Tennessee Business Litigation Lawyers Blog

Recovering Future Commissions in Tennessee

Published on: March 28, 2013 | by J. Ross Pepper

For salespeople, brokers, and agents who derive a substantial part, if not all, of their income from commissions, knowing something about Tennessee law on the subject of future commissions is worthwhile. By future commissions, I am referring, broadly, to commissions that become due after an account is established, but while the relationship between the organization that originally agreed to pay the commission and the salesperson, broker or agent is intact. I am also referring to commissions which accrue after the salesperson, broker or agent has terminated their relationship with the organization that agreed to pay commissions.

The best way for a salesperson, broker or agent in Tennessee to avoid the headaches, uncertainty and expense of a breach of contract lawsuit to recover future commissions is to make sure that there is a clear, written agreement which outlines specifically the circumstances under which future commissions are owed. In the absence of any written agreement which clearly sets forth the agreement of the parties as to future commissions, parties involved in cases about future commissions are likely to become embroiled in a legal slugfest about what was agreed to between the parties and who said what.

I have seen many employment agreements which make it crystal clear that, once the employer terminates the employee, or once the employment relationship is terminated for whatever reason, the employer will owe no future commissions even from accounts or business generated by the terminated employee. These types of provisions are enforceable. Agreements between organizations agreeing to pay commissions and independent contractors, or other non-employees, often contain similar provisions which restrict the right to future commissions once the relationship is terminated.

State Court in Tennessee vs. Federal Court in Tennessee: Advantages and Disadvantages

Published on: March 19, 2013 | by J. Ross Pepper

What are the differences between litigating a breach of contract case, personal injury case, or any other type of case in a Tennessee federal district court as opposed to a Tennessee state trial court? Which court is better for your case? When can your case be filed in federal court as opposed to state court?

The first thing to consider is whether or not your case can be filed in federal court. The federal trial courts in Tennessee, which are referred to as federal district courts, are courts of “limited jurisdiction,” as we lawyers say. By “limited jurisdiction” what we mean, in a very general sense, is that, of all of the cases that can be filed in a Tennessee state court, only a limited number of those could also be filed in a Tennessee federal district court.

A federal district court has jurisdiction over two broad categories of cases: (1) Diversity jurisdiction cases; and (2) federal subject matter jurisdiction cases. A federal court in Tennessee can hear a case (because it has jurisdiction to do so) where the case involves citizens of different states and where the amount in controversy exceeds $75,000.00. A Tennessee federal court also has jurisdiction over cases brought under federal laws and statutes which specifically provide for federal court jurisdiction like overtime pay cases under the FLSA, or age discrimination cases under the ADEA.

Supreme Court of Tennessee: Duty of Good Faith and Fair Dealing Applies To “Silent Consent” Clause In Contract

Published on: March 6, 2013 | by J. Ross Pepper

In a breach of contract case recently decided by the Supreme Court of Tennessee, Dick Broadcasting v. Oak Ridge FM, Inc., the Court held that the implied duty of good faith and fair dealing applied to a contract provision which allowed a party to assign it rights under the contract at issue to another party. The plaintiff (“Plaintiff”) and defendant (“Defendant”) entered into an agreement giving the Plaintiff a right of first refusal to purchase certain assets of the Defendant.

The Right-of-First Refusal Agreement (“Agreement”) provided that the Plaintiff could assign it rights under the Agreement, but that it had to have the prior written consent of the Defendant to do so. Unlike many other contracts that are entered into in Tennessee and in other jurisdictions, the Agreement did not provide any explanation of the conditions under which the Defendant could withhold consent. For example, many agreements with assignment clauses provide that the contract cannot be assigned without the written consent of the non-assigning party, but provide that the non-assigning party’s consent “shall not be unreasonably withheld.”

The Defendant refused to give Plaintiff permission to assign the Agreement. The Plaintiff filed suit in a Tennessee Chancery Court for breach of contract. The Plaintiff’s theory was that the implied duty of good faith and fair dealing, which has been consistently held by Tennessee courts to apply to all contracts governed by Tennessee law, applied to the assignment clause in that case. The Defendant argued that the consent clause, which was silent as to the conditions under which it could withhold consent, allowed it unfettered discretion in deciding whether to give consent.

Exclusion of Coverage for “Residents” under Homeowners’ Insurance Policies: Tennessee Law

Published on: January 10, 2013 | by J. Ross Pepper

Homeowners’ insurance policies abound in Tennessee (and in other states), and are frequently the source of insurance litigation. Such insurance policies provide liability coverage to homeowners for bodily injuries and a source of monetary recovery for injured persons, provided that the policy in question (1) covers the bodily injury, and (2) does not exclude coverage in some other provision.

Homeowners’ insurance policies typically contain provisions which specifically exclude coverage for residents of the household of the owner if the resident was also a relative of the owner. Homeowner’s insurance policies also typically exclude from coverage, by defining as “residents,” persons under the age of twenty-one and in the care of a relative of the owner , if that relative is also a resident of the household.

When a relative is staying with a homeowner temporarily, or on less than a permanent basis, can that relative be considered a “resident” of the household? Keep in mind that, if the answer to that question is “yes,” then, the relative will not be able to look to an insurance company standing behind a homeowner’s insurance policy to pay a judgment entered against the owner of the home. A recent Tennessee case lays out a good road map to use in evaluating how a Tennessee court might determine whether or not an injured relative was a resident under a homeowner’s insurance policy.

Joint and Mutual Will Cases: Tennessee Law

Published on: December 12, 2012 | by J. Ross Pepper

Often in Tennessee, a husband and wife will sign a will in which both leave their property to the surviving spouse. Sometimes, particularly it seems, when the husband and/or wife have children from a previous marriage, will contest cases are brought to determine whether the surviving spouse is bound by terms allegedly agreed to between the surviving spouse and the deceased spouse in a will signed while both were alive.

If you are a beneficiary or relative trying to figure out your rights and/or the rights of other beneficiaries in a joint or mutual will case, a good starting point is to understand some basic Tennessee will terminology. The first determination which should be made to analyze your legal rights and the strength of your case is whether your situation involves joint wills or a joint and mutual will. If the husband and wife signed two separate wills with reciprocal provisions, they would typically be considered joint wills. If the husband and wife executed one will with reciprocal provisions, the will would typically be considered a joint and mutual will.

Where a husband and wife have executed a joint and mutual will wherein they express that the bequests that they have both made are made in consideration for each other, the odds are that the chances of the surviving spouse’s ability to avoid his or her bequest made in that will, by trying to revoke the will after the death of the other spouse or by executing a new will after the death of the other spouse, are not very good. On the other hand, as evidenced by several Tennessee cases, where joint wills (two separate wills with reciprocal provisions) are involved, it is quite possible, depending on the circumstances, that a Tennessee court might well find that the surviving spouse is not bound by will terms to which he or she previously agreed.

Tennessee Case Proves that Real Estate Commission Can be Recovered Even Without a Contract

Published on: December 7, 2012 | by J. Ross Pepper

The Court of Appeals of Tennessee, in the case of Rocky Top Realty, Inc. v. Young, issued an opinion that is a good reminder that, under Tennessee law, you don’t necessarily have to prove a breach of a contract to recover money you are owed for services (or goods). The case was a real estate commission case. Here are the facts of the case:

• The plaintiff (“Plaintiff”) acted as a “facilitator” in a real estate transaction

• It was undisputed that the Plaintiff introduced to the sellers (“Sellers”) the buyer (“Buyer”) who purchased Sellers’ property for 2.7 million dollars

Strict Compliance with Statutory Requirements for Wills Reaffirmed by Supreme Court of Tennessee

Published on: December 3, 2012 | by J. Ross Pepper

The Supreme Court of Tennessee, in a recent case, reversed a decision of the Court of Appeals of Tennessee in which the appeals court had relaxed one of the requirements for a valid will and had upheld the validity of a will which did not strictly comply with a rule laid down by the Tennessee legislature for creating a legally valid Tennessee will. This will contest case resulted in an important decision for Tennessee lawyers who handle will contest cases.

A little historical background about Tennessee will law is helpful. In 1941, the Tennessee General Assembly enacted, in Tennessee, the provisions of the “Execution of Wills Act.” The purpose of the Act was to provide uniform standards for the execution of wills. One of the requirements of the Act, which is codified at T.C.A. §32-1-104, is that a will, other than a holographic will (handwritten) or nuncupative will (unique and very rare), must be signed by the testator (the person making the will).

The facts of the case are pretty simple. The Decedent’s daughter offered a will (the “Will”) for probate. The Will was two pages. The Decedent had initialed the first page of the Will, but had not signed it. Attached to the Will was a separate one page document which was titled “Self-Proved Will Affidavit.” The Decedent and the witnesses all signed the Affidavit. Some nieces and nephews of the Decedent filed a will contest case wherein they alleged that the Will was not valid because the Decedent had not signed the Will.

Tennessee Law: A Contractor’s Right to Recover Amounts in Excess of Monetary Limit of Contractor’s License

Published on: November 20, 2012 | by J. Ross Pepper

In a case involving a breach of a construction contract for a development in Gallatin, Tennessee, a contractor was allowed to recover money for work done, which work substantially exceeded the monetary limit of the contractor’s license. This decision is very significant, and favorable for Tennessee contractors and subcontractors.

The contractor (“Contractor”) submitted a bid to the owner (“Owner”) for over three million dollars. The bid was accepted. Contractor was licensed, but its license had a monetary limit of $750,000.00. At the point Contractor ceased work on the project, it had been paid in excess of $650,000.00. Contractor filed a lien in excess of $625,000.00 for work which it had done, but for which it had not been paid.

Contractor filed suit to enforce its lien and for breach of contract, and violations of the Tennessee Prompt Pay Act. The Contractor’s dispute was not with the Owner, but with a bank (“Bank”) that claimed its deed of trust had priority over Contractor’s lien. The trial court, the Circuit Court for Sumner County, Tennessee, dealt a blow to Contractor by dismissing its lawsuit against the Bank on a summary judgment motion. The trial court held that, since the Contractor had done work exceeding the monetary limit of its contractor’s license, it was “not licensed for the project from its inception.”

Tennessee Law Regarding an Insurance Company’s Right to Deny Benefits for Misrepresentation

Published on: November 14, 2012 | by J. Ross Pepper

In a recent Tennessee case, the beneficiary of a life insurance policy prevailed over the insurance company which denied coverage under the policy at issue based on alleged misrepresentations by the insured in the application for the policy. The case discusses some basic law that is applicable in Tennessee when an insurance company denies coverage because of an alleged misrepresentation on an insurance policy application. Although the case involved a term life insurance policy, many of the rules discussed by the Court of Appeals of Tennessee in the opinion are applicable to other types of insurance policies, e.g., whole life insurance policies, disability insurance policies, health insurance policies, and even liability policies.

The case involved a woman (the “Insured”) who purchased a twenty-year term life insurance policy from Tennessee Farmers. The life insurance policy was issued, but only after the Insured had completed and signed an application. In her application, the Insured identified a number of health and medical problems including a nervous disorder, sleep disorder, arthritis, and a partial disability resulting from a car accident. The Insured disclosed that she smoked half a pack a day of cigarettes, and that she was taking Percocet for pain and Xanax for sleep assistance. As part of the application process, Tennessee Farmers did a drug screen of the Insured which was negative.

Because of the numerous health issues of the Insured, Tennessee Farmers charged a premium which was 50% more than the basic policy premium. Following the issuance of the life insurance policy, the Insured died from acute methadone intoxication. Her death occurred before the contestability period in the policy, which was two years, expired. (Many life insurance and disability policies have non-contestability provisions which, generally, prevent an insurance company from denying coverage for any statement made in the application after a certain period of time—typically around two years after the issuance of the policy).

Lessons About Tennessee Bad Faith Insurance Law

Published on: November 6, 2012 | by J. Ross Pepper

Tennessee has a statute, which, provided certain conditions are met, allows an insured to recover “bad faith” damages against the insured’s insurance company. The United States Court of Appeals for the Sixth Circuit, which is the federal appeals court with jurisdiction over federal cases tried in Tennessee (and several other states), in the case of Heil v. Evanston Insurance Company, reversed a jury verdict for two million dollars in punitive damages in a bad faith case. The court’s explanation and application of the Tennessee bad faith failure to pay statute in that case is informative for anyone with a bad faith claim against an insurance company.

Before discussing the case, a couple of common misconceptions about the Tennessee bad faith failure to pay law should be discussed. First, the bad faith statute only allows an insured to recover up to 25% of the loss of the insured. For that reason, the Tennessee bad faith statute has been rightly criticized as being pretty toothless. Second, the bad faith penalty allowed in Tennessee can only be recovered by someone who was insured by the insurance company which acted in bad faith. In other words, if you have a claim against someone else for damages, and that person’s insurance company acts in bad faith in failing to pay you, you cannot make a claim under the Tennessee bad faith statute against that “third party” insurance company.

In the Heil case, the plaintiff was a company which manufactured dump truck bodies. One of its dump truck bodies lowered onto someone and killed him. Heil was sued for wrongful death. Heil was insured by Evanston Insurance Company (“Insurance Company”) under a commercial general liability policy (the “Policy”).