Tennessee Business Litigation Lawyers Blog

Articles Posted in Business Litigation

Tennessee Breach of Contract Cases: What Issues Are Juries Allowed to Decide?

Published on: August 6, 2015 | by J. Ross Pepper

If you file a breach of contract case in Tennessee and demand a jury, what are the chances that the jury will actually decide if there was a contract, and/or if it was breached? In my experience, in many Tennessee breach of contract cases, those issues are decided before they ever make it to a jury —— by a motion for summary judgment or by the court, after the trial has begun and proof has been taken, but before the case can be submitted to the jury. So, the short answer is that, in many breach of contract cases where a jury is demanded, the jury will never decide whether the defendant is liable for breach of contract.

Why is it that, even if a jury is demanded, the jury might not resolve a breach of contract case? The domain of juries in Tennessee is to resolve disputes about facts. Under Tennessee law, it is the role of the court, not the jury, to construe and to interpret the terms of a contract if the terms are clear and unambiguous.

Even if the terms of a written contract are not clear and unambiguous, it is not for the jury to decide the parties’ intent unless the court cannot resolve their intent using the recognized rules to be applied to aid in the construction of contracts (e.g., terms of a written contract are to construed against the drafter). Similarly, the court can even interpret an ambiguous contract by considering facts extraneous to the written terms of the contract (parol evidence) if such facts are not conflicting and lead to only one conclusion about the parties’ intent.

Using the Dead Man’s Statute in Tennessee Probate Lawsuits

Published on: July 26, 2015 | by J. Ross Pepper

The Tennessee Dead Man’s statute can be a major factor in the outcome of probate lawsuits in Tennessee, in some cases. How so? It can prevent the admission of pivotal evidence at trial.

The key to understanding the Dead Man’s statute is to understand what it is supposed to prevent. That may be best illustrated by an example. Suppose, after John Jones dies and his daughter is appointed executrix of his estate, a former caretaker (“Caretaker”) of Mr. Jones files a lawsuit asserting that he is entitled to $100,000 from Mr. Jones’ estate. The Caretaker claims that Mr. Jones told him repeatedly that he believed that he was underpaid and would receive $100,000 when he died.

In the above example, the Dead Man’s statute would prohibit Caretaker from testifying at trial that Mr. Jones had promised him $100,000. The statute prevents a living party to a lawsuit from testifying as to statements made by the deceased about transactions that party had with the deceased.

Parol Evidence Rule Torpedoes Subcontractor’s Lawsuit Against Contractor

Published on: July 13, 2015 | by J. Ross Pepper

A recent Tennessee breach of contract case involving a construction contract should be required reading for all subcontractors who do work in Tennessee. In all of the cases I have read over the years involving disputes between contractors and subcontractors about change orders, extras, and the scope of work, this case, Preston McNees Specialty Woodworking, Inc. v. Daniel, sums up as well as any the pitfalls that await subcontractors who perform extra work or work beyond the defined scope.

Using Accord and Satisfaction as a Defense in Tennessee Breach of Contract Cases

Published on: June 4, 2015 | by J. Ross Pepper

A review of Tennessee case law, published and unpublished, demonstrates that the affirmative defense of accord and satisfaction is asserted far more often than it is successful. Nevertheless, it can be effective. Whether an accord and satisfaction defense is successful is dependent on the unique facts of each case, and, of course, on the reaction of the particular judge or jury to those facts.

The defense is used mostly in commercial litigation, though it pops up in tort cases from time to time in disputes about settlement agreements. Since it is an affirmative defense, the burden of proving it is on the defendant. As well, whether there has been an accord and satisfaction is a jury question (provided that the defense survives summary judgment).

The defense of accord and satisfaction arises where a party who owes some obligation or debt to another gives something other than, or less than, what the party who is owed the obligation believes it is entitled to receive. The giving of the something other than, or less than, is the accord part of the defense. The giving part of the defense, or the accord part, is usually a cinch to prove.

Start with a Trial Lawyer

Published on: May 29, 2015 | by J. Ross Pepper

When you are faced with a lawsuit or have filed a lawsuit, do yourself a big favor, hire a Tennessee lawyer with trial experience (aka a “Tennessee trial lawyer”) at the outset of your legal matter. Having practiced trial law and handled litigation and arbitration matters for nearly 25 years, I have seen people’s cases hurt because they waited to bring in a trial lawyer with the hope that things would just get worked out. I have also seen clients end up with bad results because they never retained a lawyer with trial experience.

I have a friend who is a successful businessman who does a substantial amount of business outside of Tennessee. He was owed some money from a company in Louisiana, but the Louisiana company denied that he was owed anything. He hired a lawyer in Louisiana. (I was not aware of his situation until well after the fact).

My friend paid the lawyer for many months as the case proceeded to trial. My friend thought that his case was one of clear liability, and it sounded to me like it was. For some reason, although he kept paying his lawyer and waiting for the other side to come to its senses and settle, the other side never made a settlement offer.

Statutes of Limitations in Insurance Policies

Published on: May 15, 2015 | by J. Ross Pepper

Besides the statutes of limitations which have been enacted as laws by the Tennessee legislature, there is a second type of statutes of limitations. Many insurance policies contain terms which require an insured or policy owner to file a lawsuit within a certain amount of time. Anyone with a breach of contract claim, or other claim, arising from an insurance policy must be very, very aware of the limitations periods for filing lawsuits which are contained in insurance policies and how they work.

In Tennessee, limitations periods clauses in insurance policies are valid and enforceable even though many such clauses will bar a lawsuit unless it is filed within a period of time which is substantially shorter than Tennessee law would otherwise require. For example, in most insurance policy lawsuits, the main claim of the insured is that the insurance company is liable for breach of contract for not paying the claim. Under Tennessee law, a person has a full six years to file a breach of contract lawsuit. Many insurance policies, however, have provisions that essentially require a lawsuit to be filed within one year.

For either a statute of limitations made by state law or one made by an insurance company and placed in a policy, you need to know when the limitations period started. The day when the limitations period started is referred to as the “accrual of the cause of action.” When courts and lawyers talk about the date the cause of action accrued, they are referring to the date that the limitations period began to run — the date when the clock began to tick.

Contract Modifications: The Consideration Problem

Published on: May 5, 2015 | by J. Ross Pepper

For any contract in Tennessee to be valid, it must be supported by mutual consideration. What does mutual consideration mean? Very generally speaking, it means that both parties to the contract must have agreed to pay something, give something, do something, refrain from doing something, or assumed some obligation.

The requirement of mutual consideration applies not only to original contracts, but also, to modifications of original contracts. In Tennessee, if a contract is modified such that a new obligation is imposed on one of the parties, the modification will not be valid unless the other party also assumed some new obligation. This rule is sometimes referred to as the preexisting duty rule.

Here is the quintessential example of a contract modification that would not be valid because of a lack of consideration on the part of one party. Contractor agreed to remodel a structure for Owner. Contractor and Owner entered into a written contract with a specified scope of work and price. Three fourths of the way through the remodel, at a time the Contractor knows that Owner is vulnerable because Owner needs the remodel to be completed, Contractor informs Owner that he needs more money because the remodel was more work than he thought it would be. Owner balks, but Contractor informs Owner that he will walk off the job leaving the work unfinished which, of course, would force Owner to find another contractor to complete the job and would delay completion. Owner then agrees to pay ten percent (10%) more than he originally agreed to pay.

Rights of LLC Members and Shareholders to Financial Records

Published on: February 23, 2015 | by J. Ross Pepper

If you are a minority member of a Tennessee limited liability company (“LLC”) or a minority shareholder of a Tennessee corporation, you may, at some time, need to review financial information of the LLC or the corporation. What financial records are you allowed to obtain? On what grounds can the LLC or corporation refuse to produce financial records to you? What do you do if the company will not supply you with the requested financial records?

The by-laws of the corporation of which you are a shareholder or the operating agreement of the LLC of which you are a member may specify the financial records to which you are entitled and may even require that the LLC or corporation provide you with certain financial information on an annual basis, or even more frequently. As a shareholder or member of a Tennessee corporation or LLC, you are entitled to certain financial information, as a matter of law, under the provisions of the Tennessee Business Corporation Act and Tennessee Limited Liability Company Act even if the by-laws or operating agreement don’t contain provisions allowing you to have any financial records whatsoever.

Limited Liability Companies Continue reading

Which Statute of Limitations Applies: Six Year for Breach of Contract, or Three Year for Injury to Property?

Published on: February 13, 2015 | by J. Ross Pepper

The Supreme Court of Tennessee recently clarified how to determine whether the three year statute of limitations for injuries to property or the six year statute of limitations for breach of contract applies to a case. Which statute applies can be outcome determinative, so, understanding the Court’s holding in the case is a necessity for Tennessee lawyers who handle breach of contract cases and tort cases.

In the case, Benz-Elliott v. Barrett Enterprises, LP (Tenn. 2015), the Plaintiff filed a complaint containing a claim for breach of contract as well as tort claims for fraud and negligent misrepresentation. The tort claims were dismissed at the trial court level; did not become an issue on appeal; and, are irrelevant for analysis of the case.

The Plaintiff’s breach of contract claim stemmed from a written agreement wherein the Plaintiff agreed to sell some land to the Defendant. The Plaintiff owned ninety one acres of land which adjoined the Defendant’s land. The Defendant wanted to purchase four acres of the Plaintiff’s land. The Plaintiff was agreeable to selling so long as she could reserve the ownership of some of the land so that she would have access to the land she was not selling.

Sales Commissions Case: Court Holds No Breach of Contract

Published on: January 30, 2015 | by J. Ross Pepper

A recent breach of contract case decided by the Court of Appeals of Tennessee drives home two lessons. One lesson is for sales representatives who earn their living by commissions: The other is for Tennessee lawyers who handle breach of contract cases. The lesson for sales representatives is that, if they don’t obtain adequate protection for themselves in the written contract they sign before they start to work, they should not be surprised if they are not paid commissions for sales which they generated and should not be surprised if they cannot be helped by a court. The lesson for lawyers who handle sales commission cases is that the duty of good faith, which is implied in every contract in Tennessee, cannot rescue a sales representative, even one who has been treated unfairly, from a bad bargain which they made on the front end.

In Schwartz v. Diagnostix Network Alliance, LLC (Tenn. Ct. App. 2014), Mr. Schwartz, a sales representative, signed an agreement with Diagnostix Network Alliance (“Diagnostix”) pursuant to which he was to be paid commissions for each medical test which he sold. That agreement (“Commission Agreement”) provided for the payment to Schwartz of commissions, but also stated that either party could terminate it “with or without cause” and could do so “immediately” upon providing notice. Another clause in the Commission Agreement provided that Schwartz, the sales representative, had no rights to commissions once he was terminated.

For eight months after the Commission Agreement was signed, Schwartz traveled extensively and, the opinion seems to indicate, worked pretty hard and diligently to sell the medical tests offered by Diagnostix. Schwartz made pitches to one particular organization which had a big network and which could potentially result in many sales. Then, Diagnostix and that organization bypassed Schwartz by entering into an agreement for the purchase of the tests. Then, Diagnostix terminated the Commission Agreement with Schwartz. Although Diagnostix claimed that it had to terminate the agreement because the organization in question complained about Schwartz’s aggressive sales tactics, it is reasonable to assume that Diagnostix’s stated reason for terminating the agreement with Schwartz was pretextual and that it terminated him to avoid paying him commissions.

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