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Town of Smyrna v. Municipal Gas Authority
129 F. Supp. 3d 589
M.D. Tenn.
2015
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Background

  • Town of Smyrna (Smyrna) sues Municipal Gas Authority of Georgia (MGAG) alleging unauthorized multi-year hedges, asserting claims under the Tennessee Consumer Protection Act (TCPA), Tennessee False Claims Act (TFCA), breach of fiduciary duty, and breach of contract; trial was imminent and summary judgment motions were fully briefed.
  • MGAG filed both a Rule 12(c) motion and Rule 56 summary judgment motion; court treated arguments as raised on summary judgment because parties relied on matters outside the pleadings.
  • Key disputed facts: Smyrna contends MGAG placed multi-year hedges beyond what Smyrna authorized and later invoiced Smyrna; MGAG contends Smyrna knew or reasonably should have known of the hedges by spring 2010 and that the conduct was contractual and within its authority.
  • Procedural/time issue: MGAG argues Smyrna’s TCPA claim is time-barred under the one-year discovery rule; Smyrna sought to invoke nullum tempus and equitable estoppel.
  • TFCA issue: MGAG argues it is not a “person” liable under the TFCA as a public corporation/instrumentality; Smyrna argues the TFCA is remedial and should reach entities submitting fraudulent claims to Tennessee governmental units.
  • Court denied MGAG’s motion for summary judgment on the TFCA, fiduciary-duty, breach of contract, and damages claims but expressed reservations about some claims and left factual issues for the jury.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Timeliness of TCPA claim Smyrna: nullum tempus or discovery occurred when invoices issued in Dec 2010, so claim timely MGAG: Smyrna knew or should have known by spring 2010; one-year discovery rule bars claim Court: claim time-barred — Smyrna knew of alleged unlawful act in spring 2010; nullum tempus and estoppel inapplicable
Equitable estoppel to toll limitations Smyrna: MGAG’s communications induced delay MGAG: no promises or conduct that would induce delay Court: Smyrna failed to identify conduct creating estoppel; defense not tolled
Applicability of TFCA to MGAG Smyrna: TFCA remedial; should cover public corporations submitting false claims to Tennessee municipalities MGAG: as a public instrumentality created by Georgia, it is not a "person" under TFCA and cannot be liable Court: TFCA plausibly applies; denied summary judgment on TFCA claim and left factual issues (knowledge, falsity) to jury
Breach of fiduciary duty Smyrna: MGAG acted as agent for hedging (Option 2); principal-agent/fiduciary duties arose MGAG: corporation owes no fiduciary duty to members; actions were contractual and for pool benefit Court: denied summary judgment — existence of agency/fiduciary duty is a fact question for jury
Breach of contract and damages Smyrna: hedges exceeded authority; paid under protest; seeks damages (expert model) MGAG: evidence shows Smyrna knew of multi-year hedges and damages model speculative; mitigation issues Court: denied summary judgment — disputes over facts and damages calculations are for the trier of fact

Key Cases Cited

  • Max Arnold & Sons, LLC v. W.L. Hailey & Co., 452 F.3d 494 (6th Cir. 2006) (conversion of Rule 12(c) motion to summary judgment when the court considers matters outside the pleadings)
  • Anderson v. Liberty Lobby, 477 U.S. 242 (Sup. Ct. 1986) (standard for genuine dispute on summary judgment)
  • Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (Sup. Ct. 1986) (construing evidence and drawing inferences at summary judgment)
  • Redwing v. Catholic Bishop for Diocese of Memphis, 363 S.W.3d 436 (Tenn. 2012) (discovery rule and accrual of claims)
  • Cook Cnty., Ill. v. U.S. ex rel. Chandler, 538 U.S. 119 (Sup. Ct. 2003) (interpretation of "person" under False Claims Act and treatment of governments/counties)
  • Radol v. Thomas, 772 F.2d 244 (6th Cir. 1985) (corporate fiduciary duties run to the corporation via officers/directors, not directly to shareholders)
  • Hamilton Cnty. Bd. of Educ. v. Asbestospray Corp., 909 S.W.2d 783 (Tenn. 1995) (nullum tempus and distinction between governmental and private/corporate functions)
Read the full case

Case Details

Case Name: Town of Smyrna v. Municipal Gas Authority
Court Name: District Court, M.D. Tennessee
Date Published: Sep 10, 2015
Citation: 129 F. Supp. 3d 589
Docket Number: No. 3:11-00642
Court Abbreviation: M.D. Tenn.