Gregory Fodness v. Newport and Cocke County Economic Development Commission, Inc.

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
December 9, 2004 Session
GREGORY FODNESS v. NEWPORT AND COCKE COUNTY ECONOMIC
DEVELOPMENT COMMISSION, INC.
Appeal from the Chancery Court for Cocke County
No. 03-076 Telford E. Forgety, Jr., Chancellor
No. E2004-01491-COA-R3-CV - FILED MARCH 16, 2005
This case involves the interpretation of a portion of the Tennessee Public Records Act, Tenn. Code
Ann. § 10-7-503. The issue presented is whether the statutory exemption set forth in Tenn. Code
Ann. § 10-7-503(d)(1) is available to the Appellee which is a nonprofit joint municipal-county
economic development commission. The trial court granted the commission’s motion for summary
judgment, finding that the exemption was applicable and the commission did not have to provide
its records to the Appellant. We hold that the commission is entitled to the statutory exemption, but
that there is a genuine question of material fact as to whether the commission is the functional
equivalent of a public agency. Accordingly, we vacate the judgment and remand for further
proceedings consistent with this opinion.
Tenn.R.App.P. 3 Appeal as of Right; Judgment of the Trial Court Vacated;
Case Remanded
SHARON G. LEE, J., delivered the opinion of the court, in which HERSCHEL P. FRANKS, P.J., joined.
CHARLES D. SUSANO , JR., J., filed a separate opinion concurring in part and dissenting in part.
David B. Hamilton, Knoxville, Tennessee, for Appellant Gregory Fodness.
Clyde A. Dunn, Newport, Tennessee, for Appellee Newport and Cocke County Economic
Development Corporation., Inc.
OPINION
On November 20, 2003, the Appellant, Gregory Fodness, filed this action alleging that the
Newport and Cocke County Economic Development Commission (hereinafter “the Commission”)
violated the Tennessee Public Records Act by failing to provide certain records to Mr. Fodness
which he alleged were public.1 The Commission answered and alleged, among other things, that it
was entitled to the statutory exemption provided at Tenn. Code Ann. § 10-7-503(d)(1), and thus not
required to provide the requested information.
The Commission moved for summary judgment on the grounds that there was no genuine
issue of disputed fact regarding its assertion that it had met all of the requirements set forth by the
statute. After a hearing on May 18, 2004, the trial court granted summary judgment to the
Commission, finding that the Commission was exempt from the Public Records Act because it had
filed an audit. Further, the trial court found that the case of Memphis Publishing Co. v. Cherokee
Children & Family Services, Inc., 87 S.W.3d 67 (Tenn.2002) did not negate the clear exemption
provided by Tenn. Code Ann. § 10-7-503(d). Mr. Fodness appeals.
The issue in this case is whether the trial court erred in granting the Commission summary
judgment.
Our standard of review regarding summary judgment is well settled. A motion for summary
judgment should be granted when the movant demonstrates that there are no genuine issues of
material fact and that the moving party is entitled to a judgment as a matter of law. Tenn.R.Civ.P.
56.04. The party moving for summary judgment bears the burden of demonstrating that no genuine
issue of material fact exists. Bain v. Wells, 936 S.W.2d 618, 622 (Tenn.1997). On a motion for
summary judgment, the court must take the strongest legitimate view of the evidence in favor of the
nonmoving party, allow all reasonable inferences in favor of that party, and discard all countervailing
evidence. Byrd v. Hall, 847 S.W.2d 208 (Tenn.1993).
Summary judgment is only appropriate when the facts and the legal conclusions drawn from
the facts reasonably permit only one conclusion. Carvell v. Bottoms, 900 S.W.2d 23, 26 (Tenn.1995).
Since only questions of law are involved, there is no presumption of correctness regarding a trial
court's grant of summary judgment. Bain, 936 S.W.2d at 622. Therefore, our review of the trial
court's grant of summary judgment is de novo on the record before this court. Warren v. Estate of
Kirk, 954 S.W.2d 722, 723 (Tenn.1997).
This case requires an interpretation of the Tennessee Public Records Act and therefore we
must “ascertain and give effect to the legislative intent without restricting or expanding a statute’s
1
The pleadings do not describe exactly what records Mr. Fodness requested. The record does contain a copy
of an online article of the Newport Plain Talk, filed as an exhibit with the trial court, stating that Mr. Fodness had
requested the following:
All paperwork, correspondence, notes, e-mails, and/or faxes regarding the
lease/purchase of the former Virco building to Eagle Plastics and Rubber.
All paperwork, correspondence, notes, e-mails, and faxes between the owners of the
Virco building and Donald Hurst [Executive Director of the Commission] regarding
the donation of the Virco building to the Cocke County EDC.
All paperwork, correspondence, notes, e-mails, and/or faxes regarding the
lease/purchase of the Virco building to Great Lakes Chemical Corporation.
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coverage beyond its intended scope.” Owens v. State, 908 S.W. 2d 923,926 (Tenn. 1995). Issues
involving construction of a statute and its application to facts involve questions of law. Memphis
Publishing Co. v. Cherokee Children & Family Services, Inc., 87 S.W.3d 67 (Tenn. 2002).
Therefore the trial court’s resolution of these issues is not entitled to Tenn. R. App. P 13(d)’s
presumption of correctness on appeal. We will review these issues de novo and reach our own
independent conclusions regarding them. King v. Pope, 91 S.W.2d 314, 318 (Tenn. 2002).
The Commission, a nonprofit corporation, was chartered for the purposes of advancing the
economic, industrial, professional, cultural, and civic welfare for Newport and Cocke County;
encouraging the growth of existing industries and businesses; supporting all activities beneficial to
the community and opposing those which might be detrimental; and promoting the welfare of all
area citizens. It is governed by a board of directors composed of various public officials representing
Cocke County and the cities of Newport and Parrottsville, a landowner selected by the Cocke County
Farm Bureau, and individuals representing various utility boards, banks and a local hospital.
On October 21, 2003, Gregory Fodness requested certain records from the Commission.
There is some dispute as to whether Mr. Fodness was actually denied the records or just failed to
make an appointment in order to obtain the records, but in any event, Mr. Fodness did not receive the
records and filed suit to gain access to the Commission’s records under the Tennessee Public Records
Act.
The Tennessee Pubic Records Act “governs the right of access to records of government
agencies in the State.” Cole v. Campbell, 968 S.W.2d 274, 275 ( Tenn.1998). The Act “serves a
crucial role in promoting accountability in government though public oversight of governmental
activity”. Memphis Publishing Co. v. Cherokee Children & Family Services, Inc., 87 S.W.3d 67,74
(Tenn.2002).
In construing the Public Records Act, we are guided by the General Assembly’s directive that
the public records statutes are to be “broadly construed so as to give the fullest possible public access
to public records.” Tenn. Code Ann. § 10-7-505(d); see also Chattanooga Publishing Co. v.
Hamilton Co. Election Comm’n, C/A No. E2003-00076-COA-R3-CV, 2003 WL 22469808, at * 4,
2003 Tenn. App. LEXIS 767, at * 11 (Tenn. Ct. App. E.S. filed Oct. 31, 2003) and cases cited therein.
In deciding whether the records are subject to public disclosure we must be guided by the clear
legislative policy favoring disclosure. Thus, unless it is clear that disclosure of a record or class of
records is excepted from disclosure, we must require disclosure even in the face of "serious
countervailing considerations." Memphis Publ'g Co. v. City of Memphis, 871 S.W.2d at 684, Swift
v. Campbell, C/A No. M2003-02607-COA-R3-CV, 2004 WL 1920783, at * 4, 2004 Tenn. App.
LEXIS 561, at *13-14 (Tenn. Ct. App. M.S. filed Aug. 25, 2004), appl. perm. appeal denied January
31, 2005.
The relevant portion of the Public Records Act at issue here, Tenn. Code Ann. § 10-7-503,
provides:
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(a) Except as provided in § 10-7-504(f), all state, county and municipal
records. . . shall at all times, during business hours, be open for
personal inspection by any citizen of Tennessee, and those in charge
of such records shall not refuse such right of inspection to any citizen,
unless otherwise provided by state law.
* * *
(d)(1) All records of any association or nonprofit corporation described
in § 8-44-102(b)(1)(E)(i) shall be open for inspection as provided in
subsection (a); provided, that any such organization shall not be
subject to the requirements of this subsection so long as it complies
with the following requirements:
(A) The board of directors of the organization shall cause an annual
audit to be made of the financial affairs of the organization, including
all receipts from every source and every expenditure or disbursement
of the money of the organization, made by a disinterested person
skilled in such work. Each audit shall cover the period extending back
to the date of the last preceding audit and it shall be paid out of the
funds of the organization;
(B) Each audit shall be conducted in accordance with the standards
established by the comptroller of the treasury pursuant to § 4-3-304(9)
for local governments;
(C) The comptroller of the treasury, through the department of audit,
shall be responsible for ensuring that the audits are prepared in
accordance with generally accepted governmental auditing standards,
and determining whether the audits meet minimum audit standards
which shall be prescribed by the comptroller of the treasury. No audit
may be accepted as meeting the requirements of this section until such
audit has been approved by the comptroller of the treasury;
(D) The audits may be prepared by a certified public accountant, a
public accountant or by the department of audit. If the governing body
of the municipality fails or refuses to have the audit prepared, the
comptroller of the treasury may appoint a certified public accountant
or public accountant or direct the department to prepare the audit. The
cost of such audit shall be paid by the organization;
(E) Each such audit shall be completed as soon as practicable after the
end of the fiscal year of the organization. One (1) copy of each audit
shall be furnished to the organization and one (1) copy shall be filed
with the comptroller of the treasury. The copy of the comptroller of the
treasury shall be available for public inspection. Copies of each audit
shall also be made available to the press; and
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(F) In addition to any other information required by the comptroller of
the treasury, each audit shall also contain:
(i) A listing, by name of the recipient, of all compensation, fees or
other remuneration paid by the organization during the audit year to,
or accrued on behalf of, the organization's directors and officers;
(ii) A listing, by name of recipient, of all compensation and any other
remuneration paid by the organization during the audit year to, or
accrued on behalf of, any employee of the organization who receives
more than twenty-five thousand dollars ($25,000) in remuneration for
such year;
(iii) A listing, by name of beneficiary, of any deferred compensation,
salary continuation, retirement or other fringe benefit plan or program
(excluding qualified health and life insurance plans available to all
employees of the organization on a nondiscriminatory basis)
established or maintained by the organization for the benefit of any of
the organization's directors, officers or employees, and the amount of
any funds paid or accrued to such plan or program during the audit
year; and
(iv) A listing, by name of recipient, of all fees paid by the organization
during the audit year to any contractor, professional advisor or other
personal services provider, which exceeds two thousand five hundred
dollars ($2,500) for such year. Such listing shall also include a
statement as to the general effect of each contract, but not the amount
paid or payable thereunder.
The provisions of this subsection shall not apply to any association
or nonprofit corporation described in § 8-44-102(b)(1)(E)(i), that employs
no more than two (2) full-time staff members.
(2) The provisions of this subsection (d) shall not apply to any
association, organization or corporation that was exempt from federal
income taxation under the provisions of § 501(c)(3) of the Internal
Revenue Code (26 U.S.C. § 501(c)(3)) as of January 1, 1998, and
which makes available to the public its federal return of organization
exempt from income tax (Form 990) in accordance with the Internal
Revenue Code and related regulations.
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It is undisputed that the Commission is an “association or nonprofit corporation described in
§ 8-44-102(b)(1)(E)(i).”2 It is undisputed that the Commission has filed an annual audit required by
subsection (d)(1) cited above. But it is disputed whether the Commission has one employee or two
or more employees.
Mr. Fodness makes two arguments in support of his contention that the Commission is not
entitled to the exemption even though it complied with the audit requirement. First, he argues that
the second sentence in Tenn. Code Ann. § 10-7-503(d)(1)(F)(iv) quoted above, providing that “this
section” is inapplicable to an association or nonprofit corporation employing two or fewer full-time
staff members, and should be construed as barring the Commission from claiming the exemption.
Mr. Fodness argues that in order to be eligible for the statutory audit exemption, an association or
nonprofit corporation must comply with the audit requirements found at Tenn. Code Ann. § 10-7-
503(d)(1)(A-F) and employ two or fewer full-time staff members. Second, Mr. Fodness argues that
the Supreme Court’s decision in Memphis Publishing Co. v. Cherokee Children & Family Services,
Inc., 87 S.W.3d 67 (Tenn.2002), effectively precludes the Commission from being eligible for the
audit exemption. The Commission argues that the audit exemption applies to an association or
nonprofit corporation which either meets the audit requirements or employs two or fewer staff
members. We do not agree with either the position taken by Mr Fodness or that of the Commission.
After carefully reviewing the statute, we are of the opinion that the final sentence of Tenn.
Code § 10-7-503(d)(1)(F)(iv), stating “[t]he provisions of this subsection shall not apply to any
association or nonprofit corporation described in § 8-44-102(b)(1)(E)(i), that employs no more than
two (2) full-time staff members,” [emphasis added] applies to the whole of subsection (d) of the
statute, and, therefore, any such nonprofit corporation or association is not governed by the Public
Records Act. The sentence as written is ambiguous as to precisely which subsection it refers.
Therefore we have reviewed the legislative history of Tenn. Code Ann.§ 10-7-503(d)(1)(F)(iv) and
it is clear to us that the legislature determined that certain small nonprofit associations that have two
or less employees submit an annual audit to the elected officials in the communities that they serve.
The transcript of the legislative hearing on the bill that became the statutory section at issue provides
as follows:
2
Tenn. Code Ann. § 8-44-102(a) provides that “[a]ll meetings of any governing body are declared to be public
meetings open to the public at all times, except as provided by the Constitution of Tennessee.” “Governing body” is
defined in relevant part as:
(E)(i) The board of directors of any association or nonprofit corporation authorized
by the laws of Tennessee that:
(a) W as established for the benefit of local government officials or counties, cities,
towns or other local governments or as a municipal bond financing pool;
(b) Receives dues, service fees or any other income from local government officials
or such local governments that constitute at least thirty percent (30%) of its total
annual income; and
(c) W as authorized as of January 1, 1998, under state law to obtain coverage for its
employees in the Tennessee consolidated retirement system.
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Sen. Crowe: Senator Haun, Ramsey and I, and I think Senator Gilbert
concurs, felt that there are certain very small not-for-profit associations
like our Tennessee County Services Association, the Highway
Association, the County Commissioners and others, that would have
two or less full-time staff members, these already submit budgets and
audit to their board of elected officials who are primarily elected
officials in the communities that they serve, and we felt they should be
exempted from this subsection.
Therefore, these small nonprofit corporations and associations do not have to file another audit to be
exempt from the Public Records Act and so are taken out of the coverage of the Act. See Tenn. G.
Assemb., 100th G.A., 2d Sess. (1998), Senate (March 26, 1998, tape # S-34).
Based on a review of the statute as it relates to nonprofit corporations, a nonprofit
corporation’s records are not accessible to the public if:
(1) the nonprofit corporation has more than two employees and files an annual audit pursuant
to the statute, or
(2) the nonprofit corporation has two or less employees.
There is a factual dispute in this case as to whether the Commission has one employee or two
or more employees. But this is not a material factual dispute because the Commission’s records are
not open to the public under the statute regardless of the number of employees. If the Commission
has only one employee, as it claims, the Act does not apply to it pursuant to Tenn. Code Ann. § 10-7-
503(d)(1)(F)(iv). If the Commission has two or more employees, as Mr. Fodness claims, the
Commission filed an audit and so is exempt from the Act. If the Commission had not filed an audit,
then the number of its employees would be a material fact and summary judgment would not have
been appropriate.
However, our inquiry does not end here. This is where we respectfully disagree with the trial
court. It is our opinion that the Supreme Court’s directive in Memphis Publishing Co. v. Cherokee
Children & Family Services, Inc., 87 S.W.3d 67 (Tenn.2002) requires us to go a step further and
consider whether the Commission is the functional equivalent of an agency of the government
pursuant to the guidelines set forth by our Supreme Court after the enactment of the Public Records
Act.
In Memphis Publishing Co., the Supreme Court was faced with the issue of whether a
nonprofit corporation that provides privatized services to a government entity is subject to the public
access requirements of the Public Records Act. The Court held as follows:
Consequently, in light of our duty to construe the Tennessee Public
Records Act liberally in favor of "the fullest possible public access to
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public records," we follow the Connecticut Supreme Court and
interpret records "made or received ... in connection with the
transaction of official business by any governmental agency" to
include those records in the hands of any private entity which operates
as the functional equivalent of a governmental agency.
* * *
A private business does not open its records to public scrutiny merely
by doing business with, or performing services on behalf of, state or
municipal government. But when an entity assumes responsibility for
providing public functions to such an extent that it becomes the
functional equivalent of a governmental agency, the Tennessee Public
Records Act guarantees that the entity is held accountable to the public
for its performance of those functions.
Memphis Publishing Co., 87 S.W.3d at 79 (footnotes omitted).
The Supreme Court adopted a “functional equivalency” test for determining when a private
entity to which a government has delegated a public duty must make its records public. The Court
further elaborated upon the contours of the functional equivalency test as follows:
The cornerstone of this analysis, of course, is whether and to what
extent the entity performs a governmental or public function, for we
intend by our holding to ensure that a governmental agency cannot,
intentionally or unintentionally, avoid its disclosure obligations under
the Act by contractually delegating its responsibilities to a private
entity. Beyond this consideration, additional factors relevant to the
analysis include, but are not limited to, (1) the level of government
funding of the entity; (2) the extent of government involvement with,
regulation of, or control over the entity; and (3) whether the entity was
created by an act of the legislature or previously determined by law to
be open to public access.
Memphis Publishing Co., 87 S.W.3d at 79.
The Supreme Court did not specifically refer to subsection (d) of the Public Records Act,
presumably because the nonprofit corporation, Cherokee Children & Family Services, Inc., was not
a nonprofit corporation as defined by Tenn. Code Ann. § 8-44-102(a), but, rather, based its decision
on subsection (a) which refers to “[a]ll state, county and municipal records.” However, we believe
the Supreme Court intended the functional equivalency analysis to be applied to any nonprofit
corporation or association seeking to keep its records closed.
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We are persuaded that in light of our duty to construe the Tennessee Public Records Act
liberally in favor of the fullest possible public access to public records and the guidance provided by
our Supreme Court in Memphis Publishing Co., that we must make the functional equivalency
determination and, even though the nonprofit corporation has complied with the audit exception, its
records are accessible to the public if it is the functional equivalent of a governmental agency. Its
records will not be open to the public merely because it does business with or performs services on
behalf of the Cocke County government or any municipal government. To hold otherwise would to
allow a nonprofit corporation or association as defined by Tenn. Code Ann. § 8-44-102(b)(1)(E)(i)
to file an audit, or if it has less than two employees not file an audit, and close its records to the public
even though it is providing the functionally equivalent services of a government agency. We do not
believe the Supreme Court intended such a result by its comments in Memphis Publishing Co. As
the Supreme Court emphasized in that case, the Public Records Act “serves a crucial role in
promoting accountability in government through public oversight of governmental activities.”
Memphis Publishing Co., 87 S.W.3d at 74. Since this analysis is factually driven and there are not
sufficient facts in the record for us to make this analysis, we must remand this case to the trial court
for a determination of whether the services performed by the Commission are the functional
equivalent of those performed by a government agency, utilizing the factors set forth in Memphis
Publishing Co..
The judgment of the trial court is vacated and this case is remanded for the trial court to apply
the functional equivalency test in accordance with Memphis Publishing Co. v. Cherokee Children &
Family Services, Inc. Costs on appeal are assessed to the Appellee, Newport and Cocke County
Economic Development Commission.
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SHARON G. LEE, JUDGE
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