Aqua-Chem, Inc. v. D&H Machine Service, Inc.

IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

May 26, 2016 Session

AQUA-CHEM, INC. v. D&H MACHINE SERVICE, INC.

Appeal from the Circuit Court for Knox County

No. 1-306-14 Kristi M. Davis, Judge

No. E2015-01818-COA-R3-CV-FILED-OCTOBER 17, 2016

Aqua-Chem, Inc. contracted with D&H Machine Service, Inc. for D&H to machine three

large, identical pieces of equipment. The piece of equipment is referred to in the record

as a “cooler.”1 The work was not done properly, rendering them unusable. Aqua-Chem

sued D&H for breach of contract, seeking damages for the replacement cost of the

coolers and for lost profits. Aqua-Chem also sought attorney’s fees and expenses

pursuant to the terms of its agreement with D&H. Following a two-day bench trial, the

court awarded Aqua-Chem $191,870 in replacement costs, but declined to make an award

for lost profits. The court did award Aqua-Chem $50,000 in attorney’s fees and out-of-

pocket expenses. D&H appeals. Both sides raise issues. D&H argues that the trial court

erred when it held that the terms and conditions of the purchase orders presented to D&H

were applicable to the facts of this case. It also argues that the award of damages is not

supported by the evidence. Aqua-Chem contends that the trial court erred in refusing to

award damages for lost profits. It also asserts that the trial court should have awarded it

the full amount of its fees and expenses, the total of which was $64,739.48. We affirm

the trial court’s judgment in all respects.

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

Affirmed; Case Remanded

CHARLES D. SUSANO, JR., J., delivered the opinion of the court, in which JOHN W.

MCCLARTY and THOMAS R. FRIERSON, II, JJ., joined.

John B. Dupree, Knoxville, Tennessee, for the appellant, D&H Machine Service, Inc.

W. Edward Shipe and Nicholas W. Diegel, Knoxville, Tennessee, for the appellee, Aqua-

Chem, Inc.

1

“Cooler” is shorthand for “titanium lube oil cooler.” It is a part of the compulsion

system on Navy destroyers. A cooler uses sea water flowing through it to reduce the temperature

of oil and reduction gears used in propelling the ship.

OPINION

I.

Aqua-Chem was contractually obligated to the United States Navy to provide

certain parts for use on destroyers. The contract extended to the three coolers at issue in

this case. The coolers had to be machined, a function that Aqua-Chem was not able to do

in-house. It contracted with D&H to perform the required machining. After some

discussion and D&H’s confirmation that it could perform the work, Aqua-Chem provided

three purchase orders to D&H, all of which state the following pertinent terms and

conditions:

For the purposes of these Terms and Conditions of Purchase,

the term “Purchase Order” shall mean the agreement and

binding contract between Aqua-Chem . . . and Seller arising

as a result of Seller’s submission of a fully executed

acknowledgment copy of the purchase order. This Purchase

Order shall be deemed to Incorporate and be governed by

these Terms and Conditions. Seller shall be bound by this

Purchase Order and its terms and conditions when it

executes and returns the acknowledgment copy, when it

otherwise indicates its acceptance of this Purchase Order,

when it delivers to Aqua-Chem any of the items ordered

herein or when it renders for Aqua-Chem any of the services

ordered herein. THE TERMS AND CONDITIONS OF

THIS PURCHASE ORDER TAKE PRECEDENCE OVER

ANY TERMS AND CONDITIONS WHICH ARE

PROPOSED BY SELLER. ALL TERMS PROPOSED BY

SELLER ARE REJECTED UNLESS EXPRESSLY

ASSENTED TO IN WRITING BY AQUA-CHEM. Aqua-

Chem’s failure to object to any provision contained in any

communication from Seller shall not be construed as a waiver

of these Terms and Conditions nor as an acceptance of any

such provision.

* * *

2

SERVICES & DELIVERABLES. Seller agrees to perform

the services . . . described in any purchase order, in

accordance with the applicable purchase order, scope of work

and with these Terms and Conditions (“Agreement”). Upon

acceptance of a purchase order, shipment of Goods or

commencement of a Service, Seller shall be bound by the

provisions of this Agreement, including all provisions set

forth on the face of any applicable purchase order, whether

Seller acknowledges or otherwise signs this Agreement or the

purchase order, unless Seller objects to such terms in writing

prior to shipping Goods or commencing Services.

* * *

MODIFICATION OF TERMS. This Purchase Order is

expressly subject to, and Seller’s acceptance is expressly

conditioned upon, Seller’s assent to each and all of the terms

and conditions contained on the face end reverse side hereof.

No addition to or modification of the terms and conditions

hereof shall be binding upon Aqua-Chem. . . . Where Seller’s

quotation, acknowledgement, invoice or other correspondence

contains terms or conditions contrary to or in addition to

Aqua-Chem’s terms and conditions, such contrary or

additional terms are hereby refused and rejected (and without

any requirement of further notice of such refusal and

rejection) and neither acceptance by Aqua-Chem of the goods

nor payment therefor shall constitute a waiver by Aqua-Chem

of any of the terms and conditions contained herein or assent

to any other conditions.

* * *

COMPLETE AGREEMENT AND MODIFICATIONS. This

contract constitutes the entire agreement between the parties

relating to the Services and any products produced in

connection with the Services and no addition to or

modification of any provision of said agreement shall be

binding upon Aqua-Chem unless agreed in writing by Aqua-

Chem.

(Capitalization in original; emphasis added.)

3

No one from D&H signed the purchase orders. However, it is undisputed that

D&H picked up the coolers, machined them, and sent them back to Aqua-Chem. It is

also undisputed that the work was incorrectly done, which rendered the coolers unusable.

Aqua-Chem filed a complaint for breach of contract. D&H answered and filed a

counterclaim, later amended, in which it alleged that D&H had orally rejected the terms

and conditions of the purchase orders in a telephone call between representatives of the

parties. D&H alleged that it orally agreed to machine the coolers, but disputed it was to

be on the terms and conditions in the purchase orders.

Aqua-Chem moved for partial dismissal of the counterclaim, arguing that the clear

and unambiguous terms of the purchase orders provided for acceptance by performance,

and precluded any oral modification or selective rejection of the terms and conditions.

The trial court granted the motion in an order, which stated:

[T]his Court . . . finds that [Aqua-Chem’s] terms and

conditions, which were either directly attached or

incorporated by reference into each purchase order, apply to

all transactions at issue in this case. Therefore, the Court

finds that [D&H] performed the work at issue for [Aqua-

Chem] subject to all of the terms and conditions, including

the contractual limitation of liability clause limiting any

potential recovery to the purchase price.

A bench trial followed. Three witnesses testified: two representatives from Aqua-

Chem and one from D&H. The trial court rejected D&H’s allegation that the plans

provided by Aqua-Chem for the machining work were incorrect or unclear, noting that

the plans are approximately 18 years old and that they are a

result of considerable testing that had to be approved by the

Navy. They have been used apparently for 19 years.

The court found “no evidence . . . of there being any problems with implementation of

the plans.” The trial court held that “it was ultimately incumbent upon D&H to ensure

that they did machine the coolers correctly and that its failure to do so is a breach of the

contract.” It awarded Aqua-Chem $191,870 – the cost of replacing the three coolers

according to the evidence presented by Aqua-Chem.

At trial, Aqua-Chem’s vice-president of quality, David Hansard, testified briefly

regarding its claim for the profits lost as a result of the breach of contract. He said Aqua-

4

Chem’s accounting department provided him with numbers showing 730.35 labor hours

spent by Aqua-Chem employees that would have not been necessary absent D&H’s

breach of contract. Hansard estimated that Aqua-Chem’s profit margin on labor was

$25.96 per hour, resulting in a lost profit claim totaling $18,960. No one from Aqua-

Chem’s accounting department testified. Hansard stated that “our CFO calculated this

for me, and I do not know the exact method that he used.” Because Aqua-Chem provided

no other proof regarding the basis or method of computing its lost profits, the trial court

held that the evidence of lost profits was not sufficient to justify an award. Accordingly,

the court denied Aqua-Chem’s claim for lost profits.

Aqua-Chem also submitted a claim for attorney’s fees in the amount of

$64,739.48. The trial court held that Aqua-Chem was entitled to attorney’s fees under

the contract and found that fees in the amount of $50,000 were reasonable and necessary

under the circumstances. D&H timely filed a notice of appeal.

II.

D&H raises the following issues:

Whether the trial court erred in holding that the terms and

conditions of the purchase orders were applicable when the

written offer to D&H was rejected and Aqua-Chem never

sued upon any alleged oral agreement or sought property

damages.

Whether the trial court erred by awarding Aqua-Chem

damages when Aqua-Chem failed to mitigate and when the

damages sought by Aqua-Chem were too speculative to

support an award.

Aqua-Chem raises these issues:

Whether the trial court erred by not awarding Aqua-Chem its

lost profits based upon profit margin records provided to

Aqua-Chem’s executive witness by its accounting department

and where the proof was admitted into evidence at trial

without objection.

Whether the trial court erred in granting Aqua-Chem

attorney’s fees in the amount of $50,000 instead of the full

amount of $64,739.48 requested.

5

Whether Aqua-Chem is entitled to attorney’s fees on appeal.

III.

In this non-jury case, our standard of review is de novo upon the record of the

proceedings below; however, the record comes to us with a presumption of correctness as

to the trial court’s factual determinations, a presumption we must honor unless the

evidence preponderates against those findings. Tenn. R. App. P. 13(d); Wright v. City of

Knoxville, 898 S.W.2d 177, 181 (Tenn. 1995). There is no presumption of correctness as

to the trial court’s legal conclusions. Kendrick v. Shoemake, 90 S.W.3d 566, 569 (Tenn.

2002); Campbell v. Fla. Steel Corp., 919 S.W.2d 26, 35 (Tenn. 1996).

IV.

A.

D&H argues that the trial court erred in granting Aqua-Chem’s Tenn. R. Civ. P.

12.02(6) motion to partially dismiss the counterclaim for failure to state a claim upon

which relief can be granted. Our standard of review is as stated by the Supreme Court:

A Rule 12.02(6) motion challenges only the legal sufficiency

of the complaint, not the strength of the plaintiff’s proof or

evidence. The resolution of a 12.02(6) motion to dismiss is

determined by an examination of the pleadings alone. A

defendant who files a motion to dismiss admits the truth of all

of the relevant and material allegations contained in the

complaint, but asserts that the allegations fail to establish a

cause of action.

In considering a motion to dismiss, courts must construe the

complaint liberally, presuming all factual allegations to be

true and giving the plaintiff the benefit of all reasonable

inferences. A trial court should grant a motion to dismiss

only when it appears that the plaintiff can prove no set of

facts in support of the claim that would entitle the plaintiff to

relief. We review the trial court’s legal conclusions regarding

the adequacy of the complaint de novo.

6

Webb v. Nashville Area Habitat for Humanity, Inc., 346 S.W.3d 422, 426 (Tenn. 2011)

(internal citations, quotation marks and ellipsis omitted).

D&H’s amended counterclaim alleges:

[O]n or about March 4, [2014,] Aqua-Chem emailed its first

purchase order to [D&H] along with engineering plans.

Shortly after the email was sent, Aqua-Chem’s purchasing

agent, Greg Cagle, called Brian Hillard at [D&H] and

requested that Mr. Hillard sign the purchase order and return

it to Aqua-Chem. Mr. Hillard advised Mr. Cagle that he

would not sign the purchase order because he could not

accept responsibility for the value of the part and did not

agree with the terms and conditions. Mr. Hillard also advised

Mr. Cagle that [D&H] could do the machining, but would not

accept the terms and conditions on the purchase order. Mr.

Cagle then acquiesced and advised Mr. Hillard to come to

Aqua-Chem to pick up the parts. [D&H] then picked up the

parts and performed the machining never having signed the

purchase order and never having agreed to the additional

onerous terms and conditions of any of the purchase orders.

Contrary to D&H’s allegations, the trial court held that the terms and conditions

were applicable because D&H accepted them by performance. The court stated as

follows:

I want to clarify for the record that . . . my interpretation of

this agreement is that an acceptance of the terms can occur by

performance. And that is what happened in this case, is that

by performing the work as requested in the purchase order,

that D&H did accept and is bound by the terms and

conditions contained within that contract.

It is undisputed that D&H received and read, or had an opportunity to read, the terms and

conditions of the purchase orders. Each of them provides that “[D&H] shall be bound by

this Purchase Order and its terms and conditions . . . when it renders for Aqua-Chem any

of the services ordered herein.” The terms and conditions also state that, “[u]pon . . .

commencement of a Service, [D&H] shall be bound by the provisions of this Agreement,

. . . whether [D&H] acknowledges or otherwise signs this Agreement or the purchase

order, unless [D&H] objects to such terms in writing prior to . . . commencing Services.”

(Emphasis added.)

7

Regarding the concept of acceptance by performance, this Court has observed,

Assent to a contract need not take the form of words, but may

instead be “manifested, in whole or in part, by the parties’

spoken words or by their actions or inactions.” Burton v.

Warren Farmers Co-op., 129 S.W.3d 513, 521 (Tenn. Ct.

App. 2002) (citations omitted). “[I]n some instances

performance or even preparation for performance may

suffice” to give notice of acceptance by a promise. 1

Farnsworth, [Farnsworth on Contracts,] § 3.15, at 300 [3d ed.

2004]; see Restatement (Second) of Contracts § 19(1)-(2)

(1981) (stating that assent may be made by acts other than

words so long as the party “intends to engage in the conduct

and knows or has reason to know that the other party may

infer from his conduct that he assents”). Whether an action

constitutes an acceptance must be assessed in terms of

whether it “would lead a reasonable person to conclude that

the offer has been accepted.” Overman v. Brown, 372

N.W.2d 102, 105 (Neb. 1985) (citing In re Mapes

Enterprises, Inc., 15 B.R. 192 (D. Nev. 1981)). It must be

noted, though, that mutuality of assent may not be inferred

from a party’s unilateral actions, from an ambiguous course

of dealing, or “solely [from] the uncommunicated intentions

or states of mind of the contracting parties.” Burton, 129

S.W .3d at 521 (citations omitted); see Balderacchi v. Ruth,

256 S.W.2d 390, 391 (Tenn. Ct. App. 1953).

* * *

Acting in a manner that indicates acceptance of a contract is

generally deemed to be acceptance ‒ at least in the absence of

a requirement that the acceptance take a different form.

Unless the other party has reason to know of it, contract law

does not typically credit a claim that, in spite of a party’s

objective manifestations of assent, it subjectively did not

intend to be bound.

Rode Oil Co. v. Lamar Adver. Co., No. W2007-02017-COA-R3-CV, 2008 WL 4367300,

at *8-9 (Tenn. Ct. App., filed Sept. 18, 2008).

8

Here, construing the counterclaim liberally, presuming all its factual allegations to

be true, and giving D&H the benefit of all reasonable inferences, it is undisputed that

D&H picked up the coolers, performed machining work on them, and returned them. In

addition, it is undisputed that all of this occurred without a written objection to any of the

terms and conditions. Furthermore, and as previously noted, the terms and conditions

expressly preclude any oral modification of the agreement, stating:

The terms and conditions of this purchase order take

precedence over any terms and conditions which are

proposed by [D&H]. All terms proposed by [D&H] are

rejected unless expressly assented to in writing by Aqua-

Chem.

This Purchase Order is expressly subject to, and [D&H’s]

acceptance is expressly conditioned upon, [D&H’s] assent

to each and all of the terms and conditions[.]

This Purchase Order supersedes completely any oral or

written communications unless the terms are expressly

incorporated herein.

No addition or modification of the terms and conditions

hereof shall be binding upon Aqua-Chem[.]

Where [D&H’s] quotation, acknowledgement, invoice or

other correspondence contains terms or conditions

contrary to or in addition to Aqua-Chem’s terms and

conditions, such contrary or additional terms are hereby

refused and rejected[.]

This contract constitutes the entire agreement between the

parties relating to the Services . . . and no addition to or

modification of any provision of said agreement shall be

binding upon Aqua-Chem unless agreed in writing by

Aqua-Chem.

(Capitalization in original omitted.) We agree with and affirm the trial court’s

determination that the undisputed pertinent facts establish, as a matter of law, that the

terms and conditions of the purchase orders were part of the parties’ agreement and,

hence, applicable to the facts of this case.

9

The trial court allowed D&H to make an offer of proof at trial regarding its

contention that the parties had orally agreed that the terms and conditions would not

apply. D&H employee Brian Hillard testified that he spoke with Aqua-Chem

representative Greg Cagle on the telephone and told him that “he did not agree to those

terms and conditions,” and “his response was when I could [sic] have the [coolers]

machined and to come and pick them up.” The trial court, after hearing this proffer,

reaffirmed its ruling that the written terms and conditions to the purchase orders were

applicable. This ruling constitutes an implicit rejection of D&H’s argument that the

proof established a distinct oral agreement, the terms of which differed from the written

contract.

B.

D&H argues that “Aqua-Chem failed to prove its damages with reasonable

certainty” and “it was impossible to make a fair and reasonable assessment of the

damages because Aqua-Chem failed to mitigate its damages.” At trial, Aqua-Chem

executive Hansard testified that Aqua-Chem incurred replacement cost damages in the

total amount of $191,870, the amount found and awarded by the trial court. D&H did not

object to this proof, nor did it introduce countervailing evidence suggesting that this

number was inaccurate or inflated. The evidence does not preponderate against the trial

court’s determination of replacement cost damages.

C.

“Under the doctrine of mitigation of damages, an injured party is enlisted with a

duty to exercise reasonable care and due diligence to avoid loss or minimize damages

after suffering injury.” JWT, L.P. v. Printers Press, Inc., No. M2001-02590-COA-R3-

CV, 2002 WL 31397317, at *5 (Tenn. Ct. App., filed Oct. 24, 2002). Mitigation of

damages is an affirmative defense. Maness v. Collins, No. W2008-00941-COA-R3-CV,

2010 WL 4629614, at *11 (Tenn. Ct. App., filed Nov. 17, 2010) (“The failure to mitigate

damages is an affirmative defense”); Allied Waste N. Amer., Inc. v. Lewis, King, Krieg

& Waldrop, P.C., 93 F. Supp. 3d 835, 863 (M.D. Tenn. 2015) (“the failure to mitigate

damages is an affirmative defense under Tennessee law”) (internal quotation marks

omitted). Therefore, mitigation must be pleaded under Tenn. R. Civ. P. 8.03, or else it is

waived under Tenn. R. Civ. P 12.08 (“A party waives all defenses and objections which

the party does not present either by motion . . . or . . . in the party’s answer or reply, or

any amendments thereto.”). See Vintage Health Res., Inc. v. Guiangan, 309 S.W.3d

448, 460 (Tenn. Ct. App. 2009). In this case, D&H did not plead the failure to mitigate

10

damages in any pleading filed with the trial court. Accordingly, D&H’s mitigation of

damages defense has been waived.2

D.

Aqua-Chem argues that the trial court erred by declining to award damages for

lost profits resulting from the breach of contract. This Court set forth the principles

governing a claim for lost profits in Waggoner Motors, Inc. v. Waverly Church of

Christ, 159 S.W.3d 42, 58-59 (Tenn. Ct. App. 2004), stating as follows:

[A]n injured party may recover lost anticipated profits when

their nature and occurrence have been established with

reasonable certainty. Baker v. Hooper, 50 S.W.3d 463, 470

(Tenn. Ct. App. 2001); Tire Shredders, Inc. v. ERM–North

Cent., Inc., 15 S.W.3d 849, 857 (Tenn. Ct. App. 1999); 1

RECOVERY OF DAMAGES FOR LOST PROFITS § 1.4, at 9.

The reasonable certainty standard applies chiefly to the

evidence regarding the existence of damages. 1 RECOVERY

OF DAMAGES FOR LOST PROFITS § 1.6, at 17. It is a flexible

standard that permits the courts to take the particular facts of

each case into consideration. The existence of damages has

been proven with reasonable certainty when the mind of a

2

Even if it had not been waived, or to the extent it could be argued that the issue was

tried by implied consent – an argument not made by D&H – it has failed to prove that Aqua-

Chem did not exercise reasonable care and due diligence to avoid further loss or minimize its

damages. “The burden is on the defendants who breached the contract to prove what amounts

should be offset in mitigation of damages.” State ex rel. Chapdelaine v. Torrence, 532 S.W.2d

542, 550 (Tenn. 1975), abrogation on other grounds recognized by Wells v. Tenn. Bd. of

Regents, 231 S.W.3d 912, 916-17 (Tenn. 2007); accord ABC Painting Co. v. White Oaks Apts.

of Hermitage, No. M2006-00280-COA-R3-CV, 2007 WL 14250, at *3 (Tenn. Ct. App., filed

Jan 2, 2007). David Ferris, Aqua-Chem’s manufacturing engineer over military products,

testified that the incorrectly-machined coolers were not salvageable or repairable, stating, “I

don’t see a way possible that these could ever be used.” He also explained that the design for the

coolers “is a Navy design. You can’t sell it to anybody else anyway. They own the design.”

The plans and designs for this important part for Navy warships are not publicly available

information and were placed under seal by the trial court. D&H’s argument that Aqua-Chem

should not recover because it did not mitigate its damages is without merit.

11

prudently impartial person is satisfied that the injured party

has been damaged.

Once an injured party proves that it has been damaged, the

amount of the damages need not be proved with certainty or

mathematical precision. McClain v. Kimbrough Constr. Co.,

806 S.W.2d 194, 200 (Tenn. Ct. App. 1990); see also

Authentic Architectural Millworks, Inc. v. SCM Group

USA, Inc., 262 Ga. App. 826, 586 S.E.2d 726, 731 (2003).

After the fact of damages ha[s] been established, less

certainty is required with regard to the amount of the

damages. The amount of lost profits damages may be based

on estimates. While definite proof regarding the amount of

damages is desirable as far as it is reasonably possible, it is

even more desirable that an injured party not be deprived of

compensation merely because it cannot prove the extent of

the harm suffered with complete certainty. Restatement

(Second) of Torts § 912 cmt. a (1979). This principle is

based on the policy that defendants should not be permitted to

complain about the lack of exactness or precision in the proof

regarding the amount of damages when their wrongdoing

created the damages in the first place. Walgreen Co. v.

Walton, 16 Tenn. App. 213, 223, 64 S.W.2d 44, 50 (1932); 1

RECOVERY OF DAMAGES FOR LOST PROFITS § 5.2, at 385.

An award for lost profits damages depends on whether the

evidence provides a satisfactory basis for estimating what the

injured party’s probable earnings and expenses would have

been had the wrongdoing not occurred. Since lost profits can

rarely be computed down to the last penny, the evidence

needed to support an award for lost profits need only provide

a reasonable or rational basis for calculating what the lost

profits would have been.

(Footnotes and some internal citations omitted.) In Waggoner Motors, 159 S.W.3d at 58

n.29, and more recently in Borla Performance Industries v. Universal Tool and

Engineering, Inc., No. E2014-00192-COA-R3-CV, 2015 WL 3381293, at *8 (Tenn. Ct.

App., filed May 26, 2015), we observed that “definite proof regarding the amount of

damages is desirable as far as it is reasonably possible,” and that “[p]arties seeking to

recover lost profits damages would be well advised to provide the best available proof as

to the amount of their loss that the particular situation permits.”

12

Aqua-Chem executive Hansard provided the following testimony about its lost

profits allegation:

The next row is lost profit. Let me explain. We consume 730

hours of our shop labor to rebuild these three units. This is a

lost opportunity for Aqua-Chem. Because we could have

used those hours for other pursuits, other customers, other

products. My accounting department gave me a figure of

every hour. We have the ability to make $25.96 of margin.

So as the math shows, we lost 730 hours, times 25.96. That’s

18,9603 hours of lost profit opportunities.

* * *

THE COURT: I’ve got a quick question for you. On your

damages summary, your lost profit section, that $25.96 an

hour, how was that ‒ do you know how that was calculated?

Was that like an average of profit for each job?

THE WITNESS: Well, our CFO calculated this for me, and I

do not know the exact method that he used.

THE COURT: Okay. Thank you.

(Footnote added.) In order to prevail on its claim for lost profits, Aqua-Chem had the

burden to present evidence that “provides a satisfactory basis for estimating what [its]

probable earnings and expenses would have been had the wrongdoing not occurred.”

Borla Perf. Indus., 2015 WL 3381293, at *10 (quoting Waggoner Motors, 159 S.W.3d

at 58-59). As can be seen from the above testimony, when Hansard was questioned on

this very point by the trial court, he was unable to provide the basis for such a calculation.

Neither the CFO nor anyone from Aqua-Chem’s accounting department testified. Under

these circumstances, the evidence does not preponderate against the trial court’s

judgment declining to award lost profits.

E.

Aqua-Chem requested a judgment for its attorney’s fees and expenses in the

amount of $64,739.48. The trial court reviewed the request and supporting

3

The calculation actually results in a figure of 18,951 hours.

13

documentation, and determined that $50,000 was a reasonable and necessary amount for

fees and expenses. Aqua-Chem argues on appeal that the court should have awarded it

the full amount requested. As the Supreme Court has observed,

The trial court’s determination of a reasonable attorney’s fee

is “a subjective judgment based on evidence and the

experience of the trier of facts,” United Med. Corp. of Tenn.,

Inc. v. Hohenwald Bank & Trust Co., 703 S.W.2d 133, 137

(Tenn. 1986), and Tennessee has “no fixed mathematical

rule” for determining what a reasonable fee is. Killingsworth

v. Ted Russell Ford, Inc., 104 S.W.3d 530, 534 (Tenn. Ct.

App. 2002). Accordingly, a determination of attorney’s fees is

within the discretion of the trial court and will be upheld

unless the trial court abuses its discretion. Kline v. Eyrich, 69

S.W.3d 197, 203 (Tenn. 2002); Shamblin v. Sylvester, 304

S.W.3d 320, 331 (Tenn. Ct. App. 2009). We presume that the

trial court’s discretionary decision is correct, and we consider

the evidence in the light most favorable to the decision.

Henderson v. SAIA, Inc., 318 S.W.3d 328, 335 (Tenn. 2010);

Keisling v. Keisling, 196 S.W.3d 703, 726 (Tenn. Ct. App.

2005). The abuse of discretion standard does not allow the

appellate court to substitute its judgment for that of the trial

court, Williams v. Baptist Mem’l Hosp., 193 S.W.3d 545,

551 (Tenn. 2006); Myint v. Allstate Ins. Co., 970 S.W.2d

920, 927 (Tenn. 1998), and we will find an abuse of

discretion only if the court “applied incorrect legal standards,

reached an illogical conclusion, based its decision on a clearly

erroneous assessment of the evidence, or employ[ed]

reasoning that causes an injustice to the complaining party.”

Konvalinka v. Chattanooga–Hamilton Cnty. Hosp. Auth.,

249 S.W.3d 346, 358 (Tenn. 2008); see also Lee Med., Inc. v.

Beecher, 312 S.W.3d 515, 524 (Tenn. 2010).

Wright ex rel. Wright v. Wright, 337 S.W.3d 166, 176 (Tenn. 2011).

Regarding the factors to be considered by the trial court in setting a reasonable

attorney’s fee, we have recently stated,

Tennessee Supreme Court Rule 8, Rule of Professional

Conduct 1.5(a) sets forth the factors to be considered in

determining the reasonableness of attorney’s fees, providing:

14

(a) A lawyer shall not make an agreement for, charge, or

collect an unreasonable fee or an unreasonable amount for

expenses. The factors to be considered in determining the

reasonableness of a fee include the following:

(1) the time and labor required, the novelty and difficulty of

the questions involved, and the skill requisite to perform the

legal service properly;

(2) the likelihood, if apparent to the client, that the acceptance

of the particular employment will preclude other employment

by the lawyer;

(3) the fee customarily charged in the locality for similar legal

services;

(4) the amount involved and the results obtained;

(5) the time limitations imposed by the client or by the

circumstances;

(6) the nature and length of the professional relationship with

the client;

(7) the experience, reputation, and ability of the lawyer or

lawyers performing the services;

(8) whether the fee is fixed or contingent;

(9) prior advertisements or statements by the lawyer with

respect to the fees the lawyer charges; and

(10) whether the fee agreement is in writing.

Beacon4, LLC v. I & L Inv., LLC, No. E2015-01298-COA-R3-CV, 2016 WL 4545736,

at *40 (Tenn. Ct. App., filed Aug. 30, 2016). “[A] trial court properly may exercise its

discretion and consider the applicable factors in determining a reasonable amount of

attorney’s fees even if an attorney’s affidavit of fees fails to address all of the factors to

be considered or, depending on the circumstances, even in the absence of an affidavit of

attorney’s fees.” Id.

15

In this case, the trial court obviously was very familiar with the pleadings and

proceedings. As already noted, there were three witnesses presented over a two-day

bench trial. The issues presented and tried were not particularly complex. Based on our

review of the record and applicable factors, we find no abuse of discretion by the trial

court in awarding $50,000 in attorney’s fees and expenses.

F.

D&H has not appealed the trial court’s determination that it is liable to Aqua-

Chem for attorney’s fees under the terms of the parties’ agreement. Consequently, Aqua-

Chem’s request for attorney’s fees on appeal is granted. On remand, the trial court shall

hear proof and enter judgment for reasonable and necessary fees and expenses incurred

by Aqua-Chem on appeal.

V.

The judgment of the trial court is affirmed. Costs on appeal are assessed one-half

to the appellant, D&H Machine Service, Inc., and one-half to the appellee, Aqua-Chem,

Inc. The case is remanded for further action consistent with this opinion, and collection

of costs assessed below.

_______________________________

CHARLES D. SUSANO, JR., JUDGE

16