Memphis Publishing Company, et al, v. Cherokee Children & Family Services, Inc., et al. and John Morgan v. Cherokee Children & Family Svcs., Inc.

These two cases, consolidated for consideration, present two issues of enormous significance. First, we must decide whether a non-profit corporation that provides privatized services to a governmental entity is subject to the public access requirements of the Tennessee Public Records Act. The second issue concerns the authority of the state, acting through the Comptroller of the Treasury, to require said corporation to submit to a state audit. In Memphis Publishing Co. v. Cherokee Children & Family Services, Inc., Memphis Publishing Company and others seek access to records belonging to Cherokee Children & Family Services, Inc., a non-profit corporation which contracted with the Tennessee Department of Human Services to help administer a state-subsidized day care program. In seeking access to the records, the plaintiffs rely on both the Tennessee Public Records Act and provisions in the contracts between the corporation and the state. In Morgan v. Cherokee Children & Family Services, Inc., the Comptroller of the Treasury, John Morgan, seeks to require the same corporation to submit to a state audit. As authority for the audit, Morgan relies upon the contracts at issue in Memphis Publishing Co. and upon 2000 Tenn. Pub. Acts. 960 (now codified at Tenn. Code Ann. § 8-4-116 (Supp. 2001)), which authorizes the Comptroller to audit the records of entities which derive fifty percent or more of their gross revenue from state or local government. The trial -2- courts in the two cases found that Cherokee Children & Family Services, Inc. was not a governmental agency, but that all records in its possession were state property pursuant to the contracts between it and the state. Additionally, the trial court in Morgan found that an audit was authorized by 2000 Tenn. Pub. Acts 960. The Court of Appeals reversed, holding that (1) the contractual provisions at issue did not render the records public; (2) Cherokee Children & Family Services, Inc. was not a governmental agency subject to the Public Records Act; and (3) retroactive application of 2000 Tenn. Pub. Acts 960 in Morgan would be unconstitutional. We granted permission to appeal. Because we have determined, for the reasons outlined below, that Cherokee Children & Family Services, Inc. operates as the “functional equivalent” of a governmental (state) agency, we hold that all of its records are subject to the Tennessee Public Records Act and therefore
are accessible by the public. This resolution effectively resolves the audit issue, and a separate decision thereupon is unnecessary. Accordingly, the judgment of the Court of Appeals is reversed, and the cause is remanded to the trial court for further proceedings consistent with this opinion. Tenn. R. App. P. 11 Appeal by Permission; Judgment of the Court of Appeals Reversed