852 F.3d 521
6th Cir.2017Background
- Tennessee's 911 Law (T.C.A. § 7-86-101 et seq., pre-2014 version) created county Emergency Communications Districts (Districts) to operate 911 call centers and authorized a per-line 911 charge to fund them; it also required telephone service suppliers to bill, collect, report, and remit those charges to the Districts.
- Beginning in 2011, multiple Tennessee Districts sued BellSouth alleging it failed to bill/collect/remit all required 911 charges, seeking recovery under the 911 Law, a breach-of-fiduciary-duty (agency) theory, and the Tennessee False Claims Act (TFCA).
- The district court dismissed the statutory claim (holding the 911 Law implies no private right of action) and granted summary judgment to BellSouth on the TFCA claim (finding no knowing falsity); it also rejected the agency/fiduciary claim. Plaintiffs appealed; appeals were consolidated.
- On de novo review the Sixth Circuit held the district court erred: the 911 Law implies a private right of action for Districts against service suppliers because the statute includes no governmental enforcement mechanism and Districts are intended beneficiaries of the billing/ remittance provisions.
- The court reversed dismissal, declined to adopt an independent agency/fiduciary ruling because the implied statutory remedy sufficiently redresses the claim, and reversed summary judgment on the TFCA claim, finding factual disputes about allegedly misleading remittance reports and unexplained unbilled lines that preclude judgment as a matter of law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 911 Law implies a private right of action for Districts to sue service suppliers | The statute makes Districts dependent on suppliers’ billing/remittance; Districts are intended beneficiaries and statute’s lack of governmental enforcement implies a private remedy | Brown v. Tennessee Title Loans analysis forecloses implication because omission of explicit remedy against suppliers suggests legislature did not intend one | Court held the 911 Law implies a private right of action for Districts against service suppliers and reversed dismissal |
| Whether an agency/fiduciary relationship exists between Districts and BellSouth | Districts argue statute effectively makes suppliers agents for billing/collection duties, creating fiduciary obligations | BellSouth argues lack of reciprocal control and arm’s-length relationship precludes agency; district court found insufficient control | Majority declined to decide agency because implied statutory cause of action provides the relief; remanded without adopting implied fiduciary duty; concurrence would have remanded the agency claim too |
| Whether BellSouth’s monthly/annual remittance reports were false statements under the TFCA | Reports stating billing/collection “in accordance with the Tennessee Legislature” were false/misleading because BellSouth omitted many eligible lines and concealed those omissions | BellSouth contends reports merely listed amounts actually billed and reflected reasonable statutory interpretations; any dispute is interpretive, not knowing falsity | Court reversed summary judgment on TFCA: factual disputes (including unexplained unbilled lines and BellSouth’s reports) preclude summary judgment; plaintiff need not prove bad faith under TFCA |
| Whether plaintiffs needed to prove BellSouth acted in bad faith to prevail under TFCA | Plaintiffs: TFCA scienter includes actual knowledge, deliberate ignorance, or reckless disregard; specific intent not required | BellSouth/district court: reasonable statutory interpretation and good-faith disagreement defeat TFCA falsity; court required showing of bad faith | Sixth Circuit held district court erred imposing a bad-faith requirement; TFCA knowledge standard does not require specific intent to defraud and summary judgment was improper on that basis |
Key Cases Cited
- Brown v. Tennessee Title Loans, 328 S.W.3d 850 (Tenn. 2010) (sets three-factor test for implying private rights of action under Tennessee law)
- Cort v. Ash, 422 U.S. 66 (U.S. 1975) (framework for analyzing implied private rights of action)
- United States v. Southland Mgmt. Corp., 326 F.3d 669 (5th Cir. 2003) (discusses good-faith/interpretive defenses under FCA; relied on by district court but treated cautiously)
- Hardy v. Tournament Players Club at Southwind, 513 S.W.3d 427 (Tenn. 2017) (applies Brown factors and emphasizes legislative enforcement schemes in private-right analysis)
- United States ex rel. Oliver v. Parsons Co., 195 F.3d 457 (9th Cir. 1999) (rejects the view that a reasonable statutory interpretation necessarily precludes falsity under False Claims Act)
- United States ex rel. Purcell v. MWI Corp., 807 F.3d 281 (D.C. Cir. 2015) (a reasonable interpretation does not automatically foreclose fraudulent-knowledge issues; jury may find defendant was warned away from its view)