Tennessee

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By: Rob Harris

The Tennesee Court of Appeals issued a decision last week that serves to remind litigants and their attorneys of the dangers of overreaching on legal arguments.

Tennessee has a statute that permits the prevailing party in tax disputes to recover their attorneys’ fees. As we all know, attorneys’ fees can be substantial.

Five Oaks Golf & Country Club was not pleased that the state assessed sales and use tax on initiation fees and members’ monthly dues. The club grudgingly paid the tax and filed a claim for refund in the amount of $208,581.00, plus interest.

Five Oaks made two arguments. First, the club asserted that, under Tennessee law, the initiation fees and monthly dues were exempt from sales tax. Second, the club argued that, even if subject to tax, the statute of limitations precluded the state from assessing taxes on sums received by the club between January through November 2004.

After the state filed a motion to dismiss the club’s arguments, Five Oaks conceded to the court that the exemption argument was not meritorious. The court, therefore, dismissed this claim, but thereafter ruled in favor of the club on the statute of limitations issue, resulting in a refund of $61,887.00 plus interest.

The club, proclaiming that it was a prevailing party, sought to recoup the attorneys’ fees it expended in pursuing its tax appeal.  Confronted with the fact that it effectively lost on its exemption argument, the club argued that, by “conceding” the argument, the court did not effectively rule against it on this issue.

Although the trial court agreed with Five Oaks, the Court of Appeals disagreed, finding that  ”each party won one issue. Each received substantial relief. Consequently, we find that there is no prevailing party and reverse the award of attorney fees to Five Oaks.”

By overreaching initially, including a claim that had no merit, the club lost the opportunity to have its attorneys’ fees paid by the state. Message to parties and their lawyers: throwing the kitchen sink at a dispute is not always wise.

 

By: Rob Harris

Among the most pernicious of disputes are those among owners of family owned businesses. The emotional entanglements between family members substantially complicate already thorny issues concerning business ownership and operation. A frequent and unfortunate byproduct of family fights is the loss of value to the business, negatively impacting all of the family members.

This phenomenon appears to have reared its ugly head in a dispute among the long time family owners of Tennessee’s Valley Brook Country Club. The club’s website recites the storied history of the club:

“Carl Drake opened Valleybrook’s doors in 1962, and from it a community was born…Valleybrook has been the proud host of nine PGA tournaments from the 1980’s and early 1990’s. Today we still play host to the City RedBud, one of the oldest tournaments in the area.”

Mr. Drake’s children ascended to ownership of the club, but disputes among them (which appear to be longstanding), have resulted in bitterly contested family litigation. The upshot is that the club is headed for the auction block, which reportedly will serve to liquidate the club’s assets with no regard for tax consequences or other ways to maximize value to the owners.

Careful business owners will contemplate the potential for disputes by including appropriate provisions in agreements that specify buy-sell arrangements designed to preserve shareholder value in the event of disputes. Also of substantial value in agreements is the inclusion of an appropriate dispute resolution provision, as mediation often is of special value to help address the emotional overtones of family owned business disputes. (For those interested, here’s an article I wrote a number of years ago regarding the “Passionate World of Business Divorce.”)

By: Rob Harris

On a sunny August day in 1930, Tom Landress arrived at the golf course and proceeded to play “in his accustomed manner at a place where many others were playing without injury.” While in the midst of his round, Mr. Landress “was suddenly and unexpectedly overcome from the force of the sun’s rays upon his head and body.”

As a result of the sunstroke, he died, leaving among his important papers two insurance policies that provided coverage in the event of accidental death. More precisely, his widow stood to recover if his death from sunstroke was deemed to be one of “external, violent and accidental means.”

An autopsy revealed that there was no bodily infirmity or disease that was a contributing cause.  Thus, his widow–more likely her attorney–claimed that his death, “resulting from voluntary exposure to the sun’s rays under normal conditions,” was “accidental” within the meaning of the policies, entitling her to the insurance proceeds and perhaps a nice contingency fee for her lawyer.

“Not so fast,” said the trial court; “slow down,” said the appeals court; “you’re not going anywhere,” said the United States Supreme Court. As the Supreme Court held, when one is discussing accidents, there is a difference between the RESULT and the EXTERNAL MEANS that bring about the result.

According to the Court, while Mr. Landress’ failure to complete his round and return home safely was certainly unexpected and “accidental,” the same could not be said for the cause of his death. Specifically, nothing “suggest[ed] that there was anything in the sun’s rays, the weather, or other circumstances external to the insured’s own body and opeating to produce the unanticipated injury, which was unknown or unforeseen by the insured.”

So, golfers, take comfort in knowing that, if you are to find your demise on the golf course by virtue of a lightning strike, an alligator attack or a runaway golf cart–all of which we have written about–your loved ones may be able to cash in on that accidental death policy you have tucked away in your safe deposit box.  As for the sun, I suggest a good hat and lots of water.

 

By: Rob Harris

A legal website for personal injury matters cautions motorcyclists to be on the lookout for the following road hazards:  rough roads; gravel on pavement; edge breaks; expansion joints; open bridge joints; animals; slick surfaces; standing water; snow and ice; railway tracks and crossings; and debris or objects in the road.

Had Susan Westerfield briefed herself on this parade of horribles before climbing onto her motorcycle,  she still would have been unprepared for what awaited her as she tooled down South Church Street in Murfreesboro, Tennessee. Passing by Indian Hills Golf Course, Westerfield had an unfortunate mouth first encounter with a golf ball that apparently was hooked from the 14th tee.

While Westerfield managed to survive more serious injury by staying on her bike, the direct hit knocked out several teeth.

The lawyers can have a field day debating whether this was a liability event or an “act of God” –or of the golf gods.

The golfer? Wayward shots happen to all of us, and shouting “fore” would not have prevented this contact.

The golf club, however, might have a problem. Even though the left side had trees to provide protection for the adjacent street traffic, the club’s general manager–apparently not briefed by attorneys–was reported to have told local media that golf balls sometimes hit cars in the area. Oops.

As for contributory negligence, forget about it. Ms. Westerfield was wearing a helmet.

Let’s be glad the injuries were not life threatening, and, remember, this is why insurance was invented.

 

By: Rob Harris

Uninitiated visitors to the websites for Tennessee’s Rarity Pointe development would not think anything was amiss. The sites describe a vibrant community with an active lifestyle, including a Bob Cupp-designed golf course. None of the recent turmoil is evident.

In fact, Rarity Pointe’s owner, Tellico Holdings LLC put the company into bankruptcy to stave off a foreclosure sale of the golf course, residential lots and other acreage. Meanwhile, there is ongoing litigation between principals in Tellico Holdings, with point person Michael Ross having recently been declared in default by a United States District Court. The allegations in that lawsuit include claims of racketeering activity by Mr. Ross.

The future for the project, however, appears substantially more positive than first appears. The company’s bankruptcy filing was under Chapter 11, with a goal of reorganizing rather than liquidating. The development company has located a lender, Heritage Solutions LLC, who will provide it with $2.75 million in debtor-in-possession (DIP) financing. Because of the obvious risk of lending money to companies in the midst of bankruptcies, creditors will extend DIP financing only if they believe the investment is well secured. In this case, the bankruptcy court, in approving the DIP loan, found that the property value is $15 million, against existing debt of $9 million.

The reorganization plan put forward by the company contemplates ongoing lot sales over the next several years.

In this climate, with clubs continuing to fail, it’s interesting to see positive signs for a development regardless of the litigation turmoil that exists with the ownership group.

By: Rob Harris

Nashville’s Belle Meade Country Club is so exclusive that you can’t even enter the website unless you are a member. The exclusivity includes denying membership to women and African-Americans. So found the Committee on Judicial Conduct and Disability of the Judicial Conference of the United States in a groundbreaking memorandum of decision issued on December 1.

While under established precedent, Belle Meade has a lawful right to discriminate, the Committee on Judicial Conduct, acting through a panel of three appellate and two district court judges, have held that federal judges are barred from being members of such clubs.

This decision was precipitated by a complaint brought against Judge George C. Paine, II, Chief Judge of the United States Bankruptcy Court for the Middle District of Tennessee. Judge Paine has been a member of Belle Meade for 33 years. The panel found that since 1990 Judge Paine had unsuccessfully advocated within the club to open up its membership. Nonetheless, the panel concluded that reprimand was appropriate, and that consideration of harsher measures might be considered if Judge Paine were to reconsider his current plans to retire from the bench at the end of this year.

The panel reached its conclusion based on a bright line rule established by Canons 2A and 2C of the Code of Conduct for federal judges. Canon 2A requires a judge to “act at all times in a manner that promotes public confidence in the integrity and impartiality of the judiciary.” Canon 2C, adopted in 1992, is more to the point, providing that “a judge should not hold membership in any organization that practices invidious discrimination on the basis of race, sex, religion or national origin.” Reading the two Canons together, the panel said that judicial membership in a discriminatory organization raises questions in the mind of the public whether a judge can be counted upon not to discriminate in his public endeavors.

With the panel finding that Belle Meade does so discriminate, it was game, set and match against Judge Paine, notwithstanding the panel’s finding that he had no personal discriminatory animus.

This decision raises a number of important questions: How could Canon 2C go unenforced for 20 years? Will this decision have any impact on club’s membership policies generally? How will this decision translate to the state judiciaries? How will the next Republican administration find judicial nominees for the Democrats to filibuster?

Thoughts, anyone?

 

Sigh

By: Rob Harris

From Sevierville, Tennessee comes the second instance of financial defalcation committed against a municipal golf course that we have encountered this week.

We previously reported on a course manager who admitted to entering phony time cards on his son’s behalf.

Today, there are reports that a judge has ordered the former director of Sevierville’s  Eagle’s Landing Golf Club to repay $95,000 that she embezzled over a two year period.  Faye Randolph admitted to police that she forged signatures on cash collection reports and stole money from the golf course’s cash register. She apparently contended that golfers paid, and then asked for refunds. Criminal charges remain pending.

Indiana Jones, Esq.

By: Rob Harris

Rule #1. Don’t bring a knife to a gun fight. Don’t believe it? Watch here.

Rule #2. As to Rule #1, a knife is still more desirable than a five iron.

Unaware of Rule #2, the owner of Empire Windows and Manufacturing in Kingsport, Tennessee apparently found himself discussing with a customer the finer points of a warranty. Perhaps unhappy with the way the contract was drafted, the owner—according to the customer—grabbed a golf club and raised it above his head as if planning to strike. The customer, his attorney nowhere to be found, opted to pull a .380 Ruger and point it at the owner.

Although the merits of the warranty dispute remain unclear, the customer, unlike the owner, will require both a civil and a criminal lawyer, as the gun stunt resulted in his arrest.

 

Golf.com provides the following information about Futures Golf Club in Puryear, Tennessee

Year Built: 1969

Designer: Bill Collins

Greens Grass Type: Bent Grass

Fairways Grass Type: Bermuda Grass

Water Hazards: Yes

Sand Bunkers: 11-20

Yardage Markers: 200, 150, 100 Yard Markers

Green Fee: $13.00 – $17.00

Driving Range: No

Training Facilities: Putting Green, Teaching Pro, Chipping Area

Golf Pro: Bill Collins

Rental Clubs: Yes

Carts: Yes

Pullcarts: Yes

Caddies: No

Walking: Allowed

Food: Yes

Bar: No

Homes on Course: Yes

Omitted from the description, however, is one pertinent fact that may interest prospective players:  the owner packs heat.

Owner / Pro / Designer Bill Collins was arrested a few days ago, and charged with aggravated assault, after allegedly confronting customer Robert Fry with a shotgun.  The customer reported that when he returned a cart to the clubhouse, Mr. Collins inquired about another cart.  When the customer stated that three of his friends were still playing and had the cart with them.  Mr. Collins then went to his vehicle and pulled out a shotgun.  Deciding it was time to leave, the customer hopped into his truck.  As he started to back out, Mr. Collins approached the truck, put two shells in the shotgun and demanded that the customer exit the truck, threatening to shoot holes in the truck if damage had been done to the golf carts.

Unsurprisingly, Mr. Collins’ version of events adds a bit of context.  He claims that Mr. Fry and friends took the carts without paying and played golf despite the fact that the course was closed.  As for the gun—Mr. Collins claims it was for his own protection.

Whatever the merits of this dispute, you can’t second guess the decision of a recent course visitor to provide his review under a pseudonym.  According to “NY Yankees Fan,” the “[g]reens are like putting on a freshly plowed yard. This course would be a lot nicer if it was maintained a little more.”