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Buffington v. Legacy & Exit Planning LLC

Court of Appeals of Tennessee, Jackson

March 31, 2017

BENJAMIN J. BUFFINGTON
v.
LEGACY & EXIT PLANNING LLC, ET AL.

          Session November 17, 2016

         Appeal from the Chancery Court for Shelby County No. CH-11-1283 Walter L. Evans, Chancellor

         The plaintiff in this case, Benjamin Buffington ("Mr. Buffington"), is a former member of Legacy & Exit Planning, LLC ("Legacy"). Mr. Buffington sued the Appellants on the basis that they had not made certain required contractual payments incident to his departure from Legacy. In response, the Appellants asserted various counterclaims predicated upon Mr. Buffington's acquisition of a company that had been a former client of a company affiliated with Legacy. The trial court dismissed the Appellants' counterclaims upon Mr. Buffington's motion for partial summary judgment, and following a trial, it held that the Appellants were jointly and severally liable for the outstanding payments owed to Mr. Buffington. Having reviewed the record transmitted to us on appeal, we affirm and remand for further proceedings consistent with this Opinion.

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

          Michael G. McLaren and Kristine E. Nelson, Memphis, Tennessee, for the appellants, Legacy & Exit Planning, LLC and Executive Financial Services, Inc.

          John J. Heflin and Jack F. Heflin, Memphis, Tennessee, for the appellee, Benjamin J. Buffington.

          Arnold B. Goldin, J., delivered the opinion of the Court, in which Brandon O. Gibson, J., and David R. Farmer, Sp. J., joined.

          OPINION

          ARNOLD B. GOLDIN, JUDGE

         BACKGROUND AND PROCEDURAL HISTORY

         Mr. Buffington founded Legacy in the fall of 2006 with Kelly Finnell ("Mr. Finnell"). Legacy was in the business of providing consulting services with respect to employee stock ownership plans ("ESOPs") and often worked closely with another company owned by Mr. Finnell, Executive Financial Services, Inc. ("EFS"). Legacy's work was performed and billed under EFS's name, and through EFS, Legacy also engaged in the business of marketing and selling retirement plans, stock appreciation rights plans, and life insurance products. Although Mr. Buffington was compensated solely by Legacy, he was provided with EFS business cards, and EFS marketed his services as if he were an EFS employee.

         Approximately four years after they founded Legacy, Mr. Buffington and Mr. Finnell began discussions about the potential dissolution of Legacy and/or Mr. Buffington's departure from the company. Although the Legacy Operating Agreement contained a provision that governed Mr. Buffington's compensation related to a withdrawal, Mr. Finnell was unwilling to pay Mr. Buffington under the terms of the Operating Agreement. As a result, the parties soon began negotiations over the terms of Mr. Buffington's departure. On October 20, 2010, Mr. Finnell sent Mr. Buffington an email with a subject line that read "Transition Agreement." Following receipt of this email, Mr. Buffington sent Mr. Finnell a letter dated November 24, 2010. The body of each item of correspondence is reproduced below.

         (IMAGE OMITTED).

         Although Mr. Buffington subsequently received certain payments to facilitate his withdrawal from Legacy between November 30, 2010 and December 31, 2010, these payments soon ceased. As explained by EFS and Legacy in their appellate brief, Mr. Buffington stopped receiving payments after it was discovered that he had taken efforts to acquire Mock, Inc. ("Mock"), a former client of EFS. Mock is a Tennessee corporation that, among other things, provides electrical motor maintenance and industrial crane servicing. In August 2010, EFS and Mock had entered into an agreement under which EFS would prepare a "Transaction Description" regarding the formation of a potential ESOP for Mock. According to Legacy and EFS, by virtue of his acquisition of Mock, Mr. Buffington severed the business relationship between EFS and Mock.

         On August 2, 2011, after his payments had ceased, Mr. Buffington filed suit in the Shelby County Chancery Court against Mr. Finnell, Legacy, and EFS. In his complaint, Mr. Buffington averred that an enforceable contract had been created by his November 24, 2010 letter to Mr. Finnell. He prayed for a declaratory judgment on this issue and asserted that Legacy and EFS had failed to make the payments that were required of them by the contract. In order to correctly determine the outstanding amounts owed to him, Mr. Buffington also requested that Mr. Finnell be ordered to provide a full accounting of the accounts that were mentioned in Mr. Buffington's November 24, 2010 letter.

         On September 2, 2011, Legacy, EFS, and Mr. Finnell filed an answer to the complaint wherein they denied that Mr. Buffington was entitled to any of his requested relief. Contemporaneous with the filing of their answer, they also asserted a number of counterclaims predicated upon Mr. Buffington's efforts in acquiring Mock. Mr. Buffington filed an answer to the asserted counterclaims on September 22, 2011 and denied that a recovery was available against him on any theory or basis.

         On January 17, 2012, following some initial discovery, Mr. Buffington filed a motion for partial summary judgment requesting that the counterclaims asserted against him be dismissed. The motion was supported by a number of affidavits, a legal memorandum, and a statement of undisputed material facts. In pertinent part, Mr. Buffington asserted that he did not discuss acquiring Mock until after he had left Legacy's employ. Moreover, he asserted that by the time discussions regarding his potential acquisition of Mock took place, it had already been determined that an ESOP transaction was not feasible.

         On November 21, 2013, following the exchange of further discovery, Mr. Buffington filed a supplemental memorandum in support of his motion for partial summary judgment. Mr. Buffington asserted that the additional discovery that had taken place confirmed the facts underpinning his motion for partial summary judgment. On November 26, 2013, Mr. Finnell, Legacy, and EFS filed a response to Mr. Buffington's motion for partial summary judgment. On the same date, they also filed a response to Mr. Buffington's statement of undisputed material facts and set forth additional material facts that they claimed were not in dispute. A few weeks later, on December 9, 2013, Mr. Finnell, Legacy, and EFS filed a supplemental memorandum in opposition to Mr. Buffington's motion for summary judgment. This filing was soon followed by Mr. Buffington's submission of a second supplemental memorandum in support of his motion on December 12, 2013.

         A hearing on Mr. Buffington's motion for partial summary judgment was held on December 17, 2013. Over a month later, by order entered January 29, 2014, the Chancery Court granted Mr. Buffington's motion and dismissed all of the counterclaims that had been asserted against him. In connection with its dismissal of the counterclaims, the Chancery Court determined that the October 20, 2010 and November 24, 2010 correspondence between Mr. Buffington and Mr. Finnell created a binding contract.

         On April 21, 2014, a consent order was entered substituting counsel for Mr. Finnell, Legacy, and EFS. The newly substituted counsel subsequently filed a motion on behalf of his clients asking the trial court to reconsider its January 29, 2014 order. Within their motion to reconsider, Legacy, EFS, and Mr. Finnell argued that certain evidence material to each of the counterclaims was not considered at summary judgment. Specifically, they noted that "multiple key pieces of evidence . . . were not specifically brought to the Court's attention by counsel or specifically addressed by the Court in making its ruling." On August 27, 2014, the trial court entered an order denying the motion to reconsider.

         On April 1, 2015, prior to a trial on his claims, Mr. Buffington filed a motion in limine requesting that the trial court exclude from trial all evidence that would be offered by the Defendants to undermine or contradict matters already determined in the trial court's January 29, 2014 order. The trial court granted this motion by order entered April 30, 2015 and stated that the "facts determined by the Court [in its January 29 order] were determined not only for purposes of dismissal of the counterclaim[s] but also for purposes of any affirmative defenses which would be based on contradicting those facts."

         A hearing on Mr. Buffington's claims took place in July 2015. At the conclusion of the proceedings, the trial court invited the attorneys on both sides to submit proposed findings of fact and conclusions of law. The trial court issued its own findings of fact and conclusions of law on December 10, 2015, and on January 6, 2016, it entered a final order of judgment. Pursuant to its final order, the trial court held that Legacy and EFS were jointly and severally liable to Mr. Buffington for $99, 351.90. According to the trial court, this sum comprised the amount of contract damages owed to Mr. Buffington and the prejudgment interest that had accrued. In addition to this award, the trial court determined that Legacy, EFS, and Mr. Finnell were jointly and severally liable to Mr. Buffington for certain attorney's fees and costs. Following the entry of the trial court's judgment, Legacy and EFS filed a timely appeal.[1]

         ISSUES PRESENTED

         In their appellate brief, Legacy and EFS (collectively "the Appellants") raise the following issues for our review, restated verbatim as follows:

1. Whether the trial court erred in finding that Legacy & Exit Planning, LLC and Executive Financial Services, Inc. are jointly and severally liable to Plaintiff in contract damages, given that the parties to the subject contract were Benjamin J. Buffington and Legacy & Exit Planning, LLC, alone, and not Executive Financial Services, Inc.
2. Whether the trial court erred in granting Benjamin J. Buffington's Motion for Partial Summary Judgment and dismissing the counterclaim of Legacy & Exit Planning, LLC and Executive Financial Services, Inc.[2]
3. Whether the trial court erred in striking the affirmative defenses of Legacy & Exit Planning, LLC and Executive Financial Services, Inc., as addressed in the trial court's "Order Granting Plaintiff's Motion in Limine, " entered on April 30, 2015.

         STANDARD OF REVIEW

         In this appeal, our review is primarily devoted to two orders. In addition to examining the propriety of the trial court's January 6, 2016 final judgment, which incorporated by reference the trial court's findings of fact and conclusions of law entered on December 10, 2015, we review whether the Appellants' counterclaims were erroneously dismissed pursuant to the partial summary judgment order entered on January 29, 2014. Review of each of these orders entails the application of different standards. The January 6, 2016 final judgment was entered following a bench trial. As a result, we accord the findings of fact established therein a presumption of correctness and will not disturb them unless the preponderance of the evidence is otherwise. C-Wood Lumber Co., Inc. v. Wayne Cnty. Bank, 233 S.W.3d 263, 271-72 (Tenn. Ct. App. 2007) (citations omitted). In order for the evidence to preponderate against a trial court's factual finding, "it must support another finding of fact with greater convincing effect." Id. at 272 (citation omitted). In contrast to our review of the trial court's factual findings, we do not afford any presumption of correctness to the trial court's legal conclusions. Id.

         Our review of the trial court's January 29, 2014 summary judgment order involves a question of law. Accordingly, our standard of review is de novo, and we afford no presumption of correctness to the trial court's determination. Maggart v. Almany Realtors, Inc., 259 S.W.3d 700, 703 (Tenn. 2008) (citations omitted). In determining whether a grant of summary judgment was proper, we are obligated to make a fresh determination that the requirements of Rule 56 of the Tennessee Rules of Civil Procedure have been satisfied. Hughes v. New Life Dev. Corp., 387 S.W.3d 453, 471 (Tenn. 2012) (citations omitted). By rule, a motion for summary judgment should only be granted if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Tenn. R. Civ. P. 56.04.

         "The moving party has the ultimate burden of persuading the court that . . . there are no genuine issues of material fact and that it is entitled to judgment as a matter of law." Town of Crossville Hous. Auth. v. Murphy, 465 S.W.3d 574, 578 (Tenn. Ct. App. 2014) (citation omitted). If the moving party makes a properly supported motion for summary judgment, the burden of production then shifts to the nonmoving party to demonstrate the existence of a genuine issue of material fact. Id. (citation omitted).

         As the Tennessee Supreme Court has recently explained, the proper framework for evaluating summary judgment orders is found in its decision in Rye v. Women's Care Center of Memphis, MPLLC, 477 S.W.3d 235 (Tenn. 2015). See Am. Heritage Apartments, Inc. v. Hamilton Cnty. Water and Wastewater Treatment Auth., 494 S.W.3d 31, 39-40 (Tenn. 2016) (noting that although the trial court considered the motion for summary judgment pursuant to the standard set forth in Tennessee Code Annotated section 20-16-101 because the lawsuit had been filed after July 2011, the Rye standards applied); Wallis v. Brainerd Baptist Church, __ S.W.3d __, 2016 WL 7407485, at *6 (Tenn. 2016) (noting that the Rye standards do, in fact, apply to cases commenced after July 1, 2011). Consequently, our review is guided by the following standards:

[I]n Tennessee, as in the federal system, when the moving party 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. We reiterate that a moving party seeking summary judgment by attacking the nonmoving party's evidence must do more than make a conclusory assertion that summary judgment is appropriate on this basis. Rather, Tennessee Rule 56.03 requires the moving party to support its motion with "a separate concise statement of material facts as to which the moving party contends there is no genuine issue for trial." Tenn. R. Civ. P. 56.03. "Each fact is to be set forth in a separate, numbered paragraph and supported by a specific citation to the record." Id. When such a motion is made, any party opposing summary judgment must file a response to each fact set forth by the movant in the manner provided in Tennessee Rule 56.03. "[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., 475 U.S. at 586, 106 S.Ct. 1348. 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. If a summary judgment motion is filed before adequate time for discovery has been provided, the nonmoving party may seek a continuance to engage in additional discovery as provided in Tennessee Rule 56.07. However, after adequate time for discovery has been provided, summary judgment should be granted if the nonmoving party's evidence at the summary judgment stage is insufficient to establish the existence of a genuine issue of material fact for trial. Tenn. R. Civ. P. 56.04, 56.06. The focus is on the evidence the nonmoving party comes forward with at the summary judgment stage, not on hypothetical evidence that theoretically could be adduced, despite the passage of discovery deadlines, at a future trial.

Rye, 477 S.W.3d at 264-65 (emphasis in original).

         DISCUSSION

         Trial Court's Order on Mr. Buffington's Motion in Limine

         We begin our discussion by addressing the last of the Appellants' raised issues. As phrased in the "Statement of the Issues" section of their brief, the Appellants' third issue invites us to consider whether the trial court erred in striking their affirmative defenses in its April 30, 2015 order. We can dispense with this question rather quickly.

         The trial court's April 30, 2015 order was entered in response to Mr. Buffington's motion in limine that requested the exclusion of any evidence that might be offered to contradict matters already determined in the trial court's January 29, 2014 partial summary judgment order. In granting the relief requested in Mr. Buffington's motion in limine, the trial court ruled that the facts in its January 29, 2014 order were "determined not only for purposes of dismissal of the counterclaim[s] but also for [the] purposes of any affirmative defenses which would be based on contradicting those facts." Contrary to the suggestion embedded in the Appellants' phrasing of their third issue, the trial court's April 30, 2015 order did not "strike" or otherwise dismiss their affirmative defenses. As we read the order, it merely held that any facts established in the court's prior summary judgment order could not be attacked anew at trial with contradictory evidence. To the extent that the plain language of the Appellants' third issue challenges the alleged striking of their affirmative defenses, it misapprehends the actions of the trial court and thus fails to present an issue that is capable of redress. Again, the trial court's April 30, 2015 order did not strike the Appellants' affirmative defenses. The order merely prohibited the introduction of evidence at trial that might be offered to contradict the facts established in the partial summary judgment order that had been entered previously.

         In any event, despite the phrasing of the Appellants' third issue, we note that the argument section of their brief is devoid of any discussion about their affirmative defenses. As developed in the body of their brief, the Appellants' objection to the trial court's April 30, 2015 order is related solely to the dismissal of their counterclaims. They note that Mr. Buffington's motion in limine was predicated on the assumption that their counterclaims were properly dismissed. Because they contend that their counterclaims were erroneously dismissed, they argue that the April 30, 2015 order should be reversed in connection with any reversal of the trial court's order granting partial summary judgment. Indeed, in concluding their argument section on this issue, they submit as follows: "The counterclaim should proceed to trial and all relevant and material evidence should be allowed." We would not dispute this notion. If we were to reverse the trial court's dismissal of any ...


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