Court sides with counties in city-county dispute over liquor tax revenue

In a long-running dispute between Tennessee cities and counties operating school systems over distribution of liquor tax revenue, the state Court of Appeals has come down on the side of counties in a Tullahoma versus Coffee County case that could set a precedent for other similar lawsuits – like, for example, the Johnson City versus Washington County case, subject of a report in today’s Johnson City Press.


A recent court ruling has reawakened the legal duel between Johnson City and the Washington County Board of Education, in which the latter is seeking $3.4 million from prior municipal liquor sales revenues.

The Tennessee Court of Appeals in Nashville has reversed a Coffee County Chancery Court ruling and issued the following opinion: That county’s board of education does, in fact, have the legal right to sue to recover liquor-by-the-drink revenues from the City of Tullahoma. (Note: The opinion is HERE)

The opposing opinion has been one of Johnson City attorney Erick Herrin’s basic lines of litigatory defense.

“This a kick in the teeth to our case, but only if the opinion stands,” Herrin said late Tuesday. “I spoke with counsel with Tullahoma, and this opinion is going to be appealed in the state Supreme Court.”

Sullivan County Chancellor E.G. Moody ruled in March that Washington County could join the Board of Education’s suit filed in early 2014. However, no ruling has yet come down the line from Sullivan County Chancery Court about whether the Board of Education has the right to litigate for its share of revenues through the 2013 fiscal year.

“Without question this strengthens our case,” said Cleveland attorney James Logan, who is representing Washington County. “We will be pressing forward with our motion for summary judgement. I think this is a giant step in that direction.

“It has been our position since the beginning of the Coffee County case that the first ruling was not consistent with state law. The ‘lack-of-capacity position’ raised by municipalities is without merit.”

Herrin disagrees and said Johnson City will go forward with its effort to win the case on its merits regardless of the state Supreme Court’s involvement. He also said the recent opinion has farther-reaching consequences than the liquor-by-the-drink issue.

“The analysis of the court of appeals is so broad that it is difficult to identify what a county school board could not file suit over,” he said. “They may have opened the door so wide for county schools that, in my mind, it now allows for a change in county government. Can a county school board, under this opinion, sue over funding (appropriations)?”