Category: Lawsuits and News

2021 in Review: New Lawsuits in Davidson Circuit and General Session Courts were also Down

Last week, I wrote about how Bankruptcy Court debtor filings were at an all-time low in the Middle District of Tennessee.

A few of you asked if there was a corresponding drop in Chancery, Circuit, and General Sessions filings. Maybe that’s why people weren’t running to file bankruptcy.

Given the numbers in Bankruptcy Court, it’d make sense that state court litigation might have also slowed down, but I was a bit surprised by the answer.

Davidson County Chancery Court lawsuits have been surprisingly consistent. The final Chancery lawsuit of 2021 was filed at 11:59AM on December 30. It was case number 21-1324-I, which means that it was the 1,324th case filed last year. It’s an unpaid commercial debt lawsuit.

For comparison, here are the last few years’ numbers on new case filings: 1,299 cases filed in 2020; 1,569 in 2019; 1,413 in 2018; and 1,386 in 2017.

In short, there was no real drop in chancery court litigation, which surprised me. 2021 felt like a slow litigation year for Nashville.

Of the ten stories featured in the Nashville Post’s 2021 “Top Reads: Legal” article, six of them were just about law firm personnel moves not, you know, actual news-worthy litigation.

In general, you’d expect to see the business-minded Chancery Court have cases on this list, but, frankly, it’s a bit boring (no offense, toilet fire lawsuit).

What about General Sessions Cases? This is where it gets more interesting.

As of the end of November, there were 6,551 detainer / eviction warrants filed in 2021, along with 15,404 small claims lawsuits filed. For that same period (end of November) in 2019, there were 10,694 eviction lawsuits and 24,508 small claims lawsuits filed. Long story short, that’s about a 40% drop in filings.

Circuit Court? By the end of November, there had been 1,736 new civil lawsuits filed in 2021. At the end of November 2019, there had been 2,590 civil lawsuits filed, representing a 33% drop.

I’m not entirely sure what to make of this data. A 40% drop in evictions and credit card/debt collection cases would certainly be expected to result in a slower pace of new bankruptcy filings, but, nevertheless, this also shows that the common perception that “courts are closed” and “evictions aren’t happening” is incorrect.

Some credit has to be given to the LEGACY Housing Resource Diversionary Court run by Davidson County Judge Rachel Bell. This program can’t stop the new eviction filings, but it has helped many pending cases get resolved. As of September 20, 2021, $18,799,705.71 had been paid to landlords via this program and, most likely, kept those tenants out of the bankruptcy lawyers’ offices.

In the end, my take is that Middle Tennessee bankruptcy filing numbers are far more impacted by lawsuits filed in Davidson County General Sessions Courts than by the business-litigation dockets in Chancery Court. These numbers offer some part of an explanation.

Foo Fighters’ Nashville Lawsuit provides important lesson on allocating risks in contracts

When COVID first hit, lawyers talked about how future contracts would evolve to anticipate the special challenges presented by a global pandemic.

Now, 19 months in, a new Davidson County Chancery lawsuit filed on behalf of the Foo Fighters shows that–even with all the planning in the world–COVID is still disrupting the best laid plans.

The plaintiff (the touring company that books gigs for the band) alleges that defendant hired the Foo Fighters to perform at an August 13, 2021 corporate event for payroll processing company ADP. The parties entered entered into a April 5, 2021 written agreement. Per the contract, the band would receive $3,000,000 for the performance, with half paid when the contract was signed, and the other half paid at (or before) the event.

But this contract was updated to take into account all the lessons learned during a global pandemic.

Per Paragraph 10 of the Complaint, if the defendant defaults or cancels the performance for any reason, the band would receive the full performance payment (regardless of whether the band actually plays the show).

Based on the allegations of the Complaint, it’s clear that concerns about COVID played a large role in the negotiations. In fact, the parties included a section called “COVID CANCELLATION,” which–as you’d guess–allocated the risk of a forced cancellation due to the pandemic.

And, boy-oh-boy, was that risk apportioned squarely onto the plaintiff:

In short, if the contracted for event were to be deemed unsafe and impossible due to the resurgence of COVID, this provision says that it does not matter. The band, in their “sole reasonable discretion,” can terminate the obligation and refuse to perform…and still get paid.

Was COVID a “force majuere” event? The band says that they expressly removed the reference to COVID in that paragraph, and further allege this:

There’s a bit more to the story, but, in short, COVID didn’t go away, and this August 2021 event at Mile High Stadium in Denver became less and less of a good idea for the ADP corporate event.

They discussed limited capacity, the band offered to do an exclusive live-stream concert, but, on August 4, 2021 (9 days before the event), the defendant decided to cancel the event. The lawsuit points out that “there was no local, state, or other governmental restriction that required the cancellation of the Event” and, helpfully, points out a number of other large concerts and events that happened that weekend in or near Denver.

The Foo Fighters have sued for the $1,500,000 owed under the Agreement. (And I tend to agree with their analysis of the contract.)

It’s an interesting case. On the most superficial level, it shows that, no matter how hard you try, it’s hard to contract around the unexpected.

In April 2021, my own family was so exuberant about the vaccines and a COVID-free summer (and fall) that we surprised our kids with shockingly expensive Jonas Brothers tickets to celebrate the end of the pandemic. In April, my wife and I believed we had weathered the storm and that a sold out concert in September 2021 was a totally safe and reasonable reward for our kids. We went, but we were terrified taking our vaccinated kids to the show.

I have to wonder if the defendants, here, suffered from a similar bit of vaccine optimism.

Nevertheless, the Foo Fighters’ lawyers did not share that optimism; or, if they did, they included sufficient terms in the contract to assign the burden of any risk squarely on the other party.

From what I’ve seen of it, it’s a good contract. Who knew we’d be learning some lessons about contract law from the Foo Fighters?

Tennessee Court of Appeals issues a “must read” opinion on General Sessions appeals

As long-time readers know, some plaintiffs elect to file their lawsuits in General Sessions Court, even if their claims exceed the $25,000 jurisdictional limit. Of course, they’ll ask for damages right up to the max amount of $24,999, which means they’ve shaved off some amount of their claim, in order to get all the other advantages offered in small claims court.

When the plaintiffs voluntarily reduce their claim to satisfy the Sessions jurisdiction limit, they’ll often use that as part of their bargaining leverage, i.e. “if you appeal my judgment, I’ll ask for the higher amount of all my claims in Circuit Court.”

Back in 2014, I talked about that strategy, which is allowed under Tenn. Code Ann. § 16-15-729. That statute says the Circuit Court “shall allow all amendments in the form of action, the parties thereto, or the statement of the cause of action, necessary to reach the merits, upon such terms as may be deemed just and proper. The trial shall be de novo, including damages.”

As noted back then, an actual Amended Complaint under Tenn. R. Civ. P. 15 must be filed in order to assert the new claims. No big deal, right?

Well, this brand new case from the Tennessee Court of Appeals makes this maneuver drastically more risky. The opinion was published yesterday, at Chimneyhill Condominium Association v. King Chow, No. W2020-00873-COA-R3-CV (Tenn. Ct. Apps., July 20, 2021).

In that case, when the defendant appealed the Sessions judgment against it, the plaintiff asserted new and increased claims in Circuit Court against the defendant. Here, the plaintiff did everything procedurally correct: it obtained a Circuit Court Order allowing the filing of an amended complaint; and then filed the claims in an Amended Complaint. Regardless, the trial court allowed the defendant to dismiss its appeal of the Sessions judgment and found, as a result of the dismissal of the appeal, that Plaintiff’s claims in the Amended Complaint must be dismissed.

The Court of Appeals agreed, stating that “new claims asserted by a plaintiff who did not appeal a general sessions court judgment will be dismissed upon dismissal of the appeal of the opposing party…” The plaintiff is “the master of his or her complaint” and will be expected to bring all of its claims in the original proceeding.

If certain claims are omitted or the sessions court fails to grant all the relief, then the remedy is for the plaintiff to file its own appeal. In dismissing the new claims, the Court wrote that “it was therefore [plaintiff’s] own decisions that resulted in [plaintiff’s] additional claims being dismissed when [defendant] chose to dismiss his appeal.”

This case is important for several reasons. It’s contrary to long-standing practice and procedure. It appears to divert from the precepts of Tenn. Code Ann. § 16-15-729 and also the concept of a “de novo” review (i.e. if everything starts anew on appeal, without regard to what happened in the lower court, why shouldn’t the plaintiff get to restate her claim).

In the end, however, this is a procedural strategy that will greatly benefit judgment defendants and catch many judgment creditors by surprise. What’s the fix? I guess a plaintiff with significant additional claims may consider voluntarily dismissing its own claims during the appeal, and then re-filing those claims as a new Complaint.

I know this blog has a creditor-friendly bent, but, regardless, I don’t like the reasoning behind this opinion. I understand what the Court is doing, but it also seems too procedurally clever and doesn’t consider the practical implications that are facing parties on a de novo review in Circuit Court.

Will Landlords’ Casualty Paragraphs be a hot issue for Second Avenue businesses? (It looks like they already are.)

The real estate market has been so hot in Nashville over the past 6-7 years that, any time an old building in an in-demand area burns down, I’ve wondered if the culprit was a crafty real estate developer looking to build a high-rise condo. (Kidding, of course.)

But, as matter of law, a disaster can provide a landlord a way out of a long-term lease (whether they’re happy to be out or not), where the premises are fully destroyed.

I thought of this today, when reading the Nashville Post article Old Spaghetti Factory loses lease after 40-year run. Per local news, after total destruction of the building on Second Avenue, the landlord “will be terminating the lease agreement, although the restaurant reportedly has 16 years remaining on that lease.” The article notes that the restaurant is offering to spend more than $1 million of its own money to help rehab the space.

Seems unfair, right? It may be, but it’s probably allowed under the Lease.

Most commercial leases have a “Casualty” section, which dictates what happens when rental premises are totally destroyed, whether by fire, earthquake, or some other huge event.

Those provisions generally require the Landlord to restore the premises to substantially the condition that existed prior to the disaster. If the Landlord does that, then the Tenant is most likely stuck in the Lease. (Yes, even if losing the use its rented space during the repair period kills the Tenant’s business.)

Having said that, the provisions also generally give the Landlord an “out,” if the destruction is so total that the premises can’t easily be restored. In making this determination, a number of factors are considered, including if the cost to restore the building exceeds the ultimate value (and/or insurance money), if the Landlord’s lenders scoop up all the insurance money, the lease is near the end of the term, or if would take too long to restore (180 days from the event is a common measure).

In most cases, the landlord is motivated to repair or rebuild quickly, hoping to get the tenant back in the space–and back paying rent–as soon as possible.

There is no indication in the story whether the landlord here is relying on a similar provision or what types of other issues exist.

It may be that the cost to restore this historic building is so high that the landlord can’t (or isn’t financially ready to) quickly go into rebuilding mode. If the lease uses a typical 180 day requirement, the owner may know that there’s no way to do it in that time with all the special challenges presented by this terrorist event and during a global pandemic.

A skeptic would wonder if this owner wants to renovate a building to a newer, better use (like condos, offices, etc.) or may want to get rid of a long term–possibly below market–lease.

Leases are just like any other contracts. The plain text of their terms control. But, casualty provisions are a rarely negotiated point. When I prepare leases for commercial real estate, it’s often a few paragraphs at the end that I review quickly and move on.

But, when they do apply, it’s a big deal. Just like COVID got every Nashville commercial real estate attorney talking about force majeure, maybe this situation will get us negotiating casualty paragraphs.

In the end, though, yes, this is probably allowed under the lease.

Reformation may save you, but tech experts warn against “cut and pasting” document automation

During her presentation on legal tech at the TBA’s 2020 Creditors Practice Forum, Lori Gonzalez conducted an audience poll on what document-automation technology everybody was using.

The creditors’ bar must be an old-school crowd. Overwhelmingly, the most common practice was to: (1) find a similar existing document on your system in Microsoft format; and (2) cut-and-paste the old terms in the forms to match the new terms.

Lori told everybody to stop doing that.

In a recent decision, the Tennessee Court of Appeals explained why. The case is Franklin Real Estate Group, Inc. v. Spero Dei Church, No. M2019-01691-COA-R3-CV (Tenn. Ct. App., Jan. 27, 2021).

There, a real estate broker was working with property owner to sell their church building. Later, the owner asked the broker to, also, assist them in finding a property to buy.

The broker was smart to recognize the need to get a signed “seller’s” agreement; but, in preparing it, the broker “used language from the Seller’s Agreement as a template, simply substituting ‘Seller’ for ‘Buyer’ where appropriate to make the Agreement conform to a standard buyer’s agent agreement.” A classic cut-and-paste document creation.

As the legal tech experts said can happen, the broker missed a cut and paste. And, it happened in a very important paragraph–the one that defined the situation where the broker would get paid. Due to error, the final version awarded a broker a commission only where the Buyer bought a property from a “Seller/Landlord who has been introduced to the property…by Broker.”

It’s such non-sense that you almost read it the way it should have been written, but, in short, the broker would get paid if the client-Buyer bought a property from a Seller who was introduced to his own (the Seller’s) property by the broker. So, basically, if the broker found a Seller who didn’t know they owned the property and the broker was the one to tell the Seller about their property, the broker gets paid.

Total non-sense, and it’s inconsistent with the broker and client’s contemporaneous emails about the engagement.

You know how the rest of the story goes. The buyer ended up buying a property that the broker assisted on, but, for many reasons, didn’t pay a commission.

In defense, the buyer argued that the provision was drafted so poorly that it was unenforceable–that it was “void for vagueness.” The Court noted that “[i]t is a fundamental rule of law that an alleged contract which is so vague, indefinite and uncertain as to place the meaning and intent of the parties in the realm of speculation is void and unenforceable.” See Four Eights, L.L.C. v. Salem, 194 S.W.3d 484, 486 (Tenn. Ct. App. 2005).

But, while the Court agreed that the provision was “illogical,” it went on to find that the rest contract is certain and clear, except for this one provision, which is merely “the result of a mistake.” Instead, the Court decided, the real question is “whether the mistake ..is subject to reformation so that the contract conforms to the true intention of the parties.”

Courts are to enforce contracts as written, but “the law’s strong policy favoring the enforcement of contracts as written must occasionally give way and grant courts the power to alter the terms of a written contract where, at the time it was executed, both parties were operating under a mutual mistake of fact or law regarding a basic assumption underlying the bargain.”

This is called reformation, which seeks “to make the contract conform to the real intention of the parties.” The elements are:

(1) the parties reached a prior agreement regarding some aspect of the bargain; (2) they intended the prior agreement to be included in the written contract; (3) the written contract materially differs from the prior agreement; and (4) the variation between the prior agreement and the written contract is not the result of gross negligence on the part of the party seeking reformation.

The Court then considered many factors, including the the purpose of parties’ overall transactions, relationship, and related communications about the contract.

When I looked at the elements, though, I wondered about “gross negligence.” I mean, if missing a critical word in a contract that you drafted isn’t that, then what is?

The Court addressed that issue head on, finding that the drafting error was not “gross negligence.” The Court wrote, errors resulting from “inattention” are not “categorical exemption[s]” to reformation. If drafting errors were exceptions, then reformation would never be available to correct typographical mistakes.

In the end, it turned out fine for the broker, after, of course, years of litigation.

Listen to Lori on this point, consider a more advanced technology for your document automation. Because no lawyer wants to have to defend their work as “sure, it’s inattentive, but…”

Davidson County General Sessions Caps Dockets at 25 Cases: This is a Big Problem

Last week, the Davidson County General Sessions Court entered an Administrative Order that limited the number of cases that can be set on the civil dockets in Courtrooms 1A & 1B, with a cap of 25 cases per day (effective October 5, 2020).

That sounds like a lot of cases. It is not.

A typical General Sessions civil docket might have 50 to 100 cases on the docket. Davidson County has civil dockets every day of the week.

By my math, this represents a minimum 75% cut in capacity.

Granted, when I first heard about the 25 case limit, it didn’t sound like too much of a problem, since I don’t have a high volume consumer or residential eviction practice. The high volume lawyers who routinely have 25 of their own cases on each docket would be the ones with the problem, right?

Then, I got a call from a commercial landlord whose tenant hasn’t paid rent since March and has “gone dark.” The landlord asked me to get a judgment for possession as soon as possible.

Spoiler-alert: The 25 case limit is a problem.

Continue reading “Davidson County General Sessions Caps Dockets at 25 Cases: This is a Big Problem”

The Palm and the Nashville Hilton’s litigation over unpaid COVID rent has touched almost every trial court in Davidson County.

As you all know, The Palm restaurant in Nashville sued the Nashville Hilton in July. At the time, The Palm was four months in arrears in its payment of rent.

But, despite being in payment default, The Palm went on the offensive and premptively filed the first lawsuit, arguing that the landlord’s (i.e. the Nashville Hilton) own shut-down in response to COVID was a breach that excused The Palm’s payment of its rent.

At the time, I marveled at the audacity of the tenant in making the first move. Today, however, I’ve discovered that this dispute has gone absolutely bonkers, and it’s has been (or is being) litigated in nearly every trial court in Davidson County.

First, there was the Chancery Court lawsuit filed by The Palm on July 9, 2020.

Then, after the Hilton declared The Palm to be in breach on July 13, 2020, the Hilton filed a Davidson County General Sessions evictions lawsuit on July 14, 2020.

In response, The Palm filed a Notice of Removal of the detainer action to the District Court for the Middle District of Tennessee on August 7, 2020. This prompted the Hilton to file a notice of voluntary dismissal on August 10, 2020.

Then, the Hilton filed a second detainer action in General Sessions Court on August 13, 2020. On August 26, 2020, The Palm filed an Application for Removal of the matter to Davidson County Circuit Court, which was granted.

So, what courts did they miss? Criminal Court? Bankruptcy? Environmental Court?

This dispute involves two mega-law firms, so it’s fun to see big-time lawyers fighting over eviction issues in small claims court.

Still, though, I have to wonder if the Hilton could have opposed The Palm’s request to remove the matter to Circuit Court, which was–possibly–an attempt to get the matter moved to the slower-paced Circuit Court, but without having to post the detainer possessory bond pursuant to Tenn. Code Ann. § 29-18-130(b)(2), which requires a tenant that loses in sessions court to post one year’s worth of rent in order to remain in possession of the property.

Sessions Judges don’t like to waste valuable docket time on complex commercial matters, so they are generally happy to allow complicated, discovery-heavy trials to be removed to Circuit Court pursuant to Tenn. Code Ann. § 16-15-732.

But, at the same time, it’s a move that Sessions judges see all the time, and the Judges will sometimes ask tenant’s counsel “Is the rent paid current?” and, depending on the answer, grant a judgment for possession, and tell the tenant’s counsel to appeal and sort it out in Circuit Court.

I don’t want to ruin the developing story, so I will remain quiet about the Landlord’s options in Circuit Court to force payment of rent. But they have a few.

Whatever direction this goes, in the age of COVID, this qualifies as entertainment (for law nerds).

Second Lady A sues Original Lady A in Nashville: Interesting Legal Issues for Interesting Times.

I’ll start by saying this: Lady Antebellum’s heart seemed to be in the right place.

As you will recall, last month, the band announced that it was changing its name to “Lady A,” which was in recognition of the racially insensitive history of the term “Antebellum.”

The news was applauded, in light of the global outpouring of support for the Black Lives Matter movement and the growing awareness of how little so many of us understand about what it means to be a non-white member of American culture. It’s not cool for a white country music band to be walking around with Antebellum in their name.

But, then, you know what happened next. Anita White, an African American gospel and blues singer in Seattle–and who has long performed as “Lady A”–objected to the name-change.

Side-note: Did nobody do a google search on any of this?

Per Second Lady A’s twitter, the parties had a number of conversations–all friendly (see above)–which became more complicated, as Original Lady A began to recognize that her interests may not be entirely at heart in the band’s move.

Then, well, I’ll let Second Lady A say it: “Today we are sad to share that our sincere hope to join together with Anita White in unity and common purpose has ended.”

To be clear, that date of the end was July 8, 2020, when Second Lady A filed a lawsuit in Nashville federal court, asking the District Court to grant them the right to use the trademark. The lawsuit says that it isn’t asking for money, but, still, it’s a fairly aggressive move. Apparently, Original Lady A asked for $10 million as part of the conversations.

This isn’t Trademark Rights 101 , but I follow really smart lawyers on twitter. Such as this twitter chain by Alexandra Roberts, an Intellectual Property law professor, who analyzes this situation top to bottom.

It’s a really fascinating view into the thought process that a court will consider, both on the facts and relevant law. Read the whole thing…you’ll be smarter by the end of it.

Another issue that I thought was interesting is this: Did Original Lady A submit herself to jurisdiction in Nashville by participating in phone and Zoom video calls, when Second Lady A were physically in Tennessee? Yikes, if that’s the law. Professor Roberts suggests that may be the alleged basis.

So, two quick-takeaways.

(1) This is a terrible look for Second Lady A. Maybe they’re correct as a matter of law, and I’ve just got more to learn about IP law. But, again, what a terrible look for Second Lady A. I tell my clients this all the time: You may be right here, but are there other factors to consider. Should we keep looking for a middle-ground resolution?

(2) I can’t wait for more information on the basis for jurisdiction in Nashville, Tennessee for this lawsuit.

Davidson County Chancery Court’s Zoom Trial Worked!

Last month, I told you Davidson County Chancellor Ellen Lyle had scheduled a business litigation trial to be conducted entirely via Zoom.

This was big news for laywers. After COVID-19 prevented most in-person court proceedings, many innovative courts began to conduct contested, non-evidentiary hearings via the phone or Zoom.

What was so interesting about this matter, however, was this was a full-blown trial, with witnesses and 61 exhibits. This required lots of advance planning, exchanging exhibits, and technical preparation (Does Zoom work? Can you share screens and jointly review exhibits?)

And, it worked. A link to the live-streams remains available at Part III’s YouTube channel. (What a crazy thing to type…”Part III’s YouTube channel.”)

It’s been an unprecedented time for our world, but it’s awesome to see our Tennessee Courts evolving to make sure matters get heard and also not being afraid to open up these news-worthy proceedings to the public.

Earlier this week, the Tennessee Supreme Court conducted a full day of hearings via Zoom, with the proceedings live-cast on the Court’s YouTube channel.

My office is just down the street from the Davidson County Courthouse and only a block or two from the Tennessee Supreme Court, so it’s no big deal for me to stop by and observe an interesting or newsworthy court proceeding.

But, for the average citizen, the barriers to seeing the justice system at work are staggeringly prohibitive. The average person probably doesn’t know where the courthouse is, how to get there, where to park, or whether they are even allowed to “pop in” and watch a proceeding.

Long story short, the Tennessee Courts have really done a great job during the pandemic; not only staying open, but expanding and innovating. Here’s hoping that the progress continues.

341 Meeting: Suing Your Own Employees; Public Schools; Urgent Political Spam

Hassling Poor People, Who Happen to be Your Own Employees. When the economy hit rock bottom in 2009 or so, all kinds of doctors, lawyers, private schools hired me to collect their debts. Many had never dealt with bad debt before, or the awful circumstances that lead to defaults. They just saw the bad debt and thought it could be an income stream for them. It was an eye-opening lesson for many.

Since then, I occasionally have had to tell some of my clients that some debt isn’t worth collecting, whether it’s a low return on investment or, frankly, just bad PR.

This story out of Memphis reminds me of that.   NPR reports that Methodist Le Bonheur Hospital is making national news for its practice of suing its own employees when they can’t pay their medical bills, and then using some pretty aggressive collection tactics when they can’t pay the judgments rendered in the lawsuits.

…what is striking at Methodist, the largest hospital system in the Memphis region, is how many of the patients being sued are the hospital’s own employees. Hardly a week goes by in which Methodist workers aren’t on the court docket fighting debt lawsuits filed by their employer.

That’s a really bad look, especially in a climate where employers are criticized for not paying a living wage and also terrible health insurance benefits. Continue reading “341 Meeting: Suing Your Own Employees; Public Schools; Urgent Political Spam”