The KBC Report
A Quarterly Judicial Review
Volume I, Issue 4
Welcome to the conclusion of the first year of the KBC Report. I hope all our readers have enjoyed reading the report as much as I have enjoyed putting it together over the last year. Tennessee Courts put out comparatively few business-related cases this past quarter. The lion’s share of these were contract cases. The Tennessee Supreme Court heard oral arguments in Pryority Partnership v. AMT Properties LLC, about comparative-fault in negligent-misrepresentation cases, on January 26. So we can expect an opinion on that issue in a few months. Highlights from opinions we did get this past quarter include ones dealing with implied easements claimed by HOAs (Park Place Boat Dock Association), a discussion of what might happen to foreign employees if they get sued in the U.S. (United States of America v. Approximately $299,873.70 Seized from a Bank of America Account), and the pitfalls of winning where the trial court doesn’t adequately explain why that happened (Calzada).
Lynn v. Penske Truck Leasing Co., No. W2020-1202 (Tenn. Ct. App. Nov. 16, 2021)
After a jury returned a personal-injury verdict of $615,000 in favor of the plaintiff, the trial court suggested an additur of $685,351. Was that permissible? Yes, says the Court of Appeals: doubling the damages did not “destroy” the jury’s verdict, and the items of damages reflected in the new judgment were supported by the evidence at trial.
Emergency Medical Care Facilities PC v. Division of TennCare, No. M2020-1358 (Tenn. Ct. App. Oct. 7, 2021)
TennCare adopted a $50 cap for reimbursing ER physicians for non-emergency care. Was that a “rule” that required compliance with the Administrative Procedures Act? No, says the Court of Appeals: although the cap is “generally applicable,” it is not a “rule” under the APA because, as it affects only reimbursements for entities contracting with TennCare, it does not “affect private rights, privileges[,] or procedures available to the public.” N.B. – a Rule 11 application is pending in the Supreme Court for this case.
In re StockX Customer Data Security Breach Litigation, 19 F.4th 873 (6th Cir. 2021)
Plaintiffs brought a putative class action against ecommerce defendant. But the defendant had an arbitration clause in its terms of service, one it updated (after some of the plaintiffs had signed up) to require arbitration of all issues, including arbitrability. So while the district court had to determine whether a contract existed at all (it did), all the other issues (including some plaintiffs’ minority defense) were for the arbitrator. The severability holding of Rent-A-Center West Inc. v. Jackson means that defenses such as this are for the court, rather than the arbitrator, only if they uniquely attack the arbitration provision.
Long v. Piercy (In re Piercy), 21 F.4th 909 (6th Cir. 2021)
Long and Piercy were business partners. Long sued Piercy in state court for not paying him all he was owed under their agreement and won. Piercy then filed for bankruptcy, and resisted Long’s nondischargeability claim (based on embezzlement or fiduciary defalcation, § 523(a)(4)) on preclusion grounds, arguing the state court rejected allegations other than breach of contract. Not so, says the Sixth Circuit: Long’s state-court pleadings describe a claim for conversion, and the state-court judgment neither necessarily nor expressly rejected such a claim. Because the state-court record did not clearly bar the claim, then, Long was entitled to try to prove it to the bankruptcy court. And if he did so it would qualify for nondischargeability under § 523(a)(4), because partners owe each other fiduciary duties under Tennessee law. Judgment for the debtor reversed.
Pelt v. Benjamin, No. M2020-1068 (Tenn. Ct. App. Oct. 7, 2021)
Pelt and Benjamin exchange offers and counter-offers for a proposed sale of real estate. The last counter-offer expires pursuant to its terms. If the parties orally agree to extend the expiration date of the counter-offer, and the purchaser returns a signed copy within the orally extended deadline, is there an enforceable contract under the Statute of Frauds? No, says the Court of Appeals, because the version of the agreement purportedly accepted—the one including a later expiration date—wasn’t signed by the seller.
Smythe v. Fourth Avenue Church of Christ Inc., No. M2020-1190 (Tenn. Ct. App. Oct. 13, 2021)
Plaintiff and defendant sign a contract for a real-estate transaction. The parties negotiate an amendment to extend the contract time, but do they succeed in amending the contract? Nope: their exchanges did not reflect agreement on the length of the due-diligence period under the amended agreement; because that was an essential term, no enforceable agreement was reached. Judgment for the defendant seller affirmed. N.B. – a Rule 11 application is pending in the Supreme Court for this case.
Liell v. Stich, No. M2020-1071 (Tenn. Ct. App. Oct. 14, 2021)
If the parties sign a contract that contains a limitations period on claims, does that agreement become void because it contemplates a mediation that never took place? Not here: the limitations period was explicit, while the mediation was not made a condition.
Hartigan v. Brush, No. E2020-1442 (Tenn. Ct. App. Oct. 27, 2021)
Plaintiffs entered into a contract to sell their rural custom home to the defendant. But defendant decides at the last minute that he doesn’t want it after all. Plaintiffs sell the home a year later for $160,000 less. Is that the correct measure of damages? In this case it is: not because the difference between contract price and eventual sale price is the measure (it isn’t), but because the trial court found the later sale reflected the fair market value at the time of the original breach, and the evidence didn’t preponderate otherwise.
Old Hickory Coaches LLC v. Star Coach Rentals Inc., No. M2020-0941 (Tenn. Ct. App. Nov. 15, 2021)
The parties had a contract to provide trucks and trailers for use during film production: the plaintiff provided the equipment and the defendant leased them to actors and others on film sets. Defendant informed plaintiff that it needed new trailers, and the plaintiff provided them. Oops! The old trucks won’t pull the new trailers, so the defendant stops paying the plaintiff all the amounts owed under their agreement. Was that allowed? Nope: the plaintiff didn’t clearly inform the defendant of the need to provide new trucks, so that failure wasn’t a material breach (but not paying the agreed-upon amounts definitely was).
Setayesh v. State of Tennessee, No. M2020-1490 (Tenn. Ct. App. Dec. 13, 2021)
Plaintiff signs an employment contract with a community college that incorporates part of a policy manual by reference. Read in isolation, that part of the manual did not apply to the plaintiff’s situation: should the trial court have considered parol evidence about the agreement’s negotiation to make sense of the provision? Yes: it illuminated the parties’ intent and made clear that they intended to incorporate a particular portion of the policy manual. Applying that provision, the plaintiff was entitled to prevail.
G.T. Issa Construction LLC v. Blalock, No. E2020-0853 (Tenn. Ct. App. Nov. 23, 2021)
Plaintiff and defendant signed a contract to build a house, and the plaintiff built the house. The plaintiff also built a retaining wall that the parties discussed, but that wasn’t in the contract: did the contract’s integration clause bar defendant’s claim that plaintiff had agreed to finish the wall in a given manner and failed to do so? No, because the contract was not integrated as to the wall (and the court found it ambiguous anyways). Come for the parol-evidence rule, stay for the discussion of the reasonableness of the award of attorney’s fee to the prevailing defendant.
Park Place Boat Dock Association Inc. v. Gary Phillips Construction LLC, No. E2021-0160 (Tenn. Ct. App. Nov. 29, 2021)
Nonparty former developer owned a lakeside parcel with a dock and boat slips, and an adjacent parcel separating the slips from the subdivision he built. The slip parcel becomes a subdivision common element, but—oops—the adjacent parcel does not. Can the HOA establish an implied easement over that parcel against the subsequent purchaser? Yes: it has standing to sue for that here, and the history of common ownership and the necessity of crossing the parcel to reach the lake each independently support an implied easement. Put this one in your pocket for its drive-by holding that the derivation clause in a deed is admissible as substantive evidence under Tennessee Rule of Evidence 803(14).
Card v. Principal Life Ins. Co., 17 F.4th 620 (6th Cir. 2021)
The plaintiff’s ERISA plan administrator denied her claim, so she sued in federal court. Her case went up on appeal, and the Sixth Circuit decided the administrator should review the claim again. When it ordered a remand to the administrator, did that deprive the District Court of jurisdiction? No: the case stayed alive there while the administrator did its second review, so the District Court shouldn’t have dismissed it for want of jurisdiction (and maybe the initial panel should have made its remand instruction clearer).
United States of America v. Approximately $299,873.70 Seized from a Bank of America Account, 15 F.4th 1332 (11th Cir. 2021)
Does a foreign national have a constitutional right under the Fifth Amendment to enter the United States in order to participate in a civil trial? No, which means the Chinese nationals in this case, unsuccessfully fighting forfeiture of money seized in connection with a visa scam, lose. Their claims that they were unfairly and prejudicially treated was not aided by their failure to arrange to present or preserve their testimony by alternative means.
Lakeside Surfaces Inc. v. Cambria Co. LLC, 16 F.4th 209 (6th Cir. 2021)
Federal courts hearing diversity cases ordinarily apply forum-selection clauses. But what if the clause contravenes a strong public policy of the forum state, such that a state court there would disregard it? Then the federal court disregards it too and discounts the parties’ contractual agreement about where to litigate. So here: Michigan has a strong public policy against requiring Michigan franchisees to litigate out of state, so the effort to enforce the forum-selection clause that would require that fails.
Hughes v. The Liberty Mutual Fire Insurance Co., No. E2020-0225 (Tenn. Ct. App. Dec. 30, 2021)
State law requires an automobile-insurance policy to include uninsured-motorist coverage unless the insured rejects that coverage in writing. But if the insured has rejected coverage in the past and renews the policy without submitting a new “application,” the prior rejection remains effective and the insurer can issue a policy without uninsured-motorist coverage. Here, the insured did not submit an “application” within the meaning of the statute just because its broker shopped rates and submitted new financial information before renewing the existing automobile policy. And because that policy (per a valid rejection) did not include uninsured-motorist coverage, neither did the new policy.
Prevent USA Corp. v. Volkswagen AG, 17 F.4th 653 (6th Cir. 2021)
Prevent claims Volkswagen schemed to deny it business opportunities, so it sued in Germany and Michigan for violation of European and U.S. antitrust laws. Was the district court right to dismiss the Michigan suit for forum non conveniens (i.e., on the basis the claims would sensibly be brought in Germany)? Because the parties’ relationship and the alleged wrongful conduct (primarily concerning acquisition of a Brazilian company) were centered elsewhere, the evidence was all in foreign languages, the witnesses were mostly overseas, and German courts could provide as much (actually broader) relief, the dismissal was not an abuse of discretion. Prevent’s choice of forum doesn’t trump that analysis, largely because it bears the hallmarks of a shell company set up by a parent that has willingly litigated similar claims in Germany. N.B. – the court considered and rejected the 5th Circuit’s rule that antitrust claims cannot be dismissed under forum non conveniens, joining the 1st and 2d Circuits.
300 Kate Street Partners LLC v. NIS Trading Inc., No. M2020-1253 (Tenn. Ct. App. Oct. 28, 2021)
Plaintiff attempts to serve defendant’s registered agent by certified mail. The USPS says the package was delivered, but there is no signed return receipt. Was the default judgment obtained by filing the USPS tracking information valid? No: Rule 4.04 requires a signed return receipt be filed before entry of a default judgment, and filing a copy of a signature from the USPS after the fact does not cure its initial absence. The decision does not cite Fair v. Cochran, 418 S.W.3d 542 (Tenn. 2013), curiously, though the text of Rule 4.04 probably suffices to distinguish Fair in the certified-mail context.
Calzada v. State Volunteer Mutual Insurance Co., No. M2020-1697 (Tenn. Ct. App. Nov. 18, 2021)
The parties have a complex, multi-faceted dispute over insurance coverage. But we don’t get to learn who wins, because the Court of Appeals finds all of the trial court’s numerous rulings deficient under rule 56.04 and remands for entry of an order that addresses the parties’ arguments in a detailed manner.
William Powell Co. v. National Indemnity Co., 18 F.4th 856 (6th Cir. 2021)
The parties have an array of state and federal litigation concerning insurance coverage, with each party winning some issues. Then the insurer is placed in liquidation by Pennsylvania regulators. Now what? First, the McCarran-Ferguson Act (barring construing federal law to impair state insurance regulation) does not preclude jurisdiction over a case involving an insurer subject to state liquidation. Nor, in this case, did Buford abstention apply (partially because the case was not governed by Pennsylvania law). And under Byrd v. Blue Ridge Rural Electric Cooperative, Erie does not mandate staying the appeal in response to the Pennsylvania administrative order (partially because that order does not go to the merits). The court goes on to conclude that claim preclusion applies (and that exceptions to claim preclusion noted in Restatement (Second) of Judgments § 26 don’t apply).
Lowe v. Province, No. E2020-1133 (Tenn. Ct. App. Oct. 5, 2021)
An elderly married couple is found deceased in their home. Who died first? (The answer matters for intestate succession.) Only one expert testifies: he says the husband died first, but he has to make some assumptions to reach that conclusion. Was the trial court bound to accept that opinion? No: ruling that the evidence did not demonstrate that either predeceased the other (which results in each half of the estate being treated as if each had predeceased the other) affirmed.
Bradford v. Terry, No. M2019-1340 (Tenn. Ct. App. Dec. 27, 2021)
The plaintiff, facing foreclosure, sells her home to the defendant, and then leases it back with an option to purchase. Is that an equitable mortgage? No, because there is no non-contingent debt obligation, just an option. So the Truth in Lending Act does not apply. But the parties’ relationship is governed by Tennessee’s Foreclosure-Related Rescue Services Act, Tenn. Code Ann. § 47-18-5401 et seq. That statute requires a written agreement containing specified terms. Because the defendant violated the FRRSA, the parties’ transaction was void and properly rescinded. Watch out: a violation of the FRRSA is a per se violation of the Consumer Protection Act, so the plaintiff may recover attorney’s fees on remand.
Buttercup Ridge Farms LLC v. McFall Sod & Seeding LLC, No. M2021-0457 (Tenn. Ct. App. Nov. 23, 2021)
Plaintiff owned a farm (of around 80 acres) accessed via a lane running across defendant’s farm (of around 500 acres). The lane totaled 1 or 2 acres. Was the plaintiff’s claim to have adversely possessed the lane barred by his failure to pay taxes on it? No, because the boundary-dispute exception from f applies here, even though the case is not a classic boundary dispute.
F.P. Development LLC v. Charter Township of Canton, 16 F.4th 198 (6th Cir. 2021)
The town of Canton, Michigan, has a one-size-fits-all permitting regimen for cutting trees, and it levies heavy fines if you cut certain trees without a permit. Is that an unreasonable seizure, an excessive fine, or an unlawful taking? No to unreasonable seizure (the landowner gets to keep the timber), no to excessive fine (the evidence indicates the fees are remedial), but yes to unlawful taking (the town made no individualized determination of the proportionality of the mitigation efforts required in exchange for a permit).
Statutes of Limitation
First Community Mortgage Inc. v. Appraisal Services Group Inc., No. W2020-1246 (Tenn. Ct. App. Nov. 29, 2021)
Plaintiff hires defendant to conduct an appraisal in connection with a mortgage transaction. Yikes! Defendant misses a major title problem and plaintiff suffers a loss. After the appraisal but before the plaintiff’s claim accrues, the legislature adopts a statute shortening the limitations period for actions against appraisers. Does the statute apply to plaintiff’s claim? Yes, because the claim had not yet accrued when the statute took effect, the statute did not modify an already-vested right.
Biggs v. Liberty Mutual Insurance Co., No. E2021-0138 (Tenn. Ct. App. Nov. 22, 2021)
The plaintiff received benefits pursuant to a settlement of a worker’s comp claim. The defendant provided the benefits. Plaintiff sues, alleging defendant interfered with his treatment and doctor relationships, committing intentional torts in the process. Maybe, says the Court of Appeals, but the exclusive remedy for those allegations is under the Worker’s Comp statute’s remedies for bad-faith failure to pay. Dismissal affirmed.