Robert Thomas Edmunds v. Delta Partners, L.L.C.

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

November 14, 2012 Session

ROBERT THOMAS EDMUNDS v. DELTA PARTNERS, L.L.C., ET AL.

Direct Appeal from the Circuit Court for Robertson County

No. 74CCI-2009-CV24 Ross H. Hicks, Judge

No. M2012-00047-COA-R3-CV - Filed December 18, 2012

Appellant corporation appeals the trial court’s rulings finding it liable for breach of contract

damages, prejudgment interest, and damages pursuant to the Fair Labor Standards Act.

Additionally, the corporation’s president appeals the trial court’s action in piercing the

corporate veil to hold him personally liable for the contract damages. We reverse the trial

court’s finding with regard to veil piercing, but affirm the trial court in all other respects.

Tenn. R. App. P. 3. Appeal as of Right; Judgment of the Circuit Court Affirmed in

Part; Reversed in Part; and Remanded

J. S TEVEN S TAFFORD, J., delivered the opinion of the Court, in which D AVID R. F ARMER, J.,

joined, and Holly M. Kirby, J., filed a concurring opinion.

John B. Holt, Springfield, Tennessee, for the appellants, Delta Partners, L.L.C. and Michael

Richard Garrison.

Richard L. Colbert and Courtney L. Wilbert, Franklin, Tennessee, for the appellee, Robert

Thomas Edmunds.

OPINION

I. Background

Plaintiff/Appellee Robert Edmunds was offered employment by Defendant/Appellant

Delta Partners, L.L.C. ("Delta”) in 2004. Delta’s purpose was to perform “turnarounds” for

manufacturing companies, helping the companies to cut costs and increase profitability.

Upon accepting the offer of employment, Mr. Edmunds received several documents

regarding his employment with Delta, including a non-disclosure agreement, and a non-

compete covenant, to which he agreed. The documents further provided that:

In consideration of the performance of all services required by

Delta [], the confidentiality provisions and covenant not-to-

compete set forth herein, the Company [i.e. Delta] agrees to pay

Employee [i.e. Mr. Edmunds] a salary outlined in the Employee

Offer Letter. This initial salary and other benefits provided to

Employee pursuant to the Offer Letter may, from time to time as

agreed by Employee and Company, be modified.

The document further provided that “[e]mployment shall be terminable for cause, such cause

being in the sole discretion of Delta . . . .” Both Mr. Edmunds and Defendant/Appellant

Michael Garrison, as President and CEO of Delta, signed the document. Mr. Edmunds’

Employee Offer Letter stated that his starting salary would be $65,000.00. The document

also stated that Delta was an at-will employer. From 2004 until sometime in 2006, Mr.

Edmunds was paid his salary in biweekly installments of $2,500.00, totaling $65,000.00 per

year.

Subsequent to Mr. Edmunds accepting the offer of employment with Delta, Mr.

Garrison came to own 95% of Delta stock, with his wife owning the other 5%. In 2006, Delta

experienced financial difficulties, and could no longer afford to pay employees. However,

Mr. Edmunds stayed with the company “out of personal loyalty” to Mr. Garrison. In 2006,

2007 and 2008, Mr. Edmunds received sporadic payments from Delta. Ultimately, Mr.

Edmunds left the company in October 2008 due to the lack of payments, and sought payment

of the funds owed to him under the alleged employment contract for the prior three years.

When Delta refused to pay, on January 22, 2009, Mr. Edmunds filed this lawsuit in

the Robertson County Circuit Court. A bench trial was held on September 19, 2011. Mr.

Edmunds testified that, from 2004 until 2006, he was paid according to the terms of the Offer

of Employment. According to Mr. Edmunds, from the time he was hired in 2004 until he left

Delta in 2008, he reported to work five days a week for a total of forty (40) hours per week.

Mr. Edmunds testified that, while at work, he performed clerical tasks, worked on computer

issues and software programming, and took telephone calls from clients and other employees.

Per Mr. Edmunds’ testimony, these phone calls occurred throughout his time with Delta and

involved clients and employees in Tennessee, as well as Alabama, Kentucky, Indiana, and

other states. In addition, in order for the employees to be paid each month, Mr. Edmunds

would use a computer program to input the data regarding their time and wages each month;

the computer program would then create checks to be signed by Mr. Garrison and distributed

to the employees. However, in 2006, Mr. Garrison informed Mr. Edmunds that the company

was experiencing financial difficulties and work had “slowed dramatically.” Mr. Edmunds

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chose to remain with the company despite these difficulties and, according to his testimony,

performed the same clerical and administrative tasks as before, including inputting the

payroll information and answering phone calls from clients and employees in other states.

Delta was unable to pay Mr. Edmunds his full salary in 2006, 2007, and 2008. From the

evidence presented at trial, Mr. Edmunds was paid a total of $3,800.00 in 2006, $21,250.00

in 2007 and $42,500.00 in 2008. For much of 2008, Mr. Edmunds was receiving his usual

$2,500.00 biweekly payment. However, due to more difficulties, these payments again

stopped in the summer of 2008. When asked whether Mr. Garrison ever explained Delta’s

failure to pay Mr. Edmunds his prior salary, Mr. Edmunds admitted that Mr. Garrison may

have later informed him that the company did not have enough funds to cover payroll. Mr.

Edmunds testified, however, that at no time did Mr. Garrison terminate Mr. Edmunds’

employment or inform Mr. Edmunds that he would only be paid contingent on Delta getting

more work, nor did he suggest that Mr. Edmunds seek unemployment in early 2006. Instead,

Mr. Edmunds testified that Mr. Garrison “told me he’d pay me when he could. He told me

that he was going to pay me every penny he owed me, to trust him.” In addition, Mr.

Edmunds testified that he and Mr. Garrison had even discussed the tax consequences of Mr.

Edmunds receiving a considerable amount of back pay in a lump some, stating that sometime

in 2007, after reassuring Mr. Edmunds that he would be paid the full amount he was

allegedly owed, Mr. Garrison asked, “[D]o you want all of it at once or part of it? You have

got to think about the taxes situation.” However, Mr. Edmunds never received any back pay

for the amounts he was allegedly owed and, when payments again stopped in 2008, Mr.

Edmunds left his employment with Delta and sought unemployment benefits, which Delta

did not oppose.

Mr. Edmund’s wife, Amy Edmunds, also testified that Mr. Garrison reassured both

herself and her husband that Mr. Edmunds would be paid in full for his employment with

Delta in 2006, 2007, and 2008. According to Mrs. Edmunds, she and her husband went into

considerable debt as a result of Mr. Edmunds not being paid, despite her income as a teacher.

The couple first used approximately $7,000.00 or $8,000.00 they had earmarked to be put

into a 401K. Once that money was exhausted, the couple turned to a home equity loan.

According to Mrs. Edmunds, the couple drew approximately $33,000.00 from the home

equity line in 2006, at an interest rate of eight to nine percent, $25,000.00 in 2007, at an

interest rate of seven to eight percent, $4,000.00 in 2008, at an interest rate of four to seven

percent, and $14,000.00 in 2009, at an interest rate of 2.75 percent. According to Mr.

Edmunds, all of the money drawn from the home equity line was used to pay basic living

expenses. In addition, both their retirements were delayed due to Mr. Edmunds not receiving

his full pay from 2006 to 2008.

Through Mrs. Edmunds’ testimony several letters and emails were introduced in

which Mrs. Edmunds requested that Mr. Garrison and Delta pay the money that was allegedly

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owed to Mr. Edmunds. The letters, which date as early as May 24, 2007, expressed

frustration with Mr. Garrison’s continued failure to pay Mr. Edmunds, as well as Mr.

Garrison’s assurances that “something should be happening soon.” One letter, however,

stated that Mr. Edmunds would not look for another job because he believed that he would

be unable to secure employment due to his age1 and that Mr. Edmunds became angry and

refused to discuss Delta’s problems and outlook with Mrs. Edmunds. Included in the emails

were also responses to Mrs. Edmunds’ emails from Mr. Garrison. In one of the emails, dated

September 7, 2007, Mr. Garrison assured Mrs. Edmunds that work would pick up and that

“things should get back on a regular basis quickly and then begin catching up some of the

back pay.” In another response, dated August 21, 2008, Mr. Garrison assured Mrs. Edmunds

that he had taken no salary or profit from the company, instead all income to the company

had gone to pay operating expenses, payroll and taxes on the company’s two field employees.

Mr. Garrison also assured Mrs. Edmunds that Delta was “almost 100%” sure to get another

client in the coming weeks. However, due to the current lack of money, Mr. Garrison offered

“[one] alternative”—to “lay [Mr. Edmunds] off and he can draw unemployment until there

is income to pay him with or he finds another job.” Mr. Garrison stated that he had spoken

with Mr. Edmunds earlier in the week and offered to let him go back home and that he:

never insisted or even asked him to work without getting paid

and never will. I have the deepest possible gratitude for him

staying the course and do not go through [one] single day

without thinking about the debt and debt of gratitude I have for

him. . . .

* * *

I fully intend to make everything right whenever I can. If [Mr.

Edmunds] has to leave and find another job, I will do all I can

to help him in any way I can and will not discourage him in any

way. I never have. I have every intention of meeting my

obligation to [Mr. Edmunds] whenever I can regardless.

Thus Mrs. Edmunds testified that she and her husband were always led to believe that Mr.

Garrison would pay Mr. Edmunds back for his lost wages from 2006 to 2008.

Mr. Garrison denied that Mr. Edmunds was employed pursuant to a contract. Instead,

he stated that the document signed by himself and Mr. Edmunds was an employee application

and that Mr. Edmunds was merely an at-will employee. According to Mr. Garrison, in 2006,

1

Mr. Edmunds’ age is not specifically stated in the record. He and his wife have two adult children.

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he informed all the employees, including Mr. Edmunds, that Delta could not make payroll.

Mr. Garrison testified that, at that time, he encouraged Mr. Edmunds to seek new employment

or his unemployment benefits. Because of Mr. Garrison’s and Mr. Edmunds’ long-standing

friendship, however, Mr. Edmunds chose to stay on with the company. Mr. Garrison testified

that he never specifically stated that Mr. Edmunds’ employment was terminated, nor did he

ever tell Mr. Edmunds to stop coming into work. However, he did encourage Mr. Edmunds

to seek unemployment compensation and to “do what was best for him and his family.” Mr.

Garrison also testified that they never entered into an agreement wherein Mr. Edmunds would

work for free. Instead, Mr. Garrison testified that he made it clear to Mr. Edmunds that Mr.

Edmunds was to be paid only when Delta had projects, and, therefore, money, to pay him

with. Despite this “understanding,” Mr. Garrison testified that Mr. Edmunds continued to

report to work as usual until he resigned in the fall of 2008. According to Mr. Garrison, Mr.

Edmunds was paid for all biweekly periods in which Mr. Edmunds did work for Delta on

projects. On weeks he was not paid, he merely came into the office to answer the occasional

phone call, but, because there were no ongoing projects, work was scarce. According to Mr.

Garrison, because there was no contract of employment, Delta owed Mr. Edmunds no back

pay for the weeks he had worked and not been paid. However, Mr. Garrison admitted that,

in an email he wrote to Mrs. Edmunds, which is included in the record, he stated he could not

pay Mr. Edmunds, despite the fact that he had funds to pay salaries and payroll taxes on other

employees. Additionally, in the email, Mr. Garrison admitted that he was extremely busy with

work for the company, working every night until midnight for seventeen weeks, as well as ten

to eleven hours running a client’s manufacturing plant all day. However, when asked about

the “debt” portion of his statement in an email saying that he owed Mr. Edmunds a “debt and

a debt of gratitude,” Mr. Garrison stated that he was referring to “part money.” When asked

about his prior statement that he would catch up on “back pay,” Mr. Garrison responded that

he was not referring to “a total sum,” but was merely stating that he would provide Mr.

Edmunds with as much as he “possibly could.”

Mr. Garrison also denied that Mr. Edmunds did any work relating to any projects

other than those in Alabama from 2006 until 2008. According to Mr. Garrison, while Delta

attempted to gain clients out of state, their efforts were fruitless. For example, Mr. Garrison

stated that, sometime in 2007 or 2008, Delta attempted to “sell a package” to a client in

Alabama, but that the company chose not to buy the package. Mr. Garrison also admitted that

one Delta employee worked at a company in Alabama. According to Mr. Garrison, in order

to gain clients, Delta would either visit or “call a number of times,” but that they “[n]ever did

a penny of business” with most of the clients they solicited. In addition, Mr. Garrison stated

that Delta had full-time or contract employees who lived and worked outside of Georgia and

Alabama. Mr. Garrison admitted that, in addition to answering any phone calls to the Delta

office, Mr. Edmunds input the data regarding these out-of-state employees’ time sheets in

order to generate checks for the employees.

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Mr. Garrison further testified that, although Delta was still officially registered as an

L.L.C. with the Secretary of State, it was not operating because there was no more work.

However, Mr. Garrison continued to file required annual reports for the corporation until the

time of trial. In addition, Mr. Garrison testified that, from 2006 on, “Delta [] was essentially

[him],” and that it operated out of his home.

The trial court entered a Memorandum Opinion and Order on November 10, 2011. In

the order, the trial court ruled that Mr. Garrison was Delta’s alter ego and that both were liable

to Mr. Edmunds for breach of the employment contract, and unpaid minimum wages and

attorney fees under the Fair Labor Standards Act, 29 U.S.C. § 201 et. seq. The trial court

awarded Mr. Edmunds damages for breach of contract in the amount of $116,034.52 together

with prejudgment interest at a rate of 7% per annum, and $10,660.00 in unpaid minimum

wages, as a set off to the breach of contract damages, together with $10,000 in attorney fees

for work on the federal claim. Delta and Mr. Garrison appeal.

II. Issues Presented

1. Whether the trial court erred in finding a valid and enforceable contract for

employment after January 2006?

2. Whether the trial court erred in the decision to award pre-judgment interest at a rate of

seven percent (7%) interest?

3. Whether the trial court erred in the decision to consider Mr. Garrison the alter-ego of

Delta, and therefore to find him personally responsible for the judgment?

4. Whether the trial court erred in the decision to find that Mr. Edmunds was engaged in

commerce under the Fair Labor Standards Act as defined in 29 U.S.C. §203, thereby

allowing a judgment and attorney fees?

III. Standard of Review

This action was tried by the trial court without a jury. As such, we review the trial

court’s findings of fact de novo with a presumption of correctness, unless the evidence

preponderates otherwise. Tenn. R. App. P. 13(d). No presumption of correctness, however,

attaches to the trial court’s conclusions of law and our review is de novo. Blair v. Brownson,

197 S.W.3d 681, 684 (Tenn. 2006) (citing Bowden v. Ward, 27 S.W.3d 913, 916 (Tenn.

2000)).

For the evidence to preponderate against a trial court's finding of fact, it must support

another finding of fact with greater convincing effect. 4215 Harding Road Homeowners

Ass'n. v. Harris, 354 S.W.3d 296, 305 (Tenn. Ct. App. 2011); Walker v. Sidney Gilreath &

Assocs., 40 S.W.3d 66, 71 (Tenn. Ct. App. 2000). Where the trial court does not make

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findings of fact, there is no presumption of correctness and we “must conduct our own

independent review of the record to determine where the preponderance of the evidence lies.”

Brooks v. Brooks, 992 S.W.2d 403, 405 (Tenn. 1999).

IV. Analysis

A. Breach of Contract

Delta first argues that the trial court erred in finding that Mr. Edmunds was employed

by Delta pursuant to a contract for $65,000.00 a year and that Delta breached that contract.

The interpretation of a contract is a question of law. Guiliano v. CLEO, Inc., 995 S.W.2d 88,

95 (Tenn. 1999). Therefore, the trial court's interpretation of a contractual document is not

entitled to a presumption of correctness on appeal. Angus v. Western Heritage Ins. Co., 48

S.W.3d 728, 730 (Tenn. Ct. App. 2000). However, the determination of whether a breach has

occurred is a question of fact. Carter v. Krueger, 916 S.W.2d 932, 934-35 (Tenn. Ct.

App.1995) (“This is a matter of fact which is properly addressed to the trier of fact.”). With

regard to this issue, the trial court found:

6. The Court finds that there was a contract of employment

between Edmunds and Delta. Although the contract was

terminable at will, the Court finds that is was not terminated until

Edmunds left the employ of Delta in October 2008. . . .

7. The Court finds that Delta breached the employment contract

with Edmunds by failing to pay Edmunds the $65,000.00 in

annual salary owed to Edmunds under the terms of that

employment contract.

8. From January 2006 through December 2006, Edmunds only

received $3,800.00 as compensation despite the existence of the

Contract.

9. From January 2007 through December 2007, Edmunds only

received $21,250.00 as compensation despite the existence of the

Contract.

10. From January 2006 through December 2006, Edmunds only

received $43,081.48 as compensation despite the existence of the

Contract.2

11. Edmunds rarely missed a day of work, reporting for work

2

From our review of the record, it appears that the documentary and testamentary evidence in this

case shows that Mr. Edmunds was paid $42,500.00 in 2008, rather than the $43,081.48 as found by the trial

court. However, Mr. Edmunds does not take issue with the damages awarded to him pursuant to the contract.

Therefore, we decline to address this error.

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every day and working a full eight hour day.

12. Beginning in 2006, Garrison consistently promised Edmunds

that he would pay Edmunds the money owed to him. Garrison

and Edmunds’ wife, Amy Edmunds, communicated via email in

2007 and 2008. . . . Garrison repeatedly promised to pay the

monies owed to Edmunds. In reliance on these repeated promises

and assurances, Mr. Edmunds continued to report to work and

provide a direct benefit to Delta and Garrison. Edmunds trusted

and believed that Garrison, the President and CEO of Delta,

would make up the debt owed to him.

13. From August 2007 through July 2008, Edmunds received

timely, consistent, and full payments based upon his salary of

$65,000.00 per year.

* * *

15. From January 2004 through October 2008, Edmunds reported

to work as required, performed his duties in a reasonable manner,

and executed all tasked assignments to him by Garrison.

Edmunds was not disciplined or written up by anyone at Delta

during the course of his employment.

16. Edmunds was never discharged or terminated by Garrison or

Delta.

* * *

19. Despite numerous requests for payment of the compensation

owed to Edmunds pursuant to the Contract, Edmunds is still

owed $116,034.52 through his resignation on October 31, 2008.

We have thoroughly reviewed the record in this case and conclude that the evidence does not

preponderate against the trial court’s finding that a valid employment contract existed, that

the contract was not terminated until Mr. Edmunds’ resignation in October 2008, and that the

contract was breached by Delta when it failed to pay Mr. Edmunds as promised.

First, the evidence in the record fully support’s the trial court’s conclusion that Mr.

Edmunds’ employment was governed by an employment contract. In this case, both Mr.

Edmunds and Mr. Garrison, as the representative of Delta, signed the employment document

outlining the non-disclosure and non-compete requirements as well as the duties of Mr.

Edmunds as the employee. This document refers to itself as an “agreement.” Tennessee law

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defines a contract as “[a]n agreement between two or more parties creating obligations that

are enforceable or otherwise recognizable at law.” Green v. Jones, No.

E2011-02587-COA-R3CV, 2012 WL 2737803 (Tenn. Ct. App. July 10, 2012) (quoting

Black's Law Dictionary (9th ed. 2009)). By the very terms of the document, then, Mr.

Edmunds and Delta were entering into a contract of employment. Further, the contract

provides that Delta will pay Mr. Edmunds $65,000.00 annually as consideration for his

agreement to the terms of the non-disclosure and non-compete clauses. As consideration is

an essential element to the formation of a contract, we conclude that the “agreement” at issue

is speaking in terms of contract formation. Campbell v. Matlock, 749 S.W.2d 748, 751

(Tenn. Ct. App. 1987). In addition, the document states that the terms of the “agreement” can

only be modified by mutual assent of the parties. Again, the document speaks in terms of

contract law, as it is well-settled that a contract may only be modified by mutual assent.

Thompson v. Creswell Industrial Supply, Inc., 936 S.W.2d 955, 957 (Tenn. Ct. App. 1996).

Additionally, Delta now admits in its appellate brief that Mr. Edmunds’ employment was

governed by a contract. Accordingly, the evidence supports the trial court’s finding that Mr.

Edmunds’ employment was governed by a contract.

However, in the trial court, Delta argued that, because the contract was for an indefinite

term and provided that Mr. Edmunds could be terminated “at the sole discretion of Delta,” Mr.

Edmunds has no enforceable right to recover the compensation he was promised pursuant to

the contract. It is true that Tennessee follows the “at-will” employment doctrine. At-will

employment means that employment contracts of indefinite duration are terminable at the will

of the employer or employee for any or no cause. Guy v. Mut. of Omaha Ins. Co., 79 S.W.3d

528, 534-35 (Tenn. 2002). Thus, Mr. Edmunds had an expectation under the contract to be

paid $65,000.00 per year so long as he performed his duties, unless and until his employment

was terminated. Indeed, in his brief, Mr. Garrison now admits that the documents signed by

the parties in 2004 constitute an enforceable contract, but argues that the contract was

terminated in 2006 when Mr. Garrison allegedly informed Mr. Edmunds that there was no

money from which to compensate Mr. Edmunds. The trial court, however, specifically found

that Mr. Edmunds was never terminated from his employment. From our review of the record,

we again conclude that the evidence does not preponderate against this finding.

Mr. Garrison admitted at trial that, while he informed Mr. Edmunds that there was no

money to pay his salary beginning in 2006, he never specifically told Mr. Edmunds that his

employment was terminated. There are no allegations that any other Delta employee had the

authority to terminate Mr. Edmunds’ employment or that they did so. In addition, Mr.

Garrison admitted that he continued to allow Mr. Edmunds to come into work five days a

week and perform tasks on behalf of Delta, never once telling Mr. Edmunds that he should

not. Further, from our review of Mr. Garrison’s email responses to Mrs. Edmunds, Mr.

Garrison assured Mr. Edmunds and his wife that business was likely to pick up and that Mr.

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Edmunds would again be paid. In promising that Delta would soon catch up on “back pay,”

Mr. Garrison clearly stated his intention that Mr. Edmunds receive back pay for work for

which he was never paid. Accordingly, this evidence does not preponderate against a finding

that Mr. Edmunds was to be paid for the entirety of his work with Delta and not just on weeks

where there were projects to be performed. Thus, Mr. Garrison’s own testimony tends to

support the trial court’s finding that Mr. Edmunds was never terminated and that he was

promised full retroactive compensation for his work at Delta.

In addition, both Mr. Edmunds and his wife testified that Mr. Garrison, as the

representative for Delta, repeatedly assured them that Mr. Edmunds would receive full back

pay for his work and that Mr. Edmunds was still considered an employee of Delta until his

resignation in October 2008. Mr. Edmunds even stated that Mr. Garrison was concerned about

the tax consequences of receiving such a large amount of back pay in one lump sum. Mr.

Garrison, however, disputes that he ever promised to pay “a total sum” to Mr. Edmunds.

Instead, Mr. Garrison contends that while he did not specifically inform Mr. Edmunds that

his employment was terminated, termination was “obvious” based on the circumstances,

despite the fact that Mr. Garrison allowed Mr. Edmunds to come into work each day to

perform tasks that benefitted the company and that Delta continued to pay Mr. Edmunds,

albeit sporadically. Accordingly, we are faced with conflicting accounts of the events in this

case. Thus, the issues in this case turn in part on the trial court’s determination of the relative

credibility of the witnesses. When the resolution of the issues in a case depends upon the

truthfulness of witnesses, the trial judge who has the opportunity to observe the manner and

demeanor of the witnesses while testifying is in a far better position than this Court to decide

those issues. In re Arteria H., 326 S.W.3d 167, 176 (Tenn. Ct. App. 2010) (citing McCaleb

v. Saturn Corp., 910 S.W.2d 412, 415 (Tenn. 1995)). If the trial court’s factual determinations

are based on its assessment of witness credibility, this Court will not reevaluate that

assessment absent clear and convincing evidence to the contrary.” Franklin County Bd. Of

Educ. v. Crabtree, 337 S.W.3d 808, 811 (Tenn. Ct. App. 2010) (citing Jones v. Garrett, 92

S.W.3d 835, 838 (Tenn. 2002)). The trial court in this case did not make express credibility

findings. However, a trial court's finding on credibility may be implied from the manner in

which the trial court decided the case. Richards v. Liberty Mut. Ins. Co., 70 S.W.3d 729, 733

(Tenn. 2002). Clearly, in finding that the employment contract was not terminated by Delta

at any time prior to Mr. Edmunds’ October 2008 resignation, the trial court credited the

testimony of Mr. Edmunds over the testimony of Mr. Garrison. Nothing in the record leads

us to question Mr. Edmunds credibility or leads us to give greater weight to the testimony of

Mr. Garrison. Instead, the weight of the evidence in the record supports a finding that Mr.

Garrison did not terminate Mr. Edmunds, but continued to utilize his services for the benefit

of Delta, and repeatedly assured Mr. Edmunds that Delta would compensate him for the work

for which he had not been paid. Accordingly, we must conclude that the evidence does not

preponderate against the trial court’s finding that a valid, enforceable contract existed that was

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not terminated by Delta prior to October 2008. Because it is undisputed that Delta failed to

pay Mr. Edmunds pursuant to the contract, we affirm the trial court’s finding that Delta

breached the employment contract and is liable to Mr. Edmunds for the full amount of

compensation he was owed under the contract from 2006 until his resignation in 2008.

In its appellate brief and at oral argument on this appeal, Delta argues that if the

contract was not terminated in 2006, then the terms of the contract were modified in 2006

when Mr. Garrison informed Mr. Edmunds that there was no money to make payroll.

Specifically, Delta argues that, by remaining with the company after the downturn in 2006,

Mr. Edmunds agreed to work on a project-basis, only being paid for those weeks in which he

worked on specific projects for Delta. At oral argument, counsel for Mr. Edmunds objected

to this argument because it had not been asserted in the trial court. After reviewing the record

in this case, it appears that Delta instead relied on the argument that the documents signed by

Mr. Edmunds and Mr. Garrison in 2004 were not a contract or that Mr. Edmund’s

employment had been terminated, both of which have been discussed above. It is well-settled

that issues are considered waived on appeal by the failure to present them at trial. See ABN

AMRO Mortg. Group, Inc. v. Southern Sec. Federal Credit Union, No.

W2011-00693-COA-R3CV, 2011 WL 5590320, at *4 (Tenn. Ct. App. Nov. 17, 2011) (citing

Waters v. Farr, 291 S.W.3d 873, 918 (Tenn. 2009)). In addition, “a party may not litigate an

issue on one ground, abandon that ground post-trial, and assert a new basis or ground on

appeal.” State v. Leach, 148 S.W.3d 42, 55 (Tenn. 2003). Having never been presented with

this argument at the trial level, the trial court was unable to make a specific finding as to

whether a modification took place in this case. Even assuming, arguendo, that this issue is

properly raised on appeal, we conclude that the evidence preponderates in favor of a finding

that the contract at issue was not modified in the manner argued by Delta. Instead, the

evidence shows that Mr. Garrison repeatedly assured Mr. Edmunds that he owed him “a debt,”

that he would “catch[] up . . . the back pay,” and that Mr. Garrison had “every intention of

meeting my obligation to [Mr. Edmunds] whenever I can regardless.” (emphasis added). In

addition, Mr. Garrison admitted that Mr. Edmunds had never agreed to work for no

compensation, even though mutual assent to a modification was required by the terms of the

employment contract. As such, we conclude that there was no modification of the contract

with regard to Mr. Edmunds’ rate of compensation.

B. Pre-judgment Interest

Delta next argues that the trial court erred in awarding Mr. Edmunds prejudgment

interest on the contract damages at a rate of seven percent per year. Regarding pre-judgment

interest, this Court has stated:

Parties who have been wrongfully deprived of money

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have been damaged in two ways. First, they have been damaged

because they have not received the money to which they are

entitled. Second, they have been damaged because they have

been deprived of the use of that money from the time they should

have received it until the date of judgment. Awards of

pre-judgment interest are intended to address the second type of

damage. They are based on the recognition that a party is

damaged by being forced to forego the use of its money over

time. General Motors Corp. v. Devex Corp., 461 U.S. 648,

655–56, 103 S.Ct. 2058, 2062–63, 76 L.Ed.2d 211 (1983);

Mitchell v. Mitchell, 876 S.W.2d 830, 832 (Tenn.1994). Thus,

our courts have repeatedly recognized that prejudgment interest

is awarded, not to punish the wrong-doer, but to compensate the

wronged party for the loss of the use of the money it should have

received earlier. Myint v. Allstate Ins. Co., 970 S.W.2d at 927 .

...

Scholz v. S.B. International, Inc., 40 S.W .3d 78, 82 (Tenn. Ct. App. 2000) (string cite

omitted). Thus, “the law in Tennessee favors awarding prejudgment interest whenever doing

so will more fully compensate a successful plaintiff for the loss of use of money to which the

plaintiff was legally entitled.” Lockett v. Charles Blalock & Sons, Inc., No.

E2001-01000-COA-R3-CV, 2002 WL 111304, at *3 (Tenn. Ct. App. 2002) (citing Scholz,

40 S.W.3d at 82). However, Delta contends that an award of pre-judgment interest is

inappropriate under the facts of this case. Specifically, Delta argues that, because Mr.

Edmunds implicitly agreed to forego timely payment of the money by choosing to remain an

employee of Delta, he should not be entitled to prejudgment interest. In addition, Delta argues

that Mr. Edmunds cannot rely on the loans taken out by him and his wife, or Mr. Garrison’s

assurances via email that Mr. Edmunds would be compensated because Mr. Edmunds failed

to explain to Mrs. Edmunds the true circumstances of the declining business.

The trial court's award of damages and award of prejudgment interest is reviewed

under an abuse of discretion standard. BankcorpSouth Bank, Inc. v. Hatchel, 223 S.W.3d

223, 230 (Tenn. Ct. App. 2006); Franklin Capital Assocs., L.P. v. Almost Family, Inc., 194

S.W.3d 392, 405 (Tenn. Ct. App. 2005). A trial court abuses its discretion only when it applies

an incorrect legal standard or reaches a decision which is against logic or reasoning that

causes an injustice to the party complaining. Eldridge v. Eldridge, 42 S.W.3d 82, 85 (Tenn.

2001) (quoting State v. Shirley, 6 S.W.3d 243, 247 (Tenn. 1999)). If a discretionary decision

is within a range of acceptable alternatives, we will not substitute our judgment for that of the

trial court simply because we may have chosen a different alternative. White v.. Vanderbilt

Univ., 21 S.W.3d 215, 223 (Tenn. Ct. App. 1999).

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In this case, the trial court awarded pre-judgment interest to Mr. Edmunds based upon

a finding that:

The evidence showed that because Mr. Edmunds was not

receiving his agreed-upon salary for 2006, 2007, and 2008, he

was forced to take out a second mortgage on his home at a

variable interest rate. He incurred additional costs because he did

not have the benefit of the money he was to be paid at the time it

was due, costs that a mere award of back pay will not remedy.

The evidence in the record does not preponderate against these findings. Indeed, the evidence

was uncontroverted at trial that Mr. Edmunds and his wife suffered financially due to Delta’s

failure to pay Mr. Edmunds. In addition, the evidence shows that assurances were made that

the business would pick up and Mr. Edmunds would be paid, which certainly would have

induced Mr. Edmunds to stay with the company despite its financial struggles. Thus, we

conclude that it was not an abuse of discretion for the trial court to award pre-judgment

interest to Mr. Edmunds

Delta also argues that the trial court erred in awarding interest at a rate of seven percent

because the last draw on the home equity line was at a rate of 2.75 percent. However, the

evidence shows that the over seventy-five percent of the money drawn from the home equity

line was at a rate between seven to nine percent. The awarded rate of seven percent is on the

low end of this spectrum. Accordingly, we discern no abuse of discretion in the trial court’s

decision to award interest at a rate of seven percent.

C. Alter-Ego

Mr. Garrison next argues that the trial court erred in finding that Delta was his alter-

ego and that he should be personally responsible for the damages owed to Mr. Edmunds by

Delta. Accordingly, this Court must determine whether there was sufficient evidence to justify

piercing Delta’s corporate veil to impose personal liability on Mr. Garrison. In this case, the

trial court made the following findings with regard to this issue:

20. The Court finds that Delta and Garrison were alter-egos.

Garrison admitted that for quite some time he has been the sole

officer and manager of Delta. Garrison admitted that from 2006

forward Delta was essentially Garrison. When Delta ceased

paying Edmunds in regular installments, Garrison and his wife

owned 100% of Delta. Garrison was fully aware that Edmunds

was working without pay for large portions of 2006, 2007, and

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2008.

21. Garrison took personal responsibility for the monies owed to

Edmunds. Garrison continued to promise Edmunds and his wife

Amy that he would repay the debt owed to Edmunds. When

Garrison made those promises, he spoke of obligations to

Edmunds as personal obligations, not as obligations of Delta

alone, describing not only his debt but also his “debt of gratitude”

to Edmunds. Edmunds continued to report to work based upon

his personal relationship with Garrison and Garrison’s personal

assurances that Edmunds eventually would be paid for all his

work. Garrison was the only person who knew that Delta could

not afford to pay Edmunds; however, instead of terminating

Edmunds, Garrison continued to make promises that Edmunds

would be repaid and continued to allow Edmunds to report to

work on a daily basis.

Respectfully, and with due deference to the trial court’s findings on this issue, we conclude

that the evidence was insufficient to justify piercing the corporate veil and holding Mr.

Garrison personally responsible for the liabilities of Delta.

This Court explained the doctrine of piercing the corporate veil in VP Buildings, Inc.

v. Polygon Group, No. M2001-00613-COA-R3-CV, 2002 WL 15634, *4–5 (Tenn. Ct. App.

January 8, 2002):

Conditions under which the corporate entity will be

disregarded vary according to the circumstances present in the

case, and the matter is particularly within the province of the trial

court. Muroll Gesellschaft M.B.H. v. Tennessee Tape, Inc., 908

S.W.2d 211, 213 (Tenn. Ct. App. 1995) (citing Electric Power

Bd. of Chattanooga v. St. Joseph Valley Structural Steel Corp.,

691 S.W.2d 522 (Tenn. 1985)); Piper v. Andrews, No.

01A01-9612-CV-00570, 1997 WL 772127, at *3 (Tenn. Ct. App.

Dec. 17, 1997) (Perm. app. denied June 8, 1998). Thus, the

question of when an individual should be held liable for

corporate obligations is largely a factual one. “Each case

involving disregard of the corporate entity must rest upon its

special facts.” Muroll Gesellschaft, 908 S.W.2d at 213; Schlater

v. Haynie, 833 S.W.2d 919, 925 (Tenn. Ct. App. 1991).

* * *

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There is a presumption that a corporation is a distinct legal

entity, wholly separate and apart from its shareholders, officers,

directors, or affiliated corporations. In an appropriate case and in

furtherance of the ends of justice, the separate identity of a

corporation may be discarded and the individual or individuals

owning all its stock and assets will be treated as identical to the

corporation. Muroll Gesellschaft, 908 S.W.2d at 213; Schlater,

833 S.W.2d at 925; see also Fidelity Trust Co. v. Service

Laundry Co., 160 Tenn. 57, 61, 22 S.W.2d 6, 7-8 (1929); see

generally E.O Bailey & Co. v. Union Planters Title Guar. Co.,

33 Tenn.App. 439, 232 S.W.2d 309 (1950). Discarding the

fiction of the corporate entity, or piercing the corporate veil, is

appropriate when the corporation is liable for a debt but is

without funds to pay the debt, and the lack of funds is due to

some misconduct on the part of the officers and directors. Muroll

Gesellschaft, 908 S.W.2d at 213; S.E.A., Inc. v. Southside

Leasing Co., et al., No. E2000-00631-COA-R3-CV, 2000 WL

1449852, at *9 (Tenn. Ct. App. Sept. 29, 2000) (no Tenn. R.App.

P. 11 filed); Emergicare Consultants, Inc. v. Woolbright, No.

W1998-00659-COA-R3-CV, 2000 WL 1897350, at *2 (Tenn. Ct.

App. Dec. 29, 2000) (Perm. app. denied. May 14, 2001).

In those circumstances, courts may pierce the corporate

veil to find the “true owners of the entity” liable, Murroll

Gesellschaft, 908 S.W.2d at 213, or “to impose liability against

a controlling shareholder who has used the corporate entity to

avoid his legal obligations.” Manufacturers Consolidation Serv.,

Inc. v. Rodell, 42 S.W.3d 846, 866 (Tenn. Ct. App. 2000). Our

courts will disregard the corporation as a separate entity upon a

showing that the corporation is a sham or dummy or such action

is necessary to accomplish justice. Muroll Gesellschaft, 908

S.W.2d at 213; Tennessee Racquetball Investors, Ltd. v. Bell,

709 S.W.2d 617, 619 (Tenn. Ct. App. 1986); Oak Ridge Auto

Repair Serv. v. City Fin. Co., 57 Tenn.App. 707, 711, 425

S.W.2d 620, 622 (1967); Fidelity Trust Co., 160 Tenn. at 61, 22

S.W.2d at 7-8; Emergicare Consultants, Inc., 2000 WL

1897350, at *2; Piper, 1997 WL 772127, at *3.

VP Buildings, 2002 WL 15634, at *4–5 (footnote omitted); see also Boles v. National

Development Co., Inc., 175 S.W.3d 226, 244–45 (Tenn. Ct. App. 2005) (citing favorably the

analysis and discussion in VP Buildings). The doctrine of piercing the corporate veil applies

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equally to cases in which a party seeks to pierce the veil of a limited liability company, such

as Delta:

As a general rule, members, owners, employees or other agents

of a Tennessee limited liability company have no personal

liability for the debts or obligations of the company. See Tenn.

Code Ann. § 48-217-101(a)(1); Tenn. Code Ann. § 48-249-

114(a)(1)(B). Under an equitable remedy known as “piercing the

corporate veil,” however, “the separate legal entity of a

corporation may be disregarded upon a showing that it is a sham

or a dummy or where necessary to accomplish justice.” Schlater

v. Haynie, 833 S.W.2d 919, 925 (Tenn. Ct. App.1991). Despite

the inapplicability of the remedy's name, the “corporate veil” of

a Tennessee limited liability company may also be pierced,

utilizing the same standards. See Starnes Family Office, LLC v.

McCullar, 765 F.Supp.2d 1036, 1049 (W.D. Tenn. 2011).

In re Steffner, 479 B.R. 746, 755 (Bkrtcy. E.D. Tenn. 2012).

However, courts in Tennessee are cautioned that the doctrine of piercing the corporate

veil should be applied only in “ extreme circumstances to prevent the use of a corporate entity

to defraud or perform illegal acts.” Pamperin v. Streamline Mfg., Inc., 276 S.W.3d 428, 437

(Tenn. Ct. App. 2008) (perm. app. denied Oct. 6, 2008). As this Court explained:

“The principle of piercing the fiction of the corporate veil

is to be applied with great caution and not precipitately, since

there is a presumption of corporate regularity.” Schlater, 833

S.W.2d at 925; Emergicare Consultants, Inc., 2000 WL

1897350, at *2; Lindsey, Bradley & Maloy v. Media Marketing

Systems, Inc., No E200-00678-COA-R3-CV, 2000 WL 1875882,

at *4 (Tenn. Ct. App. Dec. 15, 2000) (no Tenn. R. App. P. 11

filed). The party wishing to negate the existence of such separate

entity has the burden of proving facts sufficient to justify piercing

the corporate veil. Schlater, 833 S.W.2d at 925.

VP Buildings, 2002 WL 15634, at *5. When piercing the corporate veil, a court may disregard

the corporate entity in order to impose liability against a related entity, such as a parent

corporation or a controlling shareholder, where the two entities are in fact identical or

indistinguishable and where necessary to accomplish justice. Manufacturers Consol. Serv.,

Inc. v. Rodell, 42 S.W.3d 846, 866 (Tenn. Ct. App.2000). In Continental Bankers Life Ins.

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Co. of the South v. The Bank of Alamo, 578 S.W.2d 625 (Tenn. 1979), the Tennessee

Supreme Court set forth three elements required to pierce the corporate veil as between a

parent corporation and its subsidiary:

1) The parent corporation, at the time of the transaction

complained of, exercises complete dominion over its subsidiary,

not only of finances, but of policy and business practice in

respect to the transaction under attack, so that the corporate

entity, as to that transaction, had no separate mind, will or

existence of its own.

2) Such control must have been used to commit fraud or wrong,

to perpetuate the violation of a statutory or other positive legal

duty, or a dishonest and unjust act in contravention of third

parties' rights.

3) The aforesaid control and breach of duty must proximately

cause the injury or unjust loss complained of.

Id. at 632. In this Court’s subsequent decision in Tennessee Racquetball Investors, Ltd. v.

Bell, 709 S.W.2d 617(Tenn. Ct. App. 1986), we recognized that these elements are also

required in an action to hold the individual owner of a corporation liable for the debts of the

corporation under the alter ego theory. Id. at 622; see, e.g., Island Brook Homeowners Ass'n,

Inc. v. Aughenbaugh, No. M2006-02317-COA-R3-CV, 2007 WL 2917781, at *6 (Tenn. Ct.

App. Oct. 5, 2007); Tennessee Racquetball Investors, Ltd. v. Bell, 709 S.W.2d 617, 622

(Tenn. Ct. App. 1986); but see Schlater v. Haynie, 833 S.W.2d 919, 925 (Tenn. Ct. App.

1991) (stating that Continental Bankers addressed parent/subsidiary relationships and was

therefore inapplicable to the case before it involving a corporation/shareholder relationship).

The most common factors used by Tennessee courts to determine whether to pierce the

corporate veil were originally set forth in Federal Deposit Ins. Corp. v. Allen, 584 F.Supp.

386 (E.D. Tenn. 1984), as follows:

Factors to be considered in determining whether to disregard the

corporate veil include not only whether the entity has been used

to work a fraud or injustice in contravention of public policy, but

also: (1) whether there was a failure to collect paid in capital; (2)

whether the corporation was grossly undercapitalized; (3) the

nonissuance of stock certificates; (4) the sole ownership of stock

by one individual; (5) the use of the same office or business

location; (6) the employment of the same employees or attorneys;

(7) the use of the corporation as an instrumentality or business

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conduit for an individual or another corporation; (8) the diversion

of corporate assets by or to a stockholder or other entity to the

detriment of creditors, or the manipulation of assets and liabilities

in another; (9) the use of the corporation as a subterfuge in illegal

transactions; (10) the formation and use of the corporation to

transfer to it the existing liability of another person or entity; and

(11) the failure to maintain arms length relationships among

related entities.

Id. at 397 (citing cases from various jurisdictions); see also Marshall v. Jackson, No. M2007-

01764-COA-R3-CV, 2008 WL 5156312, *6 (Tenn. Ct. App. Dec. 08, 2008) (citing the above

factors and noting that they are commonly referred to as the Allen factors); AmPharm, Inc.

v. Eastland Pharmacy Services, L.L.C., No. M2006-01334-COA-R3-CV, 2008 WL

4830803, *6 (Tenn. Ct. App. Nov 5, 2008) (citing the Allen factors); Altice v. NATS, Inc.,

No. M2007-00212-COA-R3-CV, 2008 WL 1744571, *2 (Tenn. Ct. App. Apr. 15, 2008)

(same); Dolle v. Fisher, No. E2003-02356-COA-R3-CV, 2005 WL 2051288, *4 (Tenn. Ct.

App. Aug. 26, 2005) (same); Boles v. National Development Co., Inc., 175 S.W.3d 226, 245

(Tenn. Ct. App. 2005); Oceanics Schools, Inc. v. Barbour, 112 S.W.3d 135, 140 (Tenn. Ct.

App. 2003) (same); Emergicare Consultants, Inc. v. Woolbright, No. W1998-00659-COA-

R3-CV, 2000 WL 1897350, *2 (Tenn. Ct. App. Dec. 29, 2000) (same). Generally, no one

factor is conclusive in determining whether to pierce the corporate veil; rather, courts will rely

upon a combination of factors in deciding the issue. Pamperin, 276 S.W.3d at 438 (citing

Oceanics Schools, 112 S.W.3d at 140). “Even though corporate formalities have been

observed, one may still challenge the corporate entity by showing that he has been the victim

of some basically unfair device by which the corporate form of business organization has been

used to achieve an inequitable result.” Pamperin, 276 S.W.3d at 438 (quoting Schlater v.

Haynie, 833 S.W.2d 919, 925 (Tenn. Ct. App.1991)).

Mr. Edmunds relies on two factors, which he contends are sufficient to justify piercing

the corporate veil. Mr. Edmunds first argues that the proof at trial showed that Mr. Garrison

exercised complete dominion and control over Delta during the years at issue in this case.

Indeed, Mr. Garrison admitted that Delta was “essentially” him from 2006 until the time of

trial. See Stark v Coker, 20 Cal 2d 839, 129 P2d 390 (Cal. 1942) (considering, in a veil

piercing case, evidence that the married couple who controlled the corporation stated that they

were the corporation). We agree that the evidence in this case shows that Delta had “no

separate mind, will or existence” apart from Mr. Garrison during the years at issue. Pamperin,

276 S.W.3d at 438 (quoting Continental Bankers, 578 S.W.2d at 632). However, the fact that

a shareholder exercises complete dominion and control over a corporation alone is insufficient

to justify piercing the corporate veil; the party seeking to pierce the corporate veil must also

prove that “[s]uch control must have been used to commit fraud or wrong, to perpetuate the

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violation of a statutory or other positive legal duty, or a dishonest and unjust act in

contravention of third parties’ rights.” Pamperin, 276 S.W.3d at 438 (quoting Continental

Bankers, 578 S.W.2d at 632); see also National Precast Crypt Co. v. Dy-Core of

Pennsylvania, Inc., 785 F. Supp. 1186 (W.D. Pa. 1992) (holding that “the fact that one

shareholder controlled a closely held corporation was not enough to support piercing the

corporate veil”). To meet this prong of the analysis, Mr. Edmunds points out that Mr. Garrison

made assurances to Mr. Edmunds and his wife that Mr. Edmunds would be paid his full

compensation, despite his knowledge that Delta did not have the funds to pay Mr. Edmunds.

Mr. Edmunds argues that these statements constitute personal assurances that impose liability

on Mr. Garrison personally.

“A corporate officer . . . who personally guarantees an obligation may be personally

liable for the performance of that particular obligation.” 18 Am. Jur. 2d Corporations § 57.

Indeed, some courts have pierced the corporate veil when the shareholder exercising control

over the corporation made personal assurances that a debt would be paid. For example in

DeWitt Truck Brokers, Inc. v. W. Ray Flemming Fruit Co., 540 F.2d 681, 689 (4th Cir.

1976), the Fourth Circuit Court of Appeals, applying the substantive law of South Carolina,

held that veil piercing was appropriate when the president of the defendant corporation stated

that “he (i. e., [the president of the defendant corporation]) would take care of (the charges)

personally, if the corporation failed to do so.” Id. at 689. The president of the defendant

corporation did not deny that he made this statement. The plaintiff company, who had entered

into a service contract with the defendant corporation, contended that it continued to work for

the defendant corporation in reliance on this assurance. The Court of Appeals concluded that

this assurance was a factor strongly in favor of piercing the corporate veil:

This assurance was given for the obvious purpose of promoting

the individual advantage of [the president of the defendant

corporation]. This follows because the only person who could

profit from the continued operation of the corporation was [the

president]. When one, who is the sole beneficiary of a

corporation's operations and who dominates it, as did [the

president] in this case, induces a creditor to extend credit to the

corporation on such an assurance as given here, that fact has been

considered by many authorities sufficient basis for piercing the

corporate veil. Weisser v. Mursam Shoe Corporation (2d Cir.

1942), 127 F.2d 344, 145 A.L.R. 467; Quaid v. Ratkowsky

(1918), 183 A.D. 428, 170 N.Y.S. 812, aff'd, 224 N.Y. 624, 121

N.E. 887.

Id. Other cases have come to similar conclusions. See Weisser v Mursam Shoe Corp., 127

-19-

F2d 344 (2d Cir. 1942) (concluding that issue of fact existed as to whether piercing the

corporate veil was appropriate when one of two shareholders of a company paid the first

payment on the disputed lease with a personal check); Stark v Coker, 20 Cal.2d 839, 129 P.2d

390 (Cal. 1942) (piecing the corporate veil when the married couple who controlled the

corporation stated that they were the corporation and made personal assurances as to their

obligation under the notes at issue); Claremont Press Publishing Co. v Barksdale, 187

Cal.App. 2d 813, 10 Cal Rptr 214 (Cal. Ct. App. 1960) (holding that veil piercing was

appropriate when there was evidence, disputed by the defendant, that he agreed to be

responsible for the debts of the insolvent corporation); Saxton v. Luke, 296 S.E.2d 751, 752

(Ga. Ct. App. 1982) (holding shareholder liable on the contract at issue when, among other

factors, he “gave his personal guarantee that the project would be completed, even if he had

to pay for it out of his own pocket”). However, some courts have concluded that personal

assurances on the part of a controlling shareholder do not justify piercing the corporate veil

in order to hold the shareholder personally liable for the debts of the corporation. See

Anderson v. Dailey, 25 Colo.App. 175, 136 P. 461 (Col. Ct. App. 1913) (holding that

assurances by an officer and shareholder of a corporation in charge of its operations to its

employees that it would be able to pay them did not create any personal liability against him);

Intelnet Intern. Corp. v. ITT Corp., No. A-6974-03T1, 2006 WL 2192030 (N.J. Super. Aug.

4, 2006) (concluding that veil piercing was not justified despite assurances by vice president

of company that company would honor the contracts of its subsidiary).

Other courts have held that assurances will not be deemed sufficient to justify piercing

the corporate veil when there is no evidence that the assurances were indeed personal

assurances, rather than assurances as an agent of the corporation. For example in Hester

Enterprises, Inc. v. Narvais, 402 S.E.2d 333, 335 (Ga. Ct. App. 1991), the Georgia Court of

Appeals concluded that piercing the corporate veil was inappropriate in a case in which it was

merely “speculation” that the shareholder’s assurance were personal, rather than merely on

behalf of the corporation. The Court explained:

There is evidence that, at the closing, [the shareholder]

guaranteed performance of a new agreement whereby a central

air conditioning system would be installed in appellees' home.

However, standing alone, such an assurance in no way implies

that [the shareholder] was not merely guaranteeing that the

Corporation, of which he was an officer, would perform this new

agreement. “[T]here is no evidence short of speculation that [the

shareholder] was acting in an individual capacity whereas in

apposition, the records show [appellees were] aware by [all

relevant] written documents that [the shareholder] was acting

only in a representative capacity. []” Earnest v. Merck, [] 358

-20-

S.E.2d 661[, 273 (Ga. Ct. App. 1987)].

Hester, 402 S.E.2d at 335; see also Western Broadcasting Co. of Columbus v. Barrington,

306 S.E.2d 320, 322 (Ga. Ct. App. 1983) (holding that piercing the corporate veil was

inappropriate when the plaintiff failed to show that the statements made were assurances of

personal liability); Menchio v. Rymer, 348 S.E.2d 76 (Ga. Ct. App. 1986) (reversing

judgment allowing plaintiffs to pierce corporate veil when co-plaintiff admitted that she had

dealt with corporation rather than with its president personally).

We have thoroughly reviewed the record in this case and conclude that the evidence

preponderates against the finding that the assurances at issue were personal assurances on the

part of Mr. Garrison rather than assurances on the part of the corporation. Indeed, Mr.

Garrison never specifically states that the obligation to pay back pay is his personally. In his

September 7, 2007 email, Mr. Garrison explains that he will pay Mr. Edmunds when one of

the client’s pays its’ bill to Delta. In his August 15, 2011 email, Mr. Garrison again conditions

payment to Mr. Edmunds on the money flowing to the corporation, stating that “when

payments come in, I will pay whatever I can[,] but I can do little to affect some clients[’]

payment cycles.” Based on the evidence in the record, we cannot conclude that Mr. Edmunds

has met his burden to prove that the assurances in this case represent an action on the part of

Mr. Garrison to take personal responsibility for the debt. Instead, the record shows that Mr.

Garrison qualified his assurances that Mr. Edmunds would receive compensation when Delta

had the money to pay it. As previously discussed, Mr. Edmunds bears the burden to prove the

circumstances which justify piercing the corporate veil in this case. See Schlater v. Haynie,

833 S.W.2d 919, 925 (Tenn. Ct. App.1991). From our review of the record, Mr. Edmunds

simply has not met his burden to show that the assurances at issue were personal to Mr.

Garrison, rather than simply assurances on behalf of the corporate entity.

Other than his argument about personal assurances and Mr. Garrison’s concession that

he had complete control over the corporation, Mr. Edmunds offers no other facts which tend

to show that “[s]uch control must have been used to commit fraud or wrong, to perpetuate the

violation of a statutory or other positive legal duty, or a dishonest and unjust act in

contravention of third parties’ rights.” Pamperin, 276 S.W.3d at 438 (quoting Continental

Bankers, 578 S.W.2d at 632). Indeed, after thoroughly reviewing the record in this case we

conclude that the Allen factors do not weigh in favor of piercing the corporate veil in this

case. Federal Deposit Ins. Corp. v. Allen, 584 F.Supp. 386, 397 (E.D. Tenn. 1984).

Specifically, there is no evidence in the record that (1) there was a failure to collect paid in

capital; (2) the diversion of corporate assets by or to a stockholder or other entity to the

detriment of creditors, or the manipulation of assets and liabilities in another; (3) the use of

the corporation as a subterfuge in illegal transactions; of (4) the formation and use of the

corporation to transfer to it the existing liability of another person or entity. Although it is true

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that Delta is likely unable to pay its debt to Mr. Edmunds, there is simply no evidence in the

record as to its initial capitalization. Moreover, “[a] corporate entity may not be disregarded

simply because it stands as a bar to a litigant's recovery of property.” 18 Am. Jur. 2d

Corporations § 47. In addition, while it is clear that the corporation was operated out of Mr.

Garrison’s home and Mr. Garrison held exclusive control over the corporation, as previously

discussed, those facts alone are insufficient to justify piercing the corporate veil.

Accordingly, the circumstances in this case fail to rise to the level of other Tennessee

cases in which this Court has concluded that piercing the corporate veil was appropriate.

Many cases have found that piercing the corporate veil was warranted when the assets of the

corporation were transferred to the shareholder for his or her own personal benefit, which

transfer defeated the claims of creditors. For example, in Pamperin v. Streamline Mfg., Inc.,

276 S.W.3d 428 (Tenn. Ct. App. 2008) (perm. app. denied Oct. 6, 2008), this Court found

evidence sufficient to pierce the corporate veil as to one shareholder when assets of the

corporation were improperly distributed to the shareholder “for his own personal benefit, to

the detriment of [the corporation] and its creditors.” Id. at 439–40. In another case, Oceanics

Schools, Inc. v. Barbour, 112 S.W.3d 135, 140 (Tenn. Ct. App. 2003), the Court concluded

that piercing the corporate veil was likewise appropriate when the shareholder sold the

principal asset of the corporation and transferred the proceeds from the sale to his personal

account, which rendered the corporation without assets to pay debts. Id. at 141–42. In this

case, however, there is no evidence that Mr. Garrison improperly distributed corporate assets

to himself. Indeed, Mr. Garrison’s uncontroverted testimony at trial was that he was receiving

no salary and no profits from Delta during its financial struggles.

In other cases, piercing the corporate veil was justified by the shareholder’s failure to

observe corporate formalities. In VP Buildings, Inc. v. Polygon Group, No. M2001-00613-

COA-R3-CV, 2002 WL 15634 (Tenn. Ct. App. January 8, 2002), this Court pierced the

corporate veil when the sole shareholder operated business in Tennessee despite the fact that

the corporation failed to obtain the required certificate of authority. Additionally, the sole

shareholder failed to file required annual reports, which resulted in administrative dissolution

of the corporation. In fact, the sole shareholder did not attempt to have the corporation

reinstated until she was personally sued in the case. Id. at *6. In addition, the sole shareholder

paid herself and her husband large sums of money even while the corporation was

experiencing financial difficulties. Id.; see also Dolle v. Fisher, No. E2003-02356-COA-R3-

CV, 2005 WL 2051288, *4 (Tenn. Ct. App. Aug. 26, 2005) (piercing the corporate veil when

the corporation “simply functioned as [the sole shareholder’s] private bank account which he

utilized as he wished”). Finally, the evidence showed that once the corporation was sued, the

sole shareholder encumbered its only asset, effectively preventing the plaintiffs from

satisfying their judgment. VP Buildings, 2002 WL 15634 at *7. In this case, however, there

was no evidence that Mr. Garrison failed to observe corporate formalities. In fact, Mr.

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Garrison testified that he continued to file annual reports for the corporation even after it was

effectively dissolved because there was one project remaining to be completed. In addition,

as discussed above, the undisputed evidence at trial was that Mr. Garrison received little to

no income from the corporation during the period at issue. Finally, nothing in the record

suggests any action on the part of Mr. Garrison to intentionally defeat Mr. Edmunds’ claim;

instead, from our review of the record, it appears that Mr. Garrison disclosed Delta’s financial

struggles and its lack of capital to Mr. Edmunds and his wife well before the litigation in this

case commenced.

Instead, the facts in this case most closely resemble the facts in Money & Tax Help,

Inc. v. Moody, 180 S.W.3d 561 (Tenn. Ct. App. 2005), wherein the Court of Appeals reversed

the decision of the trial court piercing the corporate veil and finding the owner personally

liable. In declining to pierce the corporate veil, the Moody Court noted that “there was very

little evidence presented to the trial court regarding [the corporation] or the way [the owner]

operated it.” Id. at 567. Indeed, the Court concluded that the only evidence presented

regarding the operation of the corporation was the owner’s admission that he was the sole

shareholder and officer of the corporation. The Court further noted that there was “no

allegation of fraud or misuse of the corporate form, nor [wa]s there any evidence regarding

the record keeping practices of [the corporation].” In addition, the agreements under which

the plaintiffs brought suit were signed by the owner in his capacity as president of the

corporation, and all documents evinced that the corporation, rather than the owner, was the

contracting party. Likewise in this case, there was little evidence of the operation of Delta

other than Mr. Garrison’s admission that he was the sole shareholder and officer and that

Delta was “essentially [him].” In addition, there are no specific allegations that Mr. Garrison

perpetrated a fraud, misused the corporate form, or that he kept improper records. Finally, Mr.

Garrison likewise signed the employment contract in this case in his capacity as President and

CEO of Delta and the contract clearly states that in consideration for Mr. Edmunds’ work,

“the Company [i.e. Delta] agrees to pay the Employee [i.e. Mr. Edmunds] a salary outlined

in the Employee Offer Letter.” Although we are sympathetic with Mr. Edmunds’ situation,

we recognize that piercing the corporate veil is an “extreme” remedy. Pamperin, 276 S.W.3d

at 438. Without more evidence tending to show that Mr. Garrison used the corporate entity

to “commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal

duty, or a dishonest and unjust act in contravention of third parties’ rights,” we must, like the

Court in Moody, decline to apply the doctrine in this case. Pamperin, 276 S.W.3d at 438

(quoting Continental Bankers, 578 S.W.2d at 632).

D. Fair Labor Standards Act

Finally, Delta and Mr. Garrison argue that the trial court erred in finding them liable

under the Fair Labor Standards Act, 29 U.S.C. § 201 et. seq.(“the FLSA”). The FLSA

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provides that workers engaged in “commerce” as defined under the statute, are required to be

paid a minimum wage:

Employees engaged in commerce; home workers in Puerto Rico

and Virgin Islands; employees in American Samoa; seamen on

American vessels; agricultural employees

Every employer shall pay to each of his employees who in any

workweek is engaged in commerce or in the production of goods

for commerce, or is employed in an enterprise engaged in

commerce or in the production of goods for commerce, wages at

the following rates:

(1) except as otherwise provided in this section, not less than--

(A) $5.85 an hour, beginning on the 60th day after May 25, 2007;

(B) $6.55 an hour, beginning 12 months after that 60th day; and

(C) $7.25 an hour, beginning 24 months after that 60th day; . . .

29 U.S.C. § 206(a). The FLSA further provides a cause of action for an employee for unpaid

minimum wages:

Any employer who violates the provisions of section 206 or

section 207 of this title shall be liable to the employee or

employees affected in the amount of their unpaid minimum

wages, or their unpaid overtime compensation, as the case may

be, and in an additional equal amount as liquidated damages. . .

. An action to recover the liability prescribed [above] may be

maintained against any employer (including a public agency) in

any Federal or State court of competent jurisdiction by any one

or more employees for and in behalf of himself or themselves and

other employees similarly situated. . . . The court in such action

shall, in addition to any judgment awarded to the plaintiff or

plaintiffs, allow a reasonable attorney's fee to be paid by the

defendant, and costs of the action.

29 U.S.C. § 216(b). Mr. Edmunds was undisputedly employed with Delta pursuant to a

contract in which he was to be paid a salary, rather than compensated hourly. However, that

fact alone does not prevent him from bringing a claim pursuant to the FLSA. For example,

in the highly analogous case of Orton v. Johnny's Lunch Franchise, L.L.C., 668 F.3d 843

(6th Cir. 2012), the plaintiff, who was a salaried employee, brought a claim pursuant to the

FLSA after the defendant employer reduced his pay due to the company’s decreased cash

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flow. The district court dismissed the case. The Sixth Circuit Court of Appeals reversed the

decision of the district court, holding that the plaintiff had made out a proper claim under the

FLSA, despite being a salaried employee. According to the Court:

The new (2004) regulations . . . establish that employment

agreements are no longer the relevant starting point for whether

an employee is paid on a salary basis. Baden–Winterwood [ v.

Life Time Fitness, Inc.], 566 F.3d [618,] 627 [(6th Cir. 2009)].

The question is therefore not what [the [plaintiff] was owed

under his employment agreement; rather, the question is what

compensation [the plaintiff] actually received.

Orton, 668 F.3d at 848. The Sixth Circuit went on to conclude that despite the plaintiff’s

salary agreement with the employer, he was entitled to pursue an action for unpaid minimum

wages pursuant to the FLSA, so long as he was not exempt from the FLSA. Thus, the salary

of an employee is only relevant when there is an allegation that the employee at issue is

exempt from the provisions of the FLSA.

An employer may raise a plaintiff's status as an exempt employee as an affirmative

defense to claims brought under the FLSA. Thomas v. Speedway SuperAmerica, L.L.C.,

506 F.3d 496, 501 (6th Cir. 2007). Exemptions, however, “‘are to be narrowly construed

against the employers seeking to assert them.’” Id. (quoting Arnold v. Ben Kanowsky, Inc.,

361 U.S. 388, 392, 80 S.Ct. 453, 4 L.Ed.2d 393 (1960)). The employer bears the burden of

establishing the affirmative defense by a preponderance of the evidence, and the employer

satisfies this burden only by providing “clear and affirmative evidence that the employee

meets every requirement of an exemption.” Thomas, 506 F.3d at 501 (internal quotation

marks omitted). Because the district court in Orton failed to place the burden to establish the

plaintiff’s exemption on the employer, the Court of Appeals reversed the judgment of

dismissal. Orton, 668 F.3d at 848–49. The Court further held that the plaintiff’s allegation

that the reduction in his salary was due to the company’s cash flow problems did not prevent

application of the FLSA, stating that “[t]he regulation makes no exception for deductions in

pay just because they were motivated by cash flow shortages,” and advising that the employer

was free to negotiate a mutually agreeable reduction in salary with the employee. Id. at 849.

In this case, Delta and Mr. Garrison argued in the trial court that Mr. Edmunds was

an exempt employee pursuant to 29 U.S.C. § 213(a)(1) (regarding “executive, administrative,

or professional” employees), and (2) (regarding “computer systems analyst[s], computer

programmer[s], software engineer[s], or other similarly skilled worker[s]”). However, the

trial court specifically found that these exemptions did not apply to Mr. Edmunds. Neither

Delta nor Mr. Garrison raised any argument or cited any authority on this issue in their

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appellate brief or at oral argument. Tennessee Rule of Appellate Procedure 13(b) provides that

appellate review will generally only extend to those issues presented for review. Although an issue

may have been presented at trial, “a party's failure to brief it ordinarily constitutes waiver or

abandonment of the issue.” Mosby v. Colson, No. W2006-00490-COA-R3-CV, 2006 WL

2354763, at *10 (Tenn. Ct. App. August 14, 2006) (other citations omitted); see also

Newcomb v. Kohler Co., 222 S.W.3d 368, 401 (Tenn. Ct. App. 2006) (failure “to cite to any

authority or to construct an argument regarding [a] position on appeal” constitutes a waiver

of the issue); Bean v. Bean, 40 S.W.3d 52, 55–56 (Tenn. Ct. App. 2000) (“Courts have

routinely held that the failure to make appropriate references to the record and to cite relevant

authority in the argument section of the brief as required by Rule 27(a)(7) constitutes a

waiver of the issue.”). Thus, the issue of whether Mr. Edmunds was exempt from the

provisions of the FLSA is waived and this Court can proceed to consider the merits of Mr.

Edmunds’ claim.

As discussed above, the trial court found that Mr. Edmunds was an employee of Delta,

engaged in commerce, and awarded him damages pursuant to the FLSA. On appeal, however,

Delta and Mr. Garrison argue that Mr. Edmunds was not an “employee” for purposes of the

Act on weeks when he was not paid. The FLSA provides that an “the term ‘employee’ means

any individual employed by an employer.” 29 U.S.C. § 203(e)(1). Delta argues that Mr.

Edmunds was not “employed by Delta” because he was terminated in 2006 and that his efforts

on behalf of Delta were merely “an ongoing application for a job.” However, the trial court

specifically found that Mr. Edmunds’ employment with Delta was never terminated and we

have found that the evidence does not preponderate against that finding. Thus, Mr. Edmunds

was an “employee” for purposes of the FLSA until his resignation in October 2008.

Next, Delta argues that Mr. Edmunds was paid for all weeks in which he engaged in

activities covered by the FLSA. As previously discussed, the FLSA only applies to those

employees that engage in commerce, or some activity related to commerce. See 29 U.S.C. §

206(a). The FLSA defines commerce as “trade, commerce, transportation, transmission, or

communication among the several States or between any State and any place outside thereof.”

29 U.S.C.A. § 203(b). The trial court specifically found that Delta and Mr. Edmunds were

engaged in commerce during all workweeks in which Mr. Edmunds was not paid, stating:

27. Delta worked all across the United States. The evidence

showed that Delta had projects in California, Kentucky,

Alabama, and Arkansas. Delta made sales calls in Indiana and

Michigan. Delta had employees that lived outside of the state of

Tennessee. Delta received and sent mail to individuals and

corporations that were based outside of Tennessee. Delta

received and initiated telephone calls to individuals and entities

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located outside of the state of Tennessee. Delta was engaged in

interstate commerce.

28.Edmunds was also engaged in interstate commerce in his

work for Delta and Garrison. Edmunds communicated by

telephone and electronic mail with Delta employees,

subcontractors, and clients that were based outside of the state of

Tennessee. Edmunds inputted data into Delta programs that

originated from Delta employees and subcontractors that were

located outside of the state of Tennessee. Edmunds opened mail

that originated outside of the state of Tennessee and sent mail

that was going outside of the state of Tennessee.

We conclude that the evidence does not preponderate against the trial court’s findings

on this issue. Mr. Edmunds testified that, throughout his time with Delta, he performed several

functions, including answering the phones and inputting the data regarding out of state

employees. Even Mr. Garrison admitted that Delta had contact, either personally or over the

phone, with various out of state clients throughout the time period at issue, but contends that

Delta did not do a “a penny of business” with those clients. Respectfully, a portion of Delta’s

business was spent soliciting clients, without which Delta would have had no business.

Accordingly, we fail to see a distinction between communications involving current clients

and communications involving potential clients. Both types of communications were made

on behalf of Delta in furtherance of its business purposes. The definition of “commerce”

under the FLSA makes no requirement that the communications result in some type of

financial benefit to one party. See 29 U.S.C.A. § 203(b).

Delta also makes much of the fact that Mr. Edmunds could not identify with any

particularity his activities on any given week. The trial in this case took place in 2011, nearly

three years since Mr. Edmunds resigned from his position with Delta. Tennessee law

recognizes that witnesses’ memories may “be dimmed by the passage of time.” Waddle v.

Elrod, 367 S.W.3d 217, 223 (Tenn. 2012). Despite the gap between the events at issue and

the trial in this case, from our review of the evidence, Mr. Edmunds clearly testified that he

was engaging in commerce every week that he worked for Delta. While Mr. Garrison

attempted to rebut that contention with his testimony, Mr. Garrison admitted that Delta had

dealings with out of state employees and companies throughout the period of time at issue.

Indeed, in his September 7, 2007 email, Mr. Garrison refers to employees working at Tiffen

Motorhomes, located in Alabama. In another email, Mr. Garrison admits that Troy Locklin,

who lived in Alabama, was still employed with Delta as late as August 2008. It is undisputed

that throughout his tenure with Delta, Mr. Edmunds would input the data regarding the

timesheets he received from of all Delta employees, including those that lived or worked out

of state. Accordingly, the evidence does not preponderate against the trial court’s finding that

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Mr. Edmunds was an employee of Delta and Mr. Garrison,3 and engaged in commerce, for all

the weeks he was not paid in 2006, 2007, and 2008.4

V. Conclusion

The judgment of the Circuit Court of Robertson County is affirmed in part, reversed

in part, and remanded for all further proceedings as may be necessary and are consistent with

this opinion. Costs of this appeal are taxed to Appellant Delta Partners, L.L.C., and its surety.

_________________________________

J. STEVEN STAFFORD, JUDGE

3

The trial court found Mr. Garrison jointly and severally liable for damages pursuant to the FLSA

because he was the “employer” of Mr. Edmunds. Indeed, “[t]he overwhelming weight of authority is that a

corporate officer with operational control of a corporation's covered enterprise is an employer along with the

corporation, jointly and severally liable under the FLSA for unpaid wages.” Donovan v. Agnew, 712 F.2d

1509, 1511 (1st Cir. 1983). Mr. Garrison does not appeal this ruling.

4

The statute of limitation on a claim pursuant to the FLSA is two years from when the cause of

action accrued. 29 U.S.C. § 255 (a). However, the statute contains an exception “that a cause of action arising

out of a willful violation may be commenced within three years after the cause of action accrued.” Id.; see

also McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988) (requiring that the plaintiff show “that

the employer either knew or showed reckless disregard for the matter of whether its conduct was prohibited

by the statute” to prove willfulness and trigger the three-year statute of limitation). There is no dispute that

Mr. Edmunds’ claim pursuant to the FLSA was timely added to this case by the filing of an amendment to

the original complaint. See Tenn. R. Civ. P. 15. The trial court in this case, however, made conflicting

findings as to whether Delta and Mr. Garrison’s violation in this case was willful, allowing Mr. Edmunds

to recover lost minimum wages for the third year, from January 22, 2006 to January 22, 2007. First, the trial

court found that Delta’s failure to pay was not willful, then later concluded that the failure was willful.

Ultimately, though, the trial court awarded damages only for two years of unpaid minimum wages as a set

off to the contract damages. Neither party takes issue with this ruling by the trial court; therefore, we will

not disturb it on appeal.

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