American Heritage Apartments, Inc. v. The Hamilton County Water and Wastewater Treatment Authority, Hamilton County, Tenenssee

IN THE SUPREME COURT OF TENNESSEE
AT KNOXVILLE
September 9, 2015 Session
AMERICAN HERITAGE APARTMENTS, INC. v. THE HAMILTON
COUNTY WATER AND WASTEWATER TREATMENT AUTHORITY,
HAMILTON COUNTY, TENNESSEE
Appeal by Permission from the Court of Appeals, Eastern Section
Appeal from the Circuit Court for Hamilton County
No. 11C1207 Jacqueline Schulten Bolton, Judge
_____________________________
No. E2014-00302-SC-R11-CV – Filed April 8, 2016
_____________________________
We granted permission to appeal to determine whether a customer who seeks to
challenge monthly rates charged by its sewer service provider must exhaust
administrative remedies before filing suit. The plaintiff apartment complex filed this
action individually and as a class representative, arguing that the monthly charge assessed
by the defendant water and wastewater treatment authority is unlawful. In response, the
defendant asserted that a customer who seeks to dispute the rates charged must first
follow the administrative procedures provided in the Utility District Law of 1937,
Tennessee Code Annotated sections 7-82-101 to –804 (2015). On this basis, the water
and wastewater treatment authority sought dismissal of the lawsuit for failure to exhaust
administrative remedies. The trial court dismissed the lawsuit for failure to exhaust
administrative remedies, and the Court of Appeals reversed. We hold that the
administrative procedures in Part 4 of the Utility District Law of 1937 do not apply to a
rate challenge filed by an individual customer against a water and wastewater treatment
authority, so we agree with the Court of Appeals that the trial court erred in dismissing
the lawsuit for failure to exhaust administrative remedies. We affirm the remainder of
the Court of Appeals‘ decision, except that we vacate the trial court‘s alternative ruling
on class certification and remand that issue to the trial court for reconsideration.
Tenn. R. App. P. 11 Appeal by Permission; Judgment of the Court of Appeals
Affirmed in Part and Reversed in Part; Decision of the Circuit Court
Vacated in Part; and Case Remanded to the Circuit Court
HOLLY KIRBY, J., delivered the opinion of the Court, in which SHARON G. LEE, C.J., and
CORNELIA A. CLARK and JEFFREY S. BIVINS, JJ., joined.
J. Christopher Clem, Chattanooga, Tennessee, for the appellant, Hamilton County Water
and Wastewater Treatment Authority.
Jimmy Fain Rodgers, Jr., Chattanooga, Tennessee; and James G. Stranch, III, J. Gerard
Stranch, IV, and Michael G. Stewart, Nashville, Tennessee, for the appellee, American
Heritage Apartments, Inc.
OPINION
FACTS AND PROCEDURAL HISTORY
Background
In 1993, Hamilton County authorities needed to provide sewer services to homes
and businesses in unincorporated areas of Hamilton County and also in seven
surrounding incorporated municipalities: East Ridge, Lakesite, Lookout Mountain, Red
Bank, Ridgeside, Signal Mountain, and Soddy-Daisy. To build the needed sewer system,
the Hamilton County Commission1 created a water and wastewater treatment authority
(hereinafter ―wastewater treatment authority‖) in accordance with Tennessee Code
Annotated sections 68-221-601—618 (2013), known as the Water and Wastewater
Treatment Authority Act (―WWTA Act‖). The entity it created is the appellant in this
action, the Defendant/Appellant Hamilton County Water and Wastewater Treatment
Authority (―County Authority‖). The sewer systems under the purview of the County
Authority are maintained separately from other sewer systems in Hamilton County,
specifically those for the City of Chattanooga and the City of Collegedale.
By 2008, the sewer systems in the service areas of the County Authority became
unable to process adequately the high influx of storm and rain water. This caused a
variety of difficulties.2 Ultimately, the problem got the attention of the Tennessee
1
The Hamilton County Commission operates the government of Hamilton County.
2
For example, the high influx of storm or rain water prevented the sewage from being effectively
treated prior to being discharged into the Tennessee River; caused sewage to overflow into
neighborhoods‘ storm water ditches, creeks, and streams; reduced the sewer system capacity for new
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Department of Environment and Conservation (TDEC), which concluded that the
inability to process the storm and rain water violated various TDEC requirements. On
March 20, 2008, TDEC issued an order (―TDEC order‖) concluding that the County
Authority had violated TDEC requirements.3 TDEC directed the County Authority to
develop a program to prevent storm water from entering or infiltrating the sewer system
in Hamilton County. More specifically, the TDEC order required the County Authority
to, among other things, (1) develop a Corrective Action Plan/Engineering Report to
optimize and document maximum ―Infiltration & Inflow‖ removal, (2) implement a
sewer overflow response plan, and (3) develop a plan to prevent the infiltration of storm
water throughout the entire County Authority sewage system. TDEC prohibited the
County WWTA from connecting new customers on Signal Mountain until it addressed
certain problems raised in the TDEC Order.
To comply with the TDEC order, the County Authority implemented several
strategies. These strategies included an ambitious program called the Private Service
Lateral Program (―the Program‖). The aim of the Program was to repair and refurbish all
of the pieces of pipe that connect private properties to county-owned sewer lines; the
pieces of pipe are referred to as either ―sewer laterals‖ or ―private sewer service
laterals.‖4 To accomplish this, the Program outlined plans to have all 26,000 of the
private service laterals in the service area inspected and repaired or replaced as necessary.
To cover the cost of the Program, the County Authority voted to authorize a flat-
rate monthly fee of $8 per unit (the ―$8 Charge‖) for all of its customers. The $8 Charge
would appear as a separate monthly fee on customers‘ water bills for a period of twenty
years.5 The County Authority incorporated the $8 Charge into its Sewer Use Rules and
connections and the expansion of existing customers; and increased the cost to treat what is mostly clean
storm water.
3
The Commissioner of TDEC has the authority to issue a complaint when he has reason to
believe that there has been a violation of the Water Quality Control Act of 1977, Tennessee Code
Annotated section 69-3-101 to –69-3-148 (2012). The Commissioner may also order that corrective
action be taken. Tenn. Code Ann. § 69-3-109(a) (2012).
4
According to the complaint, a ―sewer lateral‖ is a pipe that is ―normally four inches (4‖) in
diameter for residential and larger for commercial buildings, which runs underground from the foundation
of a home or business and connects to the public sewer main and transports sewage away from a home or
business and deposits it into a larger public sewer main.‖
5
The County Authority‘s normal sewer bill varies depending on water usage as that water usage
is reported by the private water provider. The County Authority is one of the few sewer utilities that must
deal with a private water provider. Larger cities, such as Knoxville, Nashville, and Memphis, all own
their water utilities.
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Regulations for Wastewater Collection Systems (―the Regulations‖).6 TDEC approved
the plan, and the Tennessee Attorney General opined that both the plan and its financing
were constitutional in Attorney General Opinions 08-143 (Sept. 4, 2008) and 08-185
(Dec. 12, 2008). The County Authority planned to make Signal Mountain and East
Ridge the first municipalities in which repairs under the Program were implemented.
In 2010, the County Authority began inspecting its customers‘ service laterals as a
pilot program. See Tenn. Code Ann. § 7-35-401(c)(1)(B)(iii) (2015) (authorizing the
County Authority to perform rehabilitative maintenance or construction on private
property with owner‘s consent). The sewer laterals are owned by the owners of the
buildings to which they connect. Therefore, prior to performing any work on a
customer‘s service lateral, the County Authority had to obtain consent from the property
owner; in the alternative, customers were given the option of making their own repairs to
their service laterals at their own expense.
In 2012, to finance the Program, TDEC and the Environmental Protection Agency
(EPA) approved a $10 million loan to the County Authority through the EPA Clean
Water Loan Program. The $8 Charge billed to County Authority customers was pledged
as collateral for the loan and is used to pay the loan premiums.7
Plaintiff/Appellant American Heritage Apartments, Inc. (―American Heritage‖), is
a Tennessee, not-for-profit corporation that operates a low-income, 168-unit apartment
complex in East Ridge, Tennessee, one of the incorporated municipalities served by the
County Authority. On August 19, 2011, the County Authority sent American Heritage a
letter notifying it of the $8-per-unit Charge on its water bill. Based on a 90% occupancy
6
The relevant Regulation states:
A monthly fee in the amount of $8 shall be charged to any and all gravity sewer
customers now existing or hereafter becoming customers of the [County Authority] to
cover [the County Authority‘s] cost of the Private Service Lateral Program implemented
in accordance with Article VIII F. herein. Said monthly fee shall be for a period of 20
years from the date of implementation of the Private Service Lateral Program. The Board
shall have the right to adjust the monthly fee and/or the term of the [Private Service
Lateral Program] fee as it deems necessary from time to time.
7
As a condition of the EPA loan, the County Authority must own the service laterals via an
easement, rather than securing consent to work on the service laterals from the property owners.
Consequently, since the fall of 2012, the County Authority has been obtaining easements to work on the
property owners‘ service laterals instead of consents. See Tenn. Code Ann. § 7-35-401(c)(1)(B)(i)(b)
(2015).
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rate, the letter stated, the County Authority would charge American Heritage $8 each for
151 units. This amounts to $1,208 per month or $14,496 per year; over the 20-year
projected life of the Program, the charges would total over $289,000. The letter
explained to American Heritage that the charge would be prospective only, beginning
September 1, 2011. American Heritage objected to the addition of the $8 Charge to its
monthly bill, to no avail. This lawsuit followed.
Lawsuit
On October 3, 2011, American Heritage filed the instant lawsuit against the
County Authority in Hamilton County Circuit Court. The complaint was filed by
American Heritage both individually and as a class action pursuant to Rule 23 of the
Tennessee Rules of Civil Procedure. American Heritage asserted in essence that, by
imposing the $8 Charge on its customers, the County Authority exceeded its statutory
authority. American Heritage contended that, because sewer service laterals are owned
by the owners of the buildings to which they connect, the County Authority should
charge customers according to their need of repair rather than by a per-unit flat fee.
American Heritage asked the trial court to declare that (1) the imposition of the $8
Charge constitutes an ultra vires act of the County Authority and is not ―just and
equitable, as required by statute and under the common law‖; (2) the $8 Charge breaches
the County Authority‘s contracts with American Heritage and the other members of the
class; (3) the Program violates Tennessee Code Annotated section 7-35-401; and (4) the
Program creates a monopoly that violates the Tennessee Constitution, Article II, section
21.8 American Heritage also asked the trial court to order the County Authority to cease
collecting the $8 Charge, conduct an accounting, and refund all collected charges to the
landowners who had paid them. Overall, American Heritage sought declaratory relief,
injunctive relief, restitution, costs, and any other available relief.
In response, the County Authority filed a motion to dismiss. The County
Authority contended first that American Heritage‘s lawsuit should be dismissed because
American Heritage had failed to exhaust the administrative remedies set forth in
Tennessee Code Annotated sections 86-221-6079 and 69-3-124 and Rule 25 of the
County Authority‘s bylaws. The County Authority also asserted in the motion to dismiss
that American Heritage‘s complaint did not allege sufficient facts to support a class
8
It is likely that American Heritage intended to challenge the Program based on Article I, section
22 of the State Constitution, which prohibits ―perpetuities and monopolies.‖
9
This statute was likely intended to be Section 68-221-607, because Title 86 does not exist in the
code. This discrepancy is irrelevant, however, because the County Authority later abandoned its reliance
on the statute.
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action under Rules 23.01 and 23.02 of the Tennessee Rules of Civil Procedure and that
American Heritage had failed to join the State of Tennessee as an indispensable party.
The initial trial judge, the Honorable L. Marie Williams, denied the motion to
dismiss. The County Authority then filed its answer to the complaint, in which it denied
all material allegations and asserted affirmative defenses. After that, American Heritage
filed a motion asking the trial court to certify the class of plaintiffs. American Heritage
defined the class as ―[a]ll [County Authority] customers who are being or have been
charged the [$8 Charge],‖ excluding certain persons affiliated with the County and
persons whose property had already been inspected or repaired under the Program.
In February 2013, the County Authority filed a motion for summary judgment.
Soon thereafter, the trial court entered an order indicating that it planned to entertain
American Heritage‘s motion for class certification before considering the summary
judgment motion filed by the County Authority.
Subsequently, Judge Williams entered an order recusing herself from the case.
Eventually, it was assigned to the Honorable Jacqueline S. Bolton.
In April 2013, the County Authority filed a motion to amend its answer, which
was granted.10 In the amended answer, the County Authority asserted for the first time
that it is a ―utility district‖ within the meaning of the Utility District Law of 1937 (UDL),
Tennessee Code Annotated section 7-82-101 et seq. Because it is a utility district, the
County Authority claimed, the UDL administrative procedures applicable to a rate protest
by a utility district customer would apply to this rate protest filed by American Heritage.
See Tenn. Code Ann. § 7-82-402 (2015). In fact, the County Authority asserted that the
UDL administrative process was ―the exclusive method of adjudicating such disputes.‖
Because American Heritage did not file an administrative petition under the UDL before
it filed suit, the County Authority maintained, American Heritage had ―failed to exhaust
administrative remedies as provided by T.C.A. [§] 7-82-701 et seq.‖
In May 2013, the County Authority filed its second motion to dismiss. In this
motion, consistent with its amended answer, the County Authority asked the trial court to
dismiss based on American Heritage‘s failure to exhaust its administrative remedies
under the UDL11 as well as its failure to join indispensable parties. In September 2013,
10
The County Authority was later permitted to again amend its answer to include a defense based
on the Tennessee Constitution and issue notice to the Attorney General of its constitutional challenge.
11
The County Authority‘s second motion to dismiss did not explicitly cite the exhaustion
doctrine. Rather, it asserted that American Heritage failed to file a petition with the Utility Management
Review Board as would be required under Section 7-82-102(a), and also failed to file an administrative
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following argument from counsel for the parties, the trial court concluded that the
administrative remedies found in Section 7-82-401 et seq. ―are not mandated,‖ so it
denied the second motion to dismiss.
At around the same time, American Heritage filed a motion for partial summary
judgment. American Heritage contended that it was entitled to partial summary judgment
because the undisputed facts show that the $8 Charge is inequitable, unlawful, and void.
In October 2013, the trial court entered an order. The trial court acknowledged
that several dispositive motions were pending,12 but it raised an issue that had not yet
been addressed by the parties. The trial court noted that none of the parties‘ pending
motions ―address an issue which the Court believes must be initially resolved,‖ namely,
the applicability of Brown v. Tennessee Title Loans, Inc., 328 S.W.3d 850 (Tenn. 2010),
which addressed whether there was a private right of action under the Tennessee Title
Pledge Act to contest alleged excessive interest and fees. The trial court directed the
parties to review Brown and file briefs analyzing how it applied to the case at bar. The
trial court held the parties‘ dispositive motions in abeyance pending submission of their
briefs on Brown.
Lower Court Decisions
In January 2014, after reviewing the supplemental briefs on Brown, the trial court
entered an order denying American Heritage‘s motion for partial summary judgment and
granting the motion for summary judgment filed by the County Authority. The trial court
reasoned:
The Court finds that the case at hand is directly comparable to
Brown. Tennessee Code Annotated Section 68-221-101 is a regulatory
scheme over the public utilities in Tennessee. Tennessee Code Annotated
Section 7-82-402[, a provision of the Utility District Law of 1937],
provides the process by which the utility rates may be contested. The
plaintiff attempts to distinguish this case from Brown by arguing that
instead of asserting a private right of action, it simply seeks to recover
complaint within 30 days of the 2008 or 2009 audit report establishing the $8 Charge as would be
required under Section 7-82-402. It is undisputed, however, that the gist of the County Authority‘s
argument is exhaustion of administrative remedies, and it has been framed as such as these proceedings
have progressed.
12
The motions pending at the time were the County Authority‘s motion for summary judgment,
American Heritage‘s motion for partial summary judgment, and American Heritage‘s motion for class
certification.
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charges that have been imposed without any statutory authorization or
justification. However, under the statutory scheme in T.C.A. § 7-82-402,
the procedure for contesting the utility charges is presented with no express
right for the plaintiff to recover charges by private action nor any implied
intent that there be a right to private action. Pursuant to the reasoning of
the Tennessee Supreme Court in Brown, the plaintiff must show that a right
to private action be ―manifestly clear‖ since the defendant utility is
governed by a regulatory statute. 328 S.W.3d at 863. The Court holds that
the plaintiffs have not met their burden in this case.
Thus, the trial court presumed that this dispute was governed by the UDL and that
Section 7-82-402 set forth ―the procedure for contesting the utility charges.‖ It
concluded, however, that the UDL did not present an ―express right for [American
Heritage] to recover charges by private action,‖ so it granted summary judgment in favor
of the County Authority on that basis. Based on this holding, the trial court found that
American Heritage‘s motion for class certification was moot. In the alternative, the trial
court ruled on the motion for class certification. It held that American Heritage had
satisfied the requirements for class certification under Rules 23.01 and 23.02 of the
Tennessee Rules of Civil Procedure and that ―the plaintiff‘s motion for class certification
should be granted‖ in the event that ―the appellate court decides that the plaintiff has a
private right of action.‖ American Heritage appealed.
On appeal, the Court of Appeals disagreed with the trial court‘s conclusion that the
UDL applies to this dispute. It held that the UDL does not apply because the County
Authority is not a ―utility district‖ for purposes of the administrative procedures set out in
Part 4 of the UDL. American Heritage Apartments, Inc. v. Hamilton Cnty. WWTA, No.
E2014-00302-COA-R3-CV, 2015 WL 399215, at *6-7 (Tenn. Ct. App. Jan. 30, 2015).
The appellate court first compared the WWTA Act with the UDL, noting that there are
different processes to establish either a wastewater treatment authority or a utility district.
Id. In light of this, the appellate court concluded that the County Authority would not be
considered a ―utility district‖ because it had not ―undergone the statutorily prescribed
process of becoming a utility district pursuant to the UDL.‖ Id. at *7. The appellate
court acknowledged that Section 7-82-701(a) was amended in 2002 to expand the
definition of ―utility district‖ to include an entity such as the County Authority for some
purposes. See Tenn. Code Ann. § 7-82-701(a) (2015). It pointed out, however, that the
statutory expansion of the definition of the term ―utility district‖ applied only to ―this
part,‖ referring to Part 7 of the UDL and not to Part 4. American Heritage, 2015 WL
399215, at *7. It further observed that, around the same time, other amendments were
made to the Wastewater Facilities Act of 1987 (Section 68-221-1001 to –1015 (2013))
and the Drinking Water Revolving Loan Fund Act of 1997 (Section 68-221-1201 to –
1206 (2013)), and none of those amendments indicated any intent to expand the
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definition of ―utility district‖ beyond ―that specifically ascribed to Part 7 of the UDL.‖
Id. at *7. The Court of Appeals stated that ―while Part 7 includes a statutory structure for
review of utility districts‘ financial statements and reports, . . . it includes no
administrative recourse for users protesting rates.‖ Id. For these reasons, it reversed the
trial court‘s holding that the administrative procedure in Part 4 of the UDL applied to
American Heritage‘s rate dispute with the County Authority. Id.
The Court of Appeals next considered whether American Heritage could bring a
private action pursuant to the WWTA Act. It noted that the WWTA Act does not include
a procedure for customers to challenge the rates set by a wastewater treatment authority,
such as the administrative procedure set forth in the UDL. Id. at *10. It reviewed the
powers of a wastewater treatment authority as enumerated in Section 68-221-607(a) and
the WWTA Act as a whole, and it determined ―that the legislature contemplated that a
water and wastewater treatment authority would constitute a separate entity with its own
authority to ‗sue and be sued.‘‖ Id. at *9 (quoting Section 68-221-607(a)(1)). Applying
the Brown factors for ascertaining whether there is a private right of action under a
statute, the appellate court then found that the legislature intended for there to be a private
right of action under the WWTA Act:
[C]onsidering the Brown factors in light of the record as a whole, we
determine that (1) as a customer of the County WWTA, American Heritage
is an intended beneficiary of the protection provided by the WWTA Act,
particularly Tennessee Code Annotated § 68-221-608 regarding charges for
services; (2) express legislative intent granting the County WWTA the
authority to ―sue or be sued‖ is stated in Tennessee Code Annotated § 68-
221-607(a)(1), and there is no indication of legislative intent, express or
implied, to deny a private right of action; and (3) implying a private right of
action, consistent with the constraints of governmental immunity, is
consistent with the underlying ―public and governmental purpose‖ of the
WWTA Act as stated in Tennessee Code Annotated § 68-221-602(a). See
Brown, 328 S.W.3d at 855-56.
Id. In light of the lack of any administrative remedy in the WWTA Act and the
legislature‘s apparent intent to provide for a private right of action under the WWTA Act,
the appellate court held that American Heritage could maintain its action against the
County Authority. Consequently, it reversed the trial court‘s grant of summary judgment
to the County Authority. Id.
Given its holding in favor of American Heritage, the Court of Appeals went on to
review the trial court‘s alternative holding that the requirements for class certification had
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been met.13 The appellate court stated that the County Authority did not dispute that the
Rule 23.01 requirements for class certification had been met: numerosity, commonality,
typicality, and adequacy of representation. Id. at *13. It also noted that ―Rule 23.02
provides three alternative grounds for finding a class action maintainable with a finding
of ‗superiority‘ being the third.‖ Id. The appellate court acknowledged that the trial
court had not specified which of the three grounds on which it relied in certifying the
class, but nevertheless surmised that the trial court had relied on the first ground because
the language in its order seemed ―focused on the first of these alternative grounds.‖ Id.
On this basis, the appellate court found ―no abuse of discretion in the trial court‘s
alternative holding that, upon our reversal of summary judgment, American Heritage‘s
motion for class certification should be granted.‖ Id. Other issues that had been
pretermitted by the trial court‘s grant of summary judgment to the County Authority were
remanded for the trial court‘s consideration. Id. at *14.
The County Authority filed an application for permission to appeal. We granted
permission in order to address whether the administrative procedures and remedies in the
UDL apply to this dispute and, if so, whether they require American Heritage to exhaust
its administrative remedies before filing suit.
ISSUES ON APPEAL AND STANDARD OF REVIEW
In this appeal, the County Authority argues that the Court of Appeals erred in
reversing the trial court‘s grant of summary judgment in its favor. It contends that
American Heritage was required to exhaust the administrative procedures set forth in the
UDL before filing this lawsuit. Since American Heritage failed to do so, the County
Authority contends, the lawsuit must be dismissed. The County Authority also argues
that both of the lower courts erred in holding that the requirements for class certification
are met in this action.
This appeal arises out of the trial court‘s grant of summary judgment. Because
American Heritage filed its lawsuit in October 2011, the trial court considered the motion
for summary judgment in accordance with the standard set forth in Tennessee Code
Annotated section 20-16-101, applicable to actions initiated on or after July 1, 2011. See
Sykes v. Chattanooga Hous. Auth., 343 S.W.3d 18, 25 n.2 (Tenn. 2011).
13
The County Authority argued that, because the class certification issue was not adjudicated by
the trial court in its judgment, the Court of Appeals should not address the issue. American Heritage,
2015 WL 399215, at *10. In the interest of judicial economy, the Court of Appeals exercised its
discretion to nevertheless review the trial court‘s ruling on class certification. Id.
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On October 26, 2015, however, this Court issued its decision in Rye v. Women‘s
Care Center of Memphis, MPLLC, 477 S.W.3d 235 (Tenn. 2015). In the wake of Rye,
we apply the summary judgment standard set forth in that case, to wit:
[W]hen the moving party does not bear the burden of proof at trial, the
moving party may satisfy its burden of production either (1) by
affirmatively negating an essential element of the nonmoving party‘s claim
or (2) by demonstrating that the nonmoving party‘s evidence at the
summary judgment stage is insufficient to establish the nonmoving party‘s
claim or defense. We reiterate that a moving party seeking summary
judgment by attacking the nonmoving party‘s evidence must do more than
make a conclusory assertion that summary judgment is appropriate on this
basis. Rather, Tennessee Rule 56.03 requires the moving party to support
its motion with ―a separate concise statement of material facts as to which
the moving party contends there is no genuine issue for trial.‖ Tenn. R.
Civ. P. 56.03. ―Each fact is to be set forth in a separate, numbered
paragraph and supported by a specific citation to the record.‖ Id. When
such a motion is made, any party opposing summary judgment must file a
response to each fact set forth by the movant in the manner provided in
Tennessee Rule 56.03. ―[W]hen a motion for summary judgment is made
[and] . . . supported as provided in [Tennessee Rule 56],‖ to survive
summary judgment, the nonmoving party ―may not rest upon the mere
allegations or denials of [its] pleading,‖ but must respond, and by affidavits
or one of the other means provided in Tennessee Rule 56, ―set forth specific
facts‖ at the summary judgment stage ―showing that there is a genuine issue
for trial.‖ Tenn. R. Civ. P. 56.06. The nonmoving party ―must do more
than simply show that there is some metaphysical doubt as to the material
facts.‖ Matsushita Elec. Indus. Co. [v. Zenith Radio Co.], 475 U.S. [574,]
586 [(1986)]. The nonmoving party must demonstrate the existence of
specific facts in the record which could lead a rational trier of fact to find in
favor of the nonmoving party.
Rye, 477 S.W.3d at 264 (emphasis in original). This Court reviews a trial court‘s grant of
summary judgment de novo, with no presumption of correctness in the trial court‘s
decision. Id. at 250.
The issues presented on appeal involve statutory interpretation. We review the
interpretation of the statutes by the lower courts de novo, with no presumption of
correctness. Hayes v. Gibson Cnty., 288 S.W.3d 334, 337 (Tenn. 2009).
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ANALYSIS
Exhaustion of Administrative Remedies
The County Authority argues that the Court of Appeals erred in reversing the trial
court‘s dismissal of American Heritage‘s lawsuit for failure to exhaust administrative
remedies. Its argument is based on the premise that the administrative procedures set
forth in the UDL are mandatory and must be followed in all utility rate disputes,
including American Heritage‘s challenge of the $8 Charge assessed by the County
Authority. Because American Heritage failed to exhaust the UDL administrative
remedies, the County Authority contends, its lawsuit must be dismissed.
Addressing this issue requires us to briefly immerse ourselves in the statutes
governing utility districts and wastewater treatment authorities. We will then consider
whether the statutes support the County Authority‘s position.
UDL
Enacted in 1937, the UDL is found in Title 7 of the Tennessee Code Annotated, entitled
―Consolidated Governments and Local Governmental Functions and Entities.‖ The UDL
takes up the entirety of Chapter 82 under the ―Special Districts‖ chapters. In Chapter 82,
the UDL grants counties the authority to create utility districts, including water and sewer
utility districts.14
The UDL sets out detailed procedures for the formation of a public utility district.
First, under Section 7-82-201(a), the owners of real property in the district must file a
petition for incorporation with the Utility Management Review Board and with the mayor
of the county in which the proposed district would be situated. Information required for
the petition includes the proposed boundaries of the district and the reasons why the
existing utility districts or other municipal or county services cannot meet the needs of
the petitioners. If the Utility Management Review Board approves the petition, the
petition is forwarded to the county mayor for a public hearing. If the mayor determines
that ―public convenience and necessity‖ require the creation of the utility district and that
―creation of the district is economically sound and desirable,‖ the mayor enters an order
making these findings and approving the utility district. Id. § 7-82-202(a)(3). Once
created, the utility district is incorporated and ―shall be a ‗municipality‘ or public
14
Cities and towns are authorized to create sewer systems under Chapter 68 of the Public Acts of
1933, now codified at Title 7, Chapter 35, entitled ―Sewers and Waterworks.‖ See Tenn. Code Ann. § 7-
35-401. That statutory scheme, however, is not at issue in this appeal.
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corporation in perpetuity under its corporate name.‖ Id. § 7-82-301(a)(1)(A) (2015). The
powers of the utility district are vested in the board of commissioners of the district; these
include the powers to ―[f]ix, maintain, collect and revise rates and charges for any
service.‖ Id. § 7-82-304(a)(6) (2015).
The UDL also includes specific requirements for the operation of a utility district.
A utility district must file an audited annual financial report in accordance with standards
set by the Comptroller of the Treasury. Id. § 7-82-401(a)(1). It must also file an annual
statement containing, among other things, ―the water rates then being charged by the
district.‖ Id. § 7-82-401(d)(4). The UDL requires both to be ―filed with the county
mayor or mayors where publication is required in accordance with this section and § 7-
82-608,‖ that is, publication in a newspaper of general circulation in each of the counties
situated in whole or in part in the district. Id. §§ 7-82-401(e), 7-82-608.
As the County Authority points out, the UDL outlines administrative procedures
for challenging utility district rates. These procedures are contained in two parts, Part 1
and Part 4. Part 1 gives the Utility Management Review Board ―the authority to review
rates charged . . . by public utility districts.‖ Id. § 7-82-102(a)(1)(A). This review ―can
only be initiated by a petition containing the genuine signatures of at least ten percent
(10%) of the customers within the authorized area of the public utility district.‖ Id. The
administrative procedure for review under Part 1 of the UDL is not at issue in this appeal.
The UDL rate challenge procedure in Part 4 is the administrative procedure that is
at issue in this case. Part 4 allows for a rate challenge to be filed by an individual
customer of the utility district. Section 7-82-402 provides: ―Within thirty (30) days of
the date on which the statement provided for in § 7-82-401 is published, any customer of
the district may file with the commissioners of the district a protest, giving reasons why .
. . the rates so published are too high or too low.‖ Id. § 7-82-402(a)(1)(A). Under
subsection (a)(3), if a protestant is dissatisfied with the final position of the utility district
commissioners, she may, ―by simple written request,‖ appeal to the Utility Management
Review Board ―with the right to judicial review as provided in § 7-82-702.‖ Id. § 7-82-
402(a)(3). By cross-reference in Section 7-82-702, the UDL grants the Utility
Management Review Board the power to ―[r]eview and conduct an informal hearing of
any decision of any utility district under § 7-82-402(a) . . . upon simple written request of
any utility district customer or any member of the public within thirty (30) days after [the
commissioners‘] decision.‖ Id. § 7-82-702(a)(7). The statute provides: ―Any judicial
review of any decision of the board will be held by common law certiorari within the
county in which the hearing was held.‖ Id.
- 13 -
WWTA Act
Almost forty years later, in 1974, the General Assembly enacted the WWTA Act,
codified in Part 6 of Title 68 of the Tennessee Code Annotated, on ―Health, Safety and
Environmental Protection,‖ Chapter 221 on ―Water and Sewerage.‖15 Tenn. Code Ann.
§§ 68-221-601—618 (2015); see Harpeth Valley Utils. v. Metropolitan Gov‘t of
Nashville & Davidson Cnty., No. 01A01-9711-CH-00686, 1998 WL 313397, at *3
(Tenn. Ct. App. June 12, 1988).
The procedures in the WWTA Act are more abbreviated than those in the UDL.
The WWTA Act provides that any city, metropolitan government, or county may create a
wastewater treatment authority, and it sets forth its own procedures for doing so. The
WWTA Act provides that the creating entity must publish notice of a hearing, conduct a
public hearing, determine that ―the public convenience and necessity require the creation
of an authority,‖ adopt a resolution or ordinance creating the wastewater treatment
authority, and then file the resolution or ordinance with the secretary of state. See Tenn.
Code Ann. § 68-221-604 (2013). ―[U]pon such adoption and filing, the authority shall
constitute a body politic and corporate, with all the powers hereinafter provided.‖ Id. §
68-221-604(d)(2). At that point, the creating governmental entity transfers to the
wastewater treatment authority ―the treatment works properties, functions, service area
and outstanding obligations‖ of the creating entity. Id. § 68-221-604(e)(1).
The WWTA Act provides that wastewater treatment authorities are ―public and
governmental bodies acting as agencies and instrumentalities of the creating and
participating governmental entities‖ involved in their formation or operation. Id. § 68-
221-602(a). The governing body of a wastewater treatment authority is a board of
commissioners that is ―appointed by the executive officer of the creating governmental
entity and approved by its governing body.‖16 Id. § 68-221-605(a)(1) (2013).
As can be seen, wastewater treatment authorities serve much the same function as
utility districts, but there are some differences between the two. The WWTA Act states
15
The WWTA Act is separate from the Regional Water and Wastewater Treatment Act
(―Regional WWTA Act‖), which was promulgated in 2007 as Part 13 of Title 68, Chapter 221. It
authorizes ―[a]ny contiguous city, metropolitan government, county or utility district‖ to create a water
and wastewater treatment authority under the procedures set forth in that part. Tenn. Code Ann. § 68-
221-1304(a) (2013). The Regional WWTA Act is not applicable in this appeal; indeed, it had not even
been enacted at the time the County Authority involved in this case was created.
16
The Board of Commissioners of the County Authority is comprised of representatives from
Hamilton County and the seven incorporated cities that joined in its formation.
- 14 -
that wastewater treatment authorities may, among other things, ―fix the price or charges
for its water and waste treatment services rendered to users within and without the service
area of the authority.‖ Id. § 68-221-608(a). The authorities must be audited and must
issue a public report on such audits. Id. § 68-221-607(14). However, unlike the UDL‘s
provisions regarding utility districts, the WWTA Act does not require wastewater
treatment authorities to publish either their rates or their audits.17 Important to the issues
in this appeal, in contrast to the UDL, the WWTA Act does not contain administrative
procedures by which wastewater treatment authority customers could seek to challenge
their rates.
UDL Definition of Utility District
While the WWTA Act and the UDL are generally separate and distinct, the UDL
contains some provisions that define the term ―utility district‖ to include sewer systems
formed under the WWTA Act. These UDL provisions are the basis for the County
Authority‘s exhaustion of administrative remedies argument, so we examine them in
detail.
The first provision in Part 7 of the UDL, Section 7-82-701, creates the Utility
Management Review Board in the office of the Comptroller of the Treasury for the
purpose of advising utility district governing bodies in the area of utility management.
Tenn. Code Ann. § 7-82-701(a). It also vests the Utility Management Review Board with
―authority over all utility districts.‖ Id. As put by the Court of Appeals below, ―Part 7
includes a statutory structure for [the Utility Management Review Board‘s] review of
utility districts‘ financial statements and reports.‖ American Heritage, 2015 WL 399215,
at *7. Section 7-82-701(a) goes on to provide:
For purposes of this part, ―utility district‖ includes agencies, authorities or
instrumentalities of government created by public or private act having the
authority to administer a water or wastewater facility, other than those
agencies, authorities or instrumentalities of government electing pursuant to
§ 68-221-1006(a) or § 68-221-1206(a) to come under the jurisdiction of the
water and waste water financing board.
Id. (emphasis added). Thus, under this statute, the term ―utility district‖ is defined to
include a wastewater treatment authority ―[f]or purposes of this part,‖ namely, Part 7.
17
The County Authority conceded at oral argument that it is not required by statute to publish its
rates and that the $8 Charge at issue here was not published in a newspaper of general circulation.
- 15 -
With a similar limitation, another provision in the UDL defines the term ―utility
district‖ to include a wastewater treatment authority. Section 7-82-401(h)(1) requires all
―utility districts‖ to include water losses in their audited financial reports, as prescribed
by the Utility Management Review Board. Tenn. Code Ann. § 7-82-401(h)(1) (2015).
The next subsection, subsection (h)(2), provides: ―For the purposes of subdivision (h)(1),
‗utility district‘ includes agencies, authorities or instrumentalities of government created
by public or private act having the authority to administer a water or wastewater facility,‖
again with an exception for those that elect to come under the jurisdiction of the Water
and Wastewater Financing Board. Id. § 7-82-401(h)(2) (emphasis added).
Thus, under these two provisions in the UDL, a wastewater treatment authority
that has not elected to come under the jurisdiction of the Water and Wastewater
Financing Board must submit audited financial reports to the Utility Management Review
Board, and it must include its water losses in those audited reports.
Exhaustion of UDL Administrative Remedies
The County Authority‘s exhaustion argument is premised on its contention that it
is a ―utility district‖ for purposes of Part 4 of the UDL.18 It claims that, because Section
7-82-701(a) provides that a wastewater treatment authority falls under the purview of the
Utility Management Review Board, a customer who seeks to challenge its rates should be
required to first seek recourse with the Utility Management Review Board through the
UDL administrative procedures in Part 4. The County Authority notes that utility
districts and wastewater treatment authorities are governed by two different boards—
either the Utility Management Review Board, created in the UDL, or the Water and
Wastewater Financing Board (―WWF Board‖), established in Title 68, Chapter 221,
Sections 68-221-1008(a)(1) and 68-221-1006(a)(8). The County Authority points out
that it did not elect to come under the jurisdiction of the WWF Board; consequently,
under the UDL, it is governed by the Utility Management Review Board.19 Id. § 7-82-
701(a). The County Authority acknowledges that Section 7-82-701(a) states that ―utility
district‖ should be defined to include a wastewater treatment authority ―[f]or purposes of
[Part 7].‖ It dismisses the significance of the limiting language by arguing that, once the
legislature expressly brought wastewater treatment authorities under the governance of
the Utility Management Review Board, any rate challenge brought against the County
Authority must be brought according to the procedure in Part 4 of the UDL.
18
In making its argument on exhaustion of administrative remedies, the County Authority does
not argue that American Heritage was required to follow the procedures in Part 1 of the UDL.
19
The record contains an affidavit by the executive director of the County Authority indicating
that the County Authority did not elect governance by the WWF Board.
- 16 -
In response, American Heritage notes the fact that Part 4 of the UDL, specifically
Section 7-82-402, applies only to ―utility districts.‖ It emphasizes the limiting language
in Section 7-82-701(a) expressly indicating that a wastewater treatment authority is a
utility district only for purposes of Part 7. This means, American Heritage insists, that a
wastewater treatment authority is not a utility district for other purposes, including the
Section 7-82-402 administrative procedures. In support, American Heritage points to the
context in which the legislature amended Section 7-82-701(a) to expand the definition of
the term ―utility district.‖ The 2002 amendment to Section 7-82-701(a), American
Heritage points out, was part of a broader package of amendments intended to facilitate
financing opportunities for water and wastewater systems. Since Part 7 has to do with
financing, American Heritage argues, this indicates that the legislature did not intend to
make wastewater treatment authorities synonymous with ―utility districts‖ for all
purposes of the UDL. Thus, American Heritage contends, the Court of Appeals was
correct in reversing the trial court‘s dismissal of its lawsuit.
The issue presented requires us to construe the relevant statutes. In construing
statutes, 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
we seek to give the words their natural and ordinary meaning in the context in which they
appear and in light of the statute‘s general purpose. See Lee Med., 312 S.W.3d at 526;
Hayes, 288 S.W.3d at 337; Waldschmidt v. Reassure Am. Life Ins. Co., 271 S.W.3d 173,
176 (Tenn. 2008).
To determine whether American Heritage was required to exhaust administrative
remedies before filing suit, we will first examine the language of Section 7-82-701 and
the 2002 UDL amendment expanding the definition of ―utility district,‖ on which the
County Authority relies. We then seek to ascertain the purpose of the amendments and
the legislature‘s intent by looking overall at the UDL in pari materia with the WWTA
Act, and by considering the context and substance of the 2002 amendments to the UDL.
As will be seen, all routes in this case lead inexorably to the conclusion reached by the
Court of Appeals below.
As outlined above, the UDL was enacted to prescribe the requirements for creating
and operating utility districts. The UDL does not, however, contain a general definition
of the term ―utility district,‖ other than as an entity to be created under the statutes.
The 2002 amendment to Section 7-82-701 of the UDL was the first indication that
the term ―utility district‖ could include anything other than an entity created pursuant to
the UDL. As previously stated, the 2002 amendment added language stating that the
- 17 -
term ―utility district‖ includes water and wastewater treatment authorities ―[f]or purposes
of [Part 7]‖ of the UDL. Tenn. Code Ann. § 7-82-701(a). Similarly, in 2007, Section 7-
82-401(h)(2) expanded the term ―utility district‖ to include water and wastewater
treatment authorities for a specified purpose—for purposes of subdivision 7-82-
401(h)(1).20
We can presume that the legislature ―acted purposefully‖ in adding language
limiting the expanded definition to specified purposes. Bryant v. Genco Stamping &
Mfg. Co., 33 S.W.3d 761, 765 (Tenn. 2000); accord American Heritage, 2015 WL
399215, at *7 (―[T]he specific inclusion of [wastewater treatment authorities] in the
definition of utility districts in Part 7 excludes such authorities from the definition of
utility districts in the other parts of the Act in which they are not specified.‖). Moreover,
―a legislature is presumed to have used no superfluous words.‖ In re Hogue, 286 S.W.3d
890, 896 (Tenn. 2009) (quoting Platt v. Union Pac. R.R., 99 U.S. 48, 58 (1878)); see Lee
Med., 312 S.W.3d at 527 (noting that courts presume the legislature ―used every word
deliberately‖). In looking at the language of Section 7-82-701, it is apparent that the
legislature included wastewater treatment authorities in the definition of ―utility district‖
in order to bring the authorities within the governing umbrella of the Utility Management
Review Board for specified purposes that do not include the Part 4 administrative
procedures.
The County Authority argues vigorously against this view. It contends that, by
including wastewater treatment authorities in the definition of ―utility district‖ in Section
7-82-701(a), the legislature intended to give the Utility Management Review Board the
power to preside over rate disputes between a wastewater treatment authority and its
customers. In support, the County Authority cites another provision in Part 7, Section 7-
82-702(a)(7), which contains a cross-reference to Part 4 of the UDL. This provision in
Part 7 gives the Utility Management Review Board the power to ―[r]eview and conduct
an informal hearing of any decision of any utility district under § 7-82-402(a) [in Part 4
of the UDL] . . . within thirty (30) days after such decision.‖ Tenn. Code Ann. § 7-82-
702(a)(7). This Part 7 cross-reference to Part 4, the County Authority argues, shows
legislative intent to treat wastewater treatment authorities like utility districts not only for
purposes of Part 7, but also for purposes of the administrative procedures in Part 4 of the
UDL.
To evaluate this argument, we must examine the cross-references to Part 4 that are
contained in Part 7 of the UDL. Part 4 includes Section 7-82-402(a)(3), which provides
the administrative process by which a utility district customer may ask the Utility
20
Subsection (h) was added to Section 7-82-401 by the General Assembly in 2007. See 2007
Tenn. Pub. Acts ch. 243 (approved May 24, 2007) (codified at Tenn. Code Ann. § 7-82-401(h)).
- 18 -
Management Review Board to review the actions of the board of commissioners of a
utility district, including setting water rates.21 As noted by the County Authority, Part 7
of the UDL, specifically Section 7-82-702(a)(7), gives the Utility Management Review
Board the power and authority to review the board of commissioners‘ decisions.22 Thus,
Section 7-82-402(a)(3) prescribes the appeal process, and Section 7-82-701(a)(7)
authorizes the Utility Management Review Board to perform the administrative function
referenced in Section 7-82-402(a)(3). Compare Tenn. Code Ann. § 7-82-402(a)(3) with
Tenn. Code Ann. § 7-82-702(a)(7). This appears to be normal statutory cross-
referencing; on its face, it does not indicate a legislative intent to import into Part 4 the
expanded definition of ―utility district‖ contained in Section 7-82-701(a).
Furthermore, a close look at Section 7-82-402 undercuts the County Authority‘s
assertion that the legislature intended Part 4 of the UDL to apply to wastewater treatment
authority rate disputes. The procedure for filing a rate dispute set forth in Section 7-82-
402 begins with the following instructions: ―Within thirty (30) days of the date on which
the statement provided for in § 7-82-401 [containing the water rates] is published, any
customer of the district may file with the commissioners of the district a protest . . . .‖
Tenn. Code Ann. § 7-82-402(a)(1)(A). While the UDL requires utility districts to publish
a statement containing the rates being charged, the WWTA Act does not require
wastewater treatment authorities to either file a statement or publish their rates.
Therefore, measuring the filing deadline for a rate dispute from ―the date on which the
statement provided for in § 7-82-401 is published‖ is inconsistent with the County
Authority‘s position that the rate dispute procedure was intended to apply to wastewater
treatment authorities because the statement to which the statute refers is not required of a
wastewater treatment authority.
The County Authority nevertheless insists that the legislature must have intended
the 2002 Section 7-82-701(a) expanded definition of ―utility district‖ to bring wastewater
treatment authorities within the purview of the UDL Part 4 administrative process. It
points out that, under the statutory interpretation utilized by the Court of Appeals below,
customers of wastewater treatment authorities would have no administrative procedure
for challenging their water rates.
21
Section 7-82-402(a)(3) states: ―Any protestant feeling aggrieved by the final action of the
commissioners under this section may obtain a review of the commissioners‘ action by simple written
request to the utility management review board within thirty (30) days thereafter, with the right to judicial
review as provided in § 7-82-702.‖ Tenn. Code Ann. § 7-82-402(a)(3).
22
Section 7-82-702(a)(7) states that the Utility Management Review Board has the authority to
―[r]eview and conduct an informal hearing of any decision of any utility district under § 7-82-402(a).‖
Tenn. Code Ann. § 7-82-702(a)(7).
- 19 -
An overall view of the UDL, considered in pari materia with the WWTA Act,
gives some support to the position urged by the County Authority. A comparison
between utility districts under the UDL and wastewater treatment authorities under the
WWTA Act reveals numerous parallels between the two. As outlined above, both types
of entities may serve a similar overall purpose of providing water and wastewater
treatment services to citizens, both are formed according to their respective statutes with
the participation of local governmental officials, both are governed by a board of
commissioners, both must be audited, and both set rates for water-related services. Only
the UDL, however, contains an administrative procedure for individual citizens to dispute
water rates. In light of the statutory parallels between utility districts and wastewater
treatment authorities, and given the legislature‘s expansion of the term ―utility district‖ to
include wastewater treatment authorities for at least some purposes, there is some appeal
to the argument that these purposes were intended to include the UDL administrative
procedures. Such an interpretation of the UDL amendments would give customers of
utility districts and wastewater treatment authorities alike an administrative avenue to
dispute water rates.
Alas, we find no support in the 2002 UDL amendments for the County Authority‘s
assertion that the legislature intended for the amendments to make wastewater treatment
authorities subject to the UDL Part 4 administrative process. As we have pointed out, the
2002 amendment that expanded the definition of ―utility district‖ in Section 7-82-701—
the only arguable basis for applying Part 4 to wastewater treatment authorities—was only
one provision in a comprehensive package of statutory amendments. As explained
below, a review of the whole 2002 amendment package demonstrates that it was designed
primarily to provide loan and financing options for water and wastewater treatment
entities.
In addition to amending Section 7-82-701, the 2002 amendments resulted in
additional provisions in the Wastewater Facilities Act of 1987 and the Drinking Water
Revolving Loan Fund Act of 1997, two separate Acts that have complementary functions.
The Wastewater Facilities Act addresses compliance with state and federal wastewater
water quality and drinking water standards, and the Drinking Water Revolving Loan
Fund Act established revolving loan programs to aid local governments and water
systems in establishing self-sufficiency, support system improvements, protect water
quality, and improve public health. See Tenn. Code Ann. §§ 68-221-1002(a), 68-221-
1202(a) (2013). The aim of both Acts is to create a revolving loan program to ―be used
in coordination with state and federal assistance programs.‖ Id. §§ 68-221-1002(b), 68-
221-1202(b).
The 2002 amendments included a number of provisions that worked together to
allow water authorities, such as wastewater treatment authorities, to have access to the
- 20 -
revolving loan program. For example, the 2002 amendments expanded the definition of
―local government‖ contained in the Wastewater Facilities Act to include not only local
governmental entities and utility districts, but also ―any instrumentality of government
created by any one or more of the foregoing or by an act of the General Assembly,‖ thus
encompassing wastewater treatment authorities. See 2002 Tenn. Pub. Acts ch. 603
(approved April 11, 2002) (codified at Tenn. Code Ann. § 68-221-1003(7)(A)(i)).
Similarly, the 2002 amendments broadened the definition of ―water system‖ in the
Drinking Water Loan Act to include not only community public water systems of
counties, municipalities and utility districts, but also any ―instrumentality of government
created by any one or more of the foregoing or by an act of the General Assembly as well
as such governmental entity,‖ which would include wastewater treatment authorities. Id.
(codified at Tenn. Code Ann. § 68-221-1203(6)). At the same time, both Acts were
amended to permit local governments and water systems that had obtained the low-cost
government loans to assign their rights and obligations under the loans to any other local
government or system.23 Id. §§ 68-221-1005, 68-221-1205 (2013).
The legislative history of the 2002 amendments to the UDL confirms that they
were intended to enhance financing options for regional entities such as wastewater
treatment authorities. The amendments were presented in House Bill 3140 and Senate
Bill 3093; the bill summary for HB 3140 explains the need for the legislation:
Under present law, the department of environment and conservation
administers a program for loans to local governments for wastewater
facilities under the wastewater facility revolving loan fund and a program
for loans to water systems under the drinking water revolving loan fund.
This bill would authorize any local government to assign its rights and
obligations under a wastewater facility revolving loan or a water system to
assign its rights and obligations under a drinking water revolving loan to
any other local government or system. . . . Under present law, local
governments and water systems receiving these low[-]cost loans must agree
to maintain financial records in accordance with governmental accounting
23
The 2002 amendments required the local governments and water systems to conduct annual
audits and file the audits with the Comptroller. Id. §§ 68-221-1006(a)(6); 68-221-1206(a)(6) (2013).
They also made local governments and water systems having taxing power subject to the jurisdiction of
the WWF Board, while all other local governments and water systems (including the County Authority,
which does not have taxing power) remained subject to the jurisdiction of the Utility Management
Review Board. Id. §§ 68-221-1006(a)(8), 68-221-1206(8) (2013). As noted above, the local
governments and water systems (other than utility districts formed under the UDL) governed by the
Utility Management Review Board were permitted to elect to come under the jurisdiction of the WWF
Board. Id. As we have indicated, the County Authority did not elect to come under the jurisdiction of the
WWF Board.
- 21 -
standards and conduct an annual audit of the facility‘s financial records.
This bill would require the above audit and would additionally require the
local government or system to: (1) [c]onduct its annual audit in accordance
with governmental auditing standards and with minimum standards of the
comptroller of the treasury; (2) [f]ile the audit with the comptroller; and (3)
[a]gree to be subject to the jurisdiction of the [W]ater and [W]astewater
[F]inancing [B]oard established for local governments or water systems
having taxing power. All other local governments or systems would be
subject to the [U]tility [M]anagement [R]eview [B]oard.
Tenn. Bill Summary, 2002 Reg. Sess. H.B. 3140.24 The bill summary goes on to explain
that, while the Utility Management Review Board was already authorized to advise utility
districts on utility management, the proposed legislation would authorize it to advise
regional authorities as well:
Present law defines ―system‖ and ―water system‖ to mean community
public water systems of counties, municipalities, and utility districts formed
pursuant to [the UDL]. This bill would expand this definition to include the
community public water systems of an incorporated town or city,
metropolitan government, state agency, or an entity of the government
created by the above groups or by the general assembly. This bill would
require all regional authorities to file an annual financial audit with the
comptroller of the treasury and to be subject to the comptroller‘s audit.
Under present law, a utility management review board advises utility
district boards of commissioners on utility management. For purposes of
such review board, this bill would define “utility districts” to include
agencies, authorities or instrumentalities of government created by public
or private act having the authority to administer a water or wastewater
facility.
Id. (emphasis added).
Comments by Senator Douglas Henry made in the course of his presentation of the
legislation indicate that it originated from the office of Tennessee‘s Comptroller and that
he proposed the legislation in order to facilitate financing opportunities for a new
―creature . . . called a regional authority.‖ Joint Session Hearing on Senate Bill 3093
(March 27, 2002). He noted that regional authorities such as wastewater treatment
24
Although a bill summary, compiled by a legislative service, does not recite the intent of any
legislator regarding a particular bill, we find it instructive because it is provided to legislators to explain
the perceived need for the proposed legislation.
- 22 -
authorities were created to provide water and wastewater treatment services to cities,
counties, and utility districts, and explained that the proposed legislation would enable
those regional authorities to borrow money from the State loan fund:
The way it works is the regional authority . . . borrows money from the
State loan fund, and they, with that money, go out and buy up any existing
bonds that the utility districts have out or escrow it to meet [inaudible]
maturity of those bonds.
Joint Session Hearing on Senate Bill 3093 (March 20, 2002). A week later, in a joint
session, Senator Henry gave a similar overview of the bill:
[T]his bill comes from the Comptroller‘s office. Today there is a creature
around called ―regional authority.‖ What is concerned is water or
wastewater service. What the regional authority can do and has done in a
few instances is purchase city systems, or county systems, utility district
systems, even private systems. [They] combine them all into one system
for water or wastewater purposes. This bill allows . . . the regional
authority to . . . obtain loans from the State so they can buy out these public
districts and so that they can escrow the money to cover the bonds when
due that the districts simply buy.
Joint Session Hearing on Senate Bill 3093 (March 27, 2002).
Importantly, none of the 2002 amendments were related to administrative
procedures or customer disputes regarding water rates. None of the discussion in the
legislative history touches on either administrative procedures or water rate disputes. All
pertain to the financing options for regional entities that provide water and wastewater
treatment services.
From all of this, we must conclude that the argument made by the County
Authority is simply a bridge too far. Our task is to interpret the statutes as they are
written. Perhaps it could be argued that the legislature should require customers of
wastewater treatment authorities who wish to dispute their water rates to utilize the UDL
Part 4 administrative process; regardless, it has not done so. We agree with the Court of
Appeals below that the 2002 amendment to Section 7-82-701(a) was not intended to
mean that wastewater treatment authorities are deemed ―utility districts‖ for all purposes
under UDL; rather, they are considered ―utility districts‖ only for the purposes specified
in the statute. Therefore, we affirm the Court of Appeals‘ conclusion that the UDL
administrative procedure in Part 4 is inapplicable to this rate dispute, and we affirm its
- 23 -
decision to reverse the trial court‘s dismissal of American Heritage‘s lawsuit for failure to
exhaust administrative remedies.
Remaining Issues
The County Authority also argues that the Court of Appeals erred in affirming the
trial court‘s alternative ruling on class certification. It claims that the class action was not
actually certified by the trial court and that the parties did not fully brief the question of
whether the class would have been certified had the case not been dismissed. The County
Authority also argues that the trial court must make additional findings of fact before it
can certify the class under Rule 23. The County Authority asserts that, because the trial
judge who rendered the alternative ruling on class certification is no longer available, the
new trial judge will need direction as to what issues need to be decided on remand.
The Court of Appeals commented that ―the trial court was clearly attempting to
conserve needless litigation in the event that this Court reversed summary judgment.‖
American Heritage, 2015 WL 399215, at *10. For the same reason, the appellate court
exercised its discretion to review the trial court‘s decision on class certification. Id. It
concluded that the trial court did not abuse its discretion in certifying the class and so
affirmed its decision. Id. at *13.
From our review of the record, we must respectfully disagree with the Court of
Appeals‘ implicit conclusion that the trial court decided the class action issue with
sufficient specificity to allow for meaningful appellate review. Under Rule 23, the
proponent of class certification has the burden of proving the requirements of both Rule
23.01 and Rule 23.02. Rule 23.01 provides that the class certification proponent must
establish numerosity, commonality, typicality, and adequacy of representation. Tenn. R.
Civ. P. 23.01; see Walker v. Sunrise Pontiac-GMC Truck, Inc., 249 S.W.3d 301, 307-08
(Tenn. 2008). Once those are established, the proponent must establish one of the three
requirements listed in Rule 23.02.25 Id. at 308.
25
Rule 23.02 provides:
An action may be maintainable as a class action if the prerequisites of 23.01 are
satisfied, and in addition:
(1) the prosecution of separate actions by or against individual members of the
class would create a risk of
(a) inconsistent or varying adjudications with respect to
individual members of the class which would establish incompatible
standards of conduct for the party opposing the class, or
- 24 -
The trial court‘s order in this case indicated that both Rule 23.01 and 23.02 were
satisfied. However, the trial court did not indicate the subsection of Rule 23.02 upon
which it relied in making that determination. Despite this omission and the lack of
express findings of fact in the order, the Court of Appeals gathered from some of the
language used in the order that the trial court had relied on the first subsection. The Court
of Appeals then conducted its analysis based on that assumption.
Certainly there are many cases in which this approach is appropriate, serving
judicial efficiency and avoiding unnecessary litigation for the parties. However, we must
respectfully disagree with it for a pivotal threshold issue such as certification of a class.
In order for an appellate court to conduct a meaningful review of a trial court‘s
discretionary decision on class certification, the trial court must identify sufficient facts
upon which it based its decision.26 In addition, although the record indicates that the trial
court conducted a hearing on the question of class certification, the appellate record did
not include the transcript of any such hearing.27 Therefore, with no factual findings and
(b) adjudications with respect to individual members of the class
which would as a practical matter be dispositive of the interests of the
other members not parties to the adjudications or would substantially
impair or impede their ability to protect their interest; or
(2) the party opposing the class has acted or refused to act on grounds generally
applicable to the class, thereby making appropriate final injunctive relief or
corresponding declaratory relief with respect to the class as a whole; or
(3) the court finds that the question of law or fact common to the members of the
class predominate over any questions affecting only individual members, and that a class
action is superior to other available methods for the fair and efficient adjudication of the
controversy. The matters pertinent to the findings include: (a) the interest of members of
the class in individually controlling the prosecution or defense of separate actions; (b) the
extent and nature of any litigation concerning the controversy already commenced by or
against members of the class; (c) the desirability or undesirability of concentrating the
litigation of the claims in the particular forum; (d) the difficulties likely to be encountered
in the management of a class action.
Tenn. R. Civ. P. 23.02.
26
For example, the crux of American Heritage‘s argument is that there is disparity in how
customers are treated and that charging an $8 fee penalizes some low-volume water users and benefits
high-volume users. If this is so, and the class is defined to include all of the County Authority‘s
customers, then the members of the class would have interests that are not aligned.
27
The record on appeal appears to indicate that the trial court conducted a hearing on class
certification. The record contains a scheduling order which schedules the class certification hearing for
September 23, 2013. In a comment made in the transcript of the October 14, 2013 hearing on summary
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no record of the evidence submitted at any hearing, it is difficult to determine whether or
to what extent the trial court actually engaged in the appropriate analysis in its alternative
ruling. Remand to the trial court is not possible because the trial judge who certified the
class is no longer on the bench. The new trial judge would be required to try the case
based on the former trial judge‘s nonspecific rulings.
Given this posture, we deem it prudent to vacate the trial court‘s alternative ruling
on class certification and remand for the trial court to reconsider the issue anew. See,
e.g., Government Emps. Ins. Co. v. Bloodworth, No. M2003-02986-COA-R10-CV, 2007
WL 1966022, at *51 (Tenn. Ct. App. June 29, 2007) (―Based on the record before us, we
cannot conclude that the class proponent has met her burden of establishing that the
requirements of Tenn. R. Civ. P. 23.02(3) have been met. Neither can we conclude that
the trial court has conducted the type of analysis necessary to insure compliance with
those requirements. Consequently, we must vacate the trial court‘s order certifying this
action as a class action.‖). On remand, the trial court will have the opportunity to
conduct a hearing, order discovery, or conduct any other necessary proceedings. If the
trial court finds that certification is warranted, we trust that it will expressly state the
basis for its decision.28
Within its argument on class certification, the County Authority argues that the
Court of Appeals erred in holding that the WWTA Act created a private right of action.
In our view, however, this is not properly raised within the context of the issue on class
certification; rather, it is a separate argument on the merits. On this issue, we agree with
the analysis and conclusion of the Court of Appeals‘ holding and adopt its reasoning. See
American Heritage, 2015 WL 399215, at *8-10.
CONCLUSION
We hold that the County Authority is not a ―utility district‖ for purposes of Part 4
of the UDL; therefore, American Heritage was not required to exhaust the administrative
procedures found in Part 4 of the UDL before filing this lawsuit to challenge the County
Authority‘s $8 Charge. We vacate the trial court‘s alternative ruling on class certification
and remand for reconsideration in light of our holding herein. We also affirm the Court
of Appeals‘ holding that the WWTA Act creates a private right of action. For these
judgment, counsel for the County Authority indicated that the class certification hearing was held ―three
weeks ago.‖ From this, we surmise that the class certification hearing was probably conducted.
Nevertheless, a transcript of that hearing is not included in the appellate record.
28
The County Authority also made arguments regarding the merits of the trial court‘s class
certification decision. Our decision to vacate the trial court‘s ruling on class certification is not a decision
on the merits of any of the County Authority‘s arguments.
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reasons, the decision of the Court of Appeals is affirmed in part and reversed in part, the
decision of the trial court is vacated in part, and the case is remanded to the trial court for
further proceedings consistent with this opinion. Costs on appeal are to be taxed to the
Appellant Hamilton County Water and Wastewater Treatment Authority, Hamilton
County, Tennessee, for which execution may issue, if necessary.
_________________________________
HOLLY KIRBY, JUSTICE
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