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Elvis Presley Enterprises, Inc. v. City of Memphis

Court of Appeals of Tennessee, Jackson

December 26, 2019


          Session November 14, 2019

          Appeal from the Chancery Court for Shelby County No. CH-18-0972 Jim Kyle, Chancellor.

         Appellants appeal the trial court's grant of Appellees' Tennessee Rule of Civil Procedure 12.02 motions in this declaratory judgment action. The trial court dismissed Appellants' complaint on the ground that Appellants had no standing to seek a declaratory judgment interpreting a contract, to which Appellants were neither parties nor third-party beneficiaries. We affirm the dismissal of Appellants' complaint for declaratory judgment on the ground that the complaint is barred as res judicata.

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

          Clarence A. Wilbon, and J. Bennett Fox, Jr., Memphis, Tennessee, for the appellants, Guesthouse at Graceland, LLC, Elvis Presley Enterprises, Inc., and EPPF, LLC.

          Jonathan P. Lakey, and John J. Cook, Memphis Tennessee, for the appellee, City of Memphis.

          David Wade, Clayton C. Purdom, and Rebecca K. Hinds, Memphis, Tennessee, for the appellee, Shelby County, Tennessee.

          John Marshall Jones, and Bruce D. Brooke, Memphis, Tennessee, for the appellee, Memphis Basketball, LLC.

          Kenny Armstrong, J., delivered the opinion of the court, in which Carma Dennis McGee, J., joined. J. Steven Stafford, P.J., W.S., filed a separate opinion, dissenting.



         I. Background

         On June 29, 2001, the City of Memphis ("City"), Shelby County, Tennessee ("County"), and Hoops, LP, the predecessor of Memphis Basketball, LLC ("Memphis Basketball," and together with the City and County, "Appellees") entered into the Memphis Arena Use and Operation Agreement (the "Agreement") for construction and use of the FedEx Forum and the relocation of the Vancouver Grizzlies to Memphis. As is relevant to this appeal, the Agreement provides that ". . . neither the City/County . . . shall . . . design, develop, construct or otherwise fund, provide economic or tax benefits or incentives to . . . any new Competing Facility." The Agreement defines a "Competing Facility," in relevant part, as "any new indoor or covered sports or entertainment arena, indoor or covered performance facility or other indoor or covered facility that (i) could compete with the [FedEx Forum] for the booking of any event, or (ii) has or will have a seating capacity of more than 5, 000 persons and fewer than 50, 000 persons . . . ."

         The City and County have an industrial development corporation, Economic Development Growth Engine ("EDGE"), which, among other things, considers applications of property developers for tax incentive funding ("TIF"). EDGE's decisions require subsequent approval by the Memphis City Council, County Commission, and, ultimately, the State of Tennessee.

         In 2014, Elvis Presley Enterprises, Inc., EPPF, LLC, and Guesthouse at Graceland, LLC (together, "EPE," or "Appellants") presented, to EDGE, its Graceland Economic Plan, under which EPE proposed to construct a 450-room hotel, and convention, theater, concert, and museum facilities. EPE was granted a TIF, under which 50% of the excess property taxes over the Base Tax (as defined in EPE's agreement with EDGE) would be captured and allocated to EPE's project.

         In 2017, EPE advised EDGE that it would be submitting a supplement to the Graceland Economic Plan, which would amend the scope of the original plan to include construction of a 6, 200-seat arena. To finance the arena, EPE sought an adjustment of the TIF to increase the captured and allocated taxes to 65% above the Base Tax (as opposed to the original 50%). While EPE's supplemental plan was pending, it alleges that Memphis Basketball contacted EDGE claiming that the supplemental plan violated the Agreement, which prohibits the City or County from providing economic or tax benefits or incentives for construction of competing facilities.

         On November 15, 2017, EPE filed a complaint for declaratory judgment and intentional interference with business relations against Appellees (the "First Complaint"). By order of February 16, 2018, the trial court granted Appellees' separate motions to dismiss the complaint. In relevant part, the trial court held:

EPE has a legislative and governmental issue but seeks a judicial solution . . . .
In essence, the underlying issue is one of tax divergence, which is a matter for the legislative branch of government in cooperation with the executive branch of government . . . . Before this Court should consider the issue, EPE must have EDGE formally rule that they have rejected the Supplemental Plan and that the City Council and County Commission formally deny EPE's appeal of EDGE's decision . . . .
Therefore, since EPE has not exhausted its administrative remedies, EPE lacks standing to bring this matter before the Court and all three motions to dismiss are hereby GRANTED in their entirety . . . .

         On March 7, 2018, the City filed a Tennessee Rule of Civil Procedure 59.04 motion, asking the trial court to amend certain portions of its February 16, 2018 order. EPE did not file a response to the Rule 59.04 motion.

         While the City's Rule 59.04 motion was pending, on April 5, 2018, EDGE voted to conditionally approve EPE's supplemental economic plan. Specifically, EDGE approved the supplemental economic plan contingent on

either (i) a final, binding, non-appealable ruling . . . or (ii) a binding agreement by the parties . . . which binding, non-appealable ruling or settlement agreement has the effect of providing that either (A) the Arena is not a Competing Facility under the Memphis Arena Use and Operating Agreement . . . or (B) the Arena does not violate the Non-Competition covenant in the [Agreement], or (C) that the actions of EDGE, the City of Memphis and County of Shelby, Tennessee in approving the Arena conform with [the Agreement]. . . .

         Likewise, on June 4, 2018, the County Commission voted to conditionally approve EPE's supplemental economic plan. The contingencies stated in the County's resolution were identical to those contingencies set out in EDGE's conditional approval, supra.[1] On June 12, 2018, the City voluntarily withdrew its Rule 59.04 motion.

         EPE did not appeal the trial court's February 16, 2018 order. Rather, on June 29, 2018, EPE filed a complaint (the "Second Complaint") in the trial court. In its Second Complaint, EPE omitted the intentional interference with business relations claim it had lodged in the First Complaint and asked only for a declaratory judgment to satisfy the EDGE/Shelby County resolution contingency. Appellees filed separate Tennessee Rule of Civil Procedure 12.02 motions to dismiss the Second Complaint on the ground that EPE had no standing to bring a declaratory judgment action on an Agreement to which it was neither a party nor a third-party beneficiary. In the alternative, Appellees' asserted that the Second Complaint was barred as res ...

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