Many, if not most, legal claims of an LLC must be filed directly by the LLC itself and cannot be filed by someone acting on its behalf.  The Tennessee Revised Limited Liability Company Act, however, permits a member of an LLC, in certain circumstances, to bring a derivative action on behalf of the LLC.  Very generally speaking, derivative actions are permitted when the LLC has a valid cause of action, but is not likely to pursue it itself because its current management will not do so. Before a member or holder of financial rights of a limited liability company may bring a derivative ..read more

In every initial meeting or phone conference which I have had with a potential client about a will contest case, I inevitably am asked whether the potential client has a good case to set aside the will at issue, or, the other hand, to uphold it in the face of a will contest.  Of course, there is never a definitive answer to those questions. However, in some cases, I can tell clients that they have identified facts which seem promising in terms of obtaining a favorable verdict. In other cases, I cannot tell them that. I always tell potential clients that, even if they have identified facts ..read more

Under Tennessee law, many claims arising from business disputes are barred if they are not filed with a court within four years (claims related to the sale of goods under the UCC) or six years (breach of contract claims not governed by the UCC).  Those time periods begin to run, in almost all cases, not when the contract or agreement at issue was made, but when the plaintiff’s cause of action “accrued.” When a cause of action accrues varies. For most breach of contract cases not governed by the UCC, a cause of action accrues when the defendant materially breaches the contract by failing t ..read more

In a very recent breach of contract case, a former employee of the defendant was held not to have been constructively discharged from employment, and, therefore, was not entitled to a bonus provided for in his employment agreement.  The Court of Appeals of Tennessee determined that the former employee voluntarily terminated his employment based on the totality of the facts. Here are the key facts: The former executive employee (“Executive”) signed a two- year contract (“Employment Agreement”) with the Defendant, a real estate business, to be an executive vice-president In addition to his ..read more

A former employer’s claims against a former employee and the former employee’s new employer for breach of a non-compete agreement and violating the Tennessee Uniform Trade Secrets Act (“Trade Secrets Act”) were dismissed in a case which is instructive on a couple of fronts. Mainly, the case illustrates the futility of a former employer attempting to claim that information the former employee acquired during his or her employment amounts to “trade secrets” under the Trade Secrets Act when the former employer allowed third parties to have access to the same information. Here are the key facts ..read more

The Court of Appeals of Tennessee recently issued an opinion in an easement case involving an issue of first impression in Tennessee regarding the transferability of an express easement.  Here are the key facts: In 1980, Mahaffey acquired a tract known as the “Holt Farm” Holt Farm was 107 acres Holt Farm was landlocked A lane (“Holt Lane”), ran along the eastern section of Holt Farm Before connecting to a public roadway, known as Horse Mountain Road, Holt Lane ran across property adjoining Mahaffey’s which was not owned by Mahaffey The adjoining property which Holt Lane ran across was ow ..read more

The Tennessee Revised Limited Liability Company Act (the “Act”) sets forth the circumstances under which a limited liability company (“LLC”) member or manager may be liable to the LLC or to other LLC members.  An LLC member’s or manager’s potential liability can arise from two separate categories of conduct: (1) conduct that is a breach of the member’s or manager’s duty of loyalty (duty of loyalty cases); and (2) conduct in the operation or management of the LLC that is below the standards of care set forth in the Act (duty of care cases). This blog deals strictly with the second category ..read more

It is helpful to think of the potential personal liability of members of Tennessee LLC’s falling into two categories. The first category is the personal liability of a member to the LLC itself for the member’s breach of the duty of care, breach of the duty of loyalty, or the breach of the duty of good faith and fair dealing.  The personal liability of a member for breaches of those duties (which duties are set forth in T.C.A.§ 48-249-403) is typically addressed in a derivative proceeding brought by another member of the LLC on behalf of the LLC.  The second category of personal liabi ..read more

Tennessee commercial landlord/tenant (lessor/lessee) law requires a lessor of a commercial property to act fairly and reasonably, under the circumstances, to mitigate its lost rental income resulting from a lessee/tenant abandoning the property before the expiration of the lease term or notifying the lessor that it no longer intends to comply with the lease.  Obviously, this requirement means that the lessor must try to secure a new tenant for the subject property. However, what steps on the part of the lessor satisfy its obligation to act fairly and reasonably to find a new tenant to mit ..read more

A recent construction defect case decided by the Court of Appeals of Tennessee illustrates how both the three-year statute of limitations for injury to real property and the six-year statute of limitations for breach of contract can both apply in a construction defect case. The trial court held that the claims of the Plaintiffs, the homeowners, were barred by the three-year statute of limitations. The court of appeals reversed the trial court holding that some of the Plaintiffs’ claims were subject to the three-year statute, but others were subject to Tennessee’s six-year breach of contract st ..read more