Court reviews whether a quasi-contract existed between a website developer and an LLC

ICG LINK, INC. v. PHILIP STEEN ET AL. v. TN SPORTS, LLC v. ICG LINK, INC. (Tenn. Ct. App. November 1, 2011)

This is a dispute concerning payment for website development services. The plaintiff, a website development company, filed suit against the defendants, an LLC and its managing member in his individual capacity, alleging breach of contract and unjust enrichment.

The trial court found there was no express contract between the parties due to a lack of mutual assent. The court found there was a quasi-contract and that plaintiff was entitled to the reasonable value of its services, minus the costs incurred by defendants in attempting to repair the defects in the website. Last, the court held the individual defendant personally liable for the judgment.

We affirm the finding of a quasi-contract and the personal liability of the individual defendant; however, we modify the trial court's monetary award, finding the plaintiff is entitled to recover a judgment of $13,952.88. The court's holding is affirmed in all other respects.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/icglink_110111.pdf

Court reviews whether the defendant breached a contract pertaining to a radio station's programming

DICK BROADCASTING CO., INC. OF TENNESSEE v. OAK RIDGE FM, INC., ET AL. (Tenn. Ct. App. October 19, 2011

The plaintiff filed suit against the defendants for causes of action sounding in contract after the defendants refused to consent to the assignment of certain agreements relating to the programming of a radio station. The parties filed competing summary judgment motions. The trial court dismissed the case, finding as a matter of law that the defendants did not breach one of the contracts at issue. The plaintiff appealed. We reverse the judgment of the trial court.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/dickbroadcasting_101911.pdf

Amazon to begin collecting Tennessee sales tax in 2014

Amazon to begin collecting Tennessee sales tax in 2014
October 6, 2011
Brian Reisinger (Staff Reporter - Nashville Business Journal)

Gov. Bill Haslam confirmed a sales tax deal with online retailer Amazon.com Thursday morning, announcing thousands of additional jobs and what he hopes will be the resolution of a long-running dispute within the business community.

Amazon will invest a total of $350 million and create 3,500 full-time jobs under the deal, which will also include new locations in Tennessee. Amazon had previously committed to 1,500 jobs in Hamilton and Bradley counties, and between 300 and 500 jobs in Wilson County. The company also anticipates thousands of additional seasonal jobs.

See the full article at the Nashville Business Journal web site: http://www.bizjournals.com/nashville/news/2011/10/06/haslam-seals-amazon-deal-in-tennessee.html

Attorney General Opinion: Out-of-State Dealer's Nexus as a Result of Activities of In-State Distribution Center

In this opinion, the Attorney General discussed whether an out-of-state dealer that maintains an in-state distribution center or warehouse is required to collect Tennessee sales tax from Tennessee consumers. The AG concluded that, "if a retailer directly maintains or owns an in-state distributing house or warehouse, then the retailer has a physical presence within the State of Tennessee and, thus, has nexus with Tennessee for Commerce Clause purposes. On the other hand, if the in-state distributing house or warehouse is owned by a retailer’s subsidiary, instead of the retailer directly, nexus is established only if the subsidiary’s in-state activities are significantly associated with the retailer’s ability to establish and maintain a market in Tennessee for its sales."

The Attorney General also concluded that the fact that the dealer accepts purchase orders through electronic means does not release it of liability from collecting sales tax. Finally, he states that although the "State of Tennessee cannot contractually waive a taxpayer’s obligation to pay sales taxes where the Retailers’ Sales Tax Act unambiguously establishes an obligation to pay such taxes," the Commissioner of Revenue may exercise discretion in determining the best methods of enforcing Tennessee's tax laws.

Read the full opinion here: http://www.tba2.org/tba_files/AG/2011/ag_11_71.pdf

Local banks enticed with funds for small business loans

Local banks enticed with funds for small business loans
By Josh Flory

Billy Carroll, president and CEO of Pigeon Forge-based SmartBank, acknowledges that the regulatory climate is tougher than it used to be, but said that banks still want to loan money.

'If we can't grow assets we can't make money,' he said. 'We can't generate a return for our shareholders.'

SmartBank's parent company was approved recently for $12 million through the federal Small Business Lending Fund, and Carroll said the bank is working on a couple of small-business loans that he thinks were generated by its participation in the program.

The funding, he said, allows the bank to price its loans a little more competitively, to grow its asset base 'and not have to worry about going out and immediately trying to raise capital behind that.'

SmartBank is among a handful of Tennessee community banks that have been on the receiving end of money from the $30 billion program approved by Congress last year.

See the full article at the Knoxville News Sentinel web site: http://www.knoxnews.com/news/2011/oct/03/local-banks-enticed-funds-small-business-loans/

Court reviews whether a partnership agreement was breached and the trial court's distribution of partnership profits.

LISA BRADFORD v. ABE STEPHENS (Tenn. Ct. App. September 28, 2011)

The appellant, the former business partner of the appellee, appeals the trial court's determination that the appellee did not breach their partnership agreement, as well as the trial court's distribution of partnership profits. Appellant also appeals the trial court's decision not to grant a jury trial.

We affirm the trial court's decision not to grant a jury trial as well as its determination that the appellee did not breach the partnership agreement. We adjust the amount of the court's awards to account for $5,000 of an $8,000 sale which the appellee kept rather than depositing it into the partnership account.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2011/bradfordl_092811.pdf

Patent reform act signed into law

President Obama has signed H.R. 1249, the "Leahy-Smith America Invents Act," passed by the Senate the week before. The act presents the most comprehensive overhaul of the Patent Statute (35 U.S.C.) since it was enacted in 1952, including changing our system of awarding patents from those who invent first to those who file their application first.

Law.com has the full story.

Attorney General reviews whether the Retailers' Sales Tax imposes an unconstitutional tax on imports and exports

In this opinion, the Attorney General reviews the Retailers' Sales Tax Act in order to determine whether it violates the Import-Export Clause of the U.S. Constitution. After analyzing Commerce Clause jurisprudence, he determines that the "imposition of Tennessee;s sales and use taxes on out-of-state businesses with respect to items delivered or used in Tennessee is thus constitutionally permissible, provided that “substantial nexus” is established."

He concludes that the Retailers' Sales Tax Act imposes a privilege tax on the retail sale and use of tangible personal property in Tennessee, but that it does not impose a tax on imports from and exports to foreign countries in violation of the United States Constitution.

Read the full opinion here:
http://www.tba2.org/tba_files/AG/2011/ag_11_67.pdf

Major patent overhaul passes U.S. Senate

The U.S. Senate passed the Leahy-Smith America Invents Act on Thursday, the first significant change in patent law since 1952. The legislation is designed to spur innovation and provide a boost to the job market. The law would change the nation's U.S. patent system from a first-to-invent system to a first-to-file system and would help provide adequate funding to the overwhelmed patent office by allowing it to set and keep its own fees. The final bill is controversial because it does not prohibit fee diversion -- the practice of using excess U.S. Patent and Trademark Office revenue for other government programs.

Read the full story on CNN.com

Patent office hits 8 million mark

The U.S. Patent and Trademark Office issued patent number 8 million on Tuesday, August 16. It went to Second Sight Medical Products for an invention the company says enhances visual perception for a certain kind of blindness. The first patent, for a cog mechanism in locomotives, was issued in 1836 to Sen. John Ruggles, who was known as the father of the U.S. Patent office.

Read the full story on NPR's website.

Court reviews whether guarantors are liable for loans obtained through fraudulent means without their knowledge

SECURAMERICA BUSINESS CREDIT v. KARL SCHLEDWITZ and TERRY LYNCH (Tenn. Ct. App. August 29, 2011)

This is a guaranty case. Appellants personally guaranteed a line of credit for their trucking company. Later, Appellants sold the trucking company to two employees, but were not released by the Appellee lender from their guaranties.

Under new ownership, the company falsified borrowing documents so that more money was extended on the line of credit than was collateralized per the loan agreement. This was done with the complicity of the lender, but without the knowledge of the guarantors. The debtor trucking company defaulted, and the lender sought repayment of the loan from the guarantors.

Following a bench trial, the trial court found Appellants liable for their personal guaranties, but denied prejudgment interest and punitive damages due to what the court characterized as the fraudulent actions of Appellee. In an apparent clerical mistake, on the same date that the trial court entered its final judgment, it also entered an order voluntarily dismissing all claims against Appellants. More than a year later, the trial court entered an order clarifying its prior order of dismissal.

After a thorough review of the record, we conclude that: (1) the trial court properly afforded Appellee relief under Tenn. R. Civ. P. 60.01 to clarify its prior order of dismissal; and (2) the trial court made incomplete and contradictory findings of fact and conclusions of law, such that further appellate review is precluded. Consequently, we vacate and remand for additional findings.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/securamerica_082911.pdf

Court reviews whether employer had just cause to terminate employee in violation of an employment contract

VICKI L. HUTCHINGS, v. JOBE, HASTINGS & ASSOCIATES (Tenn. Ct. App. August 15, 2011)

Plaintiff and defendant entered into a contract of employment for a term of three years, wherein plaintiff would prepare tax returns for defendant tax firm. Defendant terminated plaintiff's employment before the three year term had expired and plaintiff appealed to this Court to reverse the Trial Court's finding of breach of contract and award her damages for the breach. We hold that the evidence does not preponderate against the Trial Court's finding that the employer had just cause to terminate plaintiff. We affirm the Judgment of the Trial Court.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/hutchingsv_081511.pdf

Court reviews whether a subsequent agreement was a new agreement or a renewal of an old agreement

BSG, LLC v. CHECK VELOCITY, INC. (Tenn. Ct. App. August 12, 2011)

BSG, LLC introduced CheckVelocity to Weight Watchers. In 2005, CheckVelocity and Weight Watchers entered into an agreement whereby CheckVelocity provided check collection services. BSG, in accordance with its agreement with CheckVelocity, was to receive compensation for its introduction of CheckVelocity to Weight Watchers in the form of residual fees during the time of the CheckVelocity - Weight Watchers agreement and any renewal agreements. In 2008, CheckVelocity and Weight Watchers entered into a new agreement in which credit card collection services were added and the check collection services were continued unchanged. CheckVelocity stopped paying the residual fees because it considered the Weight Watchers agreement to be a new agreement, not a renewal of the old one. BSG sued. The trial court considered the 2008 agreement to be a new agreement, not a renewal, and ruled for CheckVelocity. BSG appealed. We reverse.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/bsg_081211.pdf

Legal agreements are NOT for when things go well

One of those basic realities of entrepreneurship is the fact that you can't get there by yourself. You will need help and it will likely come in the form of partners. Manufacturing, sales, marketing, finance, accounting, and the list goes on. Perhaps a typical scenario goes like this: you have a hot new technology but you need someone to help you make it. Your intellectual property outlines a basic concept for making the product and your challenge is to figure out how to scale up in a manufacturing environment. So you meet with a few manufactures who are excited about working with you as you are equally excited about making your stuff. You like one particular company and you sign a Memorandum of Understanding (MOU) or a Letter of Intent (LOI) and start the process of figuring out how to make your stuff. Through several trial runs, you determine the right mix of materials, the best temperature and pressure and your product turns out to be better than expected. The question is who owns this new intellectual property? You? Everybody? Nobody?

Benjamin K. Riley has written a fine article on the Fortune Blog called Three Legal Lessons For Startups in which he goes into some detail about the importance of legal agreements between business partners and joint ventures. Different legal agreement types carry different weight when it comes to ownership of intellectual property and it's important to understand these differences and make sure your trade secrets stay a secret.

Complete article may be found at:
http://www.outofthegarage.com/outofthegarage/2011/2/25/legal-agreements-are-not-for-when-things-go-well.html

Court reviews a claim against a used car business for issues including misrepresentation, fraud, and conversion

ASHRAF M. SAWERES v. ROYAL NET AUTO SALE, INC., ET AL. (Tenn. Ct. App. August 3, 2011)

This appeal arises out of an action in which the plaintiff asserted a claim that the agent of a used car business in which the plaintiff allegedly invested committed misrepresentation, fraud, and conversion, and violated the Tennessee Consumer Protection Act in failing to give him stock in the business or compensate him for work performed at the business. Plaintiff also asserted a claim based on defendants' alleged failure to repair his vehicle. The trial court held that plaintiff had not established the necessary elements for any of his claims and dismissed the case; plaintiff appeals. Finding no error, we affirm.

Full Opinion available:
http://www.tba2.org/tba_files/TCA/2011/saweresa_080311.pdf