Hamer v. Se. Res. Grp., Inc.

• Decision Date: 03 March 2016
• Docket Number: No. M2015-00643-COA-R3-CV,M2015-00643-COA-R3-CV
• Parties: JOHN HAMER v. SOUTHEAST RESOURCE GROUP, INC. ET AL.
• Court: Tennessee Court of Appeals

JOHN HAMER v. SOUTHEAST RESOURCE GROUP, INC. ET AL.

No. M2015-00643-COA-R3-CV

COURT OF APPEALS OF TENNESSEE AT NASHVILLE

December 16, 2015 Session

March 3, 2016

Appeal from the Chancery Court for Williamson County

No. 43645

James G. Martin, III, Chancellor

Plaintiff, a member of a Limited Liability Company that sells insurance products to credit union members, filed this declaratory judgment action seeking a determination that the LLC's operating agreement does not require him to make a "telemedicine counseling" business opportunity available to the LLC. The operating agreement requires members to "disclose and make available to [the LLC] each and every business opportunity that is within the scope and purpose of [the LLC] . . . ." However, "no such disclosure or offer shall be required with respect to business opportunities that are not within the scope and purpose of [the LLC]." The trial court granted Plaintiff summary judgment, finding that the undisputed facts demonstrated that the "scope" of the LLC's business was selling insurance and that the telemedicine opportunity was not an insurance product. We have determined that the parties intended "scope" to have its ordinary meaning and that the undisputed facts show that the scope of the LLC's business at the relevant time was the sale of insurance products and the telemedicine counseling business opportunity is not an insurance product. Consequently, we affirm.

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

FRANK G. CLEMENT, JR., P.J., M.S., delivered the opinion of the Court, in which ANDY D. BENNETT and W. NEAL MCBRAYER, JJ., joined.

E. Todd Presnell, Ty E. Howard, and Joshua J. Phillips, Nashville, Tennessee, for the appellants, Southeast Resource Group, Inc. and Action Financial Company, LLC.

James R. Kelley, Marc T. McNamee, and Stephen M. Montgomery, Nashville, Tennessee, for the appellee, John Hamer.

OPINION

Action Financial Company, LLC ("Action") is a limited liability company organized under Florida law. Its only members are John Hamer ("Plaintiff") and Southeast Resource Group, Inc. ("Southeast"). Action is a "manager-managed" LLC, and Plaintiff is one of its managers. See Fla. Stat. Ann. § 605.0407 (2014).

Plaintiff founded Action and, beginning in 2009, sold membership interests to Southeast in several different transactions. At the time of trial, Southeast owned 59.5% of Action, and Plaintiff owned 40.5%. Action is in the business of selling insurance products to credit union members, often by direct mail. The products Action sells are subject to insurance regulations, and Plaintiff is required to be a licensed insurance broker to sell these products.

In conjunction with the sale of membership interests in Action, Plaintiff and Southeast entered an operating agreement. Section 6.6 of the agreement states in relevant part:

Except as otherwise provided in this Section . . . each Member may engage in whatever activities they choose, whether the same are competitive with [Action] or otherwise . . . without any obligation to offer any interest in such activities to [Action] or any Member. Notwithstanding the foregoing, the Members hereby acknowledge and agree that each Member owes to [Action] and each Member the highest fiduciary loyalty and duty. In furtherance, and not in limitation, of such loyalty and duty:

(a) Each Member covenants and agrees to disclose and make available to [Action] each and every business opportunity that is within the scope and purpose of [Action] that such Member becomes aware of in his capacity as Member or otherwise; provided, however, no such disclosure or offer shall be required with respect to business opportunities that are not within the scope and purpose of [Action].

(Emphasis added).

The 2009 operating agreement does not define "scope" or "scope and purpose."¹ Additionally, the agreement does not specify whether "scope and purpose" is a reference to Action's business at the time the agreement was signed, at the time a memberdiscovers a business opportunity, or at some other time in the future. Instead, section 18.7 of the agreement states that "[e]very covenant, term and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any Member."

Further, in Article 2 (titled "Organization"), the agreement provides:

2.4 Purposes [Action] may engage in any and all other business activities whatsoever that may lawfully be conducted by limited liability companies under the [Florida Limited Liability Company Act], and [Action] may exercise all powers necessary to, connected with or incidental to the accomplishment of any business that may lawfully be conducted by limited liability companies under the [Florida Limited Liability Company Act]; provided, however, [Action] shall primarily serve credit unions.

In January 2014, Plaintiff was introduced to a "telemedicine opportunity." For purposes of this appeal, it is undisputed that the telemedicine opportunity "is a telephone and videoconferencing-based doctor consultation service that allows customers to discuss health problems with medical doctors." The service of telemedicine counseling is not an insurance product, and an insurance-related license is not required to sell this service. Further, telemedicine counseling can be marketed to all consumers, not just credit union members.

Plaintiff presented this opportunity to Southeast's board of directors in February 2014. After considering a competing telemedicine counseling service proposed by another entity, Southeast, acting on behalf of Action as one of its managing members, elected to proceed with Plaintiff's proposal. In the interim, Plaintiff, the other managing member of Action, decided to market the telemedicine opportunity on his own, without Action or Southeast.

In December 2014, Plaintiff filed this declaratory judgment action against Southeast and Action seeking a determination that the telemedicine counseling business opportunity was not within the "scope" of Action's business. After Plaintiff filed a motion for summary judgment, Southeast and Action opposed the motion relying in part on the Declaration of David Kelly, Southeast's President, which was filed pursuant to Tenn. R. Civ. P. 72.² The Declaration states that "[i]n addition to Action's historicalbusiness, it has and intends to continue to expand its business lines to other areas. As such, the scope of Action's business is not and was never intended to be static." Mr. Kelly also cites a 2008 letter from Plaintiff in which he stated that "the possibilities in our marketplace are endless . . . ," and "[t]here are countless options with virtually no limitations." Mr. Kelly also states in his declaration that, "[a]s the controlling interest in Action, [Southeast] has taken steps to expand its business to add new financial products and new insurance brokers."

At the hearing on the motion for summary judgment, the following exchanges occurred:

THE COURT: Because when I looked at the financial information that was appended, it appeared that, literally, the history of this business has been associated with the sale of insurance products.

[Counsel for Southeast/Action]: And I think that's fair, Your Honor.

. . . .

THE COURT: [Plaintiff] says, [Action is] engaged in basically the same business today that it was prior to . . . 2009, and that is the direct mail of accidental death, dismemberment insurance and other direct mail insurance products to credit union members.

Isn't that true?

[Counsel for Southeast/Action]: I think it's true except it's not just direct mail, it's through other means.

. . . .

THE COURT: There is no dispute that, historically, all Action has ever done is sell insurance-related products to credit union members.

[Counsel for Southeast/Action]: I would agree with that.

After the hearing, the trial court issued an order concluding that the operating agreement was not ambiguous and that, according to section 18.7, it was required to interpret the agreement's terms "simply, according to their fair meaning and not strictly for or against any Member." The court found that "the only business [Action] has engaged in, since its inception and up to today, is the sale of regulated insurance-related products" and that the scope of Action's business was the sale of insurance and insurance-related products. Further, the court found that the telemedicine opportunity "may have some relationship" to insurance products but that it is not regulated like insurance and does not require a license to sell. Based on the above and other findings, the court concluded that Plaintiff was not required to share the telemedicine opportunity with Action. As a consequence, the court granted Plaintiff's motion for summary judgment. This appeal by Southeast and Action followed.³

STANDARD OF REVIEW

Appellate courts review a trial court's decision on a motion for summary judgment de novo without a presumption of correctness. Rye v. Women's Care Ctr. of Memphis, MPLLC, S.W.3d No. W2013-00804-SC-R11-CV, 2015 WL 6457768, at *12 (Tenn. Oct. 26, 2015). In so doing, we must make a fresh determination of whether the requirements of Tenn. R. Civ. P. 56 have been satisfied. Id. (citing Estate of Brown, 402 S.W.3d 193, 198 (Tenn. 2013)).

The Tennessee Supreme Court has recently clarified the appropriate standard for granting summary judgment.⁴ "[S]ummary 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." Id. at *22 (citing Tenn. R. Civ. P. 56.04, 56.06) (emphasis in original). Under this standard, "[t]he 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." Id.

An issue is only "genuine" if the nonmovant presents evidence...