Tennessee Defense Litigation

2013 Tennessee Legislation – New requirements for healthcare providers to provide infant CPR information and instruction.

6/17/2013 9:40:40 AM

Analysis: The Tennessee legislature passed Public Chapter No. 197 which was signed into law by Governor Bill Haslam on April 23, 2013. Public Chapter No. 197 provides a new requirement for almost every kind of health care practitioner or health care facility that provides health care to prenatal patients or newborns. This bill requires these health care providers to provide infant CPR “information and instruction concerning the appropriate use and techniques of infant cardiopulmonary resuscitation (CPR).” TCA § 68-5-___ (the new bill did not designate a specific section for the statute but that will be done shortly). This new law goes into effect on July 1, 2013.

The information and instruction is required to be provided to one (1) parent or caregiver of the newborn infant. It is also important to point out that this new statute does not go as far as requiring classes in certification for infant CPR. The entire text of this new statute is as follows:

§68-5-____

(a) Hospitals, birthing centers, health care facilities, physicians, nurse practitioners, physician assistants or other health care practitioners who provide medical care to newborns as well as obstetricians who provide routine care for prenatal patients shall make available information and instruction concerning the appropriate use of techniques of infant cardiopulmonary resuscitation (CPR) to at least one (1) parent or caregiver of a newborn infant. Nothing in this section shall require classes in certification of infant CPR. This section shall also not constitute a requirement to be assessed during any inspection under Chapter 11, part 2 of this title.

(b) Any facility or practitioner acting within the scope of their licensure or practice shall be immune from any civil liability under this section and shall have an affirmative defense to any criminal liability arising from making such information available.

Obviously, this statute opens up the possibility of liability (including a potential negligence per se violation) should a healthcare provider fail to provide infant CPR instruction and information. If anything happens to a newborn child and CPR is not performed properly by the parents or caregiver because they do not know how to perform CPR, this statute opens up the health care providers to liability if they failed to comply with this statute. As a result, it is very important for all health care facilities and providers to have a specific requirement that this information and instruction be provided. This author recommends that this should be documented in writing with a signature of the family member or caregiver that was provided the appropriate information and instruction under the statute.

I have four young children and I know how difficult the checkout process already is after having a newborn infant as there are numerous documents that need to be signed and various representations that need to be made. However, if the hospital and medical care practitioner do not provide this information and instruction already, it must do so starting on July 1, 2013 even if it means a longer checkout process. It is my opinion the best practice is to have a signed document in writing in each patient file regarding specific compliance with this new statute. If this is not done and something happens to the child where proper CPR could have made a difference, then this statute provides a new avenue for liability of the practitioner or facility.

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Joint and Several Liability – New Tennessee Statute, T.C.A. § 29-11-107 abolishes joint and several liability in most circumstances in Tennessee.

6/10/2013 10:08:57 PM

Since Tennessee adopted the doctrine of comparative fault in McIntyre v. Balentine, 833 S.W.2d 52 (Tenn. 1992), the Tennessee Supreme Court has issued several opinions moving away from the general abolishment of joint and several liability. The Tennessee Supreme Court has created several exceptions to the general rule that joint and several liability does not apply under Tennessee’s comparative fault scheme. As a result of these exceptions created by the Court, the Tennessee legislature addressed this issue in the 2013 Tennessee legislative session. The Tennessee Legislature recently passed Public Chapter No. 317 which was signed into law by Governor Bill Haslam on April 29, 2013. It created T.C.A. § 29-11-107 which is in effect for all causes of action that accrue on or after July 1, 2013. The key language in this bill is subsection (a) which provides:

(a) If multiple defendants are found liable in a civil action governed by comparative fault, a defendant shall only be severally liable for the percentage of damages for which fault is attributed to such defendant by the trier of fact, and no defendant shall be held jointly liable for any damages.

As a result of this new bill, the Tennessee Legislature has codified the abolishment of joint and several liability in almost all circumstances in Tennessee. There are only two exceptions that remain. These exceptions are found in subsection (b) which provides:

(b) Notwithstanding subsection (a), the doctrine of joint and several liability remains in effect:

(1) To apportion financial responsibility in a civil conspiracy among two (2) or more at at-fault defendants who, each having the intent and knowledge of the other’s intent, accomplish by concert an unlawful purpose, or accomplish by concert a lawful purpose by unlawful means, which results in damage to the plaintiff, and

(2) Among manufacturers only in a product liability action as defined in § 29-28-102, but only if such action is based upon a theory of strict liability or breach of warranty. Nothing in this subsection (b) eliminates or affects the limitations on product liability actions found in §29-28-106.

As a result, the doctrine of joint and several liability will still apply to mandate complete financial responsibility of each member of a civil conspiracy under certain circumstances. Second, joint and several liability will still apply “among manufacturers only” in a product liability action as defined in T.C.A. § 29-28-102 for actions based on the theories of strict liability or breach of warranty (I will have a later blog post that addresses the impact of this change on products liability law in Tennessee – a separate post is needed to discuss this change in detail).

It is clear based on the plain language in the bill and the arguments made in the Tennessee House of Representatives by bill sponsor, Jeremy Durham (House member), that this bill is intended to overrule at least two important Tennessee Supreme Court decisions (you can watch the video of the Civil Justice Sub Committee hearing discussing the specific legislative intent of this statute). The first case this bill is intended to overrule is the Limbaugh v. Coffee Medical Center, 59 S.W.3d 73 (Tenn. 2001) decision. In Limbaugh, the Tennessee Supreme Court found that a negligent nursing home and the nursing home’s employee assistant (who was responsible for an intentional tort) were jointly and severally liable to the plaintiff. In that case, the nursing home was found to be negligent and the employee was found to be responsible for intentional acts. The Court found “that where the intentional actor and the negligent actor are both named defendants and each are found to be responsible for the plaintiff's injuries, then each defendant will be jointly and severally responsible for the plaintiff's total damages” … “where the intentional misconduct is the foreseeable risk created by the negligent defendant” Limbaugh at 87. As a result, comparative fault was basically eliminated in this circumstance. T.C.A. § 29-11-107 overrules the Limbaugh decision and would now make the negligent nursing home and the individual employee (who committed an intentional act) only responsible for their percentage of fault under normal Tennessee comparative fault principles.

The second Tennessee Supreme Court decision the new T.C.A. § 29-11-107 overrules is Resolution Trust Corp. v. Adeolph Block, 924 S.W.2d 354 (Tenn. 1996) which found joint and several liability was appropriate among officers and directors of a corporation in an action for collective breach of fiduciary duty. The Block decision allowed an entire group of officers or directors to be jointly and severally responsible for the breach of fiduciary duty (thus each one would be 100% liable for any damages). T.C.A. § 29-11-107 overrules the Block decision and makes each officer or director only responsible for their respective fault under Tennessee comparative fault principles (unless the case came within exception (b)(1) discussed above).

It is important to note that the Turner v. Jordan, 957 S.W.2d 815 (1997) Tennessee Supreme Court decision was not substantively discussed in the legislative discussion of the bill. The Turner case was factually similar to the Limbaugh decision in some ways except that the intentional tortfeasor was a patient of the facility and was not a party to the case. However, the Limbaugh decision is built upon the foundation of Turner v. Jordan and this new statute should also effectively overrule the Turner v. Jordan decision based on the plain language of the statute and the application of comparative fault principles. Subsection (d) of the statute provides some language that indicates to me that Turner v. Jordan is effectively overruled when it states that “Nothing in this section limits the liability of the trier of fact to allocate fault to a nonparty to the suit … Allocations of fault to nonparties shall be used only to determine the liability of named parties.” The totality of the language in this statute therefore indicates to me that the Turner v. Jordan case has been effectively overruled by this legislative change in addition to the clearly overruled Limbaugh decision.

The entire new statute found in Public Chapter 317 (listed as T.C.A. § 29-11-107), is as follows:

(b) Notwithstanding subsection (a), the doctrine of joint and several liability remains in effect:

(2) Among manufacturers only in a product liability action as defined in § 29- 28-102, but only if such action is based upon a theory of strict liability or breach of warranty. Nothing in this subsection (b) eliminates or affects the limitations on product liability actions found in §29-28-106.

(d) Nothing in this section limits the liability of the trier of fact to allocate fault to a nonparty to the suit, including, but not limited to, an immune third party or a settling party, person, or entity. Allocations of fault to nonparties shall be used only to determine the liability of named parties and shall not subject nonparties to liability in the action in which the allocation occurred or in any other action.

(e) Nothing in this section eliminates or diminishes:

(1) The filing of cross-claims or counterclaims against any party or third party under Tennessee Rules of Civil Procedure 13 and 14;

(2) The assertion by a party of rights to contribution or indemnity;

(3) The assertion by a party of comparative fault under Tennessee Rule of Civil Procedure 8.03;

(4) The doctrine of superseding and independent intervening cause; or

(5) Any defenses or immunities that exist as of the effective date of this act.

(f) This section shall not prevent parties from entering into a legally enforceable contract that allocates fault in a civil action among the parties to the contract.

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Waiver and Release of Liability – Is a waiver and release of liability document signed by a participant in a motorcycle safety training course enforceable under Tennessee law?

6/3/2013 10:31:55 AM

Brief Summary: A waiver and release of liability document signed by a participant in a motorcycle safety training course is enforceable and binding on the plaintiff. The plaintiff’s claim was therefore barred by the executed waiver and the plaintiff could therefore not bring a claim for negligence against the motorcycle safety and training course company.

I apologize for the length of this post. However, this is an important issue and I want to give you a complete picture of the opinion.

Analysis: The Tennessee Court of Appeals in Ruth M. Maxwell v. Motorcycle Safety Foundation, Inc., No. M2012-000699-COA-R3-CV, 2013 WL 357600 (Tenn. Ct. App. January 29, 2013) discussed the enforceability of a waiver and release of liability agreement signed prior to the injury in question. In this case, the plaintiff desired to learn how to ride a motor scooter. Maxwell at 1. As a result, she took a motor scooter safety class with the defendant in order to learn how to safely operate a motor scooter. Maxwell at 1. This course was a three-day basic rider beginner course. The course is not required to obtain a motorcycle endorsement or driver’s license, however upon proof of completion the Tennessee Department of Motor Vehicles waives the written and riding exams ordinarily required for a motorcycle endorsement on the license. Maxwell at 1.

Before the course began the plaintiff was required to read and sign a “waiver of release of liability”. This waiver document stated as follows:

READ CAREFULLY WAIVER OF RELEASE OF LIABILITY

In Consideration of MID TENN MOTORCYCLE EDUCATION CENTER furnishing service and/or equipment to enable me to participate in the Motorcycle Rider Education Class, I agree as follows:

I fully understand and acknowledge that: (a) risks and dangers exist in my use of motorcycles and motorcycle equipment and my participation in the Motorcycle Rider Education Class activities; (b) my participation in such activities and/or use of such equipment may result in injury or illness include, but not limited to bodily injury, disease, strains, fracture, partial and/or total paralysis, death or other ailments that could cause serious disability; (c) these risks and dangers may be caused by the negligence of the owners, employees, officers or agents of MID TENN MOTORCYCLE EDUCATION CENTER, the negligence of the participants, the negligence of others, accidents, breaches of contract, from foreseeable or unforeseeable causes; and (d) by my participation in these activities and/or use of equipment, I hereby assume all risks and dangers and all responsibility for any losses and/or damages, whether caused in whole or in part by the negligence or conduct of the owners, agents, officers, or employees of the MID TENN MOTORCYCLE EDUCATION CENTER or by any other person.

I on behalf of myself, my personal representatives and my heirs hereby voluntarily agree to release, waive, discharge, hold harmless, defendant and indemnify MID TENN MOTORCYCLE EDUCATION CENTER and its owners, agents, officers and employees from any and all claims, suits or causes of action for bodily injury, property damage, wrongful death, loss of services or otherwise which may arise out of my use of motorcycles and motorcycle equipment or my participation in the Motorcycle Rider Education Class activities. I specifically understand that I am releasing, discharging and waiving my claims of actions that I may have presently or in the future for the negligent acts or other conduct by MID TENN MOTORCYCLE EDUCATION CENTER and its owners, agents, officers or employees.

I HAVE READ THE ABOVE WAIVER OF RELEASE AND BY SIGNING IT AGREE IT IS MY INTENTION TO EXEMPT AND RELIEVE MID TENN MOTORCYCLE EDUCATION CENTER FROM LIABILITY FOR PERSONAL INJURY, PROPERTY DAMAGE OR WRONGFUL DEATH CAUSED BY NEGLIGENCE OR ANY OTHER CAUSE.

Maxwell at 1, 2. This documents basically waives any liability for any risks or dangers that could occur in the motorcycle training course. This waiver is effective even if the risks or dangers are caused by the negligence of the defendant.

The plaintiff completed several initial portions of the safety course. Maxwell at 2. However, when it came time to operate the motorcycle by completing several laps, the plaintiff ran off the track into a parked pickup truck and sustained significant injuries. Maxwell at 3. The plaintiff filed suit against the defendant Motorcycle Safety Course, among others. The defendants filed motions for summary judgment asserting the plaintiff’s negligence claims were barred by the waiver agreement she signed. Maxwell at 3. The trial court awarded summary judgment based on the executed release and that decision was appealed to the Tennessee Court of Appeals. Maxwell at 3.

The main issue before the Tennessee Court of Appeals was therefore whether the executed waiver was enforceable. Tennessee Court of Appeals noted “it is well-settled law in Tennessee that, subject to certain exceptions, parties may contract that one shall not be liable for his negligence to another.” Maxwell at 4. (citing Olson v. Molzen, 558 S.W.2d 429, 430 (Tenn. 1977)). The Tennessee Supreme Court has recognized that exceptions to the general rule favoring exculpatory agreements can be appropriate due to the fact “certain relationships required greater responsibility which would render such a release obnoxious.” (Olson at 430).

The Tennessee Supreme Court in Olson adopted six factors for courts to consider when determining whether an exculpatory agreement violates public policy. These factors are as follows:

(a.) It concerns a business of a type generally thought suitable for public regulation.

(b.) The party seeking exculpation is engaged in performing a service of great importance to the public, which is often a matter of practical necessity for some members of the public.

(c.) The party holds himself out as willing to perform this service for any member of the public who seeks it, or at least for any member coming within certain established standards.

(d.) As a result of the essential nature of the service, in the economic setting of the transaction, the party invoking exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks his services.

(e.) In exercising a superior bargaining power the party confronts the public with a standardized adhesion contract of exculpation, and makes no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence.

(f.) Finally, as a result of the transaction, the person or property of the purchase is placed under the control of the seller, subject to the risk of carelessness by the seller or his agents.

Olson at 431. In Maxwell, the court found that Ms. Maxwell’s situation does not fit within the exceptions to the general rule that exculpatory clauses are acceptable under Tennessee law. In fact, the Maxwell court found her case was very different from the exceptions that have been created in prior cases that prohibited the exculpatory clause. One such exception involves an exculpatory clauses signed by a patient as a condition of receiving medical treatment. Olson at 431. Another example is an exculpatory clause in a home inspector’s contract due to the reasoning that “the purchase of a home is, perhaps, the largest investment an average person will make and therefore such inspections are of great importance to the public and a matter of practical necessity for most members of the public.” Carey v. Merritt, 148 S.W.3d 912, 916 (Tenn. Ct. App. 2004).

The court further noted that the facts in Maxwell are actually similar to other cases where exculpatory agreements have been upheld in Tennessee. Maxwell at 5. One such case involved a waiver and release by a white water rafting company. Henderson v. Quest Expeditions, Inc., 174 S.W.3d 730, 733 (Tenn. Ct. App. 2005). Another case where an exculpatory clause was upheld in Tennessee, involved a motor speedway racing situation. Tompkins v. Helton, 2003 WL 21356420, at *1 (Tenn. Ct. App. June 12, 2003).

As a result, the Tennessee Court of Appeals found the exculpatory clause in the Maxwell case involving a motorcycle safety course did not violate Tennessee Public Policy. They found this situation was most similar to the cases involving white water rafting or attending a motor speedway race. Additionally, the court noted this conclusion was further bolstered by the fact the Tennessee Department of Safety actually requires that participants in any motorcycle rider education program such as the one involved here must have a “release, waiver, and indemnification form supplied by the Department.” Tenn. Comp. R. & Regs 1340-1-11-.06(5)(e). Maxwell at 6.

As a result, the release and waiver form executed by the plaintiff was upheld and the claim against the motorcycle safety class was therefore barred. This case shows there is a certain class of situations in Tennessee where a release and waiver of claims that is signed by participants will be found valid. The outer limits of the acceptability of such clauses are not known because it is a case by case determination. However, clearly white water rafting activity, motor speedway racing events and participation in motorcycle training courses are all examples where exculpatory clauses have been upheld. As a result, businesses that perform services in any similar areas should use releases and waivers of liability for participants in the activity.

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Tennessee Appeals – Tennessee Interlocutory and Extraordinary appeals in fiscal year 2011 – 2012.

5/28/2013 9:19:37 AM

Every year the Tennessee Administrative Office of the Courts publishes the “Annual Report of the Tennessee Judiciary” to provide, in part, information on appellate cases in Tennessee (this report also provides comprehensive statistics on the trial courts in Tennessee). The fiscal year, 2011 - 2012 (July 1, 2011 – June 30, 2012), report is the most recent report that has been released and it provides fascinating details about all aspects of Tennessee litigation. This post will concentrate on some statistical information on interlocutory (Rule 9) and extraordinary (Rule 10) Appeals in Tennessee. I cannot cover everything in this post so I recommend you review the full report if you have the opportunity. It is 339 pages long so there is a lot of good statistical information.

Interlocutory Appeal by Permission of the Trial Court:

Under Tennessee Rule of Appellate Procedure 9, parties have the ability to pursue an interlocutory appeal by permission from the trial court. An interlocutory appeal is an appeal in a case before the entire case is final. Under Rule 9, a party must file a motion seeking an interlocutory appeal within 30 days “after the date of entry of the order appealed from.” If the trial court grants this motion, a party is not guaranteed to be heard by the appellate court. Rule 9 provides that if the trial court grants the motion, then an application for permission to appeal must be filed with the appellate clerk within 10 days of the trial court order. Then, “the appellate court may thereupon in its discretion allow an appeal from the order.” If the intermediate appellate court denies the application for permission to appeal, then a “Application for Permission to Appeal from Denial of Rule 9 Application” can be filed with the Tennessee Supreme Court.

In the 2011 – 2012 fiscal year, a total of 116 applications for Rule 9 and Rule 10 (see below) appeals were decided by the intermediate appellate courts (Rule 9 and 10 application statistics at the intermediate appellate level are not separated). Only 27 were granted. As a result the success rate on Rule 9 and 10 appeals to the intermediate appellate court was approximately 23%.

Appeals to the Tennessee Supreme Court for the appellate court’s denial of a Rule 9 appeal application resulted in a total of four Rule 9 applications granted by the Tennessee Supreme Court. A total of 20 Rule 9 applications were denied by the Tennessee Supreme Court. As a result, the success rate on Rule 9 applications to the Tennessee Supreme Court was approximately 17%.

Extraordinary Appeal by Permission of the Appellate Court

Under Tennessee Rule of Appellate Procedure 10, parties have the ability to file an application with the appellate court for an extraordinary appeal. This type of appeal is allowed according to the Tennessee appellate rules in the following circumstances:

(1) if the lower court has so far departed from the accepted and usual course of judicial proceedings as to require immediate review, or (2) if necessary for complete determination of the action on appeal as otherwise provided in these rules.

This type of appeal is often used if the trial court does not allow an interlocutory appeal under Rule 9 as discussed above. In the 2011 – 2012 fiscal year, a total of 116 applications for Rule 9 (see above) and Rule 10 appeals were decided by the intermediate appellate courts (Rule 9 and 10 motion statistics at the intermediate appellate level are not separated). Only 27 were granted. As a result the success rate on Rule 9 and 10 appeals to the intermediate appellate court was approximately 23%.

Appeals to the Tennessee Supreme Court for the appellate court’s denial of a Rule 10 appeal application resulted in a total of three Rule 10 applications granted by the Tennessee Supreme Court. A total of 30 Rule 10 applications were denied by the Tennessee Supreme Court. As a result, the success rate on Rule 10 applications to the Tennessee Supreme Court was approximately 9%.

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

5/20/2013 9:10:34 AM

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.

In those circumstances, courts may pierce the corporate veil to find the “true owners of the entity” liable, or “to impose liability against a controlling shareholder who has used the corporate entity to avoid his legal obligations.” Our courts will disregard the corporation as a separate entity upon a showing that the corporation is a sham or dummy or such action is necessary to accomplish justice.

(citations omitted) Edmunds at 11. The Tennessee Court of Appeals discussed the fact the doctrine of piercing the corporate veil applies equally to situations involving a LLC (Limited Liability Company) as well as a corporation. In this case, the employer was a limited liability company, not a corporation, and the court found as follows:

As a general rule, members, owners, employees or other agents of a Tennessee limited liability company have no personal liability for the debts or obligations of the company. See Tenn.Code Ann. § 48–217–101(a)(1); Tenn.Code Ann. § 48–249–114(a)(1)(B). Under an equitable remedy known as “piercing the corporate veil,” however, “the separate legal entity of a corporation may be disregarded upon a showing that it is a sham or a dummy or where necessary to accomplish justice.” Despite the inapplicability of the remedy's name, the “corporate veil” of a Tennessee limited liability company may also be pierced, utilizing the same standards.

(citations omitted). The court went on to the note that the doctrine of piercing the corporate veil should only be applied in "extreme circumstances to prevent the use of a corporate entity to defraud or perform illegal acts”. Edmunds at 12. (citing Pamperin v. Streamline Mfg., Inc., 276 S.W.3d 428, 437 (Tenn. Ct. App. 2008). The Tennessee Supreme Court had set forth three elements required to pierce the corporate veil as between a parent corporation and a subsidiary. These three elements are as follows:

1) The parent corporation, at the time of the transaction complained of, exercises complete dominion over its subsidiary, not only of finances, but of policy and business practice in respect to the transaction under attack, so that the corporate entity, as to that transaction, had no separate mind, will or existence of its own.

2) Such control must have been used to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty, or a dishonest and unjust act in contravention of third parties' rights.

3) The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.

Edmunds at 12. (citing Continental Bankers Life Ins. Co. of the South v. The Bank of Alamo, 578 S.W.2d 625 (Tenn. 1979). In a subsequent decision the Tennessee Court of Appeals Tennessee Racquetball Investors, Ltd., v. Bell, 709 S.W.2d 617 (Tenn. Ct. App. 1986) recognized that these three elements are also required to hold an individual owner of the corporation or LLC liable for the debts of the corporation under the alter ego theory. Edmunds at 12.

There is a list of factors that Tennessee courts use to determine whether to pierce the corporation veil. These were originally set forth in Federal Deposit Ins. Corp. v. Allen, 584 F. Supp. 386 (E.D. Tenn. 1984) and the factors are as follows:

Factors to be considered in determining whether to disregard the corporate veil include not only whether the entity has been used to work a fraud or injustice in contravention of public policy, but also: (1) whether there was a failure to collect paid in capital; (2) whether the corporation was grossly undercapitalized; (3) the nonissuance of stock certificates; (4) the sole ownership of stock by one individual; (5) the use of the same office or business location; (6) the employment of the same employees or attorneys; (7) the use of the corporation as an instrumentality or business conduit for an individual or another corporation; (8) the diversion of corporate assets by or to a stockholder or other entity to the detriment of creditors, or the manipulation of assets and liabilities in another; (9) the use of the corporation as a subterfuge in illegal transactions; (10) the formation and use of the corporation to transfer to it the existing liability of another person or entity; and (11) the failure to maintain arms length relationships among related entities.

Numerous Tennessee Courts of Appeals decisions have cited to these factors and they are often referred to as the "Allen factors". See Edmunds at 13. No specific factor is conclusive but rather the courts are allowed to rely upon a combination of factors to decide the issue. Edmunds at 13.

Ultimately, this case provided an excellent summary and review of the Tennessee cases on the doctrine of piercing the corporate veil and a claim to hold an individual member of a corporation or LLC personally liable for the debts of the company. In this case the court found it was not appropriate to pierce the corporate veil. This is a lengthy opinion and if you have any case or situation involving an attempt to hold an individual owner or member of a corporation or LLC personally liable, then this case should be reviewed in great detail. However, for purposes of this post, the facts and discussion in this case is too lengthy to recite but I recommend you review it carefully if you are handling any type of case involving this situation.

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

5/6/2013 10:26:26 PM

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 employer for breach of the employment contract (among other things).

The trial court awarded significant breach of contract damages for pay owed under the "employment contract" that existed based on the employment documentation. (Edmunds at 4). As a result, one of the key issues on appeal was whether there was, in fact, an employment agreement. The Appellate Court noted that Tennessee follows the "at-will employment doctrine” which basically means that "employment contracts of indefinite duration are terminable at the will of the employer or employee for any or no cause." (Edmunds at 7) (citing Guy v. Mutual of Omaha Ins. Co., 79 S.W.3d 528, 534-535 (Tenn. 2002)). The Appellate Court, however, found there was an employment contract in this case because of several supporting factors. One was the employment document was signed by both the employer representative and the employee. (Edmunds at 6). Additionally, there were non-disclosure and non-competition requirements for the employee and the agreement spelled out the specific duties of the employee. (Edmunds at 6). Additionally, one of the document refers to itself as an “agreement.” The court therefore found that because "an agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law" is an enforceable contract under Tennessee law, the terms of the relationship between the parties in this case consisted of employment contract. (Edmunds at 6).

The employer, however, argued that because the contract was for an indefinite term that the employer could terminate the contract at its sole discretion at any time and therefore the employee had no enforceable right to recover compensation as he was promised under the contract. (Edmunds at 6). The real problem in this case for the employer, however, was the employer never actually terminated the employee's employment. (Edmunds at 6). There was a conversation at least two years prior to the employee's resignation where the employer informed the employee that it did not have money to pay the employee, however, the employer continued to accept the employee's services and he continued to work there for multiple years prior to resigning from the position. (Edmunds at 6, 7). During the time the employee continued to work without payment the employer’s owner told the employee that he would catch him up on "back pay" and would pay him for the entirety of his work and make everything right in the end. (Edmunds at 7). The Appellate Court therefore the employee remained an employee until his resignation in October of 2008 and therefore was entitled to pay during the entire time he worked pursuant to the employment contract. (Edmunds at 7, 8).

This case is important because it shows how crucial it is for an employer to make it very clear what its intentions are for an employee at the beginning or end of employment. Based on my reading of this case it appears there were a lot of "employment" documents exchanged and signed by the parties that did not properly clarify whether or not there was an employment contract between the employer and employee. Additionally, the employer never made it clear when it informed the employee that the employer could no longer pay the employee, whether the employee was no longer employed by the employer as a result. The parties then moved forward after this “no pay” conversation and the employee continued to work for the employer for over 2 years. As a result of these facts, in the end the employee was found to be under an employment contract and therefore was owed pay for the entire length of the employment contract until the employee's resignation. Employers should be made aware of this case because it shows what can happen when there is a fuzzy, poorly defined employer – employee relationship. Generally employment documents are going to be construed in favor of the employee so Tennessee employers must be very careful in properly defining the employer – employee relationship at the beginning and the end of the relationship.

This case actually reminds me of one of my favorite Seinfeld episodes. In that episode Kramer is fired from a job where he was never really hired by the employer to work there in the first place. The short clip of the key scene in this Seinfeld episode can be viewed here. The key lines at the end of the scene when Kramer is terminated from a job where he was working, but was never actually hired, are as follows:

Boss – “I am sorry, there is just no way we can keep you on.”

Kramer – “I don't even really work here.”

Boss – “That's what makes this so difficult.”

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Federal Sixth Circuit Court of Appeals - Reversal and timing statistics

5/2/2013 12:17:18 PM

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.

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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?

4/29/2013 9:44:16 AM

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 the modification of the statute of limitations for retaliatory discharge to a six months statute of limitations was acceptable under Tennessee law. The Tennessee Court of Appeals noted that:

It is well established that a contractual provision setting a time limitation for bringing a legal action arising out of that contract is not inherently unconscionable. The United States Supreme Court has explained: “[A] provision in a contract may validly limit, between the parties, the time for bringing an action on such contract to a period less than that prescribed in the general statute of limitations, provided that the shorter period itself shall be a reasonable period.” Order of United Commercial Travelers of Am. v. Wolfe, 331 U.S. 586, 608 (1947); Harris v. Provident Life and Accident Ins. Co., No. E2007–00157–COAR3–CV, 2008 WL 1901110, at *9 (Tenn.Ct.App. Apr. 30, 2008) (stating that “[p]arties are free ... to contract for a shorter [limitation] period, unless a statute specifically forbids them from doing so”).

FedEx cites several cases specifically holding that a contractual six-month time limitation for filing a lawsuit is reasonable. Myers v. Western–Southern Life Ins. Co., 849 F.2d 259, 262 (6th Cir.1988) (holding that “[t]here is nothing inherently unreasonable about a six-month limitations period”); see Thurman v. DaimlerChrysler, Inc., 397 F.3d 352, 357 (6th Cir.2004) (same); AMOCO Canada Petroleum Co. v. Lakehead Pipe Line Co., 618 F.2d 504, 506 (8th Cir.1980) (stating that “courts almost invariably uphold contractual limitation periods of six months or more”). Indeed, this Court has held that a contractual limitation period of less than six months is enforceable. See Morgan v. Town of Tellico Plains, No. E2001–02733–COA–R3–CV, 2002 WL 31429084, at *5 (Tenn.Ct.App. Oct. 30, 2002) (upholding a 60–day contractual limitation period).

The Tennessee Court of Appeals therefore found the six month limitation period found in the employment agreement was enforceable and the retaliatory discharge claim was barred on this basis. This case provides a good summary of authority in Tennessee and other jurisdictions that allow parties to a contract to reduce the statute of limitations time period for disputes that may arise from the agreement. This is an important consideration when drafting or reviewing a contract. If the statute of limitations time period is reduced by the contract, it will be considered enforceable as long as the time period is reasonable. In Tennessee a six month contractual statute of limitations will almost always (if not always) be deemed enforceable.

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

4/22/2013 8:53:32 AM

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 representations to you about his abilities in terms of being a builder?

A: He made himself seem very competent with decades of experience, if I remember correctly, about building in Michigan and several years and several houses. If that's experience, then yes.

Buttrey at 6. Despite the reliance on this testimony to support the intentional misrepresentation claim, the plaintiff did not introduce any evidence showing the defendant did not in fact have decades of experience nor did the plaintiff establish he did not build houses in Michigan. Buttrey at 6. As a result, essential elements of the claim were not established by the plaintiff (specifically that the representation was false).

Further, the plaintiff claimed the defendant misrepresented the workmanship in constructing the house. However, the court found these representations were, “essentially the same as the warranty in the contract, those representations related to future acts or conduct. They did not constitute representations of an existing or past fact.” Buttrey at 6. Therefore for these specific alleged misrepresentations the plaintiff failed to prove all of the essential elements for an intentional misrepresentation claim (specifically the requirement that the misrepresentation be about an existing or past fact). Buttrey at 6.

Finally, the plaintiff asserted the defendant made statements that the plaintiff was being “picky” when the defendant actually knew the house had defects. Also, the defendant “knew the house was partially supported” by an insufficient foundation and did not disclose that to the plaintiff. Buttrey at 6. The court however found that “we can find no evidence that these particular representations, even if false when made and made knowingly, caused Ms. Buttrey to suffer any damages as a result of her reliance on the alleged misrepresentations themselves, as distinguished from damages arising from the poor workmanship itself.” Buttrey at 6. For this reason, these alleged misrepresentations failed to support a claim for intentional misrepresentation under Tennessee law (plaintiff did not prove the essential element of this tort that damage resulted from the misrepresentation).

As a result, the Tennessee Court of Appeals found that the representations by the defendant did not constitute “intentional misrepresentations” because the plaintiff failed to prove all the essential elements for her claim for intentional misrepresentation. This case shows that in the construction defect context there are good defenses to a claim for intentional misrepresentation especially because of the overlap between that claim and the other claims that are normally brought in a construction defect situation.

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

4/11/2013 4:04:04 PM

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.

The plaintiff filed a claim against the nurse who administered the enemas, the director of nursing, the owner of the facility, the operator of the assisted facility, as well as against the company that had contracted to provide management services for the Celebration Way facility (the management company was Americare Systems, Inc.). Ultimately, the jury awarded the plaintiffs compensatory damages totaling $300,000.00. The jury also found punitive damages were appropriate and awarded punitive damages totaling $10,000.00 and $5,000.00 against two of the nurses who were named defendants. They also awarded punitive damages against the management company totaling $5,000,000.00. The case was appealed and the Tennessee Court of Appeals reversed the jury verdict and found there was no material evidence that the staffing deficiencies proximately caused Ms. Farrar's death. Wilson at 1.

The Tennessee Supreme Court reversed the Tennessee Court of Appeals decision and found the plaintiffs presented material evidence supporting the conclusion that the lack of adequate staffing led to a deviation from the applicable standard of care. Wilson at 8. The trial court (Judge F. Lee Russell) ruled from the bench that as a matter of law there were 21 acts or omissions that constituted a breach of the standard of care. Wilson at 8. The next question therefore was whether the lack of adequate staffing caused the deviation in the standard of care. This would allow the claim against the assisted living facility to be successful. The court found "it is a matter of reason and common sense within the jury's fact-finding province to infer that, in an employment setting, if there is too much work required of too few employees, either the work will not get done or the quality of the work will be diminished." Wilson at 8. The court went on to cite several out-of-state opinions that held juries could decide that understaffing problems can provide a basis for a successful claim against an assisted living facility. Wilson at 8.

At the end of the day the Tennessee Supreme Court found the staffing inadequacies at the facility could be relied upon by the jury to make a determination that the wrongful death of Ms. Farrar was caused by the management company. Ultimately, the overwhelming evidence of understaffing at this facility combined with the trial court's finding on the violation of the standard of care supported the jury verdict. This case shows how important it is to properly staff assisted living facilities. If there are complaints about staffing, the facility or management company should investigate and address the complaints in a satisfactory manner as soon as possible.

Punitive Damages Issue:

There is one other interesting side note in this case that is worth addressing. The Tennessee Supreme Court did not address the punitive damage award of $5 million dollars against the management company. The Tennessee Supreme Court did not address this issue because the Court of Appeals did not consider it on appeal because they found no award was appropriate against the management company. As a result, the appeal was sent back to the Tennessee Court of Appeals "for review of the award of punitive damages against Americare".

It will be interesting to see how the Court of Appeals handles this issue because the punitive damages award of $5,000,000.00 is a multiplier of 16.67 times the compensatory damages awarded ($300,000.00) in this case. Under Tennessee Supreme Court and United States Supreme Court precedent, this punitive damages award will likely be significantly reduced.

The Tennessee Supreme Court decision of Flax v. Daimler Chrysler Corp., 272 S.W.3d 521 (Tenn. 2008) discussed the significant United States Supreme Court decision of State Farm v. Campbell, 123 S. Ct. 1513 (2003). In the Flax case, the jury awarded punitive damages that were in a 1 to 5.35 ratio when compared with the compensatory damages. The Tennessee Supreme Court discussed the various guideposts for punitive damage awards in the State Farm decision:

The ratio between these two awards is 1 to 5.35. This ratio is not clearly impermissible because it does not exceed a single digit ratio. See Campbell, 538 U.S. at 425, 123 S.Ct. 1513. There is, however, some doubt as to the propriety of a ratio of 1 to 5.35 because the United States Supreme Court has suggested that a ratio of more than 1 to 4 approaches the outer limits of constitutionality. Id.; Gore, 517 U.S. at 581, 116 S.Ct. 1589. The Court has also suggested that a ratio of 1 to 1 may be all that is permissible in cases where compensatory damages are “substantial.” See Campbell, 538 U.S. at 425, 123 S.Ct. 1513. None of these ratios, however, present “rigid benchmarks,” and the United States Supreme Court has thus far declined to adopt any fixed mathematical formula to determine the appropriateness of punitive damages. Id. Instead, the Court has held that “[t]he precise award in any case, of course, must be based upon the facts and circumstances of the defendant's conduct and the harm to the plaintiff.”

(emphasis added) Flax at p. 539. As a result, once the ratio reaches 4 to 1, a court should take a critical look at the appropriateness of the punitive damages award under the Due Process Clause. Under the State Farm case, ratios greater then 9 to 1 are almost always unconstitutional. See prior post on this issue for more information.

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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)?

4/10/2013 12:55:01 AM

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 most conservative at the beginning of the list (and the most liberal at the bottom of the list) by percentage of personal injury or death trials where damages were awarded:

District and County	Cases Tried	Cases Awarded Damages	Percentage of cases awarded damages
District 29 (Dyer, Lake)	14	0	0
District 25 (Fayette, Hardeman, Lauderdale, McNairy, Tipton)	62	8	12.9
District 23 (Cheatham, Dickson, Houston, Humphreys, Stewart)	24	4	16.7
District 8 (Campbell, Claiborne, Fentress, Scott, Union)	198	34	17.1
District 15 (Jackson, Macon, Smith, Trousdale, Wilson)	61	11	18
District 28 (Crockett, Gibson, Haywood)	11	2	18.2
District 17 (Bedford, Lincoln, Marshall, Moore)	45	9	20
District 21 (Hickman, Lewis, Perry, Williamson)	121	29	23.9
District 2 (Sullivan)	56	14	25
District 12 (Bledsoe, Franklin, Grundy, Marion, Rhea, Sequatchie)	84	22	26.2
District 24 (Benton, Carroll, Decatur, Hardin, Henry)	65	19	29.2
District 1 (Carter, Johnson, Unicoi, Washington)	101	30	29.7
District 27 (Obion, Weakley)	13	4	30.8
District 5 (Blount)	42	13	30.9
District 10 (Bradley, McMinn, Monroe, Polk)	170	54	31.7
District 18 (Sumner)	96	34	35.4
District 4 (Cocke, Grainger, Jefferson Sevier)	114	41	35.9
District 9 (Loudon, Meigs, Morgan, Roane)	64	23	35.9
District 16 (Cannon, Rutherford)	136	49	36
District 11 (Hamilton)	324	117	36.1
District 3 (Greene, Hamblen, Hancock, Hawkins)	78	29	37.2
District 13 (Clay, Cumberland, Dekalb, Overton, Pickett, Putnam, White)	215	88	40.9
District 31 (Van Buren, Warren)	28	12	42.9
District 6 (Knox)	389	165	45
District 7 (Anderson)	122	63	51.6
District 30 (Shelby)	495	268	54.1
District 19 (Montgomery, Robertson)	115	67	58.3
District 22 (Giles, Lawrence, Maury, Wayne)	53	31	58.4
District 26 (Chester, Henderson, Madison)	132	80	60.6
District 20 (Davidson)	470	296	62.9
District 14 (Coffee)	44	28	63.6

The prior post on these same statistics for the 2011-2012 fiscal year showed that Shelby County was the most liberal of the large jurisdictions with 63.3% of trials resulting in damage awards. Davidson County had a rate of 52.2% of trials resulting in damage awards. Knox and Hamilton counties, expectedly, showed up as the most conservative of the large Tennessee jurisdictions where 37.7% and 35.7% of trials resulted in a damages award. Interestingly, a seven year look at the numbers changes the order and Davidson County becomes the most liberal of the large jurisdictions for this time period. A total of 62.9% of personal injury or death trials in Davidson County resulted in damage awards. Shelby County showed a rate of 54.1% in the seven year review. Knox County was next on the list with 45% of trials resulting in damage awards. Hamilton County had the lowest percentage for the large counties with 36.1% of trials resulting in damage awards.

Using these statistics, the award for the most liberal jurisdiction over the last seven years goes to Coffee County with a rate of 63.6% (something must be in the coffee in that county – sorry, I could not resist). The award for the most conservative jurisdiction goes to District 29 (Dyer and Lake Counties) with a rate of 0%! Dyer and Lake Counties have a very small sample size so an honorable mention award goes to District 25 (Fayette, Hardeman, Lauderdale, McNairy, Tipton Counties) with a 12.9% rate even with 62 trials.

I hope this information is helpful to allow you to better assess likely verdicts in Tennessee. Let me know if you have any suggestions for other statistical studies on Tennessee jurisdictions. There is a lot of information provided in the annual reports of the Tennessee Administrative Office of the Courts. It is simply a matter of drilling down into the information to make it more usable.

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

4/4/2013 12:49:02 AM

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:

(1) The amount actually paid by or on behalf of the claimant;

(2) Any amount necessary to cover unpaid medical expenses;

(3) Any amount necessary to satisfy future medical charges.

Remember, in Tennessee Health Care Liability actions (Medical Malpractice cases), the collateral source rule was eliminated by statute with T.C.A. § 29-26-119 a long time ago. As a result, there is a precedent for this kind of action.

The actual text of the pending proposed bill, as filed, is as follows:

SECTION 1. Tennessee Code Annotated, Title 29, Chapter 39, Part 1, is amended by adding a new section as follows:

29-39-105.

(a) In any civil action for personal injury or wrongful death to recover economic damages in which liability is admitted or established, the economic damages that may be recovered by a claimant for medical and other costs of health care shall only include:

(1) Any amount paid by or on behalf of the claimant;

(2) Any amount necessary to satisfy unpaid charges for medical and other costs of health care that have been incurred but not yet satisfied by or on behalf of the claimant; and

(3) Any amount necessary to satisfy future medical charges proven by expert testimony.

(b) This section shall not be construed to increase the amount of or type of damages recoverable under state law.

(d) This section is in addition to, and does not otherwise affect, any other limitation on damages under state law.

This bill was debated and discussed multiple times in the 2013 Tennessee legislative session. However ultimately, the Senate Judiciary Committee decided to establish a study committee to further discuss and study the impact of this bill over the summer and fall of 2013. The bill will be brought back in 2014 pursuant to the request of Senator Jim Tracy, who sponsored the bill in the Senate, with the approval of the Judiciary Committee. It will be interesting to see what the study committee recommends for this bill. I expect this to be a hotly debated and contested bill in the 2014 legislative session.

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

4/1/2013 8:51:01 AM

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 In re Estate of Creswell, 238 S.W.3d 263, 268 (Tenn.Ct.App. 2007)). The fact the settlement agreement in this case was expressly stated in open court with a verbatim transcript made of the announcement supported the enforceability of the settlement agreement. Grigsby at 4. Also, the fact there was a rough boundary line sketch that was made an exhibit at the open court settlement announcement further supported the sufficiency of the settlement agreement. Grigsby at 4. As a result, the Tennessee Court of Appeals stated “we find no error with the entry of judgment based upon the above facts, notwithstanding Plaintiffs' repudiation of the settlement agreement prior to entry of the judgment.” Grigsby at 4. The settlement agreement was therefore found to be enforceable.

This case shows how important it can be to put specific settlement terms on the record, if possible, and the situation is appropriate. If you are at a deposition, a motion hearing or at trial and the case settles based on a verbal agreement, you should try to put the agreement details on the record, if possible. I recently had a case where in the middle of the deposition of the plaintiff, he decided to settle the case. We therefore put a brief statement on the record about the settlement when we returned from a break in the deposition. Later, I had difficulty with obtaining a final release because of a disagreement about some common release terms that are found in most settlement agreements (we did not specify that these terms would be part of the release at the time of the settlement announcement). When the dispute arose I wished I had been more specific about the settlement terms in the settlement announcement we made at the deposition. In the end we worked it out but I learned a valuable lesson that there are times where greater specificity is better when making a settlement announcement in a deposition or at a hearing in open court. I think the Grigsby case supports this further.

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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?

3/24/2013 10:21:35 PM

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).

As a result, in the Lawing case the Tennessee Court of Appeals found that the tolling provisions within T.C.A. § 29-26-121 for Health Care Liability Actions (medical malpractice cause of actions) do not apply to extend the statute of limitations beyond one year. This is because the Tennessee legislature did not expressly state that T.C.A. § 29-26-121 applied to GTLA cases. The court also interestingly went on to also state that the notice provisions contained within T.C.A. § 29-26-121 do not apply to GTLA claims. The court specifically stated that, "we follow the rationale and holdings in Nance, Goodman and Daniel, and hold that the tolling provision does not apply and neither does the notice provisions contained in Tenn. Code Ann. § 29–26–121." Under this reasoning, apparently the notice provisions found in T.C.A. § 29-26-121 where the potential defendant must be provided notice by the plaintiff 60 days prior to suit, does not apply in a GTLA case.

This is an important decision to review and consider carefully if you handle any Health Care Liability Action case brought under the GTLA. GTLA claims have strict compliance requirements and there is a real risk of missing the requirements unless you carefully analyze the statutes and case law for GTLA claims. Further, the holding in the Lawing case that the notice requirements found in T.C.A. § 29-21-121 do not apply to GTLA claims, is a scary holding to rely upon, at best. It was basically dicta added at the end of the opinion. The case was not about whether notice to the defendant was provided prior to the one year statute of limitations, it clearly was. As of this time, this dicta holding is only found in an unreported Tennessee Court of Appeals decision and I would not want to rely upon this holding to guide any decision to not provide pre-suit notice to the defendant under T.C.A. § 29-26-121 for a GTLA Health Care Liability Action. It would keep me up at night to rely on this part of the opinion because there is certainly a chance for reversal by the Tennessee Supreme Court or even disagreement by another Tennessee Court of Appeals decision.

Follow me on Twitter at @jasonalee for updates from the Tennessee Defense Litigation site.

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

3/18/2013 9:20:55 AM

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 Tennessee Supreme Court discussed Rule 26.03 and provided a balancing test for assessing when a protective order is appropriate. In order to establish the good cause requirement of Rule 26.03 “the moving party must show that disclosure will result in a clearly defined injury to the party seeking disclosure. Broad allegations of harm, unsubstantiated by specific examples or articulated reasoning, do not amount to a showing of good cause.” Ballard at 658 (citing Cipollone v. Liggett Group, Inc., 785 F.2d 1108, 1121 (3d Cir.1986)).

The Tennessee Supreme Court went on to provide a balancing test in order to determine whether good cause was found. This balancing test is as follows:

Factors in the balance weighing against a finding of good cause include: (1) the party benefitting from the protective order is a public entity or official; (2) the information sought to be sealed relates to a matter of public concern; and (3) the information sought to be sealed is relevant to other litigation and sharing it would promote fairness and efficiency.

On the other hand, factors in the balance weighing in favor of a finding of good cause include: (1) the litigation involves private litigants; (2) the litigation concerns matters of private concern or of little legitimate public interest; and (3) disclosure would result in serious embarrassment or other specific harm.

Ballard at 658, 659. The court noted that no specific weight is assigned to any of the six elements for or against a finding of good cause for a protective order. Ultimately, the appropriateness of a protective order in a particular case is "entrusted to the sound discretion of the trial court and it will not be reversed on appeal, absent a showing of abusive discretion." Ballard at 659.

Ultimately, a protective order can be a very useful tool in Tennessee civil litigation but there are specific requirements to establish when a protective order is appropriate. Tennessee litigators should consult Rule 26.03 and the Ballard decision whenever they are going to file a motion for protective order or are in the process of opposing such a motion. This most often occurs when a client requests that certain documents should be protected from disclosure outside of the case or even in the case to the opposing party.

Follow me on Twitter at @jasonalee for updates from the Tennessee Defense Litigation site.

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

3/11/2013 11:20:50 PM

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:

IN WITNESS WHEREOF, the undersigned Tenant, Landlord, and Guarantors have executed this Lease the day and year first above written.

ADDRESS:	LANDLORD:
C/O NAI Nashville	Creekside Partners, LLC
300 Broadway	By:	/s/
Nashville, TN 37201	Name:	Nathaniel Greene
	Its:	Chief Manager
	Date:	October 1, 2007
ADDRESS:	TENANT:
	NTS Enterprises, Inc.
1213 Kathy's Trail	By:	/s/
Chatt., TN 37919	Name:	A. Nathan Scott
	Its:	President
	Date:	Sept. 28, 2007

Additionally, Article 32 of the lease provided as follows:

Article 32. Guarantors.

In consideration of the letting of the Premises, the sum of TEN DOLLARS ($10.00) and other good and valuable consideration, receipt of which is hereby acknowledged, the undersigned Albert Nathan Scott, does hereby guarantee and become primarily liable as a co-Tenant(s) do(es) hereby promise and agree to pay unto the Landlord, its successors and assigns, such sum or sums of money as will be sufficient to make up such deficiency and fully satisfy the conditions of this Lease; however, said co-Tenant(s) called upon to perform under this Article shall, upon satisfaction of such default, at this option, be entitled to assume the position of the defaulting Tenant hereunder and shall thereafter enjoy all of the rights and privileges of the original Tenant hereunder.

The plaintiff therefore asserted that these two portions of the executed lease (his signature and Article 32) caused Mr. Scott to be an individual guarantor of the lease. As a result, when the corporate tenant, NTS Enterprises, Inc. defaulted on the lease, Mr. Scott became personally liable for the lease obligations according to the plaintiff. The Tennessee Supreme Court stated in the 84 Lumbar decision that “in most cases, a representative who signs a contract is not personally bound to the contract. A representative who signs a contract may be personally bound, however, when the clear intent of the contract is to bind the representative." Creekside Partners at 3 (citing 84 Lumber Co. at 382, 383). As a result, the court analyzed the specific terms in the contract.

The court in the Creekside Partners case first analyzed the actual signature section of the contract. The court noted that the only signature provided by Mr. Scott is addressed under the corporate entity name, "NTS Enterprises, Inc." and right after the name it says "by." Creekside Partners at 3, 4. Immediately below his name it says "Its: President". The court found that this structure and language in the signature part of the lease shows Mr. Scott was not signing as a personal guarantor but only in his representative capacity. Creekside Partners at 3, 4.

The court then looked at the "Article 32. Guarantors" section of the lease (see above full quotation). The court pointed out the language in Article 32 was the same size and text as the rest of the contract. Creekside Partners at 5. In the 84 Lumber Co. case, similar language was actually typed in all capital letters and was set off from the rest of the text. Creekside Partners at 5. Additionally, in the Creekside Partners case the court found ambiguity in the "Article 32. Guarantors" section. This section purports to make Mr. Scott a personal guarantor however throughout the rest of the lease there are several sections which identify only NTS as a tenant, not Mr. Scott. The court found this was an ambiguity in the lease. Additionally, Mr. Scott’s name is only listed in relation to the words “guarantee” or “co-tenant” in one line of text out of 1,267 lines of text in the lease.

As a result, based on all of the language in the lease agreement, the court found this case was distinguishable from the 84 Lumber Co. case and that the lease "does not show a clear intent that Mr. Scott was contracting as an individual guarantor of NTS's obligations". Creekside Partners at 5.

This is an important personal guarantee contract interpretation case. The actual language and the form of the language in the personal guarantee agreement is very important. First, if you are trying to make an individual a personal guarantor of a contract, they should sign the document expressly as a personal guarantor in addition to simply signing on behalf of the corporate entity. Additionally, if there is guarantor language within the lease it would be helpful to have it in all caps, bold, and set off in a different font from the rest of the text in the agreement. Further, it is very important to make sure the document is internally consistent and there are no ambiguities found in the contract. This case shows a good defense can be presented against a poorly or even unclearly drafted personal guarantee agreement.

Follow me on Twitter at @jasonalee for updates from the Tennessee Defense Litigation site.

What Tennessee jurisdictions were the most conservative for personal injury or death trials in fiscal year 2011-2012?

3/4/2013 5:34:42 PM

Every year the Tennessee Administrative Office of the Courts publishes the “Annual Report of the Tennessee Judiciary” to provide information on cases filed and/or decided in Tennessee. The fiscal year 2011-2012 report covers all cases from July 1, 2011 through June 30, 2012 and was recently released. Part of this report specifically deals with personal injury and death cases and whether damages were awarded at trial.

One question I am often asked is how conservative a jurisdiction is for personal injury or death cases. Below is a table of information I compiled from the report for fiscal year 2011-2012 showing statistics on damages and tort cases involving personal injury or death in Tennessee. This chart shows the cases that went to trial (jury trial and non-jury trial) and how many of those cases resulted in damage awards. I will list the counties in order with the most conservative at the beginning of the list by percentage of cases where damages were awarded:

District	Cases going to Trial	Cases Awarded Damages	Percent of cases- damages awarded
District 8 (Campbell, Claiborne, Fentress, Scott, Union)	39	0	0%
District 25 (Fayette, Hardeman, Lauderdale, McNairy, Tipton)	6	0	0%
District 17 (Bedford, Lincoln, Marshall, Moore)	3	0	0%
District 23 (Cheatham, Dickson, Houston, Humphreys, Stewart)	3	0	0%
District 27 (Obion, Weakley)	3	0	0%
District 29 (Dyer, Lake)	2	0	0%
District 28 (Crockett, Gibson, Haywood)	0	0	0%
District 10 (Bradley, McMinn, Monroe, Polk)	21	1	4.8%
District 24 (Benton, Carroll, Decatur, Hardin, Henry)	5	1	20%
District 21 (Hickman, Lewis, Perry, Williamson)	4	1	25%
District 31 (Van Buren, Warren)	4	1	25%
District 13 (Clay, Cumberland, Dekalb, Overton, Pickett, Putnam, White)	39	10	25.6%
District 16 (Cannon, Rutherford)	23	6	26%
District 3 (Greene, Hamblen, Hancock, Hawkins)	7	2	28.5%
District 19 (Montgomery, Robertson)	14	4	28.6%
District 12 (Bledsoe, Franklin, Grundy, Marion, Rhea, Sequatchie)	12	4	33.3%
District 18 (Sumner)	9	3	33.3%
District 2 (Sullivan)	6	2	33.3%
District 11 (Hamilton)	42	15	35.7%
District 6 (Knox)	45	17	37.7%
District 15 (Jackson, Macon, Smith, Trousdale, Wilson)	5	2	40%
District 1 (Carter, Johnson, Unicoi, Washington)	9	4	44%
District 4 (Cocke, Grainger, Jefferson Sevier)	15	7	46.6%
District 5 (Blount)	6	3	50%
District 7 (Anderson)	25	13	52%
District 20 (Davidson)	69	35	52.2%
District 14 (Coffee)	7	4	57.1%
District 30 (Shelby)	79	50	63.3%
District 26 (Chester, Henderson, Madison)	17	11	64.7%
District 22 (Giles, Lawrence, Maury, Wayne)	6	4	66.7%
District 9 (Loudon, Meigs, Morgan, Roane)	5	4	80%

Obviously, some of the statistics are not very reliable to provide an accurate depiction of how conservative or liberal a particular jurisdiction is because of the low number of cases that actually went to trial. However, this gives a good general statistical picture for each Tennessee district. Some standouts include the largest jurisdictions in Tennessee. Not surprisingly Shelby County was the most liberal of the large jurisdictions with 63.3% of cases resulting in damage awards. Davidson County Tennessee had a rate of 52.2% of cases resulting in damage awards. Knox and Hamilton counties, expectedly, showed up as the most conservative of the large Tennessee jurisdictions where 37.7% and 35.7% of cases resulted in a damages award.

Another interesting note concerns District 8 which includes Campbell, Claiborne, Fentress, Scott and Union counties. In these counties there were a total of 39 trials involving personal injury or death. A total of 0 of these cases resulted in a damages award!

A total of 37 Tennessee counties had no trials involving personal injury or death in the 2011-2012 fiscal year. A total of 47 counties did not have any jury trials in this same time period. That means that in almost half of the counties in Tennessee there were no jury trials (there are 95 counties in the State of Tennessee).

For the entire State of Tennessee there were a total of 204 cases where damages were awarded at trial. Out of these, a total of 158 of them had an award between $1.00 and $99,999.99. Twenty-Nine of these cases resulted in awards in the range of $100,000.00 to $999,999.99. Seventeen of these cases resulted in awards of $1,000,000.00 or greater.

Follow me on Twitter at @jasonalee for updates from the Tennessee Defense Litigation site.

Under Tennessee law does a trial court have discretion to refuse to award attorney's fees to the prevailing party that are provided for in a contract between the parties?

2/27/2013 12:28:44 AM

Brief Summary: The trial court does not have discretion to refuse to award attorney’s fees that are to be paid by the “non-prevailing” party as provided for in a contract between the parties.

Analysis: The Tennessee Court of Appeals in Gatlinburg Roadhouse Investors, LLC v. Charlynn Maxwell Porter, No. E2011-02743-COA-R3-CV, 2012 WL 6643809 (Tenn. Ct. App. December 20, 2012) recently decided a breach of contract case between two parties. The contract in question had a provision requiring that the “non prevailing” party of any litigation pertaining to the contract pay the attorney's fees of the prevailing party. The specific language of this term in the contract was:

The non-prevailing party shall pay all reasonable costs and expenses, including attorneys' fees and court costs, that shall be made or incurred by the prevailing party in enforcing the terms and conditions of this Lease.

Gatlinburg at 10. In this case the trial court refused to award attorney's fees that were required in the party's contract. The trial court specifically stated on the record that:

I will not award attorney fees rightly or wrongly from a legal perspective. I will not award attorney's fees. The problem here is you had all sort of ambiguity, and the ambiguity in the Interest Purchase Agreement and the amendment to the sublease, you had the original ambiguity about the sale of the restaurant which I held is an ambiguity. That's what I think, so you are going to enforce the terms of a document, you are going to award attorney fees for enforcement in terms of a document that's so ambiguous that each side in my opinion had a reasonable basis for their argument of what the terms of the lease was. So I don't think it's appropriate to award attorney’s fees, and therefore I do not.

Gatlinburg at 11. The Tennessee Court of Appeals disagreed with the trial court and found that Tennessee law clearly allows the parties to contract for attorney's fees as an element of damages. Gatlinburg at 11. Additionally, case law in Tennessee provides that "a trial court does not have discretion to refuse to consider the provision of a contract awarding reasonable attorney's fees. However, the determination of the amount of reasonable attorney's fees is within the trial court's discretion." Gatlinburg at 11.

In this case, however, the Tennessee Court of Appeals found the trial court did not exercise appropriate discretion in not awarding attorney's fees. The court specifically found:

Here, the lease provided for the non-prevailing party to pay the attorney's fees incurred by the prevailing party in enforcing the terms and conditions of this lease. Although the Trial Court's reasoning in denying Ms. Porter's request for attorneys' fees is appealing, and was an attempt at fairness, the law is otherwise. As a consequence, this Court remands to the Trial Court with instructions to set reasonable attorney's fees for Ms. Porter.

Gatlinburg at 11. As a result, even in a case where there are great ambiguities in a contract or there are valid and sympathetic reasons for a trial court to not award attorney's fees, if the contract requires attorney's fees to be provided to a prevailing party then the trial court must grant those fees. There is no discretion provided to the trial court in this circumstance. The trial court does, however, have discretion to make a determination on what attorney's fees are reasonable and therefore there is some latitude for the trial court on this issue.

Comparative fault – Under Tennessee law can a plaintiff sue an entity outside of the statute of limitations when a defendant names that entity as a potential at-fault party in discovery responses?

2/19/2013 12:17:07 PM

Brief Summary: The identification of a potential non-party tortfeasor by a defendant in discovery responses (as opposed to in an answer) is not sufficient to trigger the extension of the statute of limitations that is allowed under T.C.A. § 20-1-119 for assertions of comparative fault.

Analysis: The Tennessee Court of Appeals recently decided an interesting case involving T.C.A. § 20-1-119 and its application in the context of discovery responses. The Tennessee Court of Appeals decision of Rev. J.M. Shaffer v. Memphis Airport Authority et. al., No. W2012-00237-COA-R9-CV, 2013 WL 209309 (Tenn. Ct. App. January 18, 2013) discussed whether the ninety day statutory period, (under T.C.A. § 20-1-119) that allows a plaintiff to bring in a new defendant outside of the statute of limitations, was triggered when a defendant answered discovery identifying a potential tortfeasor. Normally this statute is used when a defendant asserts comparative fault in an answer to the complaint outside of the statute of limitation time period for the cause of action.

In this case, the plaintiff was allegedly injured in a slip and fall on April 29, 2009. Shaffer at 1. One year later on April 29, 2010, Shaffer filed a lawsuit in Circuit Court. Shaffer at 1. The defendant filed an answer to the complaint on September 1, 2010 and asserted comparative fault against "other parties or non-parties" without identifying them by name. Shaffer at 1,2. On February 25, 2011, the defendant provided discovery responses identifying a potential third-party that was responsible under Tennessee comparative fault principles. Shaffer at 2. On May 4, 2011, 245 days after the defendant filed the answer, the plaintiff filed an amended complaint against this newly identified entity. Shaffer at 2. This new defendant filed a motion to dismiss citing the applicable one year statute of limitation and the assertion that T.C.A. § 20-1-119 did not apply to extend the statute of limitation in this circumstance based on the plain language in the statute.

T.C.A. § 20-1-119 is a very important statute under Tennessee law when dealing with any comparative fault assertion against an entity that is not named in the original complaint. It basically allows the plaintiff to file a complaint against an entity outside of the statute of limitations when a defendant in an answer or amended answer asserts comparative fault against a non-party. The plaintiff has ninety days to file an amended complaint to assert fault against the newly identified tortfeasor when comparative fault is first asserted. The full text of the part of T.C.A. § 20-1-119 that deals with this issue is as follows:

(a) In civil actions where comparative fault is or becomes an issue, if a defendant named in an original complaint initiating a suit filed within the applicable statute of limitations, or named in an amended complaint filed within the applicable statute of limitations, alleges in an answer or amended answer to the original or amended complaint that a person not a party to the suit caused or contributed to the injury or damage for which the plaintiff seeks recovery, and if the plaintiff's cause or causes of action against that person would be barred by any applicable statute of limitations but for the operation of this section, the plaintiff may, within ninety (90) days of the filing of the first answer or first amended answer alleging that person's fault, either:

(1) Amend the complaint to add the person as a defendant pursuant to Tenn. R. Civ. P. 15 and cause process to be issued for that person; or …

The issue in the Shaffer case was the defendant did not file an answer or amended answer that asserted fault against the entity that was brought in as a party. There was an assertion of fault in the first answer, however, the alleged tortfeasor was not named. Later, the defendant named the tortfeasor in response to written discovery and sixty-five days later the plaintiff filed an amended complaint against this newly identified individual. The question therefore was whether T.C.A. § 20-1-119 allowed the plaintiff to bring suit against this newly identified potential tortfeasor because otherwise the one year statute of limitations would bar the claim.

The Tennessee Court of Appeals found that the plain language of the statute requires that a defendant allege in an "answer or amended answer" the identity of the previously unknown tortfeasor in order for T.C.A. § 20-1-119 to extend the statute of limitations. The court specifically found a "discovery response simply is not the same thing as an answer." Shaffer at 7. As a result, the court held that "we must conclude that Section 20-1-119 is not applicable under the facts of this case, and Shaffer has not met her burden of establishing that her claim against SMS is excepted from the statute of limitations under Section 20-1-119." Shaffer at 7. As a result, the plaintiff's claim against this entity was dismissed.

One question I have in this case is when this case is remanded back to the trial court for further consideration, what happens if the current defendant files a motion to amend the answer to properly assert comparative fault against this entity (as opposed to simply doing so in the discovery responses)? Does this assertion of comparative fault at this late date trigger T.C.A. § 20-1-119 and allow the plaintiff to simply file an amended complaint to get around the statute of limitations? The plain language of the statute does not say anything about the time within which the defendant is required to make an assertion of comparative fault in an answer. However, it is possible the trial judge could deny a motion to amend because it is so late. I will try to keep an eye on this case to see what happens on remand to the trial court.

Summary Judgment – In Tennessee the trial court must appropriately state the legal grounds for summary judgment in the order

2/13/2013 5:48:19 PM

Analysis: The Tennessee Court of Appeals in the recent decision of Mary C. Smith v. UHS of Lakeside, Inc., No. W2011-02405-COA-R3-CV, 2013 WL 210250 (Tenn. Ct. App. January 18, 2013) discussed the requirement that a trial court state the legal grounds for summary judgment in the order. Specifically, Tennessee Rule of Civil Procedure 56.04 provides as follows:

The motion shall be served at least thirty (30) days before the time fixed for the hearing. The adverse party may serve and file opposing affidavits not later than five days before the hearing. Subject to the moving party’s compliance with Rule 56.03, the judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. The trial court shall state the legal grounds upon which the court denies or grants the motion, which shall be included in the order reflecting the court’s ruling. A summary judgment, interlocutory in character, may be rendered on the issue of liability alone although there is a genuine issue as to the amount of damages.

In the Smith case, the trial court granted a motion for summary judgment and requested the defendant's attorney to prepare the order discussing the basis and support for the granting of the motion for summary judgment. Smith at 6 - 8. In fact, the trial court judge made the following comments on the record:

Now the appellate court is going to want a rationale from our rulings, so in the case of agency I'm going to let the, on the ones for which you were successful, I'm going to let you make proposed [orders].... As far as a basis for the ruling, I'm going to let you make those.

Smith at 6. These comments were directed at counsel for the defendant. The court then entered the proposed orders drafted by counsel for the defendant over the objections of the plaintiff. Smith at 6. The plaintiff therefore appealed the rulings of the court and asserted the court did not comply with Tennessee Rule of Civil Procedure 56.04. The Tennessee Court of Appeals discussed prior cases on this issue and found:

Thus, party-prepared orders are appropriate so long as: (1) the trial court does not require counsel to prepare the orders; (2) the trial court carefully reviews the orders to ensure that the conclusions reliably reflect the court's opinion; (3) the orders dispose of all relevant issues; and (4) no matters not a proper part of the determination are included.

Smith at 9. The Appellate Court therefore found that the trial court acted improperly under Tennessee Rule of Civil Procedure 56.04 because it directed one of the attorneys to draft the order. Additionally, the trial court asked that attorney to "establish the rationale for the trial court's decision." Smith at 6 and 10.

This is an important case because if you are counsel in a case where you are successful on a motion for summary judgment then it is important for you make sure the court complies with its Rule 56.04 duties for the order. This case is clear that although it may be very appealing to have the trial court order the victorious counsel to draft the order describing the reasons, basis and rationale for the granting of motion for summary judgment, that this situation may not actually comply with Tennessee Rule of Civil Procedure 56.04 and it could be subject to reversal on appeal. It is better for counsel to ensure the court complies with Tennessee Rule of Civil Procedure 56.04 so reversal is not likely. Reversal will only increase the cost of litigation and the length the case will be pending.

Subrogation - Is an employer entitled to a subrogation lien for the cost of future medical benefits for an injured employee?

2/8/2013 12:30:07 PM

Brief Summary: An employer’s subrogation lien found in T.C.A. § 50-6-112 for benefits paid in a workers compensation case does not include future medical benefits for the employee.

Analysis: The Tennessee Supreme Court recently reconsidered whether an employer was entitled to a subrogation lien for the cost of future medical benefits for an employee in the decision of Joshua Cooper v. Logistics Insight Corp., No. M2010-01262-SC-R11-CV, 2013 WL 163976 (Tenn. 2013). This case specifically dealt with the scope of the employers subrogation rights found in T.C.A. § 50-6-112. It appears the reason the Tennessee Supreme Court took this case (despite having handed down prior decisions on this issue) was because the Tennessee Court of Appeals held that future medical expenses in this case were not too speculative as a matter of law and therefore could possibly be included in the employer's subrogation lien. Joshua Cooper v. Logistics Insight Corp., No. M2010-01262-COA-R3-CV, 2011 WL 1874577, at *4, *5 (Tenn. Ct. App. May 16, 2011).

The statute in question is T.C.A. § 50-6-112(c) which addresses an employer's subrogation rights for workers compensation benefits. The pertinent part of the statute provides as follows:

(c)(1) In the event of a recovery against the third person by the worker, or by those to whom the worker's right of action survives, by judgment, settlement or otherwise, and the employer's maximum liability for workers' compensation under this chapter has been fully or partially paid and discharged, the employer shall have a subrogation lien against the recovery, and the employer may intervene in any action to protect and enforce the lien.

(2) In the event the net recovery by the worker, or by those to whom the worker's right of action survives, exceeds the amount paid by the employer, and the employer has not, at the time, paid and discharged the employer's full maximum liability for workers' compensation under this chapter, the employer shall be entitled to a credit on the employer's future liability, as it accrues, to the extent the net recovery collected exceeds the amount paid by the employer.

(3) In the event the worker, or those to whom the worker's right of action survives, effects a recovery, and collection of that recovery, from the other person, by judgment, settlement or otherwise, without intervention by the employer, the employer shall nevertheless be entitled to a credit on the employer's future liability for workers' compensation, as it accrues under this chapter, to the extent of the net recovery.

As a result, in this case the Tennessee Supreme Court addressed "whether Tennessee Code Annotated § 50-6-112 grants an employer a subrogation lien for the cost of future medical expenses against the proceeds of an employee's lawsuit against a third-party tortfeasor." The court noted the Tennessee Supreme Court had previously ruled on this issue in Hickman v. Cont'l Banking Co., 143 S.W.3d 72 (Tenn. 2004) and Graves v. Cocke County, 24 S.W.3d 285 (Tenn. 2000) and "in both of these cases we held that the credit on the employer's future liability does not include future medical expenses." Cooper at 5.

In Cooper the Tennessee Supreme Court reviewed the Graves and Hickman decisions and found there was no compelling reason to reverse the reasoning in those two cases especially because the legislature had not made any changes to the law since those decisions came out. As a result, the court found that the employer's “subrogation lien against the proceeds of the settlement with the defendants in the chancery court action does not extend to the cost of future medical benefits to which Mr. Cooper may be entitled." Cooper at 6.

Tennessee Consumer Protection Act - Does the Tennessee Consumer Protection Act apply to claims derived from deceptive conduct in foreclosure proceedings?

2/1/2013 12:40:49 PM

Brief Summary: The Tennessee Consumer Protection Act (also “TCPA”) does not provide the basis for a claim under the TCPA for deceptive conduct in a foreclosure proceeding.

Analysis: The Tennessee Court of Appeals in David Paczko v. SunTrust Mortgages, Inc., No. M2011-02528-COA-R3-CV, 2012 WL 4450896 (Tenn. Ct. App. September 25, 2012) discussed whether allegedly deceptive foreclosure conduct can form the basis for a Tennessee Consumer Protection Act claim. In this case the plaintiff alleged claims against SunTrust Mortgage, Inc. for instituting a foreclosure against the plaintiffs with knowledge that they did not have any rights, titles, or interest in the property in question. Paczko at 2.

The trial court dismissed plaintiff's Tennessee Consumer Protection Act claim for failure to state a claim upon which relief can be granted under Tennessee Rule of Civil Procedure 12.02(6). The Tennessee Court of Appeals affirmed this decision and found the Tennessee Consumer Protection Act "does not apply to allegedly deceptive conduct in foreclosure proceedings." Paczko at 2. (citing Gibson v. Mortgage Elec. Registration Sys., Inc., 2011 WL 3608538 at *5 (W.D. Tenn. August 16, 2011)).

The court relied upon the reasoning in the Tennessee Supreme Court's decision in Pursell v. First American National Bank, 937 S.W.2d 838 (Tenn. 1996) to support this decision. In that case the Tennessee Supreme Court found:

The TCPA did not create a cause of action for deceptive repossession procedures because the actions of a bank and its agent in carrying out a repossession “did not affect the ‘advertising, offering for sale, lease or rental, or distribution of any goods, services, or property, tangible or intangible, real, personal, or mixed, and other articles, commodities, or things of value wherever situated.

In the Pursell decision the Tennessee Supreme Court also noted that "the Tennessee Consumer Protection Act does not extend to every action of every business in the State of Tennessee." Pursell, 937 S.W.2d at 941. The Tennessee Court of Appeals in this case therefore dismissed the cause of action for a Tennessee Consumer Protection Act derived from alleged deceptive conduct in the foreclosure proceeding.

Tennessee Consumer Protection Act claims are often alleged in cases that do not have a TCPA violation. When evaluating a TCPA case from a defense perspective, it is important to determine if the claim has merit under the specific provisions of the TCPA. This is especially important now that the Tennessee tort reform bill of 2011 eliminated the “catch all” provision previously found in the Tennessee Consumer Protection Act which was commonly used to stretch the TCPA as far as possible (The Tennessee Consumer Protection Act is found in T.C.A. § 47-18-101 – T.C.A. § 47-18-130). See my prior blog post on this subject for more information.

Evidence - In Tennessee when does the "cancellation rule" apply to exclude testimony of a witness who provided inconsistent testimony?

1/29/2013 10:21:43 AM

Brief Summary: The “cancellation rule” is a narrow rule and only applies to bar inconsistent testimony of a witness in limited circumstances. The rule can exclude the testimony of a witness when the testimony is clearly contradictory (is not open to different interpretations or explanation) and there is no corroborating evidence for either version of the testimony.

Analysis: The recent Tennessee Court of Appeals decision of Norman Hill v. Danny Tapia, Jr., No. M2012-00221-COA-R3-CV, 2012 WL 6697308 (Tenn. Ct. App. December 21, 2012) discussed when the "cancellation rule" applies to bar testimony from a physician who provided inconsistent testimony. This issue came up because one party contended that the entirety of a physician's testimony should be "stricken from consideration because it is vague, contradictory, and unclear." Hill at 5. The court noted that "Dr. Hampf's testimony first tends to establish causation, then tends to weaken that conclusion." Hill at 4.

The court noted that Tennessee has adopted the "cancellation rule". The Tennessee Court of Appeals stated "Tennessee follows the rule that contradictory statements by the same witness regarding a single fact cancel each other out. If determined by the trial court to be contradictory, the statements by the witness are considered to be ‘no evidence’ of the fact sought to be proved.” Hill at 5. The court went on to state:

The question here is not one of the credibility of a witness or of the weight of evidence; but it is whether there is any evidence at all to prove the fact. If two witnesses contradict each other there is proof on both sides, and it is for the jury to say where the truth lies; but if the proof of a fact lies wholly with one witness, and he both affirms and denies it, and there is no explanation, it cannot stand otherwise than unproven. For his testimony to prove it is no stronger than his testimony to disprove it, and it would be mere caprice in a jury upon such evidence to decide it either way.

Hill at 5. (citing Johnston v. Cincinnati No. & T.P. Ry. Co., 240 S.W. 429, 436 (1922)). In this particular case the court went on to hold that the cancellation rule was not applicable to exclude the testimony in question. Hill at 6. This was because the questions asked of the doctor that led to seemingly contradictory responses were slightly different and therefore the alleged contradiction was not clear. Additionally, another physician provided testimony that corroborated one of the physician’s statements. Hill at 6. The court therefore summed up the “cancellation rule” by stating:

[t]he cancellation rule only applies, ‘when the inconsistency in the witness's testimony is unexplained and when neither version of his testimony is corroborated by other evidence

Hill at 7. (citing Taylor v. Nashville Banner Publ'g Co., 573 S.W.2d 476, 483 (Tenn.Ct.App.1978)). As a result, it is important to carefully consider the conflicting testimony when trying to exclude it based on the “cancellation rule”. If there is other material evidence to support the testimony or the testimony is susceptible to multiple interpretations then it is very unlikely the testimony will be excluded. Instead the Court will allow the testimony to be presented to the jury for consideration.

Immunity - Can a person bring a cause of action in tort against their spouse under Tennessee law?

1/22/2013 3:44:57 PM

Brief Summary: The spousal immunity doctrine preventing causes of action in tort against a spouse no longer applies in Tennessee. It was abolished by the Tennessee Supreme Court in 1983 in Davis v. Davis, 657 S.W.2d 753 (Tenn. 1983).

Analysis: I received a question about whether Tennessee law allows a person to bring a tort cause of action against their spouse. I thought this was a good topic for a blog post. Historically, Tennessee applied the doctrine of "interspousal immunity" as a bar for an individual's cause of action against their spouse. The Tennessee Supreme Court abolished this rule in 1983 with the decision of Davis v. Davis, 657 S.W.2d 753 (Tenn. 1983).

The Tennessee Supreme Court in Davis discussed, in detail, the historical reasons and arguments for the "interspousal immunity" doctrine in Tennessee and in other states. Davis at 754 – 759. (This is a very interesting discussion about the reasons and historical underpinnings for this doctrine if you are interested in this type of thing). In 1983, when this decision was issued, states were turning away from this doctrine.

The Tennessee Supreme Court found that it was appropriate to abolish the "interspousal immunity" doctrine because the original reasons for the doctrine had been largely abandoned. The court stated that "no plausible reasons for retaining it, and cognizant of the high cost exacted by the rule because of the absolute bar it places in the path of potentially meritorious claims, we hold that interspousal tort immunity is totally abolished in this State." Davis at 759.

Statute of Limitations - When does the doctrine of fraudulent concealment extend the statute of limitations under Tennessee law?

1/18/2013 2:10:51 PM

Analysis: The recent Tennessee Court of Appeals decision of Alisa Leigh Eldrige v. Lee Savage, No. M2012-00973-COA-R3-CV, 2012 WL 6757941 (Tenn. Ct. App. December 28, 2012) discussed when fraudulent concealment can extend the statute of limitations for a cause of action. This case concerned an allegation that the seller of a home fraudulently concealed fire damage in the sale of the home to the plaintiff purchaser. Eldrige at 1, 2. The plaintiff alleged the defendant negligently or intentionally misrepresented the fire damage by making false statements of fact about the extent of the damage and subsequent repairs made to the home. Eldrige at 2. The original sale transaction of the home occurred in 1994 and the lawsuit was not brought until 2010. Eldrige at 1. The plaintiff asserted she did not discover the extensive fire damage until 2010. Eldrige at 1.

One of the questions in this case was whether the doctrine of “fraudulent concealment” applied to toll the statute of limitations. Eldrige at 2. Generally, the doctrine of fraudulent concealment applies "to circumstances in which the defendant purposefully engages in conduct intended to conceal the plaintiff's injury from the plaintiff." Eldrige at 4. The Tennessee Court of Appeals found that a plaintiff who invokes the doctrine of fraudulent concealment must allege and prove four specific elements as follows:

(1) that the defendant affirmatively concealed the plaintiff's injury or the identity of the wrongdoer or failed to disclose material facts regarding the injury or the wrongdoer despite a duty to do so;

(2) that the plaintiff could not have discovered the injury or the identity of the wrongdoer despite reasonable care and diligence;

(3) that the defendant knew that the plaintiff had been injured and the identity of the wrongdoer; and

(4) that the defendant concealed material information from the plaintiff by withholding information or making use of some device to mislead the plaintiff in order to exclude suspicion or prevent inquiry.

Eldrige at 4 (citing Redwing v. Catholic Bishop for Diocese of Memphis, 363 S.W.3d 436, 462 – 463 (Tenn. 2012)). If these elements are established then "the statute of limitations is tolled until the plaintiff discovers or, in the exercise of reasonable diligence, should have discovered the defendant's fraudulent concealment or sufficient facts to put the plaintiff on actual or inquiry notice of his or hear claim." Eldrige at 5. Once the plaintiff discovers facts sufficient to discover the alleged fraudulent concealment then the original statute of limitations time period begins to run and suit must be brought within that statute of limitations time period. Eldrige at 5.

In the Eldrige case the Court found the plaintiff alleged sufficient facts to survive a motion to dismiss under Tennessee Rule of Civil Procedure 12.02(6) that the “fraudulent concealment” exception to the statute of limitations should apply in this case. Eldrige at 5, 6.

Immunity - Can a child sue their parent in a tort suit in Tennessee?

1/15/2013 11:52:44 AM

Brief Summary: The parental immunity doctrine does apply in Tennessee but was limited by the Tennessee Supreme Court in 1994. The doctrine is limited to “conduct that constitutes the exercise of parental authority, the performance of parental supervision, and the provision of parental care and custody.”

Analysis: I recently received a question about whether a child can sue their parent for negligence in tort. Historically, the doctrine of “parental immunity” barred such a cause of action. This doctrine was first adopted by Tennessee Supreme Court in McKelvey v. McKelvey, 77 S.W. 664 (Tenn. 1903). It was also reaffirmed as recently as 1985 by the Tennessee Supreme Court in Barranco v. Jackson, 690 S.W.2d 221 (Tenn. 1985). However, this doctrine was modified by the Tennessee Supreme Court in 1994 in the case of Broadwell by Broadwell v. Holmes, 871 S.W.2d 471 (Tenn. 1994).

In Broadwell, the Tennessee Supreme Court noted the trend at that time across America was to modify and limit the absolute parental immunity doctrine. As a result, the Court analyzed various modifications other states had enacted to the parental immunity doctrine (this is an interesting analysis if you are interested in this topic but it will not be restated here). Broadwell at 473 – 475. The Court also noted the reasons and justification for this doctrine as follow:

The parental right to govern the rearing of a child has been afforded protection under both the federal and state constitutions. This Court has stated, “Tennessee's historically strong protection of parental rights and the reasoning of federal constitutional cases convince us that parental rights constitute a fundamental liberty interest under Article I, Section 8 of the Tennessee Constitution.” The integrity of the family unit has found protection against arbitrary state interference in the Due Process Clause of the Fourteenth Amendment.

Courts have expressed a concern that without the imposition of parent-child immunity, juries would feel free to express their disapproval of what they consider to be unusual or inappropriate child rearing practices by awarding damages to children whose parents' conduct was only unconventional.

(citations omitted) Broadwell at 475, 476. Despite the important function of the immunity, the Court decided to modify the absolute nature of the parental immunity doctrine. The Court noted that the relationship between a parent and a child is not exclusively that of parent-child. There are other facets to the relationship. The court noted:

A parent's conduct that injures a child may be outside the scope of their relationship as parent-child, and a child may be injured by a parent's conduct that is not in the exercise of parental authority, supervision, care, or custody. Consequently, the scope of the exemption from liability should be limited or defined by the purpose for granting the immunity, and the definition of the duty alleged to have been breached will disclose whether there is immunity

…

Parental immunity in Tennessee is limited to conduct that constitutes the exercise of parental authority, the performance of parental supervision, and the provision of parental care and custody. The operation of an automobile under the circumstances alleged in this case is not protected conduct under this standard.

(citations omitted) Broadwell at 476, 477.

As a result, the Court limited the parental immunity doctrine in Tennessee. The parental immunity doctrine still applies in certain circumstances; however, a fact specific inquiry must be made in order to determine the exact scope of parental immunity as applied to an individual case. In the Broadwell case, the negligent operation of an automobile by a parent that caused injuries to the parent’s children was not protected by parental immunity in Tennessee.

Medical Testimony - Is a doctor's speculation about future surgeries and costs of those surgeries admissible at trial?

1/10/2013 12:39:17 PM

Brief Summary: The short answer is that a doctor can not speculate about the need for future surgeries or the costs associated with such surgeries. Testimony from a doctor that amounts to speculation will be excluded by the trial court.

Analysis: In the recent Tennessee Court of Appeals decision of Sapinder Singh v. Larry Fowler Trucking, Inc., No. W2011-01986-COA-R3-CV, 2012 WL 3731562 (Tenn. Ct. App. 2012) the Court addressed whether the trial court’s exclusion of a doctor's speculative testimony about a future potential surgery and the cost for such surgery was proper. Singh at 1. Dr. Michael Jaffin was asked in his deposition whether the plaintiff would need additional surgery in the future. Singh at 2. The Appellate Court discussed the speculative nature of the testimony as follows:

In those portions of his testimony that were excluded from evidence, Dr. Jaffin testified that he would not “pretend to tell you what kind of surgery” Mr. Singh would require in the future, and that he could not “tell for sure” what these surgeries would cost. In fact, Dr. Jaffin testified that Mr. Singh would need further surgical evaluation, which he “would leave [ ] to a spine surgeon.” By his own admission, Dr. Jaffin is not at all certain as to what, if any, future surgeries will be medically necessary. Consequently, he is not qualified to testify as to what, if any, spinal surgeries Mr. Singh will need. As he testifies: “I can't tell you because I'm not a spine surgeon.” As such, Dr. Jaffin's testimony does not demonstrate a reasonable medical certainty concerning the need for future surgeries.

Concerning the costs of future surgeries, Dr. Jaffin testified that the costs would “be at least $300,000.” Later in his testimony, he opines that the costs would be “well over $200,000.” This testimony is also speculative. As noted above, Dr. Jaffin, by his own testimony, is not qualified to opine as to the specific surgeries that may be necessary and, because he is not qualified concerning the surgeries, he is likewise not qualified to testify as to the costs of the surgeries.

Singh at 7. In order to assess whether this testimony is admissible one must look at Tennessee Rules of Evidence 702 and 703 which requires a trial court to determine: "(1) whether expert testimony will substantially assist the trier of fact in determining a fact in issue; and (2) whether the facts and data underlying the testimony indicate a lack of trustworthiness." Singh at 5 (citing Tenn. R. Evid. 702; Tenn. R. Evid. 703). Decisions on the "admissibility, qualifications, relevance and competency of expert testimony [are] left to the sound discretion of the trial court." Singh at 5 (citing McDaniel v. CSX Transportation, Inc., 955 S.W.2d 257, 263 (Tenn. 1997)).

The Appellate Court also noted that Dr. Jaffin was never asked whether his testimony was given to a "reasonable degree of medical certainty." Singh at 6. The Court noted that while "the use of the ‘magic language’ that the opinion is to a reasonable degree of medical certainty is not necessary for admissibility, the testimony must show, as a whole, that it is more probable than not that future surgery will be required." Singh at 6. As a result, the court concluded that Dr. Jaffin's testimony about the need for future surgery and the cost for this surgery was speculative and he was not qualified to testify on these issues at trial. The trial court therefore properly excluded this testimony.

This case shows how important it is to make sure that a physician is prepared prior to giving a deposition. Additionally, although, the "magic language" of "reasonable degree of medical certainty" is not necessary for admissibility, it certainly does not hurt. As a matter of course, attorneys should ask physicians to testify to a reasonable degree of medical certainty. Also, if key questions are addressed during the deposition, I recommend asking the physician whether specific responses are "to a reasonable degree of medical certainty". This is not a guaranteed formula for admission of the testimony, but it could be very helpful.

Contract Interpretation - Can the terms of a written contract be modified by the subsequent course of conduct of the parties?

1/7/2013 10:15:25 AM

Brief Summary: The terms of a contract can be modified by the subsequent actions of the parties to that contract. Further, evidence about these actions is not barred by the parol evidence rule.

Analysis: In the recent decision of The University Corporation v. Bruce Wring, No. W2011-01126-COA-R3-CV, 2012 WL 4078517 (Tenn. Ct. App. September 18, 2012) the Tennessee Court of Appeals discussed whether a written contract could be modified by the actions of the parties. This case involved a dispute over a contract pertaining to the repair, renovation and sale of foreclosed properties. The University Corporation at 1. A dispute arose between the parties as to appropriate compensation. The University Corporation at 1.

One of the parties argued that the course of conduct between the two parties modified the terms of the written contract. Specifically, the parties never required the production of documentation showing expenses despite the fact it was explicitly required in the contract. The University Corporation at 1. In response, the other party contended the merger clause in the contract and the parol evidence rule prevented any modification of the written agreement and therefore the requirement for documentation on expenses was required. Under Tennessee law "parol evidence is inadmissible to contradict or vary the terms of a written agreement." The University Corporation at 6. However, the Tennessee Court of Appeals found this fact does not necessarily end the inquiry. The court stated as follows:

But it is well settled that this rule does not prohibit the establishment by parol evidence of an agreement made subsequent to the execution of the writing, although such subsequent agreement may have the effect of adding to, changing, modifying or even altogether abrogating the contract of the parties as evidenced by the writing; for the parol evidence does not in any way deny that the original agreement of the parties was that which the writing purports to express, but merely goes to show that the parties have exercised their right to change or abrogate the same, or to make a new and independent contract.

(emphasis added) The University Corporation at 6. (citing Brunson v. Gladish, 125 S.W.2d 144, 147 (Tenn. 1939)).

The court therefore found that evidence of any subsequent modification of the written agreement between the parties is not barred by the parol evidence rule. The University Corporation at 6. Further, the court found that "the course of conduct between parties is the strongest evidence of their original intent. A party's agreement to a modification need not be express, but may be implied from a course of conduct; this is true even where the agreement expressly specifies, as in this case, that the parties may only modify the agreement in writing." The University Corporation at 6. As a result, the merger clause in the written contract did not prevent the court from looking at the conduct of the parties to see if there was a modification to the contract on that basis.

The Tennessee Court of Appeals went on to analyze the evidence before the trial court and found the parties operated in a manner that did not require certain expense documentation to be provided. The University Corporation at 9. This was in direct contradiction to the written agreement which required such documentation. The University Corporation at 9. As a result, the fact one party did not comply with the express terms in the contract requiring certain documentation did not cause a breach of the contract.

Real Estate Law - What is required to establish a slander of title claim under Tennessee Law?

1/2/2013 11:34:14 PM

Analysis: The Tennessee Court of Appeals in David Paczko v. SunTrust Mortgages, Inc., No. M2011-02528-COA-R3-CV, 2012 WL 4450896 (Tenn. Ct. App. September 25, 2012) discussed the requirements for a slander of title claim as well as the related claim to quiet title. This case involved a dispute over the plaintiff’s property that was foreclosed against by the defendants. The plaintiff sought to enjoin the bank from going forward with the foreclosure proceeding and to clear the title. Paczko at 1.

The court found that in order to be successful with a claim for slander of title, the plaintiff must establish the following:

(1) that the [plaintiff] has an interest in the property, (2) that the defendant published false statements about the title to the property, (3) that the defendant was acting maliciously, and (4) that the false statements proximately caused the plaintiff a pecuniary loss.

Paczko at 3. (citing Brooks v. Lambert, 15 S.W.3d 482, 484 (Tenn. Ct. App. 1999)). The court further noted that in order to bring an action to quiet title, the plaintiff must “have an interest in the property at issue." Once the interest in the property ceases, the plaintiff no longer has a justiciable claim for an action to quiet title. Paczko at 3.

In this case the court found that because the plaintiffs acknowledged the property was foreclosed upon and sold during the pendency of the lawsuit and they were not seeking to recover the property, they no longer had an interest in the property. Paczko at 3. The fact the case was justiciable and able to be decided by the court when the lawsuit was filed does not mean that the court still has jurisdiction over the case once the plaintiff lost possession of the property. Paczko at 3. The court noted that "cases must be justiciable not only when they are first filed but must also remain justiciable throughout the entire course of the litigation, including the appeal." Paczko at 3. (citing McIntyre v. Traughber, 884 S.W.2d 134, 137 (Tenn. Ct. App. 1994)). Since the plaintiff no longer had an interest in the property and that was a required element of their claim, the claims for slander of title and to quiet title were moot and could not be decided by the court.

This case is important to consider when the original basis for a lawsuit is no longer present at some point during the pendency of the suit. Just because the plaintiff had a valid cause of action at the beginning of the suit does not mean that the cause of action remains viable if there is a material change to an essential component of the claim.

Premises Liability - Can a landlord be liable for injury to a third-person by a dog owned by a tenant?

12/18/2012 11:21:54 PM

Brief Summary: A landlord can be liable for injuries to a third-person by a dog owned by their tenant if (1) the landlord has knowledge of the vicious propensity of the dog, and (2) the landlord had “sufficient retained control” over the leased premises to require removal or safe restraint of the dog.

Analysis: The recent Tennessee Court of Appeals decision of George Woodson and Flora Woodson v. MEG Capital Management, Inc., et al, No. 2011-02513-COA-R3-CV, 2012 WL 4335316 (Tenn. Ct. App. September 21, 2012) discussed the potential liability of a landlord for a dog attack. The situation in question involved an attack involving the landlord's property that was rented to the tenant. Woodson at 1. The plaintiff walked by the property when two pit-bull dogs owned by the tenant escaped from the fenced-in back yard and attacked the plaintiff. Woodson at 1. He sustained significant injuries and over $200,000.00 in medical bills. Woodson at 1. The question in this case was whether the landlord could be found responsible for the attack under these circumstances.

The Tennessee Court of Appeals found a landlord could be liable for an attack caused by their tenant's dog under certain circumstances. The court specifically found as follows:

To hold a landlord liable for injury to a third person by a dog owned and kept by a tenant, two prongs must be proven with respect to the landlord: (1) knowledge or notice of the vicious propensity of the dog, and (2) sufficient retained control over the leased premises to afford an opportunity for the landlord to require the tenant to remove the dog or safely restrain it.

Woodson at 2. (citing Gilliland ex rel. Gilliland v. Pinkley, No. 2009-00982-COA-R3-CV, 2001 WL 557985, at *3 (Tenn. Ct. App. May 23, 2001)). This decision went on to provide a lengthy discussion of prong number (1) pertaining to the facts that support a contention that the defendant has knowledge or notice of a dogs "vicious propensity." Woodson at 2 – 8. This discussion is an excellent source for a detailed factual breakdown of this issue. It is too lengthy to go into detail in this post, however, the general conclusion is that when there are factually differing opinions about the “vicious propensity” of a dog, then generally it is a fact question for the jury to decide. Woodson at 8.

The second prong for holding a landlord liable for a tenant’s dog’s actions is whether the landlord had "sufficient retained control" over the dog. Woodson at 2. The lease in this particular case between the landlord and tenant was silent on animal issues. Woodson at 10. The landlord argued that because the lease did not have any provision that expressly provided the landlord with authority to require the tenants to remove their dog or safely restrain them, then the landlord did not have “sufficient retained control” over the dogs. Woodson at 9, 10. The court found this argument had no merit because the lease did have general provisions that allowed the landlord to evict tenants based on their engagement in "dangerous" or "inappropriate activities." Woodson at 10. As a result, the Court found that based on this language in the lease agreement the landlord did have the power to evict the tenant under certain circumstances and if the tenant’s dogs presented a dangerous condition then presumably the landlord had the right to evict them. Woodson at 10. As a result, the second prong for holding a landlord liable for a tenant’s dog attack was met in this case.

Damages - Can a plaintiff recover damages for loss of use and loss of profits when a commercial vehicle is destroyed and a replacement can not be put back into service within a reasonable time period?

12/14/2012 6:10:19 PM

Analysis: The Tennessee Court of Appeals in DKB Trucking Company, LLC v. JNJ Express, Inc., No. M2012-00008-COA-R3-CV, 2012 WL 3866462 (Tenn. Ct. App. September 5, 2012) discussed the appropriate damages for the loss of a tractor and trailer when the replacement could not be put into service quickly (the principles in this case could apply to other commercial vehicles as well). In this case the plaintiff's tractor and trailer were completely destroyed in a collision caused by the defendants. DKB Trucking at 1. The plaintiff's tractor and trailer were licensed by the federal government and the Commonwealth of Virginia to haul hazardous materials. DKB Trucking at 1. Proof at trial established the value of the tractor and trailer was approximately $45,000.00. DKB Trucking at 1. Proof also showed that the plaintiff replaced the trailer but did not replace the tractor even though there were four similar tractors available that could replace the destroyed tractor. DKB Trucking at 1.

The hauling of hazardous materials is heavily regulated and each of the DKB tractors were required to have proper licensure, permits and placards. DKB Trucking at 1. The process of obtaining these documents can take up to three months. DKB Trucking at 1. DKB also provided testimony that the average revenue earned by the truck that was destroyed was $3,700.00 per week. DKB Trucking at 1.

The jury found the defendant liable for the value of the tractor and trailer and awarded damages of $45,000.00. DKB Trucking at 1. The jury also awarded the plaintiff $44,000.00 for loss of use and lost profits due to the destruction of the truck. DKB Trucking at 1. The trial court disagreed with the verdict and issued a directed verdict finding the plaintiff could not recover for the loss of use or loss of profits in this case. That issue was appealed.

The Tennessee Court of Appeals noted the general rule in Tennessee is that "lost profits are not recoverable when the plaintiff's personnel property has been completely destroyed and is not capable of being repaired." DKB Trucking at 2. (citing Tire Shredders, Inc. v. ERM-North Cent., Inc., 15 S.W.3d 849, 855 (Tenn. Ct. App. 1999)). However, the court also noted that "we recognize that a plaintiff may recover damages for loss of use or lost profits when the plaintiff's personal property has been negligently destroyed by the defendant and the property cannot be replaced within a reasonable period of time" DKB Trucking at 2. (citing Tire Shredders, Inc. at 857).

As a result, the key question in this case was not simply whether the plaintiff could have simply replaced the tractor because the evidence showed the tractor could be replaced almost immediately. Rather, the important question was whether the tractor was actually "replaced" by the mere purchase of a subsequent tractor. DKB Trucking at 3. The court found that a newly purchased tractor in this circumstance could not be used to haul hazardous waste until it met federal and state guidelines and therefore was not effectively “replaced”. DKB Trucking at 3. The unrebutted testimony was that this process would take approximately three months. As a result, the simple fact the tractor could be replaced immediately did not mean the plaintiff was not entitled to damages for loss of use or lost profits because it could not be used to haul hazardous materials. DKB Trucking at 3. The court found that under these circumstances damages for loss of use or lost profits are recoverable for the reasonable amount of time that it took to put the replacement tractor into service to haul hazardous waste as opposed to simply being “replaced”. DKB Trucking at 1. The directed verdict granted by the trial court was reversed and the original jury verdict award was reinstated.

Settlement Agreement - What language in a settlement agreement is necessary to make sure all claims are settled?

12/11/2012 11:47:00 PM

Analysis: The recent Tennessee Court of Appeals decision of Timothy Scott Marcum v. Haskel Ayers, No. E2012-00721-COA-R3-CV, 2012 WL 4859126 (Tenn.Ct.App. October 15, 2012) discussed a basic settlement agreement between two parties and the validity of the agreement. The plaintiffs and defendants entered into a contract of sale for property in 2005. Marcum at 1. The real estate purchase contract consisted of an agreement that the property was sold by the defendants to the plaintiffs on an "as is" basis. Marcum at 1. After the purchase the plaintiffs began to experience problems with the house and raised concerns about these problems with the defendants. Marcum at 1. In June 2006, the parties executed a "settlement letter" which provided as follows: "The fifty-two hundred dollars ($5200) [sic] is accepted, in full, for damages to Mountain Ayers. This will be the final settlement paid on this property."

Sometime after the execution of the settlement agreement the plaintiffs experienced further problems and therefore sued the defendants. Marcum at 1. The defendants asserted that the June 2006 settlement letter was a settlement of all claims. Marcum at 1. The trial court granted summary judgment for the defendants and found the settlement letter was “not ambiguous and constituted a full and complete release of any and all claims growing out of the sale of Defendants' residence to Plaintiffs, whether past, present or future.” Marcum at 1. The plaintiff’s appealed and the question on appeal was whether the basic broad language in the "settlement agreement" prevented the plaintiff from filing suit for later discovered damages.

The Tennessee Court of Appeals found the language in this settlement agreement was a complete release of all claims including future undiscovered claims. The court found that a settlement letter with a release is considered a contract and therefore standard rules of construction for interpreting a contract are used in construing a release. Marcum at 3. (citing Jackson v. Miller, 776 S.W.2d 115, 117 (Tenn. Ct. App. 1989)).

The court then discussed the specific rules of contract interpretation that should be used to determine the validity of a release. Marcum at 3. The court relied upon the Tennessee Court of Appeals decision of Kafozi v. Windward Cove, LLC, 184 S.W.3d 693, 698-99 (Tenn. Ct. App. 2005) which found as follows:

In resolving a dispute concerning contract interpretation, our task is to ascertain the intention of the parties based upon the usual, natural, and ordinary meaning of the contract language. A determination of the intention of the parties “is generally treated as a question of law because the words of the contract are definite and undisputed, and in deciding the legal effect of the words, there is no genuine factual issue left for a jury to decide.” The central tenet of contract construction is that the intent of the contracting parties at the time of executing the agreement should govern. The parties' intent is presumed to be that specifically expressed in the body of the contract. “In other words, the object to be attained in construing a contract is to ascertain the meaning and intent of the parties as expressed in the language used and to give effect to such intent if it does not conflict with any rule of law, good morals, or public policy.”

This Court's initial task in construing the Contract at issue is to determine whether the language of the contract is ambiguous. If the language is clear and unambiguous, the literal meaning of the language controls the outcome of the dispute. A contract is ambiguous only when its meaning is uncertain and may fairly be understood in more than one way. If the contract is found to be ambiguous, we then apply established rules of construction to determine the intent of the parties. Only if ambiguity remains after applying the pertinent rules of construction does the legal meaning of the contract become a question of fact. (citations omitted) Kafozi at 698 - 699.

As a result, the court found that the basic two sentence settlement agreement between the parties was a complete settlement of all claims regarding the sale of the property and any damages discovered after the settlement were also included. Marcum at 3. The plaintiff tried to argue certain terms were not defined and were ambiguous such as "home," "damages," and "this property". Marcum at 3. However, the court found this argument was disingenuous and the language in the release was clear and unambiguous enough to constitute a full and complete settlement of all claims. Marcum at 4. The court then noted, “it is an often-cited principle in this jurisdiction that ‘[i]n the absence of mistake or fraud, the courts will not create or rewrite a contract simply because its terms are harsh or because one of the parties was unwise in agreeing to them." Marcum at 4. (citing Towe Iron Works, Inc. v. Towe, 243 S.W.3d 562, 569 (Tenn. Ct. App. 2007).

This case shows the strength of even basic settlement agreement language between two parties. Now don’t get me wrong, I am not suggesting that all settlement agreements should be this basic and broad. It is much better to have a full detailed description of the terms of the settlement and the understanding of the parties. However, this case shows that even the most basic language can effectively bar a subsequent suit over the same issues if the language is clear and unambiguous.

Follow me on Twitter at @jasonalee for updates from the Tennessee Defense Litigation site.

Premises Liability – The "open and obvious" defense in the context of a “minor aberration” in the walking surface

12/3/2012 10:58:13 AM

Analysis: The Tennessee Court of Appeals recently addressed the “open and obvious” defense in a premises liability case. In Jacqueline Elaine Green v. Paul Roberts, No. M2012-00214-COA-R3-CV, 2012 WL 4858992 (Tenn. Ct. App. 2012) the Court dealt with some interesting facts. The plaintiff walked through the defendant's parking lot to meet her cousin who parked her car in the parking lot. Green at 1. She walked across the lot to meet her cousin without any incident. Green at 1. As she left the meeting, she took a step backwards and tripped over a small metal post that protruded from the parking lot. Green at 1. The plaintiff's heel caught on the 8 inch by 8 inch metal post that protruded about ¾ of an inch above the surface of the parking lot. Green at 1. The parking lot asphalt is black and the concrete around the post is a lighter color. Green at 1. She tore her Achilles tendon and filed a lawsuit against the premises owner.

The trial court granted summary judgment because it found the plaintiff was 50% or greater at fault. Green at 2. That ruling was appealed to the Tennessee Court of Appeals. The Court noted that “traditionally, liability has not been imposed on a premises owner by courts of this state for injuries that resulted from defective or dangerous conditions that were ‘open and obvious.’” Green at 5. (citing McCormick v. Waters, 594 S.W.2d 385 (Tenn. 1980)). The Court further noted that since the adoption of comparative fault in Tennessee by McIntyre v. Ballentine, 833 S.W.2d 52 (Tenn. 1992), the “open and obvious” defense has been handled under principles of comparative fault. Green at 5. Specifically, “when an invitee is injured because of dangers that are obvious, reasonably apparent, or as well known to the injured party as to the owner or operator of the premises, liability, if any, should be determined in accordance with the principles of comparative fault analysis and the general negligence law of this state.” Green at 5.

The plaintiff, Ms. Green, admitted the area in question was visible from several feet away and in fact up to 10 to 20 feet away. Green at 7. However, when she fell she was not looking at the area where the aberration was present and therefore did not see it prior to her fall. Green at 7. Further, the Court found it was important that the area complained of by the plaintiff was only a "minor aberration in the parking lot". Green at 7. The Green court cited several Tennessee decisions that discussed that minor defects or depressions in a property are not sufficient to allow recovery under Tennessee premises liability law. Green at 7. The court specifically noted the following:

In several cases, both the Supreme Court of Tennessee and this Court have held that recovery will not lie because of the existence of minor defects and depressions. See Riddell v. Great Atlantic & Pacific Tea Co., 241 S.W.2d 406, 408 (Tenn. 1951) (“A recovery will not be allowed because of the existence of trivial holes or depressions.”); Murray v. City of Nashville, 299 S.W.2d 859, 862 (Tenn.Ct.App.1957) (“[T]he mere existence of trivial depressions ... [is] not such as to constitute actionable negligence....”); Batts v. City of Nashville, 123 S.W.2d 1099, 1103 (Tenn.Ct.App.1938) (“[S]light holes or depressions which are not in the nature of traps, and from which danger could not be reasonably anticipated, are not defects for which an action will lie.”); Rice v. Sabir, 979 S.W.2d at 309 (“The duty imposed on the premises owner ... does not include the responsibility to remove or warn against conditions from which no unreasonable risk was to be anticipated.”).

Green at 7. As a result, the Tennessee Court of Appeals found the trial court's grant of summary judgment was appropriate since it was an open and obvious condition that involved a minor aberration. This case could be important for premises liability cases in the future. Prior cases involving “minor” defects and “aberrations” generally involve depressions and undulations in the walking surface. This case involves the protrusion of a raised metal post ¾ of an inch above the surface. This is a case to keep in mind in future premises liability cases involving tripping hazards.

Comparative Fault – T.C.A. § 20-1-119 ninety day savings statute after a comparative fault allegation (after the statute of limitations has passed)

11/28/2012 4:19:00 PM

Brief Summary: T.C.A. § 20-1-119 provides a ninety day window for a plaintiff to add a new party into a lawsuit beyond the statute of limitations after a defendant (named in original or amended complaint that was filed within the statute of limitations) asserts comparative fault against that non-party.

Analysis: A recent Tennessee Court of Appeals decision discussed T.C.A. § 20-1-119 and the timeframe within which a party must be brought into a case after comparative fault is asserted (when the statute of limitations date has already passed). The Tennessee Court of Appeals decision of John Brockman v. Wesley Wolfe, No. W2011-02204-COA-R3-CV, 2012 WL 5364696 (Tenn. Ct. App. November 1, 2012) analyzed a plaintiff’s attempt to bring a party into a case greater then 90 days after a defendant asserted comparative fault against that non-party. In this case, the plaintiff filed suit alleging a date of injury of August 1, 2005. Brockman at 9. On September 9, 2008, a defendant asserted comparative fault against Wolfe Company, LLC (“Wolfe”). Brockman at 9. However, the plaintiff did not add Wolfe as a defendant until March 23, 2010. Brockman at 9.

As a result, Wolfe was not sued within the three year statute of limitations that applied to the cause of action. Brockman at 9. Additionally, Wolfe was not added as a defendant within ninety days from the date the defendant asserted comparative fault against Wolfe which occurred on September 9, 2008. T.C.A. § 20-1-119 provides a ninety day window for a plaintiff to bring suit against a party after comparative fault has been assessed against that party even if the statute of limitations has passed. The text of T.C.A. § 20-1-119 that is pertinent to this issue is as follows:

(1) Amend the complaint to add the person as a defendant pursuant to Tenn. R. Civ. P. 15 and cause process to be issued for that person; or

(2) Institute a separate action against that person by filing a summons and complaint. If the plaintiff elects to proceed under this section by filing a separate action, the complaint so filed shall not be considered an original complaint initiating the suit or an amended complaint for purposes of this subsection (a).

(b) A cause of action brought within ninety (90) days pursuant to subsection (a) shall not be barred by any statute of limitations. This section shall not extend any applicable statute of repose, nor shall this section permit the plaintiff to maintain an action against a person when such an action is barred by an applicable statute of repose.

(emphasis added). In the Brockman case, however, T.C.A. § 20-1-119 did not apply to save plaintiff’s cause of action against Wolfe and, therefore, the cause of action was time barred.

As a result, if comparative fault is asserted against a non-party and that entity is made a party by the plaintiff, it is important for defense counsel to analyze T.C.A. § 20-1-119 to ensure the statute was complied with properly. If it was not, then a motion to dismiss or a motion for summary judgment could be appropriate to dismiss the case for failure to comply with T.C.A. § 20-1-119.

Evidence of Truthfulness - Can MRI testing of the brain be admitted into evidence to show an individual is telling the truth about issues in the case?

11/20/2012 3:39:41 PM

Brief Summary: According to the United States Court of Appeals for the Sixth Circuit MRI testing of the brain to show an individual’s truthfulness is not admissible in court. The scientific evidence has not effectively established that this information is reliable enough to be admitted as evidence under the Federal Rules of Evidence.

Analysis: The United States Court of Appeals for the Sixth Circuit decided a very interesting case concerning whether results from a functional magnetic resonance imaging (MRI) test can be admitted to prove the truthfulness of testimony. The decision of United States of America v. Lorne Allan Semrau, 693 F.3d 510 (6^th Cir. 2012) considered the appeal of Dr. Lorne Semrau who was convicted of three criminal counts of healthcare fraud. At trial, Dr. Semrau’s counsel attempted to introduce evidence showing that results from MRI testing performed on Dr. Semrau indicated he was telling the truth about pertinent issues in the case. The trial court excluded this evidence. On appeal he asserted this testing should have been admitted into evidence by the trial court. Semrau at 516. The Sixth Circuit noted this was a matter of first impression in any jurisdiction. Semrau at 516.

Dr. Steven J. Laken, Ph.D., is the President and CEO of Cephos Corporation and he performed the MRI testing of Dr. Semrau. Semrau at 516 - 518. Dr. Laken testified that studies show accuracy rates of "between eighty-six percent and ninety-seven percent” for this type of testing. Semrau at 517. However, during cross-examination Dr. Laken “conceded that his 2009 ‘Mock Sabotage Crime’ study produced an ‘unexpected’ accuracy decrease to a rate of seventy-one percent.” Semrau at 517. Dr. Laken also testified that this MRI lie detection method has “a huge false positive problem in which people who are telling the truth are deemed to be lying around sixty to seventy percent of the time.” Semrau at 517, 518.

In 2009, Dr. Semrau's attorney contacted Dr. Laken to perform testing on Dr. Semrau about his alleged healthcare fraud. Semrau at 518. The prosecution was not notified that Dr. Semrau was going to be tested in this fashion and therefore they did not have the opportunity to observe the testing or submit their own questions. Semrau at 518. Dr. Laken placed Dr. Semrau in an MRI scanning machine and then questions were flashed in front of him and he then responded to the questions. Semrau at 519. A sixteen minute MRI brain scan was conducted after each question. Semrau at 519. Dr. Laken ultimately found that the MRI results showed Dr. Semrau was truthful, however he admitted “the test results do not indicate whether Dr. Semrau responded truthfully as to any specific question but rather show only whether he was generally truthful as to all of his answers collectively.” Semrau at 519. Accordingly, Dr. Laken conceded that it is ‘certainly possible’ that Dr. Semrau was lying on some of the particularly significant questions.” Semrau at 519.

Based on the evidence and testimony submitted on this issue, the Sixth Circuit agreed with the trial court’s exclusion of the MRI testing under Federal Rule of Evidence 702 because the technology "had not been fully examined in real world settings and the testing administered to Dr. Semrau was not consistent with tests done in research studies." Semrau at 516. The Sixth Circuit also determined the MRI testing was also not admissible under Rule 403 because of “(1) questions surrounding the reliability of fMRI lie detection tests in general and as performed on Dr. Semrau, (2) the failure to give the prosecution an opportunity to participate in the testing, and (3) the test result's inability to corroborate Dr. Semrau's answers as to the particular offenses for which he was charged." Semrau at 524.

As a result, the Sixth Circuit found that the MRI testing in this case was correctly excluded under Federal Rules of Evidence 403 and 702. Based on all the evidence before the court there simply was not enough scientific support and certainty from the relevant scientific community to allow this MRI testing into evidence. Overall the court appeared to leave open the possibility for future admission of such MRI evidence; however, at this point the real world testing and scientific community consensus is simply not at a point where this should be admissible in court. Perhaps in the future, this type of testing will reach a consensus of reliability in the scientific community.

Tennessee Real Estate - When can a real estate agent be responsible for failing to disclose alleged defects with a property?

11/15/2012 11:22:01 AM

Brief Summary: Both the Tennessee Residential Property Disclosure Act and the Tennessee Real Estate Broker License Act require a real estate agent to disclose adverse facts of which the agent has actual knowledge or notice.

Analysis: The recent Tennessee Court of Appeals decision of Jamie Paul Ledbetter v. Donald L. Schacht, No. W2011-01857-COA-R3-CV, 2012 WL 3775969 (Tenn. Ct. App. 2012) discussed a real estate agent’s responsibility under the Tennessee Residential Property Disclosure Act and the Tennessee Real Estate Broker License Act to disclose alleged defects in a property. In this case the plaintiffs asserted the seller’s real estate agent failed to disclose the existence of certain "foundation and structural defects in the home and repair attempts that took place prior to the sale." Ledbetter at 1. The real estate agent defendant filed a motion for summary judgment with an affidavit stating she "had no knowledge of any defects in the property or of any adverse information concerning the structural integrity of the property." Ledbetter at 1. The motion for summary judgment was granted. As a result, the question on appeal was whether the evidence before the court was sufficient to grant summary judgment to the real estate agent on this issue.

The Tennessee Residential Property Disclosure Act requires "the owner of residential property to furnish a residential property disclosure statement to a purchaser regarding the condition of the property, including any material defects known to the owner." Ledbetter at 3 (citing, T.C.A. § 66-5-202(1)). The representations in the notice are the representations of the owner, not the real estate representative. Ledbetter at 4. However T.C.A. § 66-5-206 provides for the responsibilities of the agent as follows:

If a real estate licensee performs those duties [to inform], the licensee shall have no further duties to the parties to a residential real estate transaction under this part, and shall not be liable to any party to a residential real estate transaction for a violation of this part or for any failure to disclose any information regarding any real property subject to this part. However, a cause of action for damages or equitable remedies may be brought against a real estate licensee for intentionally misrepresenting or defrauding a purchaser. A real estate licensee will further be subject to a cause of action for damages or equitable relief for failing to disclose adverse facts of which the licensee has actual knowledge or notice. “Adverse facts” means conditions or occurrences generally recognized by competent licensees that significantly reduce the structural integrity of improvements to real property, or present a significant health risk to occupants of the property.

(emphasis added). Therefore, the Tennessee Residential Property Disclosure Act does place duties on the agent to disclose adverse facts of which the real estate agent has knowledge or notice.

Additionally, under T.C.A. § 62-13-403 (the Tennessee Real Estate Broker License Act of 1973) a real estate agent has the following duty:

A licensee who provides real estate services in a real estate transaction shall owe all parties to the transaction the following duties, except as provided otherwise by § 62–13–405, in addition to other duties specifically set forth in this chapter or the rules of the commission:

...

(2) Disclose to each party to the transaction any adverse facts of which the licensee has actual notice or knowledge[.]

The Ledbetter court therefore summed up the duties of a real estate agent as follows:

In sum, a real estate license has a duty under both Acts to disclose “adverse facts” of which the licensee has actual knowledge or notice. Tenn.Code Ann. § 62–13–403, § 66–5–206. Both Acts define adverse facts as “conditions or occurrences generally recognized by competent licensees that ... significantly reduce the structural integrity of improvements to real property or present a significant health risk to occupants of the property[.]” Tenn.Code Ann. § 62–13–102(2); § 66–5–206. However, the definition of adverse facts found in the Real Estate Broker License Act of 1973 also contains a third prong, for conditions or occurrences that “have negative impact on the value of the real estate.” Tenn.Code Ann. § 62–13–102(2).

Based on the facts that existed in this case, the Court found:

[U]nder section 66–5–206, as applied to the facts of this case, the central question is whether Ms. Lipscomb had knowledge of “conditions or occurrences generally recognized by competent licensees that significantly reduce the structural integrity of improvements to real property.” (Emphasis added). We conclude that she did not. We find that the evidence submitted by Ms. Lipscomb in support of her motion for summary judgment “tend[ed] to disprove an essential factual claim” made by the Ledbetters, and therefore, it negated an essential element of the Ledbetters' claim and shifted the burden of production. In response, the Ledbetters failed to demonstrate that the previous defects and repairs significantly reduced the structural integrity of the home. The undisputed facts establish that after the recommended repairs were completed, an engineer examined the home for any structural deficiencies and found that it was structurally sound.

(citations omitted) Ledbetter at 6. As a result, the court found that as a matter of law the real estate agent did not have knowledge of "adverse facts" within the meaning of T.C.A. § 66-5-206. Additionally, the court noted the defendants submitted numerous reports showing the structural integrity of the home in support of the motion for summary judgment. The plaintiffs on the other hand did not submit any reports showing the home was structurally defective at the time of the closing. Despite the allegations of the plaintiffs that there were structural defects at the time of the closing, the court found "we cannot simply assume, based upon the assertions in the Ledbetter's brief on appeal, that the structural integrity of the home was significantly reduced by the repairs, when the evidence in the record demonstrates it was not. There is simply no evidence in the record from which we can make this assumption." This ruling shows how important it is to make sure there is actually evidence in the record of what is being asserted in arguments in response to a motion for summary judgment and further on appeal.

Follow me on Twitter at @jasonalee for updates from the Tennessee Defense Litigation site.

Intentional Infliction Of Emotional Distress – The Tennessee Supreme Court further clarifies the tort of intentional infliction of emotional distress

11/12/2012 2:00:32 PM

Analysis: In Rondal Akers v. Prime Succession of Tennessee, Inc., No. E2009-02203-SC-R11-CV, 2012 WL 4320591 (Tenn. 2012) the Tennessee Supreme Court discussed the tort of intentional infliction of emotional distress. The Court dealt with a claim filed by parents against a crematorium for allegedly mishandling their deceased son’s body that was sent to the crematorium for cremation. Akers at 1. The crematorium allegedly buried the body on the property (authorities discovered body parts for over 230 people on the property) instead of cremating it as requested. The ashes provided to the parents were tested and consisted of a mixture of soil and cement. Akers at 2. The facts surrounding this crematorium (Tri-State Crematory in Noble, Georgia) received national attention and there have been numerous lawsuits filed.

The legal argument raised on appeal in this case was whether the trial court should have granted a motion for “judgment notwithstanding the verdict (“JNOV”) or for a new trial” on an infliction of emotional distress claim. Akers at 4. The defendant argued that in Tennessee there are two separate causes of action for infliction of emotional distress, one for “intentional infliction” and another for “reckless infliction”. Akers at 4 (the defendant cited the Tennessee Supreme Court decision of Doe 1 ex rel. Doe 1 v. Roman Catholic Diocese of Nashville, 154 S.W.3d 22 (Tenn. 2005) for this proposition).

The defendant argued that because the plaintiff did not specifically allege a claim for a “reckless infliction of emotional distress” in the complaint (the plaintiff only alleged a claim for “intentional infliction” of emotional distress), then the claim should be barred. Akers at 4. They further argued the jury’s reliance upon proof involving reckless infliction of emotional distress should not be sufficient because the plaintiffs did not actually alleged a claim for reckless infliction of emotional distress. The argument was essentially that because “reckless infliction” is a separate claim from “intentional infliction” then the failure to plead a claim for “reckless infliction” bars recovery for that claim.

The Tennessee Supreme Court disagreed with the defendant’s position. The Court found the elements for intentional infliction of emotional distress were recently reaffirmed in the Tennessee Supreme Court decision of Rogers v. Louisville Land Company, 367 S.W.3d 196 (Tenn. 2012) which found as follows:

The elements of an intentional infliction of emotional distress claim are that the defendant's conduct was (1) intentional or reckless, (2) so outrageous that it is not tolerated by civilized society, and (3) resulted in serious mental injury to the plaintiff.

As a result, it is clear that the name of the tort in question “intentional infliction” is a little misleading because “reckless” conduct satisfies the first element of the tort. The Tennessee Supreme Court therefore clarified this issue as follows:

Since Doe 1 was decided, there has been some confusion and inconsistency regarding whether “reckless infliction of emotional distress” is a separate and distinct tort from intentional infliction of emotional distress.... [We have] observed numerous times that intentional infliction of emotional distress can be proven by a showing of either reckless or intentional behavior. This approach is consistent with the Restatement (Second) of Torts and the Restatement (Third) of Torts: Liability for Physical and Emotional Harm § 45 (Tentative Draft No. 5, 2007). Although Doe 1 makes it clear that the analysis differs somewhat when the claimant alleges reckless conduct, it does not expressly hold that reckless infliction of emotional distress is a separate tort.

Akers at 5 (quoting Rogers at 205). As a result, the Akers Court found that the plaintiffs were not precluded from recovery for “intentional infliction” of emotional distress due to the failure to assert a claim for “reckless infliction” of emotional distress. This is because the requirements for a claim for “intentional infliction” of emotional distress can be satisfied by the establishment of “reckless” conduct under Tennessee Law. Based on this decision it now appears clear that there are not two separate claims for “intentional infliction” and “reckless infliction” of emotional distress. Rather, the tort of intentional infliction of emotional distress includes “reckless” conduct.

Tortious Interference with Contract – What are the elements for a tortious interference with contract claim in Tennessee?

11/8/2012 10:33:53 AM

Analysis: The recent Tennessee Court of Appeals decision of Jeffrey Smith and Brenda K. Smith v. Methodist Hospitals of Memphis, et al, No. W2011-00054-COA-R3-CV, 2012 WL 3777139 (Tenn. Ct. App. 2012) discussed the elements for a tortious interference with contract claim in Tennessee. In this case the Tennessee Court of Appeals dealt with a situation where a plaintiff filed a medical malpractice claim against a hospital. During the litigation, the hospital allegedly contacted the employer of plaintiff’s expert nurse witness to try to put pressure on the nurse to not serve as an expert witness in the case. This nurse had previously submitted an affidavit on behalf of the plaintiff in the medical malpractice cause of action. A dispute therefore arose concerning whether the contact by the hospital of the expert nurse’s employer caused a breach of the contract between the expert nurse and the plaintiff when the nurse withdrew as an expert.

The Tennessee Court of Appeals discussed the requirements for a tortious interference with a contract claim in Tennessee. The Court stated that “in order to establish a cause of action for unlawful inducement of a breach of contract, a plaintiff must prove that there was a legal contract, of which the wrongdoer was aware, that the wrongdoer maliciously intended to induce a breach, and that as a proximate result of the wrongdoer's actions, a breach occurred that resulted in damages to the plaintiff.” Smith at Footnote 8 (citing the Tennessee Supreme Court decision of Quality Auto Parts Co., Inc. v. Bluff City Buick Co., Inc., 876 S.W.2d 818, 822–23 (Tenn.1994)). The hospital submitted undisputed evidence that the nurse was not influenced by the hospital’s call and instead the nurse voluntarily withdrew from the case as an expert. As a result the appellate court found that “we conclude that the evidence and the inferences reasonably drawn from the evidence permit but one conclusion, that Nurse Hudspeth voluntarily withdrew from serving as an expert in March 2003, and not as a result of any action on the part of the Hospital.” Smith at 9.

Fifth Amendment – Can negative inferences be drawn from a party’s invocation of Fifth Amendment rights in a civil case?

11/5/2012 11:08:25 AM

Brief Summary: The Tennessee Supreme Court recently held that negative inferences can be made from a party’s invocation of the Fifth Amendment in a civil case “only when there is independent evidence of the fact to which a party refuses to answer”.

Analysis: The recent Tennessee Supreme Court decision of Rondal Akers v. Prime Succession of Tennessee, Inc., No. E2009-02203-SC-R11-CV, 2012 WL 4320591 (Tenn. 2012) determined whether it is appropriate to provide a jury with instructions that negative inferences can be made when a party invokes the Fifth Amendment privilege in a civil case. The Fifth Amendment privilege is found in the Fifth Amendment to the United State Constitution. This amendment provides that no person shall “be compelled in any criminal case to be a witness against himself.” Akers at 8 (citing U.S. Const. amend. V). Federal Courts have held that the Fifth Amendment protection also applies to civil proceedings and civil trials but only “under those circumstances in which the person invoking the privilege reasonably believes that his disclosures could be used in a criminal prosecution, or could lead to other evidence that could be used in that manner or where the disclosures would not be directly incriminating, but could provide an indirect link to incriminating evidence.” Akers at 8 (citing Doe v. Glanzer, 232 F.3d 1258, 1263 (9th Cir. 2000)).

Therefore, the next question is, can a negative inference be drawn from that party’s, invocation of the Fifth Amendment right in a civil case? The United States Supreme Court has ruled that the trier of fact can draw negative inferences from the party’s invocation of the Fifth Amendment under certain circumstances. Baxter v. Palmigiano, 425 U.S. 308, 318 (1976). (See also Tennessee Court of Appeals decision in Levine v. March, 266 S.W.3d 426, 442 (Tenn. Ct. App. 2007) which stated “the majority of jurisdictions, including Tennessee, permit fact finders to draw adverse inferences against parties who invoke their Fifth Amendment rights in a civil case.”) However, since that decision other courts have found that the Baxter rule is not a blanket rule. The Ninth Circuit Court of Appeals Doe case discussed the circumstances under which negative inferences can be made as follows:

[L]ower courts interpreting Baxter have been uniform in suggesting that the key to the Baxter holding is that such adverse inference can only be drawn when independent evidence exists of the fact to which the party refuses to answer. Thus, an adverse inference can be drawn when silence is countered by independent evidence of the fact being questioned, but that same inference cannot be drawn when, for example, silence is the answer to an allegation contained in a complaint. In such instances, when there is no corroborating evidence to support the fact under inquiry, the proponent of the fact must come forward with evidence to support the allegation, otherwise no negative inference will be permitted.

Doe at 1264. The Tennessee Supreme Court in the Akers case agreed with the standard found by the Doe court. Akers at 9. As a result, the Tennessee Supreme Court held that “the trier of fact may draw a negative inference from a party's invocation of the Fifth Amendment privilege in a civil case only when there is independent evidence of the fact to which a party refuses to answer by invoking his or her Fifth Amendment privilege. In instances when there is no corroborating evidence to support the fact under inquiry, no negative inference is permitted.” Akers at 9.

This is an important Tennessee Supreme Court decision where the Court ultimately adopted the Ninth Circuit Doe standard to determine when a negative inference can be made when the Fifth Amendment privilege is invoked by a party. The fact a party asserts a Fifth Amendment privilege does not automatically mean the jury can make a negative inference about the invocation. Instead, a case by case analysis must be completed to determine if there is independent evidence supporting the negative inference.

Medical Malpractice/Health Care Liability Action - Ex parte communication with health care providers

11/1/2012 9:19:29 AM

Analysis: The Tennessee legislature adopted Public Chapter No. 926 which was signed into law by Governor Bill Haslam on May 10, 2012. This bill amended T.C.A. § 29-26-121 by adding subsection (f) to the statute. This statute now provides a method for defendants and their counsel to obtain protected health information outside the presence of the claimant or claimant’s counsel.

T.C.A. § 29-26-121(f) provides as follows:

(f)(1) Upon the filing of any “healthcare liability action,” as defined in § 29-26-101(a)(1), the named defendant(s) may petition the court for a qualified protective order allowing the defendant(s) and their attorneys the right to obtain protected health information during interviews, outside the presence of claimant or claimant's counsel, with the relevant patient's treating “health care providers,” as defined by § 29-26-101(a)(2). Such petition shall be granted under the following conditions:

(A) The petition must identify the treating healthcare provider(s) for whom the defendant(s) seek a qualified protective order to conduct an interview;

(B) The claimant may file an objection seeking to limit or prohibit the defendant(s) or the defendant(s)' counsel from conducting the interviews, which may be granted only upon good cause shown that a treating healthcare provider does not possess relevant information as defined by the Tennessee Rules of Civil Procedure; and

(C) The qualified protective order shall expressly limit the dissemination of any protected health information to the litigation pending before the court.

(2) Any disclosure of protected health information by a healthcare provider in response to a court order under this section shall be deemed a permissible disclosure under Tennessee law, any Tennessee statute or rule of common law notwithstanding.

(3) Nothing in this part shall be construed as restricting in any way, the right of a defendant or defendant's counsel from conducting interviews outside the presence of claimant or claimant's counsel with the defendant's own present or former employees, partners, or owners concerning a healthcare liability action.

As a result, defendants may petition the court for the ability to conduct ex parte communication with the patient’s treating “health care provider” as defined in T.C.A. § 29-26-101(a)(2). This statute defines “health care providers” as follows:

(2) “Health care provider” means:

(A) A health care practitioner licensed, authorized, certified, registered, or regulated under any chapter of title 63 or title 68, including, but not limited to, medical resident physicians, interns, and fellows participating in a training program of one of the accredited medical schools or of one of such medical school's affiliated teaching hospitals in Tennessee;

(B) A nongovernmental health care facility licensed under title 68, chapter 11;

(C) A nongovernmental health facility licensed under the Mental Health, Developmental Disability, and Personal Support Services Licensure Law, compiled in title 33, chapter 2, part 4;

(D) The employee of a health care provider involved in the provision of health care services, including, but not limited to, physicians, nurses, licensed practical nurses, advance practice nurses, physician assistants, nursing technicians, pharmacy technicians, orderlies, certified nursing assistants, technicians and those physicians and nurses employed by a governmental health facility; or

(E) A professional corporation or professional limited liability company established pursuant to title 48, a registered limited liability partnership rendering professional services under title 61 and which consists of one (1) or more health care practitioners licensed, authorized, certified, registered, or regulated under any chapter of title 63 or title 68, or any legal entity that is not itself required to be licensed but which employs one or more health care practitioners licensed, authorized, certified, registered, or regulated under any chapter of title 63 or title 68.

The petition to the court “shall be granted” as long as it identifies the specific treating health care providers. The claimant can file an objection requesting the prohibition or limitation of the proposed ex parte communication but this will only be granted when good cause is shown that the health care provider does not possess any relevant information to the claim. Finally, the qualified protective order must limit the disclosure of any protective health information to the pending litigation before the court.

Interestingly, subsection (3) also provides that this statute does not limit the right of the defendant or defendant’s counsel to conduct interviews regarding the health care liability action outside the presence of plaintiff or plaintiff’s counsel with the defendant’s; (1) present employees, (2) former employees, (3) partners, or (4) owners. There have been several trial courts in Tennessee that have issued orders on both sides of this issue and this statute appears to be an attempt to clarify the disagreement among the trial courts.

This statute implies that a medical care practice that is sued in a medical malpractice/health care liability action should be able to communicate with its physicians who treated the plaintiff even if those physicians are not parties to the case (without petitioning the court as discussed above). I was recently involved in a case where this was in dispute. The key issue was whether the patient’s right to privacy over protected health information trumped the right of a practice or clinic to be able to communicate with its own doctors about the physician’s treatment of the patient. Subsection (f)(3) of this statute now provides good ammunition for the argument that a defendant medical practice (and counsel) can communicate with physicians in that practice about the lawsuit and treatment by the physician related to the lawsuit.

Economic Loss Doctrine - Does the economic loss doctrine apply in Tennessee?

10/25/2012 10:07:16 PM

Analysis: I received a question from a reader of this blog asking if Tennessee has adopted the “economic loss doctrine”. The short answer is yes, Tennessee courts have adopted the “economic loss doctrine” for product liability cases. The Tennessee Court of Appeals decision of Messer Griesheim Indus., Inc. v. Cryotech of Kingsport, Inc., 131 S.W.3d 457, 463 (Tenn. Ct. App. 2003), found that:

The Tennessee Supreme Court has noted that “Tennessee has joined those jurisdictions which hold that product liability claims resulting in pure economic loss can be better resolved on theories other than negligence.” The economic loss doctrine provides that “[i]n a contract for the sale of goods where the only damages alleged come under the heading of economic losses, the rights and obligations of the buyer and seller are governed exclusively by the contract.” Consequently, a plaintiff may not maintain a claim for purely economic losses absent contractual privity with the party charged with responsibility for those losses.

(citations omitted). The more recent Tennessee Supreme Court decision of Lincoln Gen. Ins. Co. v. Detroit Diesel Corp., 293 S.W.3d 487, 489 (Tenn. 2009) dealt with the question or whether to apply an exception to the economic loss rule when the product is unreasonably dangerous. The Tennessee Supreme Court rejected this exception and held:

We agree with the United States Supreme Court that the owner of a defective product that creates a risk of injury and was damaged during a fire, a crash, or other similar occurrence is in the same position as the owner of a defective product that malfunctions and simply does not work. It follows that the remedies available to these similarly situated product owners should derive from the parties' agreements, not from the law of torts, lest we disrupt the parties' allocation of risk.

The Lincoln case provides an excellent discussion of the “economic loss doctrine” and the approach several different states have on this issue. A Tennessee Federal District Court has further stated that “the economic loss doctrine, adopted by the Tennessee courts, prohibits purchasers of products from recovering purely economic damages under negligence or products liability theories.” Americoach Tours, Inc. v. Detroit Diesel Corp., 59 UCC Rep.Serv.2d 547, 2005 WL 2335369, at *2 (W.D. Tenn. Sept. 23, 2005).

Therefore, the next question is what constitutes “economic loss”. In the Lincoln case, the Tennessee Supreme Court discussed two types of economic loss. Lincoln at 489. The Court found that “two types of economic loss, direct and consequential, occur when a defective product is damaged. Direct economic loss may be measured by the defective product's cost of repair or replacement. Consequential economic losses, such as lost profits, result from the product owner's inability to use the product.” Lincoln at 489.

As a result, the “economic loss doctrine” applies in Tennessee. This doctrine basically restricts the ability of a plaintiff to recover for purely economic losses in a product liability action to remedies in contract, not in tort. This is an important defense to consider whenever there is an economic loss involving a defective product. It is especially important when there is a purely economic loss and your client is sued by a party to whom there is no contractual privity.

Construction Defect – When can the Tennessee Consumer Protection Act be applied in a construction defect case?

10/23/2012 4:18:47 PM

Analysis: The recent Tennessee Court of Appeals decision of Dan C. Ray v. Sadler Homes, Inc., No. M2011-01605-COA-R3-CV, 2012 WL 2150752 (Tenn. Ct. App. 2012) involved a construction defect case concerning the sale of a new home. Soon after the plaintiffs purchased the home they started to experience hollow spots in the hardwood floors, leaking from the air conditioning, and uneven sagging flooring. Ray at 1. After the defendant, Sadler Homes, Inc., was advised of the problems, Sadler Homes discovered that a load bearing beam was left off the construction plans and was not installed during construction. Ray at 1. Additionally, the home had been “stretched” from the construction plans “meaning the home was somewhat wider and longer and had more square footage than specified in the construction plans.” Ray at 1.

After several repairs were conducted, the defendant refused to continue to conduct more repairs despite the fact the homeowner continued to experience more problems. Ray at 1. Sadler Homes’ representative testified that the plaintiff’s “were never going to be satisfied” which is one of the reasons he stopped making repairs. Ray at 2. As a result, the case went to trial and the trial court found there was a breach of contract, breach of warranty and a knowing violation of the Tennessee Consumer Protect Act “based upon evidence that the house was built by an experienced contractor who stretched the house and left out a load bearing beam.” Ray at 2. The trial court found total damages of $90,000.00 based on diminution in value and also awarded additional attorney’s fee damages under the Tennessee Consumer Protection Act.

A prior blog post discussed when a diminution in value award is appropriate as damages in a construction defect case. The second issue dealt with in this case was whether the trial court’s finding of a violation of the Tennessee Consumer Protection Act was appropriate. The trial court used the “catch all provision” of the act found in T.C.A. § 47-18-104(b)(27) which makes it a violation of the act for “engaging in any other act or practice which is deceptive to the consumer or to any other person.” Although the trial court record was not very clear, the appellate court noted it looked like the trial court found there was a deceptive act due to the omission of a load bearing beam and the fact the home was “stretched” from the original construction plans.

The appellate court found that in order to recover damages under the Tennessee Consumer Protection Act a plaintiff must prove: “(1) that the defendant engaged in an unfair or deceptive act or practice declared unlawful by the TCPA and (2) that the defendant's conduct caused an ascertainable loss of money or property, real, personal, or mixed, or any other article, commodity or thing of value wherever situated...” Ray at 5. (quoting Tucker v. Sierra Builders, 180 S.W.3d 109, 115 (Tenn. Ct. App. 2005). Additionally, the court found that whether a specific representation in a particular case is “unfair” or “deceptive” is a question of fact.

Under the facts of this case the court found that although it appears improper that the house was “stretched” from the construction plans there was no evidence presented that this caused any of the problems at issue. Additionally, there was no evidence that “the stretching of the home deceived the Rays for which there were damages”. Ray at 5. The defendant actually admitted the omission of the load bearing beam was improper. Ray at 6. However, the evidence showed the load bearing beam was omitted on the plans and the defendant was unaware of this fact until after the construction was complete. As soon as the defendant was made aware of the load bearing beam, it took corrective action to install the missing load bearing beam. Ray at 6. As a result, the court found that under these facts, there was no violation of the Tennessee Consumer Protection Act.

It is important to note that the “catch all” provision found in the Tennessee Consumer Protection Act has been eliminated for all causes of action that accrue on or after October 1, 2011. However, this case is still helpful to show what is required for prove a Tennessee Consumer Protection Act claim in a construction defect context. Defense counsel for companies and insurance companies need to be aware of the specific requirements for a Tennessee Consumer Protection Act case in order to best establish defenses that are appropriate to defeat such a claim.

Malicious Prosecution - What are the elements for a malicious prosecution claim in Tennessee?

10/16/2012 4:36:10 PM

Analysis: The recent Tennessee Supreme Court decision of Elliot H. Himmelfarb, M.D. et al. v. Tracy R. Allain, No. M2010-02401-SC-S10-CV, 2012 WL 3667440 (Tenn. 2012) discussed the elements for a malicious prosecution claim under Tennessee Law. This case also addressed whether a lawsuit that is terminated by a voluntary dismissal (nonsuit) without prejudice satisfies one of the requirements for a malicious prosecution claim.

In this case, Tracy Allain filed a lawsuit asserting a medical malpractice claim against Dr. Elliot Himmelfarb and Dr. Douglas York for an allegedly faulty heart catheterization procedure. Mr. Allain subsequently filed a notice of voluntary dismissal of the complaint, dismissing the case without prejudice under Tennessee Rule of Civil Procedure 41.01. One year later, Dr. Himmelfarb and Dr. York filed a complaint against Mr. Allain asserting the prior lawsuit against them constituted malicious prosecution under Tennessee law. Himmelfarb at 1.

In order to proceed with a claim for malicious prosecution the plaintiff must establish three elements. These elements are: (1) the prior lawsuit was initiated against the plaintiff without probable cause; (2) the prior lawsuit was brought with malice; and (3) the prior lawsuit was terminated in favor of the plaintiff. Himmelfarb at 2 (citing Christian v. Lapidus, 833 S.W.2d 71, 73 (Tenn. 1992)). Under element number (3), requiring the termination of the prior lawsuit in favor of the plaintiff, the termination of the lawsuit must “address the merits of the suit rather than terminating the suit on procedural or technical grounds”. Himmelfarb at 2 (citing Parrish v. Marquis, 172 S.W.3d 526, 531 (Tenn. 2005)). As a result, the Tennessee Supreme Court in this case addressed whether a voluntary nonsuit was a termination in favor of the plaintiff “on the merits” in order to support a malicious prosecution claim.

The Tennessee Supreme Court noted the majority of jurisdictions have found that a prior voluntary nonsuit should be deemed a termination “on the merits” in order to support a malicious prosecution claim. Himmelfarb at 3. Interestingly, the Tennessee Supreme Court in this case rejected the majority rule and instead concluded that "a voluntary nonsuit without prejudice is not a favorable termination for purposes of a malicious prosecution claim." Himmelfarb at 4.

As a result, the court found plaintiffs Dr. Himmelfarb and Dr. York, could not prove an essential element of their malicious prosecution claim. This was because the prior claim was dismissed by a voluntary dismissal under Tennessee Rule of Civil Procedure 41.01 and is not a termination “on the merits” for purposes of supporting a Tennessee malicious prosecution claim.

Products Liability - Fungal meningitis outbreak in Tennessee raises numerous legal liability questions

10/12/2012 12:16:14 PM

The United States Center for Disease Control and Prevention reported on October 12, 2012 that 170 people have contracted fungal meningitis due to the recent outbreak resulting in 14 deaths so far. See CDC outbreak information. ABC News and other media outlets have reported that the fungal meningitis outbreak may have been caused by spinal injections of methylprednisolone acetate for back pain. See ABC News article. Tennessee, more than any other state, has been most affected by the outbreak where there are 49 cases of fungal meningitis that have been reported including six that have been fatal. See ABC News article. According to ABC News "meningitis affects the membranous lining of the brain and spinal cord. Early symptoms of fungal meningitis, such as headache, fever, dizziness, nausea, sensitivity to light, stiff neck, weakness or numbness, slurred speech and pain, redness or swelling at the injection site can take more than a month to appear." See ABC News article.

As a result of the outbreak that is growing by the day, significant questions must be addressed pertaining to potential liability for manufacturers, sellers, distributors, medical providers and physicians for this outbreak in Tennessee. The main cause of action in any litigation under Tennessee law would most likely be a products liability action under T.C.A. § 29-28-101 - 29-28-108. The "Tennessee Products Liability Act of 1978" is codified at T.C.A. § 29-28-102.

Under T.C.A. § 29-28-102 a Tennessee "Product Liability Action" is defined as follows:

“Product liability action” for purposes of this chapter includes all actions brought for or on account of personal injury, death or property damage caused by or resulting from the manufacture, construction, design, formula, preparation, assembly, testing, service, warning, instruction, marketing, packaging or labeling of any product. “Product liability action” includes, but is not limited to, all actions based upon the following theories: strict liability in tort; negligence; breach of warranty, express or implied; breach of or failure to discharge a duty to warn or instruct, whether negligent, or innocent; misrepresentation, concealment, or nondisclosure, whether negligent, or innocent; or under any other substantive legal theory in tort or contract whatsoever;

This act is intended to broadly encompass most if not all possible causes of action and legal theories for litigation pertaining to a defective product in Tennessee. The definition of product liability action in Tennessee is therefore very broad and is intended to include causes of action for many different product liability issues and in all likelihood would include litigation related to the fungal meningitis outbreak in Tennessee.

The definition of "manufacturer" under T.C.A. § 29-28-102(4) includes as "compounder" of a product which would include whatever entity compounded the drugs that are suspected to be the cause of the meningitis outbreak. The media has widely reported that the New England Compounding Center in Framingham, Massachusetts is being investigated by the U.S. Food and Drug Administration and CDC as the potential company responsible. The firm has apparently recalled their products and actually shut down operations. See CDC Outbreak information and ABC News article.

The next question is what other entities could be legally responsible in Tennessee for the fungal meningitis outbreak. Obviously, there are many other categories of entities that could be sued, including sellers, distributors, medical providers and physicians. However, the Tennessee Products Liability Act provides some protection for "sellers" of a product in Tennessee. A seller is defined under the act in T.C.A. § 29-28-102(7) as:

“Seller” includes a retailer, wholesaler, or distributor, and means any individual or entity engaged in the business of selling a product, whether such sale is for resale, or for use or consumption. “Seller” also includes a lessor or bailor engaged in the business of leasing or bailment of a product; and.

Seller’s of a product have specific protections found in T.C.A. § 29-28-106 from potential liability. T.C.A. § 29-28-106 provides as follows:

No product liability action, as defined in § 29-28-102, shall be commenced or maintained against any seller, other than the manufacturer, unless:

(1) The seller exercised substantial control over that aspect of the design, testing, manufacture, packaging or labeling of the product that caused the alleged harm for which recovery of damages is sought;

(2) Altered or modified the product, and the alteration or modification was a substantial factor in causing the harm for which recovery of damages is sought;

(3) The seller gave an express warranty as defined by title 47, chapter 2;

(4) The manufacturer or distributor of the product or part in question is not subject to service of process in this state and the long-arm statutes of Tennessee do not serve as the basis for obtaining service of process; or

(5) The manufacturer has been judicially declared insolvent.

It is likely that the main exception that may come into play could be number five where the manufacturer has been judicially declared insolvent. Obviously, we are very early in this outbreak, but the potential litigation and legal liability exposure for the manufacturer is massive in an outbreak of this scale. It is certainly not a stretch to assume this situation will cause significant financial stress on the manufacturer of the spinal injections in question. T.C.A. § 29-28-106 was actually amended effective October 1, 2011 and now provides greater protections for sellers of products then prior to the amendment of this statute. See my prior blog post on this issue here.

There is no doubt there will be litigation over the serious fungal meningitis outbreak in Tennessee. If particular entities or individuals know they could be implicated in litigation, I would strongly recommend they obtain counsel to begin the process of assessing potential liability. Further, insurance carriers should be put on notice immediately to inform them of potential exposure. Additionally, all records, documents and evidence should be maintained in order to formulate the best defense possible to litigation that may occur as a result of the fungal meningitis outbreak in Tennessee.

Defamation of Character – “Libel” and “false light invasion of privacy” claims under Tennessee Law

10/9/2012 11:17:56 AM

Brief Summary: Libel is a recognized claim under Tennessee law and truth is a defense to a libel claim. False light invasion of privacy is a recognized claim under Tennessee law where truth is not a defense. As a result, one can be held liable for making a statement that gives an offensive impression about another in a false light even if the statement is technically true.

Analysis: The recent Tennessee Court of Appeals decision of Daniel B. Eisenstein v. WTVF-TV, News Channel 5 Network, LLC, M2011-02208-COA-R3-CV, 2012 WL 3090307 (Tenn. Ct. App. July 30, 2012) provided a great discussion on the torts of libel and false light invasion of privacy. This is an interesting case that has received some media attention due to the subject matter. Specifically, Davidson County General Sessions Court Judge Daniel Eisenstein brought a claim against News Channel 5 Network in Nashville, Tennessee asserting that News Channel 5 committed libel and false light invasion of privacy in two news stories that were completed in 2010 and 2011. Eisenstein at 1. This case is certainly interesting reading, however, the details of the case are not important for this post. I would, however, encourage anyone who is interested in these types of claims to read the full lengthy opinion.

There is a broad category of torts in Tennessee referred to as defamation. Defamation includes libel, slander, false light invasion of privacy and other causes of action. Libel is simply a form of the broader category of defamation. Generally, libel involves a written defamation. Eisenstein at 1. News broadcasts "should be considered libel; particularly if they are based on written scripts." Eisenstein at 1. (quoting Ali v. Moore, 984 S.W.2d 224, 227 (Tenn. Ct. App. 1998)).

In order to establish a prima facia case of defamation (usually slander or libel) the plaintiff must prove the following elements:

(1) a party published a statement; (2) with knowledge that the statement was false and defaming to the other; or (3) with reckless disregard for the truth of the statement or with negligence in failing to ascertain the truth of the statement.

Eisenstein at 1. (citing Hibdon v. Grabowski, 195 S.W.3d 48, 58 (Tenn. Ct. App. 2005)). Further, the defamation must result in injury to the person. Eisenstein at 1.

The second tort that is discussed in this case is "false light invasion of privacy." The Tennessee Supreme Court has adopted the definition for this tort provided by the Restatement (Second) of Torts § 652E (1977). The definition of false light invasion of privacy is as follow:

One who gives publicity to a matter concerning another that places the other before the public in a false light is subject to liability to the other for invasion of his privacy, if:

(a) the false light in which the other was placed would be highly offensive to a reasonable person, and

(b) the actor had knowledge of or acted in reckless disregard as to the falsity of the publicized matter and the false light in which the other would be placed.

Eisenstein at 2. (See West v. Media Gen. Convergence, Inc., 53 S.W.3d 640, 643-44 (Tenn. 2001)). It is important to note that when the individual is a public figure such as Judge Daniel Eisenstein then a claim for false light invasion of privacy requires actual malice. West at 647.

One significant difference between libel and false light invasion of privacy claims is that in a libel case, truth is a defense to the claim. See Memphis Pub. Co. v. Nichols, 569 S.W.2d 412, 420 (Tenn. 1978). However, under a false light invasion of privacy claim, literal truth is not a defense and instead, the question is whether "the defendant made discreet presentations of information in a fashion which rendered the publication susceptible to inferences casting the plaintiff in a false light.” West at 645 (footnote 5). As a result, a claim for false light invasion of privacy may actually pertain to technically true statements, however, the manner in which the statements were conveyed applies a false impression about the full reality of the situation. Eisenstein at 2.

It is certainly important for defense counsel to be aware of the nuances in defamation claims. This case reminds us that truth is not a defense to a false light invasion of privacy claim. As a result, when statements are made, even if they are technically true, they must not present a false offensive impression because that can be an actionable claim under Tennessee law.

Follow me on Twitter at @jasonalee for updates from the Tennessee Defense Litigation site.

Construction Defect – When can diminution in value be used as damages in a construction defect case?

10/4/2012 10:43:25 AM

Brief Summary: Diminution in value can be appropriate damages in a construction defect case under Tennessee Law depending on the facts of the case. This is especially true when the defendant fails to introduce evidence showing the feasibility or cost of repairs to fix the defect in question.

Analysis: The recent Tennessee Court of Appeals decision of Dan C. Ray v. Sadler Homes, Inc., No. M2011-01605-COA-R3-CV, 2012 WL 2150752 (Tenn. Ct. App. 2012) involved a construction defect case about the sale of a new home. Soon after the plaintiffs purchased the home they started to have hollow spots in the hardwood floors, leaking from the air conditioning, and uneven sagging flooring. Ray at 1. After the defendant, Sadler Homes, Inc., was advised of the problems, Sadler Homes discovered that a load bearing beam was left off the construction plans and was not installed during construction. Ray at 1. Additionally, the home had been “stretched” from the construction plans “meaning the home was somewhat wider and longer and had more square footage than specified in the construction plans.” Ray at 1.

After several repairs were conducted, the defendants refused to continue to conduct more repairs despite the fact the homeowner continued to experience more problems. Ray at 1. Sadler Homes’ representative testified that the plaintiff’s “were never going to be satisfied” which is one of the reasons he stopped making repairs. Ray at 2. As a result, the case went to trial and the trial court found there was a breach of contract, breach of warranty and a knowing violation of the Tennessee Consumer Protect Act “based upon evidence that the house was built by an experienced contractor who stretched the house and left out a load bearing beam.” Ray at 2. The trial court found total damages of $90,000.00 based on diminution in value and also awarded additional attorney’s fee damages under the Tennessee Consumer Protection Act.

Sadler Homes contended an award based on diminution in value was inappropriate in this case. Sadler Homes requested that the court find instead that the appropriate damages should be the cost to repair. The Tennessee Court of Appeals found the following:

The purpose of assessing damages in a breach of contract suit is to place the plaintiff, as nearly as possible, in the same position he would have had if the contract had been performed. When a contractor fails to perform in a workmanlike manner, generally, the measure of damages will be the cost of repair. However, diminution in value may be used as the measure of damages in certain circumstances, for example, when the cost of repair is disproportionate or the repairs are not feasible.

(emphasis added) Ray at 4. (citations omitted). The appellate court found the defendant did not put on any proof regarding the feasibility of making repairs and actually ceased making repairs to the home. Ray at 4. Further, the defendant did not put on any evidence of the cost to repair the home. As a result, the Court found that “based upon the unique facts of this case and the failure of Sadler Homes to introduce competent evidence to show that the deficiencies in the home could be repaired without compounding the problems, and at a price less than the diminution in value, we affirm the trial court's determination that diminution in value was the appropriate measure of damages.” Ray at 5.

This case shows how important it is to make sure that proper damages evidence is introduced at trial from a defense perspective. The fact no evidence was introduced on the feasibility or cost of repair, basically forced the court’s hand to find damages for diminution of value were appropriate in this context.

Tennessee Consumer Protection Act – The Tennessee Consumer Protection Act was amended to prevent punitive damages under the Act (after an award of treble damages).

10/1/2012 9:50:26 AM

The Tennessee tort reform bill of 2011 added a provision in the Tennessee Consumer Protection Act that explicitly prevents an award for punitive or exemplary damages beyond the treble damages found in the Act (T.C.A. § 47-18-101 – T.C.A. § 47-18-130). This change went into effect with the adoption of Public Chapter No. 510 and applies to all actions that accrue on or after October 1, 2011.

T.C.A. § 47-18-109 (a)(3) now provides as follows:

(3) If the court finds that the use or employment of the unfair or deceptive act or practice was a willful or knowing violation of this part, the court may award three (3) times the actual damages sustained and may provide such other relief as it considers necessary and proper, except that the court may not award exemplary or punitive damages for the same unfair or deceptive practice.

(emphasis added and shows language added to statute). The change made by Public Chapter No. 510 was the legislature added the last phrase in T.C.A. § 47-18-109(a)(3) providing "except that the court may not award exemplary or punitive damages for the same unfair or deceptive practice." This addition to the statute expressly confirmed that exemplary or punitive damages could not be assessed for violation of the Tennessee Consumer Protect Act when treble damages are assessed under T.C.A. § 47-18-109(a)(3).

Public Chapter No. 510 also added T.C.A. § 47-18-109(g) which provides that "no class action lawsuit may be brought to recover damages for an unfair or deceptive act or practice declared to be unlawful by this part." As a result, this new addition to the Tennessee Consumer Protection Act bars any civil class action lawsuits under the Tennessee Consumer Protection Act.

Tennessee Jurisdiction – When can Tennessee courts exercise personal jurisdiction on out-of-state corporations?

9/27/2012 12:11:41 PM

Analysis: The recent Court of Appeals decision of Precision Castings of Tennessee, Inc. v. H and H Manufacturing Co., Inc., No. M2012-00334-COA-R3-CV, 2012 WL 3608668, (Tenn. Ct. App. August 22, 2012) discussed when Tennessee courts can exercise jurisdiction over non-Tennessee entities. In this case, the defendant, H and H, contacted a Tennessee company, Precision, and requested Precision to manufacture and deliver certain metal castings and molds. H and H failed to pay for the product. A lawsuit was filed in Tennessee and a judgment was entered against H and H.

H and H contended the Tennessee court did not have jurisdiction over H and H. H and H argued it never agreed to come to Tennessee, had never been in Tennessee, had no prior business relationships in Tennessee, had not derived any revenue from people or entities in Tennessee and does not conduct any business enterprise in Tennessee. The court, however, determined the key facts as used to determine whether jurisdiction was appropriate was that H and H made electronic contact (email) with Precision in Tennessee and asked Precision to give H and H a quote to produce the products in question. Pursuant to this request, Precision provided an electronic quote to H and H and Precision delivered the product to H and H.

This case provides a good overview of when jurisdiction is appropriate in Tennessee. There are two types of jurisdiction, “general jurisdiction”, and “specific jurisdiction”. The court noted that general jurisdiction exists “when a defendant has ‘continuous and systematic contacts with the forum state sufficient to justify the state's exercise of judicial power with respect to any and all claims.” Precision Castings. at footnote 1 (citing Aristech Chem Int’l Ltd. V. Acrylic Fabricators LTD., 138 F.3d 624, 627 (6^th Cir. 1998)). Specific jurisdiction on the other hand “confers jurisdiction only on claims that arise out of or relate to a defendant’s contacts with the forum.” Precision Castings at footnote 1.

The Tennessee long arm statute is found in T.C.A. § 20-2-214(a) and allows Tennessee Courts to “exercise in personam jurisdiction on any basis not inconsistent with the state or federal constitutions.” Chenault v. Walker, 36 S.W.3d 45, 52 (Tenn. 2001). Due process principles require that “an out-of-state defendant can be subject to personal jurisdiction only if he has such minimum contacts with the forum state that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Id. at p. 53. When general jurisdiction does not exist, then specific jurisdiction can exist under Tennessee law when “a commercial actor purposely directs his activities toward citizens of the forum state and litigation results from injuries arising out of or relating to those activities.” Chenault at 53.

Tennessee courts have adopted three primary factors and two lesser factors to be considered when determining whether “minimum contacts” exist for jurisdiction. Precision Castings at 3. (quoting Masada Investment Corp. v. Allen, 697 S.W.2d 332, 334 (Tenn. 1985)). The three primary factors are as follows:

1) The quantity of the contacts,

2) The nature and quality of the contacts, and

3) The source in connection of the cause of action with the contacts.

Masada at 334. The two lesser factors to be considered are “the interest of the foreign state and the convenience” to the parties. Id. at p. 334.

In the dispute between Precision and H and H the court concluded that minimum contacts existed between H and H and Tennessee in order to provide Tennessee jurisdiction over the dispute. The court found certain facts pertinent including that H and H intentionally contacted a Tennessee corporation to manufacture parts. Id. at 3. Additionally, H and H entered into a contract which provided that all disputes under the contract would be governed under Tennessee law. Id. at 3. The court also found the fact nobody from H and H came to Tennessee and that H and H did not conduct other business activities in Tennessee was irrelevant. This was mainly because the actual dispute arose from the fact H and H purposefully directed its activity to an entity in Tennessee and litigation came about due to that activity. Id. at 3. As a result, the court found H and H should “reasonably have anticipated it might be haled into court in Tennessee.” Id. at 3.

This case provides a good summary of Tennessee law on when a Tennessee court should exercise jurisdiction over an out of state entity. It is actually somewhat surprising that H and H tried to contest jurisdiction because the actual contract referenced the fact Tennessee law would govern any disputes. Further, the fact H and H contacted a Tennessee entity and requested that entity to manufacture and deliver certain items makes jurisdiction almost certain under Tennessee law when a dispute arises out of that same transaction.

Comparative fault - T.C.A. § 16-15-735 requires pre-trial notification to the plaintiff of possible additional parties at fault in a General Sessions case

9/24/2012 8:58:15 AM

I recently came across a Tennessee statute that is very important to remember in any Tennessee General Sessions case. T.C.A. § 16-15-735 requires the defendant to provide notification to the opposing party and the clerk of the court, in writing, at least 48 hours prior to the hearing, of the identify of other individual who may be at fault. T.C.A. § 16-15-735 provides as follows:

(a) In cases or controversies arising in a court of general sessions, if a defendant feels that the defendant is either not at fault or that another person is also at fault, the defendant is to notify the opposing party or parties and the clerk of the court in writing forty-eight (48) hours prior to the scheduled date of the hearing of the names, if known, of the other person or persons at fault. If the defendant fails to so notify, the plaintiff shall be entitled to a continuance.

(b) After receiving notice that additional defendants may exist, the clerk of the court shall notify the plaintiff of this fact. The clerk shall automatically continue the hearing for thirty (30) days following notification to the plaintiff that additional defendants exist so the plaintiff can issue service and amend the warrant to include any new defendants.

This statute is important to keep in mind in order to avoid a trial continuance in the statute where the defendant is ready to move forward with trial, has experts in attendance at trial and has witnesses subpoenaed to trial. The statute automatically allows the plaintiff to receive a continuance of the trial if the defendant fails to comply with this notice requirement and plans to assert fault against individuals who are not parties.

Additionally, this statute provides a basis for the defendant to receive an automatic continuance if there is another party at fault. So if the defendant needs a continuance for some reason, the provision of notice to the plaintiff and the clerk under this statute provides an automatic 30 day continuance of the trial. This is an important statute to keep in mind in a General Sessions case if there are people the defendant intends to assert fault against that are not parties to the case.

Tennessee Premises Liability - When is liability imposed on a property owner in a premises liability case?

9/20/2012 10:41:11 AM

The recent Tennessee Court of Appeals decision of David G. Rogers v. Autozone Stores, Inc., No. M2011-02606-COA-R3-CV, 2012 WL 3594342 (Tenn. Ct. App. August 21, 2012) provides a good summary of Tennessee premises liability law. Factually, this case concerns a plaintiff who alleged she slipped and fell in a puddle in an AutoZone store a few feet away from the front counter. It was raining on the day of the incident. The plaintiff initially entered the store and then exited to go outside while it was still raining. The plaintiff then returned inside the store approximately 15 to 20 minutes after she first entered. The plaintiff claims she then fell in a puddle that was the size of a plant pot. She was the only person in the front of the store during the 15 to 20 minutes prior to the fall.

The Court found that for a plaintiff to recover under a premises liability theory, the plaintiff must establish the standard elements of negligence and one of the two following elements:

(1) the condition was caused or created by the owner, operator, or his agent, or (2) if the condition was created by someone other than the owner, operator, or his agent, that the owner had actual or constructive notice that the condition existed prior to the accident.

Rogers at 6. (citing Blair v. West Town Mall, 130 S.W.3d 761, 764 (Tenn. 2004).

The Tennessee Court of Appeals also discussed the fact that foreseeability is a key requirement in a premises liability action. The Court stated, "for a plaintiff to prevail in a premises liability case, he or she must prove that the injury was a reasonably foreseeable probability and that some action within the defendant's power more probably than not would have prevented the injury." Rogers at 6 (citing Dobson v. State, 23 S.W.3d 324, 330 (Tenn. Ct. App. 1999)).

Based on the facts in the Rogers case, the Court found

Even taking into consideration the fact that the puddle was the size of a plant pot and that the employee could have seen the puddle from the counter, we do not believe that there is any evidence to infer that Autozone should have discovered the puddle's existence when Ms. Wright was the only person in the front of the store during the 15 to 20 minutes prior to the fall. While the employees were not tasked with patrolling the store for spills at set times, they had been instructed to clean any spills that they encountered. We do not believe that a lapse of approximately 20 minutes between general inspections was unreasonable when, according to Ms. Palmore, there was only one customer in the front of the store during that time period. Additionally, we cannot say that an employee would have discovered the puddle when Ms. Wright, who admitted that she was only a few steps away from the puddle when she first left the store, did not even notice the puddle in her successive trips in and out of the store. Without any additional evidence regarding the source of the puddle or the actual length of time that the puddle was present, we hold that there was not any material evidence from which the trier of fact could infer that the dangerous condition existed for such a length of time that one exercising reasonable care would have discovered it.

(emphasis added) Rogers at 7. This language provides a good example of how Tennessee courts should analyze the facts of the case in conjunction with the law.

The Tennessee Court of Appeals also provided an interesting summary of how a plaintiff can prove "constructive notice" in a premises liability case. The court found there were three possible ways to establish constructive notice:

First, the plaintiff may demonstrate that the owner or operator of the premises caused or created the condition. Second, if a third party caused or created the dangerous condition, the plaintiff may prove constructive notice by evidence that the condition “existed for a length of time” that the owner/occupier “in the exercise of reasonable care, should have become aware of that condition.” Third, the plaintiff may show constructive notice by proving that “a pattern of conduct, recurring incident, or general continuing condition” caused the dangerous condition.

(citations omitted) Rogers at 6. Constructive notice is a very important part of most premises liability cases. This is due to the fact it is rare that a premises owner had actual notice and therefore the fight in litigation is often whether the premises owner had constructive notice of the defective condition.

Overall, this decision is helpful because it summarizes the key points of law for a premises liability case in Tennessee. Additionally, the Court affirmatively found it did not believe a lapse of approximately 20 minutes between “general inspections” was unreasonable when the plaintiff was the only person in that area of the store during that time period. This could certainly be useful for defense counsel as a presumptive example of a reasonable time period between general inspections, even when it is raining.

Res Judicata - Requirements for a case to be dismissed under doctrine of res judicata in Tennessee

9/17/2012 8:58:34 AM

Brief Summary: In order to apply the doctrine of res judicata to bar a second cause of action filed by the plaintiff over the same issues in dispute, the first cause of action must be dismissed “on the merits”. In other words, a procedural or technical dismissal of the first cause of action will not allow a second cause of action to be barred under the doctrine of res judicata.

Analysis: The recent Tennessee Court of Appeals decision of J. M. Hanner Construction Company,, Inc. v. Thomas Brothers Construction Company, Inc., E2011-01641-COA-R9-CV, 2012 WL 3012639 (Tenn. Ct. App. July 24, 2012) discussed the requirements to obtain a dismissal of a case based on the doctrine of res judicata in Tennessee. Res judicata is a doctrine that is defined as “a final judgment on the merits by a court having jurisdiction is conclusive between the parties to a suit as to all matters that were litigated or that could have been litigated in that suit.” (Quote from The Free Dictionary). The Hanner case dealt with a situation where the plaintiff filed an initial complaint that was dismissed due to the failure of the plaintiff to meet signing requirements set forth in Rule 11.01 of the Tennessee Rules of Civil Procedure. A second complaint was later filed and the defendant requested a dismissal of that case based on the doctrine of res judicata.

The Tennessee Court of Appeals noted the required elements that must be established by a party asserting a res judicata defense as follows:

(1) a court of competent jurisdiction rendered the prior judgment, (2) the prior judgment was final, (3) the same parties or their privies were involved in both proceedings, and (4) both proceedings involved the same cause of action.

Hanner at p. 3. The most important element that was pertinent in this case was the requirement that in order for res judicata to apply, the prior judgment must conclude the rights of the parties on the merits. The Hanner court cited the Tennessee Supreme Court decision of Garrett v. Corry Foam Products, Inc., 596 S.W.2d 808 (Tenn. 1980) which provided the following discussion about the “on the merits” requirement:

A party who asserts the defense of res judicata, or estoppel by judgment, has the burden of proving it and must show that the right in question was determined on the merits in the former judgment. And, if the judgment itself leaves the matter uncertain then it must be proved by other evidence.

An interesting argument was raised by the defendant in the Hanner case that res judicata should apply because the first case was actually involuntarily dismissed under Rule 41.02 of the Tennessee Rules of Civil Procedure. This rule provides as follows:

(1) For failure of the plaintiff to prosecute or to comply with these rules or any order of court, a defendant may move for dismissal of an action or of any claim against the defendant.

…

(3) Unless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision and any dismissal not provided for in this Rule 41, other than a dismissal for lack of jurisdiction or for improper venue or for lack of an indispensable party, operates as an adjudication upon the merits.

(emphasis added). As a result, Rule 41.02(3) expressly provides that a dismissal under this provision "operates as an adjudication upon the merits" unless the court, in its order, specifies otherwise. Therefore, the defendant argued that this language compelled the application of the doctrine of res judicata because the dismissal was “on the merits.”

Ultimately, the Hanner court found that the dismissal of the first complaint was due to a procedural defect under Rule 11. As a result, the case was not decided on the merits and therefore the doctrine of res judicata did not apply to the second suit. The court really did not address the specifics of the defendant's argument that Rule 41.02(3) specifically labels an involuntary dismissal as an "adjudication upon the merits" unless the trial court specifically states otherwise. The court appeared to look past the language in the Rule and instead looked at the actual basis for the dismissal and found the basis was procedure in nature. As a result, the requirement for the adjudication to be “on the merits” was not met in this case and therefore the doctrine could not be applied.

In summary, this case is important because it shows that in order for the doctrine of res judicata to apply to bar a second cause of action, the first case must be decided “on the merits.” A dismissal due to a technical or procedural deficiency will not be sufficient to allow the doctrine of res judicata to dismiss the second cause of action.

Whitewater Activity Immunity - T.C.A. § 70-7-201 et al. provides immunity to companies and individuals for certain Whitewater activities

9/11/2012 11:35:28 AM

The Tennessee legislature adopted Public Chapter No. 862 which was signed by Governor, Bill Haslam, on May 1, 2012 and is effective on that date. This bill created T.C.A. § 70-7-201 through T.C.A. § 70-7-205. The general purpose of these new statutes is identified in the bill. The bill states the purpose is to “encourage Whitewater activities by limiting the civil liability of those involved in such activities” in Tennessee. This statute provides immunity from civil suit in certain circumstances in T.C.A. § 70-7-202 which states:

Except as provided in § 70-7-203:

(1) A Whitewater professional shall not be liable for an injury to or the death of a participant resulting from the inherent risks of Whitewater activities; and

(2) No participant or participant's representative shall make any claim against, maintain an action against, or recover from a Whitewater professional, or any other participant for injury, loss, damages, or death of the participant resulting from any of the inherent risks of Whitewater activities.

As a result, the statute provides immunity to Whitewater professionals for many Whitewater activities that could result in injury. A “Whitewater professional” is defined in the statute as “a person, corporation, LLC, partnership, natural person or any other entity engaged for compensation in whitewater activity.” The term “inherent risks of Whitewater activities” is also a defined term in the statute and the immunity only applies if the injury results from one of the defined inherent risks. “Inherent risks of Whitewater activities” is defined in T.C.A. § 70-7-201 as follows:

(2) “Inherent risks of Whitewater activities” means those dangers or conditions that are an integral part of Whitewater activities, including, but not limited to:

(A) Water;

(B) Rocks and obstructions;

(D) The potential of a participant to act in a negligent manner that may contribute to injury to the participant or other, such as failing to follow instructions or not acting within the participant's ability;

It is important to note, however, that T.C.A. § 70-7-203 provides specific exceptions to the general immunity provided in this statute. T.C.A. § 70-7-203 provides:

Nothing in § 70-7-202 shall be construed to prevent or limit the liability of a Whitewater professional, or any other person if the Whitewater professional:

(1) Provided the equipment and knew or should have known that the equipment was faulty, and the equipment was faulty to the extent that it caused the injury;

(2) Owns, leases, rents, or otherwise is in the lawful possession and control of the land or facilities upon which the participant sustained injuries because of a dangerous latent condition that was known to the Whitewater professional, or person and for which warning signs have not been conspicuously posted;

(3) Commits an act or omission that constitutes gross negligence or willful or wanton disregard for the safety of the participant, and the act or omission caused the injury; or

(4) Intentionally injures the participant.

Further, T.C.A. § 70-7-204 requires Whitewater professionals to post a warning sign and to insert into any Whitewater contract a statement discussing the terms in this statute. Interestingly, the statute does not identify the penalty if a Whitewater professional does not provide the required warning sign and notification in the contract.

Construction Defect – Four year statute of repose from date of substantial completion

9/6/2012 9:46:55 PM

has a four year statute of repose for construction defect claims, with some exceptions. A statute of repose bars a claim after a date certain and is different from a statute of limitations. A statute of limitations generally bars a claim a certain amount of time after the cause of action accrues. A statute of repose, however, generally bars a claim after a certain time period passes from an event other then the time the cause of action accrues. (See Wyatt v. A-Best Products Co., 924 S.W.2d 98, 102 (Tenn. Ct. App 1995) for a good discussion on the differences between the two). The Tennessee Court of Appeals has stated that “because a statute of repose sets the triggering event as something other than accrual, it can have the effect of barring a plaintiff's claim before it accrues, most typically before the plaintiff becomes aware of his or her injury.” Wyatt at 102.

The statute of repose for construction defect claims is found in T.C.A. § 28-3-201 – T.C.A. § 28-3-205. This statute has some nuances that need to be considered in all cases involving construction defects. T.C.A. § 28-3-202 is the operative statute and provides as follows:

All actions to recover damages for any deficiency in the design, planning, supervision, observation of construction, or construction of an improvement to real property, for injury to property, real or personal, arising out of any such deficiency, or for injury to the person or for wrongful death arising out of any such deficiency, shall be brought against any person performing or furnishing the design, planning, supervision, observation of construction, construction of, or land surveying in connection with, such an improvement within four (4) years after substantial completion of such an improvement.

(emphasis added). As a result, there is a four year statute of repose which prevents a lawsuit for construction defect claims (as defined in the statute) unless the cause of action is commenced within four years after substantial completion of the improvement.

As a result, the definition of “substantial completion” is very important to determine when the four year time period begins to run. T.C.A. § 28-3-201 provides a definition for substantial completion as follows:

(2) “Substantial completion” means that degree of completion of a project, improvement, or a specified area or portion thereof (in accordance with the contract documents, as modified by any change orders agreed to by the parties) upon attainment of which the owner can use the same for the purpose for which it was intended; the date of substantial completion may be established by written agreement between the contractor and the owner.

Additionally, T.C.A. § 28-3-203 provides a minor exception to the four year statute of repose if the “injury” occurs during the fourth year after substantial completion. If the injury occurs during the fourth year, then the lawsuit must be brought within one year of the date the injury occurred. This essentially extends the statute of repose up to five years when the injury occurs in this time frame.

One other part of this statute provides some limited exceptions to the general four year statute of repose. T.C.A. § 28-3-205 provides as follows:

(a) The limitation provided by this part shall not be asserted as a defense by any person in actual possession or the control, as owner, tenant, or otherwise, of such an improvement at the time any deficiency in such an improvement constitutes the proximate cause of the injury or death for which it is proposed to bring an action.

(b) The limitation hereby provided shall not be available as a defense to any person who shall have been guilty of fraud in performing or furnishing the design, planning, supervision, observation of construction, construction of, or land surveying, in connection with such an improvement, or to any person who shall wrongfully conceal any such cause of action.

The first exception in subsection (a) provides this statute of repose can not be used as a defense by any person who is actually in possession or control of the property at the time the injury occurs. Additionally, subsection (b) provides a fraud exception that prevents a party from taking advantage of the four year statute of repose when that party is guilty of fraud or has wrongfully concealed the cause of action.

Follow me on Twitter at @jasonalee for updates from the Tennessee Defense Litigation site.

Tennessee Consumer Protection Act – The “catch all” provision (T.C.A. § 47-18-107(b)(27)) found in the Tennessee Consumer Protection Act has been eliminated

9/4/2012 9:30:38 AM

The Tennessee tort reform bill of 2011 eliminated the “catch all” provision previously found in the Tennessee Consumer Protection Act (The Tennessee Consumer Protection Act is found in T.C.A. § 47-18-101 – T.C.A. § 47-18-130). This change went into effect with the adoption of Public Chapter No. 510 (the Tennessee tort reform bill) and applies to all actions that accrue on or after October 1, 2011.

The key operative portion of the Tennessee Consumer Protection Act is T.C.A. § 47-18-104(b) which provides a long detailed listing of "unfair or deceptive acts or practices" that are forbidden under Tennessee law. Currently there are a total of forty-seven acts or practices that are listed and each of these is considered to be a Class B misdemeanor. T.C.A. § 47-18-109(a)(1) creates a private cause of action for any person who suffers a loss as a result of one of the listed “unfair or deceptive acts or practices” found in T.C.A. § 47-18-104(b). T.C.A. § 47-18-109(a)(1) provides as follows:

(a)(1) Any person who suffers an ascertainable loss of money or property, real, personal, or mixed, or any other article, commodity, or thing of value wherever situated, as a result of the use or employment by another person of an unfair or deceptive act or practice described in § 47-18-104(b) and declared to be unlawful by this part, may bring an action individually to recover actual damages.

(emphasis added). Prior to the Tennessee tort reform bill of 2011, the Tennessee Consumer Protection Act had a “catch all” provision that provided a private cause of action for “engaging in any other act or practice which is deceptive to the consumer or to any other person.” (See T.C.A. § 47-18-107(b)(27)). This “catch all” provided for a significant expansion of the Tennessee Consumer Protection Act beyond the specifically listed “unfair or deceptive acts or practices”. This “catch all” provided the Court with great discretion to find violations of the Tennessee Consumer Protection Act even if the unfair or deceptive act was not explicitly listed in the statute.

The amendment to the statute found in Public Chapter No. 510 added the following language to the end of T.C.A. § 47-18-107(b)(27): “provided, however, that enforcement of this subdivision (b)(27) is vested exclusively in the office of the attorney general and reporter and the director of the division.” (emphasis added). As a result, the ability to bring a private cause of action under the “catch all” provision found in this Act has been removed. Only the Attorney General can enforce the “catch all” provision after this amendment. This is important because this “catch all” was often used by plaintiffs to try to increase the potential damages and to allow for an award of attorney’s fees. The Tennessee Consumer Protection Act can now only be used under this section if there is a specifically enumerated "unfair or deceptive act or practice" that is violated.

Follow me on Twitter at @jasonalee for updates from the Tennessee Defense Litigation site.

Motion to Dismiss - Tennessee's new "loser pays" law … that isn’t

8/30/2012 2:46:03 PM

Brief Summary: The new “loser pays” law in Tennessee provides very limited circumstances where the “loser” plaintiff actually is required to pay for the attorney’s fees and costs of the defendant. Generally, this new law only applies to Rule 12.02(6) motions to dismiss for failure to state a claim upon which relief may be granted. Even when a Rule 12.02(6) motion to dismiss is granted, there are many exceptions to this requirement.

Analysis: The Tennessee legislature adopted Public Chapter No. 1046 which was signed into law by Governor Bill Haslam on May 21, 2012. This law applies to all claims filed on or after July 1, 2012. As a result, this “loser pays” law is currently in effect for all new claims filed in Tennessee. This law is effectively a “loser pays” statute but is has many exceptions and is very limited in scope. The new bill added T.C.A. § 20-12-119(c). The key operative portion of this “loser pays” statute is subsection (c)(1) which provides as follows:

(c)(1) Notwithstanding subsection (a) or (b), in a civil proceeding, where a trial court grants a motion to dismiss pursuant to Rule 12 of the Tennessee Rules of Civil Procedure for failure to state a claim upon which relief may be granted, the court shall award the party or parties against whom the dismissed claims were pending at the time the successful motion to dismiss was granted the costs and reasonable and necessary attorney's fees incurred in the proceedings as a consequence of the dismissed claims by that party or parties. The awarded costs and fees shall be paid by the party or parties whose claim or claims were dismissed as a result of the granted motion to dismiss.

As a result, attorney’s fees and costs “shall” be paid by the party who brought the claims that are dismissed under Tennessee Rule of Civil Procedure 12.02(6) for failure to state a claim upon which relief may be granted. This requirement is mandatory, unless one of the many exceptions applies.

Subsection (c)(3) provides that the award of attorney’s fees and costs can only be made after the appeal process is exhausted and the dismissal is final. Additionally, subsection (c)(4) provides there is a maximum potential award for attorney’s fees and costs of $10,000.00 under this statute for any single lawsuit. Even if multiple parties are dismissed under a Rule 12.02(6) motion to dismiss for failure to state a claim upon which relief can be granted, the $10,000.00 maximum is still in place and must be apportioned between the dismissed parties.

Further T.C.A. § 20-12-119(c)(5) provides six exceptions to the “loser pays” requirement under this statute. An award of attorney’s fees and costs under this statute can not be made in the following circumstances:

(1) Actions against governmental entities or public officials (See T.C.A. § 20-12-119(c)(5)(A)).

(2) Any motion to dismiss filed sixty days after the latest complaint, counter-complaint or cross-complaint (See T.C.A. § 20-12-119(c)(5)(B)).

(3) Any claim that is withdrawn or amended in good faith in order to state a claim upon which relief can be granted. However, this must be done at least three days prior to the hearing date for the motion to dismiss for this exception to apply (See T.C.A. § 20-12-119(c)(5)(C)).

(4) Actions by pro se litigants unless they “acted unreasonably in bringing, or refusing to voluntarily withdraw, the dismissed claim” (See T.C.A. § 20-12-119(c)(5)(D)).

(5) Any claim that is a “good faith, non-frivolous claim filed for the express purpose of extending, modifying or reversing existing precedent, law or regulation…” This subsection also prevents an award of “loser pays” damages for constitutionality issues of first impression that have not been addressed in a published opinion. Interestingly, the exception in this subsection does not apply unless the party who made the claim specifically pleads in the latest complaint that the dismissed claim is made for one of the expressed purposes found in this subsection (See T.C.A. § 20-12-119(c)(5)(E)).

(6) Any time the law changes between the time the complaint is filed and the time the motion to dismiss is granted (See T.C.A. § 20-12-119(c)(5)(F)).

These exceptions are rather extensive and must be considered in every case to determine if the “loser” must actually pay.

The Tennessee Supreme Court in Webb v. Nashville Area Habitat for Humanity, 346 S.W.3d 422 (Tenn. 2011) recently addressed the appropriate standard that Tennessee Court’s should use for a Rule 12.02(6) motion to dismiss for failure to state a claim upon which relied may be granted. The Court stated as follows:

A Rule 12.02(6) motion challenges only the legal sufficiency of the complaint, not the strength of the plaintiff's proof or evidence. The resolution of a 12.02(6) motion to dismiss is determined by an examination of the pleadings alone. A defendant who files a motion to dismiss ‘admits the truth of all of the relevant and material allegations contained in the complaint, but ... asserts that the allegations fail to establish a cause of action.’

In considering a motion to dismiss, courts ‘must construe the complaint liberally, presuming all factual allegations to be true and giving the plaintiff the benefit of all reasonable inferences.’ A trial court should grant a motion to dismiss “only when it appears that the plaintiff can prove no set of facts in support of the claim that would entitle the plaintiff to relief. (citations omitted)

Webb at 426. This Webb case shows how it can be difficult to obtain a dismissal based on Rule 12.02(6) in Tennessee. One negative result of this “loser pays” statute is it may actually make it even more difficult to obtain a dismissal based on a Rule 12.02(6) motion to dismiss because the Court will be aware of the consequences if the motion is granted (that the losing party will have to pay up to $10,000.00 in attorney fees and costs) and may therefore be hesitant to grant the motion.

The “loser pays” statute language found in this bill is significantly watered down from what a true “loser pays” system would look like. It is expected that the “loser pays” provisions in this statute will not likely be awarded very often. This is especially true because it is already difficult in Tennessee to be successful on a motion to dismiss for failure to state a claim upon which relief can be granted under Rule 12.02(6) due to the stringent requirements to sustain such a motion. Of course an additional issue that comes up with this statute is after a “loser pays” award is made, how will we collect this award from the plaintiff?

Follow me on Twitter at @jasonalee for updates from the Tennessee Defense Litigation site.

Tennessee Product Liability Actions – The 2011 Tennessee tort reform bill changed product liability actions against sellers in Tennessee.

8/27/2012 10:35:03 AM

Brief Summary: The new statutory language adopted in Tennessee for product liability actions found in the Tennessee tort reform bill of 2011 changed the circumstances where a seller can be found liable for selling a defective product. This statute made it more difficult for a plaintiff to recover damages against a seller of a defective product in a product liability action.

Analysis: The Tennessee tort reform bill of 2011 completely replaced the old T.C.A. § 29-28-106 with new statutory language that is more favorable to sellers in product liability actions. This statute governs when a product liability action can be maintained against a seller, other than the manufacturer, in Tennessee. The new T.C.A. § 29-28-106 provides as follows:

No product liability action, as defined in § 29-28-102, shall be commenced or maintained against any seller, other than the manufacturer, unless:

(2) Altered or modified the product, and the alteration or modification was a substantial factor in causing the harm for which recovery of damages is sought;

(3) The seller gave an express warranty as defined by title 47, chapter 2;

(5) The manufacturer has been judicially declared insolvent.

It went into effect in Tennessee with the adoption of Public Chapter No. 510 and it applies to all actions that accrue on or after October 1, 2011. This statute changed the circumstances when a seller can be found liable for selling a defective product. This new statutory language provides:

1. This statute strengthened the protections for a seller that does not modify, alter or inspect the product. Previously, the statute had a “closed container” defense which basically provided protection as long as the seller did not have a reasonable opportunity to inspect the product. As a result, this opened the door to factual disputes as to what constituted a “reasonable opportunity” to inspect the product. This new statute eliminates this prior nonspecific language and instead provides that for the seller to be responsible, it must exercise “substantial control” over “that aspect of the design, testing, manufacture, packaging or labeling of the product that caused the alleged harm for which recovery of damages is sought.”

2. The new statutory language also eliminates the ability to bring a cause of action against a seller for an “implied warranty” as was found in the original statute. The plaintiff must now rely on an “express warranty” under this statute as defined in Title 47, Chapter 2.

3. The Tennessee tort reform bill also added T.C.A. 29-39-104(c) which provides the circumstances when punitive damages can be assessed against a seller in a products liability action. A seller can only be liable for punitive damages when (1) the seller exercised substantial control “over that aspect of the design, testing, manufacture, packaging or labeling of the product that caused the harm for which recovery of damages is sought” or (2) the seller altered or modified the product and that alteration or modification was a “substantial factor” in causing the harm in question or (3) the seller “had actual knowledge of the defective condition of the product” at the time is was sold.

4. Under the new statute, the seller of the product can still be found liable when the manufacturer or distributor “is not subject to service of process” in Tennessee. Additionally, the seller can be found liable when the manufacturer has been “judicially declared insolvent”.

This statute provides significant strengthening of T.C.A. § 29-28-106 for sellers of products in Tennessee. It makes it much more difficult to bring a products liability cause of action against a seller of a product in Tennessee. This is certainly a positive development for companies that sell products in Tennessee.

When handling cases involving the defense of a seller of an allegedly defective product, it could certainly be important to know the actual changes made in the statute. For that reason, below is the language of the old version of T.C.A. § 29-28-106 for comparison purposes:

(a) No product liability action, as defined in § 29-28-102(6), shall be commenced or maintained against any seller when the product is acquired and sold by the seller in a sealed container and/or when the product is acquired and sold by the seller under circumstances in which the seller is afforded no reasonable opportunity to inspect the product in such a manner which would or should, in the exercise of reasonable care, reveal the existence of the defective condition. The provisions of the first sentence of this subsection shall not apply to:

(1) Actions based upon a breach of warranty, express or implied, as defined by title 47, chapter 2; or

(2) Actions where the manufacturer of the product or part in question shall not be subject to service of process in the state of Tennessee and where service cannot be secured by the long-arm statutes of Tennessee; or

(3) Actions where the manufacturer has been judicially declared insolvent.

(b) No product liability action, as defined in § 29-28-102(6), when based on the doctrine of strict liability in tort, shall be commenced or maintained against any seller of a product which is alleged to contain or possess a defective condition unreasonably dangerous to the buyer, user or consumer unless the seller is also the manufacturer of the product or the manufacturer of the part thereof claimed to be defective, or unless the manufacturer of the product or part in question shall not be subject to service of process in the state of Tennessee or service cannot be secured by the long-arm statutes of Tennessee or unless such manufacturer has been judicially declared insolvent.

Tennessee Statutes of Limitation – Statutes of limitation for common Tennessee causes of action

8/23/2012 9:13:06 AM

This post will address the statutes of limitation for several common Tennessee causes of action. I will also provide the Tennessee statute that is the source for the statutes of limitation for each cause of action.

It must be noted that fact specific inquiries need to be completed for each and every case. Each case could have specific facts that could impact whether the statute of limitations bars a particular claim. The “discovery rule” is one doctrine that has been applied to some Tennessee causes of action. The Tennessee Supreme Court has found the discovery rule “provides that the statute of limitations begins to run when the injury is discovered, or in the exercise of reasonable care and diligence, the injury should have been discovered. The rule responds to the unfairness of requiring that he [a plaintiff] sue to vindicate a non-existent wrong, at a time when injury is unknown and unknowable.” Quality Auto Parts v. Bluff City Buick, 876 S.W.2d. 818, 820 (Tenn. 1994). There are other potential exceptions to Tennessee statutes of limitation including exceptions for minors or those deemed incompetent under certain circumstances. See T.C.A. § 28-1-106.

The causes of action and the Tennessee statute of limitation for each are as follows:

1. Slander - "within six (6) months after the words are uttered." (See T.C.A. § 28-3-103)

2. Civil actions for compensatory or punitive damages brought under the Federal Civil Rights statutes - 1 year statute of limitation (See T.C.A. § 28-3-104(a)(3))

3. False Imprisonment - 1 year statute of limitation (See T.C.A. § 28-3-104(a)(1))

4. Injuries to the person - 1 year statute of limitation (See T.C.A. § 28-3-104(a)(1))

5. Libel - 1 year statute of limitation (See T.C.A. § 28-3-104(a)(1))

6. Malicious Prosecution - 1 year statute of limitation (See T.C.A. § 28-3-104(a)(1))

7. Medical Malpractice – 1 year statute of limitation from injury (or discovery of that injury under certain circumstances) (See T.C.A. § 29-26-116 and T.C.A. § 28-3-104)

8. Products Liability – 1 year statute of limitations from the date of the injury, not the sale of the product (See T.C.A. § 28-3-104(b)(2))

9. Suits against attorneys and accountants for malpractice - 1 year statute of limitation (See T.C.A. § 28-3-104(a)(2))

10. Wrongful Death – 1 year statute of limitation (T.C.A. § 28-3-104)

11. Actions for usury (excessive interest rate) – 2 years from “the date of the payment of the debt upon which such claim for usury shall be based” (See T.C.A. § 28-3-107)

12. Actions for detention or conversion of personal property - 3 years (See T.C.A. § 28-3-105(2))

13. Injury to personal property - 3 year statute of limitation (See T.C.A. § 28-3-105(1))

14. Injury to real property - 3 year statute of limitation (See T.C.A. § 28-3-105(1))

15. Damages against person engaging in the practice of surveying for any deficiency, defect, omission, error or miscalculation - 4 year statute of limitation from the date the survey is recorded on the plat (See T.C.A. § 28-3-114)

16. Breach of contract causes of actions (other than those expressly provided for in specific statutes) – 6 year statute of limitation (See T.C.A. § 28-3-109(a)(3))

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Tennessee Tort Reform - When can punitive damages be awarded in Tennessee under T.C.A. § 29-39-104?

8/20/2012 9:14:09 AM

Brief Summary: Under the Tennessee tort reform bill of 2011, the legislature provided specific requirements for the assessment of punitive damages in Tennessee. Many of these requirements were present in pre-existing case law but some of them are new. The main impact of this statute, T.C.A. § 29-39-104, is it codified case law requirements for punitive damage awards.

Analysis: The Tennessee tort reform bill of 2011 provided a new statute that provided specific rules for when punitive damages can be assessed in civil actions in Tennessee. T.C.A. § 29-39-104 outlines the requirements for a punitive damages award under Tennessee law. This statute is only in effect for causes of actions that accrue on or after October 1, 2011. T.C.A. § 29-39-104(a)(1) provides as follows:

(a) In a civil action in which punitive damages are sought:

(1) Punitive damages may only be awarded if the claimant proves by clear and convincing evidence that the defendant against whom punitive damages are sought acted maliciously, intentionally, fraudulently or recklessly;

This statute is broad because it is intended to apply to all civil actions where punitive damages are assessed. This opening section of the statute sets out the first threshold identifying when punitive damages can be assessed. The jury or judge must find that the defendant acted "maliciously, intentionally, fraudulently, or recklessly." Further, this must be proved by “clear and convincing evidence”. The Tennessee Supreme Court held in Hodges v. S.C. Toof & Co., 833 S.W.2d 896, 901 (Tenn. 1992) in footnote #3 that "clear and convincing evidence means evidence in which there is no serious or substantial doubt about the correctness of the conclusions drawn from the evidence."

T.C.A. § 29-39-104(a)(2) provides more requirements for a punitive damages award. This section requires that the punitive damages phase of the trial should be bifurcated (held separately) and the trier of fact must first determine whether compensatory damages are to be awarded and how much those damages are before proceeding to the punitive damages phase of the trial. Then, the jury must determine whether each defendant's conduct was "malicious, intentional, fraudulent or reckless." Next the jury must determine whether any T.C.A. § 29-39-104(a)(7) exception to the cap on punitive damages applies. The exceptions to the new cap on punitive damages were discussed in a prior blog post here.

After a jury finds that the defendant engaged in malicious, intentional, fraudulent or reckless conduct, under T.C.A. § 29-39-104 the Court then “promptly commences” an evidentiary hearing where the trier of fact will determine the amount of punitive damages. Under T.C.A. § 29-39-104(a)(4), the trier of fact should determine the amount of a punitive damage award by considering the following elements:

1. the defendant's financial condition and net worth;

2. the nature and reprehensibility of the defendant's wrongdoing;

3. the impact of the defendant's conduct on the plaintiff;

4. the relationship of the defendant to the plaintiff;

5. the defendant's awareness of the amount of harm being caused and the defendant's motivation in causing such harm;

6. the duration of the defendant's misconduct and whether the defendant attempted to conceal such misconduct;

7. the expense plaintiff has borne in attempts to recover the losses;

8. whether the defendant profited from the activity, and if defendant did profit, whether the punitive award should be in excess of the profit in order to deter similar future behavior;

9. whether, and the extent to which, defendant has been subjected to previous punitive damage awards based upon the same wrongful act;

10. whether, once the misconduct became known to defendant, defendant took remedial action or attempted to make amends by offering a prompt and fair settlement for actual harm caused; and

11. any other circumstances shown by the evidence that bear on determining a proper amount of punitive damages.

Under this statute, the jury must be instructed that the "primary purpose of punitive damages is to punish the wrongdoer and deter similar misconduct in the future by the defendant and others while the purpose of compensatory damages is to make the plaintiff whole." The remaining parts of T.C.A. § 29-39-104 provide additional details on the assessment of punitive damages including caps that apply to the damages on those damages that I discussed in a prior blog post.

Follow me on Twitter at @jasonalee for updates from the Tennessee Defense Litigation site.

Tennessee Dram Shop Law - When can a bar, retailer or restaurant be found liable for accident caused by intoxicated individual under Tennessee Law?

8/16/2012 8:25:20 AM

In 1986, the Tennessee legislature created T.C.A. § 57-10-101 and T.C.A. § 57-10-102 in order to provide a statutory scheme for Tennessee Dram Shop liability. These two statutes define when a bar, retailer or restaurant can be found responsible for selling alcohol to an individual that later causes injuries or death to another person while intoxicated from that alcohol. You may wonder why it is called “dram shop” law. “Dram shop laws are named after establishments in 18th Century England that sold gin by the spoonful (called a "dram").” Quote from Findlaw article found here.

T.C.A. § 57-10-101 provides as follows:

The general assembly hereby finds and declares that the consumption of any alcoholic beverage or beer rather than the furnishing of any alcoholic beverage or beer is the proximate cause of injuries inflicted upon another by an intoxicated person.

As a result, in Tennessee the general rule is that, bars, retailers and restaurants can not be found responsible to third-parties for damages caused by an intoxicated individual for alcohol served or sold to that person. However, T.C.A. § 57-10-102 provides some exceptions to this rule that need to be carefully considered.

T.C.A. § 57-10-102 provides as follows:

Notwithstanding the provisions of § 57-10-101, no judge or jury may pronounce a judgment awarding damages to or on behalf of any party who has suffered personal injury or death against any person who has sold any alcoholic beverage or beer, unless such jury of twelve (12) persons has first ascertained beyond a reasonable doubt that the sale by such person of the alcoholic beverage or beer was the proximate cause of the personal injury or death sustained and that such person:

(1) Sold the alcoholic beverage or beer to a person known to be under the age of twenty-one (21) years and such person caused the personal injury or death as the direct result of the consumption of the alcoholic beverage or beer so sold; or

(2) Sold the alcoholic beverage or beer to a visibly intoxicated person and such person caused the personal injury or death as the direct result of the consumption of the alcoholic beverage or beer so sold.

There are several important things to note about this statute. The first is that the plaintiff has the burden to establish the exceptions found in T.C.A. § 57-10-102 "beyond a reasonable doubt." This is a very high burden of proof for the plaintiff. Additionally, this statute requires that a jury of twelve persons must make the determination under the statute. There are some Tennessee local rules of court that provide that a jury of six individuals is standard unless a jury of twelve persons is requested. See Norris v. Nationwide, 728 S.W.2d 335 (Tenn. Ct. App. 1987) and the Local Rules of Court for Davidson County, § 31.02. However, under T.C.A. § 57-10-102 a jury of twelve people must make the findings under this statute.

Under these statutes there are two basic scenarios that a bar, retailer or restaurant can be found responsible for selling alcoholic beverages that lead to the injury or death of a third party. Before either of these scenarios can be utilized, the statute requires the plaintiff to establish beyond a reasonable doubt that the sale of the alcohol or beer was the proximate cause of the personal injury or death.

Next the plaintiff must prove one of two things. First, that the alcoholic beverage or beer was sold to an individual that was "known to be" under the age of twenty-one and that person caused personal injury or death as the direct result of the "consumption of the alcoholic beverage or beer so sold." The second option is the plaintiff can prove the sale of alcohol was to a "visibly intoxicated person" and that person caused the personal injury or death "as a direct result of the consumption of the alcoholic beverage or beer so sold."

This legislation has long made it clear in Tennessee that the legislature intends for the individual who made the decision to consume excessive amounts of alcohol to be the primary responsible party for injuries or deaths that are caused by the intoxication. Under Tennessee Law, plaintiffs have a very difficult burden to overcome in order to establish that a bar, retailer or restaurant should be found liable under Tennessee Dram Shop law.