Crossville Chronicle, Crossville, TN

April 20, 2013

Tansi resident files class action suit against POA

By Heather Mullinix
Assistant editor

CROSSVILLE — A class action lawsuit has been filed by a member of the Lake Tansi Property Owners Association against the POA claiming negligence in administration of POA funds and assets.

Mary Aggers filed the suit April 12 in Cumberland County Chancery Court and names members of the board of directors, suing them in their official capacity as board members. Those named in the suit are Jerry Davenport, James Hellem, Michael E. Ferry, Edward Liskovec, Marlene Reitz, Richard Holton, Dick LeClair, Ed Yoder, Kris Burke, David Kerr, Kenneth Qualls and Claude Coyne.

The suit alleges the board of directors of the POA transferred assets negligently to Tansi Waste Management, Inc. (TWMI). The assets transferred were rights to utility engineering services contracted between the POA and Environmental and Engineering Services; a lease of about one half acre of land for 99 years at a rate of $1; and $125,000 in cash.

It alleges a conflict of interest due to the fact Coyne was a member of the board of directors and then presumptive president and CEO of TWMI.

The transfer of assets was made without a two-thirds majority vote of the membership required by TCA 48-62-102, sale of assets other than in regular course of activities, and, according to the suit, illegal.

Also at issue is a sewer plant purported to be capable of processing 300,000 gallons per day, but which is only capable and permitted for 50,000 gallons per day.

On September 1, 2009, TWMI transferred all of its assets to Tansi Sewer Utility District (TSUD). This was done negligently, the suit states, and without adequate consideration. At the time of the transfer, the suit states Coyne endorsed the resolution as a member of the TWMI board while he was general manager of Tansi Sewer Utility District, a paid employee.

The suit states TWMI was a wholly owned subsidiary of the POA and the transfer of assets was made without approval of two-thirds of the POA membership, as required by law.

The POA had obtained a $1.2 million line of credit from First National Bank to finance the construction of a sewer treatment plant and collection system to serve the POA amenities. These assets were transferred by TWMI to TSUD Aug. 26, 2010 "without adequate consideration."

TWMI made one payment on the loan in the amount of $187,438.15, with $1.275 million owed as of July 31, 2010. The loan was unsecured.

According to the suit, TSUD agreed to pay the POA on condition of issuing public bonds.

TWMI also allowed TSUD the right to use the office at 7004 Ute Lane, purchased by TWMI for $100,000 and financed by a loan from First National Bank.

"The Plaintiff alleges that the agreement of Tansi Waste Management to pay the Defendant was conditional, speculative and illusory. Tansi Waste Management does not have sufficient assets to repay this debt. The Plaintiffs aver that a public entity such as Tansi Waste Management cannot lawfully pay a private debt."

The actions of the POA board were negligent, the suit states, because the directors failed "to exercise the care an ordinarily prudent persons in a like position would exercise under similar circumstances."

That has subjected plaintiffs to potential liability "for membership assessments to cover losses, sale of POA assets to cover losses and has caused a diminution in the market value of properties owned by the member class."

The suit seeks damages against the defendants in their official capacities of $1.2 million, as well as the cost of legal fees in the matter.

J.Cott McCluen, of Harriman, is the attorney listed on the suit.