Tennessee Business Litigation Lawyers Blog

Using the Tennessee Trust Fund Statute in Construction Cases to Recover Attorneys’ Fees

Published on: November 1, 2015 | by J. Ross Pepper

In breach of contract cases involving construction contracts, the Tennessee Trust Fund Statute, T.C.A. §66-11-138, may provide a subcontractor with a way to recover the attorneys’ fees and expenses incurred in collecting amounts owed to it, but not paid. To recover attorneys’ fees and expenses using that Statute, it is not enough to prove just a breach of the contract by the contractor or subcontractor with whom you contracted. You have to prove that you were not paid because the contractor or subcontractor who owed you money violated the Statute and did so with the intent to defraud.

The Statute also provides protection to project owners by allowing them to recover any attorneys’ fees and expenses, as well as any other damages, incurred as the result of the contractor using funds of the owner for improper purposes (purposes prohibited by the Statute).

Under the Tennessee Trust Fund Statute, any contractor or subcontractor who, with intent to defraud, uses monies paid to it for any purpose other than to pay for labor, materials, services, equipment, machinery or for related overhead or profit, while any subcontractor remains unpaid, has violated the Statute (subject to the exceptions discussed below). A violation of the Statute, besides amounting to a Class E felony, entitles the injured party to recover any damages caused to it as the result of the misuse of the funds, including attorneys’ fees and expenses.

Long Term Disability Claims for Employer Provided Insurance

Published on: October 12, 2015 | by J. Ross Pepper

There are, generally speaking, two types of long term disability insurance policies. There are “private” policies which are not obtained through employment. There are also long term disability policies which are obtained as the result of employment.

If you have a long term disability policy through your employer’s group long term disability insurance, the odds are that it is considered an “employee benefit plan” which is subject to a federal law known as “ERISA.” If you have a long term disability policy which is subject to ERISA, then the federal law known as ERISA, and the Department of Labor regulations applicable to ERISA, will apply to your claim.

If your initial claim for long term disability benefits was denied, you have certain rights under ERISA, including, but not limited to:

Filing an appeal of the denial with the plan administrator
Having at least 180 days after the denial to file an appeal
Obtaining all of the records and documents relied on by the plan administrator in denying the claim
Having an experienced disability insurance lawyer represent you in your appeal

Condemnation Case: Incidental Damages Appropriate Where Taking Affected Separate Tract Owned by Same Persons

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

In a recent eminent domain case, the Court of Appeals of Tennessee upheld a jury verdict for incidental damages caused to one tract of a dairy farm by the condemnation of part of another, but separate, tract of the dairy farm. The case is important for condemnation lawyers in Tennessee because the State’s argument that the property owner was not entitled to incidental damages caused to the tract which was not condemned was unsuccessful.

Here are the facts:

The Owners owned two separate tracts of land, a northern tract and a southern tract
The Owners operated a dairy farm
The southern tract was the site of the dairy farm operations and where manure accumulated
The northern tract was unimproved and was used for the disposal of a large percentage of the manure which was generated
The manure was taken from the southern tract to the northern tract via a tractor
The State filed a petition of condemnation to acquire a 16 acre portion of the northern tract to realign a highway
The State did not seek to take any of the southern tract
As a result of the realignment of the highway, it would no longer be possible to transport the manure from the southern tract to the northern tract via tractor
The manure would have to be transported by a “wet system” which would involve a pipe

A jury trial was held to determine the Owners’ damages. Under Tennessee law, besides being entitled to the value of the land taken by the State, a landowner is also entitled to incidental damages. Incidental damages in a condemnation or eminent domain case consist of the amount of the diminution of the value of the land because of the taking. Under Tennessee law, incidental damages are the lesser of the reasonable cost of repairing or curing the damage caused by the taking or the difference between the fair market value of the property immediately before and after the taking.

Does the Parol Evidence Rule Apply to Statements Which Are the Basis for a Claim or Defense of Fraud?

Published on: September 25, 2015 | by J. Ross Pepper

In Tennessee breach of contract cases and fraud and misrepresentation cases, it is quite possible for the parol evidence rule to come into play. (The basics of the parol evidence rule are explained in a previous blog.) It is also quite possible, in such cases, for the parol evidence rule to be outcome determinative.

A review of the relevant Tennessee case law reveals that Tennessee courts have been inconsistent in applying or not applying the parol evidence rule in cases where allegations of fraud are made, either as a defense, as a claim, or as a counterclaim.

If you want to understand the rules regarding the application of the parol evidence rule in cases where allegations of fraud (now called misrepresentation) are made, then digest the following five cases. In the first three cases, a party relied on a statement made before the contract was signed (parol evidence) to establish a misrepresentation; the other party claimed that such statement was inadmissible under the parol evidence rule; and, the court ruled that the evidence of the statement was not barred by the parol evidence rule. The same things happened in the second two cases except, in those cases, the courts held that evidence of the misrepresentations was barred by the parol evidence rule.

CASES ALLOWING PAROL EVIDENCE TO PROVE A MISREPRESENTATION Continue reading

Contract Clauses Which Prohibit Oral Modifications: How Effective Are They in Tennessee?

Published on: September 18, 2015 | by J. Ross Pepper

Many Tennessee breach of contract cases involve written contracts which contain clauses which provide that no modifications or amendments to the contract are valid unless they are in writing and signed by both parties. How effective are such clauses? Can a party successfully prove that a contract was verbally changed or modified even if it contained a “no oral modification” provision?

Clauses which require modifications to be in writing do not always foreclose the possibility that one of the parties can successfully prove that the contract was, in fact, orally modified. An opinion that gives some pretty good perspective on how such clauses might play out in breach of contract cases is Crye-Leike, Inc. v. Carver (Tenn. Ct. App. 2011).

In the Crye-Leike case, the seller (“Seller”) of a home entered into an “Exclusive Right to Sell Agreement” (the “Agreement”) with a real estate agency (“Agency”). The Agreement was an exclusive six-month listing agreement. It provided that the Agency was entitled to a commission from any sale to anyone during the six-month period or from a sale to someone who was shown the home during the six-month period who purchased the home within ninety days after the Agreement expired.

Are Forum Selection Clauses Enforceable in Tennessee?

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

Forum selection clauses are prevalent in contracts entered into by Tennessee companies and residents. Often, the purpose of a forum selection clause in a contract is to force another party to litigate in a particular court in a particular state. For example, companies which are based somewhere other than Tennessee, but which sign contracts with Tennessee businesses, frequently put forum selection clauses in their contracts. They do so to ensure that, if they have to sue the Tennessee business or, if the Tennessee business decides to sue them, the lawsuit can only be brought in their home state.

If you are a Tennessee business or resident and have signed a contract with a forum selection clause, how likely is it that a Tennessee court would not uphold the forum selection clause? In my experience, in many cases, that result is not very likely.

Forum selection clauses are considered enforceable in Tennessee, and Tennessee courts will uphold them except in limited circumstances. Here they are:

If the Tennessee business or resident who signed the contract cannot secure effective relief in the other state;
If the other state would be a substantially less convenient place for trial;
If the contract containing the forum selection clause or the forum selection clause itself was obtained by duress, abuse of economic power, misrepresentation or some other unconscionable means; or
If, for any other reason, it would be unreasonable or unfair to enforce the forum selection clause.

Partner Who Claims He Was Defrauded Gets Justice on Appeal

Published on: August 12, 2015 | by J. Ross Pepper

In a recent decision involving a partnership lawsuit, the Court of Appeals of Tennessee reversed a trial court’s decision to dismiss a partner’s fraud and promissory fraud claims against the other partner and a third party. Here are the key facts of the case:

Plaintiff and Defendant were 50% partners in a Partnership
Defendant was the managing partner
The only significant asset of the Partnership was a large commercial building
Plaintiff expressed a desire to sell his partnership interest to a Third Party
The building was appraised at $3.3 to $3.6 million dollars
Defendant insisted that the building was worth less than the appraised value by about $1 million because of hail damage to the roof which would cost about $1 million to repair
Neither Third Party nor Defendant divulged to Plaintiff, before he sold his interest to Third Party, the fact that Defendant had submitted an insurance claim for the roof damage (They both knew it for over two months before Plaintiff sold)
Plaintiff sold his interest to Third Party, and, thereafter, discovered that the insurance company had paid just over $1 million to the Partnership for the roof damage after his interest had been sold
Plaintiff testified that he sold his interest for about a half a million dollars less than he would have had he known about the insurance claim

The Plaintiff filed a lawsuit for fraud. It is difficult for me to conceive, based on the facts of the case, how a trial court could dismiss the Plaintiff’s fraud claims on summary judgment, but the trial court did just that. The trial court held that the Defendants had negated essential elements of the Plaintiff’s claims “with respect to whether there was a failure to disclose.” The Court of Appeals reversed the trial court.

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.

What Happens in Tennessee if the Original of a Will is Lost?

Published on: July 21, 2015 | by J. Ross Pepper

Here is a scenario which happens sometimes with Tennessee wills: A person gives a copy, not the original, of his or her Will to someone else for safekeeping. Several years later, the person passes away. No one can find the original of the Will. If the copy of the Will is not valid, then it will change who inherits the assets, so whether the copy is valid or not is an important matter.

Can the Will be valid based on the copy? It might be: It might not be. It all depends on the particular facts involved.

Here is what you have to prove in order to establish that a copy of a Will is valid: (1) that the testator made and executed the Will, and that it otherwise meets the requirements of a valid Will; (2) that the testator has died; (3) the substance and contents of the Will; (4) that there has been a diligent search for the original of the Will; and (5) that the testator did not revoke the Will. Usually, particularly considering the presumption discussed below, the difficulty will come in proving the last item, (5).

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