Crescent Sock Company v. Robert H. Yoe, III ( 2016 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
February 9, 2016 Session
CRESCENT SOCK COMPANY V. ROBERT H. YOE, III, ET AL.
Appeal from the Chancery Court for McMinn County
No. 2013-CV-297 Michael J. Sharp, Judge1
No. E2015-00948-COA-R3-CV-FILED-MAY 25, 2015
Crescent Sock Company filed this action against its Chief Executive Officer, Robert H.
Yoe, III, the day before Crescent terminated his employment. It sought a declaratory
judgment that Yoe’s employment contract and an agreement between Crescent and Yoe
Enterprises, Inc., a company wholly owned by Yoe, were invalid and unenforceable.
After a seven-day bench trial, the court found the two agreements to be valid. It enforced
them and found in favor of Yoe and Yoe Enterprises on some of the causes of action in
their counterclaim. The trial court awarded Yoe and Yoe Enterprises attorney’s fees of
$765,880.77. Yoe’s employment contract, however, does not include Yoe Enterprises
among those entitled to seek ―prevailing party‖ fees and expenses. Accordingly, we
vacate so much of the trial court’s judgment as grants attorney’s fees and litigation costs
to Yoe Enterprises. However, we affirm the trial court’s judgment holding that Yoe is
entitled to fees and expenses, but vacate the amount of his award. This case is remanded
to the trial court for a hearing to determine how much of the $765,880.77 in attorney’s
fees is properly associated with the professional services rendered to Yoe Enterprises.
The trial court will make the same calculation with respect to the expenses. The trial
court is instructed to subtract the fees and expenses applicable to Yoe Enterprises from
the total fee award of $765,880.77 and the award of expenses and decree the balance to
Yoe. In all other respects, the judgment of the trial court is affirmed. On remand, the
trial court is further instructed to award Yoe his reasonable attorney’s fees and expenses
on appeal.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
Vacated in Part and Affirmed in Part; Case Remanded for Further Proceedings
CHARLES D. SUSANO, JR., J., delivered the opinion of the court, in which D. MICHAEL
SWINEY, C.J., and THOMAS R. FRIERSON, II, J., joined.
1
Sitting by interchange.
John T. Winemiller, R. Bradford Brittian, and Ian G. McFarland, Knoxville, Tennessee,
for appellant, Crescent Sock Company.
Gary R. Patrick, Cara J. Alday, and McKinley S. Lundy, Jr., Chattanooga, Tennessee, for
appellees, Robert H. Yoe, III, and Yoe Enterprises, Inc.
I.
In 2000, Crescent hired Yoe to be its CEO and President, tasking him to run its
hosiery manufacturing business. Over the next thirteen years, Crescent and Yoe entered
into a series of contracts. On February 13, 2012, they executed one of the contracts at
issue on this appeal, i.e., Yoe’s executive employment agreement (the employment
agreement). It provides, among other things, that Crescent would be liable to Yoe for a
severance payment of $2,000,000 if Yoe was fired without cause. On September 4, 2012,
Crescent and Yoe Enterprises executed a contract (the Yoe Enterprises contract)
providing, in pertinent part, as follows:
WHEREAS, Yoe and Crescent have from time to time
entered into certain business agreements relative to branding
and intellectual property rights that are not memorialized in
the [employment agreement];
WHEREAS, the Parties desire to memorialize the prior
business agreements concerning branding and intellectual
property rights in a single agreement;
. . . the Parties, intending to be legally bound, hereby agree as
follows:
1. Ownership of Intellectual Property. Any and all new
brands, and other intellectual property relating to such new
brands, that are developed, registered, trademarked,
copyrighted, invented, started, conceived or designed by
Crescent, Yoe and/or [Yoe Enterprises] from January 1, 2009
through the termination of Yoe’s employment with Crescent
(the ―Intellectual Property‖) shall be 100% owned by [Yoe
Enterprises]. Crescent covenants and agrees that, on or after
the date of this Agreement, it shall perform, . . . any and all
such further acts and assurances as necessary to effectuate,
evidence and consummate the assignment of the Intellectual
Property to [Yoe Enterprises.]
2
(Underlining, capitalization, and defined term in quotation marks, in original.)
On September 3, 2013, Crescent filed this lawsuit asking the trial court to declare
the employment agreement and the Yoe Enterprises contract invalid. The next day,
Crescent fired Yoe without cause. The trial court found as follows regarding the
circumstances of Yoe’s termination:
The court finds that on September 4, 2013, Mr. Yoe was fired
from Crescent, along with five (5) other employees who were
referred to as the ―FITS Team.‖ The court finds that when
Mr. Yoe was fired, Crescent’s attorneys met him at the
business, along with a police officer. Mr. Yoe was simply
served with a copy of the lawsuit filed by Ms. Allen and Ms.
Boyd,2 which had been filed on September 3, 2013. After
being served, Mr. Yoe was forced to leave the business
without being able to retrieve his personal computer or his
other personal belongings.
(Footnote added.)
Yoe answered and filed a counterclaim against Crescent and a third-party
complaint against Allen and Boyd.3 The counterclaim sought relief in Yoe’s name and in
the name of Yoe Enterprises. The filing of the counterclaim prompted Crescent to file an
―amended and restated complaint‖ stating that ―[f]or the purpose of correcting the record,
Plaintiff hereby amends its complaint to formally add YOE ENTERPRISES . . . as a
Defendant in this matter.‖ (Capitalization in original.) Following an unsuccessful
attempt at mediation, the court heard the case at a bench trial in late September 2014 that
lasted seven days. In a well-written, thorough fifty-four-page opinion and order, the trial
court found that ―Yoe and [Yoe Enterprises] have established that the contracts in
question are enforceable contracts.‖ In accordance with the Yoe Enterprises contract, the
trial court held that three brands of socks created and developed during Yoe’s tenure with
Crescent, FITS®, Jacks, and Game Knits®, along with associated intellectual property
rights, were all owned by Yoe Enterprises. The court also initially found and held that
Crescent had an exclusive license to produce socks under these three brands.
2
Cathy Allen and Sandra Boyd are members of the Burn family, which has owned and
controlled Crescent since its inception in the early 1900s. Allen was Vice President and
Treasurer, and assumed the role of President and CEO upon the termination of Yoe. Boyd was
Corporate Secretary and became Chief Operating Officer after Yoe’s termination.
3
The third-party claims are not at issue on this appeal.
3
Yoe and Yoe Enterprises disputed the trial court’s ―exclusive license‖ decree.
They moved to alter or amend the judgment in order ―to request the clarification or
revision of a single finding of fact‖ ‒ the court’s finding that ―Crescent has the exclusive
ability to manufacture the FITS brand socks. . . .‖ They asserted that the proof at trial
established that Crescent was to have the continuing exclusive right to manufacture the
FITS brand socks only if Yoe voluntarily left Crescent. The trial court agreed with the
counter-plaintiffs, stating in its modified judgment, as follows:
The court finds that the parties agree[d] that Crescent would
have the exclusive ability to manufacture the FITS brand
socks only if Mr. Yoe left Crescent voluntarily apart from the
wishes of Ms. Boyd and Ms. Allen. Because the court finds
that Crescent terminated Mr. Yoe’s contract, the court finds
that Crescent does not have the exclusive right to manufacture
the brands owned by [Yoe Enterprises].
On January 14, 2015, Yoe and Yoe Enterprises filed a motion seeking
discretionary costs of $28,058.44. In the same motion, they sought ―other litigation costs
and expenses of $108,833.43‖ under the terms of the employment agreement, which
provides that ―the prevailing party shall be entitled to recover reasonable attorney’s fees,
costs, and expenses from the adverse party.‖ In opposition, Crescent argued that an
award of attorney’s fees was not appropriate, and asserted, in the alternative, that Yoe
should not be awarded 100% of his attorney’s fees because he did not prevail on all of the
causes of action in the counterclaim. Crescent also argued that Yoe Enterprises was not
entitled to any fees or expenses because it is not a party to the employment agreement
and, hence, not a party to the ―prevailing party‖ provisions. The trial court awarded Yoe
and Yoe Enterprises all of the attorney’s fees billed to them for the case, i.e., a total of
$765,880.77. The court also awarded Yoe and Yoe Enterprises discretionary expenses of
$28,058.44 and ―prevailing party‖ expenses of $108,833.43.4 Crescent timely filed a
notice of appeal.
II.
Crescent raises the following issues on appeal:
4
At some places in the record, these two figures are shown as $25,808.14 and
$111,083.43. We have used the amounts that we believe are correct. If they are not, the trial
court on remand can state what it finds the amounts to be.
4
1. Whether the trial court erred in awarding certain
intellectual property to Yoe Enterprises, including several
trademarks that the parties agree are owned by Crescent.
2. Whether the trial court erred in finding that Crescent’s
license to manufacture socks under the brands owned by Yoe
Enterprises became non-exclusive when Crescent terminated
Yoe’s employment without cause.
3. Whether the trial court erred in awarding Yoe attorney’s
fees and litigation expenses.
4. Whether the trial court erred in awarding Yoe Enterprises
attorney’s fees and litigation expenses.
III.
In this non-jury case, our standard of review is de novo upon the record of the
proceedings below; however, the record comes to us with a presumption of correctness as
to the trial court’s factual determinations, a presumption we must honor unless the
evidence preponderates otherwise. Tenn. R. App. P. 13(d); Wright v. City of Knoxville,
898 S.W.2d 177, 181 (Tenn. 1995). There is no presumption of correctness as to the trial
court’s legal conclusions. Campbell v. Fla. Steel Corp., 919 S.W.2d 26, 35 (Tenn.
1996).
IV.
A.
In its first issue, Crescent challenges the following portion of the trial court’s
ruling:
Based upon [Yoe’s] research and development, Yoe
Enterprises, Inc. obtained a patent [for] the ornamental design
for a toe seam and portion of a sock for the FITS® brand, and
Patent No. D670,900 (see trial exhibit 67). Furthermore, Mr.
Yoe obtained other intellectual property rights associated with
the FITS®, Jacks and Gameknits brands, including trademark
rights, domain rights and copyrights as to color, appearance,
technology, packaging, and knitting machine specifications.
(Exhibit 68). The court finds that all of these intellectual
5
property rights are in the name of [Yoe Enterprises]. (Exhibit
68).
(Emphasis added.) As can be seen, the court referenced trial exhibit 68, which is a chart
listing trademarks, copyrights, and patents owned by Crescent and by Yoe Enterprises.
Crescent interprets the trial court’s statement that ―all of these intellectual property rights
are in the name of [Yoe Enterprises]‖ to mean that the court held that all of the
intellectual properties listed on exhibit 68 are owned by Yoe Enterprises. We think the
correct interpretation of the above paragraph is that all intellectual property rights
associated with the FITS®, Jacks and Game Knits® brands are owned by Yoe
Enterprises. In fact, the parties agree that the first six items listed on exhibit 68 are
owned by Crescent. Yoe and Yoe Enterprises do not dispute the assertion in Crescent’s
brief that ―the first six trademarks listed on Trial Exhibit 68 are trademarks unrelated to
the FITS, JACKS, and GAME KNITS brands [and] are identified as trademarks
registered in Crescent’s name.‖ (Capitalization in original.) Lest there be any question
about this matter, the trial court on remand is instructed to enter an order reciting that
Crescent owns the first six trademarks listed on trial exhibit 68.
B.
Crescent next argues that the trial court erred in holding that Crescent’s license to
produce socks under the brands owned by Yoe Enterprises became non-exclusive when
Crescent fired Yoe. This issue requires us to interpret the terms of the parties’ written
agreements. As we observed in Wager v. Life Care Ctrs. of Am., Inc., No. E2006-
01054-COA-R3-CV, 2007 WL 4224723, at *10-11 (Tenn. Ct. App., filed Nov. 30, 2007),
another case involving an executive employment contract and involuntary termination,
[i]n interpreting the contract, we must keep in mind several
basic tenets of contract law. For instance, the language in
dispute must be examined in the context of the entire
agreement. Cocke County Bd. of Highway Comm’rs v.
Newport Utils. Bd., 690 S.W.2d 231, 237 (Tenn. 1985). ―All
provisions of a contract should be construed as in harmony
with each other, if such construction can be reasonably made,
so as to avoid repugnancy between the several provisions of a
single contract.‖ Rainey v. Stansell, 836 S.W.2d 117, 119
(Tenn. Ct. App. 1992). Also, words must be given their usual
and ordinary interpretation. St. Paul Surplus Lines Ins. Co.
v. Bishops Gate Ins. Co., 725 S.W.2d 948, 951 (Tenn. Ct.
App. 1986). ―A strained construction may not be placed on
the language used to find ambiguity where none exists.‖
6
Farmers-Peoples Bank v. Clemmer, 519 S.W.2d 801, 805
(Tenn. 1975).
* * *
―The cardinal rule for interpretation of contracts is to
ascertain the intention of the parties and to give effect to that
intention consistent with legal principles.‖ Rainey, 836
S.W.2d at 118. Of course, the ―intention of the parties‖ refers
to their intention when the contract was made, not their
desired interpretations after a dispute arises. The court will
look to the material contained within the four corners of the
contract to ascertain its meaning as an expression of the
parties’ intent. Bob Pearsall Motors, Inc. v. Regal Chrysler-
Plymouth, Inc., 521 S.W.2d 578, 580 (Tenn. 1975).
Therefore, if a contractual clause, read in the proper context,
unambiguously mandates a particular result, we will not
disturb that result merely because it may be harsh for one
party or the other.
* * *
―Any number of papers may be taken together to make out
the written expression of the contract of the parties, provided
there is sufficient connection between the papers.‖
Springfield Tobacco Redryers Corp. v. City of Springfield,
293 S.W.2d 189, 197 (Tenn. Ct. App. 1956). ―When the
parties’ agreement is contained in more than one document,
all the documents should be considered together.‖ Ewing v.
Smith, No. 85-294-II, 1986 WL 2582, *3 (Tenn. Ct. App.
M.S., filed Feb. 26, 1986).
Regarding the issue of the exclusive or non-exclusive nature of a license, a Federal
Circuit Court has explained the general rule as follows:
Determining whether a licensee is an exclusive licensee or a
bare licensee is a question of ascertaining the intent of the
parties to the license as manifested by the terms of their
agreement and examining the substance of the grant. The use
of the word ―exclusive‖ is not controlling; what matters is the
substance of the arrangement. Because patent rights are
7
rights to ―exclude others,‖ see 35 U.S.C. § 154(a)(1), a
licensee is an exclusive licensee only if the patentee has
promised, expressly or impliedly, that ―others shall be
excluded from practicing the invention‖ within the field
covered by the license. Put another way, an exclusive license
is ―a license to practice the invention . . . accompanied by the
patent owner’s promise that others shall be excluded from
practicing it within the field of use wherein the licensee is
given leave.‖ Thus, if a patentee-licensor is free to grant
licenses to others, licensees under that patent are not
exclusive licensees.
* * *
To qualify as an exclusive license, an agreement must clearly
manifest the patentee’s promise to refrain from granting to
anyone else a license in the area of exclusivity.
Textile Prods., Inc. v. Mead Corp., 134 F.3d 1481, 1484 (Fed. Cir. 1998) (emphasis
added; internal citations omitted). We agree with the Federal Court’s analysis. ―[A]
transfer of patent rights that is silent on whether or not the patent owner retains the right
to grant other licenses to the patented inventions in the area of exclusivity grants a
nonexclusive license.‖ Buckhorn Inc. v. Orbis Corp., No. 3:08-CV-00459, 2009 WL
2176056, at *4 (S.D. Ohio, filed July 21, 2009) (citing Textile Prods., 134 F.3d at 1484-
85).
In this case, on December 14, 2007, Crescent and Yoe executed an amendment to
Yoe’s then-existing employment agreement5 that provides, in pertinent part, as follows:
Whereas it is acknowledged:
There are no longer opportunities for [Robert H. Yoe, III] to
make large monies from:
1. the sale of Crescent
2. the increases in the net worth of Crescent
3. bonuses resulting from Crescent net income
5
Although this agreement was executed well before the execution of the two agreements
Crescent sought to invalidate, the parties agree, and the trial court held, that the amendment was
valid and pertinent to the licensing issue.
8
And where the executive board would like to make the job
exciting and potentially financially rewarding for Bob and for
the (Burn) family
The Executive Board has taken the below steps to align the
short term and long term financial interests of Crescent
stockholders and those interests of Bob’s.
Any and all new brands & related materials: developed,
registered, trademarked, copyrighted or otherwise started and
or designed by Crescent in years 2009 through Bob’s
employment:
will be owned in full and completely by Yoe Enterprises. (At
the time of this signing, none of these ―new brands‖ have
been trademarked.)
[Yoe Enterprises] will license the ―brands‖ to Crescent for
$1.00 a year.
* * *
IF Bob leaves the company apart from the wishes of Sandra
[Boyd] and Cathy [Allen] without a mutually approved
license agreement.
THEN Crescent has the right to accept or reject a
manufacturing/sourcing agreement with terms that would
allow them exclusivity to providing socks at 5% Royalty fee.
(Underlining and capitalization in original; bullet points in original omitted.)
The Yoe Enterprises contract executed on September 4, 2012, which reaffirms that
―[a]ny and all new brands, and other intellectual property relating to such new brands,
that are developed . . . by Crescent, Yoe and/or [Yoe Enterprises] from January 1, 2009
through the termination of Yoe’s employment with Crescent . . . shall be 100% owned by
[Yoe Enterprises],‖ sets forth a royalty payment schedule providing that Crescent will
pay one dollar in 2013 and 2014, and 5% of net sales in 2015 ―and thereafter.‖ The only
provision containing the term ―license‖ in this agreement states as follows:
9
Licensing. On or before 1 year after the execution of this
Agreement, [Yoe Enterprises] and Crescent will enter into an
agreement for licensing/manufacturing/sourcing relative to
the Intellectual Property . . .
(Underlining in original.) As Crescent recognizes in its brief, ―there was no evidence at
trial that any such future agreement was ever prepared, let alone executed.‖
Nothing in the employment agreement, the Yoe Enterprises Contract, or the 2007
amendment supports a conclusion that Yoe or Yoe Enterprises intended to grant Crescent
an exclusive license in the event Yoe’s employment was involuntarily terminated. The
2007 amendment, which the trial court found to be determinative on this question,
explicitly provides that Crescent would be granted an option ―to accept or reject a
manufacturing/sourcing agreement with terms that would allow them exclusivity‖ only if
Yoe left the company ―apart from the wishes of‖ Boyd and Allen, the individuals who, on
behalf of Crescent, ultimately fired him. The evidence fully supports the trial court’s
determination that Crescent does not have an exclusive license.
C.
Crescent argues that the trial court erred in awarding Yoe his attorney’s fees. The
employment contract contains the following fee-shifting provision:
12. DISPUTE RESOLUTION
a. Any claim or controversy arising out of or related to this
Agreement (a dispute) shall be resolved as set forth in this
Paragraph 12.
b. Either party may give the other party written notice of a
request for resolution of a ―dispute‖ (a Request). For the next
20 days, the parties shall meet and confer in good faith (with
whatever advisors they desire, at their own expense), in an
effort to resolve the dispute amicably and expeditiously.
c. In the event the Dispute is not resolved within the 20 day
period, the parties shall participate in non-binding mediation
in McMinn County, Tennessee, pursuant to such rules as the
parties may agree.
10
d. In the event the dispute is not resolved by mediation within
an additional 60 days, the parties may within 10 days, agree
in writing to submit the ―Dispute‖ to binding arbitration in
accordance with the rules to be agreed upon by the parties in
such writing.
* * *
f. In the event the parties do not agree to arbitrate the
―Dispute‖ with the 10 day period, then either party may
commence litigation to resolve the ―Dispute‖ in a state or
federal court located in Knox County, Tennessee, with
respect to which each party hereby irrevocably consents and
submits to the exclusive jurisdiction thereof.
g. If any civil action at law or equity, including any action for
declaratory relief, is brought to construe, enforce or interpret
the provisions of the Agreement pursuant to Paragraph 12 (f),
the prevailing party shall be entitled to recover reasonable
attorney’s fees, costs and expenses from the adverse party.
Regarding venue, the employment agreement also provides:
This ―Agreement‖ shall be governed, construed, and enforced
in accordance with the laws of the State of Tennessee, and the
parties agree that any judicial proceeding hereunder shall be
held in the state o[r] federal courts located in McMinn
County, Tennessee.
The first court action addressing the parties’ disputes was Crescent’s filing of a
complaint in the trial court, the McMinn County Chancery Court. The employment
agreement makes alternative dispute resolution optional; the first step towards ADR
would be that ―[e]ither party may give the other party written notice of a request for
resolution‖ of a dispute. (Emphasis added.) Crescent obviously elected not to pursue this
route, but rather proceeded directly to court. Still, Crescent argues that Yoe did not
follow the steps for ADR to which he agreed in section 12 of the employment agreement,
and, as a consequence, is not entitled to seek attorney’s fees and expenses against
Crescent. Furthermore, Crescent asserts that, since Yoe did not commence litigation in
Knox County pursuant to paragraph 12(f), he thereby forfeited his right to seek attorney’s
fees and expenses. Yoe responds by pointing out that if he had filed in Knox County, his
action, in all likelihood, would have been dismissed pursuant to the prior suit pending
11
doctrine, ―which dictates that a case is subject to dismissal if there is a prior lawsuit
pending involving the same parties and the same subject matter.‖ West v. Vought
Aircraft Indus., Inc., 256 S.W.3d 618, 620 (Tenn. 2008). Yoe also asserts that his
counterclaim was compulsory in nature under Tenn. R. Civ. P. 13.01, such that he was
required to raise his claims in response to Crescent’s McMinn County Chancery Court
lawsuit. The trial court held that Crescent waived the Knox County venue requirement
by electing to file in McMinn County, and that the provision in the agreement that in
―any civil action‖ the prevailing party is entitled to recover attorney’s fees and expenses
was applicable and enforceable. We agree with the trial court. This litigation ended up
in McMinn County because Crescent – totally on its own – decided to pursue relief in
that venue. Yoe did not violate the terms of section 12 of the employment agreement by
not pursuing ADR or by filing the counterclaim in the trial court.
Crescent next argues that Yoe should not be awarded all of his attorney’s fees
because he did not prevail on all of his claims in the counterclaim. In his September 19,
2013 counterclaim, Yoe asserted causes of action for breach of contract, quantum meruit,
and unjust enrichment. In his amended counterclaim filed January 10, 2014, he added
claims for ―misfeasance,‖ negligence, misappropriation/conversion of the FITS® brand,
and breach of a ―duty to perform with due care.‖ The amended counterclaim was brought
on behalf of both Yoe and Yoe Enterprises. Yoe and Yoe Enterprises later voluntarily
dismissed all of their causes of action except for Yoe’s claims for breach of contract,
quantum meruit, and unjust enrichment, and Yoe Enterprises’ claim for breach of
contract. After the trial court entered its initial post-trial order, Crescent argued that Yoe
was not entitled to recover fees and costs related to his nonsuited causes of action. The
trial court held as follows in its final judgment:
The court has already found that the employment contract is
valid and enforceable, and the executive employment
agreement is valid and binding. The court has also found that
the business agreement is valid and enforceable. Based upon
all of the above, the court has already found that attorney[’]s
fee[]s should be awarded in this matter. The court finds that
the real issue is whether the attorney fee[]s involved are
reasonable and necessary, under all of the facts and
circumstances in this case. This court has reviewed the
litigation costs and charges and expenses, including the
attorney[’]s fee[]s incurred against the plaintiffs[’] claim.
This court has also given great consideration to the amount of
time spent by Mr. Yoe and [Yoe Enterprises]’ attorneys, and
the complexity of the issues involved and the sheer amount of
time spent to review the thousands of pages of documents.
12
The court has also given great consideration to the sworn
affidavit of attorney Sam Elliott and his statements based
upon his review of the requests for attorney[’]s fee[]s,
including but not limited to, the time spent, the hourly billing
rate for both Mr. Patrick and his firm as well as Mr. Jenne and
his firm. Based upon all of the above, this court finds that the
attorney[’]s fee[]s requested by Mr. Patrick and Mr. Jenne are
reasonable, given all of the facts and circumstances in this
case.6
Specifically, the court finds that there is a common core
running throughout the entirety of this case. The court finds
that the elements were so intertwined that there would be no
way to reasonably determine which specific parts of any
specific deposition may have been used regarding some
issues but not others. In fact, given the nature of the case, this
court has no way to determine which specific part of a
deposition may have been used and/or why it was used. The
court has no way to break down how much was spent
addressing this specific individual claims based upon any
certain or particular part of the various discovery that was
taken in this case. The court simply finds that there is a
common core of issues in the various claims that w[ere] tried
in this case. The court finds that the use of discovery and the
various parts of discovery are a part of the strategic plan of
any counsel in preparing his or her case for trial. Therefore,
based upon the fact that there is a common core running
throughout the entirety of this case, the court finds that the
entirety of the attorney[’]s fee[]s charged by Mr. Patrick as
well as Mr. Jenne is reasonable, given all of the facts and
circumstances present in this case. Therefore, the court finds
that the motion for attorney[’]s fee[]s and expenses in the
total amount of $765,880.77 is reasonable and shall be
awarded.
(Footnote added.)
6
Crescent does not contest the reasonableness of the fees or whether the work was
necessary.
13
The United States Supreme Court addressed an argument similar to Crescent’s,
i.e., that Yoe was not the ―prevailing party‖ on every one of his claims, and therefore
should not recover all of his fees, in Hensley v. Eckerhart, 461 U.S. 424, 434-35 (1983),
stating:
In some cases a plaintiff may present in one lawsuit distinctly
different claims for relief that are based on different facts and
legal theories. In such a suit, even where the claims are
brought against the same defendants—often an institution and
its officers, as in this case—counsel’s work on one claim will
be unrelated to his work on another claim. Accordingly,
work on an unsuccessful claim cannot be deemed to have
been ―expended in pursuit of the ultimate result achieved.‖
The congressional intent to limit awards to prevailing parties
requires that these unrelated claims be treated as if they had
been raised in separate lawsuits, and therefore no fee may be
awarded for services on the unsuccessful claim.
. . . In other cases the plaintiff’s claims for relief will involve
a common core of facts or will be based on related legal
theories. Much of counsel’s time will be devoted generally to
the litigation as a whole, making it difficult to divide the
hours expended on a claim-by-claim basis. Such a lawsuit
cannot be viewed as a series of discrete claims. Instead the
district court should focus on the significance of the overall
relief obtained by the plaintiff in relation to the hours
reasonably expended on the litigation.
Where a plaintiff has obtained excellent results, his attorney
should recover a fully compensatory fee. Normally this will
encompass all hours reasonably expended on the litigation,
and indeed in some cases of exceptional success an enhanced
award may be justified. In these circumstances the fee award
should not be reduced simply because the plaintiff failed to
prevail on every contention raised in the lawsuit. Litigants in
good faith may raise alternative legal grounds for a desired
outcome, and the court’s rejection of or failure to reach
certain grounds is not a sufficient reason for reducing a fee.
The result is what matters.
14
(Internal citations and footnotes omitted); see also Waldo v. Consumers Energy Co., 726
F.3d 802, 822-23 (6th Cir. 2013). Tennessee courts have applied this result-oriented
―common core of facts‖ analysis in several cases. State Auto Ins. Co. v. Jones Stone
Co., No. M2009-00049-COA-R3-CV, 2009 WL 4841080, at *10-11 (Tenn. Ct. App.,
filed Dec. 15, 2009); Brunsting v. Brown, No. M2000-00888-COA-R3-CV, 2001 WL
1168186, at *6-8 (Tenn. Ct. App., filed Oct. 4, 2001); Lowe v. Johnson Cnty., No.
03A01-9309-CH-00321, 1995 WL 306166, at *6-7 (Tenn. Ct. App., filed May 19, 1995).
In the present case, we agree with the trial court that the issues involved with the
claims raised by Yoe were closely intertwined and involved a common core of facts.
Furthermore, it is clear that Yoe obtained an excellent and successful result at trial.
Under these circumstances, we affirm the judgment that Yoe is entitled to the entire
amount of his attorney’s fees and costs under the employment agreement.
D.
The trial court held that ―Mr. Yoe and [Yoe Enterprises] are entitled to recover
their attorney’s fees.‖ It ordered Crescent to pay the entire attorney’s fee bill rendered to
Yoe, a total amount of $765,880.77. All the parties are in agreement, however, that the
employment agreement providing for attorney’s fees and costs to the prevailing party was
between Yoe and Crescent, and, therefore, Yoe Enterprises is not entitled to an award of
its attorney’s fees and expenses under that agreement. Although Yoe Enterprises is a
corporation wholly owned by Yoe, it and Yoe are legally distinct from one another, and
have been treated as such throughout this litigation. The counter-plaintiffs’ counsel listed
Yoe Enterprises as a separate counter-plaintiff, and brought distinct claims on its behalf,
as distinguished from those asserted by Yoe. The attorneys for the counter-plaintiffs also
achieved success on behalf of Yoe Enterprises, as it prevailed on its claim related to
intellectual properties owned by Yoe Enterprises.
None of the proof regarding attorney’s fees contains any differentiation with
respect to fees attributable or charged to Yoe, as opposed to Yoe Enterprises. All of the
bills and documentation treated the case as if the attorneys had only one client; Yoe and
Yoe Enterprises were not billed separately. At oral argument, counsel for the counter-
plaintiffs stated that they in reality had just one client, Mr. Yoe, which is somewhat
understandable given that he is the only natural person in the case and he wholly owns
Yoe Enterprises. But the fact remains that Crescent agreed to pay attorney’s fees to Yoe
in the event he prevailed against it in a legal dispute; it never agreed to pay the fees of
Yoe Enterprises. Counsel also argues that it is impossible to go back and separate the
time spent for his individual claims from the time spent for Yoe Enterprises’ claims.
While it may be difficult, it is not impossible. In any event, to force Crescent to pay the
entire bill of $765,880.77 would be indulging in the fiction that all of the work done by
15
Yoe Enterprises’ attorneys on its behalf was provided gratis, which is neither logical nor
just. Consequently, we remand for a determination of the amount of attorney’s fees
attributable to the work done for Yoe Enterprises. Yoe Enterprises is not entitled to
recover the amount of those fees from Crescent.
The trial court also awarded Yoe and Yoe Enterprises certain litigation expenses:
[T]he court finds that Mr. Yoe and [Yoe Enterprises] incurred
expert witness fees for depositions and for this trial.
Specifically, Mr. Yoe employed an accountant, Mike
Costello, . . . who testified on behalf on Mr. Yoe and [Yoe
Enterprises] as their accounting and valuation expert. The
court found in it[]s final order that Mr. Costello engaged in an
extensive review of the financial records of Crescent and all
costs associated with the FITS product development. Mr.
Costello was deposed by Crescent prior to the trial, and Mr.
Costello testified extensively at the trial as an expert witness.
The court finds that Mr. Yoe and [Yoe Enterprises] are
entitled to these expert witness fees for depositions and for
trial, as well as trial preparation/non-testimony time. With
regard to other litigation costs and expenses, the court finds
that pursuant to the terms of the provisions of the February
15, 2012 executive employment agreement, the prevailing
party is entitled to receive the costs and expenses of the
litigation from Crescent, including all expert witness fees
pursuant to the contractual provision in the February 15,
2012 executive employment agreement. The court finds that
Mr. Yoe and [Yoe Enterprises] incurred expert witness fee
expenses for the time spent by Mike Costello and his review
of the books and the records of Crescent, his preparation of
his expert report and his preparation for deposition and trial.
Mr. Yoe and [Yoe Enterprises] are entitled to recover these
expenses.
(Emphasis added.) Again, because Yoe Enterprises is not a party to the employment
agreement, it is not entitled to recover its share of the litigation expenses.7
7
The award of discretionary expenses was pursuant to Tenn. R. Civ. P. 54.04 and not the
―prevailing party‖ provisions of the employment agreement.
16
On remand, the trial court should determine the proper amount of attorney’s fees
and litigation expenses attributable to Yoe Enterprises to be deducted from the total
award of fees and expenses made by the trial court.
Yoe argues that he is entitled to attorney’s fees on appeal. Because Yoe is the
primary prevailing party on appeal, we agree. On the other hand, under the analysis
discussed above, Yoe Enterprises must bear the costs of its attorney’s fees and expenses
on appeal. In summary, the trial court shall take evidence and determine the proper
amount of attorney’s fees and costs to be allocated to Yoe Enterprises both at trial and on
appeal. We recognize that this will not be an easy task and may result in a number that is
imprecise, but, as discussed in this opinion, it is our view that justice requires such an
effort under these unusual circumstances.
V.
We vacate so much of the trial court’s judgment as grants attorney’s fees and
litigation costs to Yoe Enterprises. We affirm the trial court’s judgment that Yoe is
entitled to fees and expenses, but vacate the amount of the award. This case is remanded
to the trial court for a hearing to determine how much of the fees and expenses awarded
to Yoe and Yoe Enterprises is applicable to the professional services rendered to, and
expenses of, Yoe Enterprises. Once this has been determined, the trial court will deduct
that found amount from the total fee and expenses and award the balance to Yoe. At the
hearing on remand, the trial court will determine, and award to Yoe, his fees and
expenses on appeal. Except as addressed in this opinion, the trial court’s judgment is
affirmed. Costs on appeal are taxed equally to Crescent Sock Company and Yoe
Enterprises, Inc. This case is remanded for further proceedings consistent with the
mandate of this opinion.
_______________________________
CHARLES D. SUSANO, JR., JUDGE
17