Nonprofit Housing Corporation v. Tennessee Housing Development Agency

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
Assigned on Briefs June 02, 2015

NONPROFIT HOUSING CORPORATION, ET AL. v. TENNESSEE
HOUSING DEVELOPMENT AGENCY

Appeal from the Chancery Court for Davidson County
No. 13856IV Russell T. Perkins, Chancellor

________________________________

No. M2014-01588-COA-R3-CV – Filed August 27, 2015
_________________________________

Three non-profit corporations filed suit alleging that they were wrongfully denied low
income housing tax credits. The trial court determined that the plaintiffs‘ claims were
moot, and we concur.

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

ANDY D. BENNETT, J., delivered the opinion of the court, in which FRANK G. CLEMENT,
JR., P.J., M.S., and RICHARD H. DINKINS, J., joined.

William G. Brown, Andrew E. Hill, and C. Mark Pickrell, Nashville, Tennessee, for the
appellants, Nonprofit Housing Corporation, et al.

Herbert H. Slatery, III, Attorney General and Reporter, and Mary Byrd Ferrara, Assistant
Attorney General, for the appellee, Tennessee Housing Development Agency.

OPINION

FACTUAL AND PROCEDURAL BACKGROUND

Nonprofit Housing Corporation (―Nonprofit‖) is a 501(c)(3)1 non-profit

1
Section 501(c)(3) of the Internal Revenue Code provides that the following entities are exempt
from taxation:

Corporations, and any community chest, fund, or foundation, organized and operated
exclusively for religious, charitable, scientific, testing for public safety, literary, or
educational purposes, or to foster national or international amateur sports competition
corporation with its principal place of business in Tennessee. The Tennessee Housing
Development Agency (―THDA‖) is a Tennessee governmental agency created pursuant
to the Tennessee Housing Development Agency Act, Tenn. Code Ann. § 13-23-101–13-
23-133.

Low Income Housing Tax Credit Program

The Internal Revenue Code establishes a Low Income Housing Tax Credit
(―LIHTC‖) program to apportion tax credits annually to each state based on census data.
26 U.S.C. § 42. Ten percent of each state‘s total tax credit apportionment is allocated for
qualified non-profit developers. 26 U.S.C. § 42(h)(5). The THDA has been designated
the ―housing credit agency‖ in charge of distributing Tennessee‘s tax credits to individual
projects. See 26 U.S.C. § 42(h)(3)(B). A housing credit agency must make its
determinations of eligibility and distribution in accordance with a ―qualified allocation
plan,‖ or ―QAP,‖ which ―sets forth selection criteria to be used to determine housing
priorities of the housing credit agency which are appropriate to local conditions.‖ 26
U.S.C. § 42(m)(1)(B)(i). Each year, the THDA develops a QAP that incorporates the
provisions mandated by federal law. See, e.g., 26 U.S.C. §§ 42(m)(1)(A)(iii),
42(m)(1)(B)(ii), 42(m)(1)(C).

Current dispute

Nonprofit submitted an LIHTC application to the THDA in 2013 but did not
receive tax credits. Nonprofit filed a Complaint and Petition for Judicial Review in
chancery court on June 13, 2013 that includes allegations that the THDA made errors in
applying the scoring system set forth in the QAP such that Nonprofit lost points for
taking advantage of the review process. Nonprofit further alleged that THDA violated
the due process clause of the United States Constitution by failing to provide applicants
with notice and an opportunity to be heard. Nonprofit also sought a declaratory judgment
that the THDA‘s procedures violated applicants‘ rights to due process under the
Tennessee and United States constitutions. In its prayer for relief, Nonprofit requested a
preliminary injunction enjoining THDA from issuing or entering into carryover allocation

(but only if no part of its activities involve the provision of athletic facilities or
equipment), or for the prevention of cruelty to children or animals, no part of the net
earnings of which inures to the benefit of any private shareholder or individual, no
substantial part of the activities of which is carrying on propaganda, or otherwise
attempting, to influence legislation (except as otherwise provided in subsection (h)), and
which does not participate in, or intervene in (including the publishing or distributing of
statements), any political campaign on behalf of (or in opposition to) any candidate for
public office.

2
agreements or issuing any I.R.S. Form 86092 for 2013 tax credits until Nonprofit‘s case
has been adjudicated.

Nonprofit filed a First Amended Complaint and Petition for Judicial Review in
August 2013 and added as a plaintiff Sunridge Development Corporation (―Sunridge‖), a
Tennessee corporation. The complaint alleged that Sunridge submitted an application for
a project in Anderson County but was denied full completeness points by the THDA.
Anderson Hall Apartments, the successful applicant for Anderson County, was given 21
completeness points for its application although, according to the complaint, Sunridge‘s
application was ―substantially similar‖ to Anderson Hall‘s. The complaint also alleged
that Anderson Hall was given ―amenity‖ points that were ―fraudulent.‖ For example, the
Anderson Hall project received amenity points for being within two miles of a
―community center.‖ The ―community center‖ identified on the application was actually
a craft store.

John Rankin, the president of Sunridge, allegedly brought these ―fraudulent‖
amenity points to the attention of Michael Blade, Director and Assistant Legal Counsel
for Multifamily Development at THDA. Mr. Blade responded that, regardless of whether
Anderson had received points improperly, the matter was now moot because ―all review
has been done, and once the review meeting of the tax credit committee is adjourned,
there is no further review is possible [sic].‖ The complaint alleged that, had it received
―comparable completeness points to the Anderson Hall application, and had Anderson
Hall received the correct number of amenity points, Sunridge would have received an
allocation of tax credits for its Anderson County project.‖

In October 2013, the plaintiffs filed a motion for a preliminary injunction
preventing THDA from entering into any further allocation agreements with Anderson
Hall Apartments and Loudon Hall Apartments; preventing THDA from issuing federal
low-income housing forms arising from the 2013 LIHTCP to the developer of the
Anderson Hall Apartments and Loudon Hall Apartments; and requiring THDA to rescind
its allocation agreements with tax credit recipients who filed fraudulent applications,
including the developer of the Anderson Hall Apartments and Loudon Hall Apartments.

In November 2013, the trial court entered an order dismissing without prejudice
count two of the Amended Complaint—the declaratory judgment action.3 The plaintiffs‘
2
After the application deadline (in 2013, February 1, 2013), THDA evaluates, scores, and ranks
the applications and ultimately allocates the available tax credits via carryover allocation agreements. In
2013, all of the tax credits were allocated as of December 31, 2013. A final application is submitted when
the project is complete, usually by the end of two years following the reservation of credits. At that point,
an I.R.S. Form 8609 is issued to the developers who received 2013 tax credits.
3
Count one was the petition for judicial review. The trial court had previously noted that
3
motion to add another plaintiff, American Housing Preservation Corporation
(―American‖), was granted.

On December 20, 2013, the plaintiffs filed a Petition for Judicial Review that
included all of the factual allegations from the previous amended complaint and added
factual allegations regarding American‘s LIHTC application, which involved a project in
Old Hickory, Tennessee. According to the complaint, American did not receive amenity
points for being near a fire station, even though a fire station was allegedly within the
required distance. Moreover, the plaintiffs alleged that American was denied an
opportunity to be heard regarding THDA‘s scoring decisions.

The plaintiffs‘ petition for judicial review includes three counts with detailed
requests for relief. The first count alleges that the plaintiffs mailed a petition for a
declaratory order to the THDA on December 13, 2013; they requested an opinion from
the agency regarding specific questions as to the application and interpretation of the
QAP. The plaintiffs asked the court to hold the instant case in abeyance until the THDA
had time to issue an opinion or declined to act within 60 days. Count two asked that, in
the alternative, the court order a contested case hearing pursuant to Tenn. Code Ann. § 4-
5-322(a)(1). In count three, another count in the alternative, the plaintiffs requested that
the court review THDA‘s scoring of the 2013 LIHTC program under the QAP criteria.

In January 2014, the Attorney General, on behalf of the THDA, moved to dismiss
the case pursuant to Tenn. R. Civ. P. 12.02(1) and (6) for lack of subject matter
jurisdiction, failure to state a claim upon which relief could be granted, and ripeness. On
February 13, 2014, the trial court entered an order staying the case pending the resolution
of the THDA‘s administrative proceedings. The plaintiffs were given thirty days
following the resolution of the administrative proceedings to amend their petition, if
necessary.

The plaintiffs filed an Amended Complaint on March 6, 2014. This complaint
includes only one count, a declaratory judgment action pursuant to Tenn. Code Ann. § 4-
5-225. The plaintiffs requested a declaratory order from THDA regarding a list of
questions, but the deadline for setting a contested case hearing in response to the petition
passed and the THDA failed to set a contested case hearing.4 The complaint alleges that
the listed rules, orders, and actions violate state or federal law. The plaintiffs request a

combining an original action with a request for judicial review was, ―at a minimum, disfavored.‖
4
Tennessee Code Annotated § 4-5-223(a) allows an ―affected person‖ to ―petition an agency for
a declaratory order as to the validity or applicability of a statute, rule or order within the primary
jurisdiction of the agency.‖ This is an administrative proceeding, distinct from the declaratory judgment
claim included in the plaintiffs‘ complaint pursuant to Tenn. Code Ann. § 4-5-225.

4
declaratory judgment regarding the constitutionality or legality of the following THDA
rules and actions:

a. Whether THDA‘s procedures under the 2013 QAP must allow for
administrative review of the applications of aggrieved parties in a
manner that comports with the contested case proceedings pursuant to
Tennessee Uniform Administrative Procedures Act, Tenn. Code Ann.
§§ 4-5-301–325, the Due Process Clause of the Fourteen[th]
Amendment, and corresponding provision of the Tennessee
Constitution. U.S. Const. Amend. 14; Tenn. Const. Art. I., § 8.
b. Whether THDA accurately, evenly, and fairly applied the scoring
criteria contained in the 2013 QAP to all applicants and applications to
comport with the Equal Protection Clause of the Fourteen[th]
Amendment. U.S. CONST. AMEND. 14.
c. Whether THDA can amend the composition of the successful
applicants[‘] list in light of proof of errors in scoring of applications,
fraud on certain successful applications, and corresponding violations of
Tenn. Code Ann. § 13-23-133.
d. Whether the above-described applications should be rescored to reflect
the accurate allocation of ―Completeness/Correctness of Initial
Application‖ points based on whether or not applications received a ―48
Hour Email‖ or ―Cure Notice‖ per the terms of the 2013 QAP.
e. Whether the aggrieved parties should have been docked
―Completeness/Correctness of Initial Application‖ points for the failure
of the mandated third-party market analyst to include an Executive
Summary in the Market Analysis section of the applications despite
assurances that applicants would not be penalized for the failures of
outside parties.
f. Whether the THDA was within its discretion under the 2013 QAP when
it awarded the maximum 21 points for ―Completeness/Correctness of
Initial Application‖ to applicants who received a ―48 Hour Email‖ or
―Cure Notice‖ indicating errors in the initial applications.
g. Whether the application ―Hillcourt‖ should have received the maximum
21 points under ―Completeness/Correctness of Initial Application‖
(QAP Part VII-(B)(3)(C)) in spite of receiving both a ―48 Hour Email‖
and a ―Cure Notice.‖
h. Whether the application ―Harrison Meadows‖ should have received the
maximum 21 points under ―Completeness/Correctness of Initial
Application‖ (QAP Part VII-(B)(3)(C)) in spite of receiving both a ―48
Hour Email‖ and a Cure Notice.‖
i. Whether the application ―Mountain View Apartments‖ was entitled to 3
5
 additional ―Amenity Points‖ for its proximity to a community center
when the THDA staff explicitly said it was not.
j. Whether the lack of property control in the ―Beasley Pointe
Apartments‖ application is a direct violation of 2013 QAP Part VII-
(A)(7)(a)(iii) that should immediately disqualify the application.
k. Whether the application ―Anderson Hall Apartments‖ was entitled to
any ―Amenity Points‖ for proximity to a public library, community
center, post office, and public park and whether the applicant is in
violation of Tenn. Code Ann. § 13-23-133.
l. Whether the application ―Stewart Place Apartments‖ should have
received the maximum 21 points under ―Completeness/Correctness of
Initial Application‖ in spite of receiving a ―Cure Notice.‖
m. Whether the application ―Northside Drive Apartments‖ should have
received the maximum 21 points under ―Completeness/Correctness of
Initial Application‖ in spite of receiving a ―Cure Notice.‖
n. Whether the application ―Loudon Hall Apartments‖ should have
received the maximum 21 points under Completeness/Correctness of
Initial Application‖ in spite of receiving a ―Cure Notice‖ and whether it
was entitled to 6 ―Amenity Points‖ for proximity to a community center.

The amended complaint goes on to request permanent injunctive relief to prevent
the THDA from entering into any more allocation agreements with participants in the
2013 LIHTC program ―who should not have received tax credits‖; to prevent THDA
from issuing federal LIHTC forms arising from the 2013 application period to applicants
―who should not have received tax credits‖; to require THDA to rescind its allocation
agreements with tax credit recipients who ―filed fraudulent applications, or who
otherwise received tax credits unlawfully‖; and, to the extent these remedies ―do not
make the aggrieved parties whole,‖ to require that ―the aggrieved parties receive a first-
priority allocation of tax credits for future-year LIHTC allocations.‖

On April 30, 2014, the THDA filed a motion to dismiss the plaintiffs‘ amended
complaint and a supporting affidavit of Mr. Blade (to be discussed more fully below).
The THDA moved to dismiss the plaintiffs‘ complaint for lack of subject matter
jurisdiction on the ground that the issues had become moot and ―there no longer exists a
justiciable controversy from which the plaintiffs may obtain redress.‖ In the alternative,
the THDA moved to dismiss based upon failure to state a claim upon which relief could
be granted.

In opposing THDA‘s motion, the plaintiffs submitted the affidavit of Phyllis Fox
Vaughn, a former THDA employee who, since 2002, had worked as a consultant for
developers hoping to secure low income tax credits from the THDA.
6
 Trial court‘s decision

After a hearing on May 23 and July 18, 2014, the trial court entered an order on
July 30, 2014. The court concluded that it lacked subject matter jurisdiction ―because the
claims asserted [in the plaintiffs‘ amended complaint] have become moot and no longer
present an active legal controversy between the parties before the court.‖ The court
found that the plaintiffs failed to satisfy their burden of making a prima facie case of facts
establishing jurisdiction. The court reasoned as follows:

. . . The Court finds that regardless of the outcome of the legal claims
asserted by the Plaintiffs, there is no redress available to them. As stated by
the Defendant and the Affidavit of Phyllis Vaughan which was filed by the
Plaintiffs, the court finds that all Low Income Housing Tax Credits have
been allocated under the 2013 Qualified Allocation Plan, and that none
remain available to be allocated pursuant to the Plaintiffs‘ 2013
applications or the 2013 Qualified Allocation Plan for allocation of tax
credits. In short, this Court finds that even were Plaintiffs to be successful
on the legal theories asserted in the Amended Complaint, no relief is
available for the Court to award in this action. Plaintiffs‘ contention that
the relief sought is the opportunity to apply for and compete for tax credits
at some time in the future is speculative and does not impact current
existing legal rights of the parties to this action. As stated in McIntyre v.
Traughber, 884 S.W.2d 134, 137 (Tenn. Ct. App. 1994):

The doctrine of justiciability prompts courts to stay their hand
in cases that do not involve a genuine and existing
controversy requiring the present adjudication of present
rights. State ex rel. Lewis v. State, 208 Tenn. 534, 537, 347
S.W.2d 47, 48 (1961); Dockery v. Dockery, 559 S.W.2d 952,
954 (Tenn. Ct. App. 1977). Thus, our courts will not render
advisory opinions, Super Flea Mkt. v. Olsen, 677 S.W.2d 449,
451 (Tenn. 1984); Parks v. Alexander, 608 S.W.2d 881, 892
(Tenn. Ct. App. 1980), or decide abstract legal questions.
State ex rel. Lewis v. State, 208 Tenn. at 538, 347 S.W.2d at
49.

Plaintiffs‘ Amended Complaint no longer involves a genuine and existing
controversy requiring the present adjudication of present rights and is,
therefore, moot.

7
 As will be discussed more fully below, the trial court also found that the plaintiffs
―did not come forward with any facts to support the ‗capable of repetition yet evading
review‘ exception to their claims.‖ The court granted the defendants‘ motion to dismiss
the plaintiffs‘ amended complaint pursuant to Tenn. R. Civ. P. 12.02(1) for lack of
subject matter jurisdiction due to mootness. The court therefore dismissed the plaintiffs‘
amended complaint with prejudice.

Issues on appeal

On appeal, the plaintiffs raise the following issues: (1) whether the plaintiffs‘ case
is moot; (2) whether, even if the case is technically moot, the court should adjudicate the
case because it falls under the exception for cases of public significance or those ―capable
of repetition yet evading review‖; and (3) whether the trial court erred in finding that the
plaintiffs ―failed to come forward with any facts establishing that this court has
jurisdiction, after having been provided with an opportunity to do so.‖

STANDARD OF REVIEW

―Determining whether a case is moot is a question of law.‖ Alliance for Native
Am. Indian Rights in Tenn., Inc. v. Nicely, 182 S.W.3d 333, 338-39 (Tenn. Ct. App.
2005). We review questions of law de novo with no presumption of correctness. Nelson
v. Wal-Mart Stores, Inc., 8 S.W.3d 625, 628 (Tenn. 1999). We review the trial court‘s
findings of fact de novo, with a presumption of correctness, unless the evidence
preponderates otherwise. TENN. R. APP. P. 13(d); Richardson v. Tenn. Assessment
Appeals Comm’n, 828 S.W.2d 403, 407 (Tenn. Ct. App. 1991).

ANALYSIS

Mootness

We will address issues (1) and (3) in this section because both pertain to the trial
court‘s determination that the plaintiffs‘ claims are moot.

The trial court dismissed the plaintiffs‘ amended complaint pursuant to Tenn. R.
Civ. P. 12.02(1) based upon lack of subject matter jurisdiction due to mootness. The
plaintiffs assert, inter alia, that Tenn. R. Civ. P. 12.02(1) is not the proper procedural
ground for a mootness defense. We disagree. Subject matter jurisdiction involves the
―‗authority of a court to adjudicate a controversy brought before it.‘‖ Haley v. Univ. of
Tenn.-Knoxville, 188 S.W.3d 518, 522 (Tenn. 2006) (quoting Kane v. Kane, 547 S.W.2d
559, 560 (Tenn. 1977)). A court exercises its jurisdiction only when ―it is called upon to
‗adjudicate a controversy.‘‖ Id. (quoting Kane, 547 S.W.2d at 560). ―[T]he controversy
8
must remain alive throughout the course of litigation, including the appeal process.‖
Public Emps. for Envtl. Responsibility v. Tenn. Water Quality Control Bd., No. M2008-
01567-COA-R3-CV, 2009 WL 1635087, at *6 (Tenn. Ct. App. June 10, 2009). The
court lacks subject matter jurisdiction over a case that has become moot. See State v.
Rodgers, 235 S.W.3d 92, 97 (Tenn. 2007) (―The mootness doctrine provides that before
the jurisdiction of the courts may be invoked, ‗a genuine and existing controversy, calling
for present adjudication‘ of the rights of the parties must exist.‖) (quoting State ex rel.
Lewis v. State, 347 S.W.2d 47, 48 (Tenn. 1961)); Public Emps., 2009 WL 1635087, at
*6-7.

Motions to dismiss under Tenn. R. Civ. P. 12.02(1) ―deal with procedural defects
apart from the underlying merits of the complaint.‖ Wilson v. Sentence Info. Servs., No.
M1998-00939-COA-R3-CV, 2001 WL 422966, at *4 (Tenn. Ct. App. Apr. 26, 2001).
Unlike motions pursuant to Tenn. R. Civ. P. 12.02(6) for failure to state a claim, motions
to dismiss on jurisdictional grounds are not converted to motions for summary judgment
when material factual disputes exist. Id. Relying on the Supreme Court case of Chenault
v. Walker, 36 S.W.3d 45 (Tenn. 2001), which involved personal jurisdiction, this court
stated:

Courts faced with a motion to dismiss for lack of jurisdiction must make
some kind of factual resolution allowing the court either to grant or to deny
the motion. In the [Tennessee Supreme Court‘s] words, courts confronted
with such motions must ―determine whether the evidence in favor of
finding jurisdiction is sufficient to allow the case to proceed.‖ Chenault v.
Walker, 36 S.W.3d at 56.

In considering the sufficiency of the evidence at the motion to
dismiss stage, the trial court must keep in mind that the plaintiff bears the
burden of proving facts establishing that the court has jurisdiction. When a
defendant has filed affidavits or other competent evidentiary materials
challenging the case‘s underlying jurisdictional facts, the plaintiff may not
rely on the complaint but must make a prima facie showing of facts that
establish jurisdiction. To do so, the plaintiff may submit affidavits or other
helpful evidence. Tenn. R. Civ. P. 43.02; Chenault v. Walker, 36 S.W.3d at
56. When evaluating the case at that stage, the trial court ―will take as true
the allegations of the nonmoving party and resolve all factual disputes in its
favor . . . [without crediting] conclusory allegations or draw[ing] farfetched
inferences.‖ Chenault v. Walker, 36 S.W.3d at 56. In doing so, however,
the court does ―not make any finding as to whether [the plaintiff‘s] version
of events is, in fact, correct. That will be for the jury to decide if the case
goes to trial.‖ Chenault v. Walker, 36 S.W.3d at 56.
9
Id. at *4-5 (footnote omitted).

The ground for lack of subject matter jurisdiction in this case is mootness. The
mootness doctrine is rooted in the idea that it is ―‗the province of a court . . . to decide,
not advise, and to settle rights, not to give abstract opinions.‘‖ Norma Faye Pyles Lynch
Family Purpose LLC v. Putnam Cnty., 301 S.W.3d 196, 203 (Tenn. 2009) (quoting State
v.Wilson, 70 Tenn. 204, 210 (1879)). Thus, courts limit their role to deciding ―‗legal
controversies.‘‖ Id. (quoting White v. Kelton, 232 S.W. 668, 670 (Tenn. 1921)). A
proceeding constitutes a legal controversy ―when the disputed issue is real and existing,
and not theoretical or abstract, and when the dispute is between parties with real and
adverse interests.‖ Id. (citations omitted). To meet their burden of proof, therefore, the
plaintiffs must come forward with evidence to establish that this case involved ―a present,
ongoing controversy.‖ Alliance, 182 S.W.3d at 338. A case will be considered moot if it
―no longer serves as a means to provide some sort of judicial relief to the prevailing
party.‖ Id.

What evidence was submitted for and against the defendant‘s motion to dismiss?
THDA submitted the affidavit of Mr. Blade, who oversaw the LIHTC program, and who
stated, in part, as follows:

8. Pursuant to U.S. Treasury Regulations (26 C.F.R. § 1.42-6(d)), the 2013
allocation process was complete upon the execution of the Carryover
Allocation Agreements.
9. For the 2013 process, the issuance of the I.R.S. Form 8609 is not the
allocating document.
10. If THDA were to be prohibited from issuing I.R.S. Forms 8609 to the
developers who received 2013 tax credits, that would not create additional
tax credits for the plaintiffs in this lawsuit or for other developers under the
2013 QAP or other future Qualified Allocation Plans.
11. If THDA were to be ordered to rescind its allocation agreements with
2013 tax credit recipients, no tax credits would be available to allocate
under the 2013 QAP or to award to plaintiffs‘ 2013 development
applications.
12. All 2013 tax credits were finally allocated on or before December 31,
2013, and there are no remaining 2013 tax credits. Should any 2013 tax
credits be returned to the State of Tennessee for any reason at this time,
they would not be available for allocation pursuant to the 2013 QAP or to
award to plaintiffs‘ 2013 development applications.
13. The process of reviewing and scoring LIHTC applications, and
allocating tax credits according to the 2013 QAP is fully concluded for the
10
 2013 tax credits.
14. The Low-Income Housing Tax Credit 2014 Qualified Allocation Plan
was approved by the Governor on November 19, 2013, and governs the
LIHTC allocation process for 2014. The application deadline for 2014
credits passed on February 3, 2014.
...
16. Sunridge Development Corporation did not submit an application for
2013 LIHTC, and has not submitted an application for tax credits for any
other year since I have been involved with the allocation process.

The plaintiffs submitted two affidavits of Ms. Vaughn, a former employee of the
THDA who worked in the division that administered the LIHTC program. Ms. Vaughn
had submitted a public records request to THDA for all of the successful 2013 LIHTC
applications. She reviewed these applications and was also familiar with nine
unsuccessful applications for which she had served as a consultant. Ms. Vaughn found
that the THDA‘s award of ―application points‖ and ―amenity points‖ was entirely
inconsistent and sometimes made the difference in an application being successful or
unsuccessful. Ms. Vaughn further stated:

15. . . . Federal regulations require that each applicant who has received an
allocation for a given year must spend at least 10% of the investment,
which are [sic] the basis for receiving tax credits, during the twelve months
after entering into a Carryover Allocation Agreement. . . .
...
17. When a developer fails to meet the 10% test, the tax credits that had
previously been allocated to him are recaptured by THDA. They may then
be used in future years. So, when tax credits from the 2013 QAP are
recaptured, they are available for use in the 2014, 2015 or subsequent
years’ QAPs.
18. . . . The plaintiffs in this case would therefore benefit by an increase in
the size of future tax credits available, were projects that were part of the
2013 QAP voided.
19. The 10% first-year spending requirement is not the only requirement
that can void a project. . . .
20. The 2013 QAP Carryover Allocation Agreements are not the final
approvals by THDA for that year. When a project is complete, the
developer must file a ―Final Tax Credit Application,‖ pursuant to federal
regulations. For the 2013 QAP, the Final Tax Credit Application is due
before December 1, 2015.
21. When THDA receives a Final Tax Credit Application, THDA must
decide whether to approve the application. If the developer fails the one-
11
 year 10% test, or the two-year available-for-occupancy test, or any other
requirement . . . , then THDA may not issue tax credits for that project.
The allocation, and resulting tax credits, are void. Those tax credits are
then recaptured for a future year‘s QAP.
22. Only after THDA approves a Final Tax Credit Application does THDA
issue I.R.S. Form 8609 to the developer. For the 2013 QAP, the process
will not be complete for most projects until 2016. While the 2013 QAP
process is ongoing, THDA retains full power to void any allocations that
were improperly issued, or which otherwise fail to meet federal and State
regulations (including the veracity of all prior certifications).

(Emphasis added).

The plaintiffs also cite the deposition of John Rankin, co-owner of Sunridge. He
testified that he was familiar with the LIHTC program because he had ―some property
that a developer applied for tax credits on for low income housing.‖ He owned a twelve-
acre parcel of property in Anderson County for which Woda Development had applied
for low income tax credits in 2013, but the company was not awarded tax credits. He
then investigated the other property in Anderson County that had received the tax credits
and discovered that the other project did not actually meet the criteria. Mr. Rankin made
an inquiry to Mr. Blade at the THDA by email and received an email back from Mr.
Blade stating that the agency staff ―uses the utmost care to review the entire application,
however, we are not infallible, and we may miss things.‖ Mr. Blade corrected a few
factual points, but then concluded:

In the end, all of this is moot as all review has been done, and once the
review meeting of the tax credit committee is adjourned, there is no further
is possible [sic]. The Qualified Allocation Plan for 2013 stated in Part
VIII-C-6, ―[n]o matters with respect to eligibility under Part VII-A or with
respect to scoring under Part VII-B will be considered after the date of the
Review Meeting.‖ The review meeting took place on May 13, 2013.

In their amended complaint, the plaintiffs seek a declaratory judgment regarding
the legality or constitutionality of a long list of THDA rules and actions relating to the
2013 QAP, as well as permanent injunctive relief to prevent the THDA from entering
into any further ―Allocation Agreements with participants in the 2013 federal low-income
housing tax credit program (‗LIHTCP‘) who should not have received tax credits‖; to
prevent the THDA ―from issuing federal low-income housing forms (including
specifically, without limitation, I.R.S. Form 8609) arising from the 2013 LIHTCP as to
applicants who should not have received tax credits‖; to require the THDA ―to rescind its
Allocation Agreements with those recipients of tax credits who filed fraudulent
12
applications, or who otherwise received tax credits unlawfully‖; and to require that ―the
aggrieved parties receive a first-priority allocation of tax credits from future-year LIHTC
allocations.‖

Based upon all of the evidence presented to the trial court and the applicable
analytical framework, we agree with the conclusion reached by the trial court: that the
case is moot. The answers to the questions raised by the plaintiffs no longer serve as a
means of redress because the 2013 LIHT5 credits have all been allocated and there is no
mechanism by which the plaintiffs can receive tax credits under the 2013 applications.
The plaintiffs‘ witness, Ms. Vaughn, testified: ―[W]hen tax credits from the 2013 QAP
are recaptured, they are available for use in the 2014, 2015 or subsequent years‘ QAPs.‖
The plaintiffs argue that they should receive ―first-priority allocation of tax credits from
that future year‘s tax credit program.‖ We agree with the trial court that, ―Plaintiffs‘
contention that the relief sought is the opportunity to apply for and compete for tax
credits at some time in the future is speculative and does not impact current existing legal
rights of the parties to this action.‖6

The plaintiffs have not presented a genuine, ongoing controversy for adjudication
by the court. See State v. Rodgers, 235 S.W.3d at 97. In their first two complaints, the
plaintiffs sought to enjoin THDA from proceeding with the process of reviewing and
scoring the 2013 tax credit applications, but they failed to pursue injunctive relief in time
to prevent the conclusion of the review process and allocation of all 2013 tax credits.
Thus, the review process continued and concluded with the final allocation of tax credits
on or before December 31, 2013. After that date, 2013 tax credits were no longer
available for that year, and none of the relief sought in the plaintiffs‘ complaint could be
granted by the trial court.

The case of Villas on Blue Mountain, L.P. v. Tennessee Housing Development
Agency, No. M2009-01250-COA-R3-CV, 2010 WL 1539843 (Tenn. Ct. App. Apr. 16,
2010), is similar to the present case. Villas attempted to submit an LIHTC application,
but it was rejected as submitted after the deadline on March 19, 2008. Villas, 2010 WL
1539843, at *1. The initial decision of the THDA employee not to accept Villas‘
application was affirmed by the agency‘s policy and programs committee and its board of
directors on March 20, 2008. Id. More than five months later, on September 5, 2008,
Villas requested that THDA issue a final order regarding its application; THDA‘s general

5
―LIHT‖ stands for ―low income housing tax.‖

6
There is no evidence in the record regarding the 2014 QAP.

13
counsel wrote a letter stating that the agency had no plans to consider the matter further.
Id. Two months later, Villas filed a petition for review arguing that the THDA‘s decision
not to accept its application was arbitrary and capricious. Id.

The THDA filed a motion for summary judgment arguing that the case was moot
because all 2008 applications had been received and all tax credits allocated for that year.
Id. at *2. The trial court dismissed the case as moot. Id. This conclusion was based on
the fact that all of the 2008 tax credit applications had been reviewed and all of 2008 tax
credits had been allocated, ―thus there was no available relief the Court could afford
Villas.‖ Id. at *3. On appeal, Villas argued that the THDA‘s disbursement of tax credits
in December 2008 was wrongful because it denied Villas the right to have a court review
the THDA‘s actions. Id. at *4. The court stated:

If Villas wanted to stop THDA from distributing the 2008 tax credits until
its petition was heard, Villas should have filed its petition earlier and, more
importantly, it should have sought injunctive relief. It did neither. Villas
offers no explanation, nor does it cite any law, that supports its contention
that THDA bore the responsibility of keeping the case justiciable, when
Villas failed to make any attempt to do so itself.

Id. Similarly, in the present case, the plaintiffs failed to seek an injunction to prevent the
QAP process from proceeding, with the result that all of the 2013 tax credits were
allocated by December 31, 2013.7 Thus, none of the relief the plaintiffs requested could
be granted to them by the court when they sought it because the case no longer presented
a live controversy.

In Villas, the plaintiff also argued that the case was not moot because some of the
2008 credits might be returned to the THDA in the future. Id. The court responded:

[I]t is possible that other developers‘ 2008 tax credits will be returned to
THDA between 2008 and 2010. However, the federal law governing the
LIHTC program requires that tax credit returned by a developer in a year
subsequent to the year the credit was issued be allocated pursuant to the
Qualified Allocation Plan in effect in the year in which the tax credit is
returned. See 26 C.F.R. § 1.42-14. . . . Accordingly, Villas‘ argument that
this case is not moot because 2008 tax credit may be returned in the future
and could then be redistributed to Villas pursuant to its 2008 LIHTC
application is without merit. Any 2008 tax credit returned to THDA would
have to be reallocated under the Qualified Allocation Plan in place during

7
Although the plaintiffs filed a motion for a preliminary injunction, the motion was never heard.
14
 the year the tax credit was returned to LIHTC.

Id. When the court in Villas rejected Villas‘ challenge because of mootness, it implicitly
found that Villas‘ reliance on the availability of additional tax credits in future years was
speculative and that its claim did not involve the adjudication of present rights. The same
reasoning applies in the present case.

We find no error in the trial court‘s conclusion that this case is moot.

Exceptions to mootness

1. Issue of great public interest

The courts recognize an exception to mootness allowing them ―to address issues of
great importance to the public and the administration of justice.‖ Norma Faye, 301
S.W.3d at 210. This exception is available, however, only ―under ‗exceptional
circumstances where the public interest clearly appears.‘‖ Id. (quoting Dockery v.
Dockery, 559 S.W.2d 952, 955 (Tenn. Ct. App. 1977)). It is within the discretion of the
courts to address such issues, but they are directed to analyze the following threshold
considerations in exercising their discretion:

(1) the public interest exception should not be invoked in cases affecting
only private rights and claims personal to the parties; (2) the public interest
exception should be invoked only with regard to ―issues of great
importance to the public and the administration of justice‖; (3) the public
interest exception should not be invoked if the issue is unlikely to arise in
the future; and (4) the public interest exception should not be invoked if the
record is inadequate or if the issue has not been effectively addressed in the
earlier proceedings.

Id. at 210-11 (footnotes omitted). In arguing that this case implicates a significant public
interest, the plaintiffs focus on the allegedly fraudulently-obtained Anderson County tax
credits. However, all of the 2013 tax credits have already been allocated. The plaintiffs
make allegations of fraud, but none of the alleged wrongdoers is a party to this action.
Thus, the record is inadequate to address this issue. The THDA is the only defendant,
and the only relief requested from the THDA is the allocation of tax credits in future
years, a form of relief that is speculative and not related to any present justiciable
controversy.

The plaintiffs have failed to establish the existence of an issue of great public
importance in this case.
15
 2. Capable of repetition but evading review

The other exception to the mootness doctrine concerns situations that are ―capable
of repetition yet evading review.‖ Alliance, 182 S.W.3d at 339. This exception, which is
invoked by the courts only in exceptional circumstances, requires the parties requesting it
to demonstrate the following: ―(1) a reasonable expectation that the official acts that
provoked the litigation will occur again, (2) a risk that effective judicial remedies cannot
be provided in the event that the official acts reoccur, and (3) that the same complaining
party will be prejudiced by the official act when it reoccurs.‖ Alliance, 182 S.W.3d at
340 (footnotes omitted); see also Villas, 2010 WL 1539843, at *5. Furthermore, ―a mere
theoretical possibility that an act might reoccur is not sufficient to invoke the ‗capable of
repetition yet evading review‘ exception.‖ Alliance, 182 S.W.3d at 340. In order to
invoke the exception, ―‗there must be a ―reasonable expectation‖ or a ―demonstrated
probability‖ that the same controversy will recur involving the same complaining party.‘‖
Id. (quoting Murphy v. Hunt, 455 U.S. 478, 482 (1982)).

In Villas, Villas argued that there was a reasonable expectation that the official
acts that provoked the litigation would reoccur based on the THDA‘s 2009 QAP, which
showed that the THDA intended to follow the same procedures regarding the acceptance
of tax credit applications as it did in 2008. Villas, 2010 WL 1539843, at *5. According
to Villas, these procedures, particularly the unclear application delivery instructions, were
arbitrary and capricious. Id. The court rejected this argument, finding that the delivery
instructions were ―clear and obvious‖ and that ―[t]he language [was] reasonable and put[]
an applicator on notice of the deadline requirements or the place for delivery of the
application.‖ Id. Thus, the court determined that Villas had ―failed to show ‗a reasonable
expectation‘ or ‗demonstrated probability‘ that the same controversy will reoccur.‖ Id.
Moreover, the court observed that Villas argued that ―LIHTC applicants,‖ rather than
Villas itself, would be prejudiced by language in the 2009 QAP, as required by factor
three of the exception. Id. at *6. The Villas court also concluded that factor two,
regarding the risk that effective judicial remedies could not be provided, was not satisfied
because an applicant whose application was refused could ―seek a judicial remedy by
taking certain actions Villas simply failed to take‖—such as, filing the petition earlier or
seeking injunctive relief. Id. Because the three factors necessary to invoke the ―capable
of repetition yet evading review‖ exception were not present, the Villas court found no
exception. Id.

In the case at hand, we likewise find that the three factors needed to invoke the
―capable of repetition yet evading review‖ exception are not present. As to factor one,
the reasonable expectation that the official acts that provoked the litigation will occur
again, the record does not include the 2014 QAP; future years‘ QAPs may or may not
16
include similar scoring provisions as the 2013 QAP. Also, future applications will
involve different pieces of real estate and different competing applications. Thus, the
plaintiffs have not satisfied the first factor. Factor two concerns the risk that effective
judicial remedies cannot be provided in the event that the conduct at issue reoccurs. As
in Villas, the plaintiffs failed to take available steps to seek an effective judicial remedy
in this action by waiting until December 31, 2013 to mail a request for a declaratory order
to the THDA and by failing to request a preliminary injunction prior to that date to
prevent the allocation of 2013 LIHT credits and preserve their claims. Finally, as to
factor three, the plaintiffs have failed to establish that they would be affected by a future
―wrongful‖ award of tax credits. Rather, the plaintiffs assert that ―the interests of
Nonprofit Housing and other competitors for tax credits could be prejudiced by the
procedure that THDA has chosen for the review of its scoring decisions.‖ The exception
requires, however, ―that the same complaining party will be prejudiced by the official act
when it reoccurs.‖ Alliance, 182 S.W.3d at 340 (emphasis added). A mere possibility is
not sufficient. Id.

We find no error in the trial court‘s decision not to apply either of the exceptions
to the mootness doctrine in this case.

CONCLUSION

The decision of the trial court is affirmed in all respects. Costs of appeal are
assessed against the appellants, and execution may issue if necessary.

_________________________
ANDY D. BENNETT, JUDGE

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