For the first time in nearly a decade, the post-judgment interest rate has decreased

It has been nearly 8 years since Tennessee changed the post-judgment interest rate by amending Tenn. Code Ann. § 47-14-121.

For years, the rate was set in stone–at 10%–and the new statute created a variable interest rate tied to the formula rate published by the Tennessee Department of Financial Institutions.

After starting at a very judgment-debtor friendly 5.25%, the rate has steadily increased over the past few years. Last year, it hit a new high of 7.5%.

But, effective January 1, 2020, the rate is heading in the opposite direction: The rate dropped to 6.75%.

Honestly, I don’t even care about the 0.75% drop. What drives me crazy is the constant changes in the post-judgment interest rate. It’s made calculating post-interest nearly impossible, since you have to constantly adjust the per diem.

In this robust Tennessee economy, I get weekly phone calls from closing companies, who discover one of my old judgments (and related judgment lien). And, yes, computing payoffs on old judgments is a wonderful task that I gleefully undertake, but it really used to be a lot simpler (and, also, this was one of my earliest reactions to the new statute).

I love collecting money for clients, but, holy smokes, I don’t always love math.

Trust in Bankruptcy Lawyers to Save Krystal's

Yes, Krystal’s filed for Chapter 11 Bankruptcy.

But, don’t worry. A bankruptcy filing doesn’t mean that the South’s favorite tiny hamburger is going away. In fact, there’s a good chance it’ll be a stronger chain after all this.

Krystal’s financial problems appear to be a relatively new problem, based on documents filed in the main Bankruptcy case.

As part of the case, the lead company filed a Declaration by its Chief Restructuring Officer, who has been trying to help Krystal correct course (and hired very recently, in November 2019).

Of the nearly 300 locations, the company closed 44 locations in 2019, including 13 closures on December 15, 2019 (in anticipation of the bankruptcy filing, I’d assume).

The quick summary? “Shifting consumer tastes and preferences, growth in labor and commodity costs, increased competition, and unfavorable lease terms.”  You can download and read a full copy of the Declaration here:

The Declaration tells the story of the events leading up to the bankruptcy filing, starting with the invention of the “iconic square hamburger patty slider” in 1932. It’s written by bankruptcy lawyers, so don’t expect a glowing press release.

The summary of the problems is this:

  • Increased competition due to “proliferation of fast casual restaurants as well as online delivery platforms…”
  • “Difficulty finding and retaining qualified employees…”
  • Entry into an expensive store rebuilding program, at a cost of about a million dollars per location.
  • Default under a Forbearance Agreement on a $50 million loan.
  • A “security incident” involving one of the company’s “payment processing systems.”

In a nutshell, the Bankruptcy docket tells a familiar story, about how a changing industry landscape is creating havoc in long-standing businesses.

This is obviously early–in fact, all the filings I looked at are what is called the “First Day Motions.” But, given the amount of debt involved and brand recognition–and, yes, I’m talking about the out-pouring of concern on twitter–I suspect Krystal’s can figure this reorganization out.

And, honestly, I’ve eaten a lot of Krystal’s during my time. If part of the reorganization is shutting down bad stores and remodeling others, I think it’s a good plan.

A Service of Process challenge may not overcome your Judgment

Service of process is a hot issue in Tennessee law. The reason is obvious: Without proper service of process, any subsequent action taken in a case is void.

Part of the reason service issues are coming up so frequently lately is the comparison between the 2009 economy and the 2019 economy. Judgment debtors have more money (and reason) to fight now, including more money to fight old judgments.

A new appellate decision considered a service of process last week, in Warren Brothers Sash & Door Company v. Santoro Custom Builders, Inc., et. al., M2019-00374-COA-R3-CV, 2020 WL 91635 (Tenn. App. Jan. 8, 2020), where an individual defendant opposed a judgment creditor’s efforts to renew a judgment rendered in 2008 by contesting service of process.

Looking at the returned Summonses, the individual had a pretty good argument, since both the corporate and individual defendants were served at the business address, when the Sheriff served both Summonses at the corporate address, by serving the person at the front desk.

Under Tenn. R. Civ. P. 4.04, an individual defendant shall be served “personally” or, if she evades, by leaving the copies at her “dwelling house or usual place of abode with some person of suitable age and discretion then residing there…”

Long story short, the Sheriff didn’t serve Santoro personally and the business address wasn’t his house, and, as a result, Santoro had a really good argument on paper.

But, Plaintiff had some really good lawyers. Instead of stopping their work on the face of the Summons, they really dug in on who accepted service. They deposed the person, and they also found at other lawsuits where this person was authorized to accept service for the individual. And, they took care to get all this information properly introduced into the record.

With all this background proof in the record, the trial court found that the agent had implied authority to accept service. In affirming, the Court of Appeals wrote:

An individual may appoint an agent for the purpose of receiving service of process, giving that agent either actual or implied authority. Implied authority “embraces all powers which are necessary to carry into effect the granted power, in order to make effectual the purposes of the agency.” Implied authority can be “circumstantially established through conduct or a course of dealing between the principal and agent.’ ”  However, the existence of implied authority is determined by the “ ‘act or acquiescence of the principal,’ ” rather than the actions of the agent.” With respect to service of process, “the record must contain ‘evidence that the defendant intended to confer upon [the] agent the specific authority to receive and accept service of process for the defendant.’ ” 

Id. at * 5 (internal citations omitted).

In the end, Plaintiff’s counsel’s thorough analysis of the facts and getting those facts into the record carried the day.

It’s telling that this opinion was written by a fairly new appellate judge, Judge Carma McGee, who spent years as a trial judge. This is a smart, well-reasoned opinion, and all credit goes to the trial counsel, who gave the Judge the proper facts.