ROCK-TENN CONVERTING COMPANY, ET AL.
THE CITY OF MEMPHIS, ET AL.
Session August 12, 2014
Appeal from the Chancery Court for Shelby County No. CH121497 Walter L. Evans, Chancellor
Waverly D. Crenshaw, Jr., and W. Travis Parham, Nashville, Tennessee, for the appellants, Rock-Tenn Converting Company and Talisha Haynes.
Prince C. Chambliss, Jr., Felisa N. Cox, Robert F. Miller, Richard D. Bennett, Patrick G. Walker, and Henry B. Talbot, Memphis, Tennessee, for the appellees, The City of Memphis and FCR Tennessee, L.L.C.
J. Steven Stafford, J., delivered the opinion of the Court, in which Richard H. Dinkins, J., and W. Michael Maloan, Sp. J., joined.
J. STEVEN STAFFORD, JUDGE
This case began on September 24, 2012 when Rock-Tenn Converting Company ("Rock-Tenn") and Talisha Haynes (together with Rock-Tenn, "Appellants") filed a complaint for declaratory judgment against the City of Memphis ("City") and FCR Tennessee, L.L.C. ("FCR, " and together with the City, "Appellees"). By their complaint, Appellants asked the trial court to declare void a January 2012 amendment to the contract that is the subject of this appeal.
Rock-Tenn is a provider of recycling services. Ms. Haynes is a Memphis resident and taxpayer. The City is a home rule municipality as authorized by Article XI, section 9 of the Constitution of the State of Tennessee ("Constitution"). The City operates under a private charter within Shelby County, Tennessee. FCR is a provider of recycling services.
A municipality, such as the City, that has chosen to be governed by home rule is also prescribed a procedure for amending its charter by Article 11, section 9 of the Tennessee Constitution, which provides, in relevant part:
Any municipality may by ordinance submit to its qualified voters in a general or special election the question: "Shall this municipality adopt home rule?"
In the event of an affirmative vote by a majority of the qualified voters voting thereon, and until the repeal thereof by the same procedure, such municipality shall be a home rule municipality, and the General Assembly shall act with respect to such home rule municipality only by laws which are general in terms and effect.
A charter or amendment may be proposed by ordinance of any home rule municipality, by a charter commission provided for by act of the General Assembly and elected by the qualified voters of a home rule municipality voting thereon or, in the absence of such act of the General Assembly, by a charter commission of seven (7) members, chosen at large not more often than once in two (2) years, in a municipal election pursuant to petition for such election signed by qualified voters of a home rule municipality not less in number than ten (10%) percent of those voting in the then most recent general municipal election.
Pursuant to the foregoing section of the Constitution, in January 1964, the City adopted home rule by Ordinance No. 1117. Charter Home Rule Amendment Ordinance 1852 was adopted in 1966. Ordinance 1852 grants the Mayor of the City of Memphis contracting authority for the City. Section 14 of the Home Rule Amendment provides:
Be it further ordained, that the power to contract (other than by franchise agreements) shall remain with the Mayor; however, all contracts requiring disbursements of funds shall be limited in an amount not in excess of that provided in the appropriate budget, either operations or capital funds. In the event an expenditure of extraordinary nature and not provided for shall appear to be reasonable and in the public interest, a request may be submitted by the Mayor and thereafter approved or rejected by the Council.
Article 7, section 51(1) of the City of Memphis Charter (the "Charter") identifies the types of contracts that must be competitively bid. This section of the Charter provides, in pertinent part:
No contract involving an expenditure exceeding ten thousand dollars ($10, 000.00) shall be awarded or let to the lowest and best bidder until after the advertisement by at least three publications in a newspaper published and circulated in the City of Memphis within the calendar week before the date fixed in the advertisement upon which bids are to be received.
Section 51 of the Charter was amended by Home Rule Amendment Ordinance No. 4434 to allow the Memphis City Council to adjust the dollar amount for purchases requiring newspaper advertisement for competitive bidding, discussed in detail, infra.
The Memphis City Code of Ordinances ("Code of Ordinances") Section 5-4-8 is titled "Purchase of goods and supplies;" it provides, in relevant part:
Sec. 5-4-8. Purchase of goods and supplies
C. 1. Notwithstanding any other provision of the Charter or this Code, no contract for equipment, apparatus, material, supplies, goods or services for the city involving more than $50, 000.00 shall be made except after the contract shall have been advertised in a newspaper of daily circulation for two consecutive days in the week preceding the day on which the bids are to be received.
2. On any contract for equipment, apparatus, materials or supplies involving more than $25, 000.00, but less than $50, 000.00, the bid procedure of the purchasing division of the City of Memphis shall be used.
3. Under the bid procedure, when the items sought are less than $25, 000.00, the purchase may be consummated by purchase order and approval of the purchasing agent.
4. Notwithstanding any other provision of the Charter or this Code, the discretionary amount allowable and necessary for division purchases shall be $5, 000.00 with approval of the division director.
5. If the items sought are in excess of $50, 000.00, then the purchase must be consummated by written contract signed by the mayor.
On August 1, 1995, the City entered into a contract with FCR (the "Initial Contract"). Under the Initial Contract, FCR agreed to operate and maintain Recycling Facilities (as defined by the contract) within the City to process and dispose of Recycled Materials (as defined by the contract). The term of the Initial Contract was for ten years, but it provided for extensions of the initial term. The parties extended and amended the Initial Contract on a number of occasions, most recently on January 9, 2012. The January 9, 2012 amendments and extension provides for a contract expiration date of August 26, 2022.
The Initial Contract, at Article IV, section 4.1(a), included an agreed upon formula concerning the payments to be ...