BEWARE OF GARNISHMENTS

A garnishment is a method of collecting a judgment. Typically, when we think of garnishments, we think of “wage” garnishments. But, garnishments can also be used by a judgment creditor to seize any funds owed by a party (the garnishee) to the judgment debtor. To encourage prompt and accurate response, the law allowing garnishments includes a penalty. If the person receiving the garnishment fails to respond, the person is liable for the full amount of the judgment.

Because of the unfairness to the garnishee, the law includes many provisions intended to protect the garnishee. In Little v. American National Property & Casualty Company, w2009-01798-COA-R3-CV (Sept. 22, 2010), the Tennessee Court of Appeals discussed those procedures. Ultimately, the Court held that the garnishee was not liable for the debt because it had not been properly served.

The facts showed that the garnishment was served on the garnishee – a Missouri insurance corporation – at the office in Tennessee of an independent agent. It was accepted by a “front-desk” person.

THE MORAL OF THIS STORY: Make sure that the “front-desk” people know that they are not authorized to accept any legal document.

FINALLY, A CASE THAT HOLDS THAT ARBITRATION IS NOT ALLOWED

Arbitration has its advocates, but I am not one of them. The judicial system in Tennessee provides most litigants with a fair and speedy disposition. Moreover, the judicial system provides a system for appeal and reconsideration. Arbitration does not. Often, even the best judges make mistakes of law or even in findings of fact. The arbitration process does not allow for that “further review.”

In Tennessee, the courts almost uniformly compel arbitration any time that the agreement provides for arbitration. In Tuetken v. Tuetken, W2008-00274-SC-R11-CV (Sept. 22, 2010), the Tennessee Supreme Court issued an opinion that gives a small victory to non-arbitration enthusiasts. In Tuetken, the court held that the parties could not agree, and the courts could not enforce, an agreement in a divorce proceeding to submit parenting issues to binding arbitration.

But the Court went further. The Court held that the parties in an arbitration proceeding cannot agree to change or modify the review procedures of the Tennessee Uniform Arbitration Act. So, even if the parties want the court to have the ability to provide “further review,” the court cannot exercise that authority. But, that is not all. The Court said that because the agreement to arbitrate was based upon the parties’ intent to give the court this expanded review authority, the agreement to arbitrate was invalid.

THE MORAL OF THIS STORY: If the other side insists on arbitration, insist that the agreement be tied to modifying the scope of appeal to the court to include a “do over.” Either the arbitration provision will be invalid or you may actually obtain a fair review.

YOU MUST ARBITRATE – EVEN IF THE ISSUE IS PURELY LEGAL

Tennessee courts mandate arbitration if the contract between the parties requires arbitration. In some cases, this mandate seems absurd. For instance, in Thomas v. Pediatrix Medical Group of Tennessee, P.C. E-2009-01836-COA-R3-CV (Tenn. Ct. App. Sept. 14, 2010), the issue was the validity of a non-competition provision in an employment agreement between a physician and his employer. After execution of the employment agreement, the Tennessee Supreme Court issued its decision in Murfreesboro Medical Clinic, P.A. v. Udom, 166 S.W.3d 674 (Tenn. 2005) holding that except as authorized by statute, physician non-competition agreements are void.

Physicians sue in court. The practice says the contract requires arbitration, so the practice demands arbitration. The physicians say arbitration is unnecessary because the issue is purely a legal issue. The court of appeals says, even if the case involves solely “legal” questions, because the contract requires arbitration, the dispute will be settled by arbitration. In fact, the court added “a panel of experienced, certified arbitrators will be able to rely on the well established laws of statutory construction” and properly decide the case.

The problem – what if the “panel of experienced, certified arbitrators” are wrong on the legal issues. Unfortunately, the Tennessee Uniform Arbitration Act and the Federal Arbitration Act allow only limited appeal of an arbitration decision. Judges often err on legal issues – and the court of appeals or supreme court exists to correct those errors.

THE MORAL OF THIS STORY – Do not sign an agreement that contains an arbitration provision unless you agree that legal issues may be decided by a court.

MOM SAID DO NOT RESUSCITATE – BUT I HAVE HER HEALTHCARE POWER OF ATTORNEY

Patient instructs doctor to “Do Not Resuscitate.” Patient crashes in front of the family members. A nurse’s assistant begins CPR. Another nurse comes into the room to help and notices the DNR notation in the chart. CPR stops. The son says “Save Mom.” I have a healthcare power of attorney, as Mom’s attorney in fact I am directing you to continue CPR. The nurses stop CPR -- Mom dies. Son sues.

Common sense says that the nurses should have continued performing CPR if they possessed actual knowledge that son in fact held a durable healthcare power of attorney for Mom. A wrongful life case is always easier to defend than a wrongful death case. But they did not, and Mom died.

In Tennessee, the Court of Appeals says that this is really a “medical malpractice” lawsuit. So, the family possesses the same obligations of expert proof and other hurdles that apply to every other medical malpractice lawsuit. Because the family failed to present expert proof on the issue of causation – would Mom have lived if CPR had been performed -- the court dismissed the case.

The unanswered question -- can the holder of a healthcare power of attorney overrule the patient’s own wishes. Although the court of appeals did not address that issue, it appears that the answer is No.

THE MORAL OF THIS STORY: If you give someone a healthcare power of attorney, make sure that the person understands what you want. It will save a lot of trauma for everyone.

Wheelock v. Doers, E2009-01968-COA-R3-CV (Tenn. Ct. App. Sept. 14, 2010)

NOT TAUGHT IN LAW SCHOOL

Foreign Judgments must be domesticated in Chancery Court or Circuit Court -- not General Sessions Court.

See Studsvik Logistics, LLC v. Royal Furniture Company.

CONTRACTUAL WAIVER OF RIGHT TO JURY

A big issue, and to my knowledge, the only case to address this one.

See Gregory Poole v. Union Planters Bank, N.A.

CORPORATE NAMES

On April 9, 2010, the Governor signed a bill that allows corporations and limited liability companies to use names that are indistinguishable from the name used by another entity. To do so, all entities using the same name must consent and must agree to use the same registered agent.

See House Bill No. 3815.

IF YOU SIGN A LEASE AS GUARANTOR, YOU MIGHT BE AN IDIOT

Or, you might get lucky if the lease fails to contain any language that sets out the obligations or duties of the guarantor.

Moreover,

a. if the landlord named in the lease does not exist

b. the lease names you as the lessee in the heading but the signature lines are for your company (and you sign as president)

c. you don't own the company when you sign the lease (and everyone knows it)

d. you sign the "Guarantor" line as "Larry N. Lunan, President"

You might win the lottery and be able to win and convice the court of appeals that there is no binding agreement because of the lack of a "meeting of the minds."

This defense is one that ordinarily is a loser. Hopefully the landlord did not have an attorney draft the lease.

See Joy Lamberson McNaughten, et al. v. Larry Lunan, et al.

A PARTNERSHIP IS NOT A PARTNERSHIP UNLESS THERE ARE 2 PARTNERS

In this case, the plaintiff knew she was dealing with Whiteco Limited Partnership and Orangeco Limited Partnership. And, if she checked the secretary of state's office, she would have discovered Certificates of Limited Partnership filed with that office. When she sued the "partnership" to enforce a contract, she discovered to her dismay that the "partnership" had only one (1) partner and alas, that "partner" was dead. So, lawsuit against other "partners" dies for lack of a partnership.

The moral of this story, as noted by the Court, is always insist on seeing a copy of the written partnership agreement.

See Sherry Tanner v. Whiteco, L.P. and Orangeco, L.P

CHOICE OF LAW FOR ARBITRATION IN CONTRACTS

I hate arbitration and strongly recommend to all of my clients that they refuse to arbitrate. Having said that, that may not be an option. This case emphasizes the difference between choosing the Federal Arbitration Act and the Tennessee Uniform Arbitration Act.

See Franke Elliott, et al. v. ICON In the Gulch, LLC

DON'T EVER IGNORE A MOTION FOR DEFAULT JUDGMENT

I hope this is a lesson, you never learn. In this case, Discover sued the widow to recover her deceased husband's credit card balance. Actually, there is some case law that supports the widow having liability for that debt (but that is another story). The widow filed a counter-claim under the Consumer Protection Act and the Fair Debt Collections Practices Act. The record indicates that Discover's attorney requested and received an extension in which to file an answer. For reasons unknown, he did not file an answer within that time. Moreover, he did not file an answer in response to communications from wife's attorney or when the motion for default judgment was filed. Worse, he failed to attend the hearing on the default judgment.

Result: Default Judgment for Wife and award of damages of $375,000, a call to the malpractice carrier and termination of the attorney. On appeal, the court of appeals affirmed the award of default judgment but reversed the damages award stating that the court applied the wrong standard.

Moral of the Story: File an answer.

See Discover Card v. Joy A. Morgan

PUBLIC EMPLOYEES AND POLITICAL OFFICE - A Tennessee Primer

For whatever reason, an extraordinary number of city and county employees want to run for elected office. Other than the pain and agony of attending endless meetings and the joy of listening to neighbors complaining about high taxes and no services, elective office generally provides little reward. In Tennessee, the law prohibits some local employees from running for elective office – they may be the lucky ones!

Here is a primer on some of the hurdles public employees face when running for political office:

· The federal Hatch Act (5 U.S.C. § 1501) prohibits an employee whose position or duties are financed by federal funds from running for office unless the election is “nonpartisan.”

· The “Little Hatch” Act (Tenn. Code Ann. § 2-19-201) limits the political activities of state employees – it does not apply to local government employees.

· Article II, Section 26 of the Tennessee Constitution prohibits a person from "holding more than one lucrative office at the same time." But, the term "office" is limited to "state office." Local offices (e.g., county school board member, city council member, and city school board member) are not state offices so a county commissioner may also be a city council member or a state representative.

· Tennessee Code Annotated section 7-51-1501 overrules any city ordinance or county resolution that prohibits or limits employees from running for state or local office.

· City or metropolitan government employees cannot run for election to the local governing body.

· School board members cannot be employed by the same school system (Tenn. Code Ann. § 49-2-203).

· County commissioners cannot also serve on the county school board (Tenn. Code Ann. § 49-2-202(a)).

· A public officer cannot hold two “incompatible offices” at the same time. (Tenn. Op. Atty. Gen. No. 08-107). A city manager cannot also be a city commissioner.

· A public officer cannot be directly interested in a contract he or she has the duty to vote for, let out, or supervise. This prohibition includes any contract with the official personally or with any business in which the official is the sole proprietor, a partner, or the person having the controlling interest. (Tenn. Code Ann. § 12-4-101(a)(1)).

There are other prohibitions under the law, however, these are the highlights.