STEPHANIE KELLER et al.
ESTATE OF EDWARD STEPHEN McREDMOND et al.
Session April 12, 2017
from the Chancery Court for Davidson County No. 063004IV
Russell T. Perkins, Chancellor
shareholders, unable to agree on the management of the family
business, brought their dispute to court. Eventually, the
brothers and sisters agreed that the business should be
dissolved and, under the court's supervision, sold as a
going concern. After soliciting bids from the siblings, the
court approved the sale of the business's assets to one
brother and two of his sisters. Pending the closing, the
court ordered the siblings to continue to operate the
business as usual and to preserve the goodwill of the
business, including the relationships with employees,
suppliers, and customers. The day after the closing, the
brother who was not part of the winning bidder group opened a
competing business. The winning bidders sought damages from
the competing sibling, claiming that he willfully violated
court orders, breached his fiduciary duty, and intentionally
interfered with business relations. After a bench trial, the
court awarded the winning bidders compensatory damages in an
aggregate amount for all claims. In the first appeal, this
Court reversed, holding that the winning bidders' claims
were derivative, not direct, and thus they lacked standing.
In Keller v. Estate of McRedmond, 495 S.W.3d 852,
877 (Tenn. 2016), our supreme court adopted a new standard
for determining whether a shareholder claim is direct or
derivative and, applying that standard, held that the winning
bidders had standing to pursue their claim that the competing
sibling violated the court's orders. So our supreme court
affirmed in part, reversed in part, and remanded the case to
this Court to review the remaining issues that were properly
raised but not addressed in the first appeal. Id. at
882-83. We affirm the trial court's decision to hold the
competing sibling in contempt, but we vacate the aggregate
award of compensatory damages.
R. App. P. 3 Appeal as of Right; Judgment of the Chancery
Court Affirmed in Part; Vacated in Part; and Case
A. Maness, Clarksville, Tennessee, for the appellant, Louis
P. Branham, C. David Briley, and Mandy Strickland Floyd,
Nashville, Tennessee, for the appellees, Linda McRedmond
Orsagh and Anita McRedmond.
Richard K. Smith, Nashville, Tennessee, for the appellee,
Estate of Edward Stephen McRedmond.
Neal McBrayer, J., delivered the opinion of the court, in
which Frank G. Clement, Jr., P.J., M.S., and Andy D. Bennett,
NEAL McBRAYER, JUDGE.
appeal, we revisit the circumstances surrounding the sale of
the assets of a closely-held family corporation, McRedmond
Brothers, Inc. ("MBI"). MBI, among other things,
owned and operated a grease business that purchased used
grease for resale to animal feed manufacturers. After the
death of the family patriarch, ten McRedmond siblings owned
all of the shares of MBI. Two siblings, Louis Anthony
McRedmond ("Louie") and Edward Stephen McRedmond
("Stephen"), owned the largest block of shares and
managed the day-to-day operations of MBI.
2006, various disagreements between Louie and Stephen began
to interfere with their joint management of MBI. Complicating
matters, an irrevocable Shareholders Agreement precluded the
other eight siblings from resolving the impasse. The siblings
split into two camps. In 2008, Louie, along with six of his
sisters, filed this action against Stephen and the remaining
two sisters in the Chancery Court for Davidson County,
Tennessee. Initially, the plaintiffs asked the trial
court to "declare the management of the corporation
[(Louie and Stephen)] deadlocked, " and to "declare
the Shareholders Agreement terminated." But after the
court concluded that the Shareholders Agreement was
enforceable, the parties agreed that MBI should be dissolved.
September 22, 2008, the court, by agreed order, appointed a
receiver to immediately take control of MBI's assets,
records and business. In the same order, the court directed
the receiver to ensure that MBI's grease business was
operated in a manner that would "protect its value"
and ordered current employees, including Louie, to
"continue to conduct the Grease Business in the ordinary
course of business, reporting directly to the Receiver."
The court also enjoined all parties from taking any actions
"as to the business or assets of [MBI]."
January 2009, the receiver reported to the court that
MBI's assets would be worth more to the siblings than to
other potential buyers. The receiver proposed selling the
business assets to the siblings as a "going
concern." After resolution of any creditors' claims,
the receiver would distribute the remaining proceeds to the
ten siblings pro rata based upon their ownership of MBI. The
court approved the receiver's plan.
and two sisters, Anita McRedmond and Linda McRedmond Orsagh,
submitted the winning bid. The only other bidder was Louie,
who submitted a bid for the grease business assets only. The
receiver and the winning bidders executed an Asset Purchase
Agreement for the grease business assets and other MBI
holdings. The grease business assets included "the names
and any derivations of the names of the business entities
which currently own and operate the Businesses [and] the
goodwill associated with the foregoing."
April 1, 2009, the court entered an order approving the
receiver's sale of assets, attaching to the order the
Asset Purchase Agreement. Pending the sale, the order
directed the current ...