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101 Construction Co. v. Hammet

Court of Appeals of Tennessee, Nashville

October 30, 2019

101 CONSTRUCTION COMPANY
v.
LAWRENCE B. HAMMET, II ET AL.

          Session July 10, 2019

          Appeal from the Chancery Court for Davidson County No. 15-1268-III Louis W. Oliver, III, Chancellor

         Plaintiff client sued Defendant attorney and law firm for damages tied to a breach of an attorney's fees contract following the completion of an arbitration matter. Following a jury trial, the jury returned a verdict in favor of defendants. Plaintiff appeals the denial of its motion for directed verdict and motion for new trial. Because the trial court erred in denying plaintiff's motion for directed verdict on interpretation of the written contract at issue, we reverse the verdict entered by the trial court and remand with instructions to enter a directed verdict against the attorney and law firm in the amount of $67, 335.69 and to determine whether prejudgment interest is warranted in this case.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed And Remanded with Instructions

          David G. Thompson, Blind Akrawi, Erik C. Lybeck, Nashville, Tennessee, for the appellant, 101 Construction Company.

          Richard M. Smith, Nashville, Tennessee, for the appellees, Lawrence B. Hammet, II, and Todd & Floyd, PLC.

          J. Steven Stafford, P.J., W.S., delivered the opinion of the court, in which Frank G. Clement, Jr., P.J., M.S., and Andy D. Bennett, J., joined.

          OPINION

          J. STEVEN STAFFORD, JUDGE

         Background

         In 2002, Plaintiff/Appellee Lawrence B. Hammet, II ("Mr. Hammet") began his legal representation of Appellant 101 Construction Company ("101 Construction") while Mr. Hammet worked in a Nashville law firm. In 2003, Mr. Hammet continued representing 101 Construction when he moved his practice to another law office, which subsequently became Defendant/Appellant Todd & Floyd, PLC ("the Firm" and together with Mr. Hammet, "Defendants").[1] Mr. Hammet represented 101 Construction continuously until 2010, when 101 Construction's CEO, Saeed Sassan ("Mr. Sassan"), asked Mr. Hammet to withdraw as counsel as the company suffered from financial difficulties. At the time, Mr. Hammet's representation included two arbitration matters where 101 Construction had not been compensated for its work.

         Weeks after Mr. Hammet withdrew as counsel for the two arbitration matters, Mr. Hammet contacted Mr. Sassan to discuss whether 101 Construction had retained new counsel and how the 101 Construction file should be transferred. Mr. Hammet later called Mr. Sassan with an alternative fee proposal that would allow Mr. Hammet to resume representing 101 Construction at a lower hourly rate than before. Under the proposal, the Firm would receive $100.00 per billable hour for its work, and an "Additional Fee" would be assessed by the Firm based on its success in the two outstanding arbitration matters. Mr. Sassan orally agreed to the terms of the fee agreement in a conversation with Mr. Hammet. In letters dated December 1, 2010, and December 10, 2010, [2] the fee structure drafted by Mr. Hammet was as follows:

At the conclusion of the matter and the receipt of the final decision and award of the arbitrator, our firm will be entitled to an additional fee payment ("Additional Fee"), in addition to the fees earned under the existing fee agreement, as well as those earned under the new fee arrangement based upon the Reduced Rate of $100 per hour. Notwithstanding the above, the Additional Fee is contingent upon the amount of monetary damages your company is awarded by the Arbitrator in its final decision ("Awarded Damages").
The Additional Fee will be calculated at an hourly rate of $150 per hour ("Bonus Rate") that will be applied to the hours billed on this matter from the date of this agreement; but only to the degree of success realized as a result of the arbitration. The Additional Fee, based upon the Bonus Rate, shall be calculated on a percentage basis determined by the percent of the Awarded Damages as compared to the amount of monetary damages 101 Construction requests to be awarded at the close of the arbitration hearing ("Requested Damages").
By way of example, should the Awarded Damages equal 100% of the Requested Damages, our firm will then be paid the Additional Fee determined by applying $150 per hour Bonus Rate to the hours charged by our firm to their matter from the date of this new agreement. Another example would be, should the Awarded Damages equal 50% of the amount of the Requested Damages, our firm then will be paid the Additional Fee by applying 50% of the $150 per hour Bonus Rate to the hours charged by our firm to this matter from the date of this agreement. Obviously, the baseline amount for determining the percentage of Awarded Damages as compared to Requested Damages for the purposes of calculating the Additional Fee will not be known until the amount of the Requested Damages is actually submitted to the arbitrator at the close of the arbitration hearing.

Upon receipt, Mr. Sassan agreed to the terms of the two letters as CEO of 101 Construction by signing the back page of each agreement.

         The Firm's representation of 101 Construction continued as the H&P Smyrna arbitration was completed in May 2012. The arbitrator awarded the majority of 101 Construction's claim and less than half of H&P Smyrna's counterclaim. Mr. Hammet calculated the Firm's Additional Fee by separating the claim and the counterclaim into two fractions, and then placing the awarded damages for each claim as numerators and the requested damages for each claim as denominators. No prejudgment interest was included in the calculations. 101 Construction disputed Mr. Hammet's calculations in October 2012, but both parties negotiated and eventually compromised on a success rate that determined the Firm's Additional Fee. The final fee determination fell generally in line with the Firm's proposed calculation. Mr. Sassan later testified that he agreed to the compromise so 101 Construction could receive proceeds from the arbitration as quickly as possible.

         Months after the H&P Smyrna fee settlement, the arbitration hearing for the Emerald Group matter occurred in January 2013. When the hearing concluded, 101 Construction sought $769, 382.18 in damages in its claim and $319, 339.39 in prejudgment interest. In a counterclaim, Emerald Group sought $253, 136.79 in damages. After evaluating and calculating the claims and counterclaims, the arbitrator granted an award of $428, 934.45 to 101 Construction.[3] No prejudgment interest was awarded. The Firm billed 1, 434.20 hours while working on the Emerald Group matter. In calculating the Additional Fee, Mr. Hammet took the $602, 886.78 awarded to 101 Construction in its original claim and divided that figure from the amount 101 Construction sought in the original claim, without considering the prejudgment interest sought.[4] Mr. Hammet calculated a 72% Success Rate, which he applied to the estimated hours that the Firm worked on 101 Construction's original claim. Mr. Hammet then took the $103, 941.33 charged against 101 Construction in the counterclaim and divided it by the $251, 136.79 in alleged counterclaim damages. That calculation resulted in a 41% Success Rate for Emerald Group, which led Mr. Hammet to apply a 59% Success Rate to the estimated hours the Firm spent litigating the counterclaim. In all, the Firm sought an Additional Fee of $152, 096.91 from 101 Construction.[5] Mr. Hammet explained his calculations in an email to Mr. Sassan, who did not agree with Mr. Hammet's findings. The Firm and 101 Construction agreed for the Firm to disburse the undisputed funds from the arbitration to 101 Construction while the matter was resolved. The Firm transferred what it believed to be its fee out of its trust account after the non-disputed funds were dispersed.

         101 Construction filed a complaint against Defendants on October 20, 2015 in Davidson County Chancery Court. 101 Construction sought $68, 669.50 in damages and alleged that the Firm and Mr. Hammet separately breached the contract at issue by failing to correctly calculate the Additional Fee under the contract. Instead of the Firm's two-pronged calculation, the plaintiff claimed that the Awarded Damages calculation should have included prejudgment interest and did not allow for separate consideration of counter-claim awards. In an exhibit filed with the complaint, 101 Construction contended that the Additional Fee should have been calculated by dividing the net award to 101 Construction ($428, 934.45) by the total amount, including prejudgment interest, it demanded during the arbitration proceeding ($1, 106, 041.00).[6] With a 38.8% Success Rate, the Additional Fee would be calculated at $83, 427.41.[7] Mr. Hammet filed a motion to dismiss while arguing that the gravamen of the complaint was not a breach of contract matter, but was instead a claim of legal malpractice which was filed beyond the statute of limitations. The Firm adopted Mr. Hammet's argument in a separate motion to dismiss.

         On January 29, 2016, Davidson County Chancellor Ellen Hobbs Lyle filed an order recusing herself from the case based on the Defendants' routine practice in her court. The case was later transferred to Sumner County Chancellor Louis W. Oliver, III on February 8, 2016.

         The trial court entered an order denying the Defendants' motions to dismiss on May 5, 2016, finding that the gravamen of 101 Construction's claim was breach of contract. Mr. Hammet subsequently filed an answer denying liability, raising several affirmative defenses, and alleging a counterclaim that 101 Construction breached the contract at issue. The Firm also denied liability and raised several affirmative defenses in a separate answer. In an amended complaint, 101 Construction renewed its allegations and included a new demand for a jury trial. In answering the counterclaim, 101 Construction denied Mr. Hammet's allegations and called for the counterclaim to be dismissed with prejudice.

         101 Construction later filed a motion seeking summary judgment for its claim and Mr. Hammet's counterclaim, arguing that the case amounted to a question of law regarding the interpretation of the contract at issue. In response, Defendants claimed that they were entitled to summary judgment based on the undisputed facts of the case. The trial court partially granted and partially denied 101 Construction's motion for summary judgment in an order filed on March 6, 2018. The court dismissed Mr. Hammet's counterclaim but denied summary judgment on 101 Construction's breach of contract claim on the basis that there were disputed issues of material fact.

         A jury trial occurred on March 14, 2018. 101 Construction's proof largely consisted of the testimony of Mr. Sassan. In contrast, Defendants generally relied on the testimony of Mr. Hammet. After the presentation of the proof, 101 Construction orally moved for a directed verdict, arguing that there was no question of fact for the jury to decide and the breach of contract issue should be decided as a matter of law. The trial court denied 101 Construction's motion and instructed the jury to decide whether: 1) the defendants breached their Fee Agreement with the plaintiff, and 2) if so, what amount of money should be paid by the defendants to the plaintiff under the Fee Agreement. During deliberations, the jury asked several questions and twice indicated that it could not come to a unanimous verdict.[8] Eventually, however, the jury returned a unanimous verdict that the Firm and Mr. Hammet did not breach its Fee Agreement with 101 Construction.

         On May 4, 2018, 101 Construction renewed its motion for a directed verdict and separately moved for a new trial based on issues regarding evidence and various jury instructions. The renewed motion for a directed verdict also included a claim for prejudgment interest related to 101 Construction's alleged damages. After Defendants opposed the motions, the trial court entered an order on June 19, 2018 that denied the renewed motion for a directed verdict and the motion for a new trial. This timely appeal by 101 Construction followed.

          Issues Presented

         Both parties presented similar issues on appeal. As we perceive them, the issues ...


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