Wischermann Partners, Inc. v. Nashville Hospitality Capital LLC

IN THE UNITED STATES DISTRICT COURT FOR THE

MIDDLE DISTRICT OF TENNESSEE

NASHVILLE DIVISION

WISCHERMANN PARTNERS, INC., et )

al., )

)

Plaintiffs/Counter-Defendants, )

) NO. 3:17-cv-00849

v. )

) JUDGE CAMPBELL

NASHVILLE HOSPITALITY ) MAGISTRATE JUDGE HOLMES

CAPITAL LLC, )

)

Defendant/Counter-Plaintiff, )

)

v. )

)

PAUL WISCHERMANN, )

)

Defendant. )

AMENDED FINDINGS OF FACT AND CONCLUSIONS OF LAW

This matter is before the Court on remand from the Sixth Circuit Court of Appeals for

reconsideration of the parties’ cross-claims for breach of contract and Defendant/Counter-Plaintiff

Nashville Hospitality Capital’s counterclaim for breach of fiduciary duty. For the reasons stated

herein, upon reconsideration of these claims, the Court finds NHC is entitled to judgment in its

favor on the breach of contract claim, and Defendants Wischermann Partners, Inc. (“WPI”) and

Paul Wischermann (collectively, the “Wischermann defendants”) are entitled to judgment on

NHC’s counterclaim for breach of fiduciary duty.

I. PROCEDURAL HISTORY

This case involves a dispute between NHC, a hotel owner and developer, the company

NHC hired to help develop and manage one of its hotels, WPI, and WPI’s owner Paul

Wischermann. NHC and WPI entered into a Consulting Agreement and, later, a Management

Agreement. When the relationship soured, NHC terminated the Management Agreement. WPI

sued for breach of contract claiming that NHC terminated the Management Agreement without

cause and failed to pay the contractual termination fee. NHC brought counterclaims against WPI

for breach of the Consulting Agreement and the Management Agreement, breach of fiduciary duty,

gross negligence, fraudulent concealment, and fraudulent inducement. NHC also brought claims

against Paul Wischermann for breach of fiduciary duty, inducement of breach of fiduciary duty,

fraudulent concealment, and fraudulent misrepresentation.

Following a bench trial, the Court found in favor of WPI and against NHC on the claim for

breach of the Management Agreement and ordered NHC to pay WPI the $1,658,044 termination

fee. The Court found in favor of the Wischermann defendants on NHC’s tort counterclaims: gross

negligence, breach of fiduciary duty, and fraud. (See Findings of Fact and Conclusions of Law,

Doc. No. 208).

On appeal, NHC challenged the Court’s conclusions on NHC’s counterclaims for breach

of contract and breach of fiduciary duty. The Sixth Circuit vacated the judgment and remanded for

reconsideration of the claims for breach of contract and breach of fiduciary duty. (Doc. No. 223).

Following remand, the parties filed additional proposed findings of fact and conclusions of law

addressing those claims and the specific issues identified by the Sixth Circuit. (See Doc. No. 228).

Now before the Court are the parties’ additional proposed findings of fact and conclusions of law

(Doc. Nos. 231, 232), responses (Doc. Nos. 233, 234), and replies (Doc. Nos. 235, 236).

II. FINDINGS OF FACT1

The case was tried without a jury on October 1-4, 2019, and October 7-10, 2019.2 (Doc.

Nos. 204, 205). From the evidence presented at trial, the Court makes the following findings of

fact.

NHC, a company founded by Kevin Fee and Seamus Ross, hired Wischermann, the CEO

and sole shareholder of WPI, to help develop a new Westin hotel in downtown Nashville,

Tennessee. (Vol. IV at 19-20). The parties formalized their relationship on December 1, 2013, by

entering into a consulting agreement (WPI Ex. 131). The Consulting Agreement included a

confidentiality clause but no restrictions on competition. (Id.).

On November 26, 2014, WPI entered into a Management Agreement with NHC regarding

the Westin. (WPI Ex. 90). The Management Agreement provided that WPI would manage and

operate the Westin on NHC’s behalf. (Id. at § 4.3). The Management Agreement contained

confidentiality and non-compete provisions. The confidentiality provision stated:

15.1 Right to Use. Neither party hereto shall use any Confidential or

Proprietary Information for any purpose other than with respect to

the Construction and Operation of the Hotel pursuant to this

Agreement.

15.3 Ownership and Non-Disclosure. … Manager will divulge

Confidential and Proprietary Information only to Permitted Persons

[] or Persons who must have access to such information in order to

perform their responsibilities with respect to this Agreement or the

Construction or Operation of the Hotel. Manager will at all times

1 These findings of fact pursuant to Fed. R. Civ. P. 52(a)(1) are in addition to the Court’s previously

issued findings of fact issued on March 3, 2021 (Doc. No. 208). To the extent the previously issued findings

of fact are relevant to the issues addressed in this decision, they are repeated here to aid understanding.

2 The trial transcript is electronically filed at Doc. No. 195 (Vol. I, Oct. 1, 2019), Doc. No. 196 (Vol.

II, Oct. 2, 2019), Doc. No. 197 (Vol. III, Oct. 3, 2019), Doc. No. 198 (Vol. IV, Oct. 4, 2019), Doc. No. 199

(Vol. V, Oct. 7, 2019), Doc. No. 200 (Vol. VI, Oct. 8, 2019), Doc. No. 201 (Vol. VII, Oct. 9, 2019), and

Doc. No. 202 (Vol. VIII, Oct. 10, 2019). For ease of reference, citations to the trial transcript are to the

volume and page number as follows: “Vol. [#] at [page].”

use all reasonable means to protect the confidentiality of the

Confidential and Proprietary Information, use it only for the sole

benefit of the Owner and the Hotel and will not communicate or

make it available to, or use it for the benefit of, any unauthorized

Persons.

Confidential and proprietary information broadly defined to include: “Guest Data, Hotel

Data, and all System Information, whether or not developed by Manager from its own Guest Data

or Hotel Data, regardless of whether such are labeled confidential, proprietary, or trade secret.”

(NHC Ex. 1, Art. 1). Each of these terms is specifically defined in the Management Agreement.

(Id.). “Guest Data” is defined as “[p]ersonal information, data, and statistics on Hotel guests

compiled from information furnished to Manager by Franchisor.” (Id.). “Hotel Data” is “Guest

Data derived from the Operation of the Hotel and the terms and conditions of all leases and other

occupancy agreements in effect at the Hotel (if any), together with all material and pertinent

information and data obtained, possessed, or generated by Manager in connection with the

Operation of the Hotel[.]” (Id.). The “Operation of the Hotel” includes virtually everything.

“Operation” is defined to include “[a]ll aspects that are customarily the subject of the management

and operation of the Hotel, including those with respect to … FF&E, OS&E, …Construction, …

Construction, …engineering, …[and] engaging independent contractors[.]” (Id.). “Construction”

is defined as “[a]ll activities and plans, specifications, drawings, scheme boards and other

information with respect to the planning, design, construction, remodeling, redecorating,

furnishing, equipping, renovation, rebuilding and replacement of, and additional, alterations,

improvements and repairs to the Hotel, including the FF&E, OS&E and interior finishes.” (Id.).

“FF&E” refers to fixtures, furnishings, fittings, and outfittings, decorations and equipment.”

“OS&E” is operating supplies and equipment such as chinaware, glassware, linens, etc. (Id.).

“System Information” includes “[a]ll information provided by Manager to Owner in the ordinary

course of business, in any for, including information, knowledge, know-how, drawings, materials,

technology, equipment, Marketing plans, strategic plans, methods, procedures, specifications,

policy manuals, operating manuals, techniques, computer programs and systems.” (Id.).

The non-compete provision prohibited the Manager from developing or managing any

other hotel within a 1-mile radius unless NHC gives prior written consent. The non-compete

provision states:

23.29 Non-Competition. Neither Manager nor any Affiliate,

successor or assignee of Manager shall, without the prior written

consent of Owner, develop, syndicate, finance, own, operate or

manage (or grant such rights to third parties), either directly,

indirectly or by any means, any other hotel within that certain

geographic area described on Exhibit D attached hereto (the

"Geographic Zone") of the Hotel but excluding any hotel properties

within such Geographic Zone currently under management by

Manager.

(Id. at § 23.29). The “Geographic Zone” is defined as the “geographic area included in the 1-mile

radius of the Hotel.” (Id. at 56). WPI specifically negotiated the non-compete down from a 3-

mile radius to a 1-mile radius so that it could work on other Nashville projects outside of the

downtown corridor. (Vol. IV at 23).

The Management Agreement also had detailed rules for contract termination. Under

Section 17.3, NHC may terminate the agreement “at any time, without cause, by written notice to

[WPI] . . . not less than sixty (60) days prior to the termination date.” Section 17.3 requires NHC

to pay a substantial termination fee.

The other termination provisions apply if WPI “fails to perform any of [WPI’s] obligations

contained in th[e] Agreement,” or fails to comply with a “material provision” of the agreement or

“a sufficient number of non-material provisions which, collectively, constitute materiality or

evidence a disregard for [WPI’s] obligations.” Under those circumstances NHC may terminate

the Agreement without payment of a termination fee if NHC notifies WPI of the unperformed

obligation or failure to comply, and “such failure continues for a period of thirty (30) days” after

NHC provides notice. These provisions are subject to a 30-day cure period, which must be

extended to 60 days under certain circumstances.

The pertinent termination provisions in the Management Agreement state:

17.1 Owner’s General Default Rights. Owner may terminate this

Agreement by notice to Manager if Manager fails to perform any of

Manager’s obligations contained in this Agreement, and such failure

continues for a period of thirty (30) days after notice to Manager

setting out the failure in reasonable detail. If the failure is such that

it cannot reasonably be cured within such thirty (30) days, Owner

may not terminate this Agreement as long as Manager begins the

cure within the thirty (30) days and proceeds diligently and in good

faith to accomplish the cure within sixty (60) days. Manager shall

not be entitled to the Termination Fee if this Agreement is

terminated as provided in this Section 17.1.

17.2 Default by Manager – Opportunity to Cure. The following,

without limitation, are events of material default by Manager, which

entitle Owner, in addition to and cumulative of any and all rights

and remedies available to Owner under this Agreement, at law or in

equity, to terminate this Agreement without payment of the

Termination Fee upon notice to Manager, subject to the Manager’s

right to cure. The cure period for any default, unless stated

otherwise, is thirty (30) days from the receipt of the notice.

* * *

(c) Failure to comply with: (i) any other material provision of this

Agreement; or (ii) a sufficient number of non-material provisions

which, collectively, constitute materiality or evidence a disregard

for Manager’s obligations under this Agreement, provided,

however, if such default is such that it cannot reasonably be cured

within thirty (30) days, Owner may not terminate this Agreement as

long as Manager begins the cure within the thirty (30) days and

proceeds diligently and in good faith to accomplish the cure within

a period not to exceed sixty (60) days.

* * *

17.3 Termination Without Cause. Owner, at its option, shall have

the right to terminate this Agreement at any time, without cause, by

written notice to Manager and payment of the Termination Fee not

less than sixty (60) days prior to the termination date.

At the time the parties entered into the Management Agreement, Wischermann was also

working with another client, Joel Pizzuti, to develop a hotel in downtown Nashville. (Vol. I at 84).

Although WPI and Pizzuti did not have a formal consulting agreement until January 1, 2016 (see

NHC Ex. 11), they began working on the Nashville hotel project in February 2014, approximately

two months after NHC and WPI signed the Consulting Agreement. (Vol. I at 209; Def. Ex. 240 at

PageID# 5099).

Wischermann made recommendations about brand selection, site location, and hotel tier.

(Vol. I at 83, 209). Pizzuti decided to build a luxury hotel, “The Joseph,” on Fourth Avenue at

Korean Veterans Boulevard in downtown Nashville, a few blocks from the Westin. (Vol. I at 84;

Def. Ex. 240 at PageID# 5104-05). WPI proceeded to consult with Pizzuti on The Joseph. (Vol. I

at 86). WPI developed and compiled budgets and proformas for The Joseph, and Wischermann’s

architect prepared preliminary floor plans. (Vol. I at 118, 210-211, 215; Def. Ex. 240 at PageID#

5106, 5110).

As part of Wischermann’s assistance to Pizzuti on The Joseph project, Wischermann

shared “all kinds of information about the Westin” with Pizzuti and his team. This included

information that was publicly available: schematics of the hotel, detailed technical drawings, plans,

and “pretty much anything you could imagine about the hotel being built”; and information that

was not: pace rate, group booking, and ADR. (Vol. I at 110; Vol. III at 49-77, 124-28, 148-50;

NHC Exs. 26, 27, 31, 36, 37, 39, 42, 43). As a result of the information provided by WPI, Pizzuti

and his contractors were able to save time and money. (Vol. III at 128 (stating that “the Pizzuti

people” did not have to go to the planning board to obtain these documents)). NHC’s expert,

Charles Pinkowski, testified that “[t]he knowledge learned by the Pizzuti development team for

having access to this information would speed up the development process, save money and assist

The Joseph to be a better competitor in the local market.” (Vol. VII at 47).

The parties dispute when and how Wischermann disclosed his work on The Joseph to NHC.

Wischermann claims he told NHC about his work on The Joseph project “right at the beginning”

– sometime in 2014. (Vol. I at 101). But Fee and Ross denied knowing that Wischermann was

working with Pizutti on The Joseph and testified that they first learned of the project in November

2016 when Wischermann mentioned that he had “another project in Nashville.” (Vol. IV at 43,

139; Vol. V at 111). Ray Waters, who initially managed the Westin, testified that Fee and Ross

reacted with “utter disbelief” when he showed them WPI’s consulting agreement with Pizutti in

January 2017. (Vol. IV at 63; Vol. V at 18).

But other evidence supports the conclusion that even if Fee and Ross did not know that

WPI had a signed agreement with Pizutti, they knew Wischermann was working with Pizzuti on

The Joseph, though perhaps not by that name, before November 2016. For example, in December

2015, Ross received an email from Quiwei Chen, who worked for one of the lenders on the Westin

project. (WPI Ex. 11). In the email, Chen asked, “Hey guys, any intel on this new 300 room project

being planned by the Omni? Looks like it is also with Starwood and Wischermann,” and included

a link to a business journal article. (WPI Ex. 11). Ross responded that Wischermann told them that

“they have applied for and got key money for a Luxury Collection Hotel” and “engaged an

architect.” (WPI Ex. 11).

In July 2016, Wischermann, Pizzuti, and a representative of Starwood hotels (at the time,

Starwood owned the Westin and The Joseph brands) met with the Office of the Mayor of Nashville

to give an overview of The Joseph project. (Vol. I at 105). After the meeting with the mayor,

Wischermann, Pizzuti, and a representative of Starwood hotels “took a tour” of the Westin, which

was still under construction. (Id.). During the tour, the group encountered Ross. (Id. at 106). Ross

became very angry that Wischermann was showing the property to “a potential competitor” and

“shar[ing] confidential information.” (Vol. V at 22-24). He testified that he was “excessively

angry” because a few weeks before that Wischermann had shared pricing information for the

Westin without informing NHC. (Id. at 23). He was also upset and felt it was a breach of trust for

Wischermann to bring the Starwood representative to the Westin without informing NHC because

they had been trying to contact that representative. And Ross felt that having the Starwood

representative, who they had been trying to get in touch with, visit without informing NHC was a

breach of trust. (Id.).

Later that day Ross spoke with his sister about his encounter with Wischermann and

Pizzuti. After that conversation, Ross’s sister sent him an email in which she stated that she had

read through the contract with Wischermann and she told him, “To me it is clear as day that he in

the breach of Section 23.29 (non-competition) & 15.1 (hotel data). You must give him 30 days to

cure. Regardless whether he severs the operating contract with the Luxury Collection, he has

shared the confidential information with a third party & he would not be able to cure this.” (WPI

Ex. 97). The email also addressed Wischermann’s potential removal: “I think if you are still

thinking of proceeding with his removal, it is about securing the word of Ray [Waters], then going

to have a discussion with Starwood Head Office & setting out the next steps with them & then

going back to your 5/6 key department managers to secure them in the changeover.” (Id.).

The Westin opened a few months later on October 13, 2016. (Vol. I at 139). On or around

November 22, 2016, NHC and WPI had the first Owner’s Meeting to discuss the Westin’s first

month of operations. (Vol. II at 100, 103; Vol. IV at 42-44; Vol. V at 28). During that meeting,

Wischermann mentioned that WPI had another hotel project in Nashville. Following the meeting,

Hubert Worrell, CFO of NHC, emailed Brian Hutchins, director of operations at WPI, asking:

“There was another hotel project mentioned in the meeting. What is WP’s involvement in the

project? And what is the status of the project?” (See WPI Ex. 9; NHC Ex. 73). Hutchins responded:

“[N]ot sure what you mean about another WP project mentioned yesterday. Can you explain.”

(Id.). The email discussion did not proceed beyond that.

Two months later, on January 18, 2017, Fee sent the following email to Wischermann:

Can you please confirm to me if you and your company have any

involvement of any kind in any other property in Downtown

Nashville? I asked Hubert to confirm back in November but I didn’t

hear anything from you or your team directly. It has come up again

for me and I just need to know of any and all involvement you

actually have now or may have in the near future. Can you please

confirm this for me so we can properly address this. Thanks.

(NHC Ex. 17). In response, Wischermann called Fee and proposed that they discuss the matter in-

person in February. (Vol. I, 249-50; Vol. IV at 49). Wischermann did not tell Fee about WPI’s

Consulting Agreement with Pizzuti during that telephone call.3 (Vol. I at 250). Later that same

day, a former WPI employee who was then working for one of Fee and Ross’s companies, gave

Fee and Ross an unsigned copy of a consulting agreement between WPI and Pizutti. (Vol. IV at 9;

Vol. VI at 61-63; NHC Ex. 91).

Fee and Ross testified that they then started to think about their options if it became

necessary to terminate WPI as manager of the Westin and began discussing the possibility of self-

managing the Westin. Self-management would require approval of Marriott. (Vol. IV at 55-56,

154; Vol. V at 32-34). On February 14, 2017, Fee and Ross formed their own hotel management

company – Castlerock Hospitality Management LLC. This company would manage other NHC

3 Fee testified that Wischermann told him that he had not signed an agreement or done any real work

on the project because there was a gap in financing. (Vol. IV at 49). Wischermann testified only that he

didn’t tell Fee about the consulting agreement during the phone call and that Fee knew about the consulting

agreement “all along.” (Vol. I at 250).

hotel projects and, if Marriott and NHC’s lenders agreed to allow NHC to self-manage, would also

manage the Westin. (Vol. IV at 127).

On February 23, 2017, Fee and Ross met with Wischermann in person. (Vol. IV at 53).

During the meeting Fee and Ross raised concerns about the non-compete and WPI’s involvement

with The Joseph. (Id.; Vol. I at 158, 255). The parties’ recollections of the details of the discussion

differ. Fee testified that Wischermann told them he had not signed an agreement relating to The

Joseph. (Vol. IV at 53). Wischermann denied having said that. He testified that he did not tell Fee

or Ross that he had a Consulting Agreement for The Joseph, but also never told them that he did

not have one. (Vol. I at 158, 255).

At the Owner’s Meeting on April 27, 2017, NHC served Wischermann with a Notice of

Default which stated that WPI was failing to perform in accordance with the Management

Agreement by, among other things, providing substantial assistance with the development of the

Joseph without seeking NHC’s prior written consent and distributing NHC’s confidential

information to Pizzuti to assist with the development of the Joseph. (NHC Ex. 20; Vol. I at 167).

Fee and Ross testified that by that time they had lost trust in Wischermann and WPI, believed

Wischermann repeatedly lied about WPI’s work on The Joseph, and determined WPI could no

longer continue managing the Westin. (Vol. IV at 61, 129; Vol. V at 41). Thus began an exchange

of letters between counsel for the parties.

On May 1, 2017, WPI responded through counsel that WPI would take steps to terminate

the consulting agreement with Pizzuti related to The Joseph even though it did not believe the

consulting agreement violated the non-compete clause. (WPI Ex. 30). WPI denied the accusation

that it “shared any Confidential or Proprietary Information” as “completely without merit” and

stated that “Wischermann has not shared any Confidential or Proprietary Information.” (Id.). WPI

iterated its intent to cure, stating that it was “confident it [could] promptly resolve any perceived

defaults” and “either has already or will immediately act to cure the perceived defaults outlined in

the letter.” (Id.).

On May 3, 2017, NHC responded that “termination of the Pizzuti agreement does not cure

months of ongoing violation of a non-compete. The damage has been done and cannot be undone

by a termination with Pizzuti Group now.” (WPI Ex. 43).

On May 16, 2017, WPI notified NHC that “effective today” WPI “terminated its consulting

agreement with the Pizzuti Group related to a prospective hotel in downtown Nashville.” (WPI

Ex. 34). In the letter, WPI asserted that “as a result, all alleged breaches noticed ‘in reasonable

detail’ in [NHC’s] correspondence have been cured.” (Id.). WPI asked NHC to confirm no later

than May 19, 2017, that it “no longer intends to proceed with its plan to usurp Wischermann’s

Management role at the Westin Nashville on May 29, 2017.”

NHC responded on May 19, 2017, by advising WPI that it “has not cured their defaults

under the Hotel Management Agreement…” and that “merely terminating the consulting

agreement [WPI] has admitted it entered into with the Pizzuti Group now does not cure months of

an ongoing violation of a non-compete. That damage to NHC and to the parties’ relationship cannot

be undone by a simple termination of the consulting agreement now.” (WPI Ex. 40). NHC

informed WPI that “consequently, [] the Management Agreement will terminate on May 29, 2017,

and effective May 30, 2017, [WPI] will no longer be managing the hotel.” (Id.).

On May 23, 2017, WPI filed the complaint in this matter against NHC. (Doc. No. 1).

III. CONCLUSIONS OF LAW

A. Breach of Contract

The parties assert cross-claims for breach of the Management Agreement. WPI claims

NHC breached the Management Agreement by failing to comply with the termination procedures

set forth in Section 17.1, 17.2, and 17.3, including failure to pay the termination fee. NHC claims

WPI breached the Management Agreement by providing NHC’s confidential and proprietary

information to Pizzuti and otherwise assisting in the development of The Joseph and that NHC,

therefore, had the right to terminate the Management Agreement without paying the termination

fee.

1. Bench Trial Verdict

Following the bench trial, the Court found in favor of WPI on the breach of contract claim.

Specifically, the Court found that the Management Agreement allowed for termination “without

payment of the termination fee if WPI failed to perform any of its obligations contained in the

Management Agreement, and such failure to perform continued for a period of thirty days after

WPI received notice setting out the failure in reasonable detail.” (Doc. No. 208 at 9). The Court

found that “the failures identified in the Notice of Default – assisting with the development of the

Joseph and distributing NHC’s confidential information to Pizzuti – did not continue for a period

of 30 days after April 27, 2017.” (Id.). Finding that WPI had thereby cured its breaching activity,

the Court concluded NHC did not have cause to terminate under Section 17.1. (Id. at 9-10).

The Court also found that NHC did not have cause to terminate under Section 17.2 of the

Management Agreement. (Doc. No. 208 at 10-11). Under Section 17.2, NHC was entitled to

terminate by notice without payment of the termination fee only if WPI breached a material

provision of the agreement or “a sufficient number of non-material provisions which, collectively,

constitute materiality or evidence disregard for Manager’s obligations under [the] Agreement.”

(Id.). The Court found that the non-compete and confidentiality provisions were not material,

reasoning that if these the parties viewed these provisions as material, “they could have included

provisions to that effect in the agreement.” (Id. at 10). The Court also found that the “failure to

comply with two non-material provisions is not ‘a sufficient number to collectively constitute

materiality or evidence of a disregard’ for WPI’s obligations under the Management Agreement.

(Id.). Because the Court found that the breaches were not material alone or in combination, it did

not reach the issue of cure under Section 17.2. (Id. at 10-11). Because NHC lacked cause to

terminate under Sections 17.1 and 17.2, the only remaining avenue for termination was for

termination without cause under Section 17.3, which required payment of a termination fee. (Id.

at 11). The Court found NHC’s failure to pay the termination fee was a breach of the Management

Agreement. (Id.).

2. Appeal

On appeal, NHC challenged the Court’s ruling on WPI’s breach of contract claim. The

Sixth Circuit disagreed with the Court’s analysis of “cure” and “materiality.” With regard to

“cure,” the Sixth Circuit noted that cure “often requires both prospective action (preventing future

wrongdoing) and retrospective action (addressing past wrongdoing). (Doc. No. 223 at 11 (citing

Cure of Default, Black’s Law Dictionary (11th ed. 2019)). “[B]ecause the district court’s findings

of fact never discussed what efforts (if any) Wischermann and WPI made to correct their alleged

breaches of confidentiality and non-competition,” the Sixth Circuit remanded for this Court “to

evaluate whether Wischermann and WPI expended any effort to cure their alleged prior breaches

of confidentiality and non-competition, and, if so, whether those efforts ‘corrected’ or ‘made right’

their breaching activity.” (Id. at 12).

In addition, the Sixth Circuit held that the Court’s analysis concerning materiality was legal

error because it relied on a single factor – that the agreement did not expressly label the

confidentiality and non-compete provisions as “material” – and failed to consider and apply the

“litany of factors” identified by the Tennessee Supreme Court in State v. Howington, 907 S.W.2d

403, 410-11 (Tenn. 1995). (Doc. No. 223 at 12-13). The Sixth Circuit instructed the Court to

reconsider whether the materiality of the non-compete and confidentiality provisions applying the

Howington factors. (Id.).

With these directives in mind, the Court proceeds to reconsider “cure” and “materiality,”

beginning with “materiality.”

3. Materiality

In determining whether a failure to perform is material, the Court considers a number of

factors, including: “(a) the extent to which the injured party will be deprived of the benefit which

he reasonably expected; (b) the extent to which the injured party can be adequately compensated

for the part of that benefit of which he will be deprived; (c) the extent to which the party failing to

perform or to offer to perform will suffer forfeiture; (d) the likelihood that the party failing to

perform or to offer to perform will cure his failure, taking account all of the circumstances

including any reasonable assurances; [and] (e) the extent to which the behavior of the party failing

to perform or to offer to perform comports with standards of good faith and fair dealing.”

Howington, 907 S.W.2d at 410-11 (quoting Restatement (Second) of Contracts § 241 (Am. L. Inst.

1981)); see also Tennessee Homes v. Welch, 664 S.W.3d 1, 9 (Tenn. Ct. App. 2022) (noting that

“it is the ‘clear trend’ of Tennessee courts ‘to apply the test found in section 241 of the Restatement

(Second) of Contracts’”). Generally, the first two factors are the most important. Madden Phillips

Const., Inc. v. GGAT Dev. Corp., 315 S.W.3d 800, 823 (Tenn. Ct. App. 2009). Tennessee courts

have recognized, however, that sometimes “these factors are only marginally helpful in analyzing

the materiality.” Tennessee Homes, 664 S.W.3d at 9 (quoting M&M Elec. Contractor, Inc. v.

Cumberland Elec. Membership Corp., 529 S.W.3d 413, 423 (Tenn. Ct. App. 2016)).

Technically, these factors relate to whether the breach of the agreement was a material

breach, whereas the contract provision refers to failure to comply a “material provision of th[e]

Agreement.” This distinction aside, generally, only a material breach will relieve a party of its

obligations under an agreement. Id. (“[I]n order for a contractual breach to be sufficient to relieve

the non-breaching party of its contractual obligations, the initial breach must be ‘material.’”)

(quoting M&M Elec., 529 S.W.3d at 423). Therefore, the Court will consider both the materiality

of the confidentiality and non-compete provisions and the materiality of the breaching conduct.

Generally, if the provision itself is not material, a breach of the provision is not a material

breach. The Agreement, however, also provides that NHC can terminate if WPI fails to comply

with “a sufficient number of non-material provisions which collectively constitute materiality or

evidence a disregard for Manager’s obligations under this Agreement.” Thus, even if the

confidentiality and non-compete provisions are not material standing alone, if breach of these

provisions “collectively constitute[s] materiality,” NHC may terminate the Management

Agreement without paying the termination fee. Accordingly, the Court also considers whether the

breaching conduct is material when taken together.

a. The extent to which the injured party will be deprived of the benefit which he

reasonably expected

NHC argues WPI’s breach of the non-compete and confidentiality provisions deprived

NHC of two core benefits of its bargain: (1) that WPI would develop and manage the Westin free

and clear of any involvement with another WPI client within downtown Nashville; and (2) that

WPI would not disclose confidential and proprietary information regarding the Westin to another

hotel owner. (Doc. No. 231 at 12). NHC states that the parties specifically negotiated the

geographic area covered by the non-compete provision to a radius of one mile down from a larger

area initially proposed by NHC. (See Vol. IV at 23; Vol. VIII at 118).

NHC argues that WPI provided extensive and ongoing assistance to Pizzuti on The Joseph

and shared “all kinds of information about the Westin with third parties,” including Pizzuti and

others at The Joseph. This included information about “pace rate, group booking, and ADR” that

was not publicly available. WPI also provided detailed technical drawings, plans, photographs,

and construction budget information to Pizzuti’s contractor, architects, and design professionals to

assist them in budget and design. (NHC Exs. 26, 27, 31, 36, 37, 39, 42, 43; Vol. III at 49-77, 124-

28, 148-50).

WPI contends NHC was not deprived of the benefit it reasonably expected to receive

because it received “the entirety of what it bargained for – advice and counseling that was essential

for NHC to acquire the Westin brand, get the hotel up and running, and managing the hotel.” WPI

claims that it did a good job in managing the hotel – the Westin exceeded budget in revenue and

profit. In fact, WPI argues NHC actually received more than it paid for because it undercharged

for preopening services expecting to profit by managing the hotel after it was up and running.

Ultimately, this factor is neutral. On one hand, NHC intended to hire a consultant and

manager who was not also working for competitors in the same immediate area and not sharing

NHC’s information with anyone, let alone competitors in the same immediate area. The fact that

WPI and Wischermann were not only working to develop another hotel but were actively

providing confidential and proprietary information to that hotel to assist in its development only

compounds the injury. This is not a situation where WPI was working with another hotel in

downtown Nashville in violation of the non-compete provision but took measures to insulate its

work on the projects – perhaps using separate teams of people and implementing systems to

prevent sharing of proprietary information. Instead, WPI’s work with Pizzuti and The Joseph

involved a troubling combination – WPI, including Wischermann himself, working on both

projects, and WPI took information from one client – NHC – and gave it to another client to help

the other client. On the other hand, WPI otherwise performed under the Management Agreement

and the Westin was profitable.

On the whole, NHC got some, but not all of what it bargained for. It got a hotel manager.

It did not get a conflict-free hotel manager, and it did not get a hotel manager that guarded NHC’s

confidential and proprietary information as it was required to do under the terms of the

Management Agreement. This factor weighs in favor of finding that the non-compete and

confidentiality provisions are material, particularly when taken together.

b. The extent to which the injured party can be adequately compensated for the

part of that benefit of which he will be deprived

NHC argues it would be difficult to quantify the harm from materially aiding another owner

to develop a competing hotel 1,500 feet away over a period of several years and using NHC’s

confidential information to do so. WPI argues there was no harm from the breach, so the adequate

compensation is quantifiable at zero.

The Court agrees with NHC that the harm from the breach is difficult to quantify and

therefore difficult to adequately compensate. Indeed, it seems virtually impossible to assign a

dollar amount to the harm caused by breach of the non-compete and years of sharing NHC’s

confidential and proprietary information. At a minimum, one could say that the confidential and

proprietary information at least had the value Pizzuti would have assigned it. It’s clear that Pizzuti

did not view the information as valueless. For example, an email from WPI’s VP of Sales, Erik

Benson, suggests the information was valuable. On February 16, 2016, he wrote an email to

Wischermann stating: “I had a chance to review [the pro forma for the Joseph Nashville] in depth

tonight, and I think it looks pretty solid overall, especially with the intel we have from TWN’s

group pace and ADR trend for future years.” He added, “I actually think you could start Year 1

higher than $301.85 – given what we know about TWN and the market.” (WPI Ex. 15; Vol I at

PageID# 3504). While some information about market rates was public, the Westin’s group pace

(the group bookings) was not public information. (Vol. I at 234).

Given the volume and nature of the information shared, it would be difficult to adequately

compensate NHC for the value of the information alone, let alone determine appropriate

compensation for sharing it with and assisting Pizzuti with development of The Joseph. Even if

The Joseph would have been built without NHC’s information or Pizzuti’s development assistance,

that does not render the assistance or the information valueless. Rather, it underscores why the

breach is difficult to compensate.

This factor weighs in favor of finding materiality.

c. the extent to which the party failing to perform or to offer to perform will suffer

forfeiture if the failure is treated as material

This factor concerns whether the party who fails to perform has relied substantially on the

expectation of the exchange, for example, by preparation or performance, and a finding that the

failure is material would result in forfeiture. For this reason, “a failure is less likely to be regarded

as material if it occurs late, after substantial preparation or performance, and more likely to be

regarded as material if it occurs early, before such reliance.” Restatement (Second) of Contracts §

241, cmt. d.

WPI says it would suffer “almost complete forfeiture” if the alleged breaches are deemed

material and it is not paid the termination fee, because it lost $662,150 in the initial and pre-

management phase and was relying on the term of the contract to recoup these losses and turn a

profit. (Doc. No. 232 at 24 (citing Vol. I at 195-196)). NHC argues any forfeiture WPI suffers is a

natural consequence of its own actions. (Doc. No. 231 at 17). Moreover, the breaching conduct

occurred throughout the duration of the Management Agreement.

The evidence shows that WPI and Wischermann anticipated recouping costs and making a

profit over the term of the contract. Unless the termination fee is paid, they will forfeit the

remaining years left on the Management Agreement. This, however, is not complete forfeiture

because NHC paid WPI over $1.5 million dollars in fees for development services, pre-opening

services, and management services, and additional amounts for reimbursements of travel expenses

and salary allocations. (Vol. 5 at 118-119).

d. The likelihood that the party failing to perform or offer to perform will cure his

failure, taking into account all of the circumstances including any reasonable

assurances

WPI argues this weighs in its favor because it ended the relationship with Pizzuti and asked

NHC what additional remedies it requested. NHC argues this factor weighs in favor of finding a

material breach because although WPI ceased its breaching conduct, to the extent it was possible

to effect a cure, WPI made no effort to do so.

As discussed in more detail below. WPI did not and likely could not have fully cured the

breach of the non-compete and confidentiality clauses. In any event, other than terminating a

development agreement with Pizzuti and stating that it intended to cure any alleged default, WPI

made no other efforts to remedy the breaches.

e. The extent to which the behavior of the party failing to perform or to offer to

perform comports with standards of good faith and fair dealing

This factor is akin to a finding of willfulness. Restatement (Second) of Contracts § 241,

cmt. f. Either way, this factor is not particularly probative of materiality given that one can act in

good faith and nevertheless commit a material breach and vice versa. The Court finds, however,

that to the extent it is relevant to the materiality determination, Wischermann, at best, ignored his

obligations under the non-compete and confidentiality provisions. Even if he did not hide his

relationship with Pizutti, Wischermann made no effort to comply with the non-compete provision

by seeking written consent before he started working with Pizzuti on The Joseph and, when NHC

asked him directly about his work with Pizzuti, he obfuscated. Moreover, Wischermann and others

at WPI treated NHC’s confidential and proprietary information as their own and freely distributed

it to third parties without regard for the confidentiality clause. Under these circumstances, the

Court finds Wischermann and WPI did not comport with the standards of good faith and fair

dealing.

Considering the foregoing factors, the Court finds that the confidentiality and non-compete

provisions are material provisions of the agreement. Even if these provisions are not material

individually, when considered together, the failure to comply with these provisions is collectively

material and evidences a disregard for WPI’s obligations under the Agreement.

Therefore, WPI was in default under the agreement pursuant to Section 17.2(c) and NHC

was entitled to terminate the Management Agreement without paying the termination fee subject

to WPI’s right to cure. Whether Wischermann and WPI cured the breaches is the next area of

reconsideration.

4. Cure

As discussed above, the Court previously found that WPI and Wischermann cured any

ongoing breaches when they terminated the consulting agreement with Pizzuti. The Sixth Circuit

ordered the Court to consider whether WPI and Wischermann “expended any effort to cure their

alleged prior breaches of confidentiality and non-competition, and, if so, whether those efforts

‘corrected’ or ‘made right’ their breaching activity.” (Id. at 12).

“Cure” requires more than merely ceasing the non-compliant conduct, it must “correct a

failure to perform,” which requires both prospective action (preventing future wrongdoing) and

retrospective action (addressing past wrongdoing). (Appeal at 12 (citing Black’s Law Dictionary

(11th ed. 2019)). In other words, “the right to cure sometimes requires the breaching party to both

abstain from future breaching activity and also to undo or diminish the consequence of its prior

failure(s) to perform.” Id. (“In some instances, a breaching party must do more than stem the

bleeding; it must work to correct the damages already done.”).

NHC argues that WPI did not make any efforts to cure its breach of the non-compete and

confidentiality provisions beyond terminating the Pizzuti Consulting Agreement. (Doc. No. 231 at

7 (citing Vol II at 45)). WPI never asked Pizzuti or its architects, designers, engineers, and

contractors to return and not use confidential and proprietary information about the Westin that

WPI had shared. NHC acknowledges that it may not have been possible for WPI to fully cure the

breach due to the extent and longevity of WPI’s assistance to Pizzuti. Indeed, NHC advised WPI

as much on May 3, 2017, and again on May 19, 2017, at which point WPI still had more than a

week left in the cure period. (NHC Ex. 22; WPI Ex. 40 (advising that “merely terminating the

consulting agreement … with the Pizzuti Group now does not cure months of an ongoing violation

of a non-compete”). NHC suggests that WPI and Wischermann’s failure to even attempt to cure

the breach was likely because Wischermann understood the breach could not be fully cured. (Doc.

No. 231 at 10-11). NHC adds that WPI filing this lawsuit before NHC terminated the agreement

and before the cure period had elapsed suggests that WPI had no intent to make any further efforts

to cure.

WPI contends that is satisfied its obligation to cure because it “fully and immediately

complied with the cure demand that NHC made, took additional action with respect to NHC’s cure

request, and those actions by WPI corrected or made right the alleged breaches that NHC

identified.” (Doc. No. 232 at 18). WPI states that the Notice of Default letter did not demand or

even request WPI to retrieve any information whatsoever from The Joseph or Pizzuti, nor did it

say that WPI’s failure to do so would constitute a breach. (Id. at 19). WPI claims it repeatedly

communicated to NHC that it would “take whatever action NHC deemed necessary to effect a

cure” and “specifically asked NHC to identify any other action NHC believed necessary for WPI

to fully cure the alleged breaches.” (Id. (citing WPI Exs. 30, 32, 34, 42, 45)). WPI argues NHC

did not identify any additional actions to cure the breach because it had already decided to

terminate the contract with WPI and replace it with Castlerock. (Id.). Essentially, WPI and

Wischermann argue that they fully cured the breaches because NHC did not demand any specific

curative action.

In addition, WPI now argues that it was not necessary to attempt to retrieve any information

given to Pizzuti and others because “the information was de minimis, old, publicly available, and

of no demonstrative competitive use to Pizzuti or The Joseph.” (Doc. No. 235 at 5). Tellingly,

when NHC first notified WPI and Wischermann of the default, they responded through counsel

that “NHC’s accusation that Wischermann has shared any Confidential and Proprietary

Information is completely without merit. Wischermann has not shared any Confidential or

Proprietary Information.” (NHC Ex. 21).

Finally, Wischermann and WPI argue that any actions WPI “did or could do to cure” would

not matter because NHC had decided to terminate the contract irrespective of cure. (Doc. No. 235

at 5). To the extent this is intended to suggest that cure is irrelevant to the breach of contract claim,

this argument is misplaced. Even if cure would not have affected NHC’s decision to terminate the

Management Agreement, whether WPI cured or at least began to cure within the allotted time

period is affects WPI’s right to a termination fee.

As discussed above, there is no dispute that WPI and Wischermann breached the non-

compete and confidentiality provisions of the Management Agreement by providing confidential

and proprietary information to Pizzuti and otherwise assisting Pizzuti in the development of The

Joseph. WPI concedes that it took no action to cure or attempt to cure these breaches other than

cancelling its agreement with Pizzuti, which only served to prevent future harm, and asking NHC

what else it should do to effect cure while at the same time denying that any confidential or

proprietary information had been disclosed. Given the duration and nature of the breach, the Court

is skeptical that cure is possible, but here WPI and Wischermann did not even attempt to remedy

past harm caused by years of disloyalty. Under these circumstances, the Court finds the breaches

were not cured.

5. Verdict

It is undisputed that WPI is in default of the non-compete and confidentiality provisions of

the Management Agreement. The Court finds that these provisions are material provisions of the

agreement or, in the alternative, that failure to comply with these provisions collectively constitutes

materiality or evidences a disregard for WPI’s obligations under the Management Agreement. The

Court further finds that WPI and Wischermann did not fully cure the default within 30 days or

begin to cure within that time period and “diligently proceed []” to accomplish the cure. Therefore,

termination for cause is appropriate under Section 17.2 and no termination fee is owed.

For the reasons stated, the Court finds in favor of NHC on WPI and Wischermann’s claim

for breach of contract.

B. Breach of Fiduciary Duty

NHC asserts that WPI and Wischermann violated their fiduciary duties by: (1) engaging in

conduct directly adverse to NHC’s interests by assisting another property owner to develop a

competitor property just 1,500 feet away from the Westin; (2) breaching NHC’s confidentiality by

providing detailed information about the design, development, and operation of the Westin to WPI

and its contractors to assist with the development of a competitor hotel project.

Following the bench trial, the Court found that NHC did not demonstrate that it suffered

damages caused by WPI’s disloyal conduct and entered judgment in favor of WPI and

Wischermann on this claim.

The Sixth Circuit remanded for reconsideration of NHC’s breach of fiduciary duty claim,

ordering:

On remand the district court should evaluate whether Wischermann and WPI

owed NHC a fiduciary duty; if so, whether they breached their duty; and, if

affirmative, whether forfeiture is an appropriate remedy. It may also consider

whether a full forfeiture is required or whether a lesser amount is appropriate.

Cf. Wall Sys., Inc. v. Pompa, 154 A.3d 989, 999-1002 (Conn. 2017).

Wischermann Partners, 2022 WL 2231934, at *5.

In order to recover for breach of fiduciary duty, a plaintiff must establish: “(1) the existence

of a fiduciary duty (2) that was breached (3) proximately causing damages.” Pagliara v. Johnston

Barton Proctor & Rose, LLP, 708 F.3d 813, 818 (6th Cir. 2013) (citing Morrison v. Allen, 338

S.W.3d 417, 438 (Tenn. 2011)).

With regard to damages, the Tennessee Court of Appeals has held that “[i]t is not necessary

that the [principal] suffer a loss” as a result of the breach of duty of loyalty. Efird v. Clinic of

Plastic and Reconstructive Surgery, P.A., 147 S.W.3d 208, 220 (Tenn. Ct. App. 2003). Even

without a provable loss, an agent who breaches the duty of loyalty “may be required to disgorge

any profit or benefit he received as a result of his disloyal activities,” including “any compensation

paid by the [principal] during the period of breach.” Id. “In addition, [an agent] who breaches the

duty of loyalty may be required to surrender any compensation paid by the [principal] during the

period of breach.” Id. (citing Baker v. Battershell, 1986 WL 7602, at *6 (Tenn. Ct. App. Jul. 9,

1986)). “It does not make any difference that the services were beneficial to the principal, or that

the principal suffered no provable damage as a result of the breach of fidelity by the agent.”

Phansalkar, 344 F.3d at 200 (cited favorably by Efird, 147 S.W.3d at 220); see also Restatement

(Second) of Agency § 469 (“An agent is entitled to no compensation for conduct which is … a

breach of his duty of loyalty”); Restatement (Third) of Agency § 8.01 cmt. d(1) (“Forfeiture may

be the only available remedy when it is difficult to prove that harm to a principal resulted from the

agent’s breach or when the agent realizes no profit through the breach.”). Finally, breach of

fiduciary duty “constitutes a material breach of the contract by the agent” and may allow the

principal “to terminate the principal’s relationship with the agent in advance of a time set for

termination in any contract between them.” Restatement (Third) of Agency § 8.01 cmt. d, (1).

Forfeiture is an equitable remedy drawing from principles of restitution and unjust

enrichment. Id., cmt. b. Whether forfeiture is an appropriate remedy, and the amount of forfeiture

depends on the circumstances of the case. See Efird, 147 S.W.3d at 221 (stating that an employee

who breaches the duty of loyalty may be required to forfeit compensation during the period of

breach and remanding to determine damages under the circumstances of the case); In re Omni

Mechanical Contractors, 114 B.R. 518, 541 (E.D. Tenn. 1990) (claim for recovery of disloyal

agent’s salary is based upon equitable principles and depends on the facts of each case); see also

Restatement (Second) of Agency § 469, cmts. a., b. (discussing apportionment of compensation);

(Restatement (Third) of Agency § 8.01, cmt. d, (1) (noting that although some cases require

forfeiture of all compensation paid over the period of disloyalty, the better rule permits courts to

consider the specific circumstances).

Although Tennessee courts have recognized that disgorgement may be an appropriate

remedy for breach of a duty of loyalty depending on the circumstances of the case, there is scant

authority for the specific factors to be considered. See Efird, 147 S.W.3d at 220 (noting availability

of remedy and remanding for consideration of damages); In re Omni Mech. Contractors, Inc., 114

B.R. 518, 541 (E.D. Tenn. 1990) (finding forfeiture of salary not warranted after considering the

egregiousness, duration, and potential harm of the breach of loyalty); Ram Tool & Supply Co., Inc.

v. HD Supply Const. Supply, Ltd., No. M2013-02264-COA-R3-CV, 2016 WL 4008718, at *5

(Tenn. Ct. App. Jul. 21, 2016) (noting possibility of disgorgement as a remedy for breach of duty

of loyalty).

In the opinion remanding the question of appropriateness of forfeiture in this case, the Sixth

Circuit cited a relatively recent decision by the Supreme Court of Connecticut that identifies a list

of factors “gleaned from existing jurisprudence” for a court to consider related to this issue.

Wischermann, 2022 WL 2231934, at *5 (citing Wall Sys., Inc. v. Pompa, 154 A.3d 989, 999-1002

(Conn. 2017) (collecting cases)).4 These factors include: the agent’s duties, role, and degree of

responsibility; the level of compensation; the frequency, timing and egregiousness of the disloyal

acts; the willfulness of the disloyal acts; the extent or degree of the principal’s knowledge of the

agent’s disloyal acts; the effect of the disloyal acts on the value of properly performed services;

the potential for harm or actual harm to the principal and the principal’s business as a result of the

disloyal acts; the degree of planning taken by the agent to undermine the principal; and the

4 The parties agree that Wall Sys., Inc. v. Pompa accurately sets for the factors the Court should

consider in deciding whether disgorgement and forfeiture are an appropriate remedy. (See WPI Br., Doc.

No. 234 at 8; NHC Br., Doc. No. 231 at 24).

adequacy of other available remedies. In Wall, the court observed that “the judicial task is to search

for a fair and reasonable solution in light of the relevant considerations and to avoid unjust

enrichment to either party.” Wall, 154 A.2d at 738 (citation modified) (citing Cameco, Inc. v.

Gedicke, 724 A.2d 783, 791 (N.J. 1999); and Hartford Elevator, Inc. v. Lauer, 289 N.W.2d 280,

287 (Wisc. 1980)).

Assuming the Wischermann defendants breached their fiduciary duties to NHC by

providing NHC’s information to Pizzuti and others and otherwise assisting in the development of

The Joseph, considering the factors set forth in Wall, the Court finds forfeiture of amounts paid to

WPI during the period of breach is not warranted.

First, other than the breaches of confidentiality and non-competition, the Wischermann

defendants’ performance under the Management Agreement was not adversely affected by the

divided loyalty. Wischermann secured the Westin brand and opened the hotel.

Second, WPI was paid less than market value for services performed during the pre-

opening phases of the Westin. They agreed to this payment structure in exchange for the 10-year

Management Agreement, which included a termination fee in the event of termination without

cause. WPI estimates it lost approximately $600,000 on pre-opening services.

With regard to the frequency, timing, and egregiousness of the disloyal acts, it is undisputed

that Wischermann and WPI provided NHC’s information and otherwise assisted Pizzuti in the

development of The Joseph from the outset, and that they did so openly and without contrition.

Although they were not hiding the relationship with Pizzuti, they were not forthcoming either.

Indeed, when confronted, Wischermann obfuscated and delayed. All of this, however, is offset by

the minimal harm inflicted on NHC’s business. Pizzuti would have developed The Joseph even

without Wischermann’s help. Most detrimental was the irreparable harm to NHC’s trust in

Wischermann and WPI.

The extent or degree of the principal’s knowledge of the agent’s disloyal acts is particularly

relevant here. There is no indication that NHC knew that Wischermann was freely sharing NHC’s

confidential and proprietary information with Pizzuti. However, the evidence strongly suggests

that NHC knew that Wischermann and WPI were working with Pizzuti on another project in

Nashville as early as 2015. While the Management Agreement requires any waiver of the non-

compete provision to be in writing (see Section 23.4), for purposes of determining whether the

equitable remedy of forfeiture is appropriate, the Court finds it highly relevant that, even if NHC

did not know WPI had entered into a formal consulting agreement with Pizzuti for The Joseph

project, it knew Wischermann was working with Pizzuti on a Nashville project in some capacity.

Finally, remedies other than forfeiture are available. As discussed above, NHC terminated

the Management Agreement for cause and therefore is not obligated to pay the termination fee.

Even if NHC does not obtain forfeiture of amounts paid during the period of disloyalty, WPI

provided services at a discounted rate with the expectation of recouping losses over the term of the

Management Agreement. Because the Management Agreement was terminated for cause without

payment of the termination fee, WPI and Wischermann effectively forfeited their ability to recoup

these losses. The Court finds this is an equitable result considering the nature of the breach and the

relative economic impact on the parties.

The Court previously found that NHC had not demonstrated that its anticipated future loss

of net income resulted from WPI’s or Wischermann’s disloyal conduct. (Doc. No. 208 at 14).

Because forfeiture of amounts paid to WPI and Wischermann is not warranted under the facts of

this case, WPI and Wischermann are not liable to NHC on the breach of fiduciary duty claim.

IV. CONCLUSION

For the reasons stated, upon reconsideration of WPI’s claim for breach of contract and

NHC’s claim for breach of fiduciary duty, the Court concludes that that NHC did not breach the

Management Agreement and is not liable to WPI for the termination fee. The Court also concludes

that WPI and Wischermann are not liable to NHC for breach of fiduciary duty.

An appropriate Order shall enter.

WILLIAM L. CAMPBELL, J d

CHIEF UNITED STATES DISTRICT JUDGE

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