Benefit Consulting Alliance, LLC v. Clarksville Montgomery County School System

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

April 10, 2013 Session

BENEFIT CONSULTING ALLIANCE, LLC v. CLARKSVILLE

MONTGOMERY COUNTY SCHOOL SYSTEM, ET AL.

Appeal from the Chancery Court for Montgomery County

No. MCCHCVMG0920 Michael R. Jones, Judge

No. M2012-01580-COA-R3-CV - Filed August 5, 2013

Consulting group that served as the agent of record for a trust established to provide

insurance to employees of a county school system filed a complaint alleging a violation of

the Open Meetings Act when a group of trustees met for lunch with one of the consulting

group’s employees and later changed the school system’s agent of record when the employee

formed a different association with another company. The trial court found that no violation

of the Open Meetings Act occurred at the lunch meeting because no decision was made

during the lunch. We affirm the trial court’s judgment.

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

P ATRICIA J. C OTTRELL, P.J., M.S., delivered the opinion of the Court, in which F RANK G.

C LEMENT, J R. and R ICHARD H. D INKINS, JJ., joined.

William K. Lane, III, Franklin, Tennessee, for the appellant, Benefit Consulting Alliance,

LLC.

Carol M. Joiner, Clarksville, Tennessee, for the appellees, Clarksville Montgomery County

School System, et al.

OPINION

I. B ACKGROUND

The Clarksville-Montgomery County Board of Education (“BOE”) established an

Agreement and Declaration of Trust (the “Trust”) in 1982 for the purpose of establishing a

plan providing healthcare and other group insurance benefits to its employees. Trustees were

named to collect and manage contributions from the employer and employees and to carry

out the purposes of the Trust, including the selection of insurance companies to provide the

benefits.

Beginning in at least the 1990s, the Trustees worked with a consultant named David

Fessenden, who provided information to the Trustees about which insurance company could

provide the Board’s employees with the best benefits for the best price. Mr. Fessenden was

affiliated with different consulting groups over the years, and the Trustees consistently

maintained their relationship with Mr. Fessenden regardless of the name of the company with

which he was associated.

In 2004 Mr. Fessenden was associated with a company called Risk Consultants, Inc.

In November of that year Benefit Consulting Alliance, LLC (“BCA”) purchased the assets

of Risk Consultants, which included Mr. Fessenden’s block of business. The effect of this

transaction was that BCA replaced Risk Consultants as the registered agent for the Trust and

all other companies for which Mr. Fessenden provided consulting services.1

Other members of David Fessenden’s family worked with him at BCA and serviced

the Trust account along with him. These individuals included Chris Fessenden, Mark

Fessenden, and Kim Phelps. The Trustees interacted with different individuals of the

Fessenden family while they were associated with BCA. The Trustees named as defendants

in this lawsuit testified that none of them ever met with any individual at BCA other than one

of the Fessendens to discuss the Trust’s insurance benefits or needs.

At some point in December 2008 David Fessenden contacted one of the Trustees,

Jeanine Chester, to schedule a business lunch. Mr. Fessenden indicated to Ms. Chester that

there was an “item of importance” he wanted to discuss with Ms. Chester, Danny Grant, and

Bruce Jobe, all of whom were Trustees. These three Trustees met Mr. Fessenden for lunch

on December 17. During this lunch, Mr. Fessenden informed the Trustees that Chris

Fessenden’s employment with BCA had been terminated and that he (David) would be

terminated within thirty days. Mr. Fessenden indicated that Kim Phelps and Mark Fessenden

were still employed with BCA, however, and could continue to provide services to the Trust

and answer any questions the Trustees might have.

In a letter dated December 22, the President of BCA, Wayne Emery, sent a letter to

Ms. Chester to inform her that Chris Fessenden’s employment with BCA was terminated on

December 15 and that David Fessenden’s employment would be terminated on January 15,

2009. Mr. Emery indicated that BCA’s remaining staff, including Kim Phelps and Mark

1

A registered agent receives commissions from the insurance company providing benefits for a

registered agent’s client, such as the Trust.

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Fessenden, were committed to providing the Trust with the “highest quality of employee

consulting services.”

In an e-mail dated March 16, 2009, Chris Fessenden informed the Trustees that the

Fessendens had formed a new entity called Risk Consultants America. Chris wrote:

This process has taken several months as we had to obtain a legal release from

our BCA non-competition agreement, which release was obtained on Friday,

March 13, 2009. Our team, Dave, Kim, Mark, Debbie and Chris are

committed to providing the same superior service as we did as your consultant,

Risk Consultants, Inc. prior to our BCA partnership and while we were

partners with BCA over the last 4 years.

.....

In order for us to work as your group insurance consultant, we will need you

to authorize us as your consultant/agent of record. We would like to continue

our working relationship and we will send you the proper forms and directions

for submission in a subsequent email, for your consideration.

We sincerely appreciate our long term relationship and look forward to

continuing as your employee benefits consultants.

Ms. Chester then sent a letter dated March 16 to the Trust’s insurance provider,

BlueCross BlueShield of Tennessee, instructing it to designate David Fessenden of Risk

Consultants America as the Trust’s Consultant/Agent of Record effective March 13, 2009.

II. BCA’S A MENDED C OMPLAINT

Following the Trust’s decision to change its consultant from BCA to Risk Consultants

America, BCA filed a lawsuit against the BOE, Clarksville-Montgomery County School

System, Clarksville-Montgomery County Insurance Trust Committee, Ms. Chester, Mr. Jobe,

and Mr. Grant. The individuals were sued in their individual capacities and as members of

the Clarksville-Montgomery County Insurance Trust Committee. The allegations BCA

asserted in its Amended Complaint include the following:

14. Plaintiff avers that on or about December 17, 2008 at or around

12:00 p.m., the three individual members of the Trust Committee members

named herein above met at Ruby Tuesday, 2239 Madison Street, Clarksville,

Tennessee 37043.

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15. At that non-public meeting, those members of the Trust Committee

were solicited by David Fessenden, a consultant, officer, and share-holder at

that time of BCA, and Kim Phelps, an employee and share-holder of BCA who

is also the daughter of David Fessenden. The purpose for which the meeting

was held was in part to discuss and deliberate toward a decision on appointing

a new Agent of Record other than BCA. As evidenced by the email from

Jeanine Chester . . ., David Fessenden “indicated there is an item of importance

that he would like to meet with the three of us to discuss . . . .” At this point

in time, David Fessenden’s direct employment with BCA was known to be

terminated effective as of January 15 2009 and upon termination he,

Fessenden, remained a share-holder in BCA. At the time of the meeting,

David Fessenden was under contract as a consultant for BCA.

.....

19. At the time of the meeting, BCA was the Agent of Record for the

CMCSS.

20. When the new Agent of Record agreement became effective on or

about March 16, 2009, Mr. Fessenden was employed by Risk Consultants

America, Inc. . . .

21. The meeting of the Trust Committee members was a meeting as

defined within Tenn. Code Ann. § 8-44-102(b)(2), or in the alternative, to the

extent that the meeting was a chance meeting or informal assemblage of two

or more members, public business was deliberated at said meeting in strict

violation of Tenn. Code Ann. § 8-44-102(c).

22. Specifically, at said meeting, discussion and deliberation of

delaying the ratification of a new Consultant/Agent of Record agreement until

after Mr. Fessenden terminated his business relationship with BCA and began

one with Risk Consultants of America took place.

23. No public notice was given of this meeting in strict violation of

Tenn. Code Ann. § 8-44-103(b).

24. No minutes of this meeting were kept in strict violation of Tenn.

Code Ann. § 8-44-104.

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25. Any deliberations on this matter conducted by the Trust Committee

members via electronic means were in violation of Tenn. Code Ann. § 8-44-

102(c) as well as § 8-44-108.

26. Plaintiff suffered damages as a result of the conduct and actions of

Mr. Fessenden and the Trust Committee through the loss of commissions.

27. Plaintiff avers that the actions taken by the Trust Committee in

awarding the Consultant/Agent of Record agreement to Risk Consultants of

America are null, void, and of no effect pursuant to Tenn. Code Ann. § 8-44-

105.

BCA asked the court to award it the following relief, inter alia:

2. That this Honorable Court find that the Trust Committee violated the

Tennessee Open Meetings Act and the actions taken by its members in

approving the contract between the Trust Committee and Risk Consultants of

America;

3. That said action and the resulting contract be declared null, void, and

of no effect pursuant to the provisions of the Tennessee Open Meetings Act,

specifically Tenn. Code Ann. § 8-44-105;

.....

5. That the Plaintiff be awarded damages in the amount of the loss of

commission suffered due to the actions and conduct of the Trust Committee.

III. T RIAL C OURT’S R ULING

Both BCA and the Defendants filed motions for summary judgment. Following a

hearing, the trial court denied BCA’s motion and granted the Defendants’ motion for

summary judgment. At the end of the hearing on the motions, the following colloquy

occurred between the trial court and BCA’s counsel:

THE COURT: Mr. Lane, do I have to make the determination that this

luncheon of these people was a meeting under the public

- - under the Tennessee public meetings law?

MR. LANE: Yes, sir.

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.....

THE COURT: Looking at the Trust Agreement that was entered on the

24th of August, 1982, and looking at Page 7 of that

agreement - - and it’s entry 21 - - it said: All actions of

the trustees are subject to the approval of such board - -

referring back to the Clarksville-Montgomery County

Board of Education - - in the administration of the trust

fund, and the performance of all other functions provided

for in this instrument are done by the trustees as an

instrumentality of the Clarksville-Montgomery County

Board of Education.

So it’s my belief that they would be subject to the Tennessee public meetings

law; however, I cannot find that this lunch - - you can draw all inferences

possible that this lunch would have been subject to the Open Meetings Law

based on just continuation of, what, 1982 forward, but I don’t believe that

there was any meeting that would have been necessary under the public

meetings law. For the purpose of the summary judgment motion, I’ll also rule

that the three named individuals will not have any personal liability in this

matter.

So I guess that I am granting the Defendant’s motion for

summary judgment.

MR. LANE: If your Honor please, for clarity purposes, with regard to

the fact that the committee is found to be subject to the

Open Meetings Act, is what you’re saying is that

regardless of the decisions that were made, they’re

subject to the Act?

THE COURT: What I’m saying is they made no decisions at that lunch

so that it was not subject to the Act. Just people eating

lunch.

In its Order the trial court wrote:

1. Upon review of the Agreement and Declaration of Trust dated

August 24, 1982, . . . the Court finds by the terms of said Agreement the

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Clarksville-Montgomery County Employees Insurance Trust (“Trust”) is an

instrumentality of the Clarksville-Montgomery County Board of Education,

and is therefore subject to the Open Meetings Act.

2. While the Trust is subject to the Open Meetings Act, the lunch

meeting that occurred in December 2008 attended by Bruce Jobe, Jeanine

Chester, Danny Grant and David Fessenden, drawing all possible inferences,

was not subject to the Open Meetings Act based upon the evidence before the

Court and as such, no violation of the Open Meetings Act occurred.

3. The individual Defendants Bruce Jobe, Jeanine Chester, and Danny

Grant have no individual liability.

Therefore, the Court finds that Defendants’ Motion for Summary

Judgment is well taken and is GRANTED and that Plaintiff’s Motion for

Summary Judgment is DENIED.

BCA appeals the trial court’s judgment granting the Defendants’ motion for summary

judgment. BCA argues the trial court erred in ruling the Trust Committee was not subject

to the Open Meetings Act “when changing the designated agent of record for employee

insurance benefit purposes.” 2

IV. A NALYSIS

Initially we note that the issue BCA raises on appeal is different from the issue that

it raised in its Amended Complaint and that the trial court ruled upon. BCA alleged in its

Amended Complaint that the Trustees had a lunch meeting on December 17, 2008, “to

discuss and deliberate toward a decision on appointing a new Agent of Record other than

BCA.” BCA further alleged that “at said meeting, discussion and deliberation of delaying

the ratification of a new Consultant/Agent of Record agreement until after Mr. Fessenden

terminated his business relationship with BCA and began one with Risk Consultants of

America took place.” BCA did not allege before the trial court, as it alleges here, that the

Defendants violated the Open Meetings Act later when they changed the designated agent

of record for employee insurance benefit purposes.

The trial court’s judgment was limited to determining the issue BCA raised, i.e.,

whether the Trustees who met with David Fessenden for lunch on December 17 violated the

Open Meetings Act by making a decision or deliberating toward a decision during that

2

BCA does not appeal the trial court’s ruling that the Trustees have no individual liability.

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meeting. Our review will therefore be limited to this issue as well. See City of Cookeville

ex rel. Cookeville Regional Med. Ctr. v. Humphrey, 126 S.W.3d 897, 905-06 (Tenn. 2004)

(citing Lawrence v. Stanford, 655 S.W.2d 927, 929 (Tenn. 1983)) (question not raised in trial

court will not be entertained on appeal).

A trial court’s decision on a motion for summary judgment enjoys no presumption of

correctness on appeal. BellSouth Advertising & Publishing Co. v. Johnson, 100 S.W.3d 202,

205 (Tenn. 2003); Scott v. Ashland Healthcare Ctr., Inc., 49 S.W.3d 281, 285 (Tenn. 2001);

Penley v. Honda Motor Co., 31 S.W.3d 181, 183 (Tenn. 2000). We review the summary

judgment decision as a question of law. Finister v. Humboldt Gen. Hosp., Inc., 970 S.W.2d

435, 437 (Tenn.1998); Robinson v. Omer, 952 S.W.2d 423, 426 (Tenn.1997). Accordingly,

this court must review the record de novo and make a fresh determination of whether the

requirements of Tenn. R. Civ. P. 56 have been met. Eadie v. Complete Co., Inc., 142 S.W.3d

288, 291 (Tenn. 2004); Blair v. West Town Mall, 130 S.W.3d 761, 763 (Tenn. 2004); Staples

v. CBL & Assoc., 15 S.W.3d 83, 88 (Tenn. 2000).

The requirements for the grant of summary judgment are that the filings supporting

the motion show that there is no genuine issue of material fact and that the moving party is

entitled to judgment as a matter of law. Tenn. R. Civ. P. 56.04; Blair v. West Town Mall,

130 S.W.3d 761, 764 (Tenn. 2004); Pero’s Steak & Spaghetti House v. Lee, 90 S.W.3d 614,

620 (Tenn. 2002); Byrd v. Hall, 847 S.W.2d 208, 210 (Tenn. 1993). Consequently, summary

judgment should be granted only when the undisputed facts, and the inferences reasonably

drawn from the undisputed facts, support one conclusion - that the party seeking the summary

judgment is entitled to a judgment as a matter of law. Webber v. State Farm Mut. Auto. Ins.

Co., 49 S.W.3d 265, 269 (Tenn. 2001); Brown v. Birman Managed Care, Inc., 42 S.W.3d 62,

66 (Tenn. 2001); Staples, 15 S.W.3d at 88.

In our review, we must consider the evidence presented at the summary judgment

stage in the light most favorable to the non-moving party, and we must afford that party all

reasonable inferences. Doe v. HCA Health Servs., Inc., 46 S.W.3d 191, 196 (Tenn. 2001);

Memphis Hous. Auth. v. Thompson, 38 S.W.3d 504, 507 (Tenn. 2001).

A party seeking summary judgment must demonstrate the absence of any genuine and

material factual issues. McCarley v. West Quality Food Service, 960 S.W.2d 585, 588 (Tenn.

1998) (citing Byrd v. Hall, 847 S.W.2d at 214). To be entitled to summary judgment, a

defendant moving party must either (1) affirmatively negate an essential element of the non-

moving party’s claim or (2) show that the nonmoving party cannot prove an essential element

of the claim at trial. Hannan v. Alltel Publishing Co., 270 S.W.3d 1,9 (Tenn. 2008). As to

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the second method, the standard is whether the moving party establishes that the nonmoving

party cannot establish an essential element at trial, not whether the nonmoving party’s

evidence at the summary judgment stage is sufficient to establish an essential element. Id.

at 7.

Each of the Trustees who attended the lunch meeting on December 17 with David

Fessenden were deposed and testified that Mr. Fessenden informed them during their lunch

meeting that BCA had terminated Chris Fessenden’s employment and that his own

employment would be terminated within the next few weeks. Mr. Fessenden let the Trustees

know that Kim Phelps and Mark Fessenden were still with BCA and could provide any

information or services the Trust needed. Each of the Trustees testified that no decision was

made during this lunch meeting.

BCA submitted no evidence to the contrary. In fact, BCA admitted the following two

statements of undisputed material fact the Defendants submitted in support of their motion

for summary judgment:

19. As to the lunch meeting on December 17, 2008, no deliberation or

decision was made by Jobe, Chester, and Grant.

22. The Trust members did not need to decide to delay the “ratification of

a new Consultant/Agent of Record agreement” because they were still

being serviced by Kim and Mark who were still working with Plaintiff.

Based on the Trustees’ uncontroverted evidence of what occurred during the lunch

meeting and BCA’s admission of the Defendants’ statements of undisputed material facts,

we conclude that the Defendants have affirmatively negated an essential element of BCA’s

claim and have shown that BCA cannot prove an essential element of its claim at trial. We

therefore hold the trial court appropriately granted the Defendants’ motion for summary

judgment and denied BCA’s motion for summary judgment.

V. C ONCLUSION

The judgment of the trial court granting the Defendants’ motion for summary

judgment and dismissing BCA’s Amended Complaint is affirmed. Costs of appeal are

assessed against the appellant, Benefit Consulting Alliance, LLC, for which execution shall

issue if necessary.

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____________________________

PATRICIA J. COTTRELL, JUDGE

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