MEMORANDUM
In this сase, set for trial at the end of the month, Defendant Municipal Gas Authority of Georgia (“the Gas Authority” or “MGAG”) has filed a Motion to Dismiss Plaintiff Town of Smyrna’s (“Town’s” or “Smyrna’s”) claims under the Tennessee Consumer Protection Act and False Claims Act (Docket No. 143), and a Motion for Summary Judgment (Docket No. 149) on those claims and others. Both motions have been exhaustively briefed
On at least four occasions, the Court has had the opportunity to review this file in the context of MGAG’s Motions to Dismiss, and finds it unnecessary to set forth a detailed exposition of the parties’ respective position on the facts. Instead, the Court will reference the factual contentions in the context of ruling on the specific legal issues presented.
Further, while MGAG’ has chosen to file both a Motion to Dismiss under Rule 12(c) and a Motion fоr Summary Judgment under Rule 56(c), the two overlap to some extent, the parties have briefed the issues in the context of both motions, and Plaintiff relies upon facts not pled in its Complaint. Accordingly, the Court will treat all arguments as if raised in the context of the Motion for Summary Judgment. See, Max Arnold & Sons, LLC v. W.L. Hailey & Co.,
The standards governing summary judgment motions are, of course, well known. A party may obtain summary judgment if the evidence establishes there are no genuine issues of material fact for trial and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Covington v. Knox Cnty. Sch. Sys.,
I. Tennessee Consumer Protection Act
“The Tennessee Consumer Protection Act, Tennessee Code Annotated Sections 47-18-101 et seq. (TCPA’), prohibits, among other things, ‘unfair or deceptive acts or practices affecting the conduct of any trade or commerce’ Tenn.Code Ann. § 47-18-104(a),’” and characterizes “[a] ‘deceptive’ act or practice [a]s ‘one that causes or tends to cause a consumer to believe what is false or that misleads or tends to mislead a consumer as a matter of fact.’ ” Borla Performance Indus., Inc. v. Universal Tool & Eng., Inc.,
MGAG argues that Smyrna’s TCPA claim is untimely. It asserts that, as alleged in the Second Amended Complaint, Smyrna knew “shortly after February 23, 2010” that MGAG was placing allegedly unauthorized longer-term hedges on the Town’s behalf. (Docket No. 144 at 4). At the very latest, MGAG argues, “Smyrna knew by April 2, 2010, that MGAG had placed the disputed hedges and that the Town was obligated to pay for them because the Gas Authority sent Smyrna a written response that day saying as much.” (Id.).
In response, Smyrna first argues that the one-year statute of limitations is inapplicable under the nullum tempus doctrine. The Court is unpersuaded by that argument.
“ The ancient rule quod nullum tempus occurit regi — that the sovereign is exempt from the consequences of its laches ... has enjoyed continuing vitality for centuries.’ ” United States v. Mandycz,
In “certain case,” the nullum tempus doctrine applies “to subordinate organs of the state, such as counties or municipalities.” Id. Specifically,
The statute of limitations does not run against the sovereign or the state, or against a county, when [the county is seeking] to enforce a demand arising outof, or dependent upon, the exercise of its governmental functions as an arm of the state. But the statute does run against a county or municipality in respect of its rights or claims which are of a private or corporate nature and in which only its local citizens áre interested, as' distinguished from a public or'governmental matter in which all the people of the state are interested.
Id. (quoting Wood v. Cannon Cnty.,
In support of its position on the nullum tempus doctrine, the Town relies upon a number of cases, none of which involved the supply of natural gas to the local citizenry. Several of the eases have to do'with suits involving schools and, in this vein, it is important to recognize “that the State of Tennessee has accepted, both in its constitution and statutory code, the duty of providing a free public education to its citizens” and, “[b]ecause of education’s inclusion in both the fundamentаl law and legislation of this state, its provision is a quintessential governmental, not a private, function.” Hamilton Cnty., 909 S.W.2d at 786 (collecting cases).
The case which ‘ appears to have the farthest reach, one of the two on which the Town of Smyrna primarily relies, is City of Elizabethton. There, the city recovered damages against a landowner for breach of a sewer easement that was part of the path for the city’s underground sewer line and on which the landowner dumped cinders and fly ash.
On appeal, the court recognized that, even though the damages that were awarded benefited the city's residents because the cost of a new sewer system would be paid for by defendant landowner; “the problem which resulted in the award of damages — the problem which prompted the prosecution of th[e] case — -was the faсt that a significant portion of the City’s sewage system was rendered inaccessible as a result of the overburden placed upon it by [defendant].”
Inasmuch as the Tennessee Water Control Act states' “that the waters of Tennessee are the property of the state and are held in public trust for the use of the people of the státe” and “declared it] to be the public policy of Tennessee that the people of Tennessee as beneficiaries of this trust, hаve a right to unpolluted waters,” which “the government of Tennessee has an obligation .., to secure, protect, and preserve,” Tenn.Code Ann § 69-3-102(a), the court found that the suit “benefited] not only the citizens of Elizabethton, but the general population of this state by securing, protecting and preserving the Tight to unpolluted waters.’ ” Id. at *4. As a consequence, “[t]he City was engaged in the exercise of a governmental function as an arm of the state” in bringing suit, and the nullum tempus doctrine applied. Id.
The other case, Knox Cnty. ex rel. Schumpert v. Perceptics Corp.,
This is not a case about taking action to prevent an environmental catastrophe, nor is it a case about insuring that a vital constitutional office continues to run unimpeded. Instead, and as the Sixth Circuit has pointed out, “[t]he underlying dispute in this case is essentially a disagreement over the price of gas,” Town of Smyrna v. Mun. Gas. Auth. of Ga.,
The nullum tempus doctrine aside, “a cause of action accrues and the statute of limitations begins to run not only when the plaintiff has actual knowledge of a claim, but also when the plaintiff has actual knowledge of ‘facts sufficient to put a reasonable person on notice that hе [or she] has suffered an injury as a result of wrongful conduct.’ ” Redwing v. Catholic Bishop for Diocese of Memphis,
• Smyrna alleges that shortly after February 23, 2010, the Gas Authority informed the Town (1) that the Gas Authority “had executed 100% of the. hedges for the program participants,” (2) that “the Town would not be permitted to reduce its volumes,” and (3) that the Town was “obligated to accept [the] prices” imposed by the now-challenged hedges.
• In a March 3, 2010 email, Smyrna said that it “was dismayed by the revelation that the Authority had already implemented hedges for next winter” and reiterated that it “d[id] not recognize [those] hedges....”
• Mark O’Neal, Smyrna’s 30(b)(6) representative agreed that on “March 3, 2010, it was the Town’s position that the Gas Authority had engaged in unauthorized hedges.”
• On April 1, 2010, Smyrna sent a second email complaining that the “Gas Authority had made unauthorized commitments to hedges for the next three winters” and expressing frustration that the Gas Authority “expected the Town ... to áceept hedge prices and volumes that the Town had not requested.”
• On April 7, 2010, the Gas Authority sent a letter responding paragraph by paragraph to Smyrna’s April 1, 2010 email. In that letter, the Gas Authority affirmed its position that Smyrna was bound by “any hedges the Gas Authority has already put in place.”
(Docket No. 192 at 2-4).
Notwithstanding that “whether a statute'of limitations has run” is “‘frequently a question of fact to be détermined by the jury or trier of fact under the evidence,’” it can sometimes be “a question of law to be determined by the Court.” Taylor v. Metro. Gov’t of Nashville & Davidson Cnty.,
The Town argues that under the TCPA an injury must be in the form of “an ascertainable loss” and that, even though it “discovered that there was something
Taken to its logical extreme, Smyrna’s argument would apply in virtually every case. As MGAG points out, “[b]efore final judgment a defendant can always decide to abandon its litigation position or to settle claims (for any or no reason),” but “[t]hat does not mean that the limitations period isn’t running.” (Docket No. 192 at 5). The Town does not direct the Court’s attention to evidence which indicates that the Gas Authority suggested that it would excuse Smyrna from being bound by, or from paying for, the hedges that had already been placed.
In any event the date of the ascertainable loss.does not begin the running of the statute of limitations under- the TCPA. Rather, under the language of the statute, “[a]ny action ... Shall be brought within one(1) year from, a person’s discovery of the unlawful act or practice.” Tenn.Code Ann. § 47-18-110. The evidence before the Court shows that the Town indisputably knew about the placing of allegedly unauthorized hedges in the spring of 2010, and that is what it claims to be the unlawful act or practice. See Overton v. Westgate Resorts, Ltd.,
The Town also argues that MGAG should be equitably estopped from asserting the statute of limitations defense. The Court disagrees.
The doctrine of equitable estoppel “tolls the running of the statute of limitations where the-defendant has ‘misled the plaintiff into failing to file [his] action within the statutory period of limitations.’ ” Fahrner v. SW Mfg., Inc.,
“A clear example” of equitable estoppel, and “the one most prominent in the case law, is a defendant’s promise not to plead the statute of limitations, which he breaks once the plaintiff has waited for the statute to expire before filing his complaint.” Fahrner,
“The party invoking the doctrine of equitable estoppel has the burden of proof,” id., and the Town has not met that burden. It identifies nothing which shows that MGAG made any statements that it knew or reasonably should have known would induce the Town to forgo or delay suit.
II. Tennessee False Claims Act
The Tennessee False Claims Act (“TFCA”) became effective on July 1,2001, and “establishes penalties for filing false claims with state, county, or municipal governments.” State ex rel. Landenberger v. Project Return, Inc.,
MGAG was created by the Georgiа General Assembly in 1987 as a “public body corporate and politic” — a nonprofit “instrumentality” and “public corporation of the State of Georgia,” charged by statute with securing “adequate, dependable, and economical sources and supplies of gas” for its Members. O.C.G.A. §§ 46-4-82(a), 80 & 95. Given its designation as a public corporation, the Gas Authority, first asserts that it is not a “person” subject to the prohibitions contained in the TFCA.
In support of its argument, the Gas Authority relies on Keeble v. Loudon Utilities,
Keeble involved the application of a general venue statute, with the question being whether Loudon Utilities; a municipal corporation, could be sued' in a particular county pursuant to a provision which related to “corporations, either domestic or foreign, which maintained an office or agency, or are otherwise amenable to service of process, in a county in this state other than the county in which the cause of action arose.” Keeble,
The statutе at issue here is markedly different than the one in Keeble. It is also markedly different than the other statutes that “expressly reach ‘public corpora
No doubt, a court “must presume that the legislature knows of the existing state of the law when it enacts new legislation.” Blankenship v. Estate of Bain,
The Tennessee legislature specifically declared the TFCA “to be remedial in nature” and that: it was to “be .liberally construed to effectuate, its purpose.” Tenn.Code.Ann. § 4-19-107. The bill’s sponsor in the House of Representatives “explained that the purpose of the act ‘[wa]s. to prevent fraud on the government,’ ” and, indeed, “like its federal counterpart, target[s] a much broader array of fraudulent activity perpetrated against state and local governments.” Knox Cnty. ex rel. Envtl. Termite & Pest Control, Inc. v. Arrow Exterminators, Inc.,
Moreover, while the statutory language is always the starting point, “[w]hen- state cоurts are called upon to interpret state constitutional provisions, statutes, rules, or regulations that have federal counterparts, it is not uncommon for them to consider and adopt the federal courts’ interpretation of similar federal provisions.” Id. at 524 n. 33; see also, State ex rel. Landenberger,
Turning to the merits, the Gas Authority levels a multi-prong attack on the Town’s TFCA claim, 'arguing that “[ajtmost ... the case is about an ambiguous contractual relationship,” and that the very essence of the Town’s claim relates to the placing of unauthorized hedging and billing for the same. The argument continues that because the Gas Authority’s actions were in keeping with the contract between the parties, there could be no TFCA violation.
The Court finds- this to be a close question because, in many respects, the Town’s TFCA claim appears to be a dressed-up version of its breach of contract claim. Indeed, were this case simply
Moreover, the TFCA may be broader than its federal counterpart. It contains a specific provision that imposes liability on any person who “[k]nowingly makes, uses, or causes to be made' or used any false or fraudulent conduct, representation, or practice in order to procure anything of value directly or indirectly from the state or any political subdivision.” Tenn.Code Ann. 4-18-103(a)(9). The Town points to facts which, if true, might lead a reasonable jury to conclude that the Gas Authority violated the TFCA. This includes, but is not limited to, misrepresenting the hedges that had'been placed and failing to disclose their volume at an earlier time so that they could be challenged by the-town, providing misleading invoices, deceiving the Town into extending its relationship with the Gas Authority, and failing to share documents that would have indicated that MGAG had placed hedges beyond, the .upcoming winter season.
That said, it very well may be that the Gas Authority did not knowingly do anything wrong. It claims it had no motive to defraud because it holds property for the benefit of the public, its assets belong to its members pursuant to O.C.G.A. § 4-4-96(a)(3), and, as such “anything of value that the Gas Authority would ‘procure’ from Smyrna already belongs to Smyrna and the other members.” (Docket No. 150 аt 16, italics in original). That may be so, but motive is not 'an essential element of a false claims case, see, United States v. Pecore,
It may also be that the Gas authority did exactly what the parties intended and, as a consequence, it made no false claims for payment. And, relatedly, it may also be true that it never presented the Town
III. Breach of Fiduciary Duty
The Gas Authority is the largest natural gas joint action in the United States, serving 78 Member municipalities from Georgia, Alabama, Florida, Pennsylvania and Tennessee that,' in turn, serve more than 240,000 customers. Although the Gas Authority retains a portion of the revenues, Members share in its revenues and are responsible for costs.
In 2000, Smyrna became a Gas Authority customer. It became a Non-Georgia Member of the Gas Authority when, on March 14, 2006, the Town Council approved an October 1, 2005 full requirement Gas Supply Contract with MGAG.
In the Fifth Count of the Second Amended Complaint, Smyrna brings a claim for breach of fiduciary duty. Specifically, Smyrna alleges that MGAG “owed a duty of care to the Town pursuant to the fiduciary relationship that existed between the parties,” and that “MGAG breached its fiduciary duty to the Town by committing the Town to hedges that it had not authorized for at least a five year time period.” (Docket No. 94, Second Amended Complaint ¶¶ 61-62).
MGAG argues that, for any of a number of reasons, this claim fails, and argues that it owed no fiduciary duty to its Members, including the Town. With some hesitation, the Court will allow the claim to go forward at this time.
“A fiduciary is a person holding the character of a trustee who bears the duty to act primarily for the benefit of another.” Sanford v. Waugh & Co., Inc.,
MGAG’s position is undoubtedly correct because, as a general proposition, “a corporation is governed by its directors .and officers,” and it is they who “owe a fiduciary duty to the corporation and to its shareholders,” that is, “[a]s fiduciaries, corporate officers and directors must act in good faith” towards the members or shareholders. Id. Indeed, the Sixth Circuit has characterized the contrary argument as being based on “a fundamental misunderstanding of the nature of the corporate director’s fiduciary relationship.” Radol v. Thomas,
Givеn this framework, courts routinely hold that a corporation owes no fiduciary duty to its shareholders or members. See, Bateman v. JAB Wireless,
Liability for breach of the directors’ fiduciary obligation could not possibly run against the corporation itself, for this would create the absurdity of satisfying the shareholders’ claims against the directors from the corporation, which is owned by the shareholders. There is not, and could not conceptually be any authority that a corporation as an entity has a fiduciary duty to its shareholders.
Radol v. Thomas,
This does not end the inquiry, however, becаuse the Town argues that, even apart from whatever duties a corporation may or may not have to its shareholders/members, the connection between the Town and MGAG in relation to hedging presented “a textbook example of a principal-agent relationship.” (Docket No. 172 at 20). After all, “the Town granted authority to, and placed its trust and confidence in, MGAG to hedge natural gas prices on the Town’s behalf.” (Id.). More fully, Smyrna’s argument is as follows: .
The parties’ course of dealing, the agreements and documents exchanged by the parties, and’ the Georgia statute that created MGAG demonstrate MGAG was the Town’s agent.
Each year, the Town authorized MGAG to hedge certain volumes. of the Town’s annual gas -supply, needs for the upcoming winter season. MGAG executed the "hedges on the Town’s behalf, not its own— Regardless of what dispute the parties have about how long MGAG could hedge out the Town’s volumes, there is no question that under the Option 2 hedging program the Town relinquished its right to make certain hedging decisions for itself, giving MGAG the authority determine how much of the Town’s authorized volumes it would hedge, the date it would execute the hedge, and the particular instrument used to hedge....
At the same time, MGAG remained subject to the Town’s control. MGAG could only hedge the volumes the Town authorized, and the Town could remove MGAG’s authority to hedge by opting out of the" program and self-directing its hedges (although MGAG ultimately and wrongfully denied the Town this right after the Town tried to opt "out in April and July 2010 and MGÁG invoiced the Town for the unauthorized hedges in December 2010 and forward).... And, MGAG was to provide the Town a monthly report of the hedges it placed оn its behalf....
Even the Georgia statute that created MGAG states it is an? agent of the municipalities it contracts with. Ga.Code Ann. § 46-4-96(a) reads:
“The authority shall have the powers necessary or convenient to carry out and effectuate the purpose and provisions of this article, including :.. the power[ ] ... (5) To acquire ... and to place into operation and' operate ,.. either as owner of all or any part in common with others or as agent, facilities and projects for the ... acquisition ... sale, exchange, or interchange of gas; to acquire-and to provide by sale or otherwise,- an adequate, dependable, and economical gas supply to political subdivisions of this state .,. and, as agent for such political subdivisions, to secure gas contracts and arrangements with other persons. The authority shall also have the power, which may be exercised either as principal or as agent, ... to execute long-term or short-term gas purchase or sale contracts ...; and to continue to sell gas ... to other persons and entities inside or outside this state and, as agent, for any or all of the same, to make gas otherwise available to them through arrangements with other persons ...”
(Docket No. 172 at 22-24, internal citations and footnote omitted, emphasis in original).
“Agency is a fiduciary relationship that arises when one person (a ‘principal’) manifests assent to another person (an, ‘agent’) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests, or otherwise consents to do so.” Savage v. City of Memphis,
“In its broadest sense, the concept of agency ‘includes every relation in which one person acts for or represents another.’” White v. Revco Disc. Drug Ctrs., Inc.,
MGAG argues that it owed no fiduciary duty to Smyrna .with respect to hedging. To place the argument in context, a brief review of the Gas Authority’s characterization of the three hedging options is appropriate.
Each Gas Authority Member had three option regarding hedging. Under Option 1, the Member agreed that MGAG wоuld bill all gas volumes using non-hedged fírstof-month prices. Under Option 3, the Gas Authority had no substantive discretion over hedging decisions because the Member participating in this option makes its own decisions about the type of hedging instrument, hedge timing, and volume.
Under Option 2, and the one central to this case, a Member elects hedge volumes and authorizes the Gas Authority to pool those volumes with other Members’ elected volumes and to. hedge that aggregate volume at the Gas Authority’s discretion. The Gas Authority then places hedges for the entire Pool and chooses the cumulative hedge volume, the duration, the price, and the type of hedging instrument.
Nevertheless, and for several reasons, the Court will not dismiss the fiduciary breach claim, but instead will await the presentation of Smyrna’s proof to determine whethеr this claim properly should be considered by the jury. The Court does so for several reasons.
First, while MGAG (with some support from the record)’contends that it was exercising Option 2 in the best interest of all of the hedging pool Members, “[i]t is ... well settled that an agent may serve two masters simultaneously, so long as the objectives of one master are not contrary to the objectives of the other.” White,
Second, while MGAG argues that the “Gas Authority operates for the benefit of the public, not for any particular Member’s individual best interest,” and relies upon the statutory language that ostensibly created the Gas Authority for that purpose, the Sixth Circuit has previously observed, that “[although it is described as an entity that supplies gas for the ‘public,’, O.G.C.A. §§ 46-4-80, 46-4-98(a), the Gas Authority is structured such that it benefits only municipalities that choose to become members.” Town of Smyrna,
Third, while the Court remains skeptical about the validity of pursuing a breach of fiduciary duty claim where recovery is also sought under a written contract because “[it] is well settled law that a tort cannot be predicated on a breach of a contract,” it is also true that a tort can exist “if a party breaches a duty which he owes to another independently of the contract.” Calipari v. Powertel Inc.,
Fourth, while MGAG .points to the economic, loss doctrine as a corollary to the rule that a party cannot recover tort damages for what is in essence contract damages, “Tennessee’s highest court has never addressed whether the economic loss doctrine applies outside the products liability context.” Ham v. Swift Transp. Co., Inc.,
Fifth and lastly, but maybe most importantly, “whether or not a fiduciary or confidential relationship existed is a question of fact.” Dickson v. Long,
IV. Breach of Contract and Damage
In its oversized brief supporting its Motion for Summary Judgment, the Gas Authority spends little more than a page arguing that the Town’s breach of contract claim should be dismissed.. It also gives short shrift to its remaining argument that the claim for damages should be dismissed. In the Court’s view, MGAG does so with good reason — the record does not establish that MGAG is entitled to summary judgment on either claim.
With regard to the breach of contract claim, MGAG argues that “Smyrna knew for years that the Gas Authority was placing multi-year hedges and paid for those hedges without complaint,” and only saw fit to complaint when “gas prices bottomed out in the wake of the shale revolution.” (Docket No. 150 at 22). However, Smyrna" points to evidence that suggests the placing of multi-year hedges contradicted MGAG’s documents and representations about the nature of the hedging program, the course of dealing between the parties and that, in any event, the Town learned of the allegedly unauthorized hedging in 2010 and thereafter paid invoices under protest. Although the Gas Authority argues, that Smyrna “does not confront the many pieces of evidence showing that the Town knew all along that the Gas Authority was placing multi-year hedges on its behalf,” (Docket No. 192 at 19), this is-an argument about the weight of the evidence.
As for damages, MGAG argues that the Town’s damages model is based on pure speculation and' seeks to place Smyrna in a better position that it would have been absent the challenged hedges. This is so, MGAG submits, because “Smyrna would have continued to hedge a portion of its natural gas volumes even had it opted ’out of the vOption 2 pool in April 2010” yet “Smyrna’s damages model assumes that Smyrna wouldn’t have paid a penny to hedge from 2010 through 2014.” (Docket No. 21). This is not a basis for granting summary judgment because it again goes to the weight of the evidence and to whether or not the Town was in fact damaged to the extent claimed.
“The extent of injury is not a proper inquiry at the summary judgment stage” because “[t]he law prohibits damages as too speculative only when the existence of damage is uncertain, not when merely the amount of damage is uncertain.” Church v. Perales,
V. Conclusion
On the basis of the foregoing, the Court will enter an Order denying the Gas Authority’s Motion to Dismiss as moot and denying its Motion for Summary Judgment on Smyrna’s TFCA, breach of fiduciary duty, breach of contract and damages claims. As should be abundantly' clear to the parties from this Court’s discussion, however, this decision hardly guarantees that each of the Town’s remaining claims will make it to the jury, particularly since the Court has expressed serious, reservations about the Town’s TFCA and breach of fiduciary duty claims.
An appropriate Order will enter.
Notes
. Given the extensive briefing, the Court finds it unnecessary to hear oral argument and will deny MGAG's’s request for the same.
. The Town argues that "the April 6, 2010 letter from the Gas Authority did not specifically address the Town’s request to honor its election for the 2010-2011 winter season or its request to opt out of the hedging program altogether if MGAG did not honor the Town’s specified elections,”, and that the Gas Authority did not reply to an July 12, 2010 "email with reduced volumes the Town wished to hedge for the upcoming winter season[.]” (Docket No. 156 at 22). This actually lends support to the Gas Authority’s position because silence oftentimes speaks volumes.
. In a footnote to its response to Defendant’s Motion to Dismiss, the Town request that it be allowed to amend its complaint should the Court decide to dismiss the TCPA claim. That request is summarily denied. Not only is the trial just weeks away, discovery closed long before the Town filed its response and, in any event, “[a] ‘request for leave to amend almost as an aside, to the district court in a memorandum in opposition to the defendant’s motion to dismiss is ... not a motion to amend.’ ” Kuyat v. BioMimetic Therapeutics, Inc.,