Edwards Moving & Rigging, Inc. v. Josh Lack
Filing
94
ORDER granting 60 Plaintiff's Motion for Summary Judgment; and denying 64 Defendant's Motion for Summary Judgment. Signed by Judge Jon Phipps McCalla on 6/24/2015. (McCalla, Jon)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
EDWARDS MOVING & RIGGING,
INC., a Kentucky Corporation,
Plaintiff,
v.
JOSH LACK, an individual, and
BARNHART CRANE AND RIGGING
COMPANY, INC., a Delaware
Corporation,
Defendants.
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No. 2:14-cv-02100-JPM-tmp
ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT; AND
DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
Before the Court are Plaintiff’s Motion for Summary
Judgment (ECF No. 60) and Defendant’s Motion for Summary
Judgment (ECF No. 64).
For the reasons that follow, Plaintiff’s
Motion is GRANTED and Defendant’s Motion is DENIED.
I.
BACKGROUND
A.
Procedural Background
Plaintiff filed its Complaint on February 10, 2014 (ECF
No. 1), and a Motion for Temporary Restraining Order (“TRO”) and
Preliminary Injunction on February 28, 2014 (ECF No. 11).
Court granted the TRO on March 5, 2014.
(ECF No. 20.)
The
The
Court enjoined Lack from continuing employment at Barnhart until
a determination in this case was ultimately made.
(Id. at 8.)
Lack and Barnhart filed their respective Answers to the
Complaint on March 25, 2014.
(ECF Nos. 27, 28.)
Following two extensions of the TRO (ECF Nos. 30, 37), the
Court entered an agreed Permanent Injunction as between Edwards
and Lack on May 7, 2014.
(ECF No. 50.)
The agreed injunction
restrains Lack from working on any “rigging and/or heavy hauling
projects/assignments that are in the bidding or pre-award
phases” until March 5, 2016.
(Id.)
Edwards filed an Amended Complaint on July 18, 2014 (1st
Am. Compl., ECF No. 57), and Barnhart answered on August 14,
2014 (Answer to 1st Am. Compl., ECF No. 58).
Edwards filed its Motion for Summary Judgment on January
12, 2015.
2015.
(ECF No. 60.)
(ECF No. 67.)
27, 2015.
Barnhart responded on February 12,
Edwards filed a reply brief on February
(ECF No. 79.)
Barnhart filed its Motion for Summary Judgment on January
16, 2015.
(ECF No. 64.)
2015.
(ECF No. 72.)
2015.
Edwards responded on February 16,
Barnhart filed its reply brief on March 4,
(ECF No. 81.)
The Court held a hearing on the motions for summary
judgment on April 3, 2015.
(Minute Entry, ECF No. 90.)
With
leave of Court, Edwards filed a Supplemental Brief Regarding
Consequential Damages on April 8, 2015.
2
(ECF No. 86.)
Barnhart
responded on April 10, 2015.
reply on April 27, 2015.
B.
(ECF No. 87.)
Edwards filed a
(ECF No. 92.)
Factual Background
Edwards Moving & Rigging, Inc. (“Edwards”) is a business
that specializes in “the transportation and lifting of heavy and
oversized equipment in the power generation, petro chemical,
automotive, manufacturing, nuclear, and construction markets
throughout [the] United States.”
(1st Am. Compl. ¶ 6.)
describes its market area as the whole United States.
Edwards
(Id.
¶ 7.)
Edwards hired Josh Lack on or about September 16, 2009.
(Id. ¶ 8.)
Also on or about September 16, 2009, Lack and
Edwards entered into an agreement that included non-competition,
non-solicitation, and non-disclosure clauses.
¶ 11; ECF No. 62-4.)
(1st Am. Compl.
The non-compete section of the contract
states the following:
A.
Non-Competition. Employee agrees that while
Employee is employed by Employer and during a period
of two (2) years immediately following the termination
of his employment with the Employer for any reason
whatsoever, (the Term), he shall not, within
Employer’s market area, (the “Territory”), engage in
any of the following activities:
(1) Directly or indirectly enter into the employ of
or render any service to or act in concert with any
person, partnership, corporation or other entity
engaged in rendering any service being conducted or
rendered by Employer at the time of the termination;
or
3
(2) Directly or indirectly engage in any such
competitive business or render any such service on his
own account; or
(3) Become interested in any such competitive
business or service directly or indirectly as an
individual, partner, member, director, officer,
principal, agent, employee, or creditor.
(ECF No 62-4 at 1, PageID 428.)
The contract includes a choice-
of-law clause, which states that the agreement “shall be
construed under and governed by the laws of the Commonwealth of
Kentucky, excluding its conflicts of law rules.”
(Id. at 3,
PageID 430.)
Edwards contends that Lack was a “critical member of the
Edwards team with responsibilities that included the planning,
execution and oversight of highly specialized work projects
. . . .”
(1st Am. Compl. ¶ 9.)
Defendant Barnhart Crane and
Rigging Company, Inc. (“Barnhart”) denies these allegations.
(Answer to 1st Am. Compl. ¶ 9, ECF No. 58.)
Edwards further
contends that Lack had no experience in rigging engineering
prior to his employment with Edwards (1st Am. Compl. ¶ 10), but
Barnhart also denies that assertion (Answer to 1st Am. Compl.
¶ 10).
On or about November 6, 2013, Lack gave notice to Edwards
that he was resigning.
(Pl.’s Undisputed Facts in Supp. of Mot.
for Summ. J. (“Pl.’s Statement of Undisputed Facts”) ¶ 12, ECF
No. 62; Response to Pl.’s Statement of Undisputed Facts in Supp.
4
of Pl.’s Mot. for Summ. J. & Barnhart Crane & Rigging Co.’s
Statement of Additional Material Facts (“Def.’s Response to
Pl.’s Statement of Undisputed Facts”) ¶ 12, ECF No. 67-1.)
His
final day of employment with Edwards was November 13, 2013.
(Pl.’s Statement of Undisputed Facts ¶ 13; Def.’s Response to
Pl.’s Statement of Undisputed Facts ¶ 13.)
Edwards alleges that Lack subsequently “became employed as
a rigging engineer on heavy hauling and rigging projects for
Barnhart” (1st Am. Compl. ¶ 25), but Defendant also denies this
allegation (Answer to 1st Am. Compl. ¶ 25).
Edwards alleges
that Barnhart is a direct competitor of Edwards for heavy
hauling and rigging jobs.
(1st Am. Compl. ¶ 27.)
initially denied that allegation.
¶ 27.)
Barnhart
(Answer to 1st Am. Compl.
Barnhart now admits, however, that it “is engaged in the
industry of heavy moving and rigging” and that “Barnhart and
Edwards compete for some of the same projects/jobs.”
(Pl.’s
Statement of Undisputed Facts ¶ 20; Def.’s Response to Pl.’s
Statement of Undisputed Facts ¶ 20.)
In August 2013, Lack notified Barnhart by email that he had
signed a non-compete agreement with Edwards, and sent Barnhart a
copy of another employee’s non-compete agreement that he
believed to be similar to his own.
Undisputed Facts ¶ 8.)
(Pl.’s Statement of
On or about November 15, 2013, Edwards,
through counsel, notified Barnhart of the non-compete clause in
5
Lack’s contract, “and informed Barnhart that Edwards fully
intends to pursue all its rights under the agreement including
interference with a contractual relationship.”
(1st Am. Compl.
¶ 30.)
Lack began working for Barnhart on or about December 16,
2013.
(Id. ¶ 31.)
Barnhart contends that the job duties for
which Barnhart hired Lack “are common to the crane and rigging
industry for an individual in an engineering position, and
involved the use of common equipment that is routinely utilized
throughout the industry; and does not involve any special or
proprietary equipment or methods.”
(Def.’s Response to Pl.’s
Statement of Undisputed Facts ¶ 8.)
II.
LEGAL STANDARD
A party is entitled to summary judgment if “the movant
shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56.
“A fact is ‘material’ for purposes of
summary judgment if proof of that fact would establish or refute
an essential element of the cause of action or defense.”
Bruederle v. Louisville Metro Gov’t, 687 F.3d 771, 776 (6th Cir.
2012).
“In considering a motion for summary judgment, [the] court
construes all reasonable inferences in favor of the nonmoving
party.”
Robertson v. Lucas, 753 F.3d 606, 614 (6th Cir. 2014)
6
(citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986)).
“The moving party bears the initial
burden of demonstrating the absence of any genuine issue of
material fact.”
Mosholder v. Barnhardt, 679 F.3d 443, 448 (6th
Cir. 2012) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986)).
“Once the moving party satisfies its initial burden, the
burden shifts to the nonmoving party to set forth specific facts
showing a triable issue of material fact.”
Mosholder, 679 F.3d
at 448-49 (citing Matsushita, 475 U.S. at 587; Fed. R. Civ.
P. 56(e)).
“‘When the non-moving party fails to make a
sufficient showing of an essential element of his case on which
he bears the burden of proof, the moving parties are entitled to
judgment as a matter of law and summary judgment is proper.’”
Martinez v. Cracker Barrel Old Country Store, Inc., 703 F.3d
911, 914 (6th Cir. 2013) (quoting Chapman v. UAW Local 1005, 670
F.3d 677, 680 (6th Cir. 2012) (en banc)); see also Kalich v.
AT&T Mobility, LLC, 679 F.3d 464, 469 (6th Cir. 2012).
“To show that a fact is, or is not, genuinely disputed,
both parties are required to either ‘cite[] to particular parts
of materials in the record’ or ‘show[] that the materials cited
do not establish the absence or presence of a genuine dispute,
or that an adverse party cannot produce admissible evidence to
support the fact.’”
Bruederle, 687 F.3d at 776 (alterations in
7
original) (quoting Fed. R. Civ. P. 56(c)(1)); see also
Mosholder, 679 F.3d at 448 (“To support its motion, the moving
party may show ‘that there is an absence of evidence to support
the nonmoving party’s case.’”) (quoting Celotex Corp., 477 U.S.
at 325).
“Credibility determinations, the weighing of the
evidence, and the drawing of legitimate inferences from the
facts are jury functions, not those of a judge[.]”
Martinez,
703 F.3d at 914 (alteration in original) (quoting Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)) (internal
quotation marks omitted).
“The court need consider only the cited materials, but it
may consider other materials in the record.”
P. 56(c)(3).
Fed. R. Civ.
“[T]he district court has no ‘duty to search the
entire record to establish that it is bereft of a genuine issue
of material fact.’”
Pharos Capital Partners, L.P. v. Deloitte &
Touche, 535 F. App’x 522, 523 (6th Cir. 2013) (per curiam)
(quoting Tucker v. Tennessee, 539 F.3d 526, 531 (6th Cir.
2008)).
“‘[J]udges are not like pigs, hunting for truffles’
that might be buried in the record.”
Emerson v. Novartis Pharm.
Corp., 446 F. App’x 733, 736 (6th Cir. 2011) (alteration in
original) (quoting United States v. Dunkel, 927 F.2d 955, 956
(7th Cir. 1991)).
The decisive question is “whether ‘the evidence presents a
sufficient disagreement to require submission to a jury or
8
whether it is so one-sided that one party must prevail as a
matter of law.’”
Johnson v. Memphis Light Gas & Water Div., 777
F.3d 838, 843 (6th Cir. 2015) (quoting Anderson, 477 U.S. at
251–52).
“[A] mere ‘scintilla’ of evidence in support of the
non-moving party’s position is insufficient to defeat summary
judgment; rather, the non-moving party must present evidence
upon which a reasonable jury could find in her favor.”
Tingle
v. Arbors at Hilliard, 692 F.3d 523, 529 (6th Cir. 2012)
(quoting Anderson, 477 U.S. at 251).
III. ANALYSIS
Plaintiff’s sole cause of action against Barnhart is
tortious interference with contract.
(1st Am. Compl. at 7–8.)
In order to recover for tortious interference with contract
under Tennessee law, a plaintiff must prove that: “[(1)] there
was a legal contract, [(2)] of which the wrongdoer was aware,
[(3)] that he maliciously intended to induce a breach, and [(4)]
there must have been a breach, [(5)] proximately caused by his
acts, [(6)] resulting in damages.”
Blake Corp. v. Diversified
Sys., Inc., 229 F.3d 1150 (6th Cir. 2000) (unpublished table
decision).
C.
The Court addresses each element in turn.
The Existence of a Legal Contract
“Kentucky courts have consistently upheld non-competition
restrictions if ‘they are reasonable in scope and in purpose.’”
Edwards Moving & Rigging, Inc. v. W.O. Grubb Steel Erection,
9
Inc., No. 3:12-CV-146-HEH, 2012 WL 1415632, at *4 (E.D. Va. Apr.
23, 2012) (quoting Hall v. Willard & Woolsey, P.S.C., 471 S.W.2d
316, 317 (Ky. 1971)).
To be enforceable, a restraint must be
“such only as to afford a fair protection to the legitimate
interests of the [employer] and not so extensive as to interfere
with the interests of the public.”
455, 456 (Ky. 1950).
Stiles v. Reda, 228 S.W.2d
“Reasonableness is to be determined
generally by the nature of the business or profession and
employment, and the scope of the restrictions with respect to
their character, duration and territorial extent.”
Hall, 471
S.W.2d at 317–18.
Barnhart argues that the non-compete agreement at issue in
this case is invalid for two reasons.
First, Barnhart contends
that Edwards does not have a legitimate interest that is
protected by the non-compete agreement.
for Summ. J. at 9–12, ECF No. 64-1.)
(Mem. Supp. Def.’s Mot.
Second, Barnhart argues
that the agreement is not sufficiently limited in duration and
geographic scope.
(Id. at 13–16.)
Edwards disagrees for three reasons.
First, Edwards argues
that because the Agreed Final Judgment of Permanent Injunction
and Order Against Defendant Josh Lack contains “an
acknowledgment and stipulation from Lack that the NonCompetition Agreement is a valid and enforceable contract,” the
law-of-the-case doctrine prevents Barnhart from now contesting
10
the validity of the contract.
(Pl.’s Response in Opposition to
Def.’s Mot. for Summ. J. at 2–5, ECF No. 72.)
Second, Edwards
argues that the geographic and temporal terms of the contract
are reasonable under Kentucky law.
(Id. at 6–8.)
Third,
Edwards argues that it has a legitimate business interest in the
“specialized knowledge, training, and confidential information”
that Lack acquired while an employee of Edwards.
(Id. at 11–
16.)
The Court agrees with Edwards that the contract is
enforceable.
The non-compete clause is reasonable in both
duration and geographic coverage under Kentucky law.
The clause
at issue only has a duration of two years, which is a duration
that has been consistently found reasonable by Kentucky courts.
See Hodges v. Todd, 698 S.W.2d 317, 318 (Ky. Ct. App. 1985)
(upholding a five-year non-compete); Lareau v. O’Nan, 355 S.W.2d
679, 680 (Ky. 1962) (same); Cent. Adjustment Bureau, Inc. v.
Ingram Associates, Inc., 622 S.W.2d 681 (Ky. Ct. App. 1981)
(upholding a two-year non-compete); Stiles v. Reda, 228 S.W.2d
455, 456 (Ky. 1950) (same).
Although the geographic restriction
is broad, Barnhart cites no Kentucky case striking down a noncompete simply because of its geographic scope.
See Cent.
Adjustment Bureau, Inc., 622 S.W.2d at 686 (upholding a noncompete covering the United States).
A geographic limit in a
non-compete governed by Kentucky law “is reasonable if it is
11
confined to the territory in which the employer keeps his market
or carries on his business.”
S.W. 295, 298 (Ky. 1926).
Thomas W. Briggs Co. v. Mason, 289
The non-compete clause at issue in
this case is limited to Edwards’ “market area.”
at 1, PageID 428.)
(ECF No. 62-4
Accordingly, the geographic limit is
reasonable under Kentucky law.
Edwards also has legitimate interests under Kentucky law
that are protected by the non-compete clause.
Contrary to
Barnhart’s assertions, a non-compete clause made for the sole
purpose of protection from ordinary competition is enforceable
under Kentucky law “unless very serious inequities would
result.”
Hall, 471 S.W.2d at 318.
Hall involved a physician-
employee that agreed not to practice medicine within fifty miles
from the city of her employment.
Id. at 316.
Despite the lack
of any confidential information, trade secrets, or specialized
skill or knowledge acquired during her employment, the Court of
Appeals of Kentucky still found the non-compete clause
enforceable.
Id. at 318.
Although Barnhart states that the non-compete “prevents
Lack from utilizing general knowledge and principles related to
civil engineering” such that enforcement “would result in severe
inequities,” this statement is not supported by the record.
is undisputed that the service that Lack is prevented from
rendering under the non-compete is “to lift and move heavy
12
It
objects.”
(Pl.’s Statement of Undisputed Facts ¶ 23; Def.’s
Response to Pl.’s Statement of Undisputed Facts ¶ 23.)
Lack’s
resumé indicates that he has significant experience in civil
engineering fields unrelated to the lifting and moving of heavy
objects.
For example, Lack spent over a year at Peterson
Engineering/WMP Construction Co. with duties in “drafting,
surveying, project supervision, municipal sewer and water
design, and taking projects to bid for construction.”
64-3 at 8.)
(ECF No.
The Court finds that no “very serious inequities”
would result from upholding the non-compete clause.
Lack’s
background indicates that he has the capacity to find gainful
employment as a civil engineer in an industry unrelated to the
lifting and moving of heavy objects.
Because the non-compete
protects a legitimate business interest and is reasonable in
scope and duration under Kentucky law, the Court finds that the
non-compete agreement is enforceable.
D.
Awareness of the Non-Compete Agreement
The undisputed evidence in the record demonstrates that
Barnhart had knowledge of Lack’s non-compete agreement.
On or about August 21, 2013, Lack notified Jim Yates
and two other Barnhart employees via email that he had
entered into a non-competition agreement with Edwards.
He attached a copy of a non-competition agreement
between Edwards and another Edwards’ employee, which
Lack believed to be similar to the Non-Competition
Agreement he executed.
13
(Pl.’s Statement of Undisputed Facts ¶ 8; Def.’s Response to
Pl.’s Statement of Undisputed Facts ¶ 8.)
Lack confirmed to
Barnhart via email on November 11, 2013, that his noncompetition agreement was the same as the other one that he had
previously provided.
(ECF No. 62-9.)
with Edwards was on November 13, 2013.
Lack’s last day of work
(Pl.’s Statement of
Undisputed Facts ¶ 13; Def.’s Response to Pl.’s Statement of
Undisputed Facts ¶ 13.)
Accordingly, the Court finds that there
is no genuinely disputed issue of material fact as to whether
Barnhart knew of the contract.
E.
Malice
The third element of tortious interference of contract
under Tennessee law is that the alleged tortfeasor “maliciously
intended to induce a breach.”
Blake Corp., 229 F.3d 1150.
Barnhart argues that it did not maliciously intend to induce a
breach because Barnhart neither “induce[d] Lack to seek
employment with Barnhart, nor . . . encourage[d] Lack to leave
his employment with Edwards.”
(Response and Mem. in Opp. to
Pl.’s Mot. for Summ. J. at 18, ECF No. 67.)
Edwards disagrees,
arguing that although there is no evidence of ill will or spite,
the Tennessee law simply requires a showing of an “intentional
commission of a harmful act without justifiable cause or
privilege.”
(Pl.’s Mem. in Supp. of It[]s Mot. for Summ. J. at
16, ECF No. 61.)
14
The Court agrees with Edwards.
“In this context, malice is
the willful violation of a known right.”
Edwards v. Travelers
Ins. of Hartford, Conn., 563 F.2d 105, 121 (6th Cir. 1977).
Barnhart knew of Edwards rights with respect to Lack, and hired
him anyway.
Consequently, Edwards acted with malice.
Further,
it is clear from the record that Barnhart intended Lack to
breach.
Barnhart mischaracterizes the record when it argues
that it did not induce Lack to leave his employment with
Edwards.
Barnhart offered Lack a job, and even increased its
initial offer to Lack when he notified Barnhart of his previous
salary with Edwards.
(Pl.’s Statement of Undisputed Facts ¶ 10;
Def.’s Response to Pl.’s Statement of Undisputed Facts ¶ 10;
Def.’s Statement of Undisputed Facts ¶ 8; Pl.’s Response to
Def.’s Statement of Undisputed Facts ¶ 8.)
“‘[I]nduce’ is
ordinarily defined as ‘[t]o lead (a person), by persuasion or
some influence or motive that acts upon the will,’ ‘to lead on,
move, influence, prevail upon (any one) to do something.’”
United States v. Hite, 769 F.3d 1154, 1161 (D.C. Cir. 2014)
(quoting Oxford English Dictionary (2d ed. 1989)); accord United
States v. Harmon, 593 F. App’x 455, 467 (6th Cir. 2014) cert.
denied, 135 S. Ct. 1579 (2015).
Barnhart’s undisputed offer of
a job -- and subsequent increased offer of salary -- acted upon
Lack’s will to influence him to accept the job with Barnhart.
Consequently, Barnhart induced Lack breach his contract, and
15
therefore did so intentionally.
Accordingly, the Court finds
that there is no genuinely disputed issue of material fact that
Barnhart maliciously intended Lack to breach his non-compete
agreement.
F.
Breach
Edwards argues that because both Edwards and Barnhart are
“engaged in the industry of heav[y] moving and rigging,” they
offer competing services.
(Pl.’s Mem. in Supp. of It[]s Mot.
for Summ. J. at 17 (citing Cain Aff. ¶¶ 12–13 (stating that
Barnhart is one of Edwards’ largest competitors), ECF No. 62-2,
and Barnhart Dep. 6, 27–30 (admitting that Edwards and Barnhart
have bid on the same jobs), ECF No. 62-22).)
Edwards therefore
argues that Lack’s employment with Barnhart constitutes a breach
of his non-compete agreement.
argument.
Barnhart does not respond to this
The Court finds that there is no genuine dispute in
the record as to whether a breach occurred when Lack began his
employment with Barnhart -- Lack’s employment with Barnhart
constituted a breach of his non-compete agreement.
G.
Proximate Cause
Edwards argues that it is “self-evident” that Barnhart’s
conduct was also a proximate cause of the breach.
in Supp. of It[]s Mot. for Summ. J. at 18.)
(Pl.’s Mem.
Similar to its
argument regarding lack of intent, Barnhart argues that it did
not proximately cause the breach because:
16
Barnhart did not actively solicit Lack, did not
pressure Lack into accepting a position and did not
believe they were violating the spirit of Lack’s noncompete with Edwards. Lack chose to quit his job with
Edwards of his own volition and accepted a position
with Barnhart that he actively sought when he decided
[to] leave Edwards to relocate his family.
(Def.’s Response & Mem. in Opp. to Pl.’s Mot. for Summ. J. at
4.)
The Court agrees with Edwards.
Tennessee follows the
“substantial factor” test for proximate causation.
McClenahan
v. Cooley, 806 S.W.2d 767, 775 (Tenn. 1991) (“There is no
requirement that a cause, to be regarded as the proximate cause
of an injury, be the sole cause, the last act, or the one
nearest to the injury, provided it is a substantial factor in
producing the end result.”)
Barnhart’s offer of employment to
Lack was not just a substantial factor in the breach of the noncompete agreement: Lack could not have breached his agreement
unless offered such a job by a competitor to Edwards.
Accordingly, Barnhart can point to no fact to show a genuine
dispute of fact as to proximate causation of the breach.
H.
Damages
Barnhart argues that “Edwards has not been able thus far to
demonstrate what damages, if any, have truly resulted from Lack
being employed by Barnhart other than it[s] attorney’s fees for
pursuing this lawsuit . . . .”
Summ. J. at 17.)
(Mem. Supp. Def.’s Mot. for
According to Barnhart, attorney’s fees alone
17
cannot provide a basis for damages under Tennessee tort law.
(See Response to Pl.’s Supp. Br. Regarding Consequential
Damages, ECF No. 87.)
Edwards concedes that the only damages it has incurred are
“legal fees and expenses enforcing the terms and conditions of
the Non-Competition Agreement against Lack.”
Opposition to Def.’s Mot. for Summ. J. at 19.)
(Pl.’s Response in
Edwards argues,
however, that attorney’s fees and expenses in enforcing a noncompete agreement are cognizable as damages in a tortious
interference of contract claim under Tennessee law.
(Pl.’s
Supp. Br. Regarding Consequential Damages.)
During the telephonic hearing on the instant Motions, the
Court granted the Parties leave to submit supplemental briefing
addressing whether consequential damages for tortious
interference of a non-compete contract can include attorneys’
fees for the enforcement of the contract.
ECF No. 90.)
(See Minute Entry,
In its supplemental brief, Edwards cites to
several cases in which Tennessee courts considered attorneys’
fees to be consequential damages in other contexts.
(Pl.’s
Supp. Br. Regarding Consequential Damages, ECF No. 86 (citing
Morrow v. Jones, 165 S.W.3d 254, 260 (Tenn. Ct. App. 2004)
(approving of award of attorney’s fees caused by breach of
contract); Bruce v. Olive, No. 03A01-9509-CV-00310, 1996 WL
93580, at *6 (Tenn. Ct. App. Mar. 4, 1996) (same); Haney v.
18
Copeland, No. E2002-00845-COA-R3-CV, 2003 WL 553548, at *2
(Tenn. Ct. App. Feb. 27, 2003) (approving of attorney’s fees
caused by breach of contract and fraud).
In response, Barnhart
argues that “[t]he American Rule simply does not permit the
recovery of attorney’s fees unless attorney’s fees are permitted
by contract or by statute.”
(Response to Pl.’s Supp. Br.
Regarding Consequential Damages at 4, ECF No. 87.)
Although Barnhart’s argument is well-taken, it is not
relevant to the instant case.
“Tennessee, like most
jurisdictions, adheres to the ‘American rule’ for award of
attorney fees.”
Cracker Barrel Old Country Store, Inc. v.
Epperson, 284 S.W.3d 303, 308 (Tenn. 2009) (footnote and
citation omitted).
“Under the American rule, a party in a civil
action may recover attorney fees only if: (1) a contractual or
statutory provision creates a right to recover attorney fees; or
(2) some other recognized exception to the American rule
applies, allowing for recovery of such fees in a particular
case.”
Id.
The American rule, however, simply prevents a
prevailing litigant from “collect[ing] a reasonable attorneys’
fee from the loser.”
Alyeska Pipeline Serv. Co. v. Wilderness
Soc’y, 421 U.S. 240, 247 (1975).
The American rule does not apply to consequential damages
flowing from a separate harm.
Under Tennessee law, “‘[o]ne who
through the tort of another has been required to act in the
19
protection of his interests by bringing or defending an action
against a third person is entitled to recover reasonable
compensation for loss of time, attorney fees and other
expenditures thereby suffered or incurred in the earlier
action.’”
Engstrom v. Mayfield, 195 F. App’x 444, 451 (6th Cir.
2006) (emphasis added) (quoting Pullman Standard, Inc. v. Abex
Corp., 693 S.W.2d 336, 340 (Tenn. 1985)).
Here, the record
uniformly demonstrates that Edwards was required to act in the
protection of its interests to bring a suit against Lack.
That
the enforcement action against Lack was joined to the instant
tortious interference of contract action is of no consequence
under Tennessee law.
Cf. id.
Accordingly, the Court finds that
there is no genuine dispute of material fact as to whether
damages were incurred as a result of the Barnhart’s tortious
interference with contract.
In contrast, the Court finds that the record is not clear
as to the particular amount of damages the Plaintiff has
suffered.
In Plaintiff’s response to Defendant’s Interrogatory
No. 2 in which Defendant requested the “dollar amount of each
and every type of damage which you claim to have sustained,”
Plaintiff stated that its consequential damages amounted to:
(1) $69,427.11 in legal fees and expenses incurred through May
31, 2014; (2) $4,976.16 in “personnel and travel expense”; and
(3) $1,122.39 in advertising expenses.
20
(ECF No. 64-4 at 3.)
Moreover, Plaintiff states that it is entitled to $226,576.98 to
$300,000.00 in punitive damages.
(Id.)
None of these
quantities are supported by any documentation in the record.
Edwards therefore is not entitled to summary judgment on the
amount of damages.
IV.
CONCLUSION
For the foregoing reasons, the Court finds that Defendant
has failed to create a genuine dispute of material fact with
respect to any element of Plaintiff’s claim for tortious
interference of contract.
As a result, Plaintiff’s Motion for
Summary Judgment is GRANTED, and Defendant’s Motion for Summary
Judgment is DENIED.
IT IS SO ORDERED, this 24th day of June, 2015.
/s/ Jon P. McCalla
JON P. McCALLA
UNITED STATES DISTRICT JUDGE
21
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