Memphis Publishing Co. v. Cherokee Children & Family Services

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Memphis Publishing Co.vs.Cherokee Children & Family Services
Number: M2000-01705-SC-R11-CV
Year: 2002
State: Tennessee
Court: Supreme Court of Tennessee
Other lawsuits in Tennessee
Other lawsuits in 2002
Precedents include:
This case established that private entities could be subject to the state public records law if they performed the "functional equivalent" of a government agency. The functional equivalency test required that a private entity perform a public function and have an acceptable combination of the following criteria so as to deem the private entity the "functional equivalent" of the public body:
  1. Is the private entity publicly funded?
  2. Is the private entity controlled by the government?
  3. Was the private entity created by a governmental body?
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Memphis Publishing Company v. Cherokee was a court case in which the Supreme Court of Tennessee ruled that private entities could be subject to the state public records law if they performed the "functional equivalent" of a government agency.[1]

Important precedents

This case established that private entities could be subject to the state public records law if they performed the "functional equivalent" of a government agency. The functional equivalency test required that a private entity perform a public function and have an acceptable combination of the following criteria so as to deem the private entity the "functional equivalent" of the public body:

  1. Is the private entity publicly funded?
  2. Is the private entity controlled by the government?
  3. Was the private entity created by a governmental body?[2]

Background

The ruling, handed down in September 2002, stemmed from a lawsuit brought by the parent company of the Memphis Commercial Appeal newspaper against a nonprofit corporation that held a state contract to arrange child care services for low-income parents, Cherokee Children and Family Services Inc. Amid questions about the charity's financial management, The Commercial Appeal asked Cherokee to make public various financial records, and Cherokee refused. The charity also turned down requests for the same records made by auditors from the office of state Comptroller John Morgan.[3]

The newspaper then sued Cherokee, arguing that it provided a service in place of the state Department of Human Services, and thus, was the equivalent of a government agency and was subject to the state public records law.[4]

The material facts of the case, as outlined by the Supreme Court are as follows:

  • Cherokee Children & Family Services (CCFS) is a private non-profit incorporated in 1989. Shortly after incorporation, CCFS entered into a contract with the state to provide child care services through the ennessee Department of Human Services (TDHS). They also amended their bylaws and redefined their purpose to be to provide childcare for individuals, as recommended by TDHS, through funding from federal and state grants.
  • From 1990-2000, in Shelby County, CCFS assisted individuals in obtaining approved childcare on behalf of TDHS who then paid the childcare provider.
  • CCFS worked under three separate contracts with the state:
  1. From 1990-1992 CCFS was reimbursed from the state for activities directly approved by the state.
  2. From 1992-1999 CCFS was awarded fees for the services it provided through a percentage of all payments made to approved child care providers. This contract also permitted inspection of CCFS financial records by the state.
  3. The third contract, which ran a portion of 2000, returned to the original cost reimbursement model, but retained the ability of the state to audit CCFS.
  • In 1999, the Commercial Appeal, the Memphis daily newspaper, began investigating CCFS for a part of a story. In the process of the investigation, the newspaper submitted extensive records requests to CCFS.
  • When CCFS rejected the request, the newspaper filed suit.
  • The trial court ruled in favor of the newspaper and the court of appeals overturned the decision and ruled in favor of CCFS.
  • The final decision was appealed.[2]

Ruling of the court

The trial court ruled in favor of the newspapers, finding that while Children and Family Services was not a public body, its records were in fact public records as they were also records of the state pursuant to the various contracts.

The first court of appeals reversed the decision and ruled in favor of Children and Family Services, arguing that they were not a public body subject to the Open Records Act.

The state's highest court sided with the newspaper, overturning the decision of the court of appeals. Writing for the five members of the court, Justice A.A. Birch said, "the public’s fundamental right to scrutinize the performance of public services and the expenditure of public funds should not be subverted by government or by private entity merely because public duties have been delegated to an independent contractor. When a private entity’s relationship with the government is so extensive that the entity serves as the functional equivalent of a governmental agency, the accountability created by public oversight should be preserved."[5] The court began its determination by rejecting a number of previous rulings made by the Tennessee Court of Appeals about the subject, including a case which required the private entities be created or recognized by the legislature (1990) and a case that established that private corporations contracting with a city to provide public services are in fact acting as agents to the city(1990). The court went on to establish the validity of the functional equivalence test by citing cases in other states, including, A. S. Abell Publishing Co. v. Mezzanote, Connecticut Humane Society v. FOIC, Marks v. McKenzie High School Fact Finding Team, News and Observer Publishing Co. v. Wake County Hospital System and News and Sun-Sentinel Company v. Schwab, Twitty, & Hanser Architecture Group. The court also chose to adopt [[Private agency, public dollars, Connecticut}Connecticut's]] stand and determined that any records "made or received . . . in connection with the transaction of official business by any governmental agency," whether they be in the possession of the government agency or a private entity are in fact public records.[2] The court went on to state that while the question of whether or not the private agency performs a governmental function is critical to the test, other factors that may be considered include:

  1. public funding,
  2. if the entity was created by a public body
  3. The extent of government involvement and control

While the court did clearly establish and weight these criteria, they opted not to draw a bright line test and instead indicated that the 3 factors need to be considered in order to determined if the private agency is in fact a public body. In this particular case, the court determined that CCFS met all but one of the criteria established in the functional equivalence test and was thus considered a public body and subject to the state's Open Records Act.[2]

In the same ruling, the high court also said that, as the records in Cherokee's possession were public, the state comptroller had similar rights of access to the charity's financial records.[6]

Outcome of the controversy

The comptroller's office later issued an investigative audit into Cherokee's operations, reporting that hundreds of thousands of dollars in government funds had been siphoned out of the charity by its executive director, WillieAnn Madison.[7]

Madison was convicted in 2004 of federal charges of tax evasion, money laundering and embezzlement, and was accused of stealing more than $700,000 from the agency. Her husband, John Madison, was convicted of tax evasion and making false statements. WillieAnn Madison's convictions were upheld in 2007.[8]

The "functional equivalent" standard set by the state Supreme Court in the Cherokee case remains in place today. It has served as the basis for which courts have held that other private entities are subject to the public records law, including The Tennessean v. Powers Management/Allen v. Day.

Associated cases

See also

External links

References