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?

Can the failure to respond to Admissions be fixed? New Court of Appeals opinion says “Maybe.”

As a young lawyer, one of the worst tasks I was ever given was to cover a hearing on a motion to deem admissions admitted, where the other lawyer appeared to have simply overlooked the deadline to respond.

Requests for admission are, basically, what they sound like. One party in a lawsuit sends another party a written demand that they admit or deny a specific thing–generally a fact or that a document is authentic. Under Rule 36.01 of the Tennessee Rules of Procedure, if the other party doesn’t respond in 30 days, the fact is conclusively admitted for purposes of the lawsuit.

And, yes, a lawyer receiving these requests and ruin a client’s case if she is not good at calendaring or paperwork.

And many lawyers are not.

So, 20 years ago, as a brand new associate, I was sent down to Williamson County Chancery Court to argue a motion like this where the other lawyer–apparently–simply forgot to respond and, as a result, his client’s fate was at the mercy of a paperwork oversight.

And he was not happy to be arguing his side of the case.

For my side, it wasn’t a particularly hard argument. You tell the Judge the date of the Requests, add 30 days, tell the Judge that there was no response by that date, and cite Rule 36.01.

What made it hard is that the lawyer on the other side was a well-known, respected lawyer, and, generally, as a matter of courtesy, lawyers don’t play “gotcha” with each other on paperwork issues like this. And, even to me–a brand-new lawyer–it was a tough request.

Ultimately, Judge Easter stared at Rule 36.01 for a long time and decided to not hold the other lawyer to 30 days. He gave him more time. I was–frankly–happy to lose that day.

I was reminded of all that when I read the Court of Appeals opinion from yesterday, in Masterfit Medical Supply v. Samuel Bada, No. W2020-01709-COA-R3-CV (Tenn. Ct. Apps., Sept. 23, 2021). In that case, a party lost at the trial court level based on his failure to respond to admissions on unpaid invoices.

A critical component of the Court’s opinion, however, was that the complaining party never filed a motion under Rule 36.02 to have the admission withdrawn or amended.

Under Tenn. R. Civ. P. 36.02, “[a]ny matter admitted under this rule is conclusively established unless the court on motion permits withdrawal or amendment of the admission. Subject to the provisions of Rule 16 governing amendment of a pre-trial order, the court may permit withdrawal or amendment when the presentation of the merits of the action will be subserved thereby and the party who obtained the admission fails to satisfy the court that withdrawal or amendment will prejudice that party in maintaining the action or defense on the merits.”

Courts favor deciding cases on the merits and that’s why Rule 36.02 makes sense. As a matter of equity, all kinds of other sworn statements can be clarified, amended, and modified, so why should un-answered admissions be unassailable, where no particular prejudice results?

That day in Williamson County, the other lawyer didn’t argue this rule, but, based on Judge Easter’s clear desire to consider the merits (and not a technicality), it’s clear that the Judge would have welcomed such a request.

Can a party ask for Rule 60 relief on its own agreed judgment?

Yesterday, the Tennessee Court of Appeals issued an opinion on whether a party can ask that their own “agreed” judgment be set aside under Rule 60 of the Tennessee Rules of Civil Procedure. It’s an interesting factual scenario, and the opinion provides a good recap of the law regarding Rule 60.02 relief.

The case is City of Memphis, Tenn. v. Beale Street Development Corporation, No. W2020-00523-COA-R3-CV (Tenn. Ct. Apps., Sept. 21, 2021). In short, the defendant’s lawyer executed an agreed judgment that fully resolved the dispute, but, then, 364 days later, the defendant filed a Motion for Relief under Rule 60.02, arguing that its board never, in fact, properly approved the settlement agreement. As such, the lawyer should never have signed the judgment and the trial court should not have entered it.

In considering a party’s motion to set aside an agreed judgment that the attorney expressly agreed to, the Court spent some time with Rule 60.02, including on the following points.

A Rule 60.02 motion is reviewed under an “abuse of discretion standard.” Discover Bank v. Morgan, 363 S.W.3d 479, 487 (Tenn. 2012). This means that the appellate court will consider whether “the trial court applied incorrect legal standards, reached an illogical conclusion, based its decision on a clearly erroneous assessment of the evidence, or employed reasoning that cause[d] an injustice to the complaining party.” Id. The “trial court’s ruling ‘will be upheld as long as reasonable minds can disagree as to [the] propriety of the decision made.” Id.

That’s a pretty high standard, so much so that Rule 60.02 relief is called “an exceptional remedy.”

One of the bases to set aside a judgment under Tenn. R. Civ. P. 60.02 is for “fraud . . . , misrepresentation, or other misconduct of an adverse party.” This generally means that the other party or its counsel committed some fraud–like lying about the court date or forging a signature. But, the Court of Appeals says, this conduct must be committed by an adverse party (just like Rule 60 says). Action by a party’s own attorney will not support relief under Rule 60.02.

Finally, the Court noted that the motion was not timely. Of course, the rule expressly one year as an outer limit, but, here, the facts dictate that the defendants should have brought this motion sooner (maybe in response to the article on the front page of the Memphis newspaper the day after the settlement was announced).

“Rule 60.02 does not ‘permit a litigant to slumber on [its] claims and then belatedly attempt to relitigate issues long since laid to rest.’” Furlough v. Spherion Atl. Workforce, LLC, 397 S.W.3d 114, 127 (Tenn. 2013).

Motions brought under this rule are a hassle for the judgment creditor for obvious reasons: Who wants their hard work to be challenged years later? But, Tennessee Courts don’t look favorably on these motions and rarely grant them and, when they do, Rule 60.02 is strictly enforced on its terms.

Keep this case handy the next time you receive one of these motions.

Who knew Pineapple Express had such technically accurate legal scenes?

Service of process can drive me and my clients crazy. Before filing the lawsuit, I am in total control of all aspects of the timing of the case, from the initial review to filing the Complaint.

But, once I file the complaint and send it to be served on the defendant, we are sometimes at the mercy of luck and a little bit of good timing.

Nobody wants to be served with a lawsuit (for obvious reasons), and, until you get them served, they have no responsibility to answer and the case doesn’t move forward.

In many cases, a plaintiff has to employ creative tactics to get the process into the hands of the defendant.

You’ve probably seen this in a movie, where the process server hides in the bushes, hands somebody a piece of paper, and yells “You’ve been served!” as he runs away.

So, yes, I thought about the opening sequence from Pineapple Express, when I read a recent opinion by Davidson County Chancellor Ellen Lyle about an evading defendant and an irritated process server, in Joyce B. Martin v. Devon Lawrence, et. al., Davidson County Chancery Court Case No. 20-1091-III.

In that case, the process server was knocking on the defendant’s door, had confirmed that the defendant was inside the house, and, when the defendant refused to come to the door, attempted service pursuant to Rule 4.04(1) by “plac[ing] the summons and complaint into a clear plastic sleeve and tap[ing] it to the glass front door before leaving the [Defendant’s house].”

(The opinion was silent on whether the process server yelled “You’ve been served!” as he walked away, but I would bet money that he did.)

On these facts, however, Chancellor Lyle found the service ineffective. Rule 4.04(1) provides that if a defendant “evades or attempts to evade service,” then the process server may perfect service of process “by leaving copies thereof at the individual’s dwelling house or usual place of abode with some person of suitable age and discretion then residing therein, whose name shall appear on the proof of service, or by delivering the copies to an agent authorized by appointment or by law to receive service on behalf of the individual served.”

Citing this Rule’s plain language—which expressly imposes a requirement that the summons be left “with some person of suitable age and discretion then residing therein”—the Judge found that merely taping the summons to the outside of a home does not meet the statutory requirements, even under these circumstances.

(Note: You can read more analysis of this opinion (and see a full copy) by visiting the Nashville Bar Association’s Trial Court Opinion page, which will be updated soon with more notable decisions.)

In a surprise twist, then, Seth Rogen’s stoner private process server turns out to be a highly effective process server whose work would be approved even by Chancellor Lyle (though she may question other aspects about his…demeanor and tactics).

In each instance in the movie clip he, in fact, personally serves each person. We lawyers can be awful to watch movies with, since we love to nit-pick the accuracy of the Hollywood depictions of the job, but this sequence complies with the law (except the part when he’s driving and using illegal substances).

But, other than that–congratulations to Seth Rogen–this clip could be shown in a first-year Civil Procedure class. Who knew?

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.

Bankers: Are your Judgments expiring?

Tennessee judgments expire after ten years.

All those judgments you took during the Great Recession are coming up for renewal. If you don’t affirmatively ask the court for an extension, they just go away.

And, all those builders, contractors, investors, and so many others who were broke in 2010/2011 but who turned things around when Nashville real estate, business, and construction boomed in 2015 (and beyond)?

They’ve been waiting. Hoping that you’d forget about them. Hoping that you’d do nothing to renew your judgment.

Part of what makes this Creditors Rights blog so popular is that I keep it an objective discussion of the law. You don’t see me use it to solicit business. (Well, overtly.)

But, for today, I’ll say this: If you have a box of judgments that you haven’t touched for years…Call or e-mail me immediately. There may still be time.

I’m seeing it happen every day. Big judgments are expiring, and debtors are ridding themselves of millions dollars’ worth of judgment liens.

Once upon a time, the creditor probably got frustrated by the dead-ends (or maybe the expensive lawyers spinning their wheels while billing by the hour). Those old files got put in a file cabinet. Maybe the banker switched banks. Maybe the bank got sold.

But, if you don’t dust off those old files, you are probably leaving money on the table. If you haven’t looked at those old files lately, it may be too late.

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…”

Legal Tech, but for lawyers who miss the camaraderie of docket calls

Last week, I had to go to the Davidson County Courthouse to file some garnishment pleadings. With the adoption of e-filing and suspension of in-person court proceedings, filing garnishments is really the only reason I set foot in the building.

Once upon a time–well, about a year ago–I’d spend nearly every Friday morning there, on the fourth floor, checking in on all of the Chancery Court dockets.

Some days, I’d have a case in every courtroom, carefully timing my arrivals so that I could cover all four. On other days, I might just have one case, but I’d linger and roam the halls to see who was there and what cases they had. It was a great way to catch up with other lawyers, talk about our cases, watch interesting hearings, observe how the judges handled issues, and, really, just stay connected to what was going on (i.e. gossip).

But, last week, it was so strange, to be back in that building and it all be so quiet.

Continue reading “Legal Tech, but for lawyers who miss the camaraderie of docket calls”

There’s no stay in judgment appeals (unless you ask for one)

There’s a bit of confusion about appellate bonds, particularly when it comes to money judgments from a court of record.

“Is what I’ve filed good enough to protect my client from an immediate garnishment?” That’s not a legal question that any attorney wants to learn after a client’s bank account gets hit.

In every appeal, the Appellate Court Clerk’s office charges certain filing fees for the Notice of Appeal. At the same time, the appellant must file an Appeal Bond for Costs, which is a bond (generally signed by the attorney) to cover the court costs in the appeal (generally, a nominal amount).

Judgment enforcement is automatically stayed for thirty days after entry pursuant to Tenn. R. Civ. P. 62.01. But, here’s the key: The filing of an appeal and posting that initial “cost bond” do not automatically stay enforcement of a creditor’s rights under a judgment.

You’ve got a valid appeal, but you don’t have any stay on enforcement.

In order to obtain a stay of collections after the appeal is filed, the appellant must file a motion with the trial court. Ultimately, this is done by filing a “stay bond,” but, until the trial court grants such a motion and approves the amount of the bond, there is no stay of judgment enforcement. See Tenn. R. Civ. P. 62.04. Tenn. R. Civ. P. 62.05 requires that the bond be in an amount sufficient to pay “the judgment in full, interest, damages for delay, and costs on appeal.”

In short, just filing an appeal and posting a cost bond does not stay the enforcement of a judgment. Bank levies, wage garnishments, all of that can still happen.

And, if you’re a litigant or attorney who doesn’t understand this issue, then there’s a good chance that you’re in for an unpleasant surprise during your appeal. Don’t be that lawyer.