ON THE LAW
December 15, 2011
CIVIL PROCEDURE—ATTORNEY’S FEES: In Dayton v. Ackerman, No. M2010–00922–COA–R3–CV, 2011 WL 5183763 (Tenn. Ct. App. Oct. 31, 2011), the Middle Section of the Tennessee Court of Appeals recently affirmed a trial court’s decision denying a defendant’s motion for attorney’s fees in a home construction case. The language of the parties’ contract for the sale of the real estate included the following provision: “In the event that any party hereto shall file suit to enforce this agreement (including suits filed after closing which are based on or related to the contract), the prevailing party shall be entitled to recover all costs of such enforcement, including reasonable attorney's fees as determined by the court. This provision shall survive the closing” Id. at *5. There were two claims at issue, one involving windows in the home, and another involving a structural issue. The homeowners won the window claim, and the builder won the structural claim. As both parties prevailed, apparently neither party was the “prevailing party” under the contract. Consider whether this appellate decision signals to contract drafters that the term “prevailing party” needs to be further parsed and qualified, so as to include the possibility of recovering attorneys’ fees as it relates to individual issues in a lawsuit. Link to Court’s Opinion
December 14, 2011
TRUSTS & ESTATES: In First Tennessee Bank, N.A. v. Woodward, No. E2011-00599-COA-R3-CV, 2011 WL 5053307 (Tenn. Ct. App. Oct. 25, 2011), the Tennessee Court of Appeals addressed the issue of when a trust created for the benefit of the decedent’s son vested and the importance of the language used in the will establishing the trust in determining the intent of the decedent. The will provided that pursuant to the terms of the trust, the decedent’s son was entitled to a monthly distribution from the trust until the son reached the age of fifty, at which point the son was to receive the corpus of the trust, along with any income, and that the trust would terminate. The will did not, however, anticipate the fact possibility that the son would die before reaching the age of fifty, and that is exactly what happened. The Court ultimately decided that the trust vested in the son at the time of the decedent’s death, not when the son reached the age of fifty. The Court based its decision, in large part, on the fact that the language creating the trust stated that the trust would terminate “when” the son reached the age of fifty, not “if.” The Court stated “[h]ad the word “if” been used, its use might well have implied that the Son would not be entitled to the corpus unless he reached the age of 50; the word “when” suggests that the Deceased intended for the Son to enjoy the full benefit of the trust but . . . wanted the Son to be content with the income until some later date when the trust would terminate.” As a result of the Court’s decision, the corpus and income of the trust went to the son’s estranged wife, rather than the decedent’s brother – an outcome unlikely to have been anticipated or desired by the decedent, as noted in footnote 1. This case demonstrates Tennessee Courts’ deference to the plain language of wills and trust documents and the implications of word choice in the drafting of such documents. Link to Court’s Opinion
December 14, 2011
CIVIL PROCEDURE: In Dassault Systemes, SA v. Keith Childress, No. 10-1987, (6th Cir. Dec. 13, 2011), the Sixth Circuit clarified the standard by which default judgments should be reviewed. In Dassault, the defendant Childress filed a motion in the trial court to set aside a default judgment, but the motion was denied. On appeal, the Sixth Circuit noted that there are two ways to set aside default judgments, Rule 55(c) and Rule 60(b). While the factors for reviewing these motions are identical, the standard for applying the factors is not. Rule 55(c) motions are granted for “good cause shown,” whereas Rule 60(b) motions require more specific findings outlined in Rule 60(b). In navigating between these two rules, the Court stated that if the issue of damages has not been resolved, then Rule 55(c) should apply, but if damages have been adjudicated, then Rule 60(b) should apply. The impact of this decision is that a plaintiff seeking default judgment should consider being prepared and asking to put on proof of damages at the default judgment hearing. Once damages are decided and a judgment is entered, the defendant is then faced with Rule 60(b) rather than the Rule 55(c). Conversely, if a defendant learns that a default judgment has been entered against it, the defendant might consider first ascertaining whether damages have been adjudicated by the Court. If the issue of damages has not been resolved, then the defendant can use Rule 55(c). While Dassault did not purport to change existing law, it attempted to clarify past Sixth Circuit precedent which seemingly contradicted this distinction between Rule 55(c) and Rule 60(b). Link to Court’s Opinion
December 13, 2011
CIVIL PROCEDURE: In Crowley v. Thomas, 343 S.W.3d 32 (Tenn. 2011), the Tennessee Supreme Court affirmed a circuit court’s dismissal of a defendant’s appeal from an adverse general sessions court judgment and affirmed the general sessions court judgment. In the proceedings below, defendant appealed a general sessions verdict in favor of plaintiff to the circuit court. Once in circuit court, plaintiff filed several amended complaints, adding a second plaintiff and seeking significantly increased damages. Days before trial, defendant dismissed its appeal, and the circuit court affirmed the judgment of the general sessions court. The Supreme Court held that a defendant can dismiss his or her appeal of an adverse general sessions judgment without the consent and over the objection of a plaintiff; such dismissal is fatal to a plaintiff’s amended cause of action and will result in the reinstatement of the original general sessions court judgment. Link to Court’s Opinion
December 13, 2011
CIVIL PROCEDURE: In Webb v. Nashville Area Habitat for Humanity, Inc., 346 S.W.3d 422 (Tenn. 2011), the Tennessee Supreme Court addressed whether to adopt the “plausibility” pleading standard recently adopted by the United States Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 (2009), or to continue to abide by Tennessee’s long-standing liberal notice pleading standard. The court rejected the federal standard and discussed several reasons for its decision. First, the court recognized that the Twombly/Iqbal approach represents a drastic shift from well-established pleadings requirements, resulting in instability and unpredictability in pleading practice. Next, the court concluded that the fact-based “plausibility” determination a federal court must now undertake when faced with a 12(b)(6) motion runs counter to Tennessee’s well-established precedent that a 12.02(6) motion only challenges the legal sufficiency of the complaint. Finally, the court expressed concerns that the new federal approach may result in the premature dismissal of meritorious claims which require discovery to be proven. As a result, Tennessee continues to follow the liberal notice pleading standard, the primary purpose of which is to provide notice of the issues presented to the opposing party and court. Link to Court’s Opinion
December 13, 2011
CONSTRUCTION LAW: In Federal Insurance Company A/S/O Robert and Joanie Emerson v. Martin Edward Winters, D/B/A Winters Roofing Company, No. E2009-02065-SC-R11-CV, 2011 WL 5053138 (Tenn. Oct. 25, 2011), the Tennessee Supreme Court recently held that general contractors have an implied duty to perform services required by their contract with homeowners in a careful, skillful, diligent, and workmanlike manner. The Court further held that while the general contractors can delegate their responsibility to perform the work to independent contractors, they are nevertheless liable if the subcontractor fails to perform the work in the proper manner. The practical impact of this decision is that general contractors will experience greater difficulty shielding themselves from liability arising from shoddy work by subcontractors. The boon to insurance companies, as subrogee, and homeowners is that they now have an additional source of funds to recover losses. Link to Court’s Opinion
December 13, 2011
MATERIALMEN’S LIENS: The Tennessee Court of Appeals recently held in Tri Am Construction, Inc. v. J&V Development, Inc., No. E2010-01952-COA-R9-CV (Tenn. Ct. App. Aug. 30, 2011), that a failure to follow some of the technical requirements of Tennessee’s materialmen’s lien statute was not fatal to a lawsuit seeking to enforce that lien. Citing the recent revisions to the statute which incorporates a liberal construction standard, the court held that a failure to make the enforcement complaint sworn under oath was not a fatal defect, among other technical deficiencies. This decision continues the trend of lessening the strict construction of the lien requirements in construction cases. Link to Court’s Opinion
