The Commissioners of the Powell-Clinch Utility District v. Utility Management Review Board

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
March 26, 2013 Session
THE COMMISSIONERS OF THE POWELL-CLINCH UTILITY
DISTRICT v. UTILITY MANAGEMENT REVIEW BOARD
Direct Appeal from the Chancery Court for Davidson County
No. 111608-IV Russell T. Perkins, Chancellor
No. M2012-01806-COA-R3-CV - Filed July 31, 2013
Respondent utility district commissioners appeal the trial court’s determination that a ground
for removal from office added to Tennessee Code Annotated § 7-82-307(b)(2), as amended
effective June 2009, may be applied retrospectively to acts occurring prior to the effective
date of the amendment to remove them from office. They also appeal the trial court’s
determination that the additional ground for removal of commissioners, “failing to fulfill the
commissioner’s or commissioners’ fiduciary responsibility in the operation or oversight of
the district,” is not unconstitutionally vague. We reverse retrospective application of the
additional ground for removal contained in the statute, as amended; hold that the statute is
not void for vagueness; and remand.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed in
Part, Affirmed in Part, and Remanded
D AVID R. F ARMER, J., delivered the opinion of the Court, in which H OLLY M. K IRBY, J., and
J. S TEVEN S TAFFORD, J., joined.
Charles Taylor, Pro Se.
Charles Oldham, Pro Se.
Jerry Shattuck, Pro Se.
Robert E. Cooper, Jr., Attorney General and Reporter, William E. Young, Solicitor General
and Ann Louise Vix, Senior Counsel, for the Appellee, Utility Management Review Board.
OPINION
This dispute requires us to determine whether a 2009 amendment to Tennessee Code
Annotated § 7-82-307(b)(2), which adds “failing to fulfill the commissioner’s or
commissioners’ fiduciary responsibility in the operation or oversight of the district” as a
ground for the removal of a commissioner from a utility district, may be applied
retrospectively to remove utility district commissioners from office for acts allegedly
committed prior to the effective date of the amendment. The facts relevant to our disposition
of the issues raised on appeal are not disputed.
Charles Taylor (Mr. Taylor), Charles Oldham (Mr. Oldham) and Jerry Shattuck (Mr.
Shattuck, collectively, “the Commissioners”) are members of the Powell-Clinch Utility
District (“the District”), a gas utility district. On June 15, 2011, the Tennessee Utility
Management Review Board (“the UMRB”) initiated a contested case hearing seeking to
remove the Commissioners from office pursuant to Tennessee Code Annotated § 7-82-
702(13) and § 7-82-307(b). In its petition, the UMRB stated that, pursuant to section 7-82-
307(b)(2)(A), the Comptroller of the Treasury (“the Comptroller”) had forwarded the results
of an October 2010 investigative audit report concerning the District to the UMRB for
review, and that on April 7, 2011, the UMRB unanimously voted to conduct a contested case
hearing to remove the Commissioners from office. The UMRB specified multiple findings
of the Comptroller in its petition, including the District’s failure to reconcile bank accounts
and customer accounts receivable on a timely basis; reimbursement to the Commissioners
for unnecessary transportation costs; the failure to review or oversee charges and purchases;
the failure to adequately supervise the former District manager, resulting in the
misappropriation of approximately $100,000 from the District; the failure to supervise
employee receivables and purchasing programs; the failure to implement adequate safeguards
to prevent abuse of District assets and property; the failure to adequately supervise and
review adjustments to customer bills; over-spending for parties and unapproved conferences;
payment for spouses and guests to travel to a Costa Rica resort; and retaliation against
individuals providing information leading to the Comptroller’s audit. The UMRB alleged
28 separate counts of the failure to fulfill fiduciary responsibilities in the operation and
oversight of the District as grounds for removal from office pursuant to Tennessee Code
Annotated § 7-82-301(b)(2)(B).
Acting pro se, the Commissioners answered in July 2011, denying allegations of
wrong-doing. The Commissioners also filed six motions to dismiss the UMRB’s petition.
In their motions, the Commissioners asserted that the UMRB lacked jurisdiction to remove
them from office because the Administrative Procedures Act (“APA”) is not applicable to
utility districts, and that an April 2011 UMRB vote rescinded the decision to remove them
from office and was final and binding. The Commissioners also asserted that the alleged
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ground for removal “constitute[d] impermissible disparate treatment [of the Commissioners]
from other similarly situated public officials,” and that the terms “fiduciary responsibility”
and “fiduciary responsibility in the context of the operation or oversight of a utility district”
were not defined by the statute. They further submitted that, under Tennessee Code
Annotated § 8-47-101, public officials in Tennessee may be removed from their positions
only upon a finding that they knowingly or willfully committed misconduct in office, or
knowingly or willfully neglected to perform a required duty. The Commissioners asserted
that, prior to June 11, 2009, the effective date of the amendment to section 7-82-307, utility
district commissioners likewise could be removed from office only for knowingly or
willfully committing misconduct in office, or knowingly or willfully neglecting to fulfill any
duty imposed by law. The Commissions moved to dismiss the UMRB’s petition on the basis
that the UMRB impermissibly sought to apply the June 2009 amendments retroactively to
acts that allegedly occurred prior to the effective date of the amendment. They further
asserted that, prior to the June 2009 amendment, a contested case proceeding before the
UMRB could be brought only upon a request for removal brought by twenty percent of the
district customers, and that the 2009 amendment provided that a contested case proceeding
also could be commenced based upon an investigative audit report from the Comptroller.
The Commissioners asserted that the amendments to the section were substantive where they
altered the procedural mechanism for bringing a contested case proceeding and added an
additional ground for the removal of commissioners from office. The Commissioners further
asserted that the UMRB exceeded its authority where it alleged facts outside the parameters
of the Comptroller’s investigative report. The Commissioners additionally asserted that two
of the UMRB’s members were biased and had conflicts of interest.
The UMRB treated the Commissioners’ motions as motions for summary judgment
where they were supported by documents and affidavits outside the pleadings, and the matter
was heard by an administrative law judge (“ALJ”) in September 2011. The ALJ determined
that the UMRB is a “state board” and that the APA therefore controlled the matter. It
dismissed the Commissioners’ motion on that basis. The ALJ also dismissed the
Commissioners’ motion on the basis of the UMRB’s April 2011 actions, determining that the
UMRB chose to delay ouster proceedings but did not decide to abandon the matter. The ALJ
also determined that, although the 2009 statutory amendments added a new, additional
procedural mechanism to oust commissioners from office, the amendment did not affect any
substantive legal rights where the removal of an official for misconduct “is certainly not new
in Tennessee.” It accordingly dismissed the Commissioners’ motion on that basis. The ALJ
also dismissed the Commissioners’ motion alleging that the UMRB exceeded its authority
by identifying grounds for removal that were not included in the Comptroller’s audit. The
ALJ stated that it was without authority to determine whether Tennessee Code Annotated
§ 7-82-307(b)(2), as amended, is unconstitutional or was being applied in an unconstitutional
manner, but determined that the Commissioners offered no factual support of their
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constitutional allegations and accordingly denied their motions predicated on constitutional
grounds. The ALJ finally determined that the Commissioners had failed to allege any facts
in support of their assertion that members of the UMRB were biased or had any direct
interest in the matter, and denied their motion on that basis. The ALJ entered its order
denying all six of the Commissioners’ motions on October 19, 2011, and the Commissioners
sought interlocutory appeal and a stay of the matter. The UMRB did not oppose the motion
for stay.
The Commissioners filed a petition for interlocutory appeal in the Chancery Court for
Davidson County in November 2011. In their petition, the Commissioners asserted that the
term “fiduciary responsibility” contained in the June 2009 amendment to section 7-82-307
is unconstitutionally vague where the statute neither defines the term nor explains what it
constitutes. The Commissioners also asserted that the amendment adding the failure to fulfill
fiduciary responsibility as a ground for removal from office resulted in an impermissible
disparate treatment of utility district commissioners where it applies only to those
commissioners and not to other public officials. They additionally asserted that the UMRB’s
attempts to remove them from office on the basis of a failure to fulfill fiduciary responsibility
resulted in a prohibitive retroactive application of the 2009 amendments where the UMRB
sought removal based on acts which allegedly occurred prior to the effective date of the
amendment. The Commissioners finally asserted that the UMRB exceeded its statutory
authority and rules set forth by the UMRB itself by considering acts not contained in the
Comptroller’s investigative report.
The UMRB replied in February 2012 and the matter was heard by the trial court in
April 2012. Finding no rule or statute governing review of an ALJ’s ruling on a motion for
summary judgment, the trial court reviewed the matter in accordance with the Tennessee
Rules of Civil Procedure governing summary judgment. The trial court reversed summary
judgment in favor of the UMRB on the issue of whether the UMRB’s ouster authority was
limited to acts of the Commissioners identified in the Comptroller’s investigative audit report
where the contested case hearing was conducted pursuant to Tennessee Code Annotated §
7-82-307(b)(2)(A). In so holding, the trial court determined that the UMRB had the authority
to address all prohibited conduct of utility district commissioners on its own initiative, but
if it chose to do so the contested case hearing should be conducted according to section 7-82-
307(b)(3)(A). The trial court declined to address the issue of whether the ALJ erred in
finding that the Commissioners had failed to assert facts in support of their contention that
members of the UMRB were biased or had a conflict of interest on the basis that the issue
did not appear to have been raised for review and that the motion to dismiss on this issue, and
responses thereto, were not included in the administrative record transmitted to the court for
review. The trial court affirmed the ALJ’s determination that the statute was not
unconstitutionally vague; determined that any disparate treatment of utility district
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commissioners and other public officials is supported by a reasonable relationship to a
legitimate state interest; and determined that application of the 2009 statute as amended was
not an impermissible retroactive application of the law where it did not place a new
obligation on district utility commissioners, but clarified the existing statutory ground for
removal for neglecting “to perform any duty imposed upon such member by law.” The trial
court determined that the amendment accordingly is procedural and remedial in nature.
In June 2012, the Commissioners filed a motion to alter or amend or, in the
alternative, for permission to seek an interlocutory appeal. On July 31, 2012, the trial court
denied the Commissioner’s motion to alter or amend and determined that its May 2012 order
was a final judgment and that the Commissioners accordingly were entitled to appeal as a
matter of right pursuant to Rule 3 of the Tennessee Rules of Appellate Procedure. The
Commissioners filed a timely notice of appeal to this Court.
Issues Presented
The Commissioners (hereinafter, “Appellants”) present two issues for our review:
1. May a new ground for removal of utility district commissioners from
office, first set forth in a legislative amendment to [Tennessee Code
Annotated ] section 7-82-307, effective June 11, 2009, be applied
retroactively against those commissioners for alleged acts or omissions
which occurred prior to June 11, 2009?
2. Is the new ground for removal of utility district commissioners from
office set forth by amendment to [Tennessee Code Annotated ] section
7-82-307, effective June 11, 2009, namely “failing to fulfill the
commissioner’s or commissioners’ fiduciary responsibility in the
operation or oversight of the district,” without the knowing or willful
element previously required and without any provisions for standards
or guidelines, unconstitutionally vague?
Standard of Review
The construction of a statute and the application of a statute to the facts of a particular
case are questions of law. E.g., Gautreaux v. Internal Med. Educ. Found., 336 S.W.3d 526,
531 (Tenn. 2011) (citation omitted). We review questions of law de novo, with no
presumption of correctness for the determination of the trial court. Id. Where the statutory
language is clear and unambiguous, “it is our duty to follow it.” Id. “Where the statutory
language is not ambiguous . . . the plain and ordinary meaning of the statute must be given
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effect.” Rogers v. Louisville Land Co., 367 S.W.3d 196, 214 (Tenn.2012)(quoting In re
Adoption of A.M.H., 215 S.W.3d 793, 808 (Tenn.2007)). The courts “‘presume that the
legislature says in a statute what it means and means in a statute what it says there.’” Id.
(quoting Gleaves v. Checker Cab Transit Corp., 15 S.W.3d 799, 803 (Tenn. 2000) (quoting
BellSouth Telecomms., Inc. v. Greer, 972 S.W.2d 663, 673 (Tenn. Ct. App.1997))). Thus,
where the statutory language is clear, we apply the plain and normal meaning of the words
chosen by the General Assembly, interpreting the statute so as to effectuate the General
Assembly’s intent “‘without a forced interpretation that would limit or expand the statute’s
application.’” State v. White, 362 S.W.3d 559, 566 (Tenn. 2012) (quoting Eastman Chem.
Co. v. Johnson, 151 S.W.3d 503, 507 (Tenn. 2004)). “If the statute is ambiguous, however,
we may look to other sources, such as the broader statutory scheme and the history of the
legislation.” Id. (citing In re Estate of Davis, 308 S.W.3d 832, 837 (Tenn. 2010)).
Retroactive Application of Amendment to Section 7-82-307(b)
We turn first to Appellants’ assertion that the UMRB’s petition to remove them from
office for the failure to fulfill their fiduciary duty results in an impermissible retrospective
application of law. Prior to June 11, 2009, the Utility District Law of 1937, codified at
Tennessee Code Annotated § 7-82-101, et. seq., provided, in relevant part, that:
Upon the petition of at least twenty percent (20%) of the customers of a utility
district to the utility management review board requesting the removal of a
member or members of the utility district board of commissioners, the board
shall conduct a contested case hearing within the service area of the utility
district on the question of whether such member or members should be
removed from office and a new member or members appointed or elected.
Tenn. Code Ann. § 7-82-307(b)(1)(2005). It further provided, in relevant part:
If the board concludes the member or members of the utility district board of
commissioners has knowingly or willfully committed misconduct in office or
has knowingly or willfully neglected to perform any duty imposed upon such
member by law, then the board shall issue an order removing such member
from office.
Tenn. Code Ann. § 7-82-307(b)(2)(2005).
Effective June 11, 2009, the General Assembly amended section 7-82-307(b) to add:
If the comptroller of the treasury investigates or conducts an audit of a utility
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district, the comptroller shall forward to the utility management review board
any published investigative audit reports involving a utility district
incorporated under this chapter. The board shall review those reports and may
conduct a contested case hearing on the question of whether utility district
commissioners should be removed from office for knowingly or willfully
committing misconduct in office, knowingly or willfully neglecting to fulfill
any duty imposed upon the member by law, or failing to fulfill the
commissioner’s or commissioners’ fiduciary responsibility in the operation or
oversight of the district.
Tenn. Code Ann. § 7-82-307(b)(2)(A)(2011). Former subsection 307(b)(2) was renumbered
and amended to provide, in relevant part:
If the board concludes the member or members of the utility district board of
commissioners has knowingly or willfully committed misconduct in office or
has knowingly or willfully neglected to perform any duty imposed upon such
member by law, or failed to fulfill the commissioner’s or commissioners’
fiduciary responsibility in the operation or oversight of the district, then the
board shall issue an order removing such member from office.
Tenn. Code Ann. § 7-82-307(b)(2)(B)(2011). Thus the 2009 amendments added a
mechanism by which a contested case hearing can be conducted by the UMRB, and added
“failing to fulfill the commissioner’s or commissioners’ fiduciary responsibility in the
operation or oversight of the district” as a ground for removal from office. As noted above,
the contested case proceeding before the ALJ proceeded pursuant to subsection 307(b)(2)(A).
In its May 2012 order, the trial court noted that “[t]he duty of a public official to
adhere to his or her fiduciary responsibilities has been part of the law of Tennessee for nearly
two centuries[,]” and that Tennessee Code Annotated § 7-82-307(b) as it existed prior to the
2009 amendment referenced utility district commissioner’s fiduciary duties where it provided
for removal from office for neglecting “to perform any duty imposed upon such member by
law.” The trial court additionally observed that a public official does not have a vested right
in their office, and determined that the June 2009 amendment to section 7-82-307(b) did not
create a new obligation or punishment, but “clarified . . . another means of redress for
violation of an already existing duty.” It additionally determined that the provision of the
2009 amendment permitting the UMRB to conduct a contested case hearing following review
of an audit or investigation by the Comptroller merely provided an alternative means of relief
and accordingly was procedural in nature. The trial court accordingly held that Tennessee
Code Annotated § 7-82-307(b)(2)(A) could be applied retrospectively in this matter.
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Notwithstanding their contention that “failing to fulfill . . . fiduciary responsibility in
the operation or oversight of the district” is unconstitutionally vague, Appellants
acknowledge in their brief to this Court that Tennessee law historically has required public
officials to adhere to their fiduciary responsibilities. They also appear to concede that the
portion of the 2009 amendments granting the UMRB the authority to initiate a contested case
based upon the Comptroller’s investigative audit is procedural in nature. Appellants contend,
however, that section 7-82-307(b) as it existed prior to June 2009 provided that a
commissioner could be removed from office only for knowingly or willfully committing
misconduct in office or knowingly or willfully neglecting to perform any duty imposed by
law. Appellants contend that the removal of a commissioner from office for the “mere”
failure to fulfill a fiduciary responsibility in the operation of oversight of the district is a
“new and substantive” ground for removal that “substantially lowers the bar for removal”
where it removes the elements of knowing and wilfulness. Appellants quote Doe v.
Sundquist, 2 S.W.3d 919 (Tenn. 1999), in support of their argument that the ground for
removal based on conduct or omissions that are not knowing or willful “create a new
obligation, imposes a new duty, or attaches a new disability in respect of transactions or
considerations already passed.”
The UMRB, on the other hand, asserts that the trial court correctly determined that the
2009 amendments to the statute did not create a new duty for utility district commissioners
where the fiduciary duties of public officers are implicit in Tennessee law. It further asserts
that application of the statute as amended does not impair any vested right where a public
official has no vested right to their office, and that application of the statute as amended
advances the public interest. The UMRB contends that the trial court correctly determined
that the 2009 amendment was procedural and remedial and not substantive in nature.
The courts of this State have long held that, despite the prohibition against
retrospective laws contained in Article I, Section 20 of the Tennessee Constitution,1 “‘not
every retrospective law . . . is objectionable in a Constitutional sense.’” Estate of Bell v.
Shelby County Health Care Corp., 318 S.W.3d 823, 829 (Tenn. 2010)(quoting Collins v. E.
Tenn., Va. & Ga. R.R., 56 Tenn. (9 Heisk.) 841, 847 (1874)). Rather, our courts have held
that the constitutional provision mandates “only that no retrospective law which impairs the
obligation of contracts, or divests or impairs vested rights, shall be made.” Id. (quoting Ford
Motor Co. v. Moulton, 511 S.W.2d 690, 696 (Tenn.1974) (quoting Shields v. Clifton Hill
Land Co., 94 Tenn. 123, 148, 28 S.W. 668, 674 (1894))); (citing Dark Tobacco Growers'
Coop. Ass’n v. Dunn, 150 Tenn. 614, 632, 266 S.W. 308, 312 (1924)). Therefore, the
1
Article I, Section 20 of the Tennessee Constitution provides:
That no retrospective law, or law impairing the obligations of contracts, shall be made.
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retrospective application of a law that is procedural or remedial in nature is not prohibited
unless application of that law would impair a contract obligation or a vested right. Id.
(citations omitted). A procedural statute is one that “‘defines the . . . proceeding by which
a legal right is enforced, as distinguished from the law which gives or defines the right.’”
Doe v. Sundquist, 2 S.W.3d 919, 923 (Tenn. 1999) (quoting Kuykendall v. Wheeler, 890
S.W.2d 785, 787 (Tenn.1994) (citation omitted)). A remedial statute is one that “provides
the means by which a cause of action may be effectuated, wrongs addressed, and relief
obtained.” Id. (citing Dowlen v. Fitch, 196 Tenn. 206, 211-12, 264 S.W.2d 824, 826 (1954)).
The retrospective application of “substantive legal changes” that “take away or impair
vested rights acquired under existing laws or create a new obligation, impose a new duty, or
attach a new disability in respect of transactions or considerations already passed[]” is
constitutionally impermissible, however. Estate of Bell, 318 S.W.3d at 829 (quoting Doe v.
Sundquist, 2 S.W.3d at 923 (quoting Morris v. Gross, 572 S.W.2d 902, 907 (Tenn. 1978));
cf. Kuykendall v. Wheeler, 890 S.W.2d 785, 787 (Tenn. 1994) (noting that “[w]hether a
statute applies retroactively depends on whether its character is ‘substantive’ or
‘procedural.’)). “Statutes are presumed to operate prospectively unless the legislature clearly
indicates otherwise.” Nutt v. Champion Int’l Corp., 980 S.W.2d 365, 368 (Tenn. 1998).
The language of the statute at dispute in this case does not clearly indicate that the
General Assembly intended the amendments to be applied retroactively. However, the initial
issue in this case is whether, as Appellants contend, the amendment in fact adds an entirely
new ground for removal of utility district commissioners from office, or whether the trial
court correctly determined that the statutory amendment simply added language to the
subsection clarifying a pre-existing basis for removal. In short, the preliminary question
posed by this matter is whether a district utility commissioner may be removed from office
for the failure to fulfill his or her fiduciary duty in the oversight or operation of the utility
district, notwithstanding the absence of the elements of knowing or willfulness, prior to the
2009 amendments.
When interpreting a statute, we seek to ascertain and effectuate the General
Assembly’s intent, neither unduly restricting nor expanding the statute beyond its intended
scope in light of the context of the entire statute and the natural and ordinary meaning of the
statutory language. Hathaway v. First Family Fin. Servs., Inc., 1 S.W.3d 634, 640 (Tenn.
1999) (citations omitted); JJ & TK Corp. v. Bd. of Comm’rs, 149 S.W.3d 628, 630–31 (Tenn.
Ct. App.2004) (citations omitted).
As noted above, prior to June 2009, a commissioner could be removed from office
under section 7-82-307(b)(2) if he or she “knowingly or willfully committed misconduct in
office or [] knowingly or willfully neglected to perform any duty imposed upon such member
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by law[.]” Tenn. Code Ann. § 7-82-507(b)(2)(2005). We additionally note that, although
section 7-82-107 provides that Title 7, Chapter 82 is “complete in itself and shall be
controlling,” the “ouster” provisions contained in subsection 307 prior to 2009 mirrored the
general provision providing for the removal from office of public officers contained at
section 8-47-101, et. seq., which provides, in relevant part:
Every person holding any office of trust or profit, under and by virtue of any
of the laws of the state, either state, county, or municipal, except such officers
as are by the constitution removable only and exclusively by methods other
than those provided in this chapter, who shall knowingly or willfully commit
misconduct in office, or who shall knowingly or willfully neglect to perform
any duty enjoined upon such officer by any of the laws of the state, or who
shall in any public place be in a state of intoxication produced by strong drink
voluntarily taken, or who shall engage in any form of illegal gambling, or who
shall commit any act constituting a violation of any penal statute involving
moral turpitude, shall forfeit such office and shall be ousted from such office
in the manner hereinafter provided.
Tenn. Code Ann. § 8-47-101. Accordingly, our case law considering the removal of public
officials from office under section 8-47-101 is instructive in this case with respect to whether
removal from office for conduct that is arguably neither willful nor knowing “take[s] away
or impair[s] vested rights acquired under existing laws or create[s] a new obligation,
impose[s] a new duty, or attach[es] a new disability in respect of transactions or
considerations already passed.”2 Estate of Bell v. Shelby County Health Care Corp., 318
S.W.3d 823, 829 (Tenn. 2010) (citations omitted).
The proceedings defined by the constitution and statutes provide the exclusive
proceedings by which a public official may be removed from office. Snow v. Pearman, 462,
436 S.W.2d 861, 863 (1968); Country Clubs, Inc. v. City of Knoxville, 395 S.W.2d 789, 793
(1965); Johnson v. Williamson, No. 01A01-9005-CH-00154, 1991 WL 27376, at *2 (Tenn.
Ct. App. Mar. 6, 1991). When considering the removal of a public official from office
pursuant to “the ouster statute” contained in Title 8, Chapter 47, we have noted that the
purpose of the statute is two-fold. First, it provides a mechanism to “‘rid the public of
unworthy officials.’” State ex rel. Jones v. Looper, 86 S.W.3d 189, 198 (Tenn. Ct. App.
2000) (quoting State ex rel. Milligan v. Jones, 143 Tenn. 575, 577, 224 S.W. 1041, 1042
2
The statutes additionally provide for the removal of officials convicted of crimes from public office.
Tennessee Code Annotated § 40-20-114; State ex rel. Carney v. Crosby, 255 S.W.3d 593 (Tenn. Ct. App.
2008). Additionally, Tennessee Code Annotated § 29-35-101, et seq. provides for the removal of a person
holding office illegally.
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(1920)). Second, the statute seeks “‘to improve the public service, and to free the public
from an unfit officer.’” Id. (quoting State v. Howse, 134 Tenn. 67, 78, 183 S.W. 510, 513
(1915)). However, “‘ouster proceedings should not be brought unless there is a clear case
of official dereliction.’” State ex rel. Carney v. Crosby, 255 S.W.3d 593, 597 (Tenn. Ct.
App. 2008)(quoting Tennessee ex rel. Leech v. Wright, 622 S.W.2d 807, 818-19 (Tenn. 1981)
(citing State ex rel Wilson v. Bush, 141 Tenn. 229, 208 S.W. 607 (1919); McDonald v.
Brooks, 215 Tenn. 535, 387 S.W.2d 803 (1965))). Thus, the plaintiff in an ouster
proceeding carries a heightened burden of proof to demonstrate that the public officer
knowingly or willfully committed misconduct in office, or knowingly or willfully neglected
to perform any duty enjoined by the laws of this State. Id. For the purposes of the ouster
statute, the “knowingly” and “willfully” elements “‘are not confined to a studied or deliberate
intent to go beyond the bounds of the law but also encompass a mental attitude of
indifference to consequences or failure to take advantage of means of knowledge of the
rights, duties or powers of a public officer[.]’” State ex rel. Leech v. Wright, 622 S.W.2d
807, 817 (Tenn. 1981) (quoting Jordan v. State, 217 Tenn. 307, 397 S.W.2d 383 (1965)).
To constitute misconduct that is willful or knowing, the public official’s conduct must exceed
“‘simple negligence.’” State ex rel. Carney, 255 S.W.3d at 598 (quoting Jordan, 397 S.W.2d
at 399). Further, “mere mistakes in judgment will not suffice” to remove a public officer
from office under the ouster statute. Vandergriff v. State ex rel. Davis, 206 S.W.2d 395, 397
(Tenn. 1937).3
As the trial court noted, a public official has no vested right in his or her office. State
3
Notwithstanding the courts’ recognition that ouster proceedings should not be commenced in the
absences of “a clear case of official dereliction[,]” we have noted:
However, the ouster statutes also reflect the General Assembly’s deep concerns regarding allegations
of misconduct by public officials. They establish special, expedited judicial procedures for the
removal of errant officials. Recognizing the gravity of accusations of misconduct in public officials,
these procedures authorize the court hearing the matter to suspend the official pending a final
hearing and determination. Tenn. Code Ann. § 8-47-116. A hearing on a motion to suspend can be
held on as little as five (5) days’ notice. Tenn. Code Ann. § 8-47-117. . . .[T]he statutes also limit
the number of pleadings allowed and shorten the usual time permitted to answer petitions or
complaints. Tenn. Code Ann. §§ 8-47-114, 8-47-115. Continuances of the trial by agreement of the
parties is expressly prohibited. Tenn. Code Ann. § 8-47-119. Both the trial court and the appellate
court are directed to give ouster cases precedence. Tenn. Code Ann. §§ 8-47-119, 8-47-125. In
addition, the legislature has determined that proceedings in ouster actions are to be “summary.”
Tenn. Code Ann. § 8-47-119.
State ex rel. Jones v. Looper, 86 S.W.3d 189, 198 (Tenn. Ct. App. 2000)(internal footnote omitted).
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v. Blazer, 619 S.W.2d 370, 374 (Tenn. 1981). Additionally, the General Assembly has the
discretion to treat public officers differently from other citizens. Id. However, “‘it is well
settled that an office is a species of property in which [a public official] has property
rights.’” Id. (quoting State v. Kerby, 136 Tenn. 386, 389, 189 S.W. 859 (1916)). Prior to the
2009 amendments to section 7-82-307, district utility commissioners, like other public
officials, could be removed from office only upon a showing of knowing or willful
misconduct. In light of the foregoing discussion, we must agree with the Commissioners that
the statutory amendments providing for the removal of utility district commissioners from
office for the failure to fulfill fiduciary duties without a showing of the elements of knowing
or willfulness, is a substantive legal change to section 7-81-307(b)(2). Notwithstanding a
public official’s duty to adhere to his fiduciary responsibilities, retrospective application of
the 2009 amendment would attach a new disability to past transactions where it removes the
elements of knowing and willfulness. We accordingly reverse summary judgment in favor
of the UMRB on this issue.
Vagueness
We next turn to Appellants’ assertion that the trial court erred in its determination that
the amended statute is not unconstitutionally vague. Appellants’ assert that “failing to fulfill
the commissioner’s or commissioners’ fiduciary responsibility in the operation or oversight
of the district” is unconstitutionally vague where the terms “fiduciary duty” and “the
operation or oversight of the district” contained in the amendments are neither defined nor
able to be understood by ordinary persons. They assert that the General Assembly offered
no statement of intent or policy, standards or guidelines to enable an administrative law judge
to determine what would constitute a breach of fiduciary duty, without an element of
knowing or willful failure, in the context of Appellants’ operation or oversight of the district.
Appellants also assert that an “apparent conflict” exists in the statutes where section 7-82-
309(b)(1) provides that “[a]ll powers and authority enumerated in this section shall be
exercised by such district for the welfare and benefit of the public served by such district[,]”
where section 7-82-309(b)(2)(A) exempts gas utility commissioners from subsection (b), and
where section 7-82-307(b)(1) “make[s] the mere failure to fulfill fiduciary duty (without the
willful element) grounds for ouster or removal.” Appellants also assert that section 7-82-
307(b) conflicts with section 48-58-601(b), which provides that “members of . . . non-profit
boards must be permitted to operate without concern for the possibility of litigation arising
from the discharge of their duties of policy makers” and 48-58-601(c), which immunizes
governing bodies of non-profit organizations from suit except in cases of willful, wanton or
gross negligence.
The UMRB, on the other hand, contends that the procedural framework contained in
the ouster statute “is designed to produce consistent and well-reasoned interpretation and
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enforcement of decisions relating to the exercise of utility district commissioners’ fiduciary
responsibility.” It submits that the statute provides that the Comptroller must conduct an
investigative audit of a utility district and submit its report to the UMRB, narrowing the
conduct that might serve as a ground for removal from office. The UMRB asserts that the
Comptroller has prescribed a minimum system of record-keeping for utility districts which
is contained in the Internal Control and Compliance Audit Manual for Tennessee Utility
Districts, and that utility districts always have been subject to annual audits. The UMRB
asserts that the provisions of the ouster are consistent with the regulatory scheme governing
utility districts. It also asserts that, after the Comptroller has submitted a report, the UMRB
must examine it to determine whether a basis exists upon which to initiate a contested case
proceeding; that any hearing must be conducted by the UMRB or an administrative law
judge; that the matter is subject to further review under section 4-5-315. The UMRB further
submits that its members include the Comptroller or his designee; experienced utility district
commissioners and managers; and a member representing the interests of utility customers.
It argues that the ouster statute is not inconsistent with the exemption for gas utility districts
provided by section 7-82-309(b) because the sale and distribution of natural gas is subject
to federal regulation. The UMRB finally argues that section 48-58-601 is not relevant to this
matter where it pertains to the personal liability of non-profit board members and not to the
grounds for removal from office.
We begin our analysis of this issue by noting that an act passed by the General
Assembly is presumed to be constitutional. E.g., Gallaher v. Elam, 104 S.W.3d 455, 459
(Tenn. 2003)(citations omitted). Thus, the courts must “indulge every presumption and
resolve every doubt in favor of the statute’s constitutionality.” State v. Taylor, 70 S.W.3d
717, 721 (Tenn. 2002). We will “uphold the constitutionality of a statute whenever
possible.” State v. Robinson, 29 S.W.3d 476, 480 (Tenn. 2000)(citations omitted). A party
challenging the constitutionality of a statute accordingly carries a “heavy burden” to
overcome that presumption. Gallaher, 104 S.W.3d at 459-60 (quoting West v. Tenn. Hous.
Dev. Agency, 512 S.W.2d 275, 279 (Tenn. 1974)).
A law regulating a person or entity must provide “fair notice” of the conduct that is
required or forbidden, as the case may be. Moncier v. Bd. of Prof’l Responsibilty, No.
E2012-00340-SC-R3-BP, — S.W.3d —, 2013 WL 2285183, at *9 (Tenn. 2013)(citations
omitted). If a law “fails either to give a person of ordinary intelligence a reasonable
opportunity to know what conduct is prohibited or to provide sufficient standards for
enforcement[,]” then it is void for vagueness. Id. “A law is not void for vagueness if an
“‘ordinary person exercising ordinary common sense’” can sufficiently understand the law
and comply with [it.]” Id. (quoting Arnett v. Kennedy, 416 U.S. 134, 159, 94 S. Ct. 1633, 40
L. Ed. 2d 15 (1974) (quoting Civil Serv. Comm'n v. Nat’l Ass’n of Letter Carriers, 413 U.S.
548, 578-79, 93 S. Ct. 2880, 37 L. Ed. 2d 796 (1973))).
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In this case, we agree with the UMRB that neither section 7-82-309(b)(2)(A) nor
section 48-58-601(b) is inconsistent with section 7-82-307(b). As the UMRB observes,
section 48-58-601(b) is applicable to personal liability actions against members of non-profit
boards, it is not a statute governing removal from public office. For the reasons set out in
section 7-82-103, section 7-82-309(b)(2)((B) exempts gas utility districts from subsection
(b). Section 7-82-103, moreover, acknowledges that federal law governs the distributing and
selling of natural gas.
We also agree with the UMRB that the term“failing to fulfill the commissioner’s or
commissioners’ fiduciary responsibility in the operation or oversight of the district” is not
so vague that a person exercising ordinary intelligence and common sense would be unable
to understand and comply with it. Appellants acknowledge that public officials have a well-
established duty to adhere to their fiduciary duties. We observe, moreover, that the law has
long imposed “fiduciary duties,” and our statutes and case law are replete with the term.
Tennessee Code Annotated § 48-240-102(a), for example, provides that a member of a
member-managed LLC has a fiduciary duty to “account to the LLC for any benefit, and hold
as trustee for it any profits derived by the member without the consent of the other members
from any transaction connected with the formation, conduct, or liquidation of the LLC or
from any use by the member of its property . . . ,” and section 48-18-601 contains a statute
of limitations applicable to actions “alleging breach of fiduciary duties” by corporate officers
and directors. Guardians and conservators owe fiduciary duties to their wards, e.g., Freeman
v. Martin, 181 S.W.2d 745,746 (Tenn. 1944); trustees owe fiduciary duties to trust
beneficiaries, e.g., Blackburn v. Blackburn, 6 S.W.3d 338 (Tenn. Ct. App. 2001); realtors
owe fiduciary duties to their clients, e.g., Ann Taylor Realtors, Inc. v. Sporup, No.
W2010-00188-COA-R3-CV, 2010 WL 4939967, at *3 (Tenn Ct. App. Dec. 3, 2010);
attorneys owe a fiduciary duty to their clients, e.g., Crawford v. Logan, 656 S.W.2d 360, 364
(Tenn. 1983); stock brokers and financial advisors providing investment advice also owe
fiduciary duties to their clients, e.g., Johnson v. John Hancock Funds, 217 S.W.3d 414, 428
(Tenn. Ct. App. 2006); and employees owe a fiduciary duty of loyalty to their employers,
e.g., Efird v. Clinic of Plastic and Reconstructive Surgery, 147 S.W.3d 208, 219 (Tenn. Ct.
App. 2003).
To impose a fiduciary duty is to impose “a duty to act with the highest degree of
honesty and loyalty toward another person and in the best interests of the other person[.]”
Black’s Law Dictionary 545 (8th ed. 2004). “Nothing is better settled in equity jurisprudence.
It is one of the canons of a court of equity that one who undertakes to act for others cannot
in the same matter act for himself. Where confidence is reposed, duties and obligations arise
which equity will enforce.” Tisdale v. Tisdale, 2 Sneed (TN) 596, 1855 WL 2382, at *6
(Tenn. 1855).
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Title 7, Chapter 82 of the Tennessee Code contains a comprehensive utility district
law. To the extent to which Appellants contend that utility district commissioners, the
UMRB, administrative law judges, the trial courts, and this Court will be unable to ascertain
the nature and extent of utility district commissioners’ fiduciary duties, we must disagree in
light of the duties imposed by the chapter. Additionally, utility district commissioners are
charged with exercising the powers and authority enumerated in the utility district law set
forth in the Code “for the welfare and benefit of the public served by [their] district.” Tenn.
Code Ann. § 7-82-309(b)(1)(2011). We are confident that utility district commissioners of
ordinary intelligence will be able to construe their fiduciary duty – the duty to act with utmost
good faith for the benefit of their district and not themselves – when exercising the duties,
powers, and authority enumerated in Chapter 82 of Title 7.
Holding
We hold that application of the portion of the June 2009 amendments to Tennessee
Code Annotated § 7-82-307(b)(2) permitting the removal of utility district commissioners
for failing to fulfill their fiduciary responsibility in the operation or oversight of the district,
absent the elements of knowing or wilfulness, is an impermissible retrospective application
of law. Summary judgment in favor of the UMRB on that issue accordingly is reversed. We
affirm the trial court’s determination that the statutory amendment is not unconstitutionally
vague. This matter is remanded to the trial court, and the trial court is directed to remand the
case to the Board for further proceedings consistent with our opinion. Costs on appeal are
taxed one-half to the Appellee, the Utility Management Review Board, and one-half to
Appellants, Charles Taylor, Charles Oldham, and Jerry Shattuck.
_________________________________
DAVID R. FARMER, JUDGE
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IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
THE COMMISSIONERS OF THE POWELL-CLINCH UTILITY
DISTRICT v. UTILITY MANAGEMENT REVIEW BOARD
Chancery Court for Davidson County
No. 111608-IV
No. M2012-01806-COA-R3-CV
ORDER
The Judgment of this Court filed in this matter on May 24, 2013, is hereby withdrawn.
It is SO ORDERED.
PER CURIAM