M & M Electrical Contractor, Inc. v. Cumberland Electric Membership Corporation
529 S.W.3d 413
Tenn. Ct. App.2016Background
- Cumberland EMC contracted with M&M (three-year construction contract) to perform energized line work using four five-person crews; Cumberland required trucks to be grounded during "hot work."
- On April 16, 2014 at a complex, highly energized New Shackle Island job, six M&M bucket trucks were observed ungrounded; M&M owners admitted knowledge of Cumberland’s grounding policy but disputed some facts.
- Cumberland safety staff investigated, and on Good Friday (April 18) Cumberland’s safety coordinator told M&M’s co-owner Julia Miller that all M&M trucks must be equipped with and use grounds by Monday, April 21.
- On April 21 Cumberland engineers inspected multiple M&M jobs and observed (or reasonably inferred) two crews performing or having just performed energized work with ungrounded trucks; M&M foremen disputed parts of the account.
- Cumberland’s board authorized termination; Cumberland terminated M&M for safety violations and paid for completed work. M&M sued for breach of contract and bad faith; the chancery court found a material breach and justified termination. M&M appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether evidence supports finding M&M performed ungrounded hot work on April 21 | M&M (through foremen) denied performing hot work; claimed buckets were raised only to drain water | Cumberland relied on engineer Abernathy’s observations and reasonable inferences that hot work had been performed | Court credited Cumberland’s witnesses; evidence did not preponderate against trial court finding of ungrounded energized work |
| Whether breach (ungrounded trucks) was material | M&M: isolated incidents, long period without injury, breach not substantial enough to justify termination | Cumberland: safety violations risk death/injury; safety provisions in contract and express termination-for-safety clause | Court held breach was material given severity and safety-focused contract terms; termination justified |
| Whether Cumberland had to give written notice and 20-day cure period under contract | M&M: contract required written notice and opportunity to cure; implied covenant of good faith required notice | Cumberland: contract provisions allowed owner to act without prior written notice; common-law remedies and right to terminate for material breach remain | Court held contract did not mandate written notice here; even if notice rule applied, Cumberland gave adequate notice and opportunity; termination in good faith |
| Whether termination breached implied covenant of good faith and fair dealing | M&M: Cumberland terminated abruptly without adequate notice/cure opportunity | Cumberland: acted reasonably, safety required prompt action, and it had contractual and common-law rights | Court held Cumberland acted within its rights and in good faith; no damages for breach of implied covenant |
Key Cases Cited
- DePasquale v. Chamberlain, 282 S.W.3d 47 (Tenn. Ct. App. 2008) (materiality required to relieve non‑breaching party)
- Forrest Constr. Co. v. Laughlin, 337 S.W.3d 211 (Tenn. Ct. App. 2009) (factors for material breach analysis)
- State v. McCormick, 494 S.W.3d 673 (Tenn. 2016) (deference to trial court credibility findings)
- Hughes v. Metro. Gov’t of Nashville & Davidson Cnty., 340 S.W.3d 352 (Tenn. 2011) (deference where trial judge observed witnesses)
- McClain v. Kimbrough Constr. Co., 806 S.W.2d 194 (Tenn. Ct. App. 1990) (construction context: notice and reasonable opportunity to perform/cure)
- Dick Broad. Co. of Tenn. v. Oak Ridge FM, Inc., 395 S.W.3d 653 (Tenn. 2013) (recognition of implied covenant of good faith and limits tied to contractual expectations)
- Wallace v. Nat’l Bank of Commerce, 938 S.W.2d 684 (Tenn. 1996) (scope of implied duty of good faith depends on contract)
- Houston Bros. v. Dickson Planing Mill Co., 15 S.W.2d 749 (Tenn. 1929) (immediate demand appropriate when no time required to perform next step)