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									Office of the Tennessee Attorney General

       2008 Annual Report
Cover photo: view through the grille over the doors at the main entrance of the John Sevier State Office Building, one of the buildings which houses the
Tennessee Attorney General’s Office. The grille depicts scenes characteristic of Tennessee—wild ducks in flight, fish leaping, possum crouching in a tree,
           a forest, a mine, a marble crane at work, a shock of wheat and two ears of corn, a rooster crowing beside a churn, a milk can, and a beehive.

                                                                  Cover photo and building photos courtesy State of Tennessee Photographic Services.
                                                               Mural photos by Aubrey C. Watson, courtesy of the Tennessee State Library and Archives.
                              From the Attorney General
                            Dear Fellow Tennesseans:

                            I am proud to present to you the 2008 Annual Report of the Office of the Attorney General.

                            As you will see, the report highlights many examples of the outstanding work accomplished for the
                            citizens of this great state by a dedicated and talented staff. While there are many challenges in the
                            year ahead, we will face those challenges with the same unwavering commitment to our mission of
                            providing sound legal representation and advice to our clients.

                            I appreciate the honor of serving as your Attorney General.

                            Robert E. Cooper, Jr.
                            Attorney General

                                                                                      Table of Contents
Management ................................................................ 2          Public Protection ........................................................ 18
           Executive Office                                                                      Antitrust Division
           Administrative Division                                                               Consumer Advocate and Protection Division
           Office of the Solicitor General                                                       Criminal Justice Division
                                                                                                 Law Enforcement and Special Prosecutions Division
Defense ......................................................................... 4
                                                                                                 Tobacco Enforcement Division
           Civil Litigation and State Services Division
                                                                                       State Finances ............................................................ 24
           Civil Rights and Claims Division
           Special Litigation Division                                                           Bankruptcy Division
                                                                                                 Collections Unit
Health and Welfare ..................................................... 10
                                                                                                 Tax Division
           Environmental Division
           Financial Division
           General Civil Division
           Health Care Division
           Real Property and Transportation Division
Management of the Tennessee               The Attorney General is a member of      Governor’s Advisory Committee
Attorney General’s Office is handled      several state commissions, including     Submits Report on Transfer of
by three divisions, each having its       the Tennessee Code Commission and
own varying functions, including          the Tennessee Judicial Council.
                                                                                   Chief Executive Powers
Executive, Administrative, and Office                                              Attorney General Cooper chaired
of the Solicitor General.                 General Cooper is assisted by a Chief    Governor Bredesen’s Advisory
                                          Deputy Attorney General whose            Committee on the Transfer of the
Executive Office                          duties are both legal and                Chief Executive Powers, established
                                          administrative. Lucy Honey Haynes        to examine ways to amend the
Attorney General Robert E. Cooper,        was appointed Chief Deputy in            Tennessee Constitution to provide for
Jr., is Tennessee’s chief legal officer   January 2008. She assists with the       the transfer of the governor’s chief
and administrative head of the            daily operation of the office –          executive powers when the governor
Attorney General’s Office. The            accepting service of process,            is unable to exercise the powers or
Attorney General is appointed to an       assigning lawsuits and other projects,   discharge the duties of the office.
eight-year term by the Tennessee          and participating in hiring decisions.   The Committee presented its report
Supreme Court pursuant to Article VI,     She reviews many legal documents         to the governor in January 2008.
Section 5, of the Tennessee               and assists in the development and
Constitution. Attorney General            implementation of office policies.
Cooper was sworn in as Tennessee’s
                                                                                   Administrative Division
26th Attorney General on November 1,      Chief Policy Deputy Larry Harrington     Deputy Ruth Thompson runs the
2006.                                     was appointed to the position in         Administrative Division, whose
                                          March 2008. He supervises special        primary function is to support every
The Attorney General’s duties are         projects, oversees legislative matters   other division and to ensure the
derived from the Tennessee                and external communications, and         smooth operation of the office. The
Constitution, statutes, and common        coordinates multistate policy            division performs a multitude of tasks
law. The office is responsible for the    initiatives with the National            including: interviewing and hiring of
legal representation of the State of      Association of Attorneys General.        attorneys and staff; preparation and
Tennessee, its agencies and its                                                    oversight of the budget and fiscal
officers. Thus, attorneys from the        Chief of Staff Leigh Ann Apple Jones     matters; offering of information
office appear in state and federal        is a principal contact with the          systems hardware, software and
courts. The Attorney General is           Tennessee General Assembly and           services; investigative services;
charged with enforcing the Consumer       National Association of Attorneys        purchasing; facilities management;
Protection Act and Tennessee and          General. She also works with the         records management; and library
federal antitrust laws. The office also   Chief Policy Deputy and director of      services.
provides legal advice to state            communications in handling media
agencies and officials, issues formal     inquiries. Sharon Curtis-Flair is the    In 2008, the division’s IS staff planned
legal opinions, reviews proposed          director of communications and is the    and supervised an upgrade of the
rules and regulations, and reviews        primary liaison between the office       office’s information technology,
many state contracts, deeds and           and the media.                           increasing the office’s efficiency and
leases.                                                                            its ability to respond to the needs of

                                                                                   both clients and the public.
Office of the Solicitor General             Moot Court Program
Solicitor General Michael E. Moore          The moot court program is a vital tool
heads the Office of the Solicitor           used by the Office of the Solicitor
General and is charged by the               General to prepare attorneys for oral
Attorney General with supervision of        argument in state and federal
the office’s appellate work. He is          appellate courts. Approximately one
responsible for all aspects of the          week before a case is scheduled for
office’s appellate litigation practice in   argument, the attorney assigned to
the Tennessee Supreme Court,                the case presents a “practice”
Tennessee Court of Appeals,                 argument before a panel of moot
Tennessee Court of Criminal Appeals,        court “judges” consisting of other
United States Supreme Court and the         attorneys in the office. The judges
Sixth Circuit Court of Appeals. He is       study the briefs and relevant lower
assisted by Associate Solicitors            court decisions in the case and ask
General Gordon Smith and Joseph             questions of the arguing attorney
Whalen. Solicitor General Moore has         intended to anticipate those likely to
argued many cases in the state and          be posed by the court at the actual
federal appellate courts, including         hearing. At the conclusion of each
three cases before the United States        moot court session, the panel and
Supreme Court. He also advises the          arguing attorneys discuss the case
Attorney General on matters of legal        and share suggestions concerning
policy and reviews all formal opinions      how the state’s position might be
of the office along with Attorney           most effectively presented at the
General Cooper.                             upcoming hearing.

The Defense area of the Attorney          breach of contract. He had               Court Upholds Licensing Board
General’s Office includes three           contracted to make repairs to the        Decision
divisions whose primary                   park manager’s home at Cumberland
responsibilities include defending        Mountain State Park but the State        A chancery court ruled in favor of the
state agencies in a variety of lawsuits   refused to pay after he abandoned        State in this case, King and Battle v.
and tort claims: Civil Litigation and     the worksite. The Claims Commission      Commissioner Virginia Trotter Betts, et
State Services (CLASS), Civil Rights      found that the plaintiff breached the    al., filed by two registered nurses at
and Claims (CRAC), and Special            contract and was not entitled to         Middle Tennessee Mental Health
Litigation.                               damages.                                 Institute who claimed they faced
                                                                                   disciplinary action if they refused to
State Employee Claims Firing              Retaliation Claims Rejected              do their jobs as directed despite
                                                                                   concerns they could be operating
Related to Political Affiliation          Three plaintiffs sued for race and       outside the bounds of their licenses.
A former employee of the                  gender discrimination as well as         The nurses spoke out against using a
Department of Safety who was              retaliation in this federal case,        pharmacy after hours to retrieve pre-
terminated after failing a Fitness for    Edmond, et al. v. Tennessee Board of     packaged medicines when no
Duty Evaluation sued for                  Probation and Parole. They sought        pharmacists were on duty. State
reinstatement or front pay, back pay,     both injunctive relief and unspecified   licensing boards determined the
$15 million in compensatory damages,      monetary damages. The trial court        practice was acceptable. The court
and $15 million in punitive damages.      granted the State’s motion for           determined there was no retaliation
In Hazelwood v. Tennessee                 summary judgment as to the claims        against the nurses by the defendants,
Department of Safety, et al., the         of two plaintiffs. The remaining         the plaintiffs were allowed to express
plaintiff alleged she was fired due to    plaintiff had a non-jury trial in        their concerns, the defendants were
her political affiliation and her         Memphis. The court found the             entitled to qualified immunity, and
friendship with another employee          defendant had not retaliated against     the defendants did not violate the
who had been fired. The trial court       plaintiff. All three plaintiffs have     plaintiffs’ constitutional rights. The
granted the State’s motion for            appealed.                                nurses have filed a notice of appeal to
summary judgment, and the plaintiff                                                the Tennessee Court of Appeals.
has appealed the case to the Sixth
Circuit Court of Appeals.

Breach of Contract Suit over
Cumberland Mountain State                              In 2008, the State of Tennessee’s General Fund
Park Repairs                                             received over $155 million in payments from
The plaintiff in this case, Gossett                       the tobacco companies participating in the
Gutter v. Tennessee Department of                               Master Settlement Agreement.
Environment and Conservation, was a
building contractor who sued for
approximately $30,000 alleging

Employment Case over                      Tennessee in which a woman sued for
Accumulated Leave Dismissed               the death of her husband, a food
                                          delivery person, who was attacked
In this case, Willcox v. District         and killed on the Tennessee State
Attorneys General Conference, et al., a   University campus by individuals who
former assistant district attorney        were neither students nor state
sued for payment for accumulated          employees. In Jimmie Bradford v.
leave to which she claimed she was        State of Tennessee, the claimants

entitled. She filed suit in federal       sued for the death of their student
court requesting compensation             son who was shot and killed on the
pursuant to the federal Fair Labor        campus of the University of Memphis
Standards Act (FLSA) and certain          during an attempted robbery. In
state statutes. She also sued for         Ashley Manis v. State of Tennessee, a
breach of contract. Her case was          student at Middle Tennessee State
dismissed when the court held the         University sued for injuries she
District Attorneys General                sustained when she was beaten by
Conference had Eleventh                   another student in whose dorm room
Amendment immunity and the                she was visiting.
plaintiff was an exempt employee
pursuant to the FLSA. The Court did       Selmer Parade Cases
not rule on the breach of contract
allegation but refused to exercise        The CRAC Division is defending the
jurisdiction over the claim as it was a   State in personal injury/wrongful
state law claim.                          death claims arising from a multiple
                                          fatality tragedy during the City of
On-Campus Crimes                          Selmer’s June 17 parade. The city
                                          hosted a parade that included a
The CRAC Division has seen a number       number of exotic cars, including race
of claims filed concerning criminal       cars. A driver lost control and his
conduct on state campuses since the       vehicle ran into the crowd, killing
Tennessee Court of Appeals upheld a       several people and injuring many
Claims Commission judgment finding        more.
the University of Tennessee liable for
injuries after a criminal attack on       Claim filed over I-40/I-240
campus. The Court upheld a
student’s claim in Smith v. State of
Tennessee that the state maintained a     Ray Bell Construction Company sued
dangerous condition when he was           TDOT for breach of contract during a
attacked by a non-student on State        dispute over how much the company
property. Following this decision,        should be paid after exceeding a
came the case Yongfen Min v. State of     deadline during construction of the

Interstate 40/Interstate 240            Ray, et al., a jury returned a favorable   Employment Discrimination
interchange in Memphis. In Ray Bell     verdict for the State.                     Suit Mediated
Construction Company (RBCC) v.
Tennessee Department of                 Whistleblower Act Suit                     In this case, Laureano v. Tennessee
Transportation, the company asked                                                  Department of Safety (TDOS), a
for the maximum incentive allowed                                                  Hispanic male sued for employment
by the contract, $2.5 million, in       The plaintiffs in Vicki C. Hood and        discrimination after he applied for
addition to reimbursement of            William Keither Ridley v. Tennessee        various positions with TDOS
$193,800 withheld by TDOT as            Board of Regents, et al., allege they      beginning in 1993 but was never
disincentive. RBCC claimed              complained to the Governor’s office        hired. The plaintiff claimed TDOS
completion of the project was           about abuses in the Tennessee Small        violated Title VII when it failed to hire
delayed by unforeseen events and        Business Development Center, a             him, and he sought back pay, front
work and/or quantities TDOT added       subsidiary of the Tennessee Board of       pay, and compensatory damages. All
to the project. RBCC also claimed       Regents, and suffered retaliation as a     his claims were dismissed on
that the completion date and the        result. The plaintiffs filed claims        summary judgment except for a claim
incentive date – the same date as the   under the Tennessee Whistleblower          based on his application for
completion date – should be             Act for racial discrimination, hostile     employment in 2004. The final claim
extended. TDOT argued the contract      work environment, and libel. The trial     was settled after mediation.
language was clear and the incentive    court awarded the state partial
date would not be extended even if      summary judgment regarding a               Defending the Tennessee Plan
the completion date were extended.      portion of the plaintiff’s claims. The
                                        Sixth Circuit Court of Appeals             In John J. Hooker and Jason Andrew
TDOT also argued that RBCC should
                                        dismissed the plaintiff’s appeal, and      Johnson v. Phil Bredesen, et al., the
not receive reimbursement because
                                        the case was subsequently settled.         Special Litigation Division is
they did not timely complete the
                                                                                   defending the Tennessee Plan,
project and because they did not
accept an offer of a completion date
extension. CLASS division attorneys
tried this case before the Tennessee
Claims Commission.

Exposure to Second-Hand
Two years after the Tennessee
Department of Correction banned
smoking at its facilities, the CRAC
Division prevailed in its last case
involving an inmate allegedly
exposed to second-hand tobacco
smoke. In Lutfi Shafq Talal v. Gayle

whereby Tennessee appellate court         that make a positive difference in the
judges are selected and then subject      lives of young people and the
to retention elections, as                conservation of wildlife resources.”
constitutional under both the             The trust will only make grants to
Tennessee and United States               organizations whose principal place
constitutions. The District Court         of business is in Middle Tennessee or
dismissed the lawsuit, and the case is    whose principal activity is to be
on appeal.                                performed in Middle Tennessee.

Voter Registration Requirement            Challenge to Restitution, Child
Upheld                                    Support Requirement Rejected
The Special Litigation Division           The State prevailed in this federal
successfully defended a challenge to      case, Terrance Johnson, et al. v. Phil
state voter registration laws in Ronald   Bredesen, et al., in which the court
Teel, et al. v. Riley Darnell, et al.     rejected the ACLU’s contentions and
Plaintiffs lived and traveled in RVs      found Tennessee’s law, which
and wished to register to vote using a    requires that disenfranchised felons
Tennessee business mailing address.       pay any outstanding court-ordered
The address was a mail drop location,     victims’ restitution and child support
and plaintiffs had not shown that         prior to restoration of a right to vote,
address was their residence.              is valid.

Court Approves Modified                   Adult Entertainment
Agreement for Maddox                      Registration Act
Foundation                                In Entertainment Productions, et al. v.
A Davidson County Probate Court           Shelby County, et al., and East Brooks
judge signed an order restoring           Books v. Shelby County, in federal
operation of the Dan and Margaret         district and circuit courts, the Special
Maddox Charitable Trust in its original   Litigation Division has been
Middle Tennessee home and                 defending the constitutionality and
approving a new board of trustees.        enforceability of Tennessee’s Adult-
The amended trust agreement               Oriented Establishment Registration
provides that the Trust will have         Act.
“charitable, religious, scientific,
literary, and/or education purposes,”     Scrap Metal Tag and Hold
with particular consideration to two      Requirements Challenged
causes that were of significant
interest to the Maddoxes: “activities     The Special Litigation Division is
                                          assisting in defending this action,

Tennessee Scrap Recyclers Association,           court action seeking approval to
et al. v. Phil Bredesen, et al., seeking to      transfer half of its interest in the
enjoin enforcement of the state’s tag-           Stieglitz Collection, an art and
and-hold requirements and the                    photography collection. Fisk
Memphis City Ordinance dealing with              University is appealing the trial
scrap metal recyclers. In 2008, the              court’s order that it may not
state law was replaced by a                      transfer its interest.
registration requirement.
                                               • Medlin v. Belmont University:
TennCare Reform                                  This is a case brought by the
                                                 Executor of Hortense Medlin
In Karl Davidson v. Governor Bredesen,           Downard’s estate seeking an
the plaintiff sued several state                 order from the court declaring
officials in connection with his                 that a charitable gift made by
termination from the TennCare                    Mrs. Downard to Belmont
program as uninsurable. This plaintiff           University has failed because of
staged a sit-in at the Capitol in 2005           the University’s failure to comply
protesting TennCare reform and filed             with the conditions of the gift.
suit against Finance Commissioner                The Attorney General intervened
Goetz, Commissioner Lodge, (former)              on the grounds that the gift is a
Commissioner Flowers, (former)                   charitable trust, and the Attorney
Assistant Commissioner Hickey, and               General represents the interests
(former) Deputy to the Governor                  of the charitable beneficiaries,
Cooley. The trial court dismissed                the students of Belmont
claims against these state officials             University.
sued in their individual capacities
only. The claims included alleged
                                              Civil Litigation and State
RICO violations, constructive fraud,
breach of fiduciary duty, §1983               Services Division (CLASS)
violations, denial of free speech              • Led by Deputy Attorney General
rights, denial of due process, and               Kevin Steiling.
violation of the Tennessee Human               • Represents the state’s various
Rights Act claiming malicious                    educational agencies and
harassment.                                      institutions.
                                               • Deals with state purchasing and
Trusts and Charitable Gifts                      personnel matters and
 • Fisk University: The Attorney                 represents the state in
   General intervened to represent               employment and construction
   the public interest in Fisk                   litigation.
   University’s unsuccessful cy pres           • Reviews state contracts.

Civil Rights and Claims Division       Special Litigation Division
(CRAC)                                  • Led by Special Counsel Steve
 • Led by Deputy Attorney General         Hart.
   Kimberly Dean.                       • Handles special litigation and
 • Defends tort and workers’              assists other divisions in litigation
   compensation actions filed             matters.
   against all departments and          • Represents the Bureau of Ethics

   agencies of state government.          and Campaign Finance.
 • Also defends state employees of
   various departments sued in civil
   rights actions for money

          William M. Leech, Jr., Award
            The William M. Leech, Jr., Award recognizes
                 those who have made significant
              contributions to the Attorney General’s
              Office. The award is named in memory
                of the late Bill Leech who served as
               Attorney General from 1978 to 1984.

            The 2008 recipients of the Leech Award are
             Kathy Celauro, Deputy of the Bankruptcy
               Division, and Renee Doyle, Employee
             Disbursement Auditor in the Fiscal Office.

Health and Welfare
Health and Welfare includes such           petition the Tennessee Supreme               violations continued even after the
areas as the environment, housing,         Court for review of the Court of             original complaint was filed. The
TennCare, children’s services, land        Appeals’ decision, and the case has          lawsuit is against three individuals
acquisition and agencies that take         now been sent back to the trial court        and a general partnership, RUSCO.
care of the health and well-being of       for further proceedings.                     The amended complaint includes
all Tennesseans. The divisions in the                                                   allegations that certain activities
office that fall under this area of        Joint Initiative on Construction             were conducted without first
practice include Environmental,            Storm Water Enforcement                      obtaining the appropriate permits,
Financial, General Civil, Health Care,                                                  that adequate erosion prevention
and Real Property and                      State ex rel. Summers, et al. v. Pelts, et   and sediment control devices were
Transportation.                            al. (RUSCO) is part of an Attorney           not installed or maintained, and that
                                           General’s Office/Tennessee                   sediment was allowed to enter
Rock and Mineral Harvesting                Department of Environment and                waters of the State which resulted in
                                           Conservation (TDEC) joint initiative         a condition of pollution. The State is
State ex rel. Cooper, et al. v. Lahiere-   on construction storm water                  seeking civil penalties, damages, and
Hill, LLC, involves harvesting of rock     enforcement. As amended, this                permanent injunctive relief.
and minerals on the Cumberland Trail       lawsuit seeks redress for numerous,
State Park (CTSP.) In July 2008, the       repeat violations of the Tennessee           Sewer Overflow Penalty
Tennessee Court of Appeals reversed        Water Quality Control Act at 15
and vacated the Hamilton County                                                         Benefits Cumberland River
                                           residential construction sites in
Chancery Court’s grant of summary          Shelby County discovered when TDEC           Compact Project
judgment to Lahiere-Hill, which owns       personnel made visits at the sites           The Environmental Division is
the mineral estate on the portion of       between December 2000 and April              representing the State in United
the CTSP that lies in Hamilton County.     2006. The State alleges that                 States and State of Tennessee v.
The State had brought an original
action for ejectment, trespass, and
injunctive relief to declare real
property rights and to abate a public                           Termination of Parental Rights Cases
nuisance. Since 2001, the State has
owned the surface estate to certain
real property in Hamilton County that
is a part of the CTSP. The appellate
court held that the company had not
met its burden of proof. It also
reversed the trial court’s dismissal of
the State’s public nuisance claim
finding that further factual
development was required on the
issue of whether Lahiere-Hill’s stone
mining methods were impermissibly

destructive. The company did not
Metropolitan Government of Nashville      Tennessee Water Quality Control
and Davidson County. The case             Board’s ruling that the Tennessee
involves a continuing problem with        Department of Environment and
overflows from the sewer system in        Conservation (TDEC) properly issued
Metro Nashville in violation of federal   a state water quality certification to
and state clean water laws. The state     Waste Management, Inc. of
and federal governments negotiated        Tennessee for a wetland alteration.
with Nashville to address these           In June 2008, the Davidson County
ongoing violations. A proposed            Chancery Court held TDEC may validly
consent decree resolving the              issue a water quality certification that
complaints, filed in 2007, establishes    allows for the alteration of a wetland
a schedule for Metro to make              that was created as mitigation for a
corrective actions and requires Metro     previous alteration at the site. The
to pay $282,019 to the United States      court also upheld the validity of the

                                                                                     Health and Welfare
and $282,019 to the State. The state      joint public notice used by TDEC
penalty will be used for a Cumberland     when a project such as this requires
River Compact project. The consent        both a state certification and a
decree stipulates additional civil        federal permit issued by the U.S.
penalties if there are future unlawful    Army Corps of Engineers. PEER has
overflows or if Metro fails to comply     appealed the trial court’s ruling to the
and requires Metro to complete a          Tennessee Court of Appeals.
$2.8 million Supplemental
Environmental Project (SEP). A few        Refunds Distributed to National
homeowners in the primary area in         Foundation of America (NFOA)
question have sought to intervene in
the lawsuit to challenge Metro’s SEP.
The matter is pending before the          This office brought an action, State ex
district court for a final decision on    rel. Newman v. National Foundation of
intervention and on the joint motion      America (NFOA), to liquidate an
of the United States, the State, and      unauthorized issuer of annuities and
Metro seeking court approval of the       securities in May 2007 on behalf of
consent decree.                           the Commissioner of Commerce and
                                          Insurance against a Franklin,
Suit over TDEC Certification for          Tennessee, family-run nonprofit
Wetland Alteration                        corporation. NFOA victimized more
                                          than 300 elderly customers
In Public Employees for Environmental     nationwide by persuading them to
Responsibility (PEER) v. Tennessee        exchange existing annuities and
Water Quality Control Board, et al.,      securities for an installment contract
PEER sought judicial review of the        by NFOA. The contract purportedly

Health and Welfare
generated tax advantages through a         violation of the law. The Court found    bond from them to cover cases of
charitable deduction, as well as a         the defendant did not know he was        insolvency or failure to pay.
schedule of regular payments for           violating the law because he thought
years in the future. NFOA recruited        he was selling a non-exempt security.    Developmental Center Law
insurance agents to sell this product,     The Tennessee Supreme Court will         Suits
which violated state laws in every         hear the case.
state where it was marketed. The                                                     • People First of Tennessee v.
Commissioner acting as Receiver has        Self-Insured Workers’                       Clover Bottom Developmental
made recoveries by selling all real                                                    Center challenged the conditions
estate purchased by NFOA in Las                                                        at Clover Bottom Developmental
Vegas, Franklin, TN, and Georgia.          The Financial Division requested the        Center, Nat T. Winston
During 2008, the Receiver made two         Davidson Chancery Court enter an            Developmental Center, Greene
distributions of estate assets to          agreed order permitting Safety              Valley Developmental Center,
NFOA’s customers, representing a 79        National Casualty Corporation (SNCC)        and the Harold Jordan Center. A
percent refund of their approved           to administer its bond for $970,000         settlement agreement was
claims. A final distribution is likely     to cover the self-insured workers’          entered in 1997. Since that time,
after recoveries have been                 compensation liabilities of Plastech        the State closed Nat T. Winston
exhausted. An action alleging              Engineered Products, Inc., in State ex      Developmental Center and
violation of the Tennessee Nonprofit       rel. Newman v. Safety National              negotiated an order dismissing
Corporation Act, among other               Casualty Corp. During 2008, Plastech        Greene Valley Developmental
damages claims, has been filed by the      filed for bankruptcy protection and         Center based on substantial
Receiver’s outside counsel against         later sold off or shut down its             compliance. Most recently, the
the individuals who ran NFOA.              Tennessee plants making automotive          district court entered an order
                                           parts in Franklin and Kenton. When          this year dismissing the Harold
Suit over Registering as a                 Plastech stopped paying claims, the         Jordan Center based on
                                           Commissioner of Commerce and                substantial compliance with the
Broker-Dealer before Selling
                                           Insurance made demand on the bond           terms of the settlement
Securities                                 company to tender funds to the State        agreement. The State is now
This case, State of Tennessee v.           or to administer the workers’               working to improve conditions at
Michael Casper, involves the reversal      compensation benefits. SNCC                 Clover Bottom Developmental
of convictions under a provision of        promptly took over administration.          Center and services being
the Tennessee Securities Act that          The purpose of the court action is to       provided to class members in the
says one must register as a broker-        specify the legal role of the bond          community.
dealer before selling securities. The      company to appear in workers’
Court of Criminal Appeals found the        compensation claims matters and to        • United States v. State of
legislature intended only to               specify the bond penalty sum as the         Tennessee (Arlington) was filed in
criminalize the selling of securities by   outside limit of its liability. The         1992 challenging the services and
an unregistered broker-dealer when         Commissioner approves qualified             care provided to residents of
the person intentionally sells the         employers to be self-insured in             Arlington Developmental Center.
security knowing such sales are in         Tennessee and requires security or          Following a trial, the district

    court entered an order requiring      Protection Act. A smoker living in
    the State to improve conditions       Tennessee sued, claiming that the Act
    at Arlington Developmental            violated his “lifestyle choice” and
    Center. The Court subsequently        that owners of businesses,
    allowed a class of former             restaurants, bars, or clubs should
    residents, current residents and      have the right to provide services to
    individuals at risk of placement at   whomever they see fit and should be
    Arlington Developmental Center        free to choose smoking or non-
    to intervene. After many years of     smoking. The United States District
    contentious post-judgment             Court granted the State’s motion to
    litigation, the district court        dismiss, holding that “smokers” are
    approved a settlement                 not a class of people as contemplated
    agreement in February 2007            in the public accommodations section
    defining the “at risk” class and      of the Civil Rights Act of 1964 and

                                                                                  Health and Welfare
    providing for the closure of          that the Non-Smoker Protection Act
    Arlington Developmental Center.       does not violate plaintiff’s equal
    The State has now filed a motion      protection rights.
    seeking to vacate this lawsuit on
    the grounds that the legal basis      Petition of Knox County Public
    for the lawsuit is no longer valid.   Defender
Non-Smoker Protection Act                 This case involves companion
                                          petitions that the Knox County Public
                                          Defender filed in 2008 in the Knox
This civil rights action, Burnette v.     County General Sessions Courts and
Bredesen, was filed against Governor      Criminal Courts. Citing a heavy
Bredesen and 28 State Senators and        caseload, the Public Defender sought
66 Representatives of the Tennessee       to be relieved from current and
General Assembly who voted for the        future appointments to represent
passage of the Non-Smoker                 certain indigent criminal defendants

               In 2008, the Bankruptcy Division filed 4,516
                 claims totaling $48.5 million resulting in
                    $8.9 million collected by the State.

Health and Welfare
in those courts. The Public               TennCare Cases Have                          the eligibility of Daniels class
Defender’s withdrawal from those          Significant Fiscal Impact                    members and vacate the injunction.
courts would leave the Administrative
Office of the Courts (AOC) with the       These cases, one ongoing for decades         The newly filed Crabtree, et al. v.
financial responsibility for indigent     and the other filed in 2008, illustrate      Goetz, et al. involves a challenge
representation by the private bar, at     the significant fiscal implications of       under the Americans with Disabilities
an estimated annual cost                  litigation related to the TennCare           Act to TennCare’s newly effective
approaching $3 million. Accordingly,      program. Daniels, et al. v. Goetz, et al.,   limits on the program’s home health
this Office moved to intervene in         filed as a class action in federal court,    and private duty nursing benefits.
both matters on AOC’s behalf. The         involves a subclass of individuals who       These benefits were previously
Knox County Criminal Courts granted       had become automatically eligible for        unlimited, and total spending on
AOC’s motion to intervene on              and enrolled in TennCare because             private duty nursing and home health
October 14, 2008, and shortly             they received federal Supplemental           in FY2008 was $214 million. The new
thereafter, on November 7, 2008, the      Security Income (SSI) cash benefits.         benefit limits are projected to save
Public Defender voluntarily dismissed     When those benefits were later               $88 million annually. The plaintiffs
the criminal court action.                terminated, those individuals were no        have asked the Court to enjoin the
                                          longer eligible for that category of         limits.
TOSHA Penalties in Excess of              Medicaid. An injunction entered by
                                          the Court in 1987 has prohibited the         TennCare Early and Periodic
$50 Upheld by Appeals Court
                                          State from terminating the Medicaid
                                                                                       Screening, Diagnosis, and
Barrett Construction objected to a        benefits of individuals in the Daniels
$950 civil penalty by the Tennessee       class even though they may in fact be        Treatment Services
Occupational Safety and Health            ineligible for Medicaid in any other         This ongoing class action case, John
Review Commission following an            category. Expenditures for the               B., et al. v. Goetz, et al., was brought
inspection of the worksite by TOSHA       Daniels class in state fiscal year 2007-     on behalf of all TennCare enrollees
inspectors. Although the company          08 totaled approximately $1.4 billion.       under the age of 21. The plaintiffs
admitted the violations, it claimed the   The State has sought relief from the         allege the State was not meeting its
penalty in excess of $50 without a        Court, asking that it approve a              obligation to provide these enrollees
jury trial violated the Tennessee         proposed process for redetermining           with early and periodic screening,
Constitution. In Barrett Construction
v. TOSHA, the Court of Appeals
upheld the constitutionality of this
civil penalty on the basis the law does
not apply to administrative agencies.                 In addition to restitution for consumers, in 2008
In addition, the Court held this                    the Consumer Protection team obtained judgments
penalty was remedial rather than
                                                      of over $17 million for consumer protection and
punitive. The case has been appealed
to the Tennessee Supreme Court.                           unauthorized practice of law violations.

diagnosis, and treatment services         commercial value of the land taken
required by the federal Medicaid Act.     and the incidental damages to the
The case was settled by consent           remaining land. The State argues
decree in 1998. Currently at issue is     that without the construction of the
the status of the State’s compliance      new highway and interchange at this
with the 1998 decree. The case is         location, the projected commercial
involved in discovery disputes            development in the land use plan
regarding the scope of the State’s        would have been delayed or never
electronic discovery obligations.         occurred, meaning a much lower land
These disputes have resulted in a         value for the plaintiff.
series of orders with the potential to
significantly impact existing and         Suit over Designation of
future litigation to which the State is   Property as a Regulatory
a party.

                                                                                  Health and Welfare
Dispute over Land Value at                In this land condemnation action,
Proposed Memphis Interchange              State of Tennessee v. Triple Z
                                          Development, the Department of
The Real Property and Transportation      Transportation took possession of a
Division filed this land condemnation     tract in 2003. The highway
action, State of Tennessee v. Donald      construction is in progress but the
Bruce Anderson, on behalf of the          landowners are seeking additional
Department of Transportation to           expert consultation regarding
acquire land for the construction of      wetlands delineation. The plaintiffs
State Route 385. The landowner            claim the department erroneously
demands $14 million. As part of the       designated part of their land as a
construction of this highway, the         regulatory wetland.
Department condemned
approximately 16 acres from a 40-         Billboard Litigation in Shelby
acre tract located at the corner of
U.S. Highway 64 and Collierville-
Arlington Road in Memphis. At the         In State of Tennessee v. William H.
time of condemnation, the City of         Thomas, Jr., the State seeks to stop
Memphis had adopted an advisory           the alleged illegal construction of a
land use plan that anticipated major      billboard within a permanent
commercial development at this            drainage easement next to Interstate
particular corner. The landowner and      40 in Shelby County. The owner of
his appraiser argue that this             the billboard filed a counterclaim
projected future development should       against the Department of
be used to enhance the award for the      Transportation. The State moved to

Health and Welfare
dismiss the counterclaim because the      respect to two statutes that regulate     Financial Division
department has sovereign immunity,        the continuing use of grandfathered
but the chancery court has denied         billboards.                                • Led by Deputy Attorney General
the motion to dismiss as well as a                                                     Gina Barham.
motion for an interlocutory appeal of     Other Environmental Division               • Provides legal services for much
that ruling. The chancery court has                                                    of the State’s business–related
                                          Actions                                      activities such as investments of
also issued a stay of various
administrative and judicial review        The Environmental Division is                the State Treasury and the
proceedings that involve the              handling or providing significant            Tennessee Consolidated
billboard owner and his billboard         advice on several matters related to         Retirement System.
construction in Shelby County.            the reburial of Native American            • Represents a number of agencies
                                          skeletal remains and artifacts; the          handling issues of government
Relocating a Billboard to a Non-          acquisition of land for the                  financing, banking, and insurance
                                          development of wetlands near                 regulation.
Qualifying Site
                                          Reelfoot Lake; the encroachment and        • Authored approximately 20
In Universal Outdoor and Eller Media v.   illegal tree cutting of private parties      percent of the 196 formal
Tennessee Department of                   within the wildlife management area          opinions issued by the Attorney
Transportation, the State denied an       that surrounds Tims Ford Lake; the           General’s Office in 2008.
outdoor advertising permit following      valuation of billboard sites acquired
the relocation of a grandfathered         as the result of public highway
billboard. The petitioners allege the     improvements; and the permitting of       General Civil Division
billboard should retain its               changeable message signs for
grandfathered status even thought         outdoor advertising use in                 • Led by Deputy Attorney General
the billboard was moved 30 feet from      Tennessee.                                   Dianne Dycus.
its original location to accommodate                                                 • Handles a wide variety of civil
highway construction. The                 Environmental Division                       matters representing a number
department asserts the billboard was                                                   of state departments, boards and
moved voluntarily, the owner was           • Led by Deputy Attorney General            agencies including the
paid relocation expenses, and the            Barry Turner.                             Departments of Children’s
petitioners do not qualify for the         • Enforces civil environmental              Services, Human Services, Mental
state outdoor advertising permit             protection laws regarding clean           Health and Developmental
because the grandfathered billboard          air, clean water, hazardous               Disabilities, Labor and Workforce
was re-erected on land not qualified         waste, and other areas.                   Development, Agriculture,
for an outdoor advertising permit.         • Gives advice to and reviews               Tourism, Veterans Affairs, and
The department has prevailed in the          regulations for the Department            Military.
administrative proceeding, the               of Environment and Conservation
chancery court of Davidson County,           and the Tennessee Wildlife
and in the Tennessee Court of                Resources Agency.
Appeals. This case presents issues of
first impression in Tennessee with

Health Care Division                  Real Property and
 • Led by Deputy Attorney General     Transportation Division
   Linda Ross.                         • Led by Deputy Attorney General
 • Primarily provides legal advice       Larry Teague.
   and representation to the Bureau    • Represents the state of
   of TennCare and the Department        Tennessee in land acquisition for
   of Health and its health–related      all purposes.
   boards such as the Board of         • Most of the work performed by
   Dentistry, the Board of Medical       the division involves the
   Examiners, the Board of Nursing,      Tennessee Department of
   and the Board of Optometry            Transportation.
   along with the Health Services      • In addition to Nashville, the Real
   Development Agency.                   Property Division has regional

                                                                              Health and Welfare
                                         offices in Knoxville, Chattanooga,
                                         and Jackson.

                        Service Awards
             In 2008, the office recognized three staffers
             who achieved significant career milestones.

              Gordon Smith, Associate Solicitor General,
              and Larry Lewis, Tax Division Deputy, both
            reached 30 years of state service. In addition,
             Jan Connell, Administrative Secretary of the
            Criminal Justice Division, celebrated her 40th
                     anniversary with the office.

               All three have made their careers at the
            Attorney General’s Office and were presented
                with plaques recognizing their tenure.

Public Protection
Public Protection consists of five         prescription medications paid by          Medicaid programs and resolved
divisions dedicated to preserving the      the participating states’ Medicaid        whistleblower claims.
rights of Tennesseans in the areas of      programs. The settlement
consumer issues and crime:                 addresses several cases involving      • Celebrex: A judgment with Pfizer
Antitrust, Consumer Advocate and           more than a dozen drugs.                 over the marketing of Celebrex
Protection, Criminal Justice, Law                                                   followed a five-year investigation
Enforcement and Special                  • Ovcon: This case involves two            by 33 states into the company’s
Prosecutions, and Tobacco                  pharmaceutical companies:                promotion of the drugs designed
Enforcement.                               Warner Chilcott and Barr. Barr           to treat pain and inflammation.
                                           planned to market a generic form         Tennessee’s share of the $60
Pharmaceutical Companies                   of Ovcon, a contraceptive                million payment to the
Settle with Tennessee, Other               product, and then entered into           participating states was almost
                                           an agreement with Warner                 $1 million.
States                                     Chilcott not to compete; Warner
In 2008, Tennessee was involved in a       Chilcott settled with the states in   New Law to Aid TennCare Fraud
number of multistate agreements            2007 for $5.5 million. In 2008,       Task Force
with pharmaceutical companies              Barr settled for $5.9 million, and
settling claims ranging from               Tennessee’s portion from the          Tennessee has a promising tool to
marketing products for non-FDA             settlement was $141,656.              help deter provider TennCare fraud:
approved uses to preventing the                                                  a new law that makes lying or willfully
release of a generic equivalent.         • CVS Caremark: Tennessee and 28        withholding evidence in connection
                                           other states entered a $38.5          with an investigation of TennCare
 • Cephalon: Cephalon is accused of        million settlement of consumer        fraud a felony. The law, similar to one
   marketing the drugs Provigil,           protection claims against             used by the federal government, will
   Gabitril, and Actiq for non-FDA         Caremark, one of the nation’s         strengthen the efforts of the
   approved uses. Tennessee’s              largest pharmacy benefits             TennCare Provider Fraud Task Force,
   portion of the $425 million             management companies.                 which includes representatives from
   settlement to the state and             Caremark agreed to limits on its      the Attorney General’s Office,
   federal governments is $7.8             drug switching program.               TennCare, and the TBI Medicaid Fraud
   million. Cephalon will also plead                                             Control Unit.
   guilty to a misdemeanor violation     • Merck: Tennessee received $11.2
   of the FDCA and pay a fine of $50       million from two separate             Nonprofit Museum at Center of
   million.                                settlements with Merck,               Divorce Dispute
                                           manufacturer of Zocor, Vioxx,
 • Bristol-Myers Squibb: Tennessee         and Pepcid. The settlements           Jeff Lane and Susan Lane formed
   received $3.5 million from Bristol-     totaled $649 million and involved     Lane Motor Museum, a Tennessee
   Myers Squibb Company to                 49 states plus the District of        nonprofit corporation, in 2001. The
   resolve allegations of illegal drug     Columbia. The agreements              museum owns a collection of unique
   marketing and pricing of                resolved claims the company           and rare vehicles which are on display
                                           failed to pay rebates due state       to the public. The museum has over

$7 million in assets, the vast bulk of      Foreclosure Rescue Company              could get them legal documents such
which came from donations by Jeff           Targets West Tennesseans                as Social Security cards, green cards,
Lane. In Lane v. Lane, Susan Lane                                                   work permits, and driver’s licenses.
attempted to join the museum as a           The State sued to stop a West
party to divorce proceedings, asking        Tennessee foreclosure rescue            Tennessee Leads Multistate
the court to include the museum’s           company, Patrick & Patrick, LLC, and
                                                                                    Investigation into Dietary
assets in the marital estate. At the        its principal from charging service
request of the court, this office filed a   fees to consumers and then failing to   Supplement Producer
brief as amicus curiae opposing Susan       follow through with the services        Tennessee led a multistate
Lane’s motion to join the museum as         promised. The State’s complaint,        investigation into and a subsequent
a counter defendant in the divorce          filed in Shelby County Chancery         agreement with Airborne Health, Inc.,
proceedings. Susan Lane withdrew            Court, also alleges violations of the   in the country’s largest payment to
her motion, and the divorce                 Tennessee unauthorized practice of      date with a dietary supplement
continued without the museum as a           law statutes and the Tennessee          producer. The $7 million agreement
party.                                      Credit Services Businesses Act.         resolves allegations of
                                                                                    unsubstantiated and unlawful
Company Targets Ft. Campbell                Non-Attorney Targets Laotian            marketing claims concerning
Soldiers Using Predatory Sales              Immigrant Community                     Airborne’s products. Tennessee’s
                                                                                    portion of the settlement as lead
and Lending Practices                       The State sued Christopher Mountry      state is $780,000. The defendants
A Montgomery County judge                   over alleged unauthorized practice of   allegedly made health-related claims
awarded the State of Tennessee over         law and consumer protection             in the marketing, packaging,
$10.8 million in State v. Rome Finance      violations for representing he is a     advertising, offering, and selling of
Company, Inc., et al., in which a lender    licensed attorney in Tennessee.         their line of dietary supplements that
was accused of using unlawful and           Mountry told members of the Laotian     were not substantiated by reliable

                                                                                                                             Public Protection
predatory sales and lending practices       community he could help them with       and competent scientific evidence at
targeting soldiers from Ft. Campbell        immigration, divorce and disability     the time the claims were made.
and elsewhere. The judgment came            issues or legal problems. Consumers
as a result of a long history of refusals   complained Mountry claimed he
by Rome to abide by court orders
requiring it to provide the Consumer
Advocate and Protection Division
with certain files and other                          In 2008, the Antitrust Division completed review of
information related to the case. The                   over 75 nonprofit mergers, sales, or dissolutions.
default judgment was awarded to the
State as a sanction after Rome and its
owner Ronald M. Wilson walked out                           Assets of the nonprofits involved totaled
of a court-ordered deposition just as                             approximately $86.5 million.
the court was preparing to conduct a
telephonic hearing.

Public Protection
Companies Agree to Stop                   court account. The Court ordered             customers. The request included
Providing Legal Services                  BlueHippo to place $1 million into the       a 11.75% return on its equity
                                          court for possible consumer                  investment. The Consumer
without a License to Hispanic             restitution.                                 Advocate, the City of
Immigrants                                                                             Chattanooga, and the Atmos
Elmer Virula, TPS Tax Professional        Protecting Utility Consumers                 Intervention Group intervened
Services, Inc., and Office Professional                                                and opposed the rate hike. After
                                           • Atmos Energy Corporation                  a hearing on the merits, the TRA
Services, Inc., agreed to stop
                                             customers saved approximately             granted only 4.3% of the rate
providing legal services without a
                                             $4.1 million in surcharges for the        increase. Tennessee American
license to members of a Hispanic
                                             period of 2000-2006 and an                Water is a public utility serving
immigrant community. The
                                             estimated $807,000 annually               the water needs of 74,535
companies claimed they could
                                             thereafter as a result of Atmos’          customers in Chattanooga and
provide legal services such as
                                             withdrawing their claim. Atmos            North Georgia.
immigration document preparation
                                             operates under a performance
and also offered marriage licenses
                                             based ratemaking plan under
and certificates, which were falsified.                                            Court Upholds GPS Monitoring
                                             which the company is allowed to
                                             keep a portion of the savings         Devices for Sex Offenders
Electronics Company                          resulting from natural gas            A sex offender challenged the statute
Overcharges Low Income                       purchases that fall below a           allowing the Board of Probation and
Consumers                                    benchmark tied to market              Parole to require that GPS monitoring
                                             averages. The Consumer                devices be worn by sex offenders
The State filed suit against BlueHippo       Advocate and Protection Division      while on probation in Doe v. Bredesen.
Funding, LLC, for allegedly making           asserts Atmos used a benchmark        The district court dismissed the case,
false statements to lure low-income          unapproved by the TRA in 2000.        and the Sixth Circuit affirmed that
and credit-challenged consumers to           Atmos is a utility regulated by the   decision. The United States Supreme
use their financing services for             Tennessee Regulatory Authority        Court denied the plaintiff’s petition
electronic items. The businesses sold        (TRA) and offers natural gas          for a Writ of Certiorari.
computers and other electronics to at        service to an estimated 126,000
least 4,500 Tennesseans at prices            customers in Tennessee.
often up to three times higher than                                                Prohibition against Direct
what consumers would pay at an                                                     Shipment of Wine Upheld
                                           • Tennessee American Water
electronics outlet. The defendants           Company customers will save $6        This action by out-of-state vintners,
allegedly made false statements              million annually following a          Jelovsek v. Bredesen, et al., challenges
about so-called “free” items and the         hearing before the TRA.               the constitutionality of the state’s
exact terms of their offers. The State       Tennessee American Water filed        prohibition against direct sales and
also filed a motion for temporary            a petition requesting an increase     direct shipments of wine to
injunction with an asset freeze              of $7.6 million in revenues, which    consumers. The plaintiffs contend
seeking to stop the alleged unlawful         would have resulted in a 21% rate     permitting in-state wineries to
conduct and requiring the company            increase for residential,             conduct onsite sales of wine to
to place monies for restitution into a

                                             commercial, and industrial            visitors while prohibiting out-of-state
wineries to sell and ship to customers     offenses, juries should simply be
in Tennessee violates the Commerce         instructed to choose which level of
Clause. The Sixth Circuit Court of         offense most properly fit a
Appeals struck down portions of            defendant's actions. In State v.
Tennessee’s Grape and Wine law but         Phedrek Davis, the court approved
upheld the prohibition of direct           the historic sequential, acquittal-first
shipment of wine to consumers. The         jury instruction, finding that there
case has been remanded to the              had to be an orderly process for jury
Eastern District Court for further         deliberations.
                                           Officers Can Enter without a
Procedure on Jury Instructions             Search Warrant to Protect the
on Lesser-Included Offenses                Public
                                           The State prevailed in this case, State
Following a 2001 Tennessee Supreme         v. Randy Lee Meeks, concerning
Court decision that a criminal             whether police officers could enter a
defendant’s right to jury instructions     hotel room to protect the public
on lesser-included offenses is, at least   without first obtaining a search
in part, constitutionally based, many      warrant. The Tennessee Supreme
criminal defendants challenged             Court held the unmistakable
Tennessee's historic practice of           presence of an active
instructing the jury that it must first    methamphetamine lab in a hotel
consider the charged offense and           room, reported by occupants in the
either unanimously convict or acquit       next room, provided both probable

                                                                                      Public Protection
on that offense before moving to           cause and sufficient exigent
consider any lesser offenses.              circumstances to allow officers to
Defendants argued that, in order to        enter without a warrant. Due to the
give fair consideration to lesser          extreme volatility surrounding the

             The Real Property and Transportation Division
           handled approximately 1,500 cases in 2008, most of
                which involved right-of-way acquisitions.

Public Protection
manufacture of methamphetamine,              Constitution. The companies also       • State v. Grand River Enterprises
the officers had an objectively              contended an amendment to the            and J&E Distributors: The State
reasonable basis for entering the            Escrow Fund Act was applied              sued Grand River Enterprises for
room immediately in order to protect         retroactively to ITP. The Sixth          failing to pay the appropriate
themselves, the defendants in the            Circuit Court of Appeals affirmed        amount into its escrow account
room, and the hotel’s other                  a trial court ruling that the            required for non-participating
occupants rather than taking the time        Escrow Fund Act is constitutional        manufacturers of tobacco
necessary to procure a search                and does not violate the                 products for the year 2007; for
warrant.                                     Sherman Act. The Sixth Circuit           knowing violations of the escrow
                                             also ruled in favor of the State on      laws; and for making a false
Regulation of Internet Tobacco               ITP’s retroactivity claim and held       certification of its escrow
Sales                                        the State is immune to suit in           requirements for 2007. The State
                                             federal court pursuant to the            also sued J&E Distributors for
In 2005, the General Assembly passed         eleventh amendment to the U.S.           submitting false reports as the
a law regulating the delivery sale of        Constitution.                            wholesaler of tobacco products
cigarettes, i.e. over the Internet or by                                              for Grand River Enterprises.
telephone. The Tobacco                     • Seneca-Cayuga Tobacco Co.: The           Grand River Enterprises moved
Enforcement Division has filed two           State sued Seneca-Cayuga, now            to dismiss the case, and the State
cases against companies that violated        known as Seneca-Cayuga Tribal            will oppose that motion.
the statute and has worked with              Tobacco Corp. (SCTTC), in circuit
other states to take steps to decrease       court seeking an order directing      Tobacco “Diligent
the number of cigarettes sold over           the company to make                   Enforcement” Defense
the Internet. These steps include            appropriate escrow deposits and
multistate agreements preventing             demanding other monetary and          In April 2006, tobacco companies
the use of credit cards to buy               injunctive relief. SCTTC filed a      participating in the Master
cigarettes over the Internet and             motion to dismiss based on            Settlement Agreement – known as
agreements with shipping                     Indian tribal sovereign immunity,     Participating Manufacturers (PMs) –
companies, FedEx, UPS, and DHL, not          and the Court ruled SCTTC had         asserted they were entitled to an
to deliver cigarettes.                       waived its sovereign immunity         adjustment to their payments under
                                             because of its protracted course      the MSA. The PMs contend the
Tobacco Escrow Fund Act                      of dealing with the State,            states failed to “diligently enforce”
Lawsuits                                     including its conduct in paying       statutes requiring tobacco companies
                                             civil penalties to resolve a prior    not participating in the MSA to make
 • S&M Brands v. Cooper: A non-              dispute under the same statute.       payments into escrow accounts
   participating member of the               SCTTC’s interlocutory appeals         during 2003. While some PMs made
   MSA, Virginia-based S&M Brands,           have been denied by the               their full 2006 payment, others
   and a tobacco importer, ITP,              appellate courts, and the case        withheld part of their payment or
   alleged provisions of the Escrow          has been remanded to the trial        made payment into a disputed
   Fund Act violated federal                 court.                                payments account. Tennessee stands
   antitrust law and the U.S.                                                      to lose between $30 and $150 million

                                                                                   if the state is found to have been non-
diligent for 2003. In November 2006,    Criminal Justice Division
the Davidson County Chancery Court
compelled Tennessee to arbitrate the     • Led by Deputy Attorney General
issue, and Tennessee has joined with       Amy Tarkington.
other states to arbitrate before a       • Handles all direct and post-
single arbitration panel. Meanwhile,       conviction appeals from criminal
the PMs have asserted they should          judgments.
also receive the adjustment for later    • Defends criminal judgments in
years, and, thus, many did not make        habeas corpus proceedings in
full payments in 2007 and 2008. The        the trial and appellate courts.
states anticipate the PMs will           • Also handles capital cases on
continue not to make full payments         appellate review in both the
unless and until the states are            state and federal courts.
successful in arbitrating the claims.
                                        Law Enforcement and Special
Antitrust Division                      Prosecutions Division
 • Led by Deputy Attorney General        • Led by Deputy Attorney General
   Dennis Garvey.                          Mike Meyer.
 • Enforces state and federal            • Handles criminal prosecution
   antitrust laws and false claims         enforcement cases such as
   acts, with a particular focus on        securities fraud and
   health care fraud.                      environmental law violations in
 • Oversees the operation of               addition to assisting the state’s
   nonprofit corporations within the       district attorneys in similar

                                                                               Public Protection
   state.                                  prosecutions.
                                         • Also handles some civil
Consumer Advocate and                      enforcement matters such as
Protection Division                        forfeitures.

 • Led by Deputy Attorney General       Tobacco Enforcement Division
   Cynthia Kinser (Mills).
 • The Consumer Protection team          • Led by Deputy Attorney General
   protects consumers and                  John Sinclair.
   businesses from unfair and            • Enforces the provisions of the
   deceptive trade practices and           1998 Master Settlement
   enforces the Unauthorized               Agreement.
   Practice of Law statute.              • Handles other tobacco–related
 • The Consumer Advocate team              matters.
   represents the interests of

   Tennessee consumers of public
   utilities services.
State Finances
Financial matters for the State are      Retail Business Filings                     characterize a criminal activity as a
handled by the Bankruptcy and Tax                                                    taxable privilege under the
Divisions and the Collections Unit of    Circuit City (filed in Virginia), Sharper   Tennessee Constitution. That
the Special Litigation Division.         Image, Linens-N-Things, and K B Toys,       argument had been rejected by the
                                         Inc. (all filed in Delaware) are just a     Davidson County Chancery Court in
                                         few of the retail businesses around         Robbins v. Chumley although that
Company Facing Consumer
                                         the country suffering due to adverse        court found the tax has elements of a
Enforcement Action Files                 economic conditions. All have filed         criminal penalty and struck it down
Bankruptcy                               for relief under Chapter 11 of the          on due process grounds. The
Only days before a Tennessee circuit     Bankruptcy Code seeking to                  Supreme Court granted review in
court judge was to rule on a             reorganize and continue doing               Waters. A decision is pending.
consumer enforcement action              business. These filings present
                                         numerous concerns to Tennessee
alleging fraudulent conduct, Rome                                                    Exemptions from State Sales
Finance, Inc., filed for bankruptcy in   agencies, including consumer
                                         protection issues such as going out of      Tax
California. Rome then sought to halt
the state enforcement case in            business sales and treatment of gift         • Gate Bluegrass Precast, Inc. v.
Tennessee by filing a lawsuit in         cards; concerns for employees when             Chumley: The Court of Appeals
California seeking an expedited          a business files for bankruptcy but is         reviewed the sales tax liability of
hearing and injunctive relief. The       self-insured for workers’                      a contractor that provided and
Consumer Advocate and Protection         compensation coverage; and                     installed architectural concrete
Division had pursued the                 environmental issues. The                      work on projects, such as the
enforcement action for three years       Bankruptcy Division has already                renovation of the Metro
seeking a final resolution to the        appeared for numerous agencies in              Courthouse in Nashville. The
charges that Rome was involved in        these cases and expects the number             Court affirmed the principle that
predatory lending practices that         of these filings to increase.                  contractors who make and install
targeted members of the military                                                        items as real property are users
service. The Bankruptcy Division         Challenges to the Tax on Illegal               of those items and do not resell
challenged the lawsuit in the            Drugs                                          them as tangible personal
bankruptcy court so the Consumer                                                        property. They thus are not
                                         The Tax Division is handling a large           eligible for manufacturers’
Division could move forward with its
                                         number of cases challenging the tax            exemptions from sales tax.
police and regulatory action in the
                                         on dealers in illegal drugs that went
state court. The state court judge
                                         into effect on January 1, 2005.              • American Fiber Systems, Inc. v.
rendered an $11 million judgment
                                         Individuals assessed with this tax             Chumley: This case concerns
against Rome in favor of consumers
                                         have alleged it violates due process,          leases of fiber optic cable. The
which will be claimed in the
                                         double jeopardy, the privilege against         Davidson Chancery Court found
bankruptcy estate. The U. S. Trustee
                                         self-incrimination, and other                  these agreements were leases of
has filed a motion for appointment of
                                         Tennessee and federal constitutional           tangible personal property
a chapter 11 trustee which the
                                         provisions. In Waters v. Chumley, the          subject to sales tax rather than
Bankruptcy Division has joined.
                                         Court of Appeals struck down the tax           nontaxable services, even though
                                         on grounds the Legislature cannot

American Fiber was obligated        TennCare Recoveries                          Bankruptcy Division
to monitor, maintain, and
repair the cable. The court         Bureau of TennCare v. Estate of Tanner        • Led by Deputy Attorney General
also found the lessees did not      is one of several cases related to the          Kathryn Behm Celauro.
resell the cable as such but        State’s recovery of federal and state         • Represents state agencies in
used it as a medium to supply       medical assistance costs. The State             bankruptcy courts across the
communication services. It          contends state and federal law                  country.
concluded that when an              contemplate the Bureau making                 • Represents the state’s interest by
agreement provides the cable        recoveries more than 12 months after            filing proofs of claims and
is removable at the pleasure of     death because statutes require the              administrative claims in
the owner, it does not become       Bureau to delay recovery from                   bankruptcy cases where a state
a fixture.                          estates until there is no living spouse,        entity is owed a debt.
                                    there is no child under age 21, and
                                    there is no disabled child in need of        Collections Unit
Liability for Occupational
                                    the decedent’s assets. The decisions
Safety and Health                   in these cases may have a                     • Part of the Special Litigation
Penalties                           multimillion-dollar impact to the               Division and headed by Deputy
                                    TennCare program because federal                Attorney General Vincent
The department seeks to
                                    Medicaid funding requires that states           Williams.
recover occupational safety
                                    make such recoveries and predicates           • Collects penalties and other
and health penalties of
                                    its reimbursements to states on the             debts owed to state
$495,000 plus interest in
                                    amounts which should be recovered.              departments and agencies.
Tennessee Department of Labor
                                                                                  • In 2008, the unit collected
and Workforce Development
                                    Suit Alleges Theft from Walter                  $229,284.29 from 39 debtors.
(TOSHA) v. Lowell Industries,
Inc., et al., after the defendant   State Community College
and its successors were fined                                                    Tax Division
                                    The Board of Regents and Walters
for a safety hazard the                                                           • Led by Deputy Attorney General
                                    State Community College filed a
defendant failed to correct                                                         Larry Lewis.
                                    lawsuit, State Board of Regents,
following an inspection. The                                                      • Represents a wide variety of
                                    Walters State Community College v.
safety hazard subsequently                                                          agencies including the
                                    Phylliss M. Akins, et al., against Phyllis
caused the death of an                                                              Department of Revenue, the
                                    Akins and Danny Gregg alleging they
employee. The Department                                                            Board of Professional
                                    stole $525,000 between 2001 and
alleges the defendant closed                                                        Responsibility, the Board of Law
                                    2007. The defendants oversaw the

                                                                                                                         State Finances
its incorporated business and                                                       Examiners, the Commission on
                                    college’s bookstore operations. The
started a new one and the                                                           Continuing Legal Education, the
                                    complaint further alleges a third
subsequent business(es) and                                                         Tennessee Regulatory Authority,
                                    defendant, Whitney Akins, received
owners should be liable for the                                                     the Tennessee Consolidated
                                    real property paid for with proceeds
penalties.                                                                          Retirement System, and many of
                                    of the theft. The lawsuit is in the
                                    discovery phase.                                the regulatory boards of the
                                                                                    Department of Commerce and

Tennessee Attorney General’s Office
          P.O. Box 20207
       Nashville, TN 37202

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