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