Court Opinion

ID: 4403407
Source: CourtListenerOpinion
Date Created: 2019-06-05 14:44:14.34637+00
Date Added: 2024-06-11T14:58:20.206810
License: Public Domain

06/05/2019
               IN THE COURT OF APPEALS OF TENNESSEE
                            AT JACKSON
                                April 9, 2019 Session

 CARY MELTON ET AL. v. CITY OF LAKELAND TENNESSEE ET AL.

                Appeal from the Chancery Court for Shelby County
                 No. CH-17-1772 Walter L. Evans, Chancellor
                    ___________________________________

                          No. W2018-01237-COA-R3-CV
                      ___________________________________

This appeal involves the dismissal of a case based on mootness. The City of Lakeland
and its Industrial Development Board passed various resolutions for the purpose of
funding the construction of a new high school. Plaintiffs—a group of citizens of
Lakeland—sued, arguing that the city lacked the statutory authority for the financing
transaction. After Congress enacted the federal Tax Cuts and Jobs Act, the financing
transaction increased in cost, and Lakeland and the Industrial Development Board
repealed the resolutions. Thereafter, upon Lakeland’s motion to dismiss, the trial court
dismissed Plaintiffs’ claims as moot. We affirm

 Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
                                  and Remanded

ARNOLD B. GOLDIN, J., delivered the opinion of the court, in which, JOHN W.
MCCLARTY, and KENNY ARMSTRONG, JJ., joined.

Robert L. J. Spence, Jr. and Bryan M. Meredith, Memphis, Tennessee, for the appellants,
Cary Melton, Lillie Melton, James D. Abbott, William T. Mallard, Brian Tipler, Deborah
Tipler, Christopher J. Smith, Melissa K. Smith, Heather Long, and James L. Murray, Jr..

Chris Patterson and Will Patterson, Memphis, Tennessee, for the appellee, City of
Lakeland, Tennessee.

Jeffrey C. Smith, Memphis Tennessee, for the appellee, Industrial Development Board of
the City of Lakeland, Tennessee.
                                        OPINION

                      BACKGROUND AND PROCEDURAL HISTORY

        Because there is no city high school in Lakeland, Tennessee, most high school-
aged children residing in the area attend the neighboring Arlington High School. In
2014, the City of Lakeland (“the City”) notified its residents that it intended to issue
$50,000,000 in general obligation bonds for the construction of a new school, grades 6-
12. In December 2014, a group of citizens requested a referendum be placed on the
ballot regarding whether or not the City should issue the bonds for the construction of the
school, and, on April 16, 2015, the City held a special referendum. The referendum
failed when approximately 60% of the voters voted against the issuance of the bonds.

       On December 5, 2017, the City’s Board of Commissioners (“BOC”) and its
Industrial Development Board (“IDB”) each held special meetings and passed resolutions
(the “December Resolutions”) approving the issuance of Series 2017 Public Improvement
Bonds by the IDB in an amount not to exceed $60,000,000 for the construction of a new
high school and to make improvements to the City’s middle school. A summary of the
financing transaction is as follows:

   1. The School Board would transfer to the IDB certain real property where the city
      middle school is located and where the new high school would be constructed.
   2. The IDB would issue the bonds, a portion of which would be used to improve the
      middle school and the remainder to construct the high school.
   3. The IDB would lease the high school and the school property to the City.
   4. The IDB would use the lease payments from the City to pay the IDB bond debt.
   5. The City would sublease the high school and school property to the School Board
      to operate the high school and the middle school.

(hereinafter the “Bond Transaction”).

       After the BOC and the IDB passed the December Resolutions, Plaintiffs, on
December 8, 2017, filed the underlying lawsuit in the Shelby County Chancery Court
(the “trial court”). Plaintiffs argued that the Bond Transaction was unlawful because it
made the City liable for the payment of the bonds and that the BOC and the IDB had
impermissibly pledged the full faith and credit and the unlimited taxing authority of the
City without a referendum in violation of Tennessee Code Annotated section 7-53-306.
On December 12, 2017, the City and the IDB (together, “Defendants”) filed a joint
motion to dismiss, arguing that the City did not pledge to be liable for the bond payments
but rather the lease payments to the IDB, which they contended is specifically authorized
pursuant to Tennessee Code Annotated section 7-53-311. The trial court denied
Defendants’ motion on December 19, 2017.

                                           -2-
       Following the trial court’s ruling on Defendants’ motion to dismiss, the federal
Tax Cuts and Jobs Act was enacted, amending the IRS tax code and—according to
Defendants—rendering the Bond Transaction unworkable due to the increase in cost.1 In
response, Defendants, on February 13 and 23, 2018, passed additional resolutions (the
“February Resolutions”) formally repealing the December Resolutions and the associated
Bond Transaction. On March 14, 2018, Defendants filed a joint motion to dismiss or, in
the alternative, for summary judgment, arguing that, with the repeal of the December
Resolutions, Plaintiffs’ claims were moot. The trial court entered its final order on June
5, 2018, granting Defendants’ joint motion to dismiss on the basis that the action before it
was moot. Plaintiffs timely filed this appeal.

                                          ISSUE PRESENTED

       As we perceive it, there is one dispositive issue on appeal: whether the trial court
erred in dismissing the underlying action as moot.

                                       STANDARD OF REVIEW

       The issue of whether the trial court erred in dismissing the case for mootness is
one of law, and thus our standard of review is de novo with no presumption of
correctness. Campbell v. Florida Steel Corp., 919 S.W.2d 26, 35 (Tenn. 1996); Alliance
for Native Am. Indian Rights in Tenn., Inc. v. Nicely, 182 S.W.3d 333, 338-39 (Tenn. Ct.
App. 2005) (“Determining whether a case is moot is a question of law[.]”).

                                             DISCUSSION

       The Tennessee Supreme Court in Norma Faye Pyles Lynch Family Purpose LLC
v. Putnam County discussed the doctrine of mootness and its exceptions as follows:

        Tennessee courts do not apply the mootness doctrine mechanically. Rather,
        when the question of mootness is raised, they consider many factors,
        including the reason that the case is alleged to be moot, the stage of the
        proceeding, the importance of the issue to the public, and the probability
        that the issue will recur. Over time, the courts have recognized several
        circumstances that provide a basis for not invoking the mootness doctrine.
        These circumstances include: (1) when the issue is of great public
        importance or affects the administration of justice, (2) when the challenged
        conduct is capable of repetition and of such short duration that it will evade
        1
          Specifically, the changes to the federal tax code prevented local governments from refinancing
existing debt on a tax-exempt basis. Because the December Resolutions were predicated on the tax-
exemption, they were effectively nullified by the change in the federal tax code. Defendants state in their
brief on appeal—acknowledged by Plaintiffs in their reply brief—that “[f]inancing costs alone were
projected to increase by approximately $1.37 million if the deal did not close before the end of 2017.”
                                                   -3-
      judicial review, (3) when the primary subject of the dispute has become
      moot but collateral consequences to one of the parties remain, and (4) when
      the defendant voluntarily stops engaging in the challenged conduct.

Norma Faye Pyles Lynch Family Purpose LLC v. Putnam Cty., 301 S.W.3d 196, 204
(Tenn. 2009) (internal footnotes omitted). Here, in dismissing the Plaintiffs’ complaint,
the trial court concluded that

      [i]t appears to the Court now that the action to prevent the issuance of the
      60 million dollars in public improvement bonds is dead. And, of course,
      it’s a possibility that some other act might be resurrected in the future. But
      the Court cannot speculate and premise its decision based on what may or
      may not happen in . . . the future.

Plaintiffs, however, argue on appeal that, while the underlying issue may be moot, “the
trial court erred in applying mootness without considering the public importance and the
voluntary cessation of challenged conduct exceptions to the mootness doctrine.” We
address each exception in turn.

       In discussing the voluntary cessation exception to the mootness doctrine, the
Norma Faye Court noted that, while it had never considered the issue, the United States
Supreme Court’s decisions “reflect a jaundiced attitude about permitting a litigant to
cease its wrongful conduct temporarily to frustrate judicial review and then be free to
resume the same conduct after the case is dismissed as moot.” Id. at 205 (citations
omitted). Accordingly, “as a general rule, the voluntary cessation of allegedly illegal
conduct does not suffice to moot a case.” Id. (citations omitted). Plaintiffs assert that
Defendants’ repealing the December Resolutions—and the associated Bond
Transaction—constitutes the voluntary cessation of allegedly unlawful conduct. We
disagree.

       In Norma Faye, the City of Cookeville, Tennessee and Putnam County filed an
eminent domain action against a landowner but failed to obtain a certificate of public
purpose and necessity as required by Tennessee law. Id. at 200. After the Tennessee
Supreme Court granted the landowner’s application for extraordinary appeal, Cookeville
and Putnam County abandoned their efforts to condemn the property, reconfigured their
plans to exclude the landowner’s property, and asked the Supreme Court to dismiss the
landowner’s appeal as moot. Id. at 202. The Supreme Court, however, denied such
request:

             [T]he fact that the City and the County have curtailed their efforts to
      acquire the disputed property in this case does not necessarily mean that
      they have abandoned their belief that state law permits them to file a
      petition to condemn property . . . without first obtaining the certificate of
                                           -4-
        public purpose and necessity required by Tenn. Code Ann. § 13-16-207(f).
        In answer to questions during oral argument, counsel insisted that cities and
        counties could, in fact, file petitions to condemn property to develop an
        industrial park without first obtaining the certificate required by Tenn.
        Code Ann. § 13-16-207(f).

                This answer reflects that while the City and the County have
        changed their practices for this plaintiff, they have not completely and
        permanently abandoned the challenged conduct . . . . Therefore, we find
        that the City and the County have failed to demonstrate that the issues in
        this case have become moot as a result of their voluntary abandonment of
        their efforts to condemn the property in which Lynch LLC owns a one-fifth
        interest.

Id. at 207. The facts of the present case, however, can be distinguished from those of
Norma Faye. There, Cookeville and Putnam County explicitly stated that they believed it
was unnecessary to acquire a certificate of public purpose and necessity—a blatant
contravention of the requirements of Tennessee Code Annotated section 13-16-207(f).
Accordingly, the Supreme Court knew with reasonable certainty that when Cookeville
and Putnam County condemned a piece of property in the future, they would again fail to
acquire the certificate as required by Tennessee law. Here, however, Defendants have
not indicated that they plan to engage in the allegedly unlawful conduct in the future.2
Moreover, while Plaintiffs may presume that the construction of the high school will be
funded by the issuance of bonds, this Court cannot speculate as to the intricacies of a
hypothetical bond transaction and whether or not it will comply with Tennessee law.
Additionally, Defendants did not abandon or voluntarily cease their allegedly unlawful
conduct; rather, Congress’ enactment of the Tax Cuts and Jobs Act rendered the Bond
Transaction unworkable. As such, the changes in the federal tax code—not any act by
Defendants—effectively nullified the Bond Transaction. This is significant because, as
noted by the Norma Faye Court, the rationale behind the voluntary cessation exception to
the mootness doctrine is to prohibit a litigant from temporarily ceasing its wrongful
conduct in order to frustrate judicial review, only to resume such conduct after the case
has been dismissed as moot. See id. at 205. Here, Defendants did not “temporarily
cease” their allegedly unlawful conduct to frustrate judicial review, and whether they will
“resume such conduct” is entirely speculative since it was predicated on the federal tax
code. Accordingly, we conclude that the voluntary cessation exception to the mootness
doctrine is inapplicable.
        2
           As evidence of Defendants’ intent to engage in the allegedly unlawful conduct in the future,
Plaintiffs assert that, even at the time of the trial court’s dismissal of the case, Defendants “continued to
publicly advertise on its municipal website that the construction of the high school, which must be funded
by the issuance of bonds, will proceed[.]” The website, however, simply states that “Lakeland Prep High
School is scheduled to open in 2020.” There is no indication of how Defendants plan to finance the
construction of the high school.
                                                   -5-
       In Norma Faye, the Tennessee Supreme Court also addressed the public interest
exception to the mootness doctrine. There, the Court stated that, “as a general rule,
Tennessee’s appellate courts should dismiss appeals that have become moot regardless of
how appealing it may be to do otherwise.” Id. at 210. However, “under ‘exceptional
circumstances where the public interest clearly appears,’ the appellate courts may
exercise their judgment and discretion to address issues of great importance to the public
and the administration of justice.” Id. (quoting Dockery v. Dockery, 559 S.W.2d 952,
955 (Tenn. Ct. App. 1977)). To guide their discretion, the courts should first address the
following threshold considerations:

        (1) the public interest exception should not be invoked in cases affecting
        only private rights and claims personal to the parties; (2) the public interest
        exception should be invoked only with regard to “issues of great
        importance to the public and the administration of justice”; (3) the public
        interest exception should not be invoked if the issue is unlikely to arise in
        the future; and (4) the public interest exception should not be invoked if the
        record is inadequate or if the issue had not been effectively addressed in the
        earlier proceedings.

Id. at 210-11. Here, Plaintiffs assert on appeal that the threshold considerations support
the application of the public interest exception. However, we conclude that the public
interest exception is inapplicable for the same reasons the voluntary cessation exception
is inapplicable.

       The Norma Faye Court invoked the public interest exception because it found that
there was a “substantial probability” that the challenged conduct would re-occur. Id. at
212. In the present case, however, any new bond transaction will have an entirely
different makeup, and we cannot speculate as to whether that transaction—which is
currently non-existent—will comply with Tennessee law.3 In short, as counsel for the
IDB stated during the hearing on Defendants’ joint motion to dismiss, “[w]e don’t know
what [a new bond transaction] might look like as we sit here today.” Moreover, given the
current status of federal law, there is no indication that a similar bond transaction will re-
occur in the near future or ever.4 Plaintiffs also assert that “this case involves an
important public issue: the legality of a Bond Transaction that will obligate the taxpayers
of Lakeland to pay for the largest debt obligation in their history.” While it may have
been an important public issue prior to 2018, the Bond Transaction at issue is no longer
in existence; therefore, the taxpayers of Lakeland are not “obligated” to pay for the
        3
           As Defendants noted at the trial court’s hearing on their joint motion to dismiss, if there is a new
bond transaction entered into between Defendants, “there will have to be public meetings, votes and
documents will have to be drafted, bond counsel retained and many, many things have to happen before
there is a bond transaction that could be effectuated.”
         4
           Indeed, the December Resolutions were repealed because the federal Tax Cuts and Jobs Act
rendered the Bond Transaction unworkable due to the increase in cost.
                                                    -6-
“largest debt obligation in their history” due to the simple fact that there is not a debt
obligation. Accordingly, we conclude that the public interest exception to the mootness
doctrine is inapplicable.

                                     CONCLUSION

      For the foregoing reasons, the judgment of the trial court is hereby affirmed.

                                                _________________________________
                                                ARNOLD B. GOLDIN, JUDGE

                                          -7-