AV Martindale-Hubbell
Super Lawyers
Legal Leaders

In a recent breach of contract case involving a construction subcontract, the Court of Appeals of Tennessee held that the contract at issue was enforceable even though the parties never signed a written agreement. This case is a reminder that a legally enforceable contract may, in some cases, be created just by the conduct of the parties.

In Tennessee, some contracts must be in writing and must at least be signed by the party against whom the contract is sought to be enforced. The relative number of those types of contracts is pretty limited. (The largest share of those types of contracts are ones for the transfer of an interest in real estate, which, under Tennessee law (the Statute of Frauds), must be in writing and signed.)

Here are the key facts of the case:

  • The Plaintiff was a general contractor (the “Plaintiff GC”)
  • The Plaintiff GC desired to bid on a public project
  • The Plaintiff GC solicited a bid for the masonry work on the project from the Defendant, a subcontractor (“Subcontractor”)
  • The Plaintiff GC’s invitation to bid to the Subcontractor included the plans and specifications for the project
  • Subcontractor submitted its bid to the Plaintiff GC for $174,154
  • Plaintiff GC notified Subcontractor that it was the low bidder, but wanted to confirm with Subcontractor that its bid was accurate and complete before submitting its bid on the project
  • Subcontractor confirmed that its bid was complete and accurate
  • Plaintiff GC bid on the project and was awarded the bid
  • Plaintiff GC notified Subcontractor that it had been awarded the bid and Subcontractor responded by thanking it for the update
  • Since Subcontractor’s initial bid of $174,154 had been off because it inadvertently included sales tax, omitted its bond costs, and omitted some materials needed, the parties agreed to amend Subcontractor’s bid upward to $185,028
  • Plaintiff GC sent a purchase order/agreement to Subcontractor which reflected the adjusted bid of $185,028
  • Although Subcontractor never signed and returned the purchase order/agreement and the parties never signed a contract, Subcontractor submitted sample materials to Plaintiff GC
  • Subcontractor thereafter informed Plaintiff GC that it did not intend to perform the work

Plaintiff GC sued Subcontractor for breach of contract. Plaintiff GC claimed its damages were $64,971 —- the difference between the contract price for which Subcontractor had agreed to do the work and the amount it had to pay the subcontractor it contracted with to perform the masonry work that Subcontractor had bid, but never performed. The trial court found for the Plaintiff GC and awarded it the requested $64,971. The Court of Appeals affirmed the trial court.

Continue reading

Liens lis pendens are, often, a critical tool in real estate and commercial litigation in Tennessee. There are two important questions about liens lis pendens that are completely unanswered by the Tennessee lien lis pendens statute. (In fact, a plain reading of that statute would give a lawyer the wrong answer to one of those questions.) Here are the questions:

  1. Can a lien lis pendens be placed on property that is not located in the same county where the plaintiff’s lawsuit is filed?
  2. If the plaintiff loses his or her case at the trial court level, can the plaintiff maintain the lien lis pendens until the appeal is decided, if the plaintiff appeals?

The answer to both questions is “yes.”

The lien lis pendens statute, if construed literally, would prohibit the filing of the lien lis pendens other than against real property “situated in the county of suit.”  In my experience, in many cases, the real estate which is the subject of the lien lis pendens is located in the same county where the suit is filed. In some cases, given Tennessee venue statutes which dictate in which county a defendant may be sued, the plaintiff has no option other than to file suit in the county in which the real property is located. However, that is not always the case. For example, when a plaintiff wants to bring suit for specific performance to require a defendant to convey the subject real estate to the plaintiff, if the defendant resides in a county other than the one in which the subject property is located, the plaintiff can bring suit in the county of the defendant’s residence, and, for strategic reasons, may want to do so.

If a plaintiff decides to bring suit in a county other than the one in which the real property against which the plaintiff wants the lien lis pendens is located, that plaintiff can rest assured that the lien lis pendens issued by the court in the county in which the plaintiff filed suit can be recorded in the county in which the real estate is located and that it will be effective. In Figlio v. Shelley Ford, Inc. (Tenn. Ct. App. 1988), the Court of Appeals of Tennessee examined the lien lis pendens statute and held, unequivocally, that a lien lis pendens issued by a county court, other than the court of the county in which the real property is located, can be filed against real estate in the county of its location.

Continue reading

Many, if not most, legal claims of an LLC must be filed directly by the LLC itself and cannot be filed by someone acting on its behalf.  The Tennessee Revised Limited Liability Company Act, however, permits a member of an LLC, in certain circumstances, to bring a derivative action on behalf of the LLC.  Very generally speaking, derivative actions are permitted when the LLC has a valid cause of action, but is not likely to pursue it itself because its current management will not do so.

Before a member or holder of financial rights of a limited liability company may bring a derivative action in Tennessee, the member or financial rights holder must establish that a demand has been made on the LLC’s management to take the necessary action to address the conduct at issue, and that the demand was denied.  In some cases, a member bringing a derivative action may be excused from having made a demand on the LLC’s management before filing the derivative action.  In so-called “demand excused” cases, a plaintiff bringing a derivative action on behalf of the LLC may be excused from having made a demand on management if the plaintiff ‘s complaint alleges, “with particularity,” facts that establish that a demand would have been futile.

A derivative action may be dismissed if the complaint filed by the plaintiff does not establish either, that a demand was made and denied, or that it should be excused because it would have been futile. Therefore, ensuring that there are adequate grounds to support a claim of demand futility is important where the plaintiff has proceeded with filing a derivative case without making demand on the LLC’s management.

A recent LLC derivative case is illustrative of what type of allegations in a derivative action complaint are insufficient to prove demand futility. Here are the key facts of the case:

  • Gary Miller was a member of an LLC (the “LLC”)
  • There were six members of the LLC
  • The opinion does not state whether the LLC was member-managed or director- managed, but it was apparently member-managed
  • Barbara Miller was another member of the LLC
  • Gary Miller alleged that Barbara Miller sold and leased real properties owned by the LLC and kept the proceeds
  • In his Complaint against Barbara Miller, the only allegations Gary Miller made to support a position that demand on the LLC’s management would have been futile were that: (1) He and Barbara Miller had been engaged in other legal disputes and were not on speaking terms; and, (2) that he was involved in other legal disputes with other members of the LLC.

Continue reading

In every initial meeting or phone conference which I have had with a potential client about a will contest case, I inevitably am asked whether the potential client has a good case to set aside the will at issue, or, the other hand, to uphold it in the face of a will contest.  Of course, there is never a definitive answer to those questions. However, in some cases, I can tell clients that they have identified facts which seem promising in terms of obtaining a favorable verdict. In other cases, I cannot tell them that.

I always tell potential clients that, even if they have identified facts which would seem to support a verdict to set aside a will, there is no way ever to predict what the verdict in a will contest will be. Nevertheless, even though the outcome of a will contest case in Tennessee is unpredictable, it is always wise to evaluate some critical facts at the outset.

This blog is an informal compendium of a few insights I have had over the years in trying to help clients make as good of an evaluation as circumstances will allow of succeeding in a will contest case. The advice and insights here also apply to cases that are not will contests, but which involve someone obtaining the funds of someone else before that person has passed away. (In many cases, bad actors not only use undue influence, misrepresentations, or other improper means to have a will changed, but also, they use the same tactics to achieve ownership of bank accounts, real estate or to become beneficiaries of life insurance policies or financial accounts.)

Many of the factors that will influence a jury in a will contest are matters of common sense. One question I always ask potential clients is how close a relationship did they have with the deceased? Juries will always pay attention to this factor. Years ago, a man called me because his only sibling, his sister, had been left everything in his father’s will, and he had been excluded. In questioning him, he did not have a bad relationship with his father, and they had had no discernible falling out, but he had not even visited his father in many years. On the other hand, his sister had maintained very steady personal contact with their father. All things being equal, that circumstance, in my estimation, hurt his chances of success in a will contest.

Continue reading

Under Tennessee law, many claims arising from business disputes are barred if they are not filed with a court within four years (claims related to the sale of goods under the UCC) or six years (breach of contract claims not governed by the UCC).  Those time periods begin to run, in almost all cases, not when the contract or agreement at issue was made, but when the plaintiff’s cause of action “accrued.” When a cause of action accrues varies. For most breach of contract cases not governed by the UCC, a cause of action accrues when the defendant materially breaches the contract by failing to render some performance it was supposed to render.

Even when a plaintiff files its lawsuit later than four or six years from when its cause of action accrued, nevertheless, its claims may survive the bar of the statute of limitations based on conduct or statements of the defendant. A relatively recent Tennessee breach of contract case proves that point. Here are the key facts of that case:

  • Defendant owned a business
  • Defendant signed an account application with the Plaintiff for the Plaintiff to supply products to the Defendant’s business
  • Defendant personally guaranteed the obligations of his company to the Plaintiff
  • Defendant’s company when out of business owing money to the Plaintiff
  • The Plaintiff’s claim for breach of contract against the Defendant was governed by a four-year statute of limitations
  • It was undisputed by the parties that the Plaintiff’s claims accrued by October 5, 2012, or, no later than October 15, 2012
  • The Defendant argued, and both the Trial Court and Court of Appeals of Tennessee assumed for the sake of argument, that Plaintiff did not file its lawsuit until February of 2017 —- more than four years after Plaintiff’s claims had accrued
  • A representative of the law firm which represented the Plaintiff testified that, in July of 2013, the Defendant had communicated with it at which time he acknowledged the debt and promised to pay it from the proceeds he expected to receive in the future from a real estate transaction
  • On August 13, 2013, the same law firm’s records reflected that Defendant had told it that he had no money to pay the debt
  • The law firm’s records reflected that, on July 24, 2014, Defendant told it that he would not pay the debt

The Plaintiff argued that the Defendant’s statements in July of 2013 prevented the statute of limitations from barring its claim. The Defendant argued that his statements did not have that effect and that, if they did toll or otherwise affect the statute of limitations, the statute began running again in August of 2013 when he told the Plaintiff’s law firm that he had no money to pay the debt.

Continue reading

In a very recent breach of contract case, a former employee of the defendant was held not to have been constructively discharged from employment, and, therefore, was not entitled to a bonus provided for in his employment agreement.  The Court of Appeals of Tennessee determined that the former employee voluntarily terminated his employment based on the totality of the facts.

Here are the key facts:

  • The former executive employee (“Executive”) signed a two- year contract (“Employment Agreement”) with the Defendant, a real estate business, to be an executive vice-president
  • In addition to his salary of $275,000 per year, the Employment Agreement provided that Executive would receive a “minimum annual bonus” of $275,000 per year
  • As the Employment Agreement was interpreted by the court, the annual bonus was payable even if Executive was unable to work, for any period (even one longer than thirty days), so long as he did not voluntarily terminate his employment
  • As the Employment Agreement was interpreted by the court, if the Executive became sick and unable to work, he was only entitled to receive his base salary for thirty days, e., he only had thirty days of paid sick leave
  • Executive began work in late February of 2017
  • Within weeks of beginning work, Executive suffered a heart attack and had to stop working
  • On April 27, 2017, Executive entered a twelve-week cardiac rehabilitation program
  • Executive was paid his full salary through May 18, 2017 (well beyond the thirty-day sick leave period provided for in the Employment Agreement)
  • After May of 2017, Executive and Defendant engaged in discussions about his continued employment, his entitlement to a bonus, and the amount thereof
  • In the above discussions, there was disagreement between Executive and Defendant
  • After June of 2017, Executive did not respond to Defendant
  • On July 28, 2017, Executive filed a beach of contract suit against Defendant requesting that the court award him, among other items, the $275,000 bonus

On appeal, one of the determinative issues was whether or not the Executive had terminated his employment with Defendant voluntarily or whether, on the other hand, he had been constructively discharged from employment, as he alleged. If it was determined that he was constructively discharged, he was entitled to the $275,000 bonus.

Constructive discharge, under Tennessee law, occurs when an employer engages in conduct which is intended to cause an employee to quit. The constructive discharge theory recognizes that some voluntary terminations of employment are, in fact, involuntary terminations.  Tennessee law requires a court to consider the “totality of facts” related to the termination of an employee’s employment in deciding whether there was a constructive discharge.

Continue reading

A former employer’s claims against a former employee and the former employee’s new employer for breach of a non-compete agreement and violating the Tennessee Uniform Trade Secrets Act (“Trade Secrets Act”) were dismissed in a case which is instructive on a couple of fronts. Mainly, the case illustrates the futility of a former employer attempting to claim that information the former employee acquired during his or her employment amounts to “trade secrets” under the Trade Secrets Act when the former employer allowed third parties to have access to the same information.

Here are the key facts:

  • Daniel was employed by one of the two Plaintiffs in the case (Plaintiff One)
  • Daniel’s position, at the time of his termination of employment with Plaintiff One, was supervisor of Plaintiff One’s billing department
  • Prior to being supervisor of Plaintiff One’s billing department, Daniel’s position at Plaintiff One was as a bill collector
  • Plaintiff One was in the business of collecting for amounts owed to Plaintiff Two
  • Plaintiff Two provided services to healthcare providers for which it was entitled to a percentage of those healthcare providers’ claims each month
  • Daniel went to work for a company called Premier Mobile (“Premier”) after his employment with Plaintiff One ended
  • Premier had a prior business relationship with both Plaintiffs
  • During that relationship, Premier engaged in the same business the Plaintiffs engaged in, but only in the State of Virginia
  • About two weeks before Premier hired Daniel, its relationship with the Plaintiffs ended
  • Premier hired Daniel in the position of “scheduler”
  • Daniel performed work in Virginia at Premier’s headquarters after Premier hired him
  • Daniel’s non-compete agreement with Plaintiff One prohibited him from competing against it in any state having customers of Plaintiff One from whom Plaintiff One received more than 2% of its annual revenue

After Daniel went to work for Premier, Plaintiff One sued Daniel for breaching his non-compete agreement by working for Premier and Plaintiffs One and Two sued Daniel and Premier for violating the Trade Secrets Act.


The Plaintiffs claimed that a number of documents which comprised trade secrets under the Trade Secrets Act were taken by Daniel and used by Daniel and his new employer, Premier. The documents which Plaintiffs claimed amounted to trade secrets included documents regarding how to provide dental treatment and to receive payment for it; “transmittal letters;” emails; spreadsheets; invoices; dental progress notes; memos; orders; and similar documents. To qualify as trade secrets under the Trade Secrets Act, not only must information meet the definition of trade secrets, but also, the party claiming the information is trade secrets must show that it took reasonable efforts, under the circumstances, to maintain its secrecy.  As well, if a third party can “readily” obtain the information which is claimed to be trade secrets “through proper means,” the information cannot qualify as trade secrets.

Continue reading

The Court of Appeals of Tennessee recently issued an opinion in an easement case involving an issue of first impression in Tennessee regarding the transferability of an express easement.  Here are the key facts:

  • In 1980, Mahaffey acquired a tract known as the “Holt Farm”
  • Holt Farm was 107 acres
  • Holt Farm was landlocked
  • A lane (“Holt Lane”), ran along the eastern section of Holt Farm
  • Before connecting to a public roadway, known as Horse Mountain Road, Holt Lane ran across property adjoining Mahaffey’s which was not owned by Mahaffey
  • The adjoining property which Holt Lane ran across was owned by Robertson-Magill
  • Robertson-Magill sued Mahaffey in the Bedford County Chancery Court to prevent Mahaffey from using the part of Holt Lane on the Robertson-Magill property
  • In 1983, the Chancery Court in the Mahaffey/Robertson-Magill lawsuit ordered that Mahaffey had an easement for ingress and egress to use the portion of Holt Lane located on the Robertson-Magill property
  • The order of the Chancery Court was filed with the Bedford County Register of Deeds
  • After the order was entered, Mahaffey acquired an additional 640 acres which adjoined the 107-acre Holt Farm Mahaffey owned
  • In 2007, Mahaffey sold the Kelloggs a 9.76-acre tract
  • The 9.76 acre tract was not part of the 107 acres originally owned by Mahaffey, but was derived from the additional 640 acres purchased by Mahaffey
  • In a document, Mahaffey granted what was called a “permanent right-of-way easement” to the Kelloggs, which grant purported to give an easement to the Kelloggs to use the same portion of Holt Lane to which Mahaffey had been granted an easement for ingress and egress by the Chancery Court
  • The Robinsons (“Plaintiffs”) purchased the Robertson-Magill property
  • Heated disputes arose between the Robinsons and the Kelloggs regarding the Kelloggs’ use of the portion of Holt Lane located on the Robinsons’ property
  • The Robinsons filed a lawsuit against the Kelloggs
  • The trial court ruled that the easement granted to Mahaffey in the 1983 Chancery Court order amounted only to an easement in gross. Therefore, the trial court held that the easement did not run with the land and did not benefit the Kelloggs.

The two broad categories of easements in Tennessee are easements in gross and easements appurtenant. In Tennessee, easements appurtenant are favored over easements in gross. An easement in gross is a personal right to use the land of another. Easements in gross do not run with the land as there is almost never a dominant estate where there is an easement in gross. Easements appurtenant benefit a dominant estate and burden a servient estate. Critically, easements appurtenant run with land and may be enforced by subsequent purchasers of the dominant estate.

The Court of Appeals started its opinion with an excellent summary of the difference between easements in gross and easements appurtenant. It then held that the easement granted by the 1983 Chancery Court order was not an easement in gross, but was an easement appurtenant.

Continue reading

The Tennessee Revised Limited Liability Company Act (the “Act”) sets forth the circumstances under which a limited liability company (“LLC”) member or manager may be liable to the LLC or to other LLC members.  An LLC member’s or manager’s potential liability can arise from two separate categories of conduct: (1) conduct that is a breach of the member’s or manager’s duty of loyalty (duty of loyalty cases); and (2) conduct in the operation or management of the LLC that is below the standards of care set forth in the Act (duty of care cases).

This blog deals strictly with the second category set forth above — liability resulting from failure to manage and to operate the LLC with the required degree of care. What level of care in the management and operation of the LLC must a member’s or manager’s care fall below before that member or manager can be personally liable? Under the Act, a member or manager may be personally liable where his or her conduct: (1) Is grossly negligent or reckless; (2) is intentional misconduct; (3) or amounts to a knowing violation of the law. In my opinion, the grossly negligent standard, in most situations, would be the easiest for a plaintiff bringing suit against another member or manager to prove.

The Act insulates LLC members and managers from liability for ordinary negligence. Why? Because the Act incorporates the policies of the Business Judgment Rule, which Rule predates the Act and has been an integral part of business law for decades. The Business Judgment Rule is meant to protect those in charge of managing and operating businesses, as long as they act in good faith and for proper purposes, from liability for business decisions that turn out to have been unwise. It recognizes that managers and operators of businesses would be deterred from taking calculated risks that might advance the organization if they had to worry about lawsuits from members or shareholders engaged in “Monday morning quarterbacking.”

Under Tennessee law, gross negligence is defined as “a conscious neglect of duty or a callous indifference to consequences” or “such entire want of care as would raise a presumption of a conscious indifference to consequences.” There is but one Tennessee case which addresses the issue of the liability of a member or manager for gross negligence. It does not shed much, if any, light on the subject. In that case, the Court of Appeals concluded, without much analysis or discussion of the facts constituting the alleged gross negligence, that the trial court had not erred in determining that the member’s conduct was not grossly negligent.

Continue reading

It is helpful to think of the potential personal liability of members of Tennessee LLC’s falling into two categories. The first category is the personal liability of a member to the LLC itself for the member’s breach of the duty of care, breach of the duty of loyalty, or the breach of the duty of good faith and fair dealing.  The personal liability of a member for breaches of those duties (which duties are set forth in T.C.A.§ 48-249-403) is typically addressed in a derivative proceeding brought by another member of the LLC on behalf of the LLC.  The second category of personal liability of an LLC member involves claims by a non-member third party against a member, individually, for some action or omission related to the business of the LLC. That second category of potential personal liability is the subject of this blog.

The Tennessee Revised Limited Liability Company Act (the “Act”) expressly codifies a rule which limits the personal liability of LLC members related to LLC business (the “Limited Liability Rule”). (See T.C.A. §48-249-114) The Limited Liability Rule is set forth in three subparagraphs which provide, generally, that: (a) The obligations and debts of the LLC, regardless of whether they originate from a contract or from tortious activity, are “solely” the obligation of the LLC; (b) a member has no personal liability for debts of the LLC just because of his or her membership; and (c) a member is not liable for the acts or omissions of other members, or employees or agents of the LLC.

The limited liability rule for LLC members provides broad protection to members. If the LLC fails to pay a creditor, the LLC’s members are not personally responsible to that creditor. If an LLC employee causes a serious personal injury to a third party while doing his or her job for the LLC, the LLC’s members are not personally liable for it.

There are quite a few exceptions, however, to the rule of limited liability for LLC members. The exceptions fall into, at least, the following categories: (1) Where an LLC member commits an intentional tort, such as misrepresentation; (2) where the LLC’s veil is pierced; (3) where the LLC member has engaged in a fraudulent transfer of LLC assets to himself or herself; (4) where the member is held personally liable under the theory that he or she did not disclose that he or she was acting on behalf of the LLC; and (5) where the LLC member has personally guaranteed debts of the LLC.

Continue reading

Contact Information