531 F. App'x 567
6th Cir.2013Background
- Old Republic Exchange Facilitator Co. contracted to manage an exchange for Notredan, L.L.C.: receive proceeds from a Mississippi property sale and use them to buy a Tennessee property, then convey the Tennessee property to Notredan.
- The contract named David J. Johnson as the closing agent for the Mississippi sale; he was to transfer sale proceeds to Old Republic.
- Johnson failed to deliver the proceeds; he claimed he accidentally wired them to an unrelated account; Notredan alleged he embezzled the funds.
- Notredan sued Old Republic in federal court (diversity jurisdiction) seeking to recover the lost sale proceeds, asserting vicarious liability and breach of fiduciary duty.
- The contract contained paragraph 21, an express disclaimer stating Old Republic “shall not be liable” for failures including a closing agent’s delay or failure to follow instructions.
- The district court dismissed Notredan’s complaint; the Sixth Circuit affirmed, applying Tennessee law (choice-of-law not contested).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Old Republic is vicariously liable for the closing agent’s failure to remit sale proceeds | Johnson’s misdirection of funds should not be exempted by the contract; Old Republic remains vicariously liable | Paragraph 21 disclaims liability for failures including a closing agent’s delay or failure to perform, absolving Old Republic | The disclaimer unambiguously covers the closing agent’s failure; vicarious-liability claim fails |
| Whether paragraph 21 is unenforceable as beyond reasonable expectations (adhesion) | The clause is adhesive and should not be enforced because it is oppressive or unexpected | Tennessee law enforces adhesive contracts unless terms are beyond reasonable expectations or unconscionable; Notredan forfeited this argument by not raising it below | Forfeited; Notredan did not preserve a substantive argument that the clause was beyond expectations or unconscionable |
| Whether paragraph 21 is an unenforceable exculpatory clause violating public policy | The clause is exculpatory and against public policy | Notredan did not argue how paragraph 21 fits the exculpatory category or violates Tennessee public policy | Forfeited; Notredan offered only conclusory assertions and failed to develop the argument |
| Whether Old Republic breached fiduciary duties to Notredan | Old Republic owed fiduciary duties and breached them by failing to safeguard proceeds | Old Republic moved to dismiss for failure to state a fiduciary-duty claim; Notredan did not respond to that argument | Forfeited; failure to address the motion below waived the fiduciary-duty claim |
Key Cases Cited
- Buraczynski v. Eyring, 919 S.W.2d 314 (Tenn. 1996) (adhesion-contract enforceability depends on expectations and unconscionability)
- Taft Broadcasting Co. v. United States, 929 F.2d 240 (6th Cir. 1991) (issue-preservation principles on appeal)
- Olson v. Molzen, 558 S.W.2d 429 (Tenn. 1977) (exculpatory clauses unenforceable when they contravene public policy)
- United States v. Huntington Nat’l Bank, 574 F.3d 329 (6th Cir. 2009) (conclusory statements without legal argument do not preserve issues)
- Shell Oil Co. v. Prescott, 398 F.2d 592 (6th Cir. 1968) (avoid interpretations that render contract language superfluous)