Jonathan King v. Dean Chase

03/17/2021

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

December 9, 2020 Session

JONATHAN KING, ET AL. v. DEAN CHASE

Appeal from the Chancery Court for Davidson County

No. 16-0030-BC Ellen Hobbs Lyle, Chancellor

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No. M2019-01084-COA-R3-CV

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Appellants, partners in a partnership that was the sole member of an LLC, filed suit

against the manager of the partnership for alleged breach of fiduciary duties related to the

sale of commercial real estate on behalf of the LLC. The manager and his business (a

partner in the partnership, and together with manager, Appellees) filed counterclaims

against Appellants, alleging breach of contractual and statutory duties. The trial court

dismissed Appellants’ lawsuit on grant of summary judgment, and we affirm that

decision. Appellees’ remaining claim for misrepresentation by concealment against

Appellants was tried to a jury, which returned a unanimous verdict in favor of Appellees.

Prior to the jury trial, the Business Court found, as a matter of law, that Appellees were

entitled to indemnification by the LLC, and we affirm that decision. Because Appellants’

tort of misrepresentation by concealment resulted in a premature distribution of the sale

proceeds by the LLC, the LLC was unable to fully indemnify Appellees. As such, the

Business Court entered judgment against Appellants for attorney’s fees and expenses as

compensatory damages. We affirm.

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

Affirmed and Remanded

KENNY ARMSTRONG, J., delivered the opinion of the court, in which J. STEVEN

STAFFORD, P.J., W.S., and CARMA DENNIS MCGEE, J., joined.

W. Gary Blackburn and Bryant Kroll, Nashville, Tennessee, for the appellants, David

King, Jonathan King, and Taylor King.

Beau C. Creson, Gayle I. Malone, Jr., and Charles I. Malone, Nashville, Tennessee, for

the appellees, Dean Chase, Sandra Chase, and D. F. Chase, Inc.1

1

In its December 7, 2018 order denying the Kings’ motion to alter or amend the order granting

summary judgment and dismissing their Complaint, see discussion infra, the trial court held, inter alia,

William Taylor Ramsey, Nashville, Tennessee, for the appellee, James W. Carrell Estate.

Lyndsay Claire Smith, Nashville, Tennessee, for the appellees, Lee Kennedy and Austin

Pennington.

William Daniel Leader, Nashville, Tennessee, for the appellee, The Rosemary Grace

Dunn 2004 Irrevocable Trust.

Robert Busby, Lithia, Florida, appellee, pro se.2

OPINION

I. Background

In late 2013, David Chase sought to purchase real estate located at One Music

Row in Nashville (the “Property”), which he planned to sell for development as a hotel

under the Virgin brand. To this end, David Chase created two entities for the purchase of

the Property and the pre-development stage of the project—NV Partners, a Tennessee

general partnership (the “Partnership”), and NV Music Row, LLC, a Tennessee limited

liability company (the “LLC,” and together with the Partnership, the “NV Entities”). At

all relevant times, the NV Partners were: (1) Lee Kennedy (with a 26% interest); (2) The

James W. Carrell Estate (with a 16.7% interest); (3) Robert Busby (with a 3.3% interest);

(4) Austin Pennington (with a 15.2% interest); (5) The Rosemary Grace Dunn 2004

Irrevocable Trust (with a .3% interest); (6) Jonathan King and Taylor King (together, the

that

The Chase Parties announced they are not seeking any relief on their claims asserted in

Count I, paragraph 47, subsection (c) of the Second Amended Counterclaim and Third-

Party Complaint, and that Sandra Chase[, Dean Chase’s wife,] shall not be included as a

party to the lawsuit.

Nonetheless, the Kings list Sandra Chase as an appellee. However, from our review, it appears she has no

stake in the outcome of the appeal because there was no judgment for or against her in the trial court. In

fact, the Kings did not assert any claims against Mrs. Chase, and she was dismissed from the underlying

lawsuit. Regardless, as noted in Appellees’ brief, to the extent necessary, Mrs. Chase adopts the

arguments asserted therein.

2

As discussed infra, by order of December 7, 2018, the trial court granted Lee Kennedy, Austin

Pennington, the Rosemary Grace Dunn 2004 Irrevocable Trust, and the James Carrell Estate’s joint-

motion to be dismissed from the lawsuit. These parties are included as appellees only to the extent that

Appellees Jonathan and Taylor King assert, as an appellate issue, that they are necessary parties on the

issue of indemnification. For the reasons discussed herein, we conclude that these parties are not

necessary parties and affirm the trial court’s December 7, 2018 order dismissing them from the lawsuit.

We note that, although Robert Busby did not join in the motion, he also is not a necessary party to the

lawsuit.

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“Kings,” or “Appellants”) (with a 16.7% combined interest); (7) David King (with a 5%

interest);3 (8) D.F. Chase, Inc. (with a 16.7% interest); and Sandra Chase (with a 5%

interest).

As set out in the NV Music Row, LLC Operating Agreement (“Operating

Agreement”), the purpose of the LLC was to “purchase, acquire, own, hold, develop and

sell or otherwise dispose” of the Property. According to the Agreement of the

Partnership of NV Partners (the “Partnership Agreement”), the Partnership was organized

to “purchase, acquire, own, hold, develop and sell or otherwise dispose” of the Property

“through a wholly owned limited liability company [, i.e., NV Music Row, LLC].” NV

Partners was the sole member of NV Music Row, LLC. At the time of its formation in

2014, David Chase was designated as the Managing Partner of the Partnership. Section

5.1 of the Partnership Agreement vests the Managing Partner with sole “power or

authority to act for or bind the Partnership,” but it also provides the Managing Partner

(and other partners) with indemnity.

Due to unrelated criminal matters involving David Chase, on February 15, 2015,

the partners amended the Partnership Agreement “in order to reflect the resignation of

David Chase as Managing Partner [and] the election of Dean Chase as successor

Managing Partner.” Because Dean Chase, individually, was not a partner in the venture,

Dean Chase’s title was listed as Manager. Pursuant to the amendment to the Partnership

Agreement, Dean Chase, a principal of D.F. Chase, Inc., acted as the Manager of the

Partnership at all relevant times.

The purchase money for the Property was comprised of contributions from the

partners and a $4,500,000 loan from lender, Silverpeak (the “Silverpeak Loan”). In or

about June 2015, Silverpeak decided not to exercise an option to convert the Silverpeak

Loan into equity in the project. In the absence of repayment, on or about July 1, 2015,

Silverpeak declared the NV Entities to be in default on the Silverpeak Loan and

demanded repayment of all amounts due (i.e., $6,105,996.29) to avoid foreclosure of the

Property. In an effort to raise the money to pay off the Silverpeak Loan, Dean Chase and

Austin Pennington met with Avenue Bank. It was decided that a loan from Avenue Bank

was not possible because three of the partners were unwilling or unable to personally

guarantee the loan. As an alternative, partner Austin Pennington offered to guarantee

half of the Avenue Bank loan if Jonathan King would guarantee the other half. Jonathan

King refused, and the loan was denied.

3

As noted herein, the trial court denied Appellees’ motion to amend their complaint to add

claims against David King. Although listed as an appellant, no judgment was entered against David

King. Accordingly, any reference to the Kings or Appellants denotes Jonathan King and his wife, Taylor

King.

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After the Avenue Bank loan was denied, on or about September 10, 2015, another

partner, The James W. Carrell Estate, offered to make a loan to the partnership to pay off

the Silverpeak Loan (the “Carrell Estate Loan”). Specifically, the Carrell Estate offered a

loan on the following terms: (1) $100,000 origination fee; (2) 15% annual interest; (3)

three-month term with an option for a three-month extension; (4) $100,000 extension fee;

(5) $750,000 default/foreclosure fee; and (6) all interest would be earned at the beginning

of the applicable term. The partners, including the Kings, voted to approve the Carrell

Estate Loan. However, after Steven Kirkham, the NV Entities’ attorney, reviewed the

foregoing terms, he advised Dean Chase, as Manager of the Partnership, that the 15%

interest rate was usurious and illegal under Tennessee law.

On the day before Silverpeak was due to foreclose on the Property, and with no

loan options available, Dean Chase caused partner D.F. Chase, Inc. to loan the NV

Entities approximately $6,300,000 to pay off the Silverpeak Loan and save the project

(the “D.F. Chase Loan”). In making the D.F. Chase Loan, Dean Chase spoke with Mr.

Kirkham and instructed him to make the costs of the loan similar to those proposed in the

Carrell Estate Loan but to ensure that the terms were compliant with Tennessee law. To

this end, Mr. Kirkham arrived at the following terms for the D.F. Chase Loan: (1)

$200,000 origination fee; (2) 7.25% annual interest; (3) three-month term with options

for two three-month extensions; (4) $20,000 extension fee; and (5) all interest would be

calculated as time elapsed rather than up front. Dean Chase did not seek Partnership

approval prior to making the D.F. Chase Loan. Rather, he concluded that a vote was not

necessary due to the fact that the partners had previously approved the Carrell Estate

Loan, which was ostensibly the same as the D.F. Chase Loan, with the exception that the

overall cost of the D.F. Chase Loan were approximately $37,744 less than those offered

by the Carrell Estate and was legal under Tennessee law. It is undisputed, however, that

the partners were advised of the D.F. Chase Loan within twenty-four hours of the

distribution of the funds to pay off the Silverpeak Loan.

Having avoided foreclosure on the Property, on November 4, 2015, NV Music

Row, LLC, with the vote of a majority of the partners, entered into a contract with Virgin

to sell the Property for $11,500,000. The contract provided for a 35 day due diligence

period, during which Virgin had the option to rescind. On December 1, 2015, Virgin

exercised its option and withdrew its initial offer. Instead, Virgin lowered its purchase

offer to $10,500,000. Following a meeting and vote, a majority of the partners directed

Dean Chase to reject Virgin’s lower offer, which he did. Thereafter, Virgin made another

offer of $11,000,000 to purchase the Property. On or about December 2, 2015, a majority

of the partners voted to accept Virgin’s $11,000,000 offer. Although the Kings voted

against the sale, after the majority of the partners voted to accept Virgin’s offer, each of

the partners, including the Kings, signed a Unanimous Consent directing Dean Chase to

consummate the transaction on behalf of the NV Entities. Following the sale, the NV

Entities were required, under Article VII of the Operating Agreement, to retain sufficient

funds to pay any future contingent liabilities but were otherwise allowed to distribute the

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remainder of the sale proceeds. As discussed below, each partner had an obligation to

disclose any known contingent liabilities. No partner disclosed any potential future

liabilities, and, on or about December 21, 2015, the NV Entities made a distribution of all

but approximately $68,000 of the sale proceeds. Each partner realized a profit of over

30% of his or her initial investment.

On December 31, 2015, approximately two weeks after distribution of the sale

proceeds, the Kings, through their attorney, sent a letter to Mr. Kirkham, in which they:

(1) requested to examine, audit, and copy the books and records of the NV Partners; and

(2) placed Dean Chase, Mr. Kirkham, his law partners, and his firm on notice of potential

claims for fraud, conversion, breach of fiduciary duty, and legal malpractice. Thereafter,

on January 12, 2016, Jonathan King filed a complaint against Dean Chase, in his capacity

as Manager of the Partnership, in the Davidson County Chancery Court. Specifically,

Jonathan King alleged that Dean Chase violated sections 6.1(a) and (c) of the Partnership

Agreement, and sections 61-1-403(b) and (c) of the Tennessee Revised Uniform

Partnership Act (“TRUPA”) by allegedly refusing Jonathan King access to the

Partnership’s books and records, and by not identifying the Partnership’s accountant. On

January 27, 2016, the case was transferred to the Business Court Pilot Project (“Business

Court,” or “trial court”).

On March 28, 2016, Dean Chase filed an answer denying liability. Concurrent

with his answer, Dean Chase filed a counterclaim against Jonathan King, personally.

Therein, Dean Chase alleged, inter alia, that Jonathan King “was planning to request the

books and records of NV Partners and to file the present and the threatened future

lawsuit(s) before the distributions were made to the partners of NV Partners on December

21, 2015.” In failing to “make . . . the other partners of NV Partners, or Mr. Chase aware

of such plans prior to the . . . distribution being made,” Dean Chase averred that Jonathan

King’s actions were intentional, knowing, reckless, and/or negligent and in contravention

of his contractual duties. Thus, Dean Chase sought a judgment for compensatory

damages in the form of attorney’s fees and costs incurred in defending the lawsuit on

behalf of the Partnership.

On August 12, 2016, Dean Chase filed a Tennessee Rule of Civil Procedure 12

motion for judgment on the pleadings, wherein he sought dismissal of Jonathan King’s

original books and records claims. Following a hearing, on September 29, 2016, the

Business Court issued a memorandum and order dismissing Jonathan King’s original

claims as a matter of law. In ruling on the motion, the trial court acknowledged Dean

Chase’s assertion that Jonathan King’s “[c]omplaint should be dismissed on the[]

ground[] [that Dean Chase] is not a proper party because he is not a Partner, only the

Manager of the Partnership.” However, the Business Court found that Dean Chase, as

the Manger of the Partnership, owed certain duties to the Partnership and was, thus, a

proper party to King’s lawsuit. Nonetheless, the Business Court ultimately dismissed

King’s lawsuit, finding that it was moot as Mr. King did, in fact, obtain the records and

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information he sought.

On January 6, 2017, Dean Chase filed a motion to amend his counterclaim and to

add parties. Therein, he explained that, on or about December 19, 2016, Jonathan King,

purporting to act on behalf of himself, Taylor King, NV Partners, and NV

Music Row, LLC, filed a purportedly pro se Complaint against Dean Chase

. . . and others in the Circuit Court for Davidson County, Tennessee (the

“King Circuit Court Case”). The King Circuit Court Case alleges claims

against Dean Chase . . . and others relating to the affairs and business of

NV Partners. Despite realizing a profit of over 30% over approximately 18

months on their capital contribution in NV Partners, Jonathan and Taylor

King seek damages of $15,000,000 from each defendant in the King Circuit

Court Case.

***

With Jonathan and Taylor King’s recent filing of the King Circuit Court

Case, it is clear that NV Partners cannot be wound down and dissolved

without Court intervention, and that NV Partners and its partners, along

with NV Music Row, LLC, must now be added as parties to this case . . . .

Following a hearing, the Business Court granted Dean Chase’s motion to amend.

On February 1, 2017, Dean Chase filed an Amended Counterclaim and Third-Party

Complaint (“Amended Counterclaim”). The Amended Counterclaim added D.F. Chase,

Inc. and Sandra Chase (together with Dean Chase and D.F. Chase, Inc., the “Chase

Parties,” or “Appellees”) as plaintiffs. The Amended Counterclaim also added the NV

Entities, and the individual partners as defendants. In relevant part, the Chase Parties

asserted: (1) claims for compensatory damages against Jonathan King and Taylor King

for their “intentional, knowing, reckless, and/or negligent failure to disclose” their plans

to sue Dean Chase prior to approving the distribution of funds from the Partnership; and

(2) claims for indemnity from NV Partners and NV Music Row, LLC for costs “incurred

in providing Jonathan King information relating to NV Partners, defending the present

lawsuit, and responding to Jonathan and Taylor King’s orchestrated campaign against NV

Partners.” The Chase Parties further averred that the “costs and expenses all have been

incurred and continue to be incurred on behalf of NV Partners [and] constitute legitimate

business liabilities of NV Partners.” The Chase Parties asserted a right to indemnification

for these costs and expenses under both the TRUPA and the Partnership Agreement.4

4

As to indemnification under the TRUPA, the Chase Parties averred:

a. Judgment against Jonathan and Taylor King individually is proper pursuant to

Tenn. Code Ann. § 61-1-307 because Jonathan and Taylor King are personally liable for

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Based on these allegations, the Chase Parties sought the following relief:

1. That the Court require Jonathan and Taylor King to deposit into Court

during the pendency of this action the $459,455.06 they were distributed

from NV Partners, or some portion thereof, because such funds belong to

NV Partners to pay its liabilities to Dean Chase and/or D.F. Chase, Inc.; or,

alternatively, that the Court require all partners of NV Partners to deposit

into Court their distributions from NV Partners, or some portion thereof, for

the same purpose;

Dean Chase’s and D.F. Chase’s claim under Tenn. Code Ann. § 61-1-306 and NV

Partners’ assets subject to execution are insufficient to satisfy the claim.

b. Judgment against Jonathan and Taylor King individually is also proper

pursuant to Tenn. Code Ann. § 61-1-307 because Jonathan and Taylor King are

personally liable for Mr. Chase’s claim under Tenn. Code Ann. § 61-1-306 and it would

be an appropriate exercise of the court’s equitable power.

49. As general partners of NV Partners and pursuant to Tenn. Code Ann. § 61-1-

306, all partners of NV Partners are likewise jointly and severally liable for the liabilities

that NV Partners owes to Dean Chase and D.F. Chase, Inc., even those such liabilities

that have been caused by the acts and omissions of Jonathan and Taylor King.

As to their claim for indemnification under the Partnership Agreement, the Chase Parties cited

Sections 5.3 and 5.1(b) of the Partnership Agreement. Section 5.3 provides:

Compensation. Except as may be hereafter approved by the Managing Partner and a

Majority Vote of the Partners, no Partner or Affiliate of any Partner shall receive any

salary, fee, or draw for services rendered to or on behalf of the Partnership, provided that

any Partner or Affiliate of any Partner may be reimbursed for any expenses incurred by

such Partner or Affiliate on behalf of the Partnership or otherwise in its capacity as a

Partner.

Section 5.1(b) of the Partnership Agreement provides:

The Partnership will indemnify the Partners and hold them harmless and defend them

from and against all claims and liabilities arising from or related to any act or omission

done in good faith or in a manner that any Partner or Partners reasonably believed to be

in or not opposed to, the best interests of the Partnership and consistent with the purpose

of the Partnership, including all damages, judgments, fees, settlements, costs, and

attorneys’ fees actually and reasonably paid or incurred by any Partner or Partners in

connection with an action, claim, suit, or proceeding incurred pursuant to this indemnity

provision, The Partner or Partners will be indemnified to the fullest extent allowed under

Tennessee law. In the event the Partnership does not have adequate funds or assets to

fully indemnify any Partner, the Partners will not, under any circumstances, be required

to indemnify the Partner or make an additional Capital Contribution to the Partnership for

the purpose of indemnifying the Partner.

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2. That the Court award Dean Chase and D.F. Chase, Inc. a money

judgment for all costs and expenses incurred on behalf of NV Partners

against Jonathan and Taylor King, or, alternatively, against NV Partners

and all its partners including Jonathan and Taylor King;

***

4. That the Court award Dean Chase and D.F. Chase, Inc. a money

judgment for compensatory damages, treble damages, and punitive

damages in an amount to be proven at trial against Jonathan King for

inducement of breach of contract;

***

6. That the Court award Dean Chase and D.F. Chase, Inc. a judgment that

they are entitled to full and complete indemnity by the NV Entities and the

partners of NV Partners;

***

9. That the Court award Dean Chase and D.F. Chase, Inc. pre judgment

interest;

10. That the Court award Dean Chase, D.F. Chase, Inc., and Sandra Chase

their costs and attorney fees in this action;

In addition to the foregoing relief, the Chase Parties also requested a declaratory

judgment that they had not engaged in any violation of the Partnership Agreement or the

TRUPA.

As noted above, the Business Court dismissed Jonathan King’s books and records

lawsuit as moot, and there is no indication in the record that the King Circuit Court Case

was transferred to the Business Court. Nonetheless, on March 22, 2017, the Business

Court granted the Kings leave to file an amended complaint. After striking some of the

proposed allegations, on April 26, 2017, the Kings filed a First Amended Complaint. On

May 10, 2017, the Chase Parties filed a motion for partial judgment on the pleadings. In

response, the Kings moved to amend their complaint, which the Business Court allowed.

On June 19, 2017, the Kings filed a Second Amended Complaint (the “Complaint”),

wherein they averred, in relevant part, that:

8. On or about February 20, 2015, David Chase resigned as managing

partner and was replaced by his father, Dean Chase. Dean Chase was then

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vested with the power to control all partnership decisions, with the

exception of Material Matters, which require the approval of the Managing

Partner and a Majority Vote of the Partners, according to the Partnership

Agreement. “Material Matters” include, inter alia, refinancing the

property, borrowing money, and the payment of compensation to any

Partner.

9. Dean Chase became a manager but was not personally made a partner in

the venture. As a result of this status, he owed a fiduciary duty to the

partnership and to its members. This duty specifically forbade him from

making business decisions in his own personal interest, but inimical to the

best interest of the partnership.

The Kings alleged breach of fiduciary duty, intentional misrepresentation, promissory

fraud, and constructive fraud against Dean Chase. Specifically, the Kings alleged that

Dean Chase violated duties he owed to the Partnership in three ways, i.e.:

a) He paid or permitted to be paid fees and expenses related, to criminal

charges against his son David from the funds of the Partnership [the

“Expense Claims”];

b) He caused D.F. Chase, Inc., a corporation owned and controlled by him,

to lend money to the Partnership, rather than pursuing borrowing options

free of conflicts. In so doing, fees and interest were paid to D.F. Chase, and

inured to the benefit of Dean Chase [the “Loan Claims”];

c) He negotiated, dominated and controlled the sale of partnership property

at less than a fair market value to satisfy the personal needs of himself and

D.F. Chase to the detriment of the Partnership and [the Kings] [the

“Property Sale Claims”].

After time for discovery, on July 13, 2018, the Chase Parties filed a motion for

summary judgment, seeking dismissal of the Kings’ Complaint on the following grounds:

2. With respect to Loan Claims, the undisputed material facts establish as a

matter of law that the loan from D.F. Chase to the Partnership was neither a

breach of fiduciary duty, a breach of the operative Partnership Agreement

of the Partnership, nor any misrepresentation or fraud in any manner.

Irrespective, the undisputed material facts also establish that neither the

Kings, specifically, nor the partners generally, suffered any damages as a

result of such loan, which was a lowest cost option to save the Partnership

from foreclosure proceedings on the land.

3. With respect to the [Property] Sale Claims, the undisputed material facts

establish that, even if the Court presumes the Kings did not vote in favor of

the sale of the property, the property was sold pursuant to a valid and

enforceable vote of the partners holding a majority interest in the

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Partnership and pursuant to the express requirements of the operative

partnership agreement. Thus, [the] claims for breach of fiduciary duty and

misrepresentation/fraud fail as a matter of law.

4. With respect to the Expense Claims, the undisputed material facts

establish that Dean Chase did not pay or permit to be paid fees and

expenses related to criminal charges against his son David Chase from the

funds of the Partnership.

The Kings opposed the motion for summary judgment, which the Business Court

heard on September 14, 2018. At the hearing, the Kings announced that they would not

pursue the Expense Claims concerning the allegation that Dean Chase caused the

Partnership to pay certain expenses related to David Chase’s criminal matters. By order

of September 27, 2018, the Business Court: (1) granted Dean Chase’s motion for

summary judgment and dismissed the King’s Complaint in its entirety (we will discuss

the Business Court’s specific findings below); and (2) granted the Chase Parties’

counterclaim concerning the request for declaratory judgment. In ruling on the

declaratory judgment, the Business Court held:

[T]he Counterclaim is that the second Count IV of the Counterclaim seeks a

declaratory judgment that pursuant to Tenn. Code Ann. § 29-14-101 et seq.,

Dean Chase and D.F. Chase did not undertake any act or omission in

relation to NV Partners or its partners in violation of the Partnership

Agreement that damaged NV Partners or its partners; and they did not

undertake any act or omission in relation to NV Partners or its partners in

violation of Tenn. Code Ann. § 61-1-101 et seq. that damaged NV Partners

or its partners. These issues are decided herein in [the Chase Parties’] favor

on summary judgment.

On November 29, 2018, the Kings filed a “Memorandum in Support of Motion to

Alter or Amend Order of Dismissal and for Additional Findings of Fact and Conclusions

of Law,” asking the Business Court to review its grant of the Chase Parties’ motion for

summary judgment. However, from the record, it appears that the Kings did not file the

actual motion to alter or amend until December 4, 2018, the day before the rescheduled

pre-trial conference, see infra. As discussed below, by order of December 7, 2018, the

Business Court denied the Kings’ motion to alter or amend.

On November 6, 2018, the Kings filed a Tennessee Rule of Civil Procedure 12.03

motion for judgment on the pleadings, seeking dismissal of the Chase Parties’ remaining

counterclaims. As grounds, the Kings argued, inter alia¸ that Dean Chase was not a

partner in the Partnership and, thus, neither the Partnership Agreement nor the TRUPA

were applicable so as to give him a right of indemnity. The Chase Parties filed a

response in opposition to the Kings’ motion. On November 27, 2018, the Chase Parties

filed a motion for leave to file a second amended counterclaim and third-party complaint.

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The Kings opposed the motion. The Kings’ Rule 12.03 motion and Chase Parties’

motion to amend were set for hearing on November 30, 2018. Following the hearing, the

Business Court entered an order on December 3, 2018. Therein, the court granted the

Chase Parties’ motion to amend, “with the exception of the proposed claims against

David King personally,” see further discussion infra.

Before ruling on the Kings’ Tennessee Rule of Civil Procedure 12.03 motion, the

Business Court, in its December 3, 2018 order, clarified:

With respect to the substance of the [Rule 12.03 motion], the Court, after

studying the law, the record and argument of Counsel, determines that the

[motion] has identified that there exist some pure issues of law reserved for

the Court to decide. The Court further determines that it is necessary to

issue these rulings of law immediately to identify and segregate the issues

to be tried by the jury in the upcoming December 10, 2018 jury trial.

Lastly, on these issues of law, the King Parties prevail on dismissing some

but not all of the Chase Parties’ claims. Moreover, some pure issues of law

are ruled upon herein on which the Chase Parties prevail.

The Business Court went on to make the following rulings, as matters of law:

1. The Business Court denied the Chase Parties’ claim for indemnification under the

Partnership Agreement, finding that Dean Chase was not a partner: “[T]he Partnership

Agreement and Amendment to the Partnership Agreement establish that Dean Chase was

not a partner, he was a manager of the partnership. Accordingly, he is not a party to the

Partnership Agreement and, therefore, the Court concludes, Dean Chase cannot enforce

the section 5.1(b) indemnity provisions against the Kings.” Although the Business Court

held that Dean Chase was not entitled to indemnification under the Partnership

Agreement, the court ultimately held that, as the Manager of the partnership, Dean Chase

was entitled to indemnification under section 48-249-115(c) of the Tennessee Revised

Limited Liability Company Act (the “LLC Act”). In short, the Business Court held, as a

matter of law, that the Chase Parties were entitled to indemnity from NV Music Row,

LLC but granted the Kings’ motion for judgment on the pleadings as to the Chase

Parties’ claim for indemnification from NV Partners under either the Partnership

Agreement or the TRUPA, see further discussion infra.

2. The Business Court granted the Kings’ Rule 12.03 motion in part, dismissing the

Chase Parties’ breach of contract and unjust enrichment claims.

3. The Business Court denied the Kings’ Rule 12.03 motion with respect to the Chase

Parties’ claims for misrepresentation by concealment, holding that

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as a matter of law [] pursuant to the plain, ordinary meaning of sections

1.10, 4.1, 10.1 and 10.2 of the Partnership Agreement and Tennessee Code

Annotated sections 61-1-403 and 404(d), Jonathan and Taylor King had a

duty to notify NV Partners of contingent liabilities and had an affirmative

disclosure obligation to provide information to the partners concerning the

partnership’s business and affairs.

***

The Court thus rules and it is ORDERED that as a matter of law the King

Parties had a duty to reveal their claims against Dean Chase to the

Partnership before they received their distribution.

4. The Business Court denied the Kings’ claim that Dean Chase, who was not a partner,

had no standing to enforce the duty to disclose provisions of the Partnership Agreement,

to-wit:

In oral argument the King Parties asserted that Dean Chase, as a

non-partner, does not have standing to assert the duty of disclosure a

partner is required to perform under the Partnership Agreement and the

Partnership Act. The Court comes to a different conclusion as to the Chase

Parties’ [] cause of action of the tort of misrepresentation by concealment.

The Court concludes, under the unique facts of this case where NV

Music Row LLC had a contractual and statutory obligation to indemnify

Dean Chase, that the King Parties’ alleged intent and conduct of waiting to

sue until after distribution of all the funds to partners, substantially thwarted

and deprived Dean Chase of his ability to obtain indemnity from NV Music

Row LLC and placed himself within the zone for persons whom the King

Parties had a duty of disclosure with respect to the tort of misrepresentation

by concealment. These facts, the Court concludes, furnish standing and a

legal basis for the disclosure duty in the Partnership Agreement and Statute

to apply to the Chase Parties’ claims of misrepresentation by concealment.

The Business Court entered an order continuing the pre-trial conference until

December 5, 2018 “[d]ue to recent filings on issues determinative of the scope of the jury

trial to be conducted.” Following the pre-trial conference, and as noted above, the trial

court entered an order on December 7, 2018, wherein it denied the Kings’ motion to alter

or amend the order granting the Chase Parties’ motion for summary judgment and the

Kings’ motion for continuance, see discussion infra. In addition, in its December 7, 2018

order, the Business Court: (1) granted the Kings’ motion to bifurcate the trial and

specified that “the Chase Parties’ . . . claims against Jonathan and Taylor King,

personally, for misrepresentation by concealment shall proceed to a trial by jury . . . on

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liability only;” (2) held that, as requested by the parties, the court would appoint a special

master “[a]s to quantification of damages subsequent to the jury trial;” and (3) noted that

(based on their agreement), “the King Plaintiffs and Chase Parties have waived their right

to a trial by jury on quantification of damages.”

On December 10-12, 2018, the Chase Parties’ counterclaim for misrepresentation

by concealment was tried to a jury. The following witnesses testified: (1) Steve Kirkham,

(2) Jonathan King, (3) Dean Chase, and (4) David King. The Kings also submitted an

offer of proof from Jeffrey Burnside, the Kings’ attorney, who was excluded as a witness,

see discussion infra. At the close of the Chase Parties’ proof, the Kings moved for

directed verdict, which the Business Court denied. On December 10, 2018, the jury

returned a unanimous verdict holding that both Jonathan King and Taylor King were

liable for misrepresentation by concealment.

On January 22, 2019, the Kings filed “Motions Pursuant to Rule 50, 52, and Rule

59,” wherein they moved the Business Court,

under Rule 50.02 to set aside the verdict and judgment entered thereon . . .

and for judgment entered in accordance with the Kings’ motions for

directed verdict, or in the alternative for a new trial pursuant to Rule 59.06

or 59.07. The Kings additionally file a second motion under Rule 52.02 to

alter or amend this Court’s order of dismissal and for additional findings of

fact and conclusions of law; and under Rule 59.04 to alter or amend the

judgment in this case.

The Business Court heard the Kings’ motion on February 22, 2019 and denied the motion

in full by order of March 1, 2019.

Having granted the Kings’ motion for bifurcation, supra, the Business Court

referred the case to a Special Master for determination of damages. On April 11, 2018,

the Special Master submitted its report, wherein it recommended that damages comprised

of attorney’s fees and expenses be awarded to the Chase Parties as follows: (1)

$68,650.98 awarded against NV Music Row, LLC; and (2) $609,117.81 awarded against

Jonathan King and Taylor King, for a total of $677,768.79. On April 29, 2019, the Chase

Parties moved the Business Court to adopt the Special Master’s recommendations. The

Kings did not oppose the motion. On May 20, 2019, the Business Court adopted the

findings of the Special Master and entered judgment in accordance therewith. On June 5,

2019, the Business Court entered its final judgment in the case.

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II. Issues

The Kings appeal. They raise the following 19 issues in their brief:

1. Whether the trial court erred in granting Dean Chase’s motion for

summary judgment on grounds that the Kings could not prove damages?

2. Whether the trial court erroneously found failure to prove damages

equates to a finding that Dean Chase did nothing wrong?

3. Whether the trial court erred in refusing to rule upon the Kings’ two

requests to make additional findings of fact and conclusions of law

regarding ignored, admitted facts?

4. Whether the trial court’s allowance of the Chase Parties to amend their

transformative Counterclaim on the eve of trial and refusal to grant a

continuance, was an abuse of discretion?

5. Whether the failure of the trial court to grant a continuance prejudiced

the Kings, who had been unable to take discovery on the Chases’ new

claims, the meaning of a contingent liability of the Partnership, or to amend

their discovery responses to list Jeff Burnside as a potential witness?

6. Whether the trial court erred in granting judgment on the pleadings in

favor of the Chase Parties, who were non-movants, based in part on a prior

summary judgment ruling, for claims that had never before been asserted

until less than a week before trial?

7. Whether the trial court erred in finding that the Kings owed any duty to

disclose information to Dean Chase by virtue of the Partnership Agreement

or T.C.A. § 61-1-401?

8. Whether the Chases’ version of a claim for misrepresentation by

concealment states a claim under Tennessee law?

9. Whether the trial court erred in finding that Dean Chase was a

“responsible person” entitled to mandatory indemnity by virtue of the

Tennessee Revised LLC Act, T.C.A. § 48-249-115(c)?

10. Whether Dean Chase lacked standing to bring a claim for

indemnification against the Kings individually?

11. Whether the Chases’ unrecognized tort theory, seeking attorney’s fees

as their sole damages, is against the public policy of the State of

Tennessee?

12. Whether the trial court erred in finding that the Kings were personally

liable for the obligation of the Partnership or the LLC, when neither the

statutes nor the relevant contracts allowed personal liability?

13. Whether the Third-Party Defendants were necessary parties pursuant to

Tenn. R. Civ. P. 19.01?

14. Whether the trial court prejudiced the jury with frequent comments and

interruptions of Kings’ counsel during opening statements?

15. Whether the trial court erred in denying the Kings’ motions for

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mistrial?

16. Whether the trial court erred in failing to instruct the jury on a material

fact, possibility, a Partner’s right to access the books and records and the

Kings’ defense of unclean hands, as well as an instruction on the American

Rule regarding attorney’s fees.

17. Whether the trial court’s exclusion of exhibits and a witness, Jonathan

King’s attorney, Jeffrey Burnside, on grounds that they had not been

disclosed in the Kings’ discovery responses answered over a year prior to

the Chase Parties’ amendment on the eve of trial to assert a new claim for

misrepresentation, was an abuse of discretion?

18. Whether the evidence preponderated against any verdict for Taylor

King?

19. Whether the trial court erred in denying a directed verdict for Taylor

King when she was not called as a witness, the Chase Parties offered none

of her deposition testimony, and no evidence of any statement made by her

was proven at trial?

The issues raised by the Kings can be divided into several broad categories: (1)

issues related to the grant of summary judgment; (2) issues related to the Chase Parties’

claim against the Kings for misrepresentation by concealment; (3) issues related to the

Chase Parties’ right to indemnification/reimbursement; (4) miscellaneous rulings made

by the Business Court prior to the jury trial; (5) issues related to the jury trial; and (6)

damages. We will address the Kings’ issues and arguments under the foregoing

categories.

III. Issues Related to the Grant of Summary Judgment

As noted above, the Kings’ claims against Dean Chase fall into three categories:

Expense Claims, Loan Claims, and Property Sale Claims. At the hearing on the motion

for summary judgment, the Kings announced that they would not pursue the Expense

Claims concerning the allegation that Dean Chase caused the Partnership to pay certain

expenses related to David Chase’s criminal matters. On appeal, the Kings do not dispute

the trial court’s grant of summary judgment on the Expense Claims; accordingly, we

affirm the court’s grant of summary judgment on this claim. We further note that the

Kings’ brief focuses primarily on the Property Sale Claims; however, in the interest of

full adjudication, we will address the Business Court’s holdings concerning both the

Loan Claims and the Property Sale Claims.

We first note that “[a] trial court’s decision to grant a motion for summary

judgment presents a question of law. Therefore, our review is de novo with no

presumption of correctness afforded to the trial court’s determination.” Bain v. Wells,

936 S.W.2d 618, 622 (Tenn. 1997). This Court must make a fresh determination that all

requirements of Tennessee Rule of Civil Procedure 56 have been satisfied. Abshure v.

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Methodist Healthcare-Memphis Hosps., 325 S.W.3d 98, 103 (Tenn. 2010). When a

motion for summary judgment is made, the moving party has the burden of showing that

“there is no genuine issue as to any material fact and that the moving party is entitled to

judgment as a matter of law.” Tenn. R. Civ. P. 56.04. “A fact is material ‘if it must be

decided in order to resolve the substantive claim or defense at which the motion is

directed.’” Akers v. Heritage Med. Assocs., P.C., No. M2017-02470-COA-R3-CV, 2019

WL 104130, at *5 (Tenn. Ct. App. Jan. 4, 2019), perm. app. denied (Tenn. May 16,

2019) (quoting Byrd v. Hall, 847 S.W.2d 208, 215 (Tenn. 1993)). Further, “[a] ‘genuine

issue’ exists if ‘a reasonable jury could legitimately resolve that fact in favor of one side

or the other.’” Akers, 2019 WL 104130, at *5 (quoting Byrd, 847 S.W.2d at 215).

The Tennessee Supreme Court has explained that when the party moving for

summary judgment does not bear the burden of proof at trial, “the moving party may

satisfy its burden of production either: (1) by affirmatively negating an essential element

of the nonmoving party’s claim, or (2) by demonstrating that the nonmoving party’s

evidence at the summary judgment stage is insufficient to establish the nonmoving

party’s claim or defense.” Rye v. Women’s Care Center of Memphis, MPLLC, 477

S.W.3d 235, 265 (Tenn. 2015) (italics omitted). Furthermore,

“[w]hen a motion for summary judgment is made [and] . . . supported as

provided in [Tennessee Rule 56],” to survive summary judgment, the

nonmoving party “may not rest upon the mere allegations or denials of [its]

pleading,” but must respond, and by affidavits or one of the other means

provided in Tennessee Rule 56, “set forth specific facts” at the summary

judgment stage “showing that there is a genuine issue for trial.” Tenn. R.

Civ. P. 56.06. The nonmoving party “must do more than simply show that

there is some metaphysical doubt as to the material facts.” Matsushita

Elec. Indus. Co., [Ltd. v. Zenith Radio Corp.], 475 U.S. [574,] 586, 106 S.

Ct. 1348 [(1986)]. The nonmoving party must demonstrate the existence of

specific facts in the record which could lead a rational trier of fact to find in

favor of the nonmoving party.

Rye, 477 S.W.3d at 265. “Upon review, this Court considers ‘the evidence in the light

most favorable to the non-moving party and draw[s] all reasonable inferences in that

party’s favor.’” Ray v. Neff, No. M2016-02217-COA-R3-CV, 2018 WL 3493158, *3

(Tenn. Ct. App. July 20, 2018) (quoting McCullough v. Vaughn, 538 S.W.3d 501, 505

(Tenn. Ct. App. 2017) (citing Godfrey v. Ruiz, 90 S.W.3d 692, 695 (Tenn. 2002))); see

also Stovall v. Clarke, 113 S.W.3d 715, 721 (Tenn. 2003) (citing Webber v. State Farm

Mut. Auto. Ins. Co., 49 S.W.3d 265, 269 (Tenn. 2001)). The trial court may grant

summary judgment only if “‘both the facts and the conclusions to be drawn from the facts

permit a reasonable person to reach only one conclusion.’” Helderman v. Smolin, 179

S.W.3d 493, 500 (Tenn. Ct. App. 2005) (quoting Carvell v. Bottoms, 900 S.W.2d 23, 26

(Tenn. 1995)).

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A. Loan Claims

As discussed above, the Kings’ Loan Claims are premised on their contention that

Dean Chase, as Manager of the Partnership, breached certain fiduciary duties by causing

his company, D.F. Chase, Inc., to make a loan to the Partnership in order to avoid

foreclosure of the Property. Indeed, “the fiduciary relationship between an agent . . . and

his [or her] principal imposes ‘a duty to be careful, skillful, diligent and loyal in the

performance of the principal’s business,’ and a cause of action for damages arises only

when there is a breach of this duty.” Carter v. Patrick, 163 S.W.3d 69, 75 (Tenn. Ct.

App. 2004) (quoting Thomson McKinnon Securities, Inc. v. Moore’s Farm Supply,

Inc., 557 F. Supp. 1004, 1011 (W.D. Tenn. 1983)).

In granting summary judgment with respect to the Loan Claims, the Business

Court primarily focused on the fact that the Partnership suffered no damages as a result of

the D.F. Chase Loan. Specifically the Business Court found “that the undisputed material

facts of record establish that neither the [Kings] nor any of the partners in the Partnership

sustained any damage with respect to the Loan Claims.” In so finding, the trial court

relied on the Kings’ response to the Chase Parties’ statement of undisputed material fact.

Responses 8 and 12 are relevant:

8. On September 10, 2015, the Carrell Estate—a partner in the

Partnership—offered to make a loan to the Partnership in order to pay off

the Silverpeak Loan on the following terms: $100,000 origination fee; 15%

annual interest; 3 month term with 3 month extension; $100,000 extension

fee; $750,000 default/foreclosure fee; and all interest would be earned at

the beginning of the appropriate term.

RESPONSE: Undisputed for purposes of summary judgment.

***

12. The D.F. Chase Loan had the following terms: $200,000 origination

fee; 7.25% annual interest; 3 month term with two 3 month extensions;

$20,000 extension fee; and all interest would be calculated as time elapsed

rather than up front.

RESPONSE: Undisputed that these were the terms of the loan that was

never disclosed to the partners, in breach of Dean Chase’s fiduciary duty to

the partnership. The funds were paid without knowledge of the Partners.

Although Dean Chase did not notify the partners of the D.F. Chase Loan prior to

distributing the funds from the D.F. Chase Loan, it is undisputed that that the D.F. Chase

Loan was less expensive than the Carrell Estate Loan. As proof of this fact, the Chase

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Parties provided a financial analysis prepared by Christopher Lovin. As found by the

trial court, “Mr. Lovin opined that the loan made by [Dean Chase’s] company was

$37,000 cheaper/more favorable to the Partnership . . ., and this opinion is unrebutted in

the record.” Contrary to the trial court’s statement that Mr. Lovin’s opinion is

“unrebutted,” the Kings assert that the D.F. Chase Loan “was not less expensive because

it does not account for legal fees incurred in preparing the loan note.” The Business

Court acknowledged this argument but ultimately concluded that “this assertion falls

within the category of a ‘metaphysical doubt,’ which under Tennessee law is insufficient

to defeat summary judgment. . . .” We agree. The Kings’ assertion that the D.F. Chase

Loan was not, in fact, more beneficial to the Partnership is not supported by any

evidence. At the summary judgment stage, the nonmoving party “must do more than

simply show that there is some metaphysical doubt as to the material facts.” Matsushita

Elec., 475 U.S. at 586. The nonmoving party must demonstrate the existence of specific

facts in the record which could lead a rational trier of fact to find in favor of the

nonmoving party. Here, the Kings have failed to meet this burden. As averred by the

Chase Parties in their reply to the Kings’ filings in opposition to the motion for summary

judgment, “The Kings . . . have not provided any evidence of what those legal fees paid

by the Carrel Estate would have been, what the amount of the legal fees purportedly

charged to the Partnership were, or how any such fees made the D.F. Chase Loan more

expensive than the proposed Carrell Estate Loan.” We agree. Mere speculation is

insufficient to show that the Partnership suffered any adverse effect in relation to the D.F.

Chase Loan. Nonetheless, the Kings argue that the lack of damages is not, ipso facto,

fatal to their Loan Claims; specifically, they contend that “the trial court erroneously

found failure to prove damages equates to a finding that Dean Chase did nothing wrong.”

We disagree. “Proof of damages is an essential element of a fiduciary duty claim, as is

causation of damages.” Morrison v. Allen, 338 S.W.3d 417, 438 (Tenn. 2011) (quoting

Union Planters Bank of Middle Tenn. v. Choate, No. M1999-01268-COA-R3-CV, 2000

WL 1231383 (Tenn. Ct. App. Aug. 31, 2000) and Restatement (Second) of Torts § 874).

“That the plaintiff sustained damages as a result of an intentional misrepresentation,

promissory estoppel or constructive fraud is an essential element of proof on the tort.”

See, e.g., Hodge v. Craig, 382 S.W.3d 325, 343 (Tenn. 2012) (citing Walker v. Sunrise

Pontiac-GMC Truck, Inc., 249 S.W.3d 301, 311 (Tenn. 2008)).

As the party moving for summary judgment, it was the Kings’ burden to show that

the Partnership was somehow damaged by the use of the D.F. Chase Loan. From our

review of the undisputed facts, they failed to meet this burden. The undisputed facts

establish that, on or about July 1, 2015, Silverpeak called its loan, which was secured by

the only asset of the Partnership, i.e., the Property. Thereafter, the partners met and

agreed to pursue alternate funding through Avenue Bank. That funding, however, proved

untenable because most of the partners (including Jonathan King) were unwilling to

personally guarantee the Avenue Bank loan. As such, the Carrell Estate, as a partner,

offered to make a loan under the terms discussed above. The majority of the partners

voted to accept the Carrell Estate loan. However, on review of the terms, Mr. Kirkham,

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the attorney for the NV Entities, advised that the loan proposed by the Carrell Estate was

usurious and illegal under Tennessee law and recommended that Dean Chase, as the

Manager of the Partnership, not accept the loan. Dean Chase followed Mr. Kirkham’s

advice. So, on the day before the scheduled foreclosure by Silverpeak, which would have

resulted in loss of the Property, Dean Chase caused D.F. Chase, a partner, to make a loan

to pay off the Silverpeak Loan. Although it is undisputed that Dean Chase did not seek

partnership approval before making the D.F. Chase Loan, it is also undisputed (as

discussed above) that the D.F. Chase Loan was more advantageous to the Partnership

than the Carrell Estate Loan, which the Partnership had voted to accept. So, even

allowing, arguendo, that Dean Chase should have consulted the partners prior to making

the D.F. Chase Loan, his failure to do so must be viewed in light of the immediate threat

of foreclosure and the fact that the partners previously approved a similar loan, i.e., the

Carrell Estate Loan. In view of those contingencies, and the fact that the D.F. Chase

Loan was less costly than the Carrell Estate Loan, the Partnership did not suffer any

adverse effect from Dean Chase’s action. Furthermore, it is undisputed that Mr.

Kirkham, who represented the interests of the NV Entities, was aware of the D.F. Chase

Loan and, in fact, consulted on the terms thereof. In the absence of proof of the essential

element of damages, we conclude that the trial court correctly held that

[a]s to all of the causes of action . . . pertaining to the Loan Claims, there

are no facts in the summary judgment record of damages. Without proof on

this essential element, the [Kings’] causes of action on the Loan Claims

must be dismissed.

B. Property Sale Claims

Concerning the Property Sale Claims, the Kings assert that Dean Chase further

breached his duties to the Partnership by consummating the sale of the Property to Virgin

for $11,000,000. It is undisputed that the Kings voted against the sale. In his deposition

testimony, Jonathan King noted that he was not in agreement with the majority’s decision

to accept the $11,000,000 offer; rather, he stated that, “I was out voted. I mean, there

was–everybody else had just—they—they were happy to not lose their money.”

According to the Partnership Agreement, a majority vote of the partners determines

Partnership decisions. Together, the Kings hold a 16.7% interest in the Partnership.

Accordingly, their vote, alone, would be insufficient to overcome the will of the

remaining partners.

The Partnership Agreement defines “Material Matter,” in relevant part, to include

the “sale, finance or refinance of the Property.” Under sections 1.10 and 5.1(a) of the

Partnership Agreement, a “Material Matter” requires both: (1) the approval of the

Manager, and (2) a majority vote of the partners of the Partnership. With the exception

of the Kings, the undisputed evidence shows that the majority of the partners voted to

direct Dean Chase to cause the Partnership to sell the Property for $11,000,000. As such,

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the Business Court held that, “to withstand summary judgment, the [Kings] had to put

forth evidence . . . that at least 50% of the partners (including the Kings) would not have

voted to sell the [Property] if those partners had known about the alleged acts and

omissions of [Dean Chase].” The Business Court ultimately concluded that “[t]here are

no such facts in the summary judgment record” and specifically held that “the [Kings]

have produced no testimony or evidence from another partner that such partner(s) was

misled, threatened, under duress, or otherwise forced to vote in favor of the sale and that

they otherwise would have voted against the sale.” From our review, we agree.

During discovery, the Kings deposed Austin Pennington and John Palmer but did

not depose any of the other partners. Messrs. Pennington and Palmer both stated that

Dean Chase did not unduly influence or coerce their votes to move forward with the sale.

In relevant part, Mr. Palmer testified that:

Q: Did Mr. Chase threaten to foreclose on the property at any

point?

A: No.

Q: Did Mr. Chase force you to vote—force the estate to vote

to sell this property for Virgin for $11 million?

A: No.

Q: Did Mr. Chase exert any undue influence on the estate to

secure their vote to sell this property for $11 million?

A: No.

Likewise, Mr. Pennington testified that:

Q: Did you ultimately sign the—I will hand you what’s

marked as—

A: I mean, I ultimately agreed to sell, yes.

Q: Was that—was your agreement procured by any

wrongdoing by Mr. Chase in that regard?

A: I don’t think Mr. Chase did anything wrong. I don’t know

what you mean by “wrong,” but I don't think he did anything

incorrect.

Q: So is it fair to say that you and Mr. Chase may have had a

different opinion on whether to hold this and try to get more

or sell now?

A: Yes.

Q: Was that all part of the discussions of all the partners at all

times during this period?

A: Yeah, and specifically on the phone call as well. That was

a common theme, but Mr. Chase did nothing incorrect or

wrong.

- 20 -

There is simply no evidence to suggest that Dean Chase exercised any undue

influence over the decision of the majority of the partners to go forward with the sale of

the Property. Despite the Kings’ intimations that the D.F. Chase Loan somehow caused

the partners to vote for a sale that the Kings imply was well below the market value of the

Property, there is no factual link between these events. The D.F. Chase Loan was made

to stop foreclosure on the Property. Had the loan not been made, the Property likely

would have been lost in foreclosure, and there would have been nothing for the

Partnership to sell. There is no indication that Dean Chase rushed to consummate the

sale in an effort to recoup the D.F. Chase Loan at an earlier date. In fact, the terms of the

D.F. Chase Loan included options for two, three-month extensions, with extension fees of

$20,000, along with interest accruing “as time elapsed rather than up front.” As such, the

Chase Parties would have benefitted more by a delay (or cancellation) of the sale to

Virgin. Regardless, the decision to go forward with the $11,000,000 sale was a separate

transaction from the D.F. Chase Loan, and the sale was accomplished by a vote of the

majority of the partners. By his own admission, Mr. King was simply “outvoted.” In

consummating the sale to Virgin, Dean Chase was merely complying with the will of the

partners, including the Kings, who ultimately signed the Unanimous Consent allowing

the sale to move forward. Had he done otherwise, Dean Chase would have violated his

fiduciary duty as Manager of the Partnership. Accordingly, the Business Court did not

err in granting his motion for summary judgment on the Property Sale Claims.

C. Kings’ Motion to Alter or Amend and for Additional Findings of Fact

Concerning Summary Judgment

As set out above, the Kings raise an issue as to “[w]hether the trial court erred in

refusing to rule upon the Kings’ two requests to make additional findings of fact and

conclusions of law regarding ignored, admitted facts in their brief.” As set out in their

brief, the Kings’ entire argument on this issue is:

The issues undecided by the trial court prejudiced the Kings at trial.

These were at the heart of the Kings’ defenses, including unclean hands and

lack of good faith. Importantly, Chase’s admitted conflict of interest, his

failure to market the Property at all, the short-sale of the Property causing

losses to the Partners of over $7 million, and the concealed D.F. Chase

Note, went directly to the Kings’ discovery of Chase’s impropriety, their

“thoughts” of exploring a lawsuit, and when these matters occurred. Had

the trial court ruled upon the Kings’ motion, it would have been obvious

that the basis for granting summary judgment was not supported by the

undisputed facts of the case.

Thus, the trial court’s refusal to rule upon the Kings’ motions to alter

or amend and for specific findings of fact was not only error, it caused

numerous additional errors in the jury instructions and the court’s conduct

- 21 -

of the trial, which prejudiced the Kings.

In the first instance, the Kings’ argument fails to comport with the requirements of

Tennessee Rule of Appellate Procedure 27(7). Under Rule 27, for each issue raised, the

appellate brief must include

[a]n argument . . . setting forth: (A) the contentions of the appellant with

respect to the issues presented, and the reasons therefor, including the

reasons why the contentions require appellate relief, with citations to the

authorities and appropriate references to the record (which may be quoted

verbatim) relied on; and (B) for each issue, a concise statement of the

applicable standard of review (which may appear in the discussion of the

issue or under a separate heading placed before the discussion of the

issues).

Here, the Kings have included neither factual allegations nor legal citations to support

their argument.

Furthermore, although the Kings allege that the Business Court “refused to rule”

on their motions to alter or amend and for additional findings of fact, the record shows

that the trial court did not “refuse to rule.” Rather, as discussed above, the Business

Court denied the motions as untimely because the Kings failed to docket the motions for

hearing prior to the jury trial. As stated in its December 7, 2018 order,

[w]ith respect to the motion of the King Parties to continue the December

10, 2018 trial, now limited to liability, it is ORDERED that to the extent

that motion continues to be asserted, it is denied.

First, by the time of the December 10, 2018 trial, this case will have

been pending for 2 years and 11 months from its January 12, 2016 filing.

Additionally, the Kings’ motion to alter or amend the September 27,

2018 summary judgment ruling is not a basis for a continuance because any

delay connected with that motion is of the Kings’ own making in several

ways. It was the Kings who sought an extension from August 2018 to

September 2018 for responding to and conducting oral argument on the

motion for summary judgment. Then, after the Court entered its summary

judgment ruling, there was a 30 day or so time between issuance of the

September 27, 2018 summary judgment ruling and the December 10, 2018

trial to file and have the motion to alter or amend heard. It was not until

November 29, 2018, that a Memorandum in support of altering and

amending was filed by the Kings.

It is therefore additionally ORDERED that the motion of the King

Parties to alter or amend and for additional findings with respect to the

September 27, 2018 summary judgment is denied for failure to docket and

- 22 -

be ruled upon prior to the December 10, 2018 trial of this case.

Having determined that the Business Court denied the motions, as opposed to refusing to

address them, the Kings’ contention does not form a basis for reversal. Although the trial

court did not address the Kings’ motions substantively, “[a] trial court’s ruling on a

motion to alter or amend may be reversed only for an abuse of discretion.” Harmon v.

Hickman Comm. Healthcare Svcs., Inc., 594 S.W.3d 297, 305 (Tenn. 2020). A trial

court abuses its discretion when the reviewing court is firmly convinced that the lower

court has made a mistake in that it affirmatively appears that the lower court’s decision

has no basis in law or in fact and is, therefore, arbitrary, illogical, or unconscionable.

See, e.g., Ballard v. Herzke, 924 S.W.2d 652, 661 (Tenn. 1996). Because the Kings

failed to docket their motion in a timely manner, we cannot conclude that the trial court

abused its discretion in denying same. That being said, this Court has reviewed the

propriety of the Business Court’s grant of the Chase Parties’ motion for summary

judgment and has concluded, supra, that the Business Court did not err in granting the

motion in full. As such, there is no basis for reversal.

IV. Issues Related to the Chase Parties’ Claims against the Kings for

Misrepresentation by Concealment

The crux of the Chase Parties’ misrepresentation by concealment claim is that the

Kings committed a legal wrong or otherwise violated their duties under the Partnership

Agreement by failing to inform Dean Chase, NV Partners, and the other partners, prior to

the distributions of monies from the NV Entities, of their intention to file a lawsuit

against Dean Chase for actions he allegedly took as Manager of the Partnership. Based

on the concealment of this fact, the Chase Parties assert that the Kings caused NV

Entities’ assets to be distributed to the partners, thus rendering the LLC financially unable

to satisfy the Chase Parties’ right to indemnification for damages (in the form of

attorney’s fees and costs) that the Chase Parties accrued in defending against the Kings’

claims that sought to undo the decision of the majority of the partners to sell the Property

to Virgin for $11,000,000.

The jury rendered a unanimous verdict finding that the Kings were liable for

misrepresentation by concealment. Concerning the prima facie elements of a

misrepresentation by concealment claim, Tennessee Pattern Jury Instruction 8.38

provides:

1. The defendant concealed or suppressed a material fact;

2. The defendant was under a duty to disclose the fact to the

plaintiff;

3. The defendant intentionally concealed or suppressed the

fact with the intent to deceive the plaintiff;

4. The plaintiff was not aware of the fact and would have

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acted differently if the plaintiff knew of the concealed or

suppressed fact; and

5. As a result of the concealment or suppression of the fact,

the plaintiff sustained damage.

See also Chrisman v. Hill Home Dev., Inc., 978 S.W.2d 535, 538-39 (Tenn. 1998)

(citations omitted). As set out in their brief, the Kings assert that the Chase Parties failed

to meet their burden on prima facie elements 1, 2, and 5. We will address each of these

elements against the record.

1. Concealment or Suppression of a Material Fact

Concerning this element, the Kings argue that any plan they may have had to file

suit against Dean Chase was merely a “thought” or “plan for future action” and, as such,

is insufficient to satisfy this element. The question of whether the Kings’ actions rose to

the level of concealment or suppression of a material fact is a question of fact for the jury.

It is well settled that when an appellate court reviews a jury’s verdict, it “may not

reweigh the evidence or make credibility determinations, and it must construe the

evidence in the light most favorable to the verdict.” Hall v. Derrick, No. W2003-01353-

COA-R3-CV, 2004 WL 2191016, at *3 (Tenn. Ct. App. Sept. 24, 2004). A jury verdict

will not be set aside if there is any material evidence to support the verdict. Tenn. R.

App. P. 13(d). “Material evidence is ‘evidence material to the question in controversy,

which must necessarily enter into the consideration of the controversy and by itself, or in

connection with the other evidence, be determinative of the case.’” Meals ex rel. Meals

v. Ford Motor Co., 417 S.W.3d 414, 422 (Tenn. 2013) (quoting Knoxville Traction Co.

v. Brown, 89 S.W. 319, 321 (Tenn. 1905)). This Court has described “substantial and

material evidence” as “‘such relevant evidence as a reasonable mind might accept to

support a rational conclusion and such as to furnish a reasonably sound basis for the

action under consideration.’” Jones v. Bureau of TennCare, 94 S.W.3d 495, 501 (Tenn.

Ct. App. 2002) (quoting Papachristu v. Univ. of Tenn., 29 S.W.3d 487, 490 (Tenn. Ct.

App. 2000)). When reviewing the trial record, we must “assume the truth of all evidence

that supports the verdict and discard all countervailing evidence.” McLemore ex rel.

McLemore v. Elizabethton Med. Inv’rs. Ltd. P’ship, 389 S.W.3d 764, 776 (Tenn. Ct.

App. 2012) (citation omitted). “[I]f the record contains any material evidence to support

the verdict the jury’s findings must be affirmed.” Id. (citation omitted).

We first review the proof concerning whether the Kings’ considering or planning

to file suit against Dean Chase was a material fact. This Court has explained that,

[i]n the context of a claim of fraudulent or negligent misrepresentation[,] a

material fact has been defined as a reasonable person would attach

importance to its existence or non-existence in determining a choice of

action in the transaction in question; or the maker of the representation

- 24 -

knows or has reason to know that its recipient regards or is likely to regard

the matter as important in determining a choice of action, although a

reasonable person would not so regard it.

Homestead Grp., LLC v. Bank of Tennessee, 307 S.W.3d 746, 752 (Tenn. Ct. App.

2009) (citing Patel v. Bayliff, 121 S.W.3d 347, 353 (Tenn. Ct. App. 2003)).

During the jury trial, Mr. Kirkham testified that the Kings’ failure to contest the

sale of the Property was material to the partners’ decision to distribute the proceeds, to-

wit:

Q. . . . If Jonathan and Taylor King had come back to you and said, “We

object,” would NV Music Row have distributed these mon[ies] to the

partners?

A. No. Our standard on any deal—this deal, like any other—if someone, a

partner, had come back and said, “We object,” then I’m sure there would

have been a discussion of “What do you object to? Why are you

objecting?” and try to understand what amounts may be objectionable.

Maybe it’s all of it. Maybe it’s a small portion. If it were a portion, then we

would distribute what we could. If it were more than a portion or all of it, I

guess there’d be a discussion about what to do. If that doesn’t work, then

we would pay it into court and let a court decide how to distribute the

money.

Q. If Jonathan and Taylor King had come to you before the distribution and

said, “We’re going to sue Dean Chase,” would NV Music Row have

distributed this $4.3 million of funds to the partners?

A. We wouldn’t have known what to distribute to them. We wouldn’t have

known numbers. We wouldn’t have known how to do that. I guess if it had

been something like that, it sounds to me like we probably would have said,

“How do we resolve this?” If we can’t resolve it, we probably would

have—the word is “interplead,” but that means we’d pay it in court with a

lawsuit[, and] [l]et [t]he Court decide how to handle it.

Q. If Jonathan and Taylor King said, “We haven’t decided if we’re going to

sue, but we’re exploring suing the manager of this [partnership],” would the

NV entities have distributed the money?

A. That would be the same situation. Whether they say they’re going to sue

or they actually sue or they’re thinking about suing, it’s the same outcome.

Q. What if they came to you and said, “We’re not sure whether we’re going

to sue or not, but we sure are going to request the books and records, and

we want to see an audit of all the financials?” Would NV Music Row have

distributed the money at that time?

A. No. Because there would be that there’s an obvious issue to be

concerned, and again, even—you don’t know exactly how much to give

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everybody at that point. You don’t know if moneys are going to have to be

held back. I suppose if we could limit it in a very small way, but that

would be impossible, I think, for a situation like that.

Q. Would the fact that Jonathan and Taylor King were exploring or

thinking about the possibility of filing a lawsuit be a material fact that NV

Music Row, NV Partners and Dean Chase as manager of these entities need

to know in determining whether the entities can distribute the money?

[The Court overrules the Kings’ objection to the question, and Mr. Kirkham

proceeds to answer]

A. I’m hesitating because there’s kind of two parts to that. So take the

Kings out of it for a minute. If it were the broker that we were talking about

earlier and somebody knew that the broker might be bringing a lawsuit, if

the Kings had known that or anybody else in the partnership had known

that, the expectation would be that that partner come forward and say,

“Hey, I think that broker is going to sue us. Maybe we need to have some

money available to pay him in case he does.” If the Kings had known that,

then we would expect them to come forward and tell. In this case, it’s not

only the partner [who] acknowledges somebody outside. In my mind, it’s

even worse that it’s actually a partner inside that has this formulation of an

idea of suing. So I –but yes. I mean if they had plans on suing, they should

have told everybody. “Hey, look. We’ve got a problem[.]” I think the

other partners would want to know.

Q. [] I want to put a finer point on that for you. As the lawyer for these

entities, would it have been material for you to know even if they were

thinking of [] suing?

A. Any lawsuit against—potential lawsuit against the partnership would be

material.

Q. What about any potential lawsuit or contemplated lawsuit against Dean

Chase as manager for the partnership? Would that also be material?

A. It would be material because the partnership has indemnity obligations

back to Dean as the manager of the entity, and so anybody involved in the

entity who had potential of some claims liability would be material.

Mr. Kirkham’s testimony clearly establishes that the Kings’ contemplation of any

lawsuit, whether merely a “thought” or “plan for future action,” was a material fact

because “a reasonable person would attach importance to its existence or non-existence in

determining a choice of action in the transaction in question [, i.e., distribution of the sale

proceeds].” Homestead Grp., 307 S.W.3d at 752. Mr. Kirkham’s undisputed testimony

is that the Partnership would have acted differently had the Kings informed the partners

of the fact that they were contemplating a lawsuit. Having determined that there is

sufficient evidence from which the jury could have found that the facts withheld by the

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Kings were material facts, we now turn to the question of whether the Kings, in fact,

withheld or suppressed that information.

Johnathan King’s video deposition was played for the jurors. Therein, he testified,

in relevant part, as follows:

Q. Were you planning on bringing legal action against Dean Chase prior to

December of 2016—2015?

A. I was exploring that.

Q. When did you begin exploring bringing legal action related to NV

Partners?

A. Immediately after the sale.

Q. Sometimes we like to be precise as lawyers. When you say

“immediately,” are you talking a matter of days?

A. Yes.

***

Q. Let me back up, Mr. King. So is it fair to say that in November you

were considering exploring legal action?

A. Yeah, December—November, December.

***

Q. It was prior—prior to the sale of the property, you were—

A. It was—

Q. –considering—

A. –the last few weeks is when I really felt—

Q. The last few weeks—

A. –I was going to explore.

Q. Okay.

A. Yeah.

***

Q. Irrespective of the exact time you decided, hey, I’m going to go forward

with legal action, is it fair to say that as of December 9th, 2015, you were

very angry at the way this partnership had unfolded, or upset?

A. Yeah, I was not happy.

Q. And you were considering bringing a lawsuit about—

A. Yes.

Q. –Your complaints?

A. Yes.

- 27 -

In addition to the foregoing testimony, certain emails were admitted into evidence

as Trial Exhibits 7, 8, 9, and 15. These emails corroborate Jonathan King’s testimony

and further establish that his wife, Taylor King, who (with Jonathan King) jointly owned

a single partnership interest, was aware of the potential lawsuit. In summary, these

emails establish:

 On December 18, 2015, after being informed that both Jonathan King and Taylor

King would need to give their respective approvals before sale proceeds were

distributed, Mr. King stated that he needed to “talk to [his] attorney;”

 The Kings accepted their distribution later on December 18, with the caveat that,

“Jonathan and Taylor King are NOT happy with the outcome of this deal;”

 Nine days after the distribution, i.e., December 30, 2015, Jonathan King sent an

email, on which Taylor King and the Kings’ lawyer were copied, to another

partner. Therein, Mr. King stated that the Kings had contacted an attorney and

were “vigilantly pursuing a cause of action for breach of fiduciary duties . . .

[against] Dean [Chase,]” and “would like to have you join us in seeking justice;”

 On December 31, 2015, the Kings’ attorney sent a demand letter on their behalf

that was intended to “put Dean Chase, D.F. Chase, Inc., [and others] on notice of

potential claims by [the Kings] for fraud, conversion, breaches of fiduciary duties

[and other claims].”

Based on the content of the foregoing correspondence, it is clear that the Kings were

contemplating their lawsuit immediately following the sale of the Property. However,

they waited until after the distribution of the sale proceeds before making their plans

known to the Partnership. As Mr. Kirkham further testified:

Q. So jumping back to Mr. King’s email to you on December 18 saying that

he was going to talk to his attorney, did he come back or did Mrs. King

come back and tell you that they objected?

A. No.

Q. Did they come back and say that they were going to sue?

A. No.

Q. Did they come back and say they were exploring a lawsuit?

A. No.

Q. Did they come back and say they were going to request the books and

records and audits?

A. No.

Q. And I think we’ve got this, but if they had said that, as lawyer for the

entities, would the entities have acted differently and not distributed these

funds?

A. Whether it was the Kings or anyone else, if there had been any potential

raised that there was [sic] thoughts of a lawsuit against the entities, then we

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would stop. We couldn’t make a distribution. We wouldn’t know how

much to distribute to everyone.

Timing, as the saying goes, is everything. Here, as Jonathan King testified, the

Kings were contemplating their lawsuit “immediately” after the sale of the Property. Yet,

they waited to disclose their plans until after the proceeds of the sale were distributed.

Had the Kings disclosed their potential lawsuit prior to the distributions, the disputes

could have been settled, and the Partnership would have retained monies necessary to

cover any liability. The foregoing evidence establishes three of the prima facie

elements: First, the Kings “concealed or suppressed a material fact.” The evidence shows

that the fact of a potential lawsuit was material and that the Kings did not disclose their

plan to file suit prior to the distribution of Partnership funds. Second, the foregoing

evidence establishes that the Kings “intentionally concealed or suppressed the fact with

the intent to deceive the plaintiff.” By his own testimony, Jonathan King had plans for a

potential lawsuit “immediately” after the sale of the Property. A reasonable jury could

infer that the Kings’ decision to withhold their plans until after distribution of the sale

proceeds was made with the intent to procure their share of the sale proceeds at the

earliest date while still seeking to set aside the sale. Finally, the foregoing evidence

establishes that, if the Kings had disclosed their plans for suit prior to distribution of the

sale proceeds, the Partnership “would have acted differently” in that it would have

withheld distribution until any disputes were settled. The evidence is sufficient to meet

the Chase Parties’ burden concerning the first, third, and fourth prima facie elements.

2. The Kings’ Duty to Disclose

In its December 3, 2018 order, the Business Court found, as a matter of law, that

the Kings owed a duty to disclose their plan to file suit against Dean Chase, to-wit:

[T]he Court rules as a matter of law that pursuant to the plain, ordinary

meaning of sections 1.10, 4.1, 10.1 and 10.2 of the Partnership Agreement

and Tennessee Code Annotated sections 61-1-403 and 404(d), Jonathan and

Taylor King had a duty to notify NV Partners of contingent liabilities and

had an affirmative disclosure obligation to provide information to the

partners concerning the partnership’s business and affairs.

The Business Court’s determination that the Kings’ owed a duty to disclose is based on

its interpretation of the Partnership Agreement and the TRUPA. Both the interpretation

of statutes and the interpretation of contracts are questions of law and, therefore, require a

de novo review on appeal with no presumption of correctness given to the trial court’s

conclusions of law. See State v. Williams, 38 S.W.3d 532, 535 (Tenn. 2001) (indicating

that the construction of statutes and the application of the law to the facts are questions of

law); see also Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn. 1999) (holding that

“[t]he interpretation of a contract is a matter of law that requires a de novo review on

- 29 -

appeal”).

In their brief, the Kings assert that, “The Kings’ only fiduciary duty was to the

Partnership. They owed no fiduciary duty to Dean Chase. No contract exists between

the Kings and Dean Chase. Thus, no duty arises . . .” We disagree. Although Dean Chase

was not a partner in NV Partners, pursuant to the amendment to the Partnership

Agreement, he was named as the Manager of the Partnership. Furthermore, Mr. Chase’s

wholly-owned company, D.F. Chase, Inc., was a partner. Thus, if the Operating

Agreement, Partnership Agreement, or the TRUPA creates a duty of disclosure on the

part of the Kings, then that duty certainly extends to Dean Chase as Manager and to the

other Chase Parties as partners.

Turning to the Partnership Agreement, it provides, in relevant part, that

distributions may be made out of the Available Cash Flow of the NV Partners. The

Partnership Agreement defines “Available Cash Flow” as the “total cash on hand less all

Partnership obligations, contingencies and reasonable working capital requirements as

determined by the partners.” (Emphases added). The Partnership Agreement further

provides that the sale of the Property is a “Liquidating Event.” Thus, prior to distribution

of the sale proceeds, the partners were obligated to “take full account of the Partnership’s

liabilities” so as to “establish[] a reserve fund which is deemed reasonably necessary . . .

to provide for any contingent or unforeseen liabilities or obligations of the

Partnership.” (Emphasis added).

Likewise, the Operating Agreement provides that the person(s) “responsible for

overseeing the winding up and liquidation of the Partnership, shall take full account of

the Partnership’s liabilities and . . . [shall] establish[] . . . a reserve fund which is deemed

reasonably necessary, in the opinion of the Managing Partner, to provide for any

contingent or unforeseen liabilities or obligations of the Partnership.”

Tennessee Code Annotated section 61-1-403 of the TRUPA provides that each

partner shall furnish, “[w]ithout demand, any information concerning the partnership’s

business and affairs reasonably required for the proper exercise of the partner’s rights and

duties under the partnership agreement. . . .” Tenn. Code Ann. § 61-1-403. The

comments to this provision explain that section 61-1-403 “imposes an affirmative

disclosure obligation on the partnership and partners.” Tenn. Code Ann. § 61-1-403, cmt.

3. Likewise, section 61-1-403 of the TRUPA provides that a “partner shall discharge the

duties to the partnership and the other partners under this act or under the partnership

agreement and exercise any rights consistently with the obligation of good faith and fair

dealing.” Tenn. Code Ann. § 61-1-404(d). The comments explain that “a disclosure

duty may, under some circumstances, also spring from the Section 404(d) obligation of

good faith and fair dealing.” Tenn. Code Ann. § 61-1-403, cmt. 3. Based on Mr.

Kirkham’s undisputed testimony, supra, the Kings’ lawsuit (and any liability stemming

therefrom) would be a “contingent or unforeseen liability” under the Partnership

- 30 -

Agreement and would also constitute “information concerning the partnership’s business

and affairs” under Tennessee Code Annotated section 61-1-403. As explained by the

Business Court in its December 3, 2018 order:

[T]he King Parties’ actions and plans to file claims against Defendant Dean

Chase concerning his management of the Partnership had a bearing on,

implicated and constituted a contingent liability for the Partnership. The

contingent liability was that if the King Parties did not prevail on their

claims against Dean Chase he had a right to be paid indemnity under the

NV Music Row LLC Operating Agreement by the Partnership as ruled

above . . . . This plan of the Kings to sue Dean Chase, because it could

result (and has resulted) in liability to the Partnership and has had

implications for and a bearing on Partnership affairs, imposed an obligation

on the Kings to state their plans as per the duties set forth in sections 1.10,

4.1, 10.1 and 10.2 of the Partnership Agreement and Tennessee Code

Annotated sections 61-1-403 and 404(d).

The Business Court further held that Dean Chase’s status as an officer of the

Partnership, and the indemnification obligations of the LLC that arose as a result of that

status, imposed a duty on the Kings to disclose their plans to sue Mr. Chase, to-wit:

The Court concludes, under the unique facts of this case where NV Music

Row LLC had a contractual and statutory obligation to indemnify Dean

Chase, that the King Parties’ alleged intent and conduct of waiting to sue

until after distribution of all the funds to partners, substantially thwarted

and deprived Dean Chase of his ability to obtain indemnity from NV Music

Row LLC and placed himself within the zone for persons whom the King

Parties had a duty of disclosure with respect to the tort of misrepresentation

by concealment. These facts, the Court concludes, furnish standing and a

legal basis for the disclosure duty in the Partnership Agreement and Statute

to apply to the Chase Parties’ claims of misrepresentation by concealment.

In arguing that they had no duty to disclose, the Kings rely on this Court’s

opinion, Macon County Livestock Market, Inc. v. Kentucky State Bank, Inc., 724

S.W.2d 343, 349 (Tenn. Ct. App. 1986), wherein the Court explained:

The Tennessee Supreme Court has held:

In all cases, concealment or failure to disclose becomes

fraudulent only when it is the duty of a party having

knowledge of the facts to discover them to the other party: 2

Pom. Eq., sec. 902. And this author, in the same section says:

“All the instances in which the duty to disclose exists and in

- 31 -

which a concealment is therefore fraudulent, may be reduced

to three distinct classes:

1. Where there is a previous definite fiduciary relation

between the parties.

2. Where it appears one or each of the parties to the contract

expressly reposes a trust and confidence in the other.

3. Where the contract or transaction is intrinsically fiduciary

and calls for perfect good faith. The contract of insurance is

an example of this last class.”

Macon Cty., 724 S.W.2d at 349 (citing Domestic Sewing Machine Co. v. Jackson, 83

Tenn. 418, 424-25 (1885); Simmons v. Evans, 206 S.W.2d 295, 296 (Tenn. 1947);

Dozier v. Hawthorne Development Co., 262 S.W.2d 705, 711 (Tenn. Ct. App. 1953)).

Contrary to the Kings’ argument, and in line with the Business Court’s holdings, the

relationship between the Kings and the Chase Parties (i.e., Dean Chase’s status as

Manager of the Partnership and the other Chase Parties’ status as partners) clearly created

a duty, on the part of the Kings, to disclose to the Chase Parties. Nonetheless, the Kings

argue that “contingent liabilities,” which are not specifically defined in either the

Operating Agreement or the Partnership Agreement, are inherently speculative and, thus,

should not be considered a material fact. The evidence does not support the Kings’

argument. As noted above, Mr. Kirkham’s testimony establishes that the Partnership

would have postponed distribution of the sale proceeds had the Kings informed the

partners or Dean Chase of their intent to file the lawsuit. As the Business Court held,

“[T]he King Parties’ actions and plans to file claims against Defendant Dean Chase

concerning his management of the Partnership had a bearing on, implicated and

constituted a contingent liability for the Partnership.” We agree. Not only did the Kings’

failure to disclose affect the decision to distribute the sale proceeds, but (as discussed

infra) the Kings’ failure to disclose also interfered with Dean Chase’s duty, under the

Operating Agreement, to wind down the NV Entities while retaining sufficient funds to

cover its liabilities.

3. Damages

We will address the Chase Parties’ right to indemnification and the question of

whether attorney’s fees and costs constitute compensable damages below. As set out in

context above, the Business Court found that the Kings’ failure to disclose their plans to

sue prior to the distribution of the sale proceeds “substantially thwarted and deprived

Dean Chase of his ability to obtain indemnity from NV Music Row LLC . . . .” We

agree. To the extent that the Chase Parties are entitled to indemnification from the LLC,

the Kings’ failure to disclose their lawsuit prior to distribution of the sale proceeds

created a shortfall in LLC proceeds and deprived the Chase Parties of full

indemnification. As Mr. Kirkham’s uncontested testimony establishes, as a result of the

- 32 -

December 21, 2015 distributions, NV Music Row, LLC was left with $68,650.98 to pay

any contingent liabilities. Dean Chase testified that this amount was insufficient to

reimburse the Chase Parties for amounts paid toward legal fees and expenses incurred in

defending against the Kings’ lawsuit. In other words, if the Chase Parties are entitled to

indemnity, see discussion infra, then the Kings’ breach of their duty of disclosure

resulted in the LLC having insufficient funds to satisfy the Chase Parties’ right to

indemnification, and the Chase Parties suffered damages. As noted by the Business

Court:

The Kings’ intentional, knowing, reckless, and/or negligent failure to

disclose the plans described above was done for the inequitable purpose of

receiving a distribution of funds to which they knew they were otherwise

not entitled and which they knew should have been available to NV

Partners to pay for the substantial expense that has been and will continue

to be incurred by Dean Chase and D.F. Chase on behalf of NV Partners, the

partners of NV Partners, and NV Music Row.

Since at or around December 31, 2015, when the Kings sent their

first demand related to the present lawsuit, Dean Chase has incurred and

continues to incur substantial costs and expense in defending the present

lawsuit. . . .

***

The Court thus rules and it is ORDERED that as a matter of law the King

Parties had a duty to reveal their claims against Dean Chase to the

Partnership before they received their distribution.

Having determined that there is sufficient evidence from which a jury could have

determined that the Chase Parties’ met their burden to show a prima facie case for

misrepresentation by concealment, we now turn to the question of whether the Chase

Parties are entitled to indemnification for their damage.

V. Issues related to the Chase Parties’ Right to

Indemnification/Reimbursement

As noted above, in its December 3, 2018 order, the Business Court held, as a

matter of law, that the Chase Parties were entitled to indemnification from NV Music

Row, LLC. Specifically, the court held:

The facts are undisputed that Dean Chase served as the manager of NV

Partners, and that NV Partners is the sole member of NV Music Row, LLC.

These facts fit the requirements of Tennessee Code annotated section 48-

- 33 -

249-102; 401(e); and 115(c), (e) and (g) for Dean Chase to qualify as an

individual to whom indemnity is provided. It is also established in the

record, by the summary judgment order entered September 27, 2018,

dismissing the Plaintiffs’ claims, that under section 48-249-115(c) of the

Revised LLC Act the Chase Parties were “wholly successful . . . in the

defense of any proceeding.” Thus, the essential elements for indemnity

under Tennessee Code Annotated sections 48-249-102; 401(e); and 115(c),

(e) and (g) are established. It is therefore ORDERED that the Chase Parties

are awarded indemnity to recover their costs and expenses in this action

from NV Music Row, LLC.

Tennessee Code Annotated section 48-249-115 of the LLC Act provides, in

relevant part:

(c) Mandatory indemnification. An LLC shall indemnify a responsible

person who was wholly successful, on the merits or otherwise, in the

defense of any proceeding to which the person was a party, because the

person is or was a responsible person, against reasonable expenses incurred

by the person in connection with the proceeding.

***

(g) Indemnification of officers, employees and agents.

(1) An officer of the LLC who is not a responsible person is entitled to

mandatory indemnification under subsection (c), and is entitled to apply for

court-ordered indemnification under subsection (e), in each case, to the

same extent as a responsible person.

(2) The LLC may indemnify and advance expenses to an officer, employee,

independent contractor or agent of the LLC who is not a responsible

person, to the same extent as a responsible person.

Tenn. Code Ann. §§ 48-249-115(c); (g)(1)-(2). The LLC Act defines a “responsible

person,” in pertinent part, as

an individual who is or was a director of a director-managed LLC, a

manager of a manager-managed LLC or a member of a member-managed

LLC, or an individual who, while a director of a director-managed LLC, a

manager of a manager-managed LLC, or a member of a member-managed

LLC, is or was serving at the LLC’s request as a director, manager, officer,

partner, trustee, employee or agent of an employee benefit plan or any other

foreign or domestic entity.

- 34 -

Tenn. Code Ann. § 48-249-115(a)(6). The LLC Act defines an “officer” as anyone who

has been “delegate[d] the rights and powers to manage and control the affairs of the

LLC” by its members, irrespective of whether that person is a member himself or herself.

Tenn. Code Ann. §§ 48-249-102; -401(e).

The Operating Agreement outlines the single purpose of the LLC, which is to

“purchase, acquire, own, hold, develop and sell or otherwise dispose” of the Property.

The Partnership Agreement states that NV Partners was organized to “purchase, acquire,

own, hold, develop and sell or otherwise dispose” of the Property “through a wholly

owned limited liability company [, i.e., NV Music Row, LLC].” In December 2015, all

of the partners of NV Partners, including the Kings, signed a Unanimous Consent

directing Dean Chase, as the Manager of the Partnership, to cause NV Music Row, LLC

to sell the Property to Virgin for $11,000,000. The Partnership Agreement, Operating

Agreement, and Unanimous Consent directed Dean Chase to act on behalf of the

Partnership to sell the Property. The Kings filed suit against Dean Chase in his capacity

as the Manager of Partnership for actions he took at the direction of the partners. The

foregoing facts are not disputed. Under the LLC Act definition, there can be no doubt

that Dean Chase was acting as an officer in that the Operating Agreement delegated, to

Dean Chase, “the rights and powers to manage and control the affairs of the LLC,”

namely, the sale of the Property. Accordingly, Dean Chase clearly was an officer of the

LLC. Nonetheless, the Kings argue that Dean Chase was not a “responsible person” as

used in Tennessee Code Annotated section 48-249-115(a) and defined in Tennessee Code

Annotated section 48-249-115(a)(6); as such, the Kings argue that he is not entitled to

indemnification under the LLC Act. This argument ignores the fact that, even allowing

arguendo that Dean Chase was not a “responsible person,” there can be no question (on

the undisputed facts) that he was an officer of the LLC. Thus, under Tennessee Code

Annotated section 48-249-115(g), which allows for indemnification of “officers” to the

“same extent as a responsible person,” he is entitled to indemnification from the LLC.

As set out in the LLC Act, an LLC is required to indemnify an officer “who was

wholly successful, on the merits or otherwise, in the defense of any proceeding in which

the person was a party, because the person is or was” an officer of the LLC. Tenn. Code

Ann. § 48-249-115(c). The Kings argue that the Chase Parties were not “wholly

successful” and, thus, are not entitled to indemnification under the LLC Act. We

disagree.

As explained by this Court,

[i]n determining whether plaintiff is entitled to indemnification as a matter

of law, it must be determined whether she was “wholly successful, on the

merits or otherwise” in defending [the] lawsuit. The Tennessee statute was

patterned after the indemnification section of the Revised Model Business

- 35 -

Corporation Act. Like the language in T.C.A. § 48-18-503, Section 8.52 of

the RMBCA entitles a director to indemnification where that director is

“wholly successful, on the merits or otherwise.”

The Official Comment to the Model Act gives light to the meaning

of those words.

A defendant is “wholly successful” only if the entire

proceeding is disposed of on a basis which does not involve a

finding of liability . . .

The language in earlier versions of the Model Act and in

many other state statutes that the basis of success may be “on

the merits or otherwise” is retained. While this standard may

result in an occasional defendant becoming entitled to

indemnification because of procedural defenses not related to

the merits, e.g., the statute of limitations or disqualification of

the plaintiff, it is unreasonable to require a defendant with a

valid procedural defense to undergo a possibly prolonged and

expensive trial on the merits in order to establish eligibility

for mandatory indemnification.

Rev. Model Bus. Corp. Act § 8.52 Official Comment (1984).

Courts have interpreted the phrase “on the merits or otherwise” to include

dismissal of the case with prejudice and settlement with the dismissal of

claims. See generally 18B Am. Jur. 2d Corporations § 1911 (1985); see

also Wisener v. Air Express International Corp., 583 F.2d 579 (2d Cir.

1978) (applying Illinois law); Galdi v. Berg, 359 F.Supp. 698 (D. Del.

1973); B & B Invest. Club v. Kleiner’s Inc., 472 F. Supp. 787 (E.D.

Pa.1979); Merritt–Chapman & Scott Corp. v. Wolfson, 321 A.2d 138 (Del.

Super. 1974).

Sherman v. Am. Water Heater Co., 50 S.W.3d 455, 461 (Tenn. Ct. App. 2001) (holding

that a party who obtained dismissal through a settlement agreement without incurring any

personal liability was “wholly successful”). Having affirmed the trial court’s grant of

the Chase Parties’ motion for summary judgment, by which it dismissed all of the Kings’

claims against the Chase Parties with prejudice, it is clear that the Chase Parties were, in

fact, “wholly successful.” Further, with respect to court-ordered indemnity, the court

may, upon application of the officer, “order indemnification if it determines . . . the

[officer] is fairly and reasonably entitled to indemnification in view of all the relevant

circumstances.” Tenn. Code Ann. § 48-249-115(e). Under the particular facts of this

case, it was reasonable for the Business Court to “order indemnification [on] it[s]

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determin[ation] . . . the [officer] is fairly and reasonably entitled to indemnification in

view of all the relevant circumstances.” Tenn. Code Ann. § 48-249-115(e). From the

totality of the circumstances, we conclude that the trial court correctly held that the Chase

Parties are entitled to indemnification from the LLC.

As discussed above, the Kings’ misrepresentation by concealment led to a lack of

funds in the LLC to cover all of the Chase Parties’ fees and expenses. The question, then,

is whether the Chase Parties are entitled to recover from the Kings personally.

Throughout these proceedings, the Kings have maintained that section 5.1(b) of the

Partnership Agreement precludes personal liability. Section 5.1(b) of the Partnership

Agreement provides that:

In the event the Partnership does not have adequate funds or

assets to fully indemnify any Partner, the Partners will not,

under any circumstances, be required to indemnify the Partner

or make any additional Capital Contribution to the

Partnership for the purpose of indemnifying the Partner.

(Partnership Agreement § 5.1(b) []). A “Capital Contribution”

is defined as “any cash, cash equivalents, promissory

obligations, or the fair market value of other property which a

Partner contributes or is deemed to have contributed to the

Partnership with respect to the issuance of any Partnership

Interest.” (Partnership Agreement § 1.10).

In the trial court, the Kings referred to the foregoing section as an “anti-clawback”

provision and essentially argue that, even if they did commit fraud . . . this provision

immunizes them from liability and damages. The Business Court denied the argument in

holding that the Kings were not entitled to judgment on the Chase Parties’ pleadings, to-

wit:

The Chase Parties are not seeking a “clawback” of distributions from the

Kings. Instead, the Chase Parties are asserting independent claims of legal

wrongs by the Kings that caused the Chase Parties damages. Thus, even if

the relevant provision did contain a “clawback” prohibition, it would be

inapplicable to the Chase Parties’ claims. Irrespective, the provision at

issue does not prohibit a “clawback” or return of improper distributions of

Available Cash Flow, as defined by the Partnership Agreement. Instead, it

simply prohibits a partner from having to personally indemnify someone or

from having to make additional capital contributions for purposes of

indemnity. As previously explained, the Chase Parties are not seeking an

indemnity award against the Kings personally and they are not seeking an

order requiring the Kings to make additional capital contributions to NV

Partners [footnote omitted]. Thus, the Kings are not entitled to dismissal of

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the Chase Parties’ claims based on Section 5.1(b) of the Partnership

Agreement. . . .

We agree with the Business Court. It must be noted that the Kings’ decision to

bring suit against Dean Chase was a unilateral decision on their part, and the Kings did

not seek the other partners’ approval or vote before proceeding with the lawsuit. The

crux of the Kings’ initial books and records lawsuit against Dean Chase concerned his

management of the Partnership and potential violation of the Partnership Agreement. At

the time the Kings filed their lawsuit, the Property had been sold and distributions made;

thus, the business of the NV Entities was concluded, and the only remaining item was to

wind down. The Kings’ lawsuit stopped the winding down of the Partnership and caused

Dean Chase to have to defend against the lawsuit in order to conclude the business of the

NV Entities. When the Kings’ initial claims were dismissed as moot, they added the

Loan Claim and the Property Sale Claim—this despite the fact that the Kings had signed

the Unanimous Consent directing Mr. Chase to consummate the sale of the Property to

Virgin and had accepted their distribution from the sale proceeds without raising any

concerns. Had the Kings been successful on these claims, the decision of the majority of

the partners to sell the Property for $11,000,000 would have been undermined.

Therefore, as the Manager of the Partnership, it was incumbent on Dean Chase to defend

against these claims so as to affect the will of the majority of the partners. The Kings

certainly had a right to bring their lawsuit, but they also had an obligation and duty to

disclose their plans to the partners before the sale proceeds were distributed. This is

because the Kings’ claims triggered potential liability on the part of the NV Entities. As

found by the Business Court in its December 3, 2018 order, these claims “had a bearing

on, implicated and constituted a contingent liability for the Partnership. The contingent

liability was that if the King Parties did not prevail on their claims against Dean Chase he

had a right to be paid indemnity [from] NV Music Row LLC.” Here, the Kings did not

prevail on any of their claims against the Chase Parties, who were entitled to

indemnification by the LLC. If the Kings had satisfied their duty to disclose their plans

to file suit in a timely manner, the LLC would have delayed distribution of the sale

proceeds until the lawsuit was resolved. Had that occurred, the LLC would have been

able to indemnify the Chase Parties. However, due solely to the Kings’ concealment of

the material fact of their pending lawsuit, the LLC was rendered insolvent. The Kings, as

the only tortfeasors, are solely liable for any damages arising from their concealment.

VI. Issues Related to Miscellaneous Rulings Made Prior to the Jury Trial

A. Chase Parties’ Motion to File a Second Amended Counterclaim

In its December 3, 2018 order, the trial court granted the Chase Parties’ motion to

amend their complaint “with one exception. The one exception is that the amendment to

add allegations and claims against David King, personally, contained in Count III of the

proposed Second Amended Counterclaim and Third-Party Complaint, is denied as

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untimely.” The Business Court allowed the remainder of the motion to amend, reasoning

that,

while it is filed on the eve of trial, the amendment does not contain

anything new or different that the King Parties are unaware of and

incapable of defending. The amendment corrects an incorrect citation and

correctly cites to the Revised LLC Act as the applicable law, and conforms

the pleadings to the facts and claims which were obtained in discovery. The

Court denies the King Parties’ assertion that they have not had sufficient

notice to defend. In so concluding, the Court adopts the following

explanation provided by the Chase Parties:

[T]he Proposed Second Amended Counterclaim simply

streamlines the claims that will be pursued by the Chase

Parties at the trial of this matter. By way of example only, the

Proposed Second Amended Counterclaim eliminates the

cause of action seeking that some or all of the partners deposit

into Court their distributions from the NV Entities during the

pendency of this action, as the Chase Parties have elected not

to pursue that relief during the course of the case. While the

Proposed Second Amended Counterclaim more clearly

delineates the claims set forth in the Chase Parties’ proposed

jury instructions, all such claims were adequately pled in the

Amended Counterclaim. . . . In other words, there is no lack

of notice or undue prejudice to the Kings because the claims

that will be litigated at trial were already pled in the Amended

Counterclaim. The Kings had a full opportunity to seek

discovery on these claims, including the option to serve

contention interrogatories if they were confused about the

contours or bases of the claims. They chose not to do so.

Further, there has been no bad faith or repeated failure to cure

any deficiencies on the part of the Chase Parties, this

amendment merely seeks to streamline and more clearly

delineate the claims that will be presented to the jury. For

these reasons, the Chase Parties should be allowed to make

such amendments.

The decision to grant or deny a motion to amend the pleadings lies within the

sound discretion of the trial court and will not be disturbed on appeal absent an abuse of

discretion. Henderson v. Bush Bros. & Co., 868 S.W.2d 236, 237 (Tenn. 1993);

McCullough v. Johnson City Emergency Physicians, P.C., 106 S.W.3d 36, 44 (Tenn.

Ct. App. 2002); Hawkins v. Hart, 86 S.W.3d 522, 532 (Tenn. Ct. App. 2001). Tennessee

Rule of Civil Procedure 15.01 allows a plaintiff to amend his or her complaint once as a

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matter of course so long as it is done before the opposing party has filed a responsive

pleading. Thereafter, a plaintiff may only amend the complaint with the consent of the

opposing party or by leave of the trial court. Tenn. R. Civ. P. 15.01.

Leave to file an amended complaint must be “freely given when justice so

requires.” Tenn. R. Civ. P. 15.01. In deciding whether “justice [] requires” that an

amendment to the complaint be allowed after a responsive pleading has been filed, the

trial court must consider the following factors: (1) the plaintiff’s undue delay in filing the

motion; (2) lack of notice to the opposing party; (3) bad faith by the moving party; (4)

repeated failure to cure deficiencies by previous amendments; (5) undue prejudice to the

opposing party; and (6) futility of the amendment. Hawkins, 86 S.W.3d at 532-33; Isbell

v. Travis Elec. Co., No. M1999-00052-COA-R3-CV, 2000 WL 1817252, at *15 (Tenn.

Ct. App. Dec. 13, 2000).

From our review, by their motion to file a second amended counterclaim, the

Chase Parties did not seek to add any new substantive claims (with the exception of those

against David King, which were denied). Rather, the Chase Parties sought to: (1) correct

a typographical error in their amended counterclaim by substituting the applicable statute,

i.e., the Tennessee Revised Limited Liability Act, as opposed to the Tennessee Limited

Liability Company Act; and (2) streamline the causes of action asserted against the

Kings. In support of their motion, the Chase Parties included an exhibit containing a

side-by-side comparison between the amended counterclaim and their proposed second

amended counterclaim.

Concerning the typographical amendment, the Kings assert that, “The amendment

of the operative statute to the Revised LLC Act in T.C.A. § 48-249-115 was a

fundamental change in the Chase’s cause of action.” We disagree. In both the amended

counterclaim and the second amended counterclaim, the Chase Parties assert a claim for

indemnification against the LLC. The Chase Parties attached the Operating Agreement

to both versions of their counterclaim. The Operating Agreement defines the applicable

“Act” to mean “the Tennessee Revised Limited Liability Company Act.” (Emphasis

added). The fact that the applicable “Act” was mislabeled in the amended complaint as

the “Tennessee Limited Liability Company Act” is not fatal to the Chase Parties’ motion

to amend. There can be no doubt that the Kings were on notice of the applicable Act by

virtue of the Operating Agreement and inclusion of that agreement as an appendix to the

Chase Parties’ amended counterclaim. Furthermore, a comparison of the applicable

provisions of the Tennessee LLC Act and the Revised LLC shows that they are

substantively identical. Compare Tenn. Code Ann § 48-243-101, with Tenn. Code Ann.

§ 48-249-115. As such, we conclude that the Kings were not prejudiced by this

amendment.

Concerning the other amendments, we agree with the trial court’s conclusion that

these changes “more clearly delineate the claims that [would] be presented to the jury.”

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In short, there is no indication that the Chase Parties, by their second amended

counterclaim, sought to add any additional claims against the Kings. Rather, given the

protracted procedural history of the case and the fact that parties and claims had been

dismissed from the action, the “streamlining” of the issues that would be presented to the

jury was necessary to avoid confusion. Regardless, because the Chase Parties did not

seek to add additional or new claims or theories, we conclude that the Kings were not

prejudiced by the trial court allowing the second amended counterclaim; thus, there was

no abuse of discretion warranting reversal.

B. Kings’ Motion for Continuance

The Kings further contend that they were prejudiced by the Business Court’s

denial of their motion for continuance after the court allowed the Chase Parties to file

their second amended counterclaim. Specifically, the Kings argue that they were

“prejudiced by the Chase[s’] Amendment a week before trial, which asserted a new cause

of action based on a separate and distinct statutory provision under the Tennessee[]

Revised LLC Act.” The decision to grant or deny a motion for continuance rests in the

sound discretion of the trial court. See, e.g., Blake v. Plus Mark, Inc., 952 S.W.2d 413,

415 (Tenn. 1997). “The ruling on the motion will not be disturbed unless the record

clearly shows abuse of discretion and prejudice to the party seeking a continuance.” Id.

As discussed above, the Kings suffered no prejudice due to the filing of the Chase

Parties’ second amended counterclaim. There were no new claims added by the

amendment, and the Kings were on notice from the outset that the Chase Parties were

seeking indemnification under the Revised LLC Act as the revised Act is the only statute

referenced in the Operating Agreement that was attached to both the amended

counterclaim and the second amended counterclaim. The Kings had ample opportunity

to prepare their defense. As such, we cannot conclude that the Business Court abused its

discretion in denying the Kings’ motion for continuance.

C. Dismissal of Third-Party Defendants, i.e., all partners except the Kings

The Chase Parties’ second amended counterclaim added the other partners as

third-party defendants. However, at a hearing on December 5, 2018, the Chase Parties

announced that they were not seeking relief from any partner except the Kings.

Following this announcement, the remaining partners filed a joint motion seeking to be

dismissed from the lawsuit as there were no pending claims against them. The Kings

filed a response in opposition to the joint motion, wherein they argued, inter alia, that the

remaining partners were necessary parties on the issue of indemnification. In its

December 7, 2018 order, the trial court granted the joint motion and dismissed all

partners except the Kings. The order states, in relevant part:

It is ORDERED that the motion of the Third-Party Defendants . . . is

granted, and the Movants are dismissed as parties to the lawsuit. This ruling

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is based upon these findings and conclusions.

 There are no claims in the lawsuit asserted by Jonathan, David, or

Taylor King against the Movants.

 With the December 3, 2018 entry of judgment on the pleadings

dismissing Count II paragraph 51 claims of Dean Chase, D.F. Chase,

Inc., and Sandra Chase (the “Chase Parties”) in the second amended

counterclaim and third-party complaint for indemnity against NV

Partners, no claims by the Chase Parties remain which involve the

Movants.

 With the agreement announced in open court on December 5, 2018

by the Movants to the Chase Parties’ Count VI Claim for Judicial

Dissolution and agreement for that to occur now or anytime in the

future, there is nothing in dispute as to the Movants and they are not

necessary parties.

In view of our holding that the tortious conduct of the Kings was the sole cause of the

damages incurred by the Chase Parties, we agree with the Business Court that the other

partners are not necessary parties to the lawsuit. In short, but for the sole actions of the

Kings in failing to disclose their plan to file suit, there would have been sufficient funds

in the LLC to indemnify the Chase Parties. As noted above, the Kings’ decision to bring

suit, as well as the decision to withhold those plans, was theirs alone. As such, the Kings

are solely responsible for damages, and the other partners are not necessary parties.

VII. Issues Related to the Jury Trial

A. Jury Instructions / Mistrial

As set out in the Kings’ brief:

On December 5, 2018, the Kings filed their proposed Special Jury

Instructions. On December 7, 2018, the Chase Parties submitted a Notice

of Filing Redacted Prior Court Orders, which removed all reference to the

King’s claims. This meant that the Kings could not even testify about the

clearly relevant claims they had brought against Dean Chase in order to

explain when they had learned of the conduct and formed the intent to bring

them. The trial court’s redacted Order granting summary judgment

removed all reference to the trial court’s holding that the Kings could not

prove damages and were out voted. This precluded the Kings from showing

the jury the circumstances of the vote approving the sale.

In arguing that the trial court erred in charging the jury, the Kings maintain that:

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The trial court erroneously charged the jury that the court had previously

found that all of the Kings’ claims were dismissed and Dean Chase had

done nothing wrong, that he was owed indemnity, and that the Kings were

under a duty to disclose their plans to Dean Chase. The Chancellor refused

to charge the language from the summary judgment order itself[, i.e., “As to

all of the causes of action of the Second Amended Complaint pertaining to

the Loan Claims, there are no facts in the summary judgment record of

damages. Without proof on this essential element, the Plaintiffs’ causes of

action on the Loan Claims must be dismissed.”].

Whether a jury instruction is erroneous is a question of law and is, therefore,

subject to de novo review with no presumption of correctness. Nye v. Bayer

Cropscience, Inc., 347 S.W.3d 686, 699 (Tenn. 2011) (citation omitted). “Under

Tennessee law the jury charge will be viewed in its entirety and considered as a whole in

order to determine whether the trial judge committed prejudicial error.” Otis v.

Cambridge Mut. Fire Ins. Co., 850 S.W.2d 439, 446 (Tenn. 1992). A jury instruction

“will not be invalidated as long as it fairly defines the legal issues involved in the case

and does not mislead the jury.” Id. We first note that the Kings’ argument fails to

specify the actual portion of the jury charge they challenge. However, from their

argument, supra, we deduce that the following instruction is the basis of their challenge:

I also am going to state again the following information and

background events which occurred before the lawsuit was filed and some

rulings that have already been made in the lawsuit as background of the

case.

NV Music Row, LLC is a Tennessee company that was formed to

buy, develop, and sell certain property near downtown Nashville for the

purposes of building a hotel. NV Music Row, LLC is solely owned by NV

Partners.

Dean Chase served as Manager of NV Partners.

This case was originally brought by Jonathan and Taylor King

against Dean Chase. In their lawsuit, the Kings claimed that Mr. Chase,

while acting as Manager of NV Partners, committed certain wrongs that

damaged the Kings. Dean Chase denied the claims of the Kings, and filed a

counter-lawsuit against the Kings for damages caused by their acts.

In the prior proceedings in this case, all of the claims the Kings

brought against Mr. Chase were dismissed. In addition it has already been

decided that Dean Chase and his business did not act or omit to do anything

that damaged NV Partners or its partners.

Also it has already been determined that Dean Chase and his

business are entitled to compensation from NV Music Row, LLC for costs

incurred in this lawsuit.

These matters have already been decided by the Court, and you may

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hear about them some during the case. You are bound by Tennessee law to

follow the Court’s rulings on these issues.

Furthermore, in their sixteenth issue, the Kings argue that the trial court erred in failing to

instruct the jury on a partner’s right to access to the books and records of the Partnership

and the doctrine of unclean hands (on the part of Dean Chase). Concerning a “books and

records” instruction, as discussed above, the Kings’ books and records lawsuit was

dismissed as moot. To the extent that their right to examine the books and records of the

Partnership may have shown some state of mind or justification for their initiating a

lawsuit against Dean Chase, the gravamen of the Chase Parties’ fraudulent concealment

claim did not rest on the question of whether the Kings were entitled to bring their suit.

Rather, the question before the jury was whether the Kings withheld their plan to bring

the lawsuit. Thus, the absence of a jury instruction indicating that a partner has a right to

examine the books and records of the Partnership was not fatal to the jury charge.

Concerning the Kings’ remaining arguments regarding the jury instructions, in

view of our holdings above, wherein we affirm: (1) the Business Court’s grant of

summary judgment dismissing the Kings’ claims against the Chase Parties; (2) its

holding, as a matter of law, that the Chase Parties are entitled to indemnity from the LLC;

and (3) its declaratory judgment that Dean Chase did not violate his duties to the NV

Entities (i.e., that he did not have unclean hands), we conclude that there was no basis to

charge the jury with the unclean hands doctrine. Furthermore, for the reasons discussed

below, instruction concerning the “American Rule” was not warranted in this case.

Accordingly, there is no basis for reversal on the jury instructions.

Because the Kings’ issue concerning the trial court’s denial of a mistrial also rests

on the allegation that the jury instructions were flawed, we also conclude that the trial

court did not abuse its discretion in denying a mistrial. State v. Robinson, 146 S.W.3d

469, 494 (Tenn. 2004) (stating that the decision whether to grant or deny a motion for

mistrial rests within the sound discretion of the trial court and should not be reversed

absent a clear showing of abuse of discretion).

B. Jeffrey Burnside

The Kings assert that the Business Court committed reversible error in granting

the Chase Parties’ motion to exclude the testimony of Jeffrey Burnside, the Kings’

attorney. It is undisputed that the Kings failed to disclose Mr. Burnside as a potential

witness during the discovery process. Despite the Chase Parties’ interrogatory, asking

the Kings to identify all individuals with knowledge and claims and counterclaims in the

case, the Kings waited until December 7, 2018, which was one business day before trial,

to file an amended witness list, wherein they first disclosed their intent to bring Mr.

Burnside as a witness. Tennessee Rule of Civil Procedure 37.03 provides that, “A party

who without substantial justification fails to supplement or amend responses to discovery

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requests . . . is not permitted, unless such failure is harmless, to use as evidence at trial, at

a hearing, or on a motion any witness or information not so disclosed.” Furthermore,

Davidson County Local Rule of Court 29.01 provides:

At least seventy-two (72) hours (excluding weekends and holidays) before

the trial of a civil case, opposing counsel shall either meet face-to-face or

shall hold a telephone conference for the following purposes:

a. to exchange names of witnesses, including addresses and home and

business telephone numbers (if not included in interrogatory answers)

including anticipated impeachment or rebuttal witnesses; and

b. to make available for viewing and to discuss proposed exhibits.

In ruling on the Chase Parties’ motion to exclude Mr. Burnside, the Business

Court stated:

Mr. Burnside shall not be allowed to testify because we have rules that

govern these proceedings. Under the rules, witnesses such as Mr. Burnside

are to be designated in response to discovery. In this case, the right

questions were asked, and Mr. Burnside was not listed as someone having

knowledge. And so under Tennessee law, it’s unfairly prejudicial on the

eve of trial to come in with a surprise witness in the case. And that’s what

the rules are designed to eliminate, and This Court is enforcing that rule.

As noted by the Tennessee Supreme Court in Otis v. Cambridge Mut. Fire Ins.

Co., 850 S.W.2d 439, 442 (Tenn. 1992), “admissibility of evidence is within the sound

discretion of the trial judge. When arriving at a determination to admit or exclude even

that evidence which is considered relevant trial courts are generally accorded a wide

degree of latitude and will only be overturned on appeal where there is a showing of

abuse of discretion.” Concerning the exclusion of undisclosed witnesses, this Court has

explained:

The fact that the court can impose the sanction of not permitting the

unnamed witness to testify, does not mean that it must do so. Generally,

where a party has not given the name of a person with knowledge of

discoverable matter, the court should consider the explanation given for the

failure to name the witness, the importance of the testimony of the witness,

the need for time to prepare to meet the testimony, and the possibility of a

continuance. In the light of these considerations the court may permit the

witness to testify, or it may exclude the testimony, or it may grant a

continuance so that the other side may take the deposition of the witness or

otherwise prepare to meet the testimony. See: 8 Wright and Miller, Federal

Practice and Procedure, supra; 23 Am.Jur.2d Depositions and Discovery §

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265 (1965).

Strickland v. Strickland, 618 S.W.2d 496, 501 (Tenn. Ct. App. 1981), perm. app. denied

(Tenn. June 29, 1981). However, where a “party willfully, knowingly, and intentionally

withheld the name of a person with knowledge of discoverable matter, the imposition of

the sanction of not permitting that person to testify is strongly suggested.” Id. (citation

omitted); see also Brandy Hills Estates, LLC v. Reeves, 237 S.W.3d 307, 316-17 (Tenn.

Ct. App. 2006) (affirming the trial court’s exclusion of witnesses, who, like Mr.

Burnside, were disclosed “less than seventy-two hours prior to the commencement of the

trial.”).

Concerning their failure to disclose Mr. Burnside during discovery or within 72

hours of the jury trial, the Kings again assert that the Chase Parties’ second amended

counterclaim contained new claims against them. For the reasons discussed above, the

second amended complaint merely streamlined the Chase Parties’ existing claims. As

such, we conclude that the Business Court’s denial of Mr. Burnside’s testimony was not

an abuse of its discretion.

C. The Kings’ Opening Statement

In their fourteenth issue, the Kings assert that the Business Court prejudiced the

jury by its frequent interruptions and comments during the Kings’ attorney’s opening

argument. Turning to the record, the trial court’s first interruption came several minutes

into the opening:

THE COURT: And, Mr. Blackburn, this is what the proof will show based

on the witnesses that are going to be called et cetera. That’s what our

opening statement is about, correct?

MR. BLACKBURN: Just as Mr. Creson’s was, mine is as well.

THE COURT: Yes. This is what you believe the proof will show by the

witnesses that you’ve indicated will be called. All right. You may proceed.

MR. BLACKBURN: This proof will show that. . . .

THE COURT: Excuse me, Mr. Blackburn. Hearsay, if we’re not going to

have a certain witness. So if this is just what you believe

MR. BLACKBURN: That is not hearsay, respectfully.

THE COURT: You will remind us this is what the proof, you believe, will

show, the admissible proof will show.

MR. BLACKBURN: Your Honor, all of these statements are that, and I

agree. . .

THE COURT: All right.

The only other “interruption” in Mr. Blackburn’s opening occurred when the

Chase Parties’ counsel objected to Mr. Blackburn’s statements concerning matters that

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had been excluded by grant of their motions in limine:

MR. BLACKBURN: . . . [I]nto discovery in this case, [Jonathan King]

learned other things that he had no way of knowing. One of those things

had to do with funds that were charged to the closing. It had to do with

money paid on a note. It had to do with various things that you’ll see in

these subsequent pleadings, that D.F. Chase advanced this money without

even a promissory note to support it, that D.F. Chase—

MR. CRESON: Object, Your Honor, in terms of motion in limine, the order

that’s been entered on that.

THE COURT: Yes. The Court sustains the objection.

MR. BLACKBURN: I presume that the jury is going to be shown those

pleadings because the state of mind at that time

THE COURT: Let’s continue on with something else. You can complete

the list that you were making. Let’s move to the next item of it, please.

MR. BLACKBURN: When you see the lawsuits that caused Mr. Chase to

incur the funds, you will see that a great deal of it could not possibly have

been known by him on December 21 of 2015 and was not. Now, when you

conclude, when you hear the conclusion of all of this proof and you weigh

it, what you’re going to see is that no actual fact was ever, ever withheld

from anyone at any time. Thank you.

THE COURT: Thank you, Mr. Blackburn. Members of the jury, that

completes our opening statements. . . .

The foregoing sections of the transcript constitute the only “interruptions” and

comments by the trial court during Mr. Blackburn’s opening statement. The first

comments were warranted in that the Business Court was merely reminding Mr.

Blackburn to limit his statements to proof he expected would be adduced through witness

testimony. See, e.g., Harris v. Baptist Mem’l Hosp., 574 S.W.2d 730, 732 (Tenn. 1978)

(stating that opening statement is not evidence). “Opening statements ‘are intended

merely to inform the trial judge and jury, in a general way, of the nature of the case and

to outline, generally, the facts each party intends to prove.’” State v. Gayden, No.

W2011-00378-CCA-R3-CD, 2012 WL 5233638, at *9 (Tenn. Crim. App. Oct. 23, 2012)

(quoting Harris, 574 S.W.2d at 732). Thus, it is well-settled that “[o]pening statements

are not stipulations or evidence.” Id. (citing Harris, 574 S.W.2d at 732). The trial

court’s comments do not rise to the level of prejudicial statements against Mr. Blackburn

or his case.

Concerning the second “interruption,” the Business Court did not instigate the

interruption. Rather, the court was merely ruling on an objection lodged by the Chase

Parties’ attorney. As set out in context above, after the trial court sustained the objection,

Mr. Blackburn continued to argue that the jury should be apprised of certain pleadings.

The trial court correctly denied any ruling on exhibits or evidence at that point in the

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proceedings and urged Mr. Blackburn to continue with his opening. This does not

constitute error.

D. Denial of Taylor King’s Motion for Directed Verdict

The Kings assert that the Business Court erred in denying Taylor King’s motion

for directed verdict because “[t]here was no proof from which a jury could have found

that Taylor King was liable for the tort of misrepresentation by concealment.” We

disagree.

Tennessee Rule of Civil Procedure 50.02 provides, in relevant part, that

Whenever a motion for a directed verdict made at the close of all the

evidence is denied or for any reason is not granted, the court is deemed to

have submitted the action to the jury subject to a later determination of the

legal questions raised by the motion. Within thirty (30) days after the entry

of judgment a party who has moved for a directed verdict may move to

have the verdict and any judgment entered thereon set aside and to have

judgment entered in accordance with the party’s motion for a directed

verdict; or if a verdict was not returned, such party, within thirty (30) days

after the jury has been discharged, may move for a judgment in accordance

with such party’s motion for a directed verdict. A motion for a new trial

may be joined with this motion, or a new trial may be prayed for in the

alternative. If a verdict was returned, the court may allow the judgment to

stand or may reopen the judgment and either order a new trial or direct the

entry of judgment as if the requested verdict had been directed.

When reviewing a motion for directed verdict, this Court applies the same standard as the

trial court. The court must “take the strongest legitimate view of the evidence in favor of

the opponent of the motion, allow all reasonable inferences in his or her favor, discard all

countervailing evidence, and deny the motion when there is any doubt as to the

conclusions to be drawn from the evidence.” Akers v. Prime Succession of Tennessee,

Inc., 387 S.W.3d 495, 509 (Tenn. 2012) (quoting Mercer v. Vanderbilt Univ., Inc., 134

S.W.3d 121, 130-31 (Tenn. 2004)). The court should not weigh the evidence nor should

it evaluate the credibility of the witnesses. Plunk v. Nat’l Health Investors, Inc., 92

S.W. 3d 409, 412 (Tenn. Ct. App. 2002); Goree v. United Parcel Serv., Inc., 490 S.W.3d

413, 428-29 (Tenn. Ct. App. 2015). The granting of such motion “is appropriate only

when the evidence is insufficient to create an issue for the jury to decide, or when

reasonable minds can reach only one conclusion [contrary to the jury’s verdict].” Plunk,

92 S.W.3d at 413 (citations omitted).

Turning to the record, at trial, the Chase Parties presented evidence that Taylor

King and Jonathan King each owned one-half of a single interest in the Partnership. As

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such, any action on the part of Jonathan King would also have bound Taylor King. In

short, the Kings were engaged as partners in a joint venture. As explained by this Court:

Under the joint venture doctrine, “the negligence of one member [of the

joint venture] is imputed to all of the other members.” Fain v. O’Connell,

909 S.W.2d 790, 793 (Tenn. 1995). To establish the existence of a joint

venture among several parties, the Defendants must show that there is (a) a

common purpose, (b) some manner of agreement among them, and (c) an

equal right on the part of each to control both the venture as a whole and

the relevant instrumentality. “Liability predicated on a joint venture theory

of mutual responsibility is not imposed in instances in which the parties

join together purely for pleasure, but is reserved, rather, for cases in which

the parties associate for business, or expense sharing, or some comparable

arrangement.” The concept of a “joint venture” was described in Fain v.

O’Connell:

A joint venture is an association of persons with intent, by

way of contract, express or implied, to engage in and carry

out a single business contract, express or implied, to engage

in and carry out a single business adventure for joint profit,

for which purpose they combine their efforts, property,

money, skill, and knowledge, but without creating a

partnership in the legal or technical sense of the term, or a

corporation, and they agree that there shall be a community of

interest among them as to the purpose of the undertaking, and

that each coadventurer shall stand in the relation of principal,

as well as agent, as to each of the other coadventurers, with

an equal right of control of the means employed to carry out

the common purpose of the adventure.

909 S.W.2d at 793 (quoting 30 Am. Jur., p. 939, Sec. 2).

Anderson v. U.S.A. Truck, Inc., No. No. W2006-01967-COA-R3-CV, 2008 WL

4426810, *15-16 (Tenn. Ct. App. Oct. 1, 2008) (some internal citations omitted). The

fact that the Kings were engaged in a joint venture would allow Mr. King to bind Mrs.

King in any decisions concerning their joint venture. Furthermore, as set out in Trial

Exhibits 7 and 8, in his email correspondence with Mr. Kirkham, Mr. King states that,

“Jonathan and Taylor King are NOT happy with the outcome of this deal.” (Emphasis

added). From these exhibits, alone, a reasonable jury could conclude that Mrs. King

joined in her husband’s contest to Dean Chase’s actions as Manager of the Partnership.

Moreover, as evidenced by Trial Exhibit 15, on December 30, 2015, within a few days of

the distribution of the proceeds from the sale of the Property, Mr. King sent

correspondence to another partner, wherein he stated that he was “vigilantly pursuing a

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cause of action for the breach of fiduciary duties . . . [against] Dean [Chase].”

Importantly, Mrs. King is copied on this communication. From this, and the additional

emails that were admitted into evidence, there is sufficient evidence from which a

reasonable jury could have concluded that Taylor King was aware, and actively

participated in Jonathan King’s plan to contest the sale of the Property. Neither of the

Kings took the stand to testify otherwise. Accordingly, it was not reversible error for the

trial court to deny Taylor King’s motion for directed verdict.

VIII. Damages

Tennessee follows the “American Rule” that “in the absence of a contract, statute

or recognized ground of equity so providing there is no right to have attorneys’ fees paid

by an opposing party in civil litigation.” State ex rel. Orr v. Thomas, 585 S.W.2d 606,

607 (Tenn. 1979) (citing Deyerle v. Wright Mfg. Co., 496 F.2d 45 (6th Cir.1974); Carter

v. Va. Sur. Co., 216 S.W.2d 324 (Tenn. 1948)). Relying on the American Rule, the

Kings assert that the Chase Parties cannot recover their attorney’s fees and expenses as

compensatory damages. Under the very narrow and particular facts of this case, we

disagree.

In Pullman Standard, Inc. v. Abex Corp., the Tennessee Supreme Court adopted

certain exceptions to the American Rule. First, the Court adopted an exception based on

implied indemnity, to-wit:

[W]e have held in previous cases that costs and attorneys’ fees are

recoverable under an express indemnity contract if the language of the

agreement is broad enough to cover such expenditures, see Harpeth Valley

Utilities District v. Due, 225 Tenn. 181, 465 S.W.2d 353 (1971); 41

Am.Jur.2d Indemnity § 36 (1968). However, the issue raised in this case,

the recovery of litigation expenses and attorneys’ fees under an implied

indemnity contract, is apparently one of first impression in this state.

We have examined the law in other jurisdictions on this issue. It

appears that a majority of courts which have considered the issue allow the

recovery of attorneys’ fees under an implied indemnity contract in an

appropriate case. See, e.g., Heritage v. Pioneer Brokerage & Sales, Inc.,

604 P.2d 1059 (Alaska 1979); Sendroff v. Food Mart of Connecticut, Inc.,

34 Conn.Supp. 624, 381 A.2d 565 (1977); Addy v. Bolton, 257 S.C. 28, 183

S.E.2d 708 (1971). See also, Frumer & Friedman Products Liability §

44.10[1] (1984); 22 Am.Jur.2d Damages § 166 (1965); 42 C.J.S. Indemnity

§ 24 (1944). Other jurisdictions disallow the recovery of such expenses by

relying upon the general rule that attorneys’ fees are not recoverable, absent

a statute or contract specifically providing for such recovery. See Kerns v.

Engelke, 76 Ill.2d 154, 28 Ill. Dec. 500, 390 N.E.2d 859, 865 (1979).

We are in agreement with the majority view that attorneys’ fees are

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recoverable under an implied indemnity agreement in appropriate cases.

We continue to adhere to the rule in Tennessee that attorneys’ fees are not

recoverable in the absence of a statute or contract specifically providing for

such recovery, or a recognized ground of equity; however, we recognize an

exception to that rule and hold that the right of indemnity which arises by

operation of law, based upon the relationship of the parties, see Cohen v.

Noel, 165 Tenn. [1 Beel.] 600, 56 S.W.2d 744 (1933), includes the right to

recover attorneys’ fees and other litigation costs which have been incurred

by the indemnitee in litigation with a third party.

Pullman Standard, Inc. v. Abex Corp., 693 S.W.2d 336, 338 (Tenn. 1986). In Pullman

Standard, the Court concluded that the plaintiff’s complaint contained sufficient

allegations to state a claim for attorney’s fees under this theory. Id. at 338. The

complaint alleged that the plaintiff, Pullman Standard, was required to defend itself in

prior lawsuits because a wheel designed and manufactured by the defendant, Abex

Corporation, was defective and caused the damages complained of in those suits. Id.

Accordingly, although the complaint did not allege that Pullman Standard was required to

pay a judgment or settlement in the prior lawsuits, the complaint clearly alleged that

Pullman Standard was required to defend the prior lawsuits due to the fault of Abex. In

recognizing the right to recover attorney’s fees under an implied indemnity theory, the

Court explained that this right

is not based upon the failure of the indemnitor to fulfill an obligation to

take over the indemnitee’s defense or upon the existence of some benefit to

the indemnitor arising from the defense conducted by the indemnitee.

Instead, it is, like the right of the indemnitee to be indemnified for any

judgment or settlement it pays, based upon the relationship between the

parties and their respective degrees of fault.

Id. at 339. Thus, the indemnitee’s right to recover attorney’s fees under this theory

depends not upon the fact that the indemnitee was required to defend itself in a prior

lawsuit, but that the indemnitee was forced to defend itself due to some fault or

wrongdoing by the indemnitor. Id. Here, the Chase Parties have a right to

indemnification from the LLC, but there is no fault on the part of the indemnitor, NV

Music Row, LLC; as such, the implied indemnity exception is not clearly applicable.

However, in addition to the implied indemnity theory, the Pullman Standard Court also

recognized a second means of recovery for attorney’s fees and costs under an

independent tort theory, to-wit:

Pullman’s second theory of recovery of attorneys’ fees and litigation

expenses is based upon the tort of deceit. Again we are faced with an issue

of first impression in Tennessee. The Court of Appeals refused to recognize

a cause of action for recovery of attorneys’ fees based upon an independent

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tort because to do so would allow circumvention of its refusal to permit the

recovery of such damages under an indemnity theory. In view of our

holding that attorneys’ fees and litigation expenses are recoverable under an

implied agreement to indemnify, the Court of Appeals’ justification for

refusing to recognize Pullman’s second theory of recovery is no longer a

concern.

It appears that attorneys’ fees and costs are recoverable under an

independent tort theory in most jurisdictions which have considered the

issue. Indeed, we have been cited to no case, and have discovered none in

our own research, which has refused to recognize the theory of recovery.

As stated in the annotation to 42 A.L.R.2d 1183 (1956),

“It appears to be well settled that where the natural and

proximate consequence of a tortious act of defendant has been

to involve plaintiff in litigation with a third person,

reasonable compensation for attorneys’ fees incurred by

plaintiff in such action may be recovered as damages against

the author of the tortious act.” Id. at 1186.

The Restatement (Second) of Torts, § 914(2) (1979), cites a similar rule:

“One who through the tort of another has been required to act

in the protection of his interests by bringing or defending an

action against a third person is entitled to recover reasonable

compensation for loss of time, attorney fees and other

expenditures thereby suffered or incurred in the earlier

action.”

See also 22 Am.Jur.2d Damages § 166 (1965). We adopt the prevailing rule

and recognize the cause of action set forth above. See: Safway Rental &

Sales Co. v. Albina Engine & Machine Works, 343 F. 2d 129 (10th

Cir.1965).

Pullman Standard, 693 S.W.2d at 339-40; accord Whitelaw v. Brooks, 138 S.W.3d 890

(Tenn. Ct. App. 2003), perm. app. denied (Tenn. June 21, 2004) (applying the Pullman

Standard independent tort exception). The Pullman Standard independent tort

exception to the American Rule applies when a party, “through the tort of another[,] has

been required to act in the protection of his interests by bringing or defending an action

against a third person. . . .” (Emphasis added). Here, of course, the Chase Parties

brought their lawsuit directly against the tortfeasors (i.e., the Kings) and not against a

third party. Nonetheless, Tennessee Courts have approached the third party requirement

of the independent tort exception differently depending on the particular facts and

equities presented in the case. See Grace v. Grace, No. W2016-00650-COA-R3-CV,

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2016 WL 6958887, at *7 (Tenn. Ct. App. Nov. 29, 2016) (“The independent tort

exception recognized in Pullman and applied by the federal district court in Edwards

Moving simply does not apply in this case. First, we note that this case involves only

claims between Appellee and Appellant. Accordingly, there can be no dispute that

Appellee was not required to bring suit against a third party to protect his interests in the

underlying lawsuit. See Pullman, 693 S.W.2d at 340.”); Whitelaw, 138 S.W.3d at 894

(Tenn. Ct. App. 2003) (applying the independent tort theory and stating, “The trial court

below awarded Whitelaw his attorney’s fees, not for the negligence action against Hall,

but for the litigation expenses incurred for the action against Brooks and the other

landowners holding land interests which encroached upon Whitelaw’s realty. . . . Were it

not for Hall’s negligence, which is not disputed on this appeal, Whitelaw would not have

been required to bring that action to clear up his title in court.”). But see Evans v. Young,

No. 01A01-9711-CV-00638, 1999 WL 11510, at *4 (Tenn. Ct. App. Jan. 14, 1999) (“We

recognize that, in the instant case, the tortious conduct of Hailey Wrecking and Levy

Industrial did not cause Ms. Evans to engage in litigation with a third party. Thus, the

‘tort of another doctrine’ is not directly applicable. We find, however, that the equitable

principles underlying this doctrine are nevertheless relevant considerations in the case at

bar. Hailey Wrecking and Levy Industrial conspired with Mr. Young to hinder or prevent

the collection of Ms. Evans’ judgment. As a direct result of this conspiracy, Ms. Evans

incurred almost seven thousand dollars in costs and attorney fees. We find that, under

such circumstances, it is appropriate to require Hailey Wrecking and Levy Industrial to

pay these expenses.”).

We conclude that circumstances presented in this case are best suited to the

analysis and reasoning employed in Evans v. Young. For the reasons discussed above, it

is clear that due solely to the Kings’ tort of misrepresentation by concealment, the Chase

Parties were “required to act in the protection of [the] interests [of the Partnership].”

Pullman Standard, 693 S.W.2d at 340 (citing The Restatement (Second) of Torts, §

914(2) (1979)). In other words, “the natural and proximate consequence of a tortious act

of [the Kings] has been to involve [the Chase Parties] in litigation.” Id. (citing 42

A.L.R.2d 1183 (1956)). Here, the Kings do not dispute the amount of damages incurred

by the Chase Parties in the form of attorney’s fees and costs expended in defense of the

Kings’ lawsuit, i.e., $677,768.79. Rather, the Kings assert that because the damages are

in the form of attorney’s fees and costs, the Chase Parties are precluded from recovery

under the American Rule. Pursuant to the foregoing discussion, the Chase Parties are

entitled to indemnification by NV Music Row, LLC. However, it is undisputed that the

LLC retained only $68,650.98 from the Property sale proceeds to cover any contingent

liabilities. The record establishes that but for the Kings’ concealment of the material fact

that they were contemplating bringing their lawsuit to dispute Dean Chase’s handling of

the Property sale, the LLC would have retained sufficient funds to cover any costs or

expenses incurred in defending the lawsuit, which defense was necessary to effect the

will of the majority of the partners as evidenced by the Unanimous Consent to sell the

Property to Virgin for $11,000,000. Due solely to the Kings’ concealment of their plans

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and their acceptance of their portion of the sale proceeds prior to bringing their lawsuit,

the Chase Parties’ were deprived of their right to full indemnification from the LLC and

were placed in the position of having to expend their own funds to protect the sale made

on behalf of the NV Entities. In this regard, the attorney’s fees and expenses that were

not available for reimbursement from the LLC were compensatory damages. As noted in

Edwards Moving & Riggin, Inc. v. Lack, No. 2:14–cv–02100–JPM–tmp, 2015 WL

381953 (W.D. Tenn. June 24, 2015):

The American rule, however, simply prevents a prevailing litigant from

“collect[ing] a reasonable attorneys’ fee from the loser.” Alyeska Pipeline

Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 247 (1975). The American

rule does not apply to consequential damages flowing from a separate

harm. Under Tennessee law, “‘[o]ne who through the tort of another has

been required to act in the protection of his interests by bringing or

defending an action against a third person is entitled to recover reasonable

compensation for loss of time, attorney fees and other expenditures thereby

suffered or incurred in the earlier action.’” Engstrom v. Mayfield, 195 F.

App’x 444, 451 (6th Cir.2006) (emphasis added) (quoting Pullman

Standard, Inc. v. Abex Corp., 693 S.W.2d 336, 340 (Tenn.1985)).

Edwards Moving & Riggin, Inc., 2015 WL 381953, at *8.

Here, the Chase Parties’ attorney’s fees and costs were not awarded because they

were the “prevailing party” in the litigation, which is what the American Rule is designed

to prevent. Id. Rather, in this case, attorney’s fees and costs were awarded to

compensate the Chase Parties for actions they were forced to take to defend the NV

Entities against the Kings’ unilateral lawsuit. Had the Kings not brought their

unsuccessful claims, the Chase Parties would not have expended the fees and costs of

defending same. Furthermore, had the Kings disclosed their plan to file suit, the LLC

would have retained sufficient funds to indemnify the Chase Parties. The only measure

of damages in this case is the attorney’s fees and expenses paid by the Chase Parties that

were not reimbursed from the LLC. The only reason these fees and expenses were

incurred is the tortious act of the Kings. As this Court has explained:

The purpose of compensatory damages is to compensate a party for the loss

or injury caused by a wrongdoer’s conduct. The goal is to restore the

injured party, as nearly as possible, to the position the party would have

been in had the wrongful conduct not occurred. The injured party should be

fully compensated for all losses caused by the wrongdoer’s conduct.

Waggoner Motors, Inc. v. Waverly Church of Christ, 159 S.W.3d 42, 58 (Tenn. Ct.

App. 2004); accord Memphis Light, Gas & Water Div. v. Starkey, 244 S.W. 3d 344, 354

(Tenn. Ct. App. 2007). Under the particular facts of this case, the Business Court’s

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award of attorney’s fees and costs does just this—it compensates the Chase Parties for the

loss caused by the Kings’ independent tort of misrepresentation by concealment. In this

regard, attorney’s fees and costs are the sole measure of compensatory damages in this

case, and were not awarded punitively. For these reasons, we affirm the award of

attorney’s fees and costs as

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