Brown v Birman Managed Care

• Decision Date: 25 April 2001
• Docket Number: 99-02551
• Citation: 42 S.W.3d 62
• Parties: CHARLOTTE BROWN, ET AL. v. BIRMAN MANAGED CARE, INC., ET AL.IN THE SUPREME COURT OF TENNESSEE AT NASHVILLE
• Court: Tennessee Supreme Court

CHARLOTTE BROWN, ET AL. v BIRMAN MANAGED CARE, INC., ET AL.

No. M1999-02551-SC-R11-CV

IN THE SUPREME COURT OF TENNESSEE AT NASHVILLE

February 6, 2001 Session

Filed April 25, 2001

Appeal by permission from the Court of Appeals, Middle Section Circuit Court for Putnam County: No. 97-J0266

John A. Turnbull, Judge

The plaintiff, individually and on behalf of her daughter, sued her former husband and his employers for fraud and civil conspiracy to defraud. She alleges that these defendants successfully carried out a plan to reduce the amount of her former husband's child support payments. Part of the plaintiff's conspiracy claim is based on the testimony of her former husband in a child support hearing in which he is alleged to have falsely stated his income. The defendants moved for summary judgment on two grounds: (1) the quality of the plaintiff's evidence and (2) the defense of "testimonial privilege," which grants a witness immunity from subsequent civil liability based on testimony he gave in a judicial proceeding. The trial court granted the defendants' motion. The Court of Appeals, in an opinion authored by Judge Cantrell, reversed, holding that the defendants were not entitled to summary judgment and that the former husband's testimony comes within the "larger conspiracy" exception to the testimonial privilege. We affirm both holdings of the Court of Appeals.

Tenn. R. App. P. 11 Application for Permission to Appeal; Judgment of the Court of Appeals Affirmed

FRANK F. DROWOTA, III, J., delivered the opinion of the court, in which ,E. RILEY ANDERSON, C.J., ADOLPHO A. BIRCH, JR., JANICE M. HOLDER, and, WILLIAM M. BARKER, JJ. joined.

Kelli L. Thompson, Knoxville, Tennessee, for the appellants, Birman Managed Care, Inc., Birman & Associates, Inc., Dr. David N. Birman, and Sue D. Birman.

Steve D. Gibson, Ashland City, Tennessee, for the appellee, Charlotte Brown, individually and as custodial parent on behalf of the minor child Christen Barenkamp.

OPINION

Charlotte Brown ("Brown") and William F. Barenkamp, II ("Barenkamp") were married in 1980 and lived in Connecticut. The next year they had a child, Christen Barenkamp, and a few years later were divorced. In 1988, a Connecticut court awarded Brown custody of Christen and ordered Barenkamp to pay child support in the amount of $25 per week.

Barenkamp later moved to Cookeville, Tennessee, where he met his second wife, Kathy. In Tennessee, the Barenkamps became close friends with Dr. David N. Birman ("Dr. Birman"), the founder and principal of Birman Managed Care, Inc., ("BMCI"), and its subsidiary, Birman & Associates ("B&A"), and with his wife, Sue, who was a senior company executive. In 1990, the Barenkamps moved to Texas. Three years later, a court in Dallas, Texas modified the Connecticut child support order by increasing Barenkamp's payments to $335 per month.

In November 1993, the Barenkamps moved back to Tennessee. Barenkamp began working as the Director of Marketing for B&A at an annual salary of $25,000. Kathy Barenkamp was hired by B&A at a salary of $15,000. She was given the title of secretary, though, as we discuss below, her role as an employee is in dispute. Barenkamp rose rapidly through the executive ranks. He became the Chief Operating Officer (COO) of the company before the end of 1996, eventually earning a salary of $100,000. Kathy's salary reached over $40,000 before she resigned in November 1995.

In late 1995, Brown petitioned the Circuit Court of Putnam County, Tennessee to modify the Texas order to reflect Barenkamp's increased income. During the petition hearing, on April 19, 1996, Barenkamp testified that his income was $5,400 per month ($65,000 per year). He failed to mention his bonus income of $20,000 per year, although the 1995 W-2 form he submitted to the court appears to include this income. Based on Barenkamp's testimony, the court increased his child support payment from $335 per month to $787.50 per month, and directed B&A to withhold this amount from Barenkamp's paycheck. This order became final on June 28, 1996. On July 1, 1996, the next business day, B&A gave Barenkamp a $25,000 raise. Brown claims that Barenkamp's testimony and the timing of his raise are part of a "Bonus Scheme," in which Barenkamp and his employers concealed part of his income to reduce his child support payments.

Brown also claims that Barenkamp and his employers participated in a "Secretary Scheme" to accomplish the same goal. She has gathered a large amount of evidence which she claims supports this allegation. In particular, the record shows that Brown was first informed by two anonymous letters that B&A was splitting Barenkamp's salary with his wife in order to minimize his child support obligation. The letter was purportedly written by a former employee of B&A who claimed to be outraged by such conduct. Brown also points to affidavits and depositions of former B&A employees which, she argues, confirm the allegations contained in the letter. The Barenkamps sought to rebut this evidence before the Court of Appeals by characterizing it as rumor and conjecture from disgruntled, former employees. Brown also points to Sue Birman's deposition and other evidence regarding Kathy Barenkamp's salary in support of her allegations. We discuss this and other evidence more fully below.

Based on this evidence, Brown brought a claim in the trial court for fraud and civil conspiracy to commit fraud against the following defendants: the Barenkamps, the Birmans, BMCI, and B&A. She alleges that they all conspired to reduce Barenkamp's child support payments (through the Bonus and Secretary Schemes), ultimately avoiding $89,375 in payments to which her daughter was entitled. The defendants filed a motion to dismiss which, through the submission of affidavits and other evidence, was converted to a motion for summary judgment. The court granted this motion. Brown appealed to the Court of Appeals, which reversed the trial court, holding that she had presented sufficient evidence to establish genuine issues for trial on her fraud and conspiracy claims.

The Court of Appeals also considered the defendants' argument that Brown's claims must be dismissed because they are based on Barenkamp's testimony before the circuit court in the child support hearing. The court held that although under Tennessee law witnesses testifying before a court are granted immunity from future civil liability relating to that testimony - what is often called the "testimonial privilege" - an exception to this rule applies here. This exception, explained further below, is known as the "larger conspiracy" exception to the testimonial privilege, and it applies where testimony at trial is simply one stage in a multi-staged plan - the rest of the stages occurring outside of court - to cause the plaintiff harm. Where this exception applies, the court reasoned, the defendant loses the immunity normally attached to trial testimony. The court held that Barenkamp's statement of his income in the child support hearing falls into this exception, and therefore Brown may base her claims on this allegedly false testimony.

We take up both issues discussed by the Court of Appeals. First, we decide whether the intermediate court erred in reversing the trial court's grant of summary judgment. Second, we decide whether the court erred in holding that Brown may sue the defendants based on Barenkamp's trial testimony, because that testimony was part of the larger conspiracy exception. We note that only the Birman defendants - Dr. and Mrs. Birman, BMCI, and B&A - have appealed to this Court. We shall refer to them, where appropriate, as the appellants; we shall use the term defendants to refer to the appellants in combination with the Barenkamps.

ANALYSIS

Both issues on appeal are questions of law, which we review de novo, without a presumption of correctness of the Court of Appeals' judgment. See Nelson v. Wal-Mart Stores, Inc., 8 S.W.3d 625, 628 (Tenn. 1999).

Summary Judgment

Tennessee Rule of Civil Procedure 56.04 provides that summary judgment is appropriate where: (1) there is no genuine issue with regard to the material facts relevant to the claim or defense contained in the motion, and (2) the moving party is entitled to judgment as a matter of law on the undisputed facts. See Staples v. CBL & Associates, Inc., 15 S.W.3d 83, 88 (Tenn. 2000); Bain v. Wells, 936 S.W.2d 618, 622 (Tenn. 1997); Byrd v. Hall, 847 S.W.2d 208 (Tenn. 1993). "Courts must view the evidence in the light most favorable to the nonmoving party and must also draw all reasonable inferences in the nonmoving party's favor." Staples, 15 S.W.3d at 89. "Courts should grant a summary judgment only when both the facts and the inferences to be drawn from the facts permit a reasonable person to reach only one conclusion." Id.

Brown's suit charges the defendants with having committed two common law torts, fraud and conspiracy to defraud. The common law action for fraud may be stated as follows:

When a party intentionally misrepresents a material fact or produces a false impression in order to mislead another or to obtain an undue advantage over him, there is a positive fraud. The representation must have been made with knowledge of its falsity and with a fraudulent intent. The representation must have been to an existing fact which is material and the plaintiff must have reasonably relied upon that misrepresentation to his injury.

First Nat'l Bank v. Brooks Farms, 821 S.W.2d 925, 927 (Tenn. 1991) (quoting Haynes v. Cumberland Builders, Inc., 546 S.W.2d 228, 232 (Tenn. Ct. App. 1976)); see also Hodges v. S.C. Toof & Co., 833 S.W.2d 896, 901 (Tenn. 1992); Dobbs v. Guenther, 846 S.W.2d 270, 274 (Tenn. Ct. App. 1993). "Tennessee courts have recognized that fraud by its nature is often difficult to prove and thus may be properly proved by wholly circumstantial evidence." Edwards v. Travelers Ins. of Hartford, 563 F.2d 105, 112 (6th...