Corporation and LLC law - Piercing the corporate veil under Tennessee Law.

Analysis:  The recent Tennessee Court of Appeals decision of Robert Thomas Edmunds v. Delta Partners, LLC, No. M2012-00047-COA-R3-CV, 2012 WL 6604580 (Tenn. Ct. App. December 18, 2012) discussed the concept of piercing the corporate veil under Tennessee law.  This case, in part, dealt with what is required to be established under Tennessee law in order to pierce the veil of a corporation.  In short, the doctrine of piercing the corporate veil allows, in certain circumstances, individual members or executives of a corporation (including an LLC - Limited Liability Company) to be personally responsible for the liabilities of the corporation.  This cased involved a dispute between an employer and a former employee over back pay (see detailed prior post on this same case on what constitutes an employment contract under Tennessee law). Edmunds at 1 - 3.  The employee was ultimately awarded damages by the trial court which were affirmed by the Appellate Court for back pay pursuant to an employment contract. Edmunds at 4 - 5. The plaintiff tried to hold the owner of the company personally responsible under the doctrine of “piercing the corporate veil”. 

The Tennessee Court of Appeals in this case discussed that a corporation is presumed to be a distinct legal entity that is separate from its members, shareholders, officers, as follows:

There is a presumption that a corporation is a distinct legal entity, wholly separate and apart from its shareholders, officers, directors, or affiliated corporations. In an appropriate case and in furtherance of the ends of justice, the separate identity of a corporation may be discarded and the individual or individuals owning all its stock and assets will be treated as identical to the corporation.  Discarding the fiction of the corporate entity, or piercing the corporate veil, is appropriate when the corporation is liable for a debt but is without funds to pay the debt, and the lack of funds is due to some misconduct on the part of the officers and directors.

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Employment Contract - When do documents between an employer and employee consist of an "employment contract" under Tennessee Law?

Analysis:  The Tennessee Court of Appeals recently discussed the important issue of when a document or series of documents should be considered an “employment contract” under Tennessee law in Robert Thomas Edmunds v. Delta Partners, LLC, No. M2012-00047-COA-R3-CV, 2012 WL 6604580 (Tenn. Ct. App. December 18, 2012).  In this case the employee received several documents from his employer about his employment with Delta, the employer.  These documents included both a non-disclosure agreement and a non-competition agreement, to which the employee agreed to and signed.  (Edmunds at 1).  These employment documents (that the employee and employer executed) included the following language:

In consideration of the performance of all services required by Delta [ ], the confidentiality provisions and covenant not-to-compete set forth herein, the Company [i.e. Delta] agrees to pay Employee [i.e. Mr. Edmunds] a salary outlined in the Employee Offer Letter. This initial salary and other benefits provided to Employee pursuant to the Offer Letter may, from time to time as agreed by Employee and Company, be modified.

It is of note that both the employer representative and the employee signed the documents as well as the offer letter identifying the $65,000.00 starting salary.  (Edmunds at 1).  A dispute eventually arose about the compensation the employee was owed after the employer informed the employee in 2006 that the employer could no longer afford to pay the employee.  (Edmunds at 1).  Despite this representation from the employer, the employee continued to work for the company "out of personal loyalty" for over two years despite the fact he was only sporadically paid by the employer.  (Edmunds at 1 - 3).  Eventually the employee resigned in the fall of 2008 and then brought suit against the employ...

Federal Sixth Circuit Court of Appeals - Reversal and timing statistics

This is a good article that I thought you might be interested in concerning reversal statistics for the US Court of Appeals for the Sixth Circuit.  This is from the Sixth Circuit Appellate Blog which is a great blog that keeps you up to date on cases and information pertaining to the Sixth Circuit Court of Appeals.  This information is essential for anyone practicing in Federal Court within the Sixth Circuit.

One interesting statistic is that 16% of the decisions appealed to the Sixth Circuit Court of Appeals were reversed on appeal.  This is higher then any Federal Circuit other then the D.C. Circuit Court of Appeals.  Also, it takes an average of 14.7 months for an appeal in the Sixth Circuit.

Statute of Limitations - In Tennessee can parties to an employment contract create a shorter length statute of limitations (six months) for a retaliatory discharge claim?

Brief Summary:  The recent Tennessee Court of Appeals decision of Karim Skaan v. Federal Express Corporation, No. 2011-01807-COA-R3-CV, 2012 WL 6212891 (Tenn. Ct. App. December 13, 2012) discussed whether parties can shorten a statute of limitations time period for a retaliatory discharge claim in an employment contract.  The pertinent facts for purposes of this post are that Federal Express hired Mr. Skaan in 1999 as an employee and in the employment paperwork Mr. Skaan signed an employment agreement.  Skaan at 1, 2.  Paragraph 15 of the employment agreement provided as follows:

To the extent the law allows an employee to bring legal action against Federal Express Corporation, I agree to bring that complaint within the time prescribed by law or 6 months from the date of the event forming the basis of my lawsuit, whichever expires first.

Skaan at 2.  As a result, the plain language of the employment agreement requires that any legal action against Federal Express Corporation by the employee must be filed within six months of the date of the event forming the basis of the lawsuit (or the time period could be even less than six months if the law provides).  Skaan at 2.  Mr. Skaan was terminated from his job by Federal Express.  He claimed he was terminated due to the filing of a workers compensation claim.  Skaan at 2.

Mr. Skaan did not file any claim against Federal Express until eight months after his termination from his employment.  Skaan at 2.  This case has lots of facts and interesting information pertaining to what evidence was presented on appeal however for our purpose the issue we are discussing in this post simply pertains to whether...

Construction Defect - Under Tennessee law what is required to establish a claim for intentional misrepresentation for a construction defect claim?

Analysis:  The recent Tennessee Court of Appeals decision of Brooke Buttrey v. Holloway's, Inc., No. M2011-01335-COA-R3-CV, 2012 WL 6451802 (Tenn. Ct. App. December 12, 2012) discussed the Tennessee tort of intentional misrepresentation in the context of a construction defect case.  In this case the trial court found there was ample evidence the home was not constructed in a workmanlike manner.  Buttrey at 5.  In fact the defendant did not even appeal this issue to the Tennessee Court of Appeals.  However, the defendant did appeal the trial court's ruling that the defendant was responsible for intentional misrepresentation under Tennessee law.

Under Tennessee law in order to establish a claim for fraudulent or intentional misrepresentation (these two torts have identical elements) the plaintiff must prove the following:

1) the defendant made a representation of an existing or past fact; 2) the representation was false when made; 3) the representation was in regard to a material fact; 4) the false representation was made either knowingly or without belief in its truth or recklessly; 5) the plaintiff reasonably relied on the misrepresented material fact; and 6) the plaintiff suffered damage as a result of the misrepresentation.

Buttrey at 5 (citing Walker v. Sunrise Pontiac – GMC Truck, 249 S.W.3d 301, 311 (Tenn. 2008)).  One of the alleged misrepresentations in this case was testified about by the plaintiff as follows:

Q: When you approached Mr. Holloway about building this home, did he make any representati...

Assisted Living Facility – Recent Tennessee Supreme Court decision discusses liability for failure to provide adequate staff by an assisted living facility.

Analysis:  The Tennessee Supreme Court recently decided a case pertaining to the liability of an assisted living facility's management company for failing to provide appropriate staff to the facility (Celebration Way facility).  Wilson v. Americare Systems, Inc., No. M2011-00240-SC-R11-CV, 2013 WL 658078 (Tenn. 2013).  At trial the jury found the management company (Americare Systems, Inc.) of an assisted living facility was negligent, causing the death of a resident, based on the fact it understaffed the facility.  Wilson at 1.  The resident of the facility, Mable Farrar, died from a perforated colon.  The testimony at trial showed that the assisted living facility failed to follow Ms. Farrar’s physician’s order to administer medicine for constipation.  Wilson at 1.  As a result of this failure to provide the prescribed medicine, Ms. Farrar became significantly constipated and her doctor therefore ordered the assisted living facility to give her three to four enemas a day.  Wilson at 1.  The assisted living facility only gave Ms. Farrar one enema on the first day after the order, none on the second day and one on the third day.  On the third day, after she received the enema, her colon perforated and she died.  Wilson at 1, 2.  The testimony at trial established she should not have been provided an enema by the facility nurse based on her physical status at that time.

Testimony at trial showed there were only two licensed nurses that worked at this facility.  Wilson at 7.  One of the nurses testified she was "always on call, twenty-four hours a day".  Wilson at 7.  The two licensed nurses had to cover a lot of shifts and were not paid overtime compensation because they were salaried employees.  Wilson at 7.  The nurses that worked at the facility as well as the regional operations director for the assisted living facility management company testified there were staffing problems at the facility.  There were numerous complaints from the staff at the facility requesting additional staffing in order to be able to provide adequate care for the residents.  Wilson at 6-8.  Despite these complaints, no additional staffing was provided to the facility.  Wilson at 7, 8

PART II (Seven year review) - What Tennessee jurisdictions were the most conservative or liberal for personal injury or death trials over the last seven years (July 1, 2005 – June 30, 2012)?

Every year the Tennessee Administrative Office of the Courts publishes the “Annual Report of the Tennessee Judiciary” to provide information on cases filed and decided in Tennessee.  I previously provided an article showing the percentage of trials in each Tennessee jurisdiction that resulted in damages (for personal injury or death cases) for fiscal year 2011-2012.  Based on the positive response to that article, I decided a longer term review was warranted to get more accurate numbers on how conservative or liberal a particular Tennessee jurisdiction is for trials involving personal injury cases.  The statistics in the below chart are for a seven year period from July 1, 2005 – June 30, 2012.  I will list the counties in order with the...

Tennessee Collateral Source Rule – Status of the pending proposed 2013 Tennessee legislation to abolish the collateral source rule in Tennessee.

The Tennessee legislature is considering many interesting pieces of legislation in the 2013 legislative session.  One bill that is of great interest to Tennessee attorneys as well as anyone handling Tennessee personal injury claims is SB 1184/HB 0978.  The bill is aptly named the “Phantom Damages Elimination Act”.  This bill would effectively abolish the collateral source rule in Tennessee. 

The collateral source rule prevents a defendant from introducing evidence that the injured plaintiff received payments from any other source to try to reduce or mitigate the damages sustained by the plaintiff.  The Tennessee Court of Appeals in Fye v. Kennedy, 991 S.W. 2d 754, 763 (Tenn. Ct. App. 1998) stated that:

An injured party's right to recover his or her “reasonable and necessary expenses” must be viewed in connection with the collateral source rule:

Normally, of course, in an action for damages in tort, the fact that the plaintiff has received payments from a collateral source, other than the defendant, is not admissible in evidence and does not reduce or mitigate the defendant's liability.

See also John Day’s detailed discussion of the collateral source rule on his blog for a more detailed discussion of the collateral source rule. 

Proposed SB 1184/HB 0978 would effectively eliminate the collateral source rule in Tennessee.  In fact, the language in the bill would only allow a plaintiff in a personal injury or wrongful death case to recover economic damages for medical and other costs of medical care for:

Settlement Agreement - In Tennessee can a party revoke a settlement agreement that was announced in open court before the final settlement order is entered?

Analysis:  The recent Tennessee Court of Appeals decision of Thomas Grigsby v. W. Arlen Harris, Sr., No. M2012-00370-COA-R3-CV, 2012 WL 6449782 (Tenn.Ct.App. December 12, 2012) discussed whether a party can withdraw a settlement agreement after it has been announced in open court.  This case involved a boundary line dispute between two parties.  Grigsby at 1.  On the morning of the trial, the parties announced in open court that they reached a settlement agreement resolving the boundary line dispute. Grigsby at 1.  The parties agreed to swap two pieces of property and a rough non-scale drawing was presented to the court at the hearing showing the parties agreement to the land swap. Grigsby at 1.  An order of the court was not entered at that time but rather the parties represented they were going to determine the exact terms of the swap based on a new survey that was to be completed and then the parties would submit a final order. Grigsby at 1, 2. 

After the hearing one of the parties decided they no longer wanted to submit to the terms of the settlement agreement.  They informed the court that they “misunderstood the amount of land that they were giving away and that land swap deprives them of their only means of access; to wit, the driveway, to their property” Grigsby at 2.  The trial court ultimately enforced the settlement agreement that was announced on the day of trial and entered an order approving the land swap.  Grigsby at 2, 3.

On appeal the Tennessee Court of Appeals found that Tennessee courts "now uniformly hold that if the terms of a settlement are announced to the court or memorialized in a signed, enforceable contract, a judgment may be entered thereon, even if one party later repudiates."  Grigsby at 4 (citing Continue Reading  

Do the Health Care Liability Action pre-suit notice requirements and tolling provisions found in T.C.A. § 29-26-122 apply to a GTLA (Governmental Tort Liability Act) case in Tennessee?

Brief Summary:  In a Tennessee GTLA Health Care Liability Action, the statute of limitations tolling provisions found in T.C.A. § 29-26-121 for the pre-suit notice requirements do not apply.  A Health Care Liability Action brought under the GTLA must therefore be filed within the one year statute of limitations with no tolling available under this statute.

Analysis:  In Betty Lou Lawing v. Greene County EMS, No. E2011-01201-COA-R9-CV, 2012 WL 6562155 (Tenn. Ct. App. December 17, 2012) the Tennessee Court of Appeals discussed the Health Care Liability Action (Medical Malpractice) pre-suit notice requirements and their applicability in a GTLA case (the Tennessee Governmental Tort Liability Act can be found in T.C.A. § 29-20-101 et seq.).  In the Lawing case there was an alleged medical malpractice event on July 8, 2009 that resulted in an injury.  Notice pursuant to T.C.A. § 29-26-121 was provided on July 2^nd, 2010, which was within the one year statute of limitations.  The lawsuit was then filed on October 27, 2010, outside of the one year statute of limitations but within the 120 day tolling provision contained in T.C.A. § 29-26-121 (the statute provides a 120 day extension of the one year statute of limitations when notice is provided to the opposing party within the one year statute of limitations).  The question, therefore, was whether the plaintiff could take advantage of the tolling provisions found in T.C.A. § 29-26-121 for this Health Care Liability Action brought under the GTLA.

The Tennessee Supreme Court has previously held that claims against governmental entities “must be brought in strict compliance with the GTLA, and that our courts have thus held that the savings statute as well as joinder provisions in the comparative fault statute do not operate to extend the statute of limitations in the GTLA because the legislature did not expressly provide that they would apply to claims under the GTLA”.  Lawing at 2 (citing Lynn v. City of Jackson, 63 S.W.3d 332 (Tenn. 2001); Daniel v. Hardin County General Hospital, 971 S.W.2d 21 (Tenn. Ct. App. 1997)) (Note that T.C.A. § 20-1-119 was amended by the legislature in 1999 after the Daniel decision to explicitly apply the comparative fault joinder provisions to GTLA cases – however it took a specific act of the Tennessee legislature to make this clear as required under the GTLA).

Protective Orders - What is a party required to establish in order to obtain a protective order under Tennessee Rule of Civil Procedure § 26.03?

Analysis:  Tennessee Rule of Civil Procedure § 26.03 allows a party to file a motion for a protective order preventing or limiting discovery that is requested by the opposing party under certain circumstances.  Rule 26.03 provides that the party requesting the protective order must show "good cause" and the specifically listed circumstances that allow a party to obtain a protective order include when "justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense."  Tennessee Rule of Civil Procedure § 26.03

Tennessee Rule of Civil Procedure § 26.03 provides a list of things the court can do in a protective order.  This list includes the following

(1) that the discovery not be had;

(2) that the discovery may be had only on specified terms and conditions, including a designation of the time or place;

(3) that the discovery may be had only by a method of discovery other than that selected by the party seeking discovery;

(4) that certain matters not be inquired into, or that the scope of the discovery be limited to certain matters;

(5) that discovery be conducted with no one present except persons designated by the court;

(6) that a deposition after being sealed be opened only by order of the court;

(7) that a trade secret or other confidential research, development, or commercial information not be disclosed or be disclosed only in a designated way;

(8) that the parties simultaneously file specified documents or information enclosed in sealed envelopes to be opened as directed by the court.

In Ballard v. Herzke, 924 S.W.2d 652 (Tenn. 1996) the Tennes...

Contract law - When is an individual liable as a personal guarantor for a company's lease contract obligations?

Analysis:  The recent Tennessee Court of Appeals decision of Creekside Partners v. Albert Nathan Scott, No. M2012-00623-COA-R3-CV, 2013 WL 139573 (Tenn. Ct. App. January 10, 2013) discussed the liability of an individual as a personal guarantor for a corporate tenants lease obligations.  This case comes on the heels of the recent Tennessee Supreme Court decision of 84 Lumber Co. v. Smith, 356 S.W.3d 380 (Tenn. 2011) which is a very important Tennessee case on this issue.  The Creekside case provides further explanation on how Tennessee courts will analyze this type of a situation following the 84 Lumber Co. decision.

In this case the individual in question, Albert Nathan Scott, signed the written contract as follows: