Denver Post: Restaurants say online reviewers may exploit their power

The Red Rabbit Kitchen and Bar in Sacramento, Calif. — whose co-owners include Matt Nurge, left, and John Bays — was the apparent target of an alleged extortion attempt by a Yelp user. (Paul Kitagaki Jr., Sacramento Bee/MCT)

Restaurant co-owner Sonny Mayugba was given an offer he almost could not refuse last month. Not by a local gangster but by a user of the popular online-review site Yelp.com. Mayugba said the user threatened to blast Red Rabbit Kitchen and Bar in Sacramento, which Mayugba co-owns, on Yelp because he believed he and his party got food poisoning from their meals.

Read the full story at the Denver Post's website: http://www.denverpost.com/business/ci_20763457/restaurants-say-online-reviewers-may-exploit-their-power#ixzz1wvTS6Lqh

Penalties vary for companies convicted of crimes

Brian Wanamaker is a criminal defense attorney with Ritchie, Dillard, Davies & Johnson. This column is provided through the Knoxville Bar Association.

Most companies expect the occasional civil judgment or fine; they rarely expect to plead guilty to a criminal offense. Global health care company Abbott Laboratories Inc. recently agreed to do just that to resolve civil and criminal liability issues related to off-label marketing of its anti-seizure medication Depakote. Abbott agreed to plead guilty to one misdemeanor and pay about $1.6 billion. That is one hefty misdemeanor.

Read the full story at:
http://www.knoxnews.com/news/2012/jun/04/penalties-vary-for-companies-convicted-of-crimes/

Court reviews whether members of a partnership could be held individually liable for a mortgage loan

BEACH COMMUNITY BANK v. EDWARD A. LABRY, III, ET AL. (Tenn. Ct. App. June 15, 2012)

This case involves personal guaranties on a loan to purchase real estate. The Appellants entered into a partnership for the purpose of buying and selling real estate. The partnership obtained a loan in the amount of $2,611,000.00 to purchase real property located in Florida. The Appellants each signed a personal guaranty on the loan in favor of the Appellee bank. By the express terms of the guaranties, the Appellants guaranteed “up to a principle amount of $795,600.00.”

The partnership defaulted on the loan and the bank sued to enforce the guaranties. The Appellants answered that the guaranties were joint and several and that, because they were only 30% owners of the partnership, they could only be liable for 30% of the amount of the defaulted loan. In addition, the Appellants argued that the bank breached the covenant of good faith in failing to foreclose on the subject property.

The trial court found that, under Florida law, the guaranties were not ambiguous, but were separate guaranties holding each Appellant separately liable for $795,600.00. The trial court also awarded interest on the entire debt.

We affirm the trial court’s determination that the guaranties unambiguously require each Appellant to be separately liable for $795,600.00, but hold that the term regarding interest is ambiguous. Accordingly, we reverse the grant of summary judgment on this issue and remand to the trial court for the consideration of parole evidence regarding the amount of interest and fees chargeable to the Appellants. Affirmed in part, reversed in part and remanded.

Opinion available at:
https://www.tba.org/sites/default/files/beachbank_061512.pdf

Tennessee Supreme Court reviews whether a plaintiff's injuries in a bar are covered by liability insurance

DONNA CLARK v. SPUTNIKS, LLC ET AL. AND LEONARD GAMBLE v. SPUTNIKS, LLC ET AL. (Tenn. May 30, 2012)

In these consolidated cases, the primary issue is whether there is liability insurance coverage for the plaintiffs’ injuries resulting from an altercation on the premises of the insured’s bar and restaurant. The insurer denied coverage and declined to defend the insured based on its determination that there was no coverage under the terms of the policy.

We hold that based on the clear terms of the policy agreement, there is no liability coverage because the incident arose from an assault and battery, which was an excluded cause, and because there is no nonexcluded concurrent cause to provide coverage. We further hold that estoppel by judgment does not apply to collaterally estop the insurer from arguing the lack of coverage. The judgment of the trial court is reversed.

Opinion available at:
https://www.tba.org/sites/default/files/gamble_053012.pdf

Court reviews whether Plaintiff was an at-will employee eligible to sue for retaliatory discharge

CAROL PETSCHONEK v. THE CATHOLIC DIOCESE OF MEMPHIS, ET AL. (Tenn. Ct. App. May 23, 2012)

Defendant employer moved for summary judgment in this common law retaliatory discharge action on the grounds that Plaintiff employee was not an employee-at-will and that Plaintiff had failed to identify any law or clear public policy allegedly violated by Defendant. The trial court denied the motion.

We granted permission for interlocutory appeal. On appeal, Defendant raises the issue of whether the courts lack jurisdiction under the ministerial exception. We hold that the court has subject matter jurisdiction. We also hold that Plaintiff was not an at-will employee, and therefore cannot establish a prima facie case of common law retaliatory discharge. The trial court’s judgment denying Defendant’s motion for summary judgment is reversed.

Opinion available at:
https://www.tba.org/sites/default/files/petschonekc_052312_0.pdf

Concurring opinion:
https://www.tba.org/sites/default/files/petschonekc_CON_052312_0.pdf

Court reviews whether an employer breached its fiduciary duty to a former employee

BETH PROFFITT v. SMOKY MOUNTAIN WOODCARVERS SUPPLY, INC., ET AL. (Tenn. Ct. App. May 15, 2012)

This appeal arises from the termination of Beth Proffitt (“Plaintiff”) from employment at Smoky Mountain Woodcarvers Supply, Inc. (“the Corporation”). Plaintiff, a minority shareholder in the Corporation, sued the Corporation, as well as the other shareholders Mac Proffitt and Ray Proffitt (collectively, “the Defendants”) in the Circuit Court for Blount County (“the Trial Court”). The Trial Court bifurcated the issues of liability and damages.

Plaintiff alleged, among other things, that the Defendants breached their fiduciary duty to her. After a trial on the matter of liability, the Trial Court found the Defendants liable for breach of fiduciary duty. After the hearing on damages, the Trial Court awarded damages to Plaintiff, including lost salary and bonus. The Trial Court also awarded Plaintiff her attorney’s fees. The Defendants appeal.

We find that the Trial Court did not err in finding that the Defendants did breach their fiduciary duty to Plaintiff. We, however, reverse the award of attorney’s fees to Plaintiff. Otherwise, we affirm the judgment of the Trial Court.

Opinion available at:
https://www.tba.org/sites/default/files/proffittb_051512.pdf

Court reviews whether a farmer can be considered a merchant for the purposes of the UCC Statute of Frauds

BROOKS COTTON COMPANY, INC. v. BRADLEY F. WILLIAMS (Tenn. Ct. App. April 23, 2012)

This interlocutory appeal concerns the question of whether a farmer may be considered a merchant for purposes of the Uniform Commercial Code Statute of Frauds.

Appellant farmer allegedly entered into an oral contract to sell his cotton crop to Appellee cotton company. The farmer failed to deliver the cotton and the cotton company sued for specific performance. The farmer defended the suit by arguing that the alleged oral contract was unenforceable due to the Statute of Frauds. The cotton company countered that the farmer was a merchant for purposes of the merchant exception to the Statute of Frauds. The trial court granted partial summary judgment in favor of the cotton company, finding that the farmer was a merchant for purposes of the Statute of Frauds.

We hold that a farmer may be considered a merchant for purposes of the Uniform Commercial Code Statute of Frauds, the determination of which is a mixed question of law and fact. However, because the question of whether this particular farmer qualifies as a merchant raises genuine issues regarding the inferences to be drawn from the facts, we reverse the grant of partial summary judgment and remand to the trial court for a trial on the merits.

Opinion available at:
https://www.tba.org/sites/default/files/brookscotton_042312.pdf

Tennessee Supreme Court reviews whether a city's ordinance substantially interferes with a firework dealer's use of land

SNPCO, INC. v. CITY OF JEFFERSON CITY ET AL. (Tenn. March 26, 2012)

This appeal involves the question of whether a city’s ordinance banning the sale of fireworks within its city limits implicates Tenn. Code Ann. § 13-7-208(b) (Supp. 2008) which permits pre-existing nonconforming businesses to continue to operate despite a “zoning change.”

After the City of Jefferson City annexed the property on which a fireworks retailer’s business was located, the retailer filed suit in the Circuit Court for Jefferson County seeking compensation for a regulatory taking or, in the alternative, for a declaration that Tenn. Code Ann. § 13-7-208(b) permitted it to continue to sell fireworks.

The trial court dismissed the retailer’s complaint in accordance with Tenn. R. Civ. P. 12.02(6), and the Court of Appeals affirmed. SNPCO, Inc. v. City of Jefferson City, No. E2009-02355-COA-R3-CV, 2010 WL 4272744, at *11 (Tenn. Ct. App. Oct. 29, 2010). We granted the retailer’s Tenn. R. App. P. 11 application to clarify the application of the “substantial interference” test in Cherokee Country Club, Inc. v. City of Knoxville, 152 S.W.3d 466 (Tenn. 2004) to ordinances such as the one involved in this case.

We have determined that our decision in Cherokee Country Club, Inc. v. City of Knoxville requires consideration of both the terms and effects of the challenged ordinance. Thus, the courts must first determine whether the challenged ordinance relates to the city’s “general plan of zoning.” If the courts determine that the challenged ordinance relates to the city’s general plan of zoning, then, and only then, may the courts ascertain whether the ordinance results in a “substantial interference” with the use of land.

Based on this record, we have determined that Jefferson City’s challenged ordinance banning the sale of fireworks within its city limits is not related to the city’s general plan of zoning. Accordingly, we affirm the judgments of the courts below.

Opinion available at:
https://www.tba.org/sites/default/files/snpcoinc_032612.pdf

Court reviews the "starting point" for determining the amount owed in a case involving a loan dispute

DELTA DEVELOPMENT CORPORATION, ZOO CONCESSION AND GIFT, INC., and SMITH & ROGERS COMPANY v. F. FANI GULF INTERNATIONAL, GULF INTERNATIONAL, FAROKH FANI, and F. FANI/GULF INTERNATIONAL v. FARIBORZ FERDOWSI; LELA FERDOWSI; FARZIN FERDOWSI; ZIBA FERDOWSI; FARSHEED FERDOWSI; TALIEH FERDOWSI; AZAR FERDOWSI; CYRUS AZHDARI; HOMAYOUN AMINMADANI; and ZOHRE AMINMADANI (Tenn. Ct. App. April 4, 2012)

Defendants made a series of loans to Plaintiffs and a dispute arose as to the interest and principal owed. A judgment was entered in favor of Defendants. However, Defendants appealed the award, claiming that the trial court erred in admitting evidence, which allegedly reduced the judgment amount, and in refusing to hold all shareholders of the Plaintiff companies liable for the judgment. Plaintiffs also claim, on appeal, that the Special Master and the trial court set an incorrect “starting point” for determining the judgment owed. We affirm the Special Master and the trial court in all respects.

Opinion available at:
https://www.tba.org/sites/default/files/deltadevelopment_040412.pdf

Court reviews a case involving an unpaid promissory note, unjust enrichment, and breach of a purchase agreement

LAUNDRIES, INC. v. COINMACH CORPORATION v. CARLA MOYER, ET AL. (Tenn. Ct. App. March 21, 2012)

Plaintiff filed an action to recover $150,000 due on a promissory note executed in conjunction with the purchase of its assets. Defendant admitted that it had not paid the full amount of the promissory note but denied that the amount was due, and asserted a counterclaim contending, inter alia, that the plaintiff had breached the asset purchase agreement, committed misrepresentation and not disclosed material facts with respect to the transaction, had fraudulently induced defendant to close on the transaction, and that plaintiff had been unjustly enriched. Plaintiff filed a motion for dismissal and for judgment on the pleadings, which the trial court granted. Defendant appeals. Finding that the causes of actions asserted in defendant’s counterclaim failed to state a claim for relief, we affirm the dismissal of the counterclaim. We reverse the grant of the motion for judgment on the pleadings and remand the case for further proceedings.

Opinion available at:
https://www.tba.org/sites/default/files/laundriesinc_032112.pdf

Court reviews whether a guarantor was personally liable for the debt on an open account

AMBER BRAZILIAN EXPORT RESOURCES, INC., DBA AMBER INTERNATIONAL v. CROWN LABORATORIES, INC. ET AL. (Tenn. Ct. App. March 21, 2012)

Amber Brazilian Export Resources, Inc., doing business as Amber International (“the Plaintiff”), filed this action against Crown Laboratories, Inc. and Jeffrey A. Bedard (collectively “the Defendants”) to collect a debt owed on an “open account.” The liability of Mr. Bedard is based upon a personal guaranty of Crown’s obligation. The Defendants admit that something is owed on the account but deny the amount and further deny that Mr. Bedard signed the guaranty in a personal capacity. The Plaintiff filed a motion for summary judgment supported by the affidavit of its president, which the Defendants opposed with the affidavit of Mr. Bedard in which he states that he signed the guaranty in a representative capacity. He also disputes the amount due as stated in the Plaintiff’s affidavit. The trial court granted the Plaintiff’s motion. The Defendants appeal. We affirm that part of the judgment holding Mr. Bedard liable on the guaranty and vacate that part of the judgment setting the amount owed because there is a genuine issue of material fact as to the amount.

Opinion available at:
https://www.tba.org/sites/default/files/amberbrazilian_032112.pdf

Court reviews breach of fiduciary duty, breach of contract, and other issues in a case involving an employee's termination

CYNTHIA H. KOVACS-WHALEY, DIRECTOR AND SHAREHOLDER OF WELLNESS SOLUTIONS, INC. v. WELLNESS SOLUTIONS, INC. ET AL. (Tenn. Ct. App. March 19, 2012)

Plaintiff, an employee, shareholder, and director of Wellness Solutions Inc., filed this action against the Company and shareholders Steven Scesa and Laura Reaves following the termination of Plaintiff’s employment with Wellness Solutions, Inc., asserting a shareholder derivative action and claims for breach of fiduciary duty and duty of good faith.

Following her termination and the initiation of this action, the Company exercised a call option contained within the Shareholders’ Agreement and purchased Plaintiff’s stock. Plaintiff then amended her complaint to include claims for breach of contract and false light invasion of privacy against Mr. Scesa.

The trial court summarily dismissed all of Plaintiff’s claims. We reverse the summary dismissal of Plaintiff’s claim for breach of contract finding there are genuine issues of material fact. We also reverse the summary dismissal of Plaintiff’s claim for false light invasion of privacy finding that Mr. Scesa, as the moving party, failed to negate the essential element of damages or demonstrate that Plaintiff cannot prove the essential element of damages at trial.

We affirm the summary dismissal of Plaintiff’s claims for breach of fiduciary duty, breach of the duty of good faith, and breach of the duty of loyalty upon the finding the Defendants demonstrated that the business judgment rule applies to their decisions at issue, which negates an essential element of each of these claims. Further, we deny Defendants’ request for attorneys’ fees pursuant to Tennessee Code Annotated § 47-56-401(c) upon the finding that Plaintiff did not properly bring a shareholder’s derivative action.

Opinion available here:
https://www.tba.org/sites/default/files/kovacs-whaleyc_031912.pdf

Court reviews a contract dispute involving the refusal to make payments on a delivery

WILSON SPORTING GOODS CO. v. U.S. GOLF & TENNIS CENTERS, INC., ET AL. (Tenn. Ct. App. February 24, 2012)


Wilson Sporting Goods Company brought suit in the Cumberland County General Sessions Court on an open account against U.S. Golf & Tennis Centers, Inc. (“the Company”) and its owners, Arthur H. Bell and Louise Bell (collectively “the Guarantors”). The account resulted from a large shipment of golf balls. After delivery, the Company questioned the price charged and refused and failed to make any payments.

In response to Wilson’s suit, the defendants filed a counterclaim in which they denied owing the amount sought and moved the court to modify or rescind the contract with Wilson. Following a bench trial, the general sessions court entered judgment in favor of Wilson. On appeal to the trial court, both sides sought summary judgment; both motions were denied. After a bench trial, the court entered judgment in favor of Wilson for $33,099.28. The defendants appeal. We affirm.

Opinion available at:
https://www.tba.org/sites/default/files/wilsonsporting_022412.pdf

America Invents: Looking at the New U.S. Patent Act

Sheri Qualters posted a list of the top ten things you should know about the new Patent Act on Law.com. Qualters discusses several aspects of the Act, including the first-to-file model, the PTO court, and changes to the prior use, best mode, and joinder rules.

Read the full article here: Top 10 Things You Should Know About the New Patent Law

The New York Times also posted an article about how the new Patent Act, which was enacted under the name the "America Invents Act," is affecting small businesses. This article also discusses the new-to-the-US First to File model, and it also discusses the Track One "fast track" process and how Postgrant Review works.

Read that article, posted by Eliene Zimmerman, here: Business Owners Adjusting to Overhaul of Patent System

Court reviews whether the final payment in a Development Agreement was contingent upon satisfying certain requirements of a Partnership Agreement.

EAGLES LANDING DEVELOPMENT, LLC. v. EAGLES LANDING APARTMENTS, LP., ET AL. (Tenn. Ct. App. February 2, 2012)

This is a breach of contract case. Following a bench trial, the trial court awarded Appellee Developer the remaining balance due under a Development Agreement that was entered by and between Appellee and the Appellants, a partnership and its limited liability partners, for construction of an apartment complex. Appellants contend that Appellee was not entitled to final payment because the general partner, who is not a party to this appeal, had not funded the development fees that were contemplated under a Partnership Agreement, to which Appellee was not a party. Specifically, Appellants argue that the payment under the Development Agreement is contingent upon satisfaction of the funding requirements specified in the Partnership Agreement. We conclude that the conditions precedent under the Development Agreement were met, and that the Appellee was, therefore, entitled to its full fee under the Development Agreement. The trial court assessed judgment against the limited liability partners and the partnership. Under the Tennessee Revised Uniform Partnership Act, Appellants' status as limited partners protects them from liability for the debts of the partnership. Appellee contends that it is a third-party beneficiary under the Partnership Agreement and may, therefore, have judgment against the limited partners who were parties to that agreement. We conclude that the third-party beneficiary issue is waived and that the trial court erred in entering judgment against the limited partners. Affirmed in part, reversed in part, and remanded.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2012/eagleslanding_020212.pdf