.
There are several problems with Appellants’ argument. First, the expenditure
provision at issue is governed by the Memphis City Charter, rather than simple ordinance.
Amendments to home rule charter must be approved by referendum election by the voters.
See Tenn. Const. art. XI, § 9 (2014); see also Tenn. Code Ann. § 2-5-151 (establishing the
procedure for a referendum for the purposes of, inter alia, amending a charter). In their reply
brief, Appellants do not dispute that Ordinance Section 5-8-8(C)(1) was not approved by
referendum election. Thus, it simply cannot amend the Charter’s specific language requiring
competitive bidding only for contracts involving “expenditures.”
Further, Section 51 of the Charter was amended by Home Rule Amendment
Ordinance No. 4434 to allow the Memphis City Council to adjust the dollar amount for
purchases. Specifically, Home Rule Amendment Ordinance No. 4434 provides that: “the
City Council by ordinance may adjust the limits for purchases and newspaper advertisement
for competitive bidding and the purchase orders therefor.” (Emphasis added). It appears that,
in enacting Ordinance 5-4-8, the City Council was, in fact, increasing the threshold amount
of purchases that were subject to competitive bidding procedures (i.e., the Ordinance
increases the threshold amount from $10,000.00 to $50,000.00). Nothing in Home Rule
Amendment Ordinance No. 4434, however, allows the Memphis City Council to delete the
Charter’s requirement that competitive bidding only applies to contracts involving
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“expenditures.” Consequently, contrary to Appellants’ contention, the Ordinance could not
have expanded or amended Article 7, section 51(1) of the Charter in any aspect other than
the threshold amounts. Thus, the requirement that competitive bidding only applies to those
contracts that involve an “expenditure” remains in place in spite of Ordinance Section 5-8-
8(C)(1).
Material Amendment Doctrine
It is undisputed that the City has not paid any monies in connection with the FCR
Contracts. From the record, however, it appears that when the City first contemplated a
recycling program, it believed that it might have to pay a fee to a vendor for these services.
For this reason, the City initially advertised for competitive bidding because of its belief that
an expenditure would be required. During the bidding process, however, the City learned
that vendors would not charge the City a fee if it delivered its recyclable waste to the facility.
Instead, the City was paid for its recyclables; thus, the Initial FCR contract was not, in fact,
subject to the competitive bidding procedures. Accordingly, the subsequent amendments to
the Initial Contract, were not subject to the competitive bidding process because none of the
amendments required the City to expend monies for the recycling service. See BSG, LLC
v. Check-Velocity, Inc., 395 S.W.3d 90 (Tenn. 2012) (holding that each amendment to a
contract that includes new terms and conditions constitutes a new and separate contract).
As Appellants’ note in their brief, the City’s Purchasing Manual states, in relevant
part:
A competitively-procured contract cannot be renewed without
rebidding unless the original contract contains a renewal
provision . . . .
In addition, the Appellants cite the case of Browning-Ferris Industries of Tennessee, Inc.
v. City of Oak Ridge, 644 S.W.2d 400 (Tenn. Ct. App. 1982) to support their argument that
“a contract subject to competitive bidding may not be extended without competitive bidding
absent an express provision permitting extension . . . .” In Browning-Ferris, the City of Oak
Ridge, pursuant to its competitive bidding ordinance, entered into a contract for garbage
services with Tennessee Industrial Disposal (“TID”). Id. at 401. Although not specifically
stated by this Court, implicit in the Browning-Ferris Opinion is that Oak Ridge was paying
or expending city funds to have TID pick up trash and waste. At the conclusion of the
original contract term, Oak Ridge advertised for vendors to submit bids on a new contract
for these services; however, Oak Ridge ultimately rejected all bids in favor of continuing
with TID. The lower bidder then filed suit against Oak Ridge, alleging violation of its
competitive bidding requirements. Id. Oak Ridge and TID challenged the lower bidder on
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two grounds: (1) whether the lower bidder had standing to file suit; and (2) whether the
contract’s negotiation provision allowed Oak Ridge the right to extend the duration of the
contract or merely authorized further negotiations. Id. at 401–403.
The instant case differs significantly from the Browning-Ferris case. In Browning-
Ferris, it is undisputed that the underlying contract was initially subject to Oak Ridge’s
competitive bidding procedures; here, although the City believed that the Initial Contract was
subject to competitive bidding, ultimately the contract was not because it did not involve an
expenditure of funds by the City. Furthermore, it is undisputed that none of the amendments
to the Initial Contract required the City to expend funds. Accordingly, the Browning-Ferris
case is not specifically applicable to the instant appeal. Instead, because neither the Initial
Contract, nor any of the subsequent amendments, required the City to make a monetary
expenditure, the contracts were simply not subject to competitive bidding.
For the foregoing reasons, we affirm the order of the trial court. The case is remanded
to the trial court for such further proceedings as may be necessary and are consistent with this
Opinion. Costs of the appeal are assessed against the Appellants, Rock-Tenn Converting
Company and Talisha Haynes, and their respective sureties.
_________________________________
J. STEVEN STAFFORD, JUDGE
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