620 S.W.3d 318
Tenn.2021Background
- In 2001 Memphis Basketball (successor to HOOPS) and the City/County entered an Arena Agreement that includes a Non-Participation Provision barring City/County support for any “Competing Facility” (defined to include indoor venues with capacity >5,000 and <50,000) without Memphis Basketball’s written consent.
- Elvis Presley Enterprises, Inc., EPPF, LLC, and Guesthouse at Graceland, LLC (EPE) sought TIF support from EDGE for a multi-phase Graceland redevelopment; EDGE, City, and County initially approved a TIF plan for phase one.
- In 2017 EPE proposed a Supplemental Plan adding a 6,200-seat arena and requesting increased TIF; Memphis Basketball objected, asserting the arena would violate the Arena Agreement.
- EPE filed a first declaratory-judgment suit (EPE I) in 2017; the chancery court dismissed EPE I for failure to exhaust administrative remedies (stating it was not ruling on the merits); EPE did not appeal that order. EDGE/County later gave conditional approvals contingent on a final court ruling or a binding agreement among Arena Agreement parties.
- EPE filed a second suit (EPE II) seeking a declaratory judgment that the Supplemental Plan/TIF would not violate the Arena Agreement; the trial court dismissed EPE II for lack of standing, and the Court of Appeals affirmed on the alternative ground that EPE II was barred by res judicata.
- The Tennessee Supreme Court reversed the Court of Appeals, holding the EPE I dismissal was not an adjudication on the merits for res judicata purposes, and remanded for the Court of Appeals to decide the standing issue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether EPE II is barred by res judicata because of the EPE I dismissal | EPE: EPE I was dismissed for failure to exhaust administrative remedies and was not a merits adjudication, so res judicata does not apply | Appellees: EPE I dismissal operated as an adjudication on the merits (Rule 41.02(3)), so EPE II is precluded | Court: EPE I dismissal for failure to exhaust administrative remedies was not a merits adjudication; res judicata does not bar EPE II; reversed Court of Appeals |
| Whether dismissal for failure to exhaust administrative remedies is an adjudication on the merits under Rule 41.02(3) | EPE: Such dismissals are generally not on the merits and trial court expressly said it did not rule on merits | Appellees: Rule 41.02(3) and cited authorities can make dismissal operate as adjudication; EPE could have completed administrative process earlier or sought post-judgment relief | Court: Dismissal for failure to exhaust administrative remedies is not an adjudication on the merits; trial court’s order made that clear; Rule 41.02(3) not transformed into merits here |
| Whether the Court of Appeals should decide standing instead of res judicata | EPE: Standing should be reached if res judicata does not apply; EPE contends it has a present interest because approvals were conditioned on a court ruling | Appellees: EPE lacks standing to seek judicial resolution of the contract issue | Court: Declined to decide standing; remanded to Court of Appeals to address the pretermitted standing question |
| Whether EPE’s failure to seek post-judgment relief (e.g., under Rules 59.04 or 60) converts EPE I dismissal into a merits adjudication | EPE: Lack of such motion does not retroactively make the prior dismissal a merits judgment | Appellees: EPE could have sought relief and judicial review in EPE I; equitable considerations support preclusion | Court: Declined to require such procedural steps to treat the prior dismissal as on the merits; absence of those motions does not convert the dismissal into an adjudication on the merits |
Key Cases Cited
- Crews v. Buckman Labs. Int’l, Inc., 78 S.W.3d 852 (Tenn. 2002) (standard of review for Rule 12.02 motions)
- Jackson v. Smith, 387 S.W.3d 486 (Tenn. 2012) (elements and policy of res judicata/claim preclusion)
- Pendleton v. Mills, 73 S.W.3d 115 (Tenn. Ct. App. 2001) (dismissal for failure to exhaust administrative remedies is not a merits adjudication for res judicata)
- Creech v. Addington, 281 S.W.3d 363 (Tenn. 2009) (example of dismissal operating as adjudication on merits)
- Regions Fin. Corp. v. Marsh USA, Inc., 310 S.W.3d 382 (Tenn. Ct. App. 2009) (distinguished — summary judgment is a merits ruling)
- Lien v. Couch, 993 S.W.2d 53 (Tenn. Ct. App. 1998) (articulation of res judicata elements)