Supreme Court Reviews Whether a Nonprofit Foundation’s Records are Available Under the Public Records Act

THOMAS M. GAUTREAUX v. INTERNAL MEDICINE EDUCATION FOUNDATION, INC. (Tenn. February 28, 2011)

Plaintiff requested records from a nonprofit foundation pursuant to the Tennessee Public Records Act. The nonprofit foundation refused the request, stating that the foundation was not a government agency and that the records were not public. Plaintiff filed a Petition for Access to Public Records in chancery court, which held that the records were available because the nonprofit foundation was the functional equivalent of a government agency. The Court of Appeals affirmed.

We hold that the nonprofit foundation's records are not available pursuant to the Tennessee Public Records Act because it is not the functional equivalent of a government agency. We also hold that its records are not available pursuant to Tennessee Code Annotated section 10-7-503(d) (1999) because the nonprofit foundation has no more than two full-time staff members. We therefore reverse the judgment of the lower courts and dismiss the case.

Opinion Available At:
http://www.tba2.org/tba_files/TSC/2011/gautreauxt_022811.pdf

Court Reviews Whether Employee’s Termination was For Cause and Whether Employee was Entitled to Severance Pay

DEAN G. HAFEMAN v. PROTEIN DISCOVERY, INC., A TENNESSEE CORPORATION (Tenn. Ct. App. February 28, 2011)

This is a breach of employment contract action filed by Dean G. Hafemen ("the Employee") against Protein Discovery, Inc., a Tennessee corporation ("the Employer" or "the Company") after the Employer terminated the Employee's employment before the expiration of the term of his "Amended and Restated Employment Agreement" ("the Agreement").

The complaint alleges that the Employee is entitled to certain severance benefits provided for in the Agreement for any termination that does not qualify as a "Termination For Cause" as defined in the Agreement. After a bench trial, the court found that the termination was for cause and entered judgment in favor of the Employer. The Employee appeals. We reverse.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/hafemand_022811.pdf

Businesses Shift Strategy in Hiring Lawyers

The recession has brought changes to the business of law as companies try to find ways to lower fees and enter into less costly billing arrangements. Industry experts say some of these strategies include using junior associates at a lower billing rate, engaging different lawyers for specific issues, and paying by the hour rather than by retainer. In a New York Times article reprinted in the Memphis Commercial Appeal, business consultants and law firm managers offer their insights for making legal services affordable for small businesses.

Read the story here: http://www.commercialappeal.com/news/2011/feb/13/strategies-shift-in-hiring-lawyers/

Court Reviews an Interlocutory Appeal Regarding Class Certification

DONALD J. ROBERTS IRA, ET AL. v. PHILLIP H. MCNEILL, SR., ET AL. (Tenn. Ct. App. February 23, 2011)

This is an interlocutory appeal from a class certification. The named plaintiffs, former owners of preferred stock in Equity Inns, Inc., filed a class action against the company's former directors. Their amended complaint asserted breaches of the fiduciary duties allegedly owed to the preferred shareholders during the negotiation and approval of a merger. The trial court granted the plaintiffs' motion for class certification with respect to "[a]ll holders of Equity Inns preferred stock as of June 21, 2007." We vacate and remand for further consideration.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/robertsd_022311.pdf

New 8(a) Regulations Limit Joint Ventures, Allow Higher Income

SBA has overhauled rules governing the 8(a) program, imposing new restrictions on joint ventures and raising limits on a business owner’s annual income and wealth. The final rule, published in the Feb. 11 Federal Register, is the first rewrite of 8(a) regulations in more than 10 years. It becomes effective March 14.

In a joint venture between an 8(a) firm and a non-8(a) partner, the 8(a) firm will be required to do at least 40% of the work done by the joint venture. Since the JV is required to perform at least 50% of the work on a contract, that means the 8(a) partner must perform at least 20% of the total contract. The current rule requires only that the 8(a) firm do a “significant portion” of the work. The non-8(a) partner may not take a second bite of the apple by serving as a subcontractor to the joint venture. The 8(a) partner in the JV must receive profits commensurate with the amount of work it performs.

SBA has indicated that the new JV rules were a response to suspicions that Alaska Native Corporations were passing through virtually all work to a large partner. Legislation is pending in Congress to restrict the size of sole source contracts awarded to Alaska Native and tribally owned 8(a) firms. Alaska Native Corporations and tribally owned companies will be required to report how their 8(a) contracts benefited their communities.

The Alaska firms have argued that their payments to impoverished Native people justify their special procurement preferences, but congressional investigators found that some Alaska companies paid only a few hundred dollars in dividends to Native shareholders. The owner of a company entering the 8(a) program will not be considered economically disadvantaged if his annual income exceeds $250,000, averaged over a three-year period. To remain eligible for the program, the owner’s annual income may not exceed $350,000. An individual may rebut a finding that he is not economically disadvantaged by showing that the high income was the result of an unusual event, such as an inheritance. Since the 8(a) owner usually must be the highest paid employee, SBA said the higher income limits will allow 8(a) firms to pay competitive salaries to other top-level executives. An owner will not be considered economically disadvantaged if his assets exceed $4 million at the time of application for the 8(a) program.

Complete article available with subscription to Set-Aside Alert

Haslam Unveils First Legislative Agenda

Gov. Bill Haslam unveiled his first legislative agenda today. Among its provisions, the proposal would limit damages in civil suits against businesses as part of an effort to attract more companies to Tennessee.

Under the plan, non-economic damages would be capped at $750,000. Tony Thompson, a lobbyist for the Tennessee Association for Justice, responded saying the group is not convinced that civil damages are a problem in Tennessee or are keeping businesses from moving into the state.

http://www.knoxnews.com/news/2011/feb/17/haslam-unveil-legislative-package-thursday/?partner=newsletter_headlines

Court Reviews Whether a Partnership Existed Between Two Parties

RICHARD SWECKER, et al., v. STEVEN MICHAEL SWECKER, et al., and, DINAH SLUDER, et al., IN RE: ESTATE OF JOSEPH JAMES SWECKER, STEVEN SWECKER, et al., v. RICHARD ALLEN SWECKER (Tenn. Ct. App. January 26, 2011).

Plaintiffs brought this action to establish a partnership with the deceased against the estate's personal representative and others. Defendants answered, denying the allegation that a partnership existed, and filed a counter-complaint, asserting the estate should be reimbursed for plaintiffs' mismanagement of the farm, and for monies the plaintiffs removed from the estate's bank account.

Following an evidentiary hearing, the Trial Court held that deceased and plaintiff had entered into a partnership and that the partnership would be wound up by the Court and the partnership assets distributed. Also, the Trial Court held that plaintiffs would be required to pay rent on the house they occupied on the farm for several years.

On appeal, we affirm the finding that a partnership existed, but reverse the Trial Court's holding that plaintiffs owed the estate rent for occupancy of the house on the farm. We remand, with directions to the Court to wind up the partnership.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2011/sweckerr_012611.pdf

TN Supreme Court Reviews Whether Taxpayer’s Capital Gains were Business Earnings that were Subject to the Excise Tax

BLUE BELL CREAMERIES, LP v. RICHARD ROBERTS, COMMISSIONER, DEPARTMENT OF REVENUE, STATE OF TENNESSEE (Tenn. January 24, 2011).

Taxpayer is a Delaware limited partnership that produces, sells, and distributes ice cream in Tennessee and elsewhere. At issue in this appeal is the Tennessee Department of Revenue's excise tax assessment on capital gains from a one- time stock transaction between Taxpayer and its holding company. Taxpayer sought a refund in chancery court, challenging the validity of the tax assessment on statutory and federal constitutional grounds. Both Taxpayer and the Department moved for summary judgment. The chancery court granted summary judgment to Taxpayer, and the Court of Appeals affirmed the judgment.

Based on the uncontested facts in the record, we hold that Taxpayer's capital gains were business earnings pursuant to the functional test provided in Tennessee Code Annotated section 67-4-2004(1) (Supp. 2000) and therefore subject to the excise tax. Additionally, we hold that the tax assessment was constitutional pursuant to the unitary business principle. We therefore reverse the judgment of the Court of Appeals and enter summary judgment for the Department. We remand to the trial court to determine the amount of excise tax related to Taxpayer's capital gains.

Opinion may be found at:
http://www.tba2.org/tba_files/TSC/2011/bluebell_012411.pdf

Court Reviews Whether A Commercial Landlord Misrepresented the Estimated Operating Expenses to the Tenant-Plaintiff

SOLES4SOULS, INC. v. DONELSON CEDARSTONE ASSOCIATES, LP ET AL. (Tenn. Ct. App. December 20, 2010).

In a landlord-tenant dispute, the tenant plaintiff claims that before the parties entered into a lease for commercial property, the landlord defendants misrepresented estimated operating expenses that the plaintiff was expected to pay as part of its rent pursuant to the lease terms.

The plaintiff appeals the trial court's dismissal of its claims for fraud and violation of the Tennessee Consumer Protection Act. We find that the defendants misrepresented estimated operating expenses after entering into the initial lease with the plaintiff but before entering into an agreement for expansion space.

We therefore reverse the judgment of the trial court on the plaintiff's claims for fraud and violation of the TCPA and remand for determination of an appropriate remedy for damage the plaintiff suffered after agreeing to lease the expansion space.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2010/soles4souls_122010.pdf

TN Supreme Court Reviews Whether a Creditor May Bring a Direct Cause of Action Against an Insolvent Corporation’s Directors and Officers

MICHAEL SANFORD v. WAUGH & COMPANY, INC. ET AL. (Tenn. December 17, 2010)

The primary issue presented in this appeal is whether an individual creditor of an insolvent corporation may bring a direct cause of action for breach of fiduciary duty against the corporate directors and officers.

We hold that a creditor of an insolvent corporation may not bring a direct claim, only a derivative claim, against officers and directors for breach of the fiduciary duties they owe to the corporation.

We adopt the reasoning of the Delaware Supreme Court in North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, 930 A.2d 92 (Del. 2007), observing that corporate creditors are adequately protected by existing law, and that recognizing a new direct cause of action is unnecessary and would impede corporate governance.

We further hold that the trial court properly excluded evidence of conspiracy to interfere with contract and dismissed the claim for punitive damages. The judgment of the Court of Appeals is reversed.

Opinion available at:
http://www.tba2.org/tba_files/TSC/2010/sanfordm_121710.pdf

TN Supreme Court Reviews A Corporation’s Liability for the Payment of Use Tax

CAO HOLDINGS, INC. v. CHARLES A. TROST, COMMISSIONER OF REVENUE (Tenn. December 15, 2010).

This appeal involves a corporation's liability for the payment of use tax following its purchase of a business jet. After it received an assessment from the Tennessee Department of Revenue for over $700,000, the corporation paid the tax and filed suit in the Chancery Court for Davidson County seeking a refund on the ground that it qualified for the sale for resale exemption under Tenn. Code Ann. section 67-6-102(a) (28)(A) (Supp. 2004) because it had leased the aircraft to another corporation. Both the corporation and the Department filed motions for summary judgment.

The trial court granted the corporation's motion for summary judgment, and the Department appealed. A divided Court of Appeals panel affirmed the trial court. CAO Holdings, Inc. v. Chumley, No. M2008-01679-COA-R3-CV, 2009 WL 1492230 (Tenn. Ct. App. May 27, 2009). We granted the Department's application for permission to appeal.

We have now determined that neither party is entitled to a summary judgment because material disputes exist regarding the factual inferences or conclusions that can be drawn from the facts.

Opinion available at:
http://www.tba2.org/tba_files/TSC/2010/caoholdings_121510.pdf
 
CORRECTION: on page 5, line 25 adds the word "no" between the words "conferred" and "real"
http://www.tba2.org/tba_files/TSC/2011/caoholdings_COR_011311.pdf

Court Reviews Contractual Obligations and Retaliatory Discharge Claims in a Breach of Contract Case

KARIM SKAAN v. FEDERAL EXPRESS CORPORATION, INC. (Tenn. Ct. App. December 14, 2010).

Plaintiff/Appellant filed an action alleging breach of contract and retaliatory discharge. Defendant moved for summary judgment on both claims, and asserted the action was barred by a contractual limitations provision in the application for employment.

The trial court awarded summary judgment to Defendant with respect to the retaliatory discharge claim, and denied summary judgment with respect to Defendant's assertion that the matter was timebarred. Plaintiff appealed.

We dismiss this appeal for failure to appeal a final judgment where the trial court has not entered an order adjudicating or otherwise disposing of Plaintiff's breach of contract claim, and Plaintiff has failed to show cause why this matter should not be dismissed.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2010/skaank_121410.pdf

Court Reviews Whether Plaintiff Proved the Existence of a Partnership for Profit Between the Partie

JOYCE VIA v. LARRY EDWARD OEHLERT, SR. (Tenn. Ct. App. December 10, 2010)

This appeal arises out of a complaint to dissolve a partnership. The plaintiff alleged that she and the defendant, an unmarried couple, acquired real property through joint efforts. She further alleged that she contributed to the improvement of the property and an increase in its value, giving rise to a partnership for profit and a right to a distribution of the partnership's assets following dissolution.

The defendant denied that a partnership existed and counterclaimed for damages and attorney's fees arising out of the plaintiff's refusal to vacate the property following their break-up. At the ensuing bench trial, the defendant moved for a directed verdict on the plaintiff's claims.

The trial court granted the motion and dismissed the plaintiff's claims, specifically finding that the plaintiff was unable to prove the existence of an express or implied partnership for profit between the parties. We affirm.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2010/viaj_121010.pdf

Attorney General Reviews Whether Beer Boards Can Prohibit Sales of Beer through Drive-Up Windows or other Curbside Services

Prohibiting the Sale of Beer Through Drive-Up Windows
TN Attorney General Opinions
Date: 2010-11-19
Opinion Number: 10-113

In this opinion, the Attorney General distinguishes between Class A counties and Class B counties, cities, and towns. Class A counties have the authority to create beer boards and issue beer permits, but do not have the statutory authority to deny beer permits based solely on the sale of beer through drive-up windows, drive-through service, or curb service. Class B counties also have the authority to create beer boards and issue permits, but they have also been granted broad discretion to regulate, restrict, or prohibit beer sales.

Based on these classifications, the Attorney General concludes that while a Class B county (or municipality) would be able to deny permits to applicants who want to sell beer through drive-up windows, this type of restriction could not be imposed by a Class A county's local beer board rule or decision.

The full opinion is available at:
http://www.tba2.org/tba_files/AG/2010/ag_10_113.pdf

Court Reviews Employee's Discharge for Violating Company Policy

ALBERT J. HALE, v. JAMES NEELEY, COMMISSIONER, et al. (Tenn. Ct. App. November 19, 2010)

Claimant, an employee of Wal-Mart, was charged with possession of cocaine and pled guilty to a misdemeanor possession, and was then discharged for violating company policy. Claimant was not at work nor on Wal-Mart's property when the offense occurred.

The agency found that claimant was discharged under disqualifying conditions and denied unemployment benefits. Throughout the appeals process, denial of benefits was upheld.

On appeal to this Court, we hold that claimant violated Wal-Mart's policies by failing to report his conviction under a criminal drug statute to his employer within three days as required under the employer's policy. We affirm the denial of unemployment benefits to claimant.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2010/halea_111910.pdf