November 9–November 15, 2024

  • Man injured in a tractor-trailer accident sues Trucking Company.  After filing suit, Man serves process on Trucking Company’s registered agent.  When Trucking Company neglects to respond to the lawsuit, Man moves for and obtains a $750,000.00 default judgment.  Arguing that its registered agent, for some unexplained reason, never actually informed it about the litigation, Trucking Company then files a motion to set aside the default judgment, which the trial court denies.  Trucking Company then appeals, arguing that its motion to set aside the default judgment should have been granted, or alternatively, that the trial court erred by failing to conduct an appropriate evidentiary hearing on unliquidated damages.  Tennessee Court of Appeals: The trial court was within its discretion to deny the motion to set aside the default.  “There is no point in a company having a designated agent for service of process if litigants cannot count on that agent as a means for serving process on the company,” and Trucking Company “has offered no explanation at all for why it never received notice of the lawsuit even though its designated agent was served.”  Because that fact supports a finding that Trucking Company willfully failed to respond, no further analysis is needed.  And because “the record contains no transcript of the default hearing” and Trucking Company “points to nothing that contradicts th[e] statement in [the] Order by the Trial Court” that states it held a hearing to quantify Man’s unliquidated damages, the trial court’s judgment is affirmed in full.  We also offer some interesting musings in a footnote on page 14: “While the term ‘excusable neglect’ is used both in Tennessee case law and the Tennessee Rules of Civil Procedure, it is a somewhat contradictory notion. It is difficult to square how if conduct is neglectful, it can be excusable. Likewise, if conduct is excusable, how can it be neglectful? This is nothing we need to consider any further in this Opinion.”
  • Man files a lawsuit seeking to enforce a deed restriction that forbids “mobile homes.”  At issue is whether something called a “CrossMod home”—which is mostly constructed offsite—is a “mobile home” within the meaning of the deed restriction.  Tennessee Court of Appeals: Guided by Tennessee Supreme Court authority that restrictive covenants are “‘strictly construed’ and should not be extended ‘to any activity not clearly and expressly prohibited by [their] plain terms[,]’” we conclude that “[t]he fact that the livable space in a CrossMod is manufactured off-site does not make it a mobile home.”
  • After Hospitals decline to pony up a requested $14 million subsidy, a Medical Service Provider sends written notice of its intent to stop providing the Hospitals anesthesia services.  This creates a problem for the Hospitals, which are prohibited from directly hiring the Clinicians who work there based on the Clinicians’ two-year non-compete agreements with Medical Service Provider.  Hospitals the Clinicians then sue to invalidate the non-compete agreements, arguing that “Hospitals would be forced to shut down if anesthesia services were unavailable, requiring transfer of all current and future patients to other facilities,” and arguing further that “finding facilities with the capability and capacity to service the area would be extremely difficult and would require the use of every ambulance in the state, the cooperation of numerous facilities, and the activation of the National Guard.”  Tennessee Court of Appeals: Covenants not to compete are generally disfavored in Tennessee; they are construed in favor of employees; and their validity is determined by multi-factor tests that consider whether an enforcer has a legitimate business interest to be protected and whether the restrictions are reasonable.  Here, Medical Service Provider “failed to establish that it held a legitimate business interest that was properly protected by a covenant not to compete.”  Further, “the covenants not to compete are unreasonable because they would impose significant financial hardship on the Clinicians and would be inimical to the public interest.”  Additionally, because “[a] different time period or the ability to practice in a different specialty would not have made any difference in the court’s finding that the enforcement of such provisions was inimical to the public interest[,]” the trial court did not err “by failing to consider equitable reformation of the contracts [sometimes called ‘blue-penciling’] as a basis for relief.”
  • Mother holds the majority voting share of an LLC that owns seven properties.  Shortly before Mother dies, she transfers the properties to her Daughter and Son-In-Law for no consideration as a form of estate planning.  Father—a part owner of the LLC—is not informed of the transfers.  After Mother dies, her estate sues to void the transfers.  Tennessee Court of Appeals: Though the statutes and the LLC operating agreement involved here will make your head hurt, we hold in a blessedly short eight-page opinion that the transactions were manifestly unreasonable and void.  We also invoke Tennessee Rule of Appellate Procedure 2 to suspend the final judgment rule for what your summarist thinks is the third time this year (previous examples are included in the January 26, 2024 and February 16, 2024 editions of Intermediate Scrutiny).

Firm Updates

Horwitz Law, PLLC was in the news this week, discussing on behalf of client Laura Cantwell why secretly recording sex acts with unknowing partners will result in your criminal prosecution and financial ruin.  Relatedly, there are a huge number of civil remedies available to victims of non-consensual pornography (more commonly known as “revenge porn”) in Tennessee.  If you or someone you know would benefit from knowing about those remedies, here’s a primer: https://horwitz.law/legal-remedies-available-to-victims-of-revenge-porn-and-other-non-consensual-pornography-in-tennessee/