To Recover Attorney’s Fees in Tennessee, You Have to Be Express and Exact in Your Contract

We’ve talked about this before: Tennessee is a great, creditor-friendly state, but, if you want to recover your attorney’s fees in Tennessee, you’d better have some very specific language in your contract.

The Tennessee Court of Appeals filed an opinion last week as a reminder, at Nyrstar Tennessee Mines-Strawberry Plains, LLC v. Claiborne Hauing, LLC, Tenn. Ct. Apps, No. E2017-00155-COA-R3-CV.

Here is the contract provision the Court considered:

The Customer must pay Nyrstar all costs and expenses incurred by Nyrstar in connection with enforcing its rights against the Customer under an Agreement including legal expenses and other costs incurred in recovering monies owed by the Customer to Nyrstar.

By my read, “all costs and expenses,” along with “including legal expenses,” should be good enough.

The Nystar Court disagreed. That text does not say “including reasonable attorney’s fees.”

As a result, “The provision at issue does not specifically or expressly create a right to ‘fees,’ ‘attorney’s fees,’ or ‘reasonable attorney’s fees.'” Further, ““the term ‘expenses,’ without more, . . . does not include an award of attorney fees.”

As a result, “[t]he language in the contract before us is not sufficient for Nyrstar to be  entitled to recover its attorney’s fees. The provision at issue does not expressly or  specifically create a right for Nyrstar to recover its attorney’s fees.”

So, if you want to recover attorney’s fees in Tennessee, you’d better say exactly that in your contract–that the prevailing party shall be entitled to recover its attorney’s fees.

The Ethical Implications of How You Obtain Evidence: Avoid “Pretexting” (And Also Everything Else Harvey Weinstein Did)

This week, the New Yorker ran an article, “Harvey Weinstein’s Army of Spies,” which talked about the ways that the embattled movie producer investigated the women making sexual harassment claims against him.

One of the stranger aspects, however, is that he used his lawyer, David Boies, to employ these investigators, who later pretended to be victims in order to gain the trust and sympathy of the targeted victims.

Sure, we can be appalled at the extreme measures employed, but, when his lawyer puts his signature on any aspect of it, it becomes even more troubling.

This blog isn’t about Harvey Weinstein-level counter-intelligence, but this type of thing occasionally comes up in real life law practice, particularly in domestic relations.

This is referred to as “pretexting,” and it involves some sort of ruse or deception to obtain information. Frequently, it will entail the creation of a fake social media accounts to “friend” or communicate with a witness or opposing party.

This is unethical behavior and, in Tennessee, violates the Rules of Professional Responsibility. Rule 4.1 provides that “a lawyer shall not knowingly make a false statement of material fact or law to a third person.” In addition to lawyer professional disciplinary proceedings, such actions can result in criminal or civil liability under the Gramm-Leach-Bliley Act and other mail/wire fraud statutes.

But, let’s be clear: Information that a person publicly posts online is perfectly ripe for the taking and use, including public posts and pictures. Similarly, information that a person privately posts but which a party has knowing permission to access can also be used.

The key is that a lawyer–or an investigator working for the lawyer–should not use deception or lie in order to obtain that access.  But, short of that, if it’s out there and it’s useful, download it, copy it, save it, and use it.

As an aside–and totally appropriate for this topic–I’ll be presenting the topic “Ethical Issues: Using Social Media/The Evidentiary Role of Technology,” at the Family Law Conference for Tennessee Practitioners in December 2017.

 

 

Tennessee Law on Sheriff’s Sales Can be Confusing, but Worth the Work

A very long time ago, I wrote that judgment collections may require patience but that, fortunately, Tennessee judgments are valid for ten years.

So, while you may be dealing with a debtor without any money now, keep in mind that this economy can shift for the good, as quick as it went bad. In collections, patience can lead to money.

That was in July 2010, and, man-oh-man, has Nashville’s economy rebounded. If you’ve followed my other advice, way back when, you have already ordered a certified copy of your judgment and recorded it as a lien in the real property records.

So, fast-forward to 2017. If you take that old judgment lien and add in 7-8 years’ worth of property appreciation, maybe it’s time for you to consider conducting a sheriff’s sale of real property pursuant to your judgment lien.

In Tennessee, Sheriff’s Sales are governed by Tenn. R. Civ. P. 69.07(4) and Tenn. Code Ann. § 26-5-101, et. seq. At a recent seminar, I was asked which of the two lines of authority controlled the process: Rule 69; or the Tennessee Code?

The correct answer is, unfortunately, that nobody is entirely sure. So, I guess, the answer is that both control the process.

As a practical matter, when I’m conducting a sheriff’s sale of real property to enforce a judgment, I follow all of the requirements under Rule 69 and also under Tenn. Code Ann. § 26-5-101. Sure, that makes for a lot of “hoops” to jump through, but the hoops are never contradictory.

Given the appreciation in property values, sheriff’s sales can be a very effective collection method.

 

Court of Appeals Issues Friendly Ruling in Lawyer Malpractice Matters

The Tennessee Court of Appeals recently tackled an interesting issue of when a client “discovers” a lawyer’s malpractice.

The opinion is Mark Thomas v. Richard Myers, No. W2016-02581-COA-R3-CV (Tenn. Ct. Apps., Oct. 19, 2017).

The most interesting aspect of the case is that the lawyer’s defense, basically, admitted malpractice:

Q: And you were aware that you had lost, for lack of a better term, big
time, a lot of money.
A: A great deal of money, yes.
Q: And you were aware that the evaluation by Richard Myers was
wrong.
A: Yes.
Q: And you were aware that Richard Myers’ deceptions as to what a
great case this was was wrong.
A: Yes. Yes.
Q: And you were aware that Richard Myers’ negligence and
misrepresenting to you what the law was, what the facts could be
presented as, and your great position in this lawsuit was wrong.
A: Yes.
Q: And you were aware on that day that he was not being truthful about
the odds of winning.
A: Yes.
Q: And you were aware on the day that whatever risk outline he had
given you, be it little, small, or none, was wrong, because the reality
was you’d had a judgment rendered against you, so you knew he had
misled you and deceived you.

A: Yes.

But, as a legal matter, the defense relied on the “discovery rule” to argue that, despite the lawyer “explaining away the loss” and saying that they’d ultimately win on appeal, the client “discovered” that he suffered an injury on the day that the adverse judgment was rendered at the trial court.

So, again, despite continued assurances from the lawyer that they’d win on appeal, the one-year statute of limitations for malpractice actions starts on the day of the adverse judgment. “At that point, the client is aware of the fact of injury.” Yikes.

This is an interesting decision, that clients will hate, but lawyers will love.

 

General Sessions Court is Weird, and Also Awesome

In General Sessions  today, I saw two funny things. One lawyer was walking around with a half-empty bottle of Mountain Dew in his suit jacket. Another lawyer had a can of snuf in his back-pocket as he made an argument to the Judge.

(Disclaimer: I love Mountain Dew, and I’ve praised  the A.A. Birch courthouse and others for keeping it fully stocked.)(Second Disclaimer: I’ve talked about Mountain Dew a lot on twitter.)

What I’m saying is that Davidson County General Sessions Court is a little bit different than the stuffy and formal proceedings in District Court.

That’s why a lot of the larger Nashville law firms don’t file anything in small claims court.  It can be a weird, fly-by-the-seat of your pants exercise in justice. Big firms and “fly-by-your-seat” don’t mix well.

But the following timeline shows how General Sessions Court is awesome:

  • October 18, 2017:   Filed Civil Warrant for $24,999.00.
  • October 19, 2017:  Obtained Personal Service on Defendant.
  • October 26, 2017:  Took a Judgment for $33,500.00 (base amount, but remember this old post–you can exceed that amount with attorney fees, expenses, etc.).

So, to be clear, after the 10 day appeal period expires on Monday, November 6, 2017, I’ll have a final judgment for $33,500.00 and can execute on it–in less than three weeks after filing the lawsuit.

If your creditor lawyers are filing collection lawsuits in Circuit Court or Chancery to collect debts that are less than $25,000.00, you’re paying too much and waiting too long for your Judgments.

Don’t Lose Your Next Default Judgment Hearing: Why Some Judges Ask for an Affidavit

Under Tenn. R. Civ. P 55 (governing “Default”), if a defendant does not answer or defend a lawsuit, then the plaintiff can take a default judgment against the defendant. If they don’t answer, the court grants the motion and enters a judgment. Easy, right?

Yes, but, sometimes, some courts make it more complicated than that.

In some counties, even when the defendant hasn’t responded and doesn’t appear at the hearing, the Judge will: (1) ask if I filed an Affidavit; or (2) set the matter for a “damages hearing,” which can be months in the future and could require a witness to attend.

Having seen this happen, I’ve scoured Rule 55 and the various counties’ Local Rules, but have no idea where this idiosyncrasy comes from. But, over time, I started filing affidavits along with my motion for default in non-Davidson County counties.

But, recently, I saw a Davidson County Chancellor ask about an affidavit as part of an uncontested motion for default. When the plaintiff didn’t have one, the judge set a damages hearing to occur in 90 days.

I never, ever want a non-responding defendant to get an extra 90 judgment-free days, so I now carry around this recent opinion from the Court of Appeals, Judith Husk v. Brandon Thompson, No. M2016-01481-COA-R3-CV (Tenn. Ct. Apps. Aug. 10, 2017).

That opinion covers a lot of ground, including bases to set aside a default judgment, but I want to focus on the “damages” analysis. The opinion lays out the law as follows:

Generally, the rule in Tennessee ‘is that the defendant, by suffering a default judgment to be entered against him, impliedly confesses all of the material allegations of fact contained in his complaint, except the amount of the plaintiff’s unliquidated damages.’ …Thus, a default judgment establishes the non-defaulting party’s right to maintain the action and recover some damages, but the amount of damages remains an open question to be determined by proof. … If the amount of the plaintiff’s damages is liquidated, however, a trial court may immediately enter a final judgment without a determination by proof.

(Citations Omitted/emphasis added).

So, the issue comes down to whether the claim is for “liquidated” or “unliquidated” damages.

The Court noted that unliquidated damages are uncertain and the type that require a “determination by proof” and are “damages that cannot be determined by a fixed formula…”

“Liquidated damages” are the type that are for “a set amount of money, or a or a certain formula, expressly stipulated in a contract as the amount of damages to be paid by a party that breaches the agreement. Liquidated damages can also be defined as the amount which has been ascertained by judgment or by specific agreement of the parties or which are susceptible of being made certain by mathematical calculation from known factors…”

Long story short, a lawsuit alleging breach of contract for amounts due under a promissory note plus interest using the “math” laid out in the note? Liquidated.

A lawsuit alleging damages “in an amount to be determined at trial” as a result of an auto accident? Unliquidated.

In the Davidson County matter I saw, the Chancellor expressly referenced the Husk opinion, even though the Court was faced with a breach of contract action with liquidated damages.

Having seen that happen, then, I think it’s a good practice to always include an affidavit in support of your motions for default, just so there’s no question. Plus, it’s probably good to get the facts supporting the existence of the contract, the damages, and showing the “math” into the record.

 

Collections in Probate: Some Pointers

Earlier this month, I taught a CLE seminar for the Probate & Estate Planning Section of the Memphis Bar Association.  The seminar was called “Collection After Death: Common Roadblocks and Strategies in Collection Before, After, and During Probate.”

As you probably know, Probate Law isn’t my focus, so I spent a good amount of time brushing up in preparation for this presentation in Memphis.  Over the next few weeks, I’m going to share some of the info I learned.

Here’s a starter: Did you know that there’s an absolute bar to filing claims against a deceased person 12 months after the date of their death? Look at Tenn. Code Ann. § 30-2-310.

So, notwithstanding the Notice to Creditor requirements of Tenn. Code Ann. § 30-2-306 and the associated deadlines imposed under the Code, this absolute 12 month statute of limitation still applies and can bar a creditor’s claim, even if the the creditor didn’t know the debtor was dead and even if the creditor didn’t receive any sort of notice of death or notice to file claims.

In fact, as a result of this strict 12 month statute of limitations on the filing of claims, if the probate case isn’t actually filed in that 12 month period, the creditor is simply out of luck. To be clear, as an example, if the probate case isn’t filed until 13 months after the date of death, there is no reason to issue a notice to creditors, as all of the creditors’ claims are barred.

The law says that the remedy for a creditor dealing with a deceased borrower is to commence their own probate case for the borrower during that 12 month period and, in that case, file a claim. Yikes. Who knew probate law was so tricky?