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Battery Alliance, INC. v. Allegiant Power, LLC

Court of Appeals of Tennessee, Jackson

January 30, 2017

BATTERY ALLIANCE, INC. ET AL.
v.
ALLEGIANT POWER, LLC ET AL.

          Session October 25, 2016

         Appeal from the Chancery Court for Shelby County No. CH-14-1532-2 Jim Kyle, Chancellor

         In this dispute among competing battery distribution companies, the plaintiff companies appeal the trial court's grant of summary judgment in favor of the defendant company and its employees. The plaintiffs also appeal the trial court's denial of their motion to dismiss the defendant company's counterclaim on jurisdictional grounds. Having determined that the trial court granted summary judgment without stating the legal basis for its decision prior to instructing the defendants' counsel to prepare a template for the court's order, we conclude that the trial court failed to fully comply with the procedural requirements of Tennessee Rule of Civil Procedure 56.04. We therefore vacate the trial court's order granting summary judgment in favor of the defendants and denying the plaintiffs' motion to compel discovery. We affirm the trial court's denial of the plaintiffs' motion to dismiss the defendant company's counterclaim. We remand to the trial court for further proceedings consistent with this opinion, including a determination of the defendants' motion for summary judgment in compliance with Rule 56.04 and of the plaintiffs' motion to compel discovery.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed in Part, Vacated in Part; Case Remanded

          Bruce S. Kramer, Amy E. Strickland, and Martha C. Burgett, Memphis, Tennessee, for the appellants, Battery Alliance, Inc., and Allegiant Power, LLC, a Tennessee Limited Liability Company.

          Richard D. Underwood and Henry B. Talbot, Memphis, Tennessee, for the appellees, Allegiant Power, LLC, a Florida Limited Liability Company; Tom Wilson; Sam Fox; Tim Weyandt; Noel Sutton; Carleen Dinwiddie; Brandy Davis; and Eric Burrus.

          Thomas R. Frierson, II, J., delivered the opinion of the court, in which J. Steven Stafford, P.J., W.S., and Brandon O. Gibson, J., joined.

          OPINION

          THOMAS R. FRIERSON, II, JUDGE.

         I. Factual and Procedural Background

         Prior to May 2014, the individual defendants, Tom Wilson, Sam Fox, Tim Weyandt, Noel Sutton, Carleen Dinwiddie, Brandy Davis, and Eric Burrus (collectively, "the Individual Defendants"), were employed by Battery Alliance, Inc. ("Battery Alliance"). The record reflects that no employment contract and no covenant not to compete existed between the Individual Defendants and Battery Alliance. Battery Alliance is a Tennessee corporation in the business of providing batteries and battery-related products to its "customer-members" throughout the United States.

         Mr. Wilson began working for Battery Alliance in 2000 and became President of the corporation in 2012 after the death of his father, who had been President. Mr. Wilson's mother, Diane Wilson, became majority shareholder following her husband's death. Mr. Wilson served as President of the corporation from 2012 until April 2014. Based on the parties' pleadings, there appears to be a dispute as to whether Mr. Wilson's removal from his position as President of the company in April 2014 was voluntary or involuntary. Nonetheless, Mr. Wilson maintained employment with Battery Alliance until June 16, 2014, when he voluntarily resigned from the company. On May 7, 2014, Mr. Fox resigned from his position as Vice President of Sales and from his employment with Battery Alliance.

         Mr. Wilson and Mr. Fox founded Allegiant Power, LLC, a Florida limited liability company ("Florida Allegiant Power"). The record reflects a dispute regarding the exact date on which Florida Allegiant Power was established. Similar to Battery Alliance, Florida Allegiant Power acts as a "middlem[a]n" between its vendors and member-customers to provide batteries and battery-related products throughout the United States. By June 23, 2014, the remaining Individual Defendants had resigned from Battery Alliance. They subsequently joined Mr. Wilson and Mr. Fox at Florida Allegiant Power. In August 2014, with knowledge of the existence of Florida Allegiant Power, Diane Wilson founded Allegiant Power, LLC, a Tennessee limited liability company ("Tennessee Allegiant Power"). Ms. Wilson acknowledged during her deposition testimony that Tennessee Allegiant Power had never conducted business under its filed name and that Ms. Wilson remained its sole "employee."

         Battery Alliance and Tennessee Allegiant Power (collectively, "Plaintiffs") filed a complaint on October 17, 2014, against Florida Allegiant Power and the Individual Defendants (collectively, "Defendants"), alleging (1) infringement for use of the name "Allegiant Power" in the state of Tennessee; (2) breach of fiduciary duty of loyalty; (3) intentional interference with business relationships; (4) civil conspiracy; (5) violation of the Tennessee Consumer Protection Act, codified at Tennessee Code Annotated §§ 47-18-101 to -131 (2013 and Supp. 2016); (6) use and disclosure of trade secrets and confidential proprietary information; (7) conversion; (8) violation of the Computer Fraud and Abuse Act, codified at 18 U.S.C.A. § 1030 (2000 and Supp. 2010); and (9) "unfair competition/trade dress infringement in violation of the Lanham Act, " codified at 15 U.S.C.A. § 1051 et seq. (2009). Plaintiffs sought damages and injunctive relief to prohibit Defendants from (1) conducting business under the name "Allegiant Power"; (2) contacting any customer or vendor with whom they had contact while they were still employed by Battery Alliance; (3) contacting any employee of Battery Alliance for the purpose of soliciting or recruiting such employee "to work with or for Defendants in any capacity"; (4) using any property of Battery Alliance; and (5) disseminating, disclosing, or using information they learned while employed with Battery Alliance.

         On December 8, 2014, Defendants filed an answer to the complaint, denying all substantive allegations and asserting multiple defenses. Acting separately, Florida Allegiant Power concomitantly filed a counterclaim, alleging that Plaintiffs, with knowledge that Florida Allegiant Power was doing business as "Allegiant Power, LLC, " acted with "malice and malicious intent" by filing organizational papers in the State of Tennessee that prevented Florida Allegiant Power from "enrolling to do business in the State of Tennessee." In its counterclaim, Florida Allegiant Power also requested damages and "an order that [Tennessee] Allegiant Power's State of Tennessee filings be deemed invalid or remain valid and belong to [Florida] Allegiant Power, LLC." Four of the Individual Defendants-Tom Wilson, Sam Fox, Eric Burrus, and Tim Weyandt-also filed a counterclaim, alleging that Battery Alliance "wrongfully refused to pay certain individual defendants salaries/wages earned prior to their resignation from [Battery Alliance]." These Defendants requested damages in favor of the individuals not paid, plus treble damages, attorney's fees, and costs.

         Discovery commenced on November 18, 2014, when Plaintiffs propounded interrogatories, a request for production of documents, and requests for admission to Defendants. Defendants responded to several discovery requests on December 8, 2014; December 9, 2014; and December 19, 2014.

         On January 8, 2015, Plaintiffs filed a motion to dismiss Florida Allegiant Power's counterclaim against them, alleging that Florida Allegiant Power was not authorized to do business in Tennessee and was thereby precluded from maintaining a lawsuit in Tennessee pursuant to Tennessee Code Annotated § 48-246-601(a). Plaintiffs also filed an answer in response to Defendants' respective counterclaims against them, denying all substantive allegations.

          On April 29, 2015, Defendants responded to additional discovery requests, which they later supplemented on May 29, 2015. Defendants filed a motion for summary judgment on May 26, 2015, asserting that "there is no issue of material fact and that Defendants are entitled to judgment as a matter of law" and that "Plaintiffs' evidence is insufficient to establish and Plaintiffs cannot prove the required elements of their claims." Defendants contemporaneously filed a memorandum of law and statement of undisputed material facts in support of their motion for summary judgment. On June 19, 2015, Plaintiffs filed a motion for an extension of time to respond to Defendants' motion for summary judgment. The trial court granted the extension on July 8, 2015, while also granting Plaintiffs leave to take depositions.

         Plaintiffs filed a motion to compel discovery on June 19, 2015, requesting, inter alia, that the trial court order Defendants to produce communications between Defendants and Plaintiffs' competitors, vendors, and customer-members taking place from January 1, 2014, through July 30, 2014. In response to the motion to compel discovery, Defendants stated that they had answered the relevant portion of the respective interrogatory request and that the remaining request was (1) seeking irrelevant information, (2) unlikely to lead to the discovery of admissible evidence, (3) overly broad, or (4) pursuing information already in the possession or control of Plaintiffs. The trial court heard the Plaintiffs' motion to compel on June 26, 2015, and entered an order denying Plaintiffs' request on July 1, 2015. On August 13, 2015, Plaintiffs filed both a "Memorandum in Response to Defendants' Motion for Summary Judgment" and a "Plaintiffs' Statement of Additional Facts." Defendants subsequently filed a reply in support of their motion for summary judgment. Plaintiffs then filed a supplemental response and a second supplemental response to Defendants' statement of undisputed facts.

         Meanwhile, on July 17, 2015, Plaintiffs sent "Notices of Deposition Duces Tecum" to all individual defendants, requesting that they appear for depositions and produce all communications between Defendants and Plaintiffs' competitors, vendors, and customer/members taking place from June 1, 2014, through June 30, 2014. According to Plaintiffs, the individual defendants participated in depositions but did not produce the requested documents. Plaintiffs filed their second motion to compel on August 19, 2015, the day prior to the hearing on the motion for summary judgment and motion to dismiss.

         On August 20, 2015, the trial court heard arguments regarding the motion to dismiss filed by Plaintiffs and the motion for summary judgment filed by Defendants.[1]

          The court denied Plaintiffs' motion to dismiss and took the motion for summary judgment under advisement. On August 21, 2015, the judicial law clerk for the court, at the behest of the chancellor, informed the parties' counsel via electronic mail that the court had made its decision and intended to grant Defendants' motion for summary judgment "based on the briefs and the argument." In that communication, the attorneys for Defendants were instructed to "draw up the order."

         Upon subsequently appearing before the trial court for hearing on the motion to compel, counsel for Plaintiffs requested that the court provide its legal reasoning supporting the decision to grant Defendants' motion for summary judgment prior to entry of the judgment. The transcript reflects that the court did not provide specific reasons but informed counsel that the legal reasoning would be provided in the court's order. The trial judge informed the parties that counsel for Defendants was preparing only a "template" for the court's order and that the actual court order entered would be the court's "work." The trial court denied the Plaintiffs' second motion to compel, determining that additional discovery was not necessary because the court had already announced its intention to grant Defendants' motion for summary judgment. An order memorializing the trial court's dismissal of Plaintiffs' second motion to compel was entered thereafter.

         On September 17, 2015, at the request of the trial court, counsel for Defendants emailed to the court and Plaintiffs' counsel the template prepared for the court's order granting the summary judgment motion. Plaintiffs did not prepare a template for the court but instead filed an objection to the template prepared by Defendants' counsel. On September 23, 2015, the trial court entered its "Opinion and Order Granting Defendants' Motion for Summary Judgment." The court entered a judgment certified as final pursuant to Tennessee Rule of Civil Procedure 54.02 on October 29, 2015. Plaintiffs timely appealed.

         II. Issues Presented

1. Whether the trial court erred by denying Plaintiffs' motion to dismiss the counterclaim filed by Florida Allegiant Power.
2. Whether the trial court erred by failing to comply with the procedures regarding summary judgment set forth in Tennessee Rule of Civil Procedure 56.04.
3. Whether the trial court erred by denying Plaintiffs' second motion to compel discovery after the court had announced its decision to grant the motion for ...

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