Hometown Folks, LLC v. S & B WILSON, INC.

supervisor, tions she told FOLKS, LLC, HOMETOWN Plaintiff- peo-

“you we work with immature know Appellant/Cross-Appellee, em- ple.” Craig Spangler, another CSX ployee worked with Williams at the depot, testified that when Bruceton WILSON, INC.; BS & William L. Wil working the were

Williams was bathrooms son; Sally Wilson, B. Defendants- out, when clean and trash taken Appellees/Cross-Appellants. lay- “Trash working she was not would be 09-6004, Nos. 09-6007. Garbage on the tables. cans around Appeals, United States Court of couple would be full. A of times I’ve Sixth Circuit. you walked in the bathroom and could tell somebody the floor had used instead Dec. Argued: 2010. using commode.” Decided Filed: June 2011. Rehearing Rehearing En Banc A could reasonable fact-finder thus Aug. Denied counterparts white inferred Williams’s janitorial were not made to fulfill their

duties, was, regardless she how while unsanitary

extreme and the conditions Oncale,

were. permit- Under

ted to infer from this differently

Williams was treated than her counterparts

white because her race. inference, conjunction

This with the evi- Wingo’s blatantly

dence of com- race-based 3d, 2004, September

ments on 2d occasions,

on other rendered the district grant

court’s of judgment as a matter of improper. The claim should have

been jury. submitted to the

I grant would reverse the district court’s

of judgment as a matter law to CSX

Williams’s race-based hostile-work-envi-

ronment pro- claim and remand for further

ceedings. Bethea, Chambliss,

Richard W. Bahner P.C., Tennessee, Stophel, Chattanooga, Appellees. MARTIN, NORRIS, and

Before: COOK, Judges. Circuit J., MARTIN, opinion delivered 536-37), NORRIS, (pp. J. court. separate opinion concurring delivered opinion, the majority the reached result COOK, J., joined. in which OPINION MARTIN, JR., F. Circuit BOYCE Judge. Folks, LLC entered into an Corporation with BS & Wilson King buy Burger eleven restaurants. S Agreement,

& terminated Wilson the B. and for of contract Hometown sued breach faith good breach trial, dealing. jury fair After found B properly that & Wilson had terminat- ed but had breached dealing, and it $190,907.27 in awarded Hometown dam- later, ages. year Over one district partial judgment relative court entered a jury verdict. The district court specific performance denied awarded $5,176.24 $424,282.19 expenses fees and it in- litigation. with the curred connection appeal, parties On raise a number of ar- appellant, As an issues. (1) Konvalinka, Grant, in: gues P. district court erred ARGUED: John Harrison, P.C., all refusing to award Hometown Chattanoo- Konvalinka Tennessee, expenses fees and incurred Appellant. for Thomas ga, (2) Greenholtz, Chambliss, litigation; failing with Bahner & connection Stophel, Tennessee, judgment promptly after P.C., Appel- for enter Chattanooga, (3) verdict; Konvalinka, denying claim P. Hometown’s BRIEF: John lees. ON Pearce, Fisher, performance. cross-ap- for As a specific Richard G. Charles G. Harrison, P.C., Grant, pellant, argues S & B Wilson Konvalinka & (1) Tennessee, denying in: S & B Appellant. district court erred Chattanooga, Bahner, judgment as a matter Greenholtz, motion for T. Maxfield Wilson’s Thomas alleging Davenport stating to the claim breach to Gordon that Home- law as (2) town had been dealing; approved purchase S & judg- & B motion for restaurants. denying S Wilson’s Wilson’s The with respect Burger ment matter of law letter stated that would King as a re- (3) awarding any attorneys’ damages; quire S & place found, to Hometown. at closing. fees and escrow and it disputed, that this date is not was the correctly S & denied The district Burger King consented to the transaction. judgment motion for mat- as a Wilson’s alleging ter of as to claim law conducting due diligence While on the properties, Hometown became aware of However, we REVERSE the district environmental issues at two of the restau- as a court’s matter denial rant locations. The transaction stalled damages. Fur- to S & Wilson during January February of 2006 as thermore, although used & B proposed Hometown and S rea- acceptable method to determine a arrange- various solutions such as escrow award, it applied sonable fee purchase price. ments and set-offs Therefore, incorrectly. this method we attorney proposal Hometown’s sent one of attorneys’ REVERSE award fees attorney S & B Wilson’s 7. March S & and new REMAND for a determination. B attorney responded Wilson’s that he was grant as a judgment Because we matter 20, out until country March but that B damages, law to Wilson on need S & he would continue work on the deal remaining address Hometown’s claims 14, he when returned. On March Home- failing that the court erred in district town notified B S & Wilson that intend- jury enter after judgment promptly ed to close the transaction on March 29. verdict in denying and Hometown’s claim 21, On March & Wilson a S sent letter for specific performance. stating

to Hometown that it was terminat- I. AND 9.1, FACTUAL PROCEDURAL Agreement pursuant to Section

BACKGROUND which states: Sally William and are sole Agreement may This be terminated and shareholders, directors, and officers of S & contemplated hereby the transactions Wilson, operates which and owns eleven may be at any prior abandoned time Burger King restaurants in the Gaines- Closing: ville, Georgia Davenport area. Gordon Davenport Elliott are the mem- (d) By Seller if the Closing shall not Hometown, bers of oper- which owns and occurred on before the Outside ates a Burger King number of restaurants Date]; days [120 Date after the Consent in the Chattanooga, Tennessee area. The provided that Seller shall not be entitled restaurants, Wilsons their decided sell pursuant terminate this S & Wilson entered clause if the failure of Seller to into a Purchase and for Sale any obligations fulfill of its under this Burger King eleven restaurants on Agreement shall have been the reason 4, October Closing that the shall not have occurred The Agreement required Burger King on or before said date.... Corporation to consent transaction. On King November Burger sent a letter closing taking place. from The district Burger King requires

(g) By Seller remodeling granted for motion excess expenditures provide order repair respect matter of law with to a claim that a Consent. B& Wilson waived certain contractual S defenses, but denied motion on all suit against filed April On grounds. S B & Wilson renewed its United States District & B in the S Wilson case, motion at the close of and the the Eastern District Tennes- for Court again denied the motion. see, breach breach of contract and alleging dealing, faith and jury On December returned performance requesting specific special verdict form. As to verdict on July & B On S Wilson indemnification. 9.1(d), jury found that Section per- for lack of to dismiss the case moved Date” when S & B passed “Outside summary judg- jurisdiction and sonal terminated the It also mo- The district court denied both ment. transaction found that the reason tions. had not closed the Outside Date was court determined that The district not due to failure to fulfill S Wilson’s related to breach decide the claims should obligations Agree- under the contract, found, however, that & ment. indemnification, dealing, estopped B Wilson should be from termi- attor- except portions related to for those nating Agreement pursuant to this sec- associated with neys’ fees and tion. trial, the jury After the litigation. the jury to the 9.1(g), As Section found that to issues planned decide the more than attorneys’ in- specific performance, fees of repair expenditures in in maintenance transaction, during underlying the curred its to the transac- grant order consent by Hometown relat- expenses incurred jury that S tion. The also found & litigation. ed to the estopped from termi- Wilson should be jury twelve-day held a The district court nating pursuant the contract this sec- 13, 2007. beginning trial on November instructions, According jury the tion. parties presented evidence about their The below, findings further these as discussed regard dis- meaning intent with to the of imply jury that the that S & B found terms, particularly contract sections puted the properly Agree- terminated Wilson 9.1(d) addition, Hometown 9.1(g). provision. ment under this B& that S Wilson presented evidence its of breached The found S & B jury that its by diligently carry out dealing failing good faith fair breached its Agree- responsibilities pursuant dealing as to constitute a breach of so ment. leading by up either actions termination or its B Wilson moved

On November S carrying in out course of conduct law pursuant a matter of judgment jury The award- terms a Procedure 50 on to Federal Rule of Civil $190,907.27 damages. ed Hometown grounds. Among things, number of ex- equal This amount Hometown’s & B asserted that Hometown transaction, in connection with the penses a no to allow reason- fees, to which a exclusive of a jury able to find that at trial. prevented representative a testified trial, January 20, the district ordered verdict. On Home- After to submit briefs whether town filed a Motion to Alter or parties Amend specific per- Hometown was entitled in which it Judgment, requested that the formance, attorneys’ expenses fees and Non-appealable Judgment Partial transaction, attor- connection with the pro amended be entered nunc tunc as 11, 2007, neys’ expenses relating fees and entry December the date of 3, 2008, litigation. April jury’s 30, 2009, the district On verdict. March On specific court entered order denied district court denied Hometown’s motion performance, but concluded that Home- judgment and entered final awarding $45,468.28 town its fees and expenses damages could recover in addi- underlying incurred transaction tion to awarded “arising expenses $190,907.27. out of the timely fees and filed No- litigation, instant with the caveat Appeal tice of on August Plaintiff is entitled to those expenses Section 10.10 of the Agreement states from, of, resulted arose out “it governed by shall be and con- breach of the Defendants’ strued and enforced in accordance with the dealing.” The district court laws the State of Tennessee without proof of ordered Hometown to submit at- regard to its principles.” choice torneys’ expenses. fees and agreed parties that the district court proof apply should law. submitted Tennessee fees and in connection with II. DUTY OF GOOD FAITH $40,292.04, transaction the amount of AND FAIR DEALING litigation and in connection with $424,282.19. amount of Hometown assert- action, Because this is a diversity ed was entitled to recover we review the denial S & B’s motion for $346,398.19 amount, of that even though using as matter of law some of that time spent developing applicable standards under Tennessee law. on claims which it not prevail, did because Enters., Co., See K & T Inc. v. Zurich Ins. its successful claim (6th Cir.1996). was so entwined with 171, 97 176 F.3d Under its unsuccessful that segregation claims of Tennessee law we must “take the strong 5, 2009, fees was impossible. On March legitimate est view of the evidence in favor the district court entered an order award- motion, opponent of of the allow all all of its fees and favor, reasonable in inferences his or her expenses in connection with the transac- evidence, countervailing discard all $40,292.04. tion in the of Using amount a deny the motion where there is doubt methodology” “results-based that will be as to the conclusions be drawn from the below, in discussed detail further Wilson, dis- whole evidence.” Holmes v. 551 trict only (Tenn.1977). awarded Hometown 682, S.W.2d A verdict $5,176.24 $424,282.19 of the only should be directed “where a reason fees and in- able mind could but draw one conclusion.” curred connection with the litigation. Id. 24,

On a alleges December Hometown filed mo- S & Wilson that the district tion to confirm or a judgment denying enter on the judg- erred its motion for 7, 2009, jury On January verdict. the ment as a matter of law that it had not district court granted Hometown’s motion good breached the faith and fair partial judgment entered a dealing. Interrogatory special relative to six of the a dealing lan- as matter law because following fair contained the verdict form entitled to terminate the guage: was pursuant moved Federal that Defendants you have found Because 50(b), terminate the contract properly pro- Rule of Procedure which could Civil provisions, termination one of the under that: vides law, by Defendants’ termination grant If the court not a motion for does not a on March Agreement a judgment as matter of law made under good faith fair breach of 50(a), Rule the court considered to up to leading actions dealing. jury- the action to the submitted Agreement or of the termination subject deciding to the court’s later carrying out the of conduct course legal questions by raised the motion. a terms of the could entry days No later than 28 after fair of the judgment if the a motion addresses —or dealing. verdict, jury a no issue decided termination considering Not Defendants’ days later than 28 after the 21, 2006, on March did discharged may movant file a re- —the Defendants breach judgment a newed motion for as matter dealing that it consti- faith and fair such may law include an or alternative contact? tuted a breach of joint request for a new trial under Rule interrogatory this The answered motion, ruling renewed Thus, must determine the affirmative. may: the court whether prior that S B actions showing & Wilson’s (1) verdict, judgment on if the allow terminating Agreement breached verdict; a jury returned duty of (2) trial; a new order imposes Tennessee (3) entry of direct the perform in the good faith See, every e.g., Lamar ance contract. matter of law. Partners, By-Pass v.

Adver. Co. “ 50(b) ‘Because the Rule motion (Tenn.Ct.App.2009). motion, it preverdict can be renewal of “(1) to is: purpose implied covenant only on advanced in the granted grounds expectations honor the reasonable ” Cnty. motion.’ Ford preverdict (2) protect contracting parties (6th Traverse, F.3d Grand parties the the benefits rights of receive Cir.2008) Fed.R.Civ.P. 50 Adviso- (quoting they the into which entered.” agreement Note). regard With ry Committee argues B that Hometown Id. S & Wilson duty good dealing, faith expectation reasonable could have no B only argument presented by S & Wilson closing a for two alternative reasons. 50(a) sufficiency was a in its Rule motion First, terminated properly & BS re- argument. Having evidence Second, itself Hometown Agreement. transcript, trial we conclude viewed the on the terms of unwilling to close legal raise a B failed to that S & Wilson arguments fail. Agreement. Both inconsisten- argument respect with Agree- Proper A. Termination allowing jury find both that cy ment properly had been termi- duty of and good faith nated and it argues B could S & Wilson breached. dealing and fair had been duty good faith have breached the 528 1988) (“All 51

During parties the district court’s Rule are bound law act conference, deed, & B Wilson failed charge S in responsible word manner ” al object explicitly (internal omitted)). instruction that to the quotation .... marks duty jury lowed the to find breach of good Parties have a faith and fan- good faith and fair after found only in dealing not executing transac- B termination of the that S & Wilson’s ultimately contemplated tion by the con- proper. This omission im tract, in fulfilling precondi- but also plies conceived of this that S & Wilson contingencies tions and set forth only argument post-verdict. Conseco Robinson, contract. See Covington Cf. Co., Servicing Corp. Mortg. v. N. Am. Fin. (find- (Tenn.Ct.App.1986) S.W.2d (8th Cir.2004) (“It 381 F.3d 822 n. good faith and fair dealing apparent developed [defendant] required purchasers in real estate contract 50(b) theory raised their Rule motion in good to work faith to obtain financing). (1) only jury’s after verdict because it Because the nature form, object general-verdict failed to to the fair dealing depends on the con- (2) explaining offered no instructions issue, tract at “courts look the language legal theory post-ver [the advanced its of the instrument to the intention of (3) motion], dict made no substantive parties, impose a construction instruction.”). objection [jury] Be which and reasonable.” TSC In- cause & B Wilson conceived of this dus., Tomlin, Inc. v. argument post-verdict, it is improper (Tenn.Ct.App.1987). 50(b) Ford, assert it in a Rule motion. See (holding 535 F.3d at 493 that defendant trial, At presented evi raising was barred from an issue a Rule dence S & Wilson failed to meet a 50(b) motion where defendant did not en number of pre-closing un requirements gage colloquy in a with the district court Agreement. der the For example, Home or opposing point on this counsel and did town presented evidence that S & Wil not request instruction clarifying its delayed giving son Hometown access to argument). Thus, review S & properties diligence certain to perform due sufficiency Wilson’s of the evidence argu required by In addi ment. tion, evidence that S B& Wilson failed to meet its deadline to Sufficiency B. of the Evidence deliver financial documents to Hometown twenty days within after the end dealing requires parties to a contract to accounting period. pre fairly conduct themselves and responsibly. sented that & B S Wilson breach See, e.g., v. Educators Credit Un Winfree ed fair dealing ion, (Tenn.Ct.App. by blocking diligence failing due 1995) (“[T]here implied undertaking is an deliver financial information. in every part party contract on the of each intentionally presented will not Hometown also evi purposely he or dence at trial that & B anything showing do ... which will have S Wilson the effect attempts of hindered its to destroying injuring right of the close the transac party contemplated to tion by Agreement. receive the fruits of the (internal quotation contract.” and Tennessee courts that “[e]ach marks have found omitted)); citation v. party implied Williams Maremont to under an [is] 78, Corp., 776 (Tenn.Ct.App. obligation any S.W.2d to from doing restrain act regardless of the environmental is- par- action prevent the other delay or that would sues. Each of contract.... ty’s performance proceed free of right to party [has] sufficient support There evidence ACG, by party.” the other

hinderance finding that S & Wilson’s jury’s Elevator, Inc., 163, 912 S.W.2d Inc. v. Se. to the termination leading up actions Passive non-co- (Tenn.Ct.App.1995). Agreement or its course of conduct car- non-coopera- as well active operation, rying out the terms of duty tion, may constitute faith and fair good breached dealing. fair See German good faith and Thus, dealing. we AFFIRM Ford, (Tenn.Ct.App. & B motion for court’s denial of S Wilson’s 2009). presented Hometown evidence judgment as a of law as matter it respond, & B was slow S good breach of all, attempts responded at to Hometown’s dealing. a solution the environmental

to find III. DAMAGES also introduced evi- issues. Hometown S & B Wilson that March dence The awarded Hometown in an deliberately stalled the transaction $190,907.27 damages for the breach of provision. a termination attempt invoke dealing. faith and fair extremely our deferential under appears The amount of the verdict review, standard taken from Trial Exhibit Plaintiffs that S & B Wilson breach- evidence at trial “Summary Appx. which is entitled faith and fair ed the With Expenses Fees and Connection hindering attempts Hometown’s by (Other Expenses Than Transaction close the transaction. Counsel).” summarizes This exhibit costs by before & incurred Wil- Furthermore, the district court & B son terminated the transaction. S to hold that a reasonable was correct argues that the district court erred will found that Hometown was could have denying motion for as a as it was to close on the respect matter of law with points to some written. S & Wilson because no evidence shows that Hometown evidence that indicates any damages as a result of the suffered to close the transaction be was hesitant actions it claimed violated issues were re fore the environmental example, points For to testimo solved. above, when Davenport and Elliott As discussed review ny from Gordon judgment as matter of ing a denial of unwilling that Hometown was to close law, legiti strongest we must “take the adjustments based on envi without some concerns, view of the favor propos and to several mate ronmental motion, allow all opponent of the reason renegotiate the terms als Hometown favor, able inferences in his or her discard Gordon evidence, deny countervailing all also that Home Davenport testified Elliott as to the with a motion where there is doubt ready to move forward town was from the whole taking legiti conclusions to be drawn strongest When closing. Holmes, at favor evidence.” mate view of the evidence in Hometown, Tennessee courts have found “[t]he there was evidence from which assessing damages in a breach jury purpose conclude that a reasonable could place plaintiff, is to as willing close of contract suit was the trans- Hometown position stating in the same it B nearly possible, require as he that would S & Wilson $98,800 have had the contract had been to place closing, in escrow at & would S v. performed.” Wilhite Brownsville Con B already had more spent Wilson than (Tenn. Co., Inc., $30,000 crete 798 S.W.2d repairs on maintenance. support Thus, To award of Ct.App.1990). the evidence shows S B that injured party must sustain damages, “[t]he arguably Wilson knew at least Novem- result from damages consequently that ber that be it would able terminate the Cigna v. breach.” Metro. Gov’t Health Agreement 9.1(g) under Section because Tenn., Inc., care already spent the amount and the amount (Tenn.Ct.App.2005). we must deter required in escrow totaled more than jury mine reasonable whether could have $100,000. presented Hometown found that Hometown established that it that it although spent money had little at $190,907.27 damages suffered in as a result proceeded point, spend significant it B S & Wilson’s breach of the of money diligence on due on or around No- dealing. vember 8. & B Wilson did S not exercise right 21, 2006, its to terminate until March We not know which specific do conduct $190,907.27 after spent Hometown had on jury found violated & B Wilson’s B transaction. If S & Wilson had good faith fair dealing. There knowledge disclosed its and intentions appear ways two alternative in which Burger about the amount that King was could have found that Hometown requiring gain it to in $190,907.27 spend order to in con- damages sustained aas re- transaction, sent for the then Hometown sult of S & B Wilson’s breach of the may nearly have been able to avoid all of First, $190,907.27 spent it before S & jury could have found that Hometown sus- Agreement. Wilson terminated the damages tained the as a result of & BS blocking Wilson’s actions diligence due panel agree All three members that S & failing to deliver financial infor- B Wilson’s failure to disclose to Hometown However, mation as discussed above. that Burger King amounts was Hometown suffered no from requiring in triggered right escrow these actions because S & B prop- terminate did not cause Hometown dam- erly the Agreement. terminated ages. disagree on the rea- soning: I Alternatively, believe that S could have con- & Wilson was information, cluded under no disclose this Hometown suffered $190,907.27 panel while the other damages as a result of two members believe S & delay informing ordinary diligence Wilson’s Hometown’s due should revealed King amounts that that S & B Burger requiring in would be able to expenditures escrow and its terminate briefly below, I repairs triggered right explain my they view to termi- explain nate the theirs 9.1(g). under Section the concurrence. presented The jury evidence that S & could have found that S & B early as Wilson knew delay informing October 2005 Wilson’s going require right about its decision terminate the spend more than order to caused Hometown’s damages approve the transaction. Hometown also if S B & Wilson had a to disclose Burger evidence that when King that information. Group, Homestead Cf. Tenn., issued its consent form on November 8 LLC Bank

531 Furthermore, this (stating the land itself. case in the context (Tenn.Ct.App.2009) negligent misrepresentation arms-length transaction simi- of the tort of involved O’Neal, liability, there must also that find such dispute. “to lar a franchise See 860 accused of showing person a that the (noting F.2d 1350 that a at franchise duty a to the other to the concealment had fiduciary agreement did not create question”). the matter disclose relationship between franchi- confidential held that Supreme Court has Tennessee franchisee). Thus, Lonning sor and is to a contract bound dis- party “each may apply not in this disclosure duties may respect- he know close to the other all ease at all. affecting subject materially matter were to Lonning apply, Even neither it,of unless common obser- a correct view & its S B Wilson’s failure disclose deci- the informa-

vation would have furnished its sion to terminate nor failure disclose Evans, 282, Tenn. tion.” v. 185 Simmons right its to terminate could serve as a (internal (1947) quota- awarding basis for to Hometown. omitted). and citation Subse- tion marks have relied on quent opinions Tennessee First, BS & Wilson’s failure to disclose par- proposition “[a] for Simmons alleged Agree- decision to terminate the ty to contract has a to disclose to a a liability ment could not serve as basis for party any affecting material fact not because Hometown did introduce suffi- subject matter the essence exactly cient evidence to when prove S contract, ordinary would diligence unless to terminate the Wilson decided con- the undisclosed fact.” Lon- have revealed Although tract. evi- Homes, ning v. Jim Walter that & B as early dence S Wilson knew as (Tenn.Ct.App.1986). The district right 2005 that it had the to termi- October in accordance instructed nate, is no evidence that it had there made with this law. that option. the decision exercise However, I am that this law convinced Second, the fact S & Wilson could not serve as a basis to award dam right failed to disclose that to terminate ages Applying Tennessee to Hometown. triggered could contract had been not law, Lonning have we noted liability. Applying serve a basis regard general “court’s statements of law law, we have held that franchi- Tennessee proper ing the of disclosure are most any duty not to disclose sors are “under ly characterized as dicta.” O’Neal long-term corporate strategy their ... Inc., 1341, 1351 Burger Chef Sys., 860 F.2d O’Neal, franchise owners.” 860 F.2d at Cir.1988). (6th applying The cases this Thus, we franchisor held generally been limited to real have under no to disclose its decision to purchases estate and used car sales. See sell to franchisees. Id. at the franchise Co., Racetrac Petroleum 338 F.3d Shah v. above, this holding 1350. As discussed (6th Cir.2003). Thus, n. 9 arms-length applies to other transactions “to anticipate Ten declined involving franchises. See id. There- would extend the Supreme nessee Court fore, law, party to a under Tennessee Lonning to the con Simmons and cases owes to disclose its intent no dispute.” Although text of a franchise Id. rights. its contract This is exercise purchase, involves a real estate case weight authority. consistent with the alleging that & B Wilson See, Roasters, Colgate- Inc. v. e.g., fact United had a material re disclose (4th Co., issue, F.2d Cir. at rather than Palmolive garding the contract 1981) (“[T]here very to be in tract not provi- little said itself does include a notice that good rule of law faith sion. favor of a right a of termi-

requires possessing one blocking S & B Wilson’s actions due party promptly nation inform the other to diligence failing provide financial any right.”); to exercise the decision information did not cause Hometown dam- Parks, Cnty. Elec. Inc. v. Coop., DeWitt ages properly S & B because ter- (Tex.1999) (holding that a S.W.3d Agreement. Furthermore, minated the all party duty contract owes no to a dis- panel three agree members that S & B close intent to exercise its contract Wilson’s failure to disclose to Hometown rights). the amounts that was requiring in escrow triggered right to Furthermore, Hometown does not iden- terminate not did cause Hometown dam- tify authority in any Tennessee else- ages, Thus, albeit different reasons. imposes part where of the duty REVERSE district court’s denial good dealing duty in- as a matter of law to S & B party merely form a right the other damages. The Agreement provided terminate. BS & Wilson could terminate the Agree- IV. ATTORNEYS’ FEES Burger King required ment if more than correctly district held that $100,000 remodeling repair ex- Hometown could recover those ex- penses in order to consent to the transac- penses of, from, that arose out or resulted words, tion. it within S & B S & B Wilson’s breach of of good rights Wilson’s contract to terminate the faith Furthermore, and fair dealing. Agreement Burger King required more district used an acceptable method to remodeling than repair attorneys’ determine a reasonable fee Furthermore, expenses. the condition was award. court ap- waivable and it was also within & B plied incorrectly. this method rights Wilson’s contract to decline to ter- minate the The Agreement The district court held that Hometown any did not contain requirements notice “only entitled recover those ex- relating provision. penses of, from, Home- that arose out or resulted attempting town is use the Defendants’ breach of faith dealing incorporate and fair faith dealing,” and fair not but “its ex- additional term into the contract that penses it did out arising resulting of or from its view, negotiate. In my one claim party that Defendants’ termination of the should not be to give notice to the awas breach of contract.” right other that its to terminate a argues contract Hometown it is entitled to triggered has been unless the contract so recover all of its reasonable fees provides. party If a notice wants when a connection the litiga- with triggered, tion, condition is free to negoti- and that district court failed to provision. Thus, ate for that I apply do not law regarding segre- Tennessee believe that the Supreme Tennessee gation Court and reasonableness of would the Simmons and Lonning extend fees. S & B Wilson argues that Home- cases to hold town is not entitled to award because and fair dealing encompasses a duty to the correctly district court found that the disclose fact that right alleging improper terminate a claims termination and been triggered has when alleging the con- those of good Co., Distribs. separable, are and Star (Tenn.1988). of Supreme what Court Ten- failed show attorneys’ from the breach of nessee has held that “costs and out of or result arise express and fair are recoverable under an in- good faith fees of of demnity language contract general, In we review “a dis is to cover agreement enough broad such attorney fees and court’s award of trict Standard, expenditures.” Pullman Inc. v. for an abuse discretion.” Imwalle costs (Tenn. 336, Corp., Abex 693 S.W.2d 338 Inc., Prods., F.3d Med. 515 v. Reliance 1985). law, Under Tennessee cardinal “[a] (6th Cir.2008). 531, Substantial defer 551 interpretation is to rule of ascer- “is in view the district appropriate ence give and effect to the intent tain understanding liti superior court’s Watson, parties.” Ins. Co. v. 195 Allstate fre desirability avoiding gation and (Tenn.2006). 609, A S.W.3d 611 essentially review of what quent appellate parties must “ascertain intention Hensley matters.” v. Ecker are factual usual, natural, upon and based ordi- hart, 424, 1933, 437, 76 461 103 S.Ct. U.S. nary meaning language.” contractual (1983). A district court abuses L.Ed.2d 40 Cleo, Inc., v. Guiliano 995 S.W.2d 95 wrong legal if it “applies its discretion (Tenn.1999). standard, misapplies legal the correct stan Hometown claims that it is entitled to its dard, clearly find or relies on erroneous fees, expenses, including attorneys’ in- Co., of fact.” Gonter v. Hunt Valve ings pursu- in its pursuit litigation curred (6th Cir.2007) (internal 610, 616 510 F.3d 7.2(b) of Agreement, ant to Section omitted). marks and citation quotation which states: the district court’s we review Principals, jointly and and sever- Sellers interpretation of law and of contracts state indemnify, defend, ally, hereby agree Mkt., Ziegler Hog v. IBP de novo. See hold harmless Purchaser its (6th Inc., Cir.2001); 249 512 see F.3d officers, managers and members from Son, Hollander, & Inc. v. also Oscar Gruss against all Cir.2003). Damages asserted (2d 186, 198 F.3d

against by or incurred Purchaser or Damages Re- A. that Hometown Could members, officers, managers, and such

cover indirectly, directly arising or out of or (i) any resulting repre- from: cases, diversity attorneys’ sentation, warranty, agree- or covenant by Poly- law. governed fees are state See or Principals ment of Seller contained Hindo, Const., Inc. v. Tiseo Neyer, Flex ... pursuant or made (W.D.Mich. Ltd., F.Supp.2d or the the other Transaction Documents 2009). Tennessee follows “American contemplated hereby transactions or contract, Rule” that “in the absence thereby or facts or circumstances so recognized ground equity or statute constituting such breach.... attor providing right there is no is opposing “Damages” The term defined Section neys’ paid party fees 7.2(a) “demands, claims, or litigation.” ex rel. Orr v. Thom actions civil State (Tenn.1979). action, assessments, losses, as, dam- causes liabilities, provides attorneys’ ages, expenses, costs includ- a contract Where limitation, interest, penalties fees, however, are parties ing, entitled without “[t]he fees, attorney’s costs and according to and reasonable have their contract enforced Mgmt. expenses.” express terms.” Co. disbursements above, duty party As discussed entitled to fees recover implied every segregate does have a those See, they fees extent that to a e.g., Ad relate Tennessee contract. Lamar Co., claim is entwined with a claim under ven at 791. Because it is which fees are allowable. This contract, every imposed in argument First, fails for two reasons. dealing qualifies as a Brunsting opinion unpublished thus covenant, “representation, warranty, non-binding. Ry. See Co. v. S. Foote Min- 7.2(b). agreement” The under Section Co., (6th Cir.1967) 224, 384 eral F.2d 228 S & B found that Wilson’s actions (stating that an unpublished opinion from leading up Agree termination of the Supreme the Tennessee Court is not bind- ment or carrying course conduct in out courts). that ing on court or on federal Agreement the terms of a breach Second, the in attorneys’ provision fees of the faith good dealing. and fair Brunsting required the non-prevailing We by jury’s are bound determinations party “pay all in- expenses costs of fact resolving equitable when issues. curred party enforcing Arban v. Corp., West Pub. 345 F.3d establishing hereunder, rights includ- (6th Cir.2003). ing, limitation, without court costs rea- Tennessee courts have “[a]ll held that attorneys’ sonable Brunsting, fees.” provisions of contract should be con- 1168186, at Brunsting WL *6. The harmony other, strued as with each if heady noted language, “[t]his is broad made, such can reasonably construction Here, sweeping.” contrast, Id. so repugnancy as to avoid between the specifically provided that S & provisions several of a single contract.” indemnify Home- Enters., Park Place Ctr. Inc. v. Park Place only town for damages “arising out of or L.P., Assocs., Mall 836 S.W.2d 116 resulting from” breach of a covenant. (Tenn.Ct.App.1992). The district court Thus, the language in Brunsting signifi- correctly noted that the element causation cantly broader language than the at issue meaningless would be here. Because explicitly the court were to award all of addresses how apportion fees ex- its trial expenses. the district court penses action, among causes of the district correctly interpreted plain language correctly found that Hometown could 7.2(b) Section hold S & Wilson re- only recover expenses those that it could sponsible expenses for the “arising prove arose out of or resulted from S & out resulting of or from” its breach Wilson’s breach good faith and fair dealing. faith fair dealing.

Hometown contends that it is entitled to Determining B. Method for a Reason- recover its fees and incurred able Award prosecuting its unsuccessful claims be- cause they inextricably are entwined with The district court determined that the S & B Wilson’s most rational of calculating method dealing. Hometown relies appropriate fee award this case towas heavily Brown, Brunsting on v. No. compare amount of M2000-00888-COA-R3-CV, 2001 WL sought the amount of dam- 4, 2001), 1168186 (Tenn.Ct.App. Oct. to ages that recovered. S & Wilson argue that Tennessee has recognized argues Hometown should not recover in a involving claims, lawsuit multiple any fees because it failed Connors, ney. proving which ex- Connors 594 S.W.2d to meet its burden of (Tenn.1980); Sup.Ct. from liti- 676 see also R. arose out of or resulted Tenn. penses substantially guide (setting the breach of the forth similar gating lines). argues Supreme United States Court all district court failed consider has held that “the most critical factor is fashioning relevant factors in an award. degree of success Hensley, obtained.” 436, 103 461 U.S. at S.Ct. 1933. argument that Home- S & B Wilson’s town should recover rejected courts Tennessee fees fails. Hometown the burden to methodology solely based ratio fee be in what a reasonable would prove requested the fees to the amounts eventu Wilson, at this case. See ally plaintiff. awarded See Keith v. proof the burden of on the (“Obviously, (Tenn. Howerton, 252-53 is fee in question of what a reasonable However, Ct.App.2004). the district court plaintiff plaintiff is the and upon case in and this case relied Connors ac position in a tender such should be knowledged that it was of the aware vari However, submit proof.”). Hometown did ety factors that should in be considered evidence of the fees that it incurred some fixing attorney’s a reasonable fee. The litigate S & breach the Wilson’s main factor that the district court relied on fair in faith and the was amount the involved and the results form of an affidavit from John P. Konvalin- case, Depending obtained. on the certain ka, attorney represented who Home- may factors Connors more relevant Furthermore, in litigation. town the the Here, than others. S & did not jury found that S & B Wilson violated its dispute the reasonableness of Hometown’s dealing, good faith and attorneys’ fees, claimed and the district plain the con- according language to the apportion court’s was these tract, Hometown is entitled to recover its Thus, among fees Hometown’s claims. expenses fees that arose out certain as the factors such time limitations Thus, from this breach. the dis- resulted circumstances, imposed by the the fee cus correctly trict court found that Hometown tomarily charged locality in the for similar could recover fees that the services, experience, reputation, and the of or from this breach. arose out resulted ability attorney have little would argues the district In relevance. addition to the amount in failed to consider all the relevant factors in obtained, the the volved and results dis fashioning Supreme an award. Court appeared trict to consider the time has appropriate of Tennessee held performing legal services: devoted fixing guides factors to be used as in (1) day jury over a Having presided fee include: twelve attorney’s reasonable performing legal significant pre-trial trial and ruled on time devoted ser- (2) motions, vices; time the Court inti- imposed post-trial limitations circumstances; (3) case, and it novelty mately and dif- familiar with legal the skill that what this case ficulty of the issues and obvious Court (4) service; really obtaining perform about was Plaintiff locality ownership franchis- customarily charged fee for trial, (5) services; Plaintiff con- primarily the amount involved es. At similar (6) obtained; proving expe- cerned with results rience, ability would hopes of the attor- the Court award reputation, and performance and order Defen-

specific the district court erred in failing to enter judgment promptly to sell the to Plaintiff. jury’s dants franchises after the verdict. Furthermore, grant because we S & B addition, carefully the district court con- judgment as a matter of as to rejected option sidered award- damages, it is obvious that the district portion Hometown a court did err denying Hometown’s on the number of claims on which it based See, specific claim performance. e.g., compared was successful to the number of Quinn, Shuptrine brought claims Typically, this case. (Tenn.1979) (noting that where the award court is entitled to wide discretion practical would be and ade- “superior understanding because of its quate, a court generally compel will not Imwalle, litigation.” See 515 F.3d at specific Thus, performance). AFFIRM the district court did not err in per- district court’s denial of specific primary placing reliance on the ratio of formance. Hometown’s success to what claimed calculating an attorneys’ fee award. VI. CONCLUSION grant because we S & Wil- The district court correctly denied S & son as a matter of law as to motion for judgment Wilson’s as a mat- damages, the amount that Hometown re- jury’s finding ter of law to the of a in damages covered is now zero.1 Al- faith and fair though proven Hometown has not dam- However, dealing. we REVERSE the it ages, proven has & B that S Wilson district court’s denial of S & Wilson’s

breached the judgment motion for as a of law matter Thus, dealing. under terms of Furthermore, damages. the dis- because Agreement, may still be enti- trict court miscalculated a at- reasonable to attorneys’ tled reasonable fees arising award, torneys’ fee we REVERSE and breach, out or resulting from the deter- REMAND fee decision. by mined the factors outlined Connors. Thus, we REVERSE the district court’s NORRIS, E. ALAN concurring. of attorneys’ award fees and REMAND I recalculation. concur the result Judge for reached opinion, Martin’s but respectfully disagree analysis with the offered in III. Section V. REMAINING CLAIMS agree I with While that majority S & grant Because we judg- S & B Wilson failure alleged Wilson’s to disclose its as a ment matter of damages, law as to we decision to terminate be- need address claim Hometown’s that tween Hometown and BS & can- addition, despite we note In the fact to Hometown was of the claimed 1.22% $424,282.19, $5,176.24. properly district court selected making calculation, fashioning method for fees, an award the district court listed the value applying franchises, it erred Burger King method to the fi- increased costs, facts this case. The nancing duplicate district found closing costs as $18,959,899.31 sought that Hometown part sought. that Hometown award pay obtained an Hometown would have had $231,199.33. The district court found that purchase these amounts in order fran- Thus, recovery Hometown recovered S & B judg- 1.22% chises from Wilson. sought. actually sought by found ment was much that a reasonable award for and fees smaller than the district court calculated. diligence with its due because of liability proceeded for because as a basis not serve $1,201 only a no indicat- shortfall because relative- ly necessary its decision minor would have been repair S & B Wilson made ing when terminate, under Ten- disagree I to cause S & Wilson meet law, B Wilson’s failure dis- threshold termination. S & nessee Hence, terminate the contract due right diligence Hometown’s close liability. as a basis for it to not serve should have led ascertain whether could view, our majority states that additional made.1 repairs “[i]n been give not be party one should I believe that federal courts Because right other that termi- notice to the sitting diversity refrain from un- should triggered.” Maj. been nate a contract has law, deciding of state I necessarily issues no to rule on this at 532. I see reason Op. on the would reverse above stated factual Home- aspect of Tennessee because grounds. expansive fail town’s claim would under interpretation of ordinary due dili

Hometown’s that S should have revealed

gence would be able to terminate the “A party a contract has party any duty to disclose America, UNITED STATES of affecting fact the essence material Plaintiff-Appellee, contract, unless subject matter of the ordi diligence would have revealed the nary Lonning v. Jim Walter undisclosed fact” MAYS, Defendant-Appellant. Fredrick (Tenn. Homes, Inc., added). (emphasis Viewing Ct.App.1986) No. 08-5374. light in the most favorable to

the evidence Appeals, United States Court of Hometown, knew at S & Wilson least Sixth Circuit. November it would be able to terminate the under Section June already spent 9.1(g) because the amount required totaled amount escrow $100,000. time, At more than Home knowing

town admitted place S & Wilson $1,101 This is still escrow. satisfy

short of the amount needed to Sec 9.1(g), enough place

tion but Home repairs that the could ex

town notice $100,000. plausible It

ceed not

Hometown to claim it would completed. repairs Yet indicates Hometown was ditional would be 1. The record Hometown, diligence, performing decreased after due never told amount escrow 8, 2005, King inquired any repairs Burger as to whether had been November stated they when ad- made before November 8. would inform Hometown

Case Details

Case Name: Hometown Folks, LLC v. S & B WILSON, INC.

Court Name: Court of Appeals for the Sixth Circuit

Date Published: Jun 30, 2011

Citation: 643 F.3d 520

Docket Number: 09-6004, 09-6007

Court Abbreviation: 6th Cir.