TBA Law Blog


Posted by: Robert Hibbett & Justin Hickerson on Mar 1, 2017

Journal Issue Date: Mar 2017

Journal Name: March 2017 - Vol. 53, No. 3

The Tennessee Claims Commission

Few attorneys, and even fewer laypersons, know about the Tennessee Claims Commission. The commission, although not titled as a court by statute, functions as a court for the purpose of adjudicating monetary lawsuits against the State of Tennessee. Between Jan. 1 and Dec. 31, 2016, the Claims Commissioners conducted 459 hearings and 16 regular docket trials. As of Dec. 31, 2016, there were 18 Claims Commission cases pending before the appellate courts of Tennessee.

This article seeks to inform readers about the structure and jurisdiction of the Claims Commission and examines recent legal precedents established by Tennessee’s appellate courts in cases appealed from the commission.

Structure and Jurisdiction of the Claims Commission

In general, the state of Tennessee possesses sovereign immunity and cannot be held liable for the actions of its employees.[1] However, Article I, Section 17, of the Tennessee Constitution states the following: “[s]uits may be brought against the state in such manner and in such courts as the Legislature may by law direct.”[2] The Supreme Court of Tennessee has interpreted this constitutional provision to mean that the state may consent to suit; however, unless the legislature has affirmatively created such a right against the state, a party may not file suit.[3] Prior to 1931, the state possessed absolute immunity from liability. In 1931, the state created a Board of Claims that investigated personal injury and property damage claims arising from the state’s negligence in highway construction and maintenance.[4] In 1982, the state legislature expanded the authority of the Board of Claims by enabling it to pay for damage awards rendered in the courts against a state employee if the employee was acting in good faith and within the scope of his/her duties.[5] This system remained in effect until the state established the Tennessee Claims Commission in 1985.[6]

The Tennessee Claims Commission is a tribunal (court) established by the state legislature to adjudicate monetary claims against the state based on the acts or omissions of state employees.[7] The state has established a limited waiver of sovereign immunity in 23 statutorily established areas.[8] Examples of these 23 categories include the following: the negligent care, custody and control of persons, property or animals; negligent operation or maintenance of a motor vehicle; dangerous conditions created or maintained on state real property or on state maintained highways; defamation; breach of a written contract; taxes paid under protest; and claims by crime victims.[9] There are three claims commissioners for the state, with each commissioner presiding over a grand division (West, Middle, and East).[10] The claims commissioners are appointed by the governor and confirmed by the state legislature for a renewable eight-year term.[11]

The Claims Commission has two dockets — the small docket and the regular docket.[12] Small docket cases are adjudicated without the use of a court reporter and usually proceed on affidavits alone; however either party may request a hearing.[13] The decision of the claims commissioner is final, as the parties may not appeal the decision.[14] The regular docket is “similar to those maintained by courts of record,” and the commissioner sits as judge of the facts and law.[15] There is a plethora of opinions, statutes, and the Rules of the Claims Commission that indicate that the claims commissioners are judges and therefore are members of the judiciary. The most notable of these instances may be found in the Tennessee Claims Commission legislation, which states that “the commissioners shall comply with the standards of conduct contained in the Code of Judicial Conduct of the Rules of the Tennessee Supreme Court.”[16]

With regard to the procedure of regular docket cases, a court reporter must be used at all hearings, and the Tennessee Rules of Civil Procedure apply.[17] Additionally, the Claims Commission may — and has — established its own rules governing procedure.[18] Under these rules, the commission adopted the Tennessee Rules of Evidence in all regular docket cases.[19] With regard to the interpretation of these rules, Tennessee appellate courts will “construe the commission’s procedural rules according to [its] decisions construing the Tennessee Rules of Civil Procedure […] except where the respective rules differ.”[20] Cases are heard by an individual claims commissioner and, unlike small docket cases, may be appealed.[21] If a litigant wishes to appeal the decision of a commissioner, he/she may appeal the decision of an individual commissioner to the entire Claims Commission, which sits en banc (however, the commission retains the right to decide whether to grant an en banc hearing).[22] Further, the litigant may appeal the decision of an individual commissioner or the commission sitting en banc to the Court of Appeals of Tennessee.[23]

Additionally, a case before the Claims Commission may be removed to chancery or circuit court by motion of one of the litigants prior to hearing, or upon a written determination of the commissioner.[24] A commissioner may make such a determination if “fair and complete resolution of all claims involved cannot be accomplished in administrative proceedings before the commission.”[25] For example, if the plaintiff has sued the state and a private individual, the commissioner may remove the case to the appropriate chancery or circuit court since the commission could only resolve part of the dispute — the claim against the state.

One other procedural matter that is unique to the Tennessee Claims Commission is the inapplicability of the saving statute.[26] In general, if a litigant takes a nonsuit and refiles within a year, the statute of limitations is satisfied. With regards to cases before the Claims Commission, however, the Court of Appeals of Tennessee has held that the saving provision of Tenn. Code Ann. § 28-1-105 does not apply.[27]

Recent Legal Developments

Important developments in Tennessee jurisprudence have occurred based on appeals of decisions from the Claims Commission. The areas of Tennessee law most impacted by these decisions are public contracts, defamation by state employees and retaliatory taxes.

Public Contracts

One of the most important government contract cases decided in recent years is Ray Bell Construction Co. Inc. v. State.[28] In Ray Bell, a dispute arose regarding Ray Bell’s contract with the state.[29] The contract contained an incentive clause, which awarded Ray Bell $10,000 for every day the project was completed before Dec. 15, 2006, and a disincentive clause, which imposed a $10,000 penalty on Ray Bell for every day after Dec. 15, 2006 the project remained unfinished.[30] Lastly, the contract contained a provision that allowed the state to extend the completion date (Dec. 15, 2006) if delays occurred that were beyond the control of Ray Bell.[31] The conflict in this case arose when the state granted an extension of the disincentive date and the completion date, but did not extend the incentive date because, they argued, the contract did not allow such action.[32] On the other hand, Ray Bell stated that all three provisions — the incentive clause, the disincentive clause and the completion clause — could be extended.[33] The claims commissioner held that a “latent ambiguity” existed in the contract, which required consideration of extrinsic evidence under the parol evidence rule.[34] The Court of Appeals of Tennessee, on a 2-1 vote, affirmed the commissioner.[35]

The Supreme Court of Tennessee reversed the Court of Appeals, holding that the contract terms were unambiguous, and thus the incentive date could not be extended.[36] This case is important in public contract jurisprudence because the Supreme Court of Tennessee has seemingly established a fairly high threshold for what constitutes ambiguity in a public contract. Even with the claims commissioner stating that the contract contained an “egregious ambiguity,” and the Court of Appeals affirming such a holding, the Supreme Court of Tennessee nevertheless stated that the “language [of the contract] is not reasonably subject to another interpretation.”[37] Based on the court’s decision in Ray Bell, it seemed as if future litigation regarding public contracts would have to overcome a high threshold in order for extrinsic evidence to be considered by the Claims Commission.

However, the strict approach to the consideration of parol evidence adopted by the Tennessee Supreme Court in Ray Bell seems to have been loosened in a series of recent unpublished opinions by the Tennessee Court of Appeals. These cases are also important because they hold that the Claims Commission may have jurisdiction over a claim that arises from subsequent conduct or oral modifications related to a written contract.

In Boyraz v. State, the Tennessee Court of Appeals adopted a broad view regarding the jurisdiction of the Claims Commission, and held the state accountable for subsequent conduct even without the existence of a written contract.[38] In Boyraz, a professor at Tennessee State University signed a one-year employment contract in May 2008.[39] No additional contracts were signed after the 2008 contract, but the claimant remained an employee of the state until she was terminated in January 2012.[40] The Claims Commission granted the state’s motion to dismiss, holding that, since at the time of the employee’s termination, no written contract existed, it lacked jurisdiction.[41] In making this determination, the commissioner relied on Tenn. Code Ann. § 9-8-307(L), which grants the Claims Commission jurisdiction over claims arising out of written contracts only.[42] The Court of Appeals of Tennessee reversed the commission, holding that the Claims Commission had jurisdiction in this matter.[43] In its decision, the Court of Appeals quoted a Supreme Court of Tennessee decision that held, “where one enters into the service of another for a definite period, and continues the employment after the expiration of that period, without any new contract, the presumption is that the employment is continued on the terms of the original contract.”[44]

This decision thus adopts a broad conception of the Claims Commission’s jurisdiction, allowing the commission to adjudicate a claim even though there was no current written contract if a written employment contract existed at some point in the past, and the parties proceeded as if the contract were still in effect.

Also in Boyraz v. State, the Court of Appeals of Tennessee indicated in dicta that e-mail messages could be used to determine the intent of the parties to a contract.[45] The Court of Appeals stated, “we recognize, however, that the email communications may be relevant in the determination of the nature and extent of the contractual obligations which arose from the” 2008 contract.[46] This statement appears to adopt a more narrow reading of the Supreme Court’s holding in Ray Bell Const. Co. Inc. v. State, regarding the admissibility of parol evidence, thus making it easier to use parol evidence to resolve ambiguities in a public contract.

In RCR Building Corp. v. State, the Tennessee Court of Appeals further solidified its broad view of the Claims Commission’s jurisdiction over public contracts and continued to lower the threshold for when parol evidence may be considered in such cases.[47] In RCR, the State of Tennessee entered into a contract with RCR Building Corporation to build a welcome center in Ardmore, Tennessee.[48] The contract stated that changes to the plans or implementation of the project must be approved by written change orders.[49] However, throughout the course of this project, the state, through its agent, repeatedly made modifications to the project without a written change order.[50] At the project’s conclusion, the state refused to pay for several of the modifications that did not have written change orders, arguing that, since these modifications were not made according to the provisions of the contract, it should not be liable for them.[51] Further, the state argued that the Claims Commission lacked jurisdiction over this claim because it related to oral modifications and agreements, not a written contract.[52]

Although the Tennessee Court of Appeals explicitly refused to “frame this issue as a question of jurisdiction,” it nevertheless held the state liable for its subsequent oral modifications to a written contract, thus affirming a broader conception of the Claims Commission’s jurisdiction similar to that seen in Boyraz.[53]

Furthermore, like the court in Boyraz, which followed a looser approach to the consideration of parol evidence than that seen in Ray Bell, the court in RCR considered evidence aside from the written contract. For example, the court considered evidence regarding oral modifications of the written contract and also looked to the course of dealing between the parties in making its determination regarding damages.[54]

In sum, Boyraz and RCR clearly indicate that the Tennessee Claims Commission may have jurisdiction over a claim even if it is not based on written contractual terms, so long as a written contract formed the basis of the parties’ dealings. Furthermore, these cases seem to mitigate the rigid approach regarding the consideration of parol evidence adopted by the Supreme Court in Ray Bell. Finally, Boyraz and RCR show that the appellate courts will not allow the state to avoid liability by hiding behind the written words of a contract when it does not adhere to the provisions of the contract.[55]

Defamation by State Employees

In Jones v. State, the plaintiff, an employee of the Tennessee Department of Correction (TDOC), filed a claim against the state and TDOC with the Tennessee Claims Commission. The Plaintiff alleged that the TDOC commissioner made defamatory comments against him related to job-related travel expenses.[56] The Claims Commission denied the state’s motion for summary judgment, but gave the state permission to file an interlocutory appeal.[57] The Court of Appeals of Tennessee denied the appeal, and the state appealed to the Supreme Court of Tennessee.[58] The Supreme Court of Tennessee held, in a case of first impression, that cabinet-level officials “have an absolute privilege to publish defamatory matter concerning another in communications made in the performance of his official duties.”[59] The key reasoning behind this holding was that the Supreme Court of Tennessee wanted high-level state officials to carry out their duties without fear of being hauled into court over actions conducted within the scope of their office. This decision puts Tennessee in line with the United States Supreme Court, which held that federal executive officials who publish defamatory comments in furtherance of their official duties have an absolute privilege of immunity.[60]

With the court’s decision in Jones v. State, some plaintiffs may be left without legal remedy. The Supreme Court of Tennessee acknowledged this concern, but nevertheless held that “such a sacrifice ‘is justified by the public’s need for free and unfettered action by its representatives.’”[61]

Retaliatory Taxes

The state of Tennessee may impose retaliatory taxes on foreign insurance companies doing business in Tennessee.[62] In order to calculate retaliatory taxes, the state first determines the total taxes, fees, fines, penalties, licenses, deposit requirements, or other obligations of a Tennessee insurance company doing business in another state, such as Pennsylvania. The state then determines the total amount of taxes, fees, etc. that Tennessee imposes on a Pennsylvania company doing business in Tennessee. If Pennsylvania imposes a higher burden on the Tennessee company than Tennessee imposes on the Pennsylvania company, the state may impose a retaliatory tax less than or equal to the difference on the Pennsylvania company.

In American Casualty Co. of Reading, Pennsylvania v. State, the Supreme Court of Tennessee addressed what constitutes as a “tax” for retaliatory tax purposes.[63] Beginning in 2008, the Tennessee Department of Commerce and Insurance increased the retaliatory tax on Pennsylvania insurance companies doing business in Tennessee due to changes associated with worker’s compensation statutes in Pennsylvania.[64] Under these statutes, insurance companies operating in Pennsylvania had to collect assessments levied by the workers’ compensation statutes and then remit those funds to the Pennsylvania Department of Labor and Industry.[65] The Tennessee Department of Commerce and Insurance considered these assessments to be a tax on Tennessee companies operating in Pennsylvania, and thus included those assessments in its retaliatory tax calculations.[66] The Pennsylvania companies paid Tennessee’s retaliatory taxes under protest, and filed suit in 2010, seeking a refund of the retaliatory taxes.[67] The companies argued that the charges associated with the worker’s compensation statutes were imposed on the insured employers and not the insurance companies, and thus did not constitute a “tax” for retaliatory tax purposes.[68] The claims commissioner granted the state of Tennessee’s motion for summary judgment, holding that the taxes associated with the compensation statutes could be considered in calculating retaliatory taxes.[69] The Court of Appeals affirmed the commissioner.[70]

The Supreme Court of Tennessee reversed the Tennessee Court of Appeals and the claims commissioner, holding that the taxes imposed by the worker’s compensation statutes were actually imposed on the insured, not the insurer, and thus could not be considered when calculating levels of taxation for retaliatory tax purposes.[71] Describing the insurance companies as mere “tax collectors,” the court emphasized that the liability for these assessments rested with the insured employers not the insurance companies.[72] Thus, the State of Tennessee had to refund these retaliatory taxes.[73]

Conclusion

The Tennessee Claims Commission plays a vital role in the adjudication of a wide variety of cases, and numerous judicial precedents have been established by cases originating from the commission. Hopefully, this article has informed attorneys and laypersons about the Tennessee Claims Commission’s unique jurisdiction, procedure and structure, and has educated readers about recent legal developments in the areas of public contracts, defamation, and retaliatory taxes. Based upon the volume of cases handled by the commission, and the number of commission cases reviewed by Tennessee’s appellate courts, the Tennessee Claims Commission will continue to have an ever-expanding footprint on the Tennessee legal community.

Notes

  1. Colonial Pipeline Co. v. Morgan, 263 S.W.3d 827, 848-50 (Tenn. 2008).
  2. Tenn. Const. art. I, § 17.
  3. Williams v. Register of West Tennessee, 3 Tenn. 214, 218 (Ct. Err. & App. 1812). See also Scates v. Board of Com’rs of Union City, 265 S.W.2d 563, 566 (Tenn. 1954).
  4. 1931 Tenn. Pub. Acts 75.
  5. 1982 Tenn. Pub. Acts 717.
  6. 1985 Tenn. Pub. Acts 105.
  7. Tenn. Code Ann. § 9-8-301 et seq.
  8. Tenn. Code Ann. § 9-8-307(a)(1)(A)-(W).
  9. Id.
  10. Tenn. Code Ann. § 9-8-302.
  11. Id.
  12. Tenn. Code Ann. § 9-8-403(a).
  13. Tenn. Code Ann. § 9-8-403(a)(2).
  14. Id.
  15. Tenn. Code Ann. § 9-8-403(a)(1).
  16. Tenn. Code Ann. § 9-8-302 See also Tenn. Comp. R. & Regs. 0310-01-01-.01.(1)(a) and Tennessee Advisory Opinion No. 03-02, 2003 WL 26088530 (TN Jud. Eth. Comm.)
  17. Tenn. Code Ann. § 9-8-403(a)(1).
  18. Rules of the Tennessee Claims Commission, Chapter 0310-1-1-.01 et seq., available at http://www.state.tn.us/sos/rules/0310/0310.htm.
  19. Id. at Chapter 0310-1-1-.01(1)(a).
  20. Hembree v. State, 925 S.W.2d 513, 515 (Tenn. 1996).
  21. Tenn. Code Ann. § 9-8-403(a)(1).
  22. Id.
  23. Id.
  24. Tenn. Code Ann. § 9-8-404.
  25. Id.
  26. Brown v. State, 783 S.W.2d 567, 572 (Tenn. Ct. App. 1989).
  27. Id.
  28. Ray Bell Const. Co. v. State, 356 S.W.3d 384 (Tenn. 2011).
  29. Id. at 385-86.
  30. Id.
  31. Id.
  32. Id. at 386.
  33. Id.
  34. Id.
  35. Id.
  36. Id. at 388-89.
  37. Id. at 388.
  38. Boyraz v. State, No. M2013-02976-COA-R3-CV, 2015 WL 2438756, *1 (Tenn. Ct. App. May 20, 2015).
  39. Id. at *1.
  40. Id.
  41. Id. at *2.
  42. Id. at *2.
  43. Id. at *3-4.
  44. Id. at * 3 (quoting Srygley v. City of Nashville, 135 S.W.2d 451, 451 (Tenn. 1940)). See also Crye-Leike Inc. v. Carter, 415 S.W.3d 808, 822 (Tenn. Ct. App. 2011).
  45. Boyraz, 2015 WL 2438756 at *4.
  46. Id. at *4.
  47. RCR Building Corp. v. State, No. M2014001555-COA-R3-CV, 2015 WL 5016943 (Tenn. Ct. App. Aug. 34, 2015).
  48. Id.
  49. Id.
  50. Id.
  51. Id. *1-2, *11.
  52. Id. at *9.
  53. Id. at *10.
  54. Id. at *11.
  55. Id. at *12. (In its decision, the Court of Appeals quoted part of the commissioner’s decision which stated, “The State cannot hide behind the Contract when it did not follow the terms of the Contract.” The Court of Appeals added, “We could not agree with the commissioner more.”)
  56. Jones v. State, 426 S.W.3d 50 (Tenn. 2013).
  57. Id. at 53.
  58. Id.
  59. Id. at 58. It would seem that this opinion also applies to constitutional officers.
  60. Barr v. Matteo, 360 U.S. 564, 576 (1959) (plurality opinion).
  61. Id. at 56 (citing Blair v. Walker, 349 N.E.2d 385, 389 (Ill. 1976)).
  62. Tenn. Code Ann. § 56-4-218(a).
  63. American Casualty Co. of Reading, Pennsylvania v. State, 475 S.W.3d 240 (Tenn. 2015).
  64. Id. at *1.
  65. Id. at *3.
  66. Id. at *1.
  67. Id. at *1.
  68. Id. at *6.
  69. Id. at *1.
  70. Id. at *1.
  71. Id. at *8.
  72. Id. at *8 n.11.
  73. Id. at *1.

Robert N. Hibbett ROBERT N. HIBBETT was appointed commissioner of Claims for the Middle Grand Division of Tennessee in 2011. He received his law degree from the University of Tennessee in 1985 and was in private practice in Knoxville until in 1989 he was appointed assistant district attorney general for the Fifteenth Judicial District of Tennessee. In 2009, he was named deputy district attorney general (Criminal Division). Hibbett is a former president of the Fifteenth Judicial District Bar Association and a former member of the Board of Governors for the Tennessee Bar Association. He retired from the Army National Guard as a colonel after 30 years of commissioned service

 

Justin Hickerson JUSTIN HICKERSON is a third-year law student at Belmont University College of Law. He clerked with Commissioner Hibbett during summer of 2015 through the Tennessee Bar Association Young Lawyers Division’s Judicial Internship Program. He plans to join Waller's Healthcare Operations Section in the fall.