Wednesday, September 30, 2009

Court reviews constitutionality of a tax assessment based a subsidiary and a parent corporation's relationship to one another

BLUE BELL CREAMERIES, L.P. v. LOREN CHUMLEY, COMMISSIONER DEPARTMENT OF REVENUE, STATE OF TENNESSEE (Tenn. Ct. App. September 30, 2009)

The Tennessee Department of Revenue assessed an excise tax on a nondomiciliary subsidiary corporation which conducted business in the state based on income earned outside the state as a result of the parent corporation's redemption of outstanding stock held by the subsidiary. The Department's tax assessment was based on a determination that the income was taxable as "business earnings" under the Tennessee Excise Tax Law. The trial court found that the subsidiary and its parent corporation were not part of a unitary business relationship and, consequently, that the tax assessment was unconstitutional. Finding that the entities were not part of a unitary business relationship, the judgment of the trial court is affirmed.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2009/bluebell_093009.pdf

Tuesday, September 29, 2009

Court reviews whether trial court properly dismissed a case as a result of a forum selection clause.

TENNESSEE RIVER COLLECTION YACHT SALES, LLC, ET AL. v. P.F.C., INC. dba STINGRAY BOAT COMPANY (Tenn. Ct. App. September 29, 2009)

This case arises out of the termination of a dealer agreement ("the Agreement"), pursuant to which Tennessee River Collection Yacht Sales, LLC, and TRC Watersports Center, LLC (collectively "the Dealers") were authorized to sell recreational boats manufactured by P.F.C., Inc. dba Stingray Boat Company ("the Supplier"), a South Carolina corporation. The Supplier terminated the Agreement citing the Dealers' failure to purchase the current product models. The termination was also based upon the recommendation of the Supplier's representative following an on-site visit to the Dealers.

The Dealers filed suit alleging that the Supplier's refusal to repurchase the Dealers' remaining inventory of Stingray boats was a violation of statutory law governing the "Repurchase of Terminated Franchise Inventory," the Code Commission-supplied label for Tenn. Code Ann. sections 47-25-1301 - 14 (2001) ("the Repurchase Act"or "the Act"). The Supplier filed a motion to dismiss for lack of jurisdiction, asserting that under a governing law and forum selection clause contained in the Agreement, the action had to be brought in South Carolina, not Tennessee. The trial court agreed and dismissed the complaint without prejudice. The Dealers appeal. We affirm.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2009/tennesseeriver_092909.pdf

Thursday, September 24, 2009

Court reviews whether a non-compete contract is enforceable for an at-will employee who allegedy signed it under duress

CUMMINGS INCORPORATED v. TERRY J. DORGAN, JR. (Tenn. Ct. App. September 24, 2009)

This appeal involves an employment agreement and a non-compete covenant. The defendant sales representative was employed as a salesperson by the employer sign company. The parties executed an agreement setting out the structure of the employee's compensation, to be effective for three years. Prior to the expiration of the agreement, the plaintiff employer asked the employee to sign a new contract, changing his pay from straight commissions to salary plus commissions, as well as a separate two-year non-compete contract. The employee initially declined to sign the new contracts, but ultimately did so because he was told that he would be terminated if he refused. Over a year later, the employee quit to work for one of the plaintiff's competitors, and began soliciting his previous employer's largest account. The employer filed this lawsuit to enforce the non-compete contract. The employee asserted that the non-compete contract was unenforceable and filed a counterclaim, alleging breach of contract.

After a bench trial, the trial court enforced the non-compete contract, but held that the new compensation contract, executed on threat of termination, was void because it was signed under duress. The trial court awarded the employee damages. The employer now appeals, arguing that the new compensation contract was not signed under duress. The employee argues on appeal that the non-compete contract is unenforceable, because it was not supported by consideration and was also signed under duress.

We find that the defendant employee was an employee-at-will of the plaintiff company. On this basis, we reverse the trial court's finding that the new compensation contract was signed under duress, because threatening an at-will employee with termination does not constitute duress under the circumstances. We affirm the trial court's holding that the non-compete contract was enforceable.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2009/dorgant_092409.pdf

Monday, September 21, 2009

Court reviews summary judgment ruling in breach of contract case

MARK VII TRANSPORTATION CO., INC. v. RESPONSIVE TRUCKING, INC. (Tenn. Ct. App. September 21, 2009)

This action arises from an agreement between Appellant Mark VII Transportation Co. and Appellee Responsive Trucking, Inc. Appellant filed suit seeking to recover for breach of contract based on the Carmack Amendment standard of liability adopted by the parties in their agreement and for indemnification as allowed by their agreement. Both parties moved for summary judgment. The trial court denied Appellant's motion for summary judgment and granted Appellee's motion for summary judgment. Finding material issues of fact in dispute, we affirm in part and reverse in part.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2009/marktransportation_092109.pdf

Tuesday, September 8, 2009

Court reviews whether distributions made to plaintffs constituted repayment of loans or distribution of capital

JON THOMPSON, ED GATLIN, AND EMPIRE EXPRESS, INC. v. J. T. DAVIS AND BARBARA DAVIS (Tenn. Ct. App. September 8, 2009)

This is an action for contribution. The two individual plaintiffs and the defendant formed a limited liability company for the purpose of owning and operating an arena football team. To fund the team, the three investors took out two loans in their individual names. The business was a losing venture, and eventually the team was sold. The proceeds of the sale were used to pay all of the business's debts except the remaining liability on the two personal loans. The two plaintiffs paid the balance of the loans out of their personal funds.

The plaintiffs then filed the instant lawsuit against the defendant for contribution, alleging that he was jointly and severally liable for his pro rata share of the debt. The defendant conceded that he owed a small part of the debt, but argued that his liability should be reduced by the amounts distributed to the plaintiffs by the business. The defendant contended that the funds distributed to the plaintiffs should have been applied to the business debt. After a bench trial, the trial court held in favor of the plaintiffs. The trial court rejected the defendant's claim that his debt should be offset, finding that the distributions made to the plaintiffs constituted a repayment of loans, not a distribution of capital. It also awarded the plaintiffs attorney's fees. The defendant now appeals. We affirm the decision of the trial court in all respects.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2009/gatlinj_090809.pdf