Remote Contractors Can’t Assert a Materialman’s Lien on Residential Property in Tennessee

In this booming economy, there’s money in real estate, and the contractors who went broke in the Great Recession are back on top. So, let’s talk for a moment about mechanic’s and materialman lien laws, i.e. the Tennessee laws that allow an unpaid contractor to assert a lien claim on the real property that is improved by his labor and materials.

If you’re a contractor and you provide labor and materials to a real property project, you can always assert a lien on the property, right? Well, like many things in the legal world, the real answer isn’t that easy.

Here’s a quick exception to keep in mind.

First off, are you a “remote contractor” or a “prime contractor”?

A contractor who contracts directly with the owner is a “prime contractor.” A “remote contractor” is anyone who provides material, services, equipment or machinery in furtherance of an improvement pursuant to a contract with a person other than an owner (i.e. a subcontractor who is brought on to the project by the general contractor).

Under Tennessee’s lien laws, remote contractors may not assert liens on what is defined as “residential real property.” Tenn. Code Ann. § 66-11-146(a)(1) defines “residential real property” as a dwelling unit in which the owner intends to reside. There’s an exception under Tenn. Code Ann. § 66-11-146(b)(2) for situations where the owner is operating as a de facto general contractor (in which case the remote contractor has contracted with the owner, so the remote contractor is really a prime contractor).

So, yes, lien laws are a great way to protect contractors and ensure that their debts are paid. Just not on residential projects.

Ineffective Service of Process Will Not Toll the Statute of Limitations in Tennessee: Act Fast in Obtaining (or Correcting) Service

Earlier this year, I wrote a blog post explaining that, under Tenn. R. Civ. P. 3, just because you filed a timely lawsuit, doesn’t mean that you don’t have statute of limitations issues–you have to also accomplish prompt and timely service of process.

Recently, the Tennessee Court Appeals re-visited that issue in Kimberly Urban v. Robin Nichols, and it came to the same conclusion. In the Urban case, the Plaintiff filed the lawsuit within the one year statute of limitations, but the Plaintiff delayed in obtaining valid service of process and, worse, delayed in correcting her defective efforts to obtain service. The Court found that the ineffective service, followed by the long delay in correcting the service, failed to prevent the statute of limitations from expiring. Accordingly, the Court dismissed the lawsuit.

But, basically, that’s the same law as the blog post from April, right? Yes, but what I found interesting about this new case is that, if the Plaintiff had been diligent about correcting the ineffective service of process, the Court would have cut her some slack.

In fact, the Court said she could have amended her Complaint under Rule 15 to correct the defective name of one of the defendants or she could have issued new summons. If she had made any of these corrective efforts in a timely fashion, the Court suggests, the case would not have been dismissed on the technicalities, since Tennessee law and policy favor litigants to amend their pleadings to have disputes resolved on the merits.

So, the moral of the story may be: If you make a technical error, act fast in getting it fixed or at least brought before the Court.

Forum Selection Clauses Will be Upheld by Tennessee Courts

You don’t need a law degree to know this: The tricky stuff in a contract is always in the fine print, at the end of the contract.

For instance, most good contracts will invariably include a forum selection clause. This is generally a line at the end of the “Miscellaneous” paragraph that says something like: the parties to the contract agree that any action or proceeding arising under or related to this agreement shall be filed only in the United States District Court or the state courts in Nashville, Tennessee.

Of course, forum selection clauses don’t always say “Nashville,” but they do generally list the forum in a location that is: (1) convenient to the party preparing the contract; and (2) inconvenient for the other party. It makes sense, the contract drafter says, because that company doesn’t want to open itself to lawsuits all over the country. Presented with these “take it or leave it” terms, the other party often doesn’t object, no matter how burdensome the forum would be, because a party doesn’t generally sign a contract anticipating a default.

Unless, you know, they have a lawyer review the contract and warn you about the doomsday scenario. In Tennessee, these provisions are generally enforceable, as noted in a recent Court of Appeals opinion, The Cohn Law Firm v. YP Southeast Advertising & Publishing, LLC. In that case, a Memphis-based law firm filed suit against the Yellow Pages in Memphis; in response, the Yellow Pages moved to dismiss, citing page 3, paragraph 18 (titled “Miscellaneous”) of the contract, stating that all lawsuits must be filed in Georgia. The lower court dismissed the lawsuit for lack of jurisdiction and improper venue, and the appellate court agreed.

That Court wrote that: “Generally, a forum selection clause is enforceable and binding on the parties entering the contract. Lamb v. MegaFlight, Inc., 26 S.W.3d 627, 631 (Tenn. Ct. App. 2000). A forum selection clause will be upheld if it is fair and reasonable in light of all the circumstances surrounding its origin and application. Id. (citing Dyersburg Mach. Works, Inc. v. Rentenbach Eng’g Co., 650 S.W.2d 78 (Tenn. 1983)). A party seeking to invalidate a forum selection clause must prove that the clause resulted from misrepresentation, duress, abuse of economic power, or other unconscionable means. Id.”

The Court further wrote: “Tennessee law is clear that the party challenging the enforcement of the forum selection clause “should bear a heavy burden of proof.” Chaffin v. Norwegian Cruise Line Ltd., 1999 WL 188295, *4 (Tenn. Ct. App. Apr. 7, 1999).

The Plaintiffs argued that the contract was an “adhesion” contract, i.e. a boilerplate provision that wasn’t discussed or contemplated, and the Court ultimately rejected this, since the forum selection clause wasn’t patently unfair and had a reasonable basis.

I estimate that most contracts have these provisions in them; if they don’t, they should. A good lawyer will always consider the “worst case” scenario, even at the front end of the deal. In doing that, no lawyer worth his billable hour rate will overlook the impact of a forum selection clause.

New Lawsuit filed in Davidson County Challenges Nashville’s AirBNB Restrictions

An interesting case was filed yesterday in the Davidson County Circuit Court. The lawsuit, styled Rachel Anderson and P.J. Anderson v. The Metropolitan Government of Nashville and Davidson County, Davidson County Circuit Court No. 15C3212, attacks Nashville’s regulations on Airbnb.com listings.

A copy of the Complaint can be found here.

Essentially, the Plaintiffs allege that the ordinances violate their constitutional due process and equal protection rights by imposing an arbitrary interference and limits on their operation of their residence as a rental property on the short-term rental site Airbnb.com.

It’s a strange lawsuit, with a lot of details alleged. It was filed by the in-house counsel at the Beacon Center of Tennessee.

Teaching CLE on Social Media for Lawyers: Do you really want your Lawyer as a Facebook Friend?

Because I’m an expert level blogger–or, well, I am when I actually, you know, blog–I’ve been asked to teach the audio CLE seminar “Marketing Your Legal Practice: Websites, Blogs, and More,” presented by M. Lee Smith Publishers. This seminar takes place on Thursday, August 27, 2015, at 2pm CST.

Just like the title says, I’ll be talking about all the things in social media and online that lawyers need to be thinking about. Plus, if you know me, I shoot pretty straight and offer my opinions when I think certain things are a waste of time.

Tune in, follow my advice, and watch the referrals roll in. Or, maybe, watch the scam emails from fake clients roll in (watch that CLE too).

All Lawyer Jokes Aside, Lawyers are Great at Public Speaking

I attended a local comedy show called “That Time of the Month,” which featured regular people (not professional speakers or comedians) reading stories they’d prepared. The stories were funny anecdotes from their lives, read by people who may have never been on stage before in their lives. The people had typed up their stories, and, generally, read them verbatim from their text on stage.

They were introduced as “readers” to the audience, and the first two were terrified. The microphone stand was at the wrong height, the stool was awkwardly placed, and their written pages shook in their trembling hands.

It was then, watching that, that I realized how impressive a typical lawyer is at public speaking. Even a mediocre lawyer has stumbled through articulating some complex argument in front of an audience of impatient lawyers and a cranky judge. It’s not long before a skilled lawyer learns the value of a 3 second pause, a glance up at the Judge, and some well timed vocal inflection.

I remember my first ever hearing. It was in Bankruptcy Court in 1999. It was also the Bankruptcy Judge’s first hearing. It was awful. But, now, 5,000 court appearances later, it’s second nature. I make jokes. I exude confidence. Sometimes, I hope that my case is called first so that I can dazzle the lawyers stuck behind me on the docket. When I watch Saul Goodman stare into the courthouse mirror and say “It’s Showtime!” before a hearing, I see a little bit of that in my colleagues.

So, yes, being a lawyer can be fun. Of course, 99% of the time, it’s paperwork, e-mails, deadlines, and anxiety. Lawyers get made fun of a lot, and people love lawyer jokes for a reason.

But, at this comedy show, watching people who never speak in public, I realized that, yes, lawyers really are a special breed, with a special gift.

Let’s Get Political for a Moment: My Endorsements for the 2015 Nashville Elections

I stay away from politics. I make sure to always vote, but, aside from the occasional sign in my yard, I tend to read the news, pick who I think would do a good job (regardless of party affiliation), and go back home. I don’t even wear the “I Voted” sticker.

But, this year is a little different, because I personally know some candidates and really think they’d do a great job. (And, if you know me in real life, you know that I wouldn’t go to this trouble unless I was sincere.)

First Endorsement: Charles Robert Bone for Mayor. (Disclaimer: I work with CRB.) When Charles Robert first announced he was running for mayor, I hated the idea, but not for any good reason. Instead, because he’s one of the smartest, hardest working lawyers at our firm. Why should Nashville’s gain be my firm’s loss, right?

Here at the firm, when we have a complicated case that needs some strong, smart firepower, my practice group has always roped Charles Robert in. He’s a great lawyer, smart, practical, and a leader at our firm. Plus, he’s sincere, nice, and funny. He’s got a real “Nashville” vibe, and he’s the type of person I want representing my city as we make some tough decisions in the next few years. I’m voting for him.

Second endorsement: David Briley for Vice Mayor. You think you’re seeing a pattern here, don’t you? Yes, I work with David Briley. Again, if you know me, you know I don’t give compliments easily, but I think he’d be great in this position. Briley is a leader at our firm and helped guide the firm through a tough economy over the past few years–both by leading the firm through hard decisions in lean financial times and also winning really big cases.

Last year–here’s where I’m biased–he and I worked together on a case against a Fortune 100 company (and won), and I was impressed with his strategy, decorum, and intelligence. He’s a guy I want on my side.

Third endorsement: Bob Mendes for Metro Council at Large: Wow, another lawyer? You really think I’m biased now. But here’s a secret: I hate having cases with Mendes. He’s smart, analytical, and great at strategy. When I see that he’s on the other side, I know I have to bring my “A game.” That’s what he would bring to this office. He would go to sleep thinking about the city and wake up the next morning thinking about the city. He would be a great councilman.

My other endorsements: I like John Lasiter for Metro Council At Large. I think he has an interesting perspective, and he seems engaged with the city.

I also like Peter Westerholm and Anthony Davis. I’m not in either of these Metro Council Districts, but they both are smart, engaged incumbent leaders who seem to really be looking out for Nashville’s future.

Enforcement of Judgments on Out of State Debtors Made Easy: When the Debtor Comes to You

Four years ago, we talked about domestication of judgments. Long story short, a judgment awarded in Tennessee can only reach a debtor’s assets located inside the State of Tennessee. So, if you have a judgment against somebody who lives in Texas, you may have to file a second lawsuit in Texas to attach his assets.

But maybe not.

I mean, sure, if he owns land in Texas,  owns a car that’s registered in Texas, or has a million dollars in cash under his Texas bed, then your Tennessee judgment is not going to be effective to execute on those assets. To get those, you need to go through the domestication process, which results in your out of state judgment being recognized by that foreign state as a valid judgment for enforcement in that state.

But, here’s a trick: What if the debtor has all his assets in that foreign state, but he banks at a large bank with offices all over the country? And what if that bank has a branch in Tennessee? The answer is that you can levy on that bank account.

So, debtors with accounts at Wells Fargo and Bank of America, watch out.

Presenting for NACM on Buying and Selling Claims in Bankruptcy

If you’ve ever been a creditor in a large Bankruptcy Case, you’ve probably received some calls or letters, offering to buy your Bankruptcy Proof of Claim from you. Sounds like a great deal, right? Somebody is going to pay you money for a bad debt. What can go wrong?

On Friday, July 17, 2015, I am presenting an education session on “The Value of Selling Claims in Bankruptcy” for National Association of Credit Management. This is part of their National Communications Credit Group Annual Meeting, taking place in Nashville this year.

In my presentation, I’ll be talking about the issues surrounding claim buying and selling, and also all the reasons why somebody would want to pay you for a bankruptcy claim.

But, if you’re not attending, don’t worry. After the seminar, I’ll be posting some of the highlights from my materials.