Tennessee Business Litigation Lawyers Blog

Articles Posted in Business Litigation

Tennessee Member-Managed Limited Liability Companies: Liability Of Members To Other Members And/Or The LLC

Published on: August 13, 2012 | by J. Ross Pepper

This blog addresses Tennessee law regarding the liability of members of Tennessee limited liability companies to other members and/or to the LLC itself. In 1994, the “Tennessee Limited Liability Company Act” became law in Tennessee. In 2005, the “Tennessee Revised Limited Liability Company Act” became law. The Revised Act added statutes regarding the conduct of LLC members which would subject them to personal liability to other LLC members, the LLC, and to holders of financial rights.

Tennessee recognizes three types of LLCs: (1) member-managed LLCs; (2) manager-managed LLCs; and (3) director-managed LLCs. This blog focuses only on member-managed LLCs, though much of the law discussed herein is equally applicable to the two other types of LLCs.

The starting point for understanding the potential liabilities of members of Tennessee member-managed LLCs to other members and/or to the LLC is Tennessee Code Annotated §48-249-403. Even though that statute has been in effect for about seven years, there is no Tennessee case law interpreting that statute or discussing its application. In fact, a Westlaw search for all Tennessee cases in which the statute is mentioned turns up no cases.

Changing Insurance Policy Beneficiaries In Violation Of Marital Dissolution Agreements: What Tennessee Courts Have To Say

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

Frequently, as part of a divorce, a spouse is required to maintain life insurance for the benefit of the other spouse or for children. In our practice, we have been involved in several cases where, in spite of a requirement in a divorce decree or marital dissolution agreement, a spouse has either changed the designated beneficiary of a life insurance policy, or let the life insurance policy lapse. Under Tennessee law, a former spouse or child who has been wronged by such conduct has the law on his or her side, as evidenced by the Tennessee cases discussed in this blog.

In Dossett v. Dossett, a decision of the Supreme Court of Tennessee, the plaintiffs were children of an insured (the father) who was divorced from the children’s mother prior to his (the insured father’s) death. The divorce decree between the father of the children and their mother required the father to maintain a policy of life insurance upon his life with the children designated as beneficiaries. Specifically, the marital dissolution agreement in that case stated:

“That the Defendant [the father] is required to maintain a $20,000.00 life insurance policy upon his life and with the minor children of the marriage designated as the beneficiaries of said policy.”

Joint Bank Account With Right Of Survivorship Case: Tennessee Court Of Appeals Lays Ground Rules

Published on: July 31, 2012 | by J. Ross Pepper

In our practice, we are pretty frequently involved in cases (usually undue influence cases) where parties, usually relatives, are at odds over who should receive funds owned by a deceased relative in a bank account, or certificate of deposit. A recent case from the Tennessee Court of Appeals, Guess v. Finlay, not only provides a very useful analysis of Tennessee law regarding joint accounts with rights of survivorship, but also, reverses some prior Tennessee law regarding joint accounts.

Here are the facts:

• At the time of his death, Deceased had accounts at SunTrust Bank worth nearly $250,000.00, consisting of a checking account, a money market account, and CDs

Home Construction Contract Case: Tennessee Court Of Appeals Upholds Nashville Chancery Court

Published on: July 24, 2012 | by J. Ross Pepper

A recent opinion of the Tennessee Court of Appeals in a construction defect case between a homeowner and a contractor is worth the read for any lawyer or homeowner contemplating a breach of contract case against a contractor. The opinion touches on two areas of the law that might be implicated in any construction defect case where breach of contract and/or negligence are alleged: (1) the amount of damages a homeowner might be able to recover for a contractor’s defective work; and (2) a homeowner’s right to the remedy of rescission of the contract in a breach of construction contract case.

The opinion gives a plenary explanation and description of the contractor’s work which was alleged to have been incomplete, defective, and below standard (which is too detailed and lengthy to be repeated in this blog). In a nutshell, the facts of the defective construction case were as follows:

• Homeowner retained Contractor to remodel her residence

Tennessee Law Regarding Implied Contracts

Published on: July 16, 2012 | by J. Ross Pepper

In Tennessee, as in many other states, the law is not so technical as to deny a party a right to recover on a breach of contract claim just because the party’s contract was not expressed adequately either in writing or verbally. Where the facts make it clear that parties had an agreement (which is supported by mutual consideration and sufficiently definite), a party to that agreement might be able to recover– even without an express contract.

It is always best to have an express written contract. If you don’t have an express written contract, the next best thing to have is an express oral contract with someone who is truthful, and who will not deny the terms of your agreement. If you have neither an express oral nor a written contract, your only chance of recovery, in a breach of contract case, may depend on Tennessee common law regarding implied contracts.

Tennessee law recognizes two types of implied contracts: contracts implied in fact, and contracts implied in law. What is the difference? Contracts implied in fact arise when the court determines that the parties’ conduct shows mutual assent to a contract even though they never expressly agreed (either verbally, or in writing). Contracts implied in law can be created by a court to avoid an injustice even where there was neither an express agreement between the parties, nor conduct of the parties upon which the court can base an implied contract.

“Getting It In Writing:” When Is It A Must In Tennessee

Published on: June 27, 2012 | by J. Ross Pepper

When do you have to have a written contract? What if you, or the other party, never signed anything? If you don’t have a written agreement or a signature does that mean that there is not a legally enforceable contract? As a general rule, unwritten contracts are legally enforceable in Tennessee. Furthermore, the lack of a signature on a written agreement does not necessarily mean that the agreement is not enforceable.

Frequently, the biggest problem with unwritten agreements (sometimes called “verbal” or “oral” contracts) is not their legal enforceability, but proving them. If it is your word against someone else’s, it can be tough to carry your legal burden of proof when you are trying to enforce an oral contract.

There are some agreements which Tennessee law requires to be written and which Tennessee law requires to be signed by the party against whom the agreement is being enforced. The agreements that must be in writing are set forth in what is referred to, in legal jargon, as the “statute of frauds.” In Tennessee, as a general rule, you must have the following agreements in writing and signed by the party against whom you want to enforce the agreement:

Tennessee Supreme Court Holds Statute Of Frauds Applies To Settlement Agreement

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

In a recent opinion in a real estate litigation case which originated in Murfreesboro, the Supreme Court of Tennessee examined the Tennessee statute of frauds and made two significant rulings about its application. The case involved a settlement agreement which was made after a breach of contract suit had been filed to settle that suit.

The plaintiff (“Buyer”) and the defendant (“Seller”) entered into a real estate contract. The Buyer paid the Seller $10,000.00 in earnest money. After the real estate contract was entered into and the earnest money paid, the Buyer discovered that the Seller had conveyed one-half of her interest in the property at issue to her niece (“Niece”).

The Buyer sued the Seller and her Niece for breach of contract, fraud, and negligent and intentional misrepresentation. Seller filed a cross claim against Niece alleging that the Seller’s transfer of her one-half interest in the property to Niece was the result of undue influence and requesting that the transfer be set aside.

Supreme Court Of Tennessee Issues Opinion In Case Involving Mistake Of Insurance Agent

Published on: June 1, 2012 | by J. Ross Pepper

In a case decided by a 3-2 vote which involved coverage under a commercial liability insurance policy issued by Allstate, the Supreme Court of Tennessee held in favor of an insured finding that the insurance company was responsible for a mistake by one of its agents in Tennessee. The case falls in the category of an insurance agent mistake case, many of which type cases end up in Tennessee courts.

Here are the key facts of the case:

• The Plaintiff in the case was a customer of Allstate Insurance Company who owned and insured six vehicles under a commercial policy with Allstate

Evaluating Breach Of Contract Cases In Tennessee (Part Two)

Published on: May 24, 2012 | by J. Ross Pepper

What amount of damages a party has incurred as the result of a breach of contract is important to evaluate as thoroughly as possible at the outset of any breach of contract case. Sometimes, the best defense to a breach of contract case is proving that the plaintiff did not suffer damages, or did not suffer the amount of the damages claimed.

There are lots of potential defenses that a defendant with a skilled and experienced breach of contract lawyer can successfully use to defend the damages aspect of a breach of contract case. Similarly, a skilled breach of contract lawyer representing a plaintiff can often find ways to maximize the plaintiff’s damage award in a breach of contract case. Because of the investment of time and money a breach of contract case can take, it is always in a client’s best interest to insist on an opinion about damages at the outset.

In our practice, we are confronted sometimes with potential clients who have cases where proving that the other side is liable to them for breach of contract is a cinch, but for whom it is not worthwhile to bring a legal action. Why may it not be worth it for these clients to bring lawsuits? Answer: Attorneys’ fees and expenses. If the maximum recoverable damages in a case are $10,000.00, but it will cost that amount, or very close to it, to litigate the case to settlement or judgment, in many situations, it is better to forego a lawsuit.

Evaluating Potential Breach Of Contract Cases In Tennessee (Part One)

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

While the types of contracts and businesses involved in breach of contract cases vary widely, as a general rule, the basic principles of contract law that Tennessee courts apply in breach of contract cases are pretty much the same in most cases. One exception to that general rule is breach of contract cases governed by the Uniform Commercial Code, as adopted in Tennessee, which, generally speaking, applies only in cases involving the sale of goods.

There are innumerable factors that need to be considered in evaluating breach of contract cases, and this blog is not nearly comprehensive enough to be taken as a complete and definitive checklist for evaluating potential breach of contract cases.

In evaluating a breach of contract case, it may be productive to break the potential case down into two broad areas for evaluation: (1) Liability; and (2) Damages. (Part Two of this blog addresses damages).

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