                   IN THE COURT OF APPEALS OF TENNESSEE
                              AT KNOXVILLE
                                     October 29, 2014 Session

                GARY HAISER, ET AL. v. MICHAEL HAINES, ET AL.

                 Appeal from the Chancery Court for Cumberland County
                    No. 2011CH508     Ronald Thurman, Chancellor


              No. E2013-02350-COA-R3-CV-FILED-DECEMBER 12, 2014


This appeal arises from an internal conflict in a planned community. A group of property
owners (“Plaintiffs”) sued another group of property owners (“Defendants”)1 in the Chancery
Court for Cumberland County (“the Trial Court”). Both groups contested which was the
legitimate Board of Directors for the community association. Plaintiffs sought, among other
things, declaratory relief as to the rights and responsibilities of the parties. Plaintiffs filed
a motion for class action certification. The Trial Court, finding that Plaintiffs had failed to
establish the requirements of typicality and adequacy of representation, denied Plaintiffs’
request for class certification. Plaintiffs appeal the denial of class certification. Finding no
abuse of discretion, we affirm the Trial Court.

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

D. M ICHAEL S WINEY, J., delivered the opinion of the Court, in which C HARLES D. S USANO,
J R., C.J., and J OHN W. M CC LARTY, J., joined.

Melanie E. Davis, Maryville, Tennessee, for the appellants, Gary Haiser, Joel Matchak, John
Moore, Gerald Nugent, and Renegade Mountain Community Club, Inc.

Gregory C. Logue and Lindy D. Harris, Knoxville, Tennessee, for the appellees, Michael
McClung, Phillip Guettler, and Moy Toy, LLC.




        1
           In addition to the parties listed in this Opinion as represented on appeal, Michael Haines, pro se,
also is a defendant party of record. Mr. Haines, however, has submitted no brief, and expressed to this Court
a desire not to participate in the appeal.
                                          OPINION

                                         Background

              The community at the center of this case is Renegade Resort (“Renegade”) in
Cumberland County, Tennessee. While many Renegade property owners live in the
community, others live elsewhere. Renegade includes around 1,300 lots and living units and
around 530 property owners. Renegade was developed from 1968 to 1972 as a master
planned community, featuring amenities like a guarded entrance and tennis courts. Moy Toy,
LLC, a defendant in this case, bought tracts of land in Renegade in 2010. Much of the
controversy in this case stems from opposition by some community members to certain
development moves in the community and a belief that the community has fallen into a state
of disrepair.

              Certain of Plaintiffs called a meeting of the Renegade Community Club in
September 2011. At this special meeting, new directors were elected by the membership.
Defendants Michael McClung and Moy Toy, through counsel, tried to overtake the vote
through proxy votes. Plaintiffs vigorously opposed these proxy votes, alleging that they were
not in adherence with relevant by-laws and restrictions. In November 2011, certain
Defendants called their own meeting of the Community Club. Defendants called into
question the legitimacy of the “takeover” by Plaintiffs. Thus, the two competing Boards at
Renegade vie for legitimacy.

               In December 2011, Plaintiffs filed a complaint in the Trial Court in a bid to
resolve the dispute. Plaintiffs filed amended complaints thereafter. Certain of Defendants
filed their own suit, and the cases were consolidated. Plaintiffs sought to validate the
election of officers at the September 2011 meeting. Plaintiffs also challenge the purported
developer rights of Moy Toy. Additionally, Plaintiffs sought a finding of breach of fiduciary
duty against the individual Defendants, except Darren Guettler. Overall, Plaintiffs alleged
that the Community Club neglected its duties in the past and that Renegade suffered as a
result. Rather than try to join each property owner individually, Plaintiffs attempted to certify
the owners as a class through a motion to that end.

                In September 2013, a hearing was held on the issue of class certification. At
the hearing, John Moore (“Moore”) testified as a representative Plaintiff. Moore’s testimony
was the only testimony presented on Plaintiffs’ motion. Moore testified to his efforts to
gather group names and addresses for potential class members. It was acknowledged that
it is unclear exactly where everyone in the Renegade community stands in this dispute. There
are at least two camps, possibly more, to say nothing of the indifferent community members.
Defendants moved to dismiss the motion for class certification. The Trial Court denied

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Plaintiffs’ motion for class action certification and gave Plaintiffs 90 days to join
indispensable parties. The Trial Court did, however, open an opportunity for Plaintiffs to
present additional proof. The Trial Court stated: “Based on the proof here today, I don’t
believe the third and fourth elements of 23.01 [typicality and adequacy of representation]
have been met, at least as of this time . . . Does that mean you can’t do it later? It doesn’t
preclude you from doing that, but as of this time, it concludes that it is inadequate for the
court to certify a class.”

               In an October 2013 order, the Trial Court denied class certification. The Trial
Court stated, inter alia:

       Plaintiffs’ request for class certification is denied. While Plaintiffs presented
       evidence of the elements set forth in Tennessee Rule of Civil Procedure
       23.01(1)(2), Plaintiffs failed to submit a prima facie case on all of the elements
       so that the request for class certification was denied without Respondents
       having to place evidence in the record rebutting Plaintiffs’ evidence.

Plaintiffs appealed the denial of class certification to this Court as allowed under Tenn. Code
Ann. § 27-1-125.

                                          Discussion

               Although not stated exactly as such, Plaintiffs raise the following issue on
appeal: whether the Trial Court erred in denying Plaintiffs’ motion for class certification on
the basis of failure to prove typicality and adequacy of representation. Defendants raise the
issue of whether this appeal is frivolous because it allegedly was taken solely for purposes
of delay. Defendants also filed a motion to consider post-judgment facts.

              This Court previously has articulated the standard of review for trial courts’
grant or denial of class certification:

              A trial court's decision on class certification is entitled to deference.
       See Meighan v. U.S. Sprint Commc'ns Co., 924 S.W.2d 632, 637 (Tenn. 1996).
       The grant or denial of class certification is discretionary, and the court's
       decision will stand absent abuse of that discretion. Id. (citing Sterling v.
       Velsicol Chem. Corp., 855 F.2d 1188, 1197 (6th Cir. 1988)). The abuse of
       discretion standard typically applies when a choice exists in the trial court
       among several acceptable alternatives. Lee Med., Inc. v. Beecher, 312 S.W.3d
       515, 524 (Tenn. 2010) ( citing Overstreet v. Shoney's, Inc., 4 S.W.3d 694, 708
       (Tenn. Ct. App. 1999)). Because the trial court is vested with the responsibility

                                              -3-
to make that choice, a reviewing court cannot second-guess the lower court's
judgment or merely substitute an alternative it finds preferable. Id. at 524
(citations omitted). A reviewing court must instead affirm the discretionary
decision so long as reasonable legal minds can disagree about its correctness.
Eldridge v. Eldridge, 42 S.W.3d 82, 85 (Tenn. 2001) (citing State v. Scott, 33
S.W.3d 746, 752 (Tenn. 2000); State v. Gilliland, 22 S.W.3d 266, 273 (Tenn.
2000)). The same principles apply here; a trial court's certification decision
must stand if reasonable judicial minds can differ about the soundness of its
conclusion. Freeman v. Blue Ridge Paper Prod., Inc., 229 S.W.3d 694, 703
(Tenn. Ct. App. 2007) (citing White v. Vanderbilt Univ., 21 S.W.3d 215, 223
(Tenn. Ct. App. 1999)). “The abuse of discretion standard of review does not,
however, immunize a lower court's decision from any meaningful appellate
scrutiny.” Beecher, 312 S.W.3d at 524 (citing Boyd v. Comdata Network, Inc.,
88 S.W.3d 203, 211 (Tenn. Ct. App. 2002)).

        A trial court's discretion is not unbounded. Cf. Gulf Oil Co. v.
Bernard, 452 U.S. 89, 100, 101 S. Ct. 2193, 68 L.Ed.2d 693 (1981). A trial
court must consider controlling legal principles and relevant facts when
making a discretionary decision. Beecher, 312 S.W.3d at 524 (citing
Konvalinka v. Chattanooga-Hamilton Cnty. Hosp. Auth., 249 S.W.3d 346, 358
(Tenn. 2008); Ballard v. Herzke, 924 S.W.2d 652, 661 (Tenn. 1996)). A trial
court abuses its discretion if it (1) applies an incorrect legal standard, (2)
reaches an illogical or unreasonable decision, or (3) bases its decision on a
clearly erroneous evaluation of the evidence. Elliott v. Cobb, 320 S.W.3d 246,
249-50 (Tenn. 2010) (citation omitted); see also Walker v. Sunrise Pontiac-
GMC Truck, Inc., 249 S.W.3d 301, 308 (Tenn. 2008) (citation omitted).
Additionally, a trial court abuses its discretion if it “strays beyond the
applicable legal standards or when it fails to properly consider the factors
customarily used to guide the particular discretionary decision.” Beecher, 312
S.W.3d at 524 (citing State v. Lewis, 235 S.W.3d 136, 141 (Tenn. 2007)).

        Appellate courts review a trial court's discretionary decision to
determine “(1) whether the factual basis for the decision is properly supported
by evidence in the record, (2) whether the lower court properly identified and
applied the most appropriate legal principles applicable to the decision, and (3)
whether the lower court's decision was within the range of acceptable
alternative dispositions.” Id. at 524-25 (citing Flautt & Mann v. Council of
Memphis, 285 S.W.3d 856, 872-73 (Tenn. Ct. App. 2008)). We review the
trial court's legal conclusions de novo with no presumption of correctness. Id.
at 525 (citing Johnson v. Nissan N. Am., Inc., 146 S.W.3d 600, 604 (Tenn. Ct.

                                       -4-
App. 2004); Boyd v. Comdata Network, Inc., 88 S.W.3d 203, 212 (Tenn. Ct.
App. 2002)). We review the trial court's factual conclusions under the
preponderance of the evidence standard. Id. (citations omitted).

                                      ***

        Rule 23 of the Tennessee Rules of Civil Procedure governs class action
certification. Walker, 249 S.W.3d at 307 (citing Hamilton v. Gibson Cnty.
Util. Dist., 845 S.W.2d 218, 225 (Tenn. Ct. App. 1992)). The burden is on the
proponent of class certification to demonstrate that a class action is
appropriate. Id. This burden is two-fold. The proponent must first satisfy the
numerosity, commonality, typicality, and adequacy of representation
requirements of Rule 23.01. Id. at 307-08 (citing Tenn. R. Civ. P. 23.01).
Rule 23.01 permits class certification if

       (1) the class is so numerous that joinder of all members is
       impracticable, (2) there are questions of law or fact common to
       the class, (3) the claims or defenses of the representative parties
       are typical of the claims or defenses of the class, and (4) the
       representative parties will fairly and adequately protect the
       interest of the class.

Tenn. R. Civ. P. 23.01. The proponent of class certification must demonstrate
compliance with each of Rule 23.01's requirements. Walker, 249 S.W.3d at
307-08.

        The proponent must next establish the class action is maintainable
under Rule 23.02. Id at 308. In contrast to Rule 23.01, the proponent of class
certification must establish only one Rule 23.02 basis for the maintenance of
a class action. Id. Rule 23.02 provides three bases for class action
certification:

       (1) the prosecution of separate actions by or against individual
       members of the class would create a risk of

               (a) inconsistent or varying adjudications with respect to
       individual members of the class which would establish
       incompatible standards of conduct for the party opposing the
       class, or



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                     (b) adjudications with respect to individual members of
             the class which would as a practical matter be dispositive of the
             interests of the other members not parties to the adjudications or
             would substantially impair or impede their ability to protect their
             interest; or

             (2) the party opposing the class has acted or refused to act on
             grounds generally applicable to the class, thereby making
             appropriate final injunctive relief or corresponding declaratory
             relief with respect to the class as a whole; or

             (3) the court finds that the question of law or fact common to the
             members of the class predominate over any questions affecting
             only individual members, and that a class action is superior to
             other available methods for the fair and efficient adjudication of
             the controversy. The matters pertinent to the findings include:
             (a) the interest of members of the class in individually
             controlling the prosecution or defense of separate actions; (b)
             the extent and nature of any litigation concerning the
             controversy already commenced by or against members of the
             class; (c) the desirability or undesirability of concentrating the
             litigation of the claims in the particular forum; (d) the
             difficulties likely to be encountered in the management of a
             class action.

      Tenn. R. Civ. P. 23.02. Class certification is permissible only if the proponent
      demonstrates compliance with both Rule 23.01 and Rule 23.02. Freeman, 229
      S.W.3d at 702 (citing Hamilton, 845 S.W.2d at 225).

Roberts v. McNeill, No. W2010-01000-COA-R9-CV, 2011 WL 662648, at *3-5 (Tenn. Ct.
App. Feb. 23, 2011), no appl. perm. appeal filed.

             In this appeal, the relevant requirements of Rule 23.01 are typicality and
adequacy of representation. This Court discussed these requirements as follows:

      “[A] plaintiff's claim is typical if it arises from the same event or practice or
      course of conduct that gives rise to the claims of other class members, and if
      his or her claims are based on the same legal theory.” Freeman, 229 S.W.3d
      at 703 (quoting In re Am. Med. Sys., Inc., 75 F.3d 1069, 1082 (6th Cir. 1996))
      (alteration in original) (citation omitted) (internal quotation marks omitted).

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      The typicality inquiry focuses on whether the legal and remedial theories of the
      class representatives are sufficiently similar to those of the unnamed class
      members. Mullen v. Treasure Chest Casino, LLC, 186 F.3d 620, 625 (5th Cir.
      1999) (citing Lightbourn v. Cnty. of El Paso, Tex., 118 F.3d 421, 426 (5th Cir.
      1997)); Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992)
      (citations omitted).

              “A necessary consequence of the typicality requirement is that the
      representative's interests will be aligned with those of the represented group,
      and in pursuing his own claims, the named plaintiff will also advance the
      interests of the class members.” In re Am. Med. Sys., Inc., 75 F.3d at 1082
      (citing 1 Herbert B. Newberg & Alba Conte, Newberg on Class Actions § 3.13
      (3d ed.1992)). “The typicality requirement reflects the belief that a class
      action's progress should not be compromised by a diversion of attention from
      the substance of the basic claim involved in the case .” Bayberry Assocs. v.
      Jones, 87-261-II, 1988 WL 137181, at *9 (Tenn. Ct. App. Nov. 9, 1988)
      (citation omitted), vacated for lack of a final judgment, 783 S.W.2d 553 (Tenn.
      1990). “Its purpose, therefore, is to screen out class actions in which the legal
      or factual position of the representative party is markedly different from that
      of the other members of the class, even though common issues of law or fact
      may also be present.” Id. (citations omitted).

               The claims or defenses of a class representative are atypical if a defense
      unique to that person or a small subclass is likely to become a major focus of
      the litigation. Koos v. First Nat. Bank of Peoria, 496 F.2d 1162, 1164-65 (7th
      Cir. 1974) (citation omitted); see also In re Schering Plough Corp. ERISA
      Litig., 589 F.3d 585, 599-601 (3d Cir. 2009); Gary Plastic Packaging Corp.
      v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 176, 180 (2d Cir.
      1990) (citations omitted); Rolex Emps. Ret. Trust v. Mentor Graphics Corp.,
      136 F.R.D. 658, 663-64 (D. Or. 1991) (citations omitted). Regardless of
      whether courts frame this issue in terms of typicality or adequacy of
      representation, the danger is that a class representative will not properly
      advance the interests of the absent class members if overly concerned with
      defenses or affirmative defenses unique to him. Gary Plastic, 903 F.2d at 180
      (citations omitted); see also Beck v. Maximus, Inc., 457 F.3d 291, 301 (3d Cir.
      2006) (“A proposed class representative is neither typical nor adequate if the
      representative is subject to a unique defense that is likely to become a major
      focus of the litigation.”).

Roberts, 2011 WL 662648, at *6 (footnotes omitted).

                                              -7-
               We first address whether the Trial Court erred in denying Plaintiffs’ motion for
class certification on the basis of failure to prove typicality and adequacy of representation.
Among other things, Plaintiffs put forward the following in their brief on appeal:

       There needs to be a uniform decision as to which restrictions and which by-
       laws govern the community and which persons constitute the Board of
       Directors of the Community Club. Uniformity in decision through the vehicle
       of a class action will result in the interests of the entire community being
       bettered because everyone will know which rules are in effect, who is in
       charge, etc. as opposed to leaving that question up in the air or risking
       inconsistent judgments on important questions as to the community and its
       governance moving forward.

Defendants, on the other hand, argue the following:

              In the present consolidated matters, the Plaintiffs and Defendants in
       both actions are property owners in Renegade Resort whose claims are
       diametrically opposed to each other, and there are many other property owners
       aligned against the Plaintiffs. It defies logic to suggest that such property
       owners could be lumped into a class unified by similar claims and legal
       theories.

               As Plaintiffs themselves acknowledge, this is an unusual set of facts for a class
action case. The chief problem, as we see it, is the overwhelming antagonism amongst the
proposed class. Given the limited proof presented to the Trial Court of at least two
competing groups in the community and with little proof of the size and composition of these
groups, we are skeptical that the requirements of typicality and adequacy of representation
can be met under the limited evidence in the record before us. The Plaintiffs, after all, are
taking positions directly contrary to some unknown number of the proposed class members.
We understand Plaintiffs’ frustration at the prospect of suing and serving potentially
hundreds of people. Nevertheless, the requirements of Rule 23.01 must be satisfied.
Plaintiffs argue that in the alternative, subclasses would be suitable for this case. Again,
based upon the limited record on this issue, antagonism among proposed class members
works to undermine the requirements of typicality and adequacy of representation. This is
a case about a community divided, not a group of similarly situated people pursuing the same
grievance.

              The standard of review on this denial of class certification is abuse of
discretion. We note that the Trial Court held a window open for Plaintiffs to present
additional proof on the issues of typicality and adequacy of representation. For all the above

                                              -8-
discussed reasons, particularly the inherent antagonism among the members of the proposed
class, the Trial Court’s decision to deny Plaintiffs’ request for class certification defies
neither logic nor reason. Likewise, we find that the Trial Court did not apply an incorrect
legal standard, reach an illogical or unreasonable decision, or base its decision on a clearly
erroneous evaluation of the evidence. While reasonable judicial minds perhaps could differ
concerning the Trial Court’s decision, the very essence of a discretionary decision, we are
not at liberty to substitute what we may believe to be a preferable alternative decision. Under
the evidence as contained in the record before us, we conclude that Plaintiffs have failed to
show that the Trial Court abused its discretion in denying Plaintiffs’ motion for class
certification.

              Defendants filed a motion on appeal to consider certain post-judgment facts.
Defendants assert that a separate action has been filed by a group affiliated with Plaintiffs.
Defendants state: “This separate action is evidence of the frivolity of this appeal . . . Plaintiffs
continue to benefit from the delay by improperly representing . . . that they are the Board of
Directors when they are not, and to improperly collect assessments . . . .” We do not believe
this development has any bearing on the positions of the parties in this lawsuit. We,
therefore, deny Defendants’ motion to consider post-judgment facts. We note, however, that
the inclusion of these facts in our consideration would not have altered the outcome of this
appeal in any way as to any issue before us.

             The final issue we address is whether this appeal is frivolous because it
allegedly was taken solely for purposes of delay. Our Supreme Court has stated:
“[I]mposing a penalty for a frivolous appeal is a remedy which is to be used only in obvious
cases of frivolity and should not be asserted lightly or granted unless clearly
applicable—which is rare.” Henderson v. SAIA, Inc., 318 S.W.3d 328, 342 (Tenn. 2010).
While Defendants prevailed, the issue raised by Plaintiffs clearly was not devoid of merit.
We, therefore, decline Defendants’ request to find this appeal frivolous.

                                           Conclusion

              The judgment of the Trial Court is affirmed, and this cause is remanded to the
Trial Court for collection of the costs below. The costs on appeal are assessed against the
Appellants, Gary Haiser, Joel Matchak, John Moore, Gerald Nugent, and Renegade
Mountain Community Club, Inc, and their surety, if any.

                                                      _________________________________
                                                      D. MICHAEL SWINEY, JUDGE




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