IN THE SUPREME COURT OF TENNESSEE
AT NASHVILLE
FILED
FOR PUBLICATION
June 28, 1999
Filed: June 28, 1999
Cecil Crowson, Jr.
Appellate Court Clerk
DWAYNE HAWKINS and )
AL GOSSETT, )
)
PLAINTIFFS/APPELLEES, ) Davidson Circuit No. 96-C-2528
)
v. ) Hon. Barbara N. Haynes, Judge
)
SUPERIOR MOTORS, INC. and ) No. 01S01-9811-CV-00199
PATRICK A. HART, )
)
DEFENDANTS/APPELLANTS, )
)
)
NELSON BOWERS II and BOW ERS )
TRANSPORTATION GROUP, LLC, )
)
DEFENDANTS. )
FOR DEFENDANTS/APPELLANTS: FOR PLAINTIFFS/APPELLEES:
JOHN BRANHAM STEVEN A. RILEY
KATHRYN BARNETT KATHARINE R. CLOUD
Nashville Nashville
OPINION
COURT OF APPEALS AFFIRMED IN PART AND
REVERSED IN PART; CASE REMANDED TO
TRIAL COURT HOLDER, J.
OPINION
We granted this appeal to address: (1) whether the Court of Appeals
erred in effectively granting summary judgment to the plaintiffs on the issue of
individual liability; and (2) whether a party is required to produce privilege logs for
documents or materials withheld pursuant to a claim of privilege or work product
protection. We hold that there exist genuine issues of material fact on the issue
of individual liability and that any creation of a requirement for privilege logs
similar to that found in the Federal Rules of Civil Procedure should be in the form
of an amendment to the Tennessee Rules of Civil Procedure. The decision of
the Court of Appeals on both these issues is reversed.
FACTS
The following facts appear not to be in dispute. Patrick Hart met Mark
Chmelar at a yacht show in Miami. Chmelar owned Superior Motors, Inc., an
automobile dealership located in Nashville, Tennessee. Chmelar suggested that
Hart acquire an interest in the Nashville dealership. Hart subsequently invested
$500,000.00 and acquired a fifty percent interest in Superior Motors, Inc. The
parties agreed that Chmelar would manage the day-to-day operations of the
dealership. In addition, Hart and his wife personally guaranteed a $4,000,000
capitalization loan and a $6,000,000 floor plan loan and provided First
Tennessee with a $1,000,000 letter of credit.
Less than a year and one-half after entering the business arrangement
with Chmelar, Hart was notified by First Tennessee Bank that Superior Motors
was $1,000,000 out of trust on its floor plan. Chmelar assured Hart that there
were no problems. Approximately three months later, however, Hart was
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informed that Superior Motors was now $1,600,000 out of trust. Once again,
Chmelar assured Hart that everything was all right.
During the next several months, Hart learned that: (1) Chmelar had used
Superior Motors' credit to purchase an airplane; (2) Chmelar had used Superior
Motors' assets to purchase a yacht; (3) Chmelar was paying himself a salary of
$351,357 rather than the agreed-upon salary of $144,000; and (4) Superior
Motors had sustained an operating loss of $714,000. First Tennessee contacted
Hart and informed him that the bank intended to call his letter of credit and was
going to require him to honor his personal guaranty unless Superior Motors'
financial problems were quickly resolved. Hart, now facing serious potential
personal liability, retained an attorney to investigate the problems at Superior
Motors.
Al Gossett and Dwayne Hawkins had been partners in the automotive
business since the late 1980s. Gossett contacted Hart in Seattle and informed
him that he and Hawkins were interested in acquiring the Nashville dealership.
Hart met with Gossett and Hawkins in Memphis. Gossett and Hawkins agreed to
make an offer for Superior Motors, Inc. The following day, the parties executed
two documents, an "Agreement for the Purchase and Sale of Assets" and an
"Agreement for Interim Management Agreement."
Hart and Gossett met later in the day with Hart's lawyer. Hart informed his
lawyer that "I got this thing solved. Here are the two agreements. They're all
signed, put to bed, and I can go home." Later, Hart was apparently advised by
his attorney that the contracts were not financially advantageous to him and that
he could probably have made more money from the sale.
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The next day, Hart's attorney sought Gossett's assistance in convincing
Chmelar to relinquish his stock in the Nashville dealership. Since Hart and
Chmelar each owned fifty percent of Superior Motors, Hart could not out-vote
Chmelar. Following a meeting between Gossett and Chmelar, Chmelar
relinquished his stock and was subsequently terminated as president.1 Gossett's
testimony indicates that he learned of Hart's intention not to perform under the
agreement the day after Chmelar was terminated as president. Hart later
contracted to sell the Nashville dealership for more money to Nelson Bowers.
Gossett and Hawkins filed suit against Hart and Superior Motors, Inc.,
seeking to enforce the contract for the sale of Superior Motors, Inc. Bowers was
provided notice of this action. Bowers later purchased Superior Motors and
assigned his interest to European Motors, Inc. Gossett and Hawkins amended
their complaint to include Bowers and Bowers Transportation Group as
defendants.
Superior Motors, Inc. and Patrick A. Hart moved for summary judgment.
They alleged that the "Agreement for the Purchase and Sale of Assets" was too
uncertain to be enforced. Hart also argued that he could not be held personally
liable on the contract. Bowers and Bowers Transportation Group also moved for
summary judgment on the constructive trust claim. The trial court found that the
agreement for sale was too indefinite to be enforced and that impressing a
constructive trust on the assets of Superior Motors was not an appropriate
equitable remedy. The trial court granted summary judgment to Superior Motors
and Hart. The Court of Appeals held that portions of the agreement were
1
Gossett was instructed by Hart to terminate Chmelar. Gossett was apparently acting
man ager of S uperior M otors at tha t time pu rsuant to the Interim Mana gem ent Agre eme nt.
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enforceable, that Hart could be held individually liable,2 and that Hart should
provide an index containing a description of the materials being withheld
pursuant to an assertion of privilege or work product protection. We granted
review only on the issues of individual liability and privilege logs.
INDIVIDUAL LIABILITY
The Court of Appeals held that the agreement between the parties
"imposes individual liability upon Hart as guarantor to the extent of the liability of
Superior Motors, Inc." The court, however did not explain its reasoning behind
this holding.
A party seeking summary judgment must demonstrate the absence of any
genuine and material factual issues. Byrd v. Hall, 847 S.W.2d 208, 214 (Tenn.
1993). Mere "conclusory assertion[s] that the non-moving party has no evidence
[are] clearly insufficient." Id. at 215. The movant must either affirmatively negate
an essential element of the non-movant's claim or conclusively establish an
affirmative defense. Id. 215 n.5. If the movant does not negate a claimed basis
for the suit, the non-movant's burden to produce either supporting affidavits or
discovery materials is not triggered and the motion for summary judgment fails.
Id. Summary judgment shall be denied if there is "any doubt whether or not a
genuine issue exists." Id. at 211.
Hart signed the agreement both as "Pat Hart" and as "Guarantor." Hart
alleges that his personal liability as a guarantor extended only to the provision
that provided personal liability for Superior Motors' failure to pay specified
2
Har t alleg ed in h is m otion for su mm ary jud gm ent th at he was not ind ividua lly liable. T his
issue was pretermitted by the trial court. The Court of Appeals simply held, "The agreement
imposes individual liability upon Hart as guarantor to the extent of the liability of Superior Motors,
Inc."
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employee benefits and taxes. The plaintiffs counter by citing several contractual
provisions that provide that "the parties shall take all necessary actions to
effectuate . . ." and the parties agree to "bring about and consummate" the deal.
Both parties cite to various excerpts in depositions supporting their relative
positions. Gossett apparently began acting as interim manager pursuant to the
parties' agreements when he terminated Chmelar. We hold that, on the basis of
the record before us, there exist genuine and material issues of fact as to
whether Hart may be held individually liable in this case to the extent of Superior
Motors, Inc.'s liability.
PRIVILEGE LOGS
The plaintiffs subpoenaed files from Hart's prior and current lawyers that
relate to Superior Motors.3 From the 25,000 pages of documents requested, the
defendants estimated that they produced all but the contents of two and one-half
bankers' boxes of documents. The defendants argue that these files are
protected from discovery based upon the attorney-client privilege and the work
product doctrine.
The trial court, in two separate orders, declined to require the defendants
to provide a description of the withheld documents. The Court of Appeals held
that upon remand "the trial court should require Hart to provide an index
containing a description of the materials being withheld in order to enable the
court to determine whether the claim of privilege is being properly asserted."
The defendants allege that the Court of Appeals' decision imposes an obligation
to provide privilege logs in Tennessee. The defendants argue that the Court of
3
The subpoena to the law firm of Harwell, Howard, Hyne, Gabbert & Manner, for example,
lists thirteen c ategories of docu men ts reque sted. Am ong thos e docu men ts are "[a]ll doc ume nts
related to Patrick Hart," "[a]ll documents related to Superior Motors, Inc.," and "documents in the
person al files of [listed atto rneys] that a re respo nsive to re quests 1-12 ab ove."
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Appeals erred in relying on the Federal Rules of Civil Procedure in establishing a
privilege log requirement because the Tennessee Rules of Civil Procedure do
not provide for such. We agree.
The Federal Rules of Civil Procedure provide that a party must provide
notice to other parties if it is withholding materials due to an assertion of privilege
or work product protection. See generally Fed R. Civ. P. 26. The federal rule
further mandates that a party asserting privilege or work product must provide
sufficient information to enable other parties to evaluate the applicability of the
claimed privilege or protection. Specifically, the federal rule provides:
When a party withholds information otherwise discoverable under
the rules by claiming that it is privileged or subject to protection as
trial preparation material, the party shall make the claim expressly
and shall describe the nature of the documents, communications,
or things not produced or disclosed in a manner that, without
revealing information itself privileged or protected, will enable other
parties to assess the applicability of the privilege protection.
Fed. R. Civ. P. 26(b)(5). The rule is designed to reduce the need for in camera
examination of documents.
The Tennessee Rules of Civil Procedure do not have a discovery
provision requiring privilege logs similar to that contained in Fed. R. Civ. P.
26(b)(5). Under our current rules of discovery, documents or material withheld
pursuant to a claim of privilege or work product protection may be submitted to
the trial judge for in camera inspection. See generally Tenn. R. Civ. P. 26.03;
Munke v. Munke, 882 S.W.2d 803, 806 (Tenn. App. 1994). We hold that
adoption of a policy similar to that contained in Fed. R. Civ. P. 26(b)(5) should
7
come in the form of an amendment to the Tennessee Rules of Civil Procedure
and be promulgated through the normal process for such amendments. 4
CONCLUSION
The judgment of the Court of Appeals granting the plaintiffs summary
judgment on the issue of Hart's individual liability and creating the requirement
for privilege logs is reversed. We hold that there exist genuine issues of material
fact on the issue of individual liability and that creation of a requirement for
privilege logs similar to that found in the Federal Rules of Civil Procedure should
be in the form of an amendment to the Tennessee Rules of Civil Procedure. The
case is remanded to the trial court for further proceedings consistent with this
opinion. The cost of this appeal shall be taxed against the plaintiffs for which
execution shall issue if necessary.
JANICE M. HOLDER, JUSTICE
Concurring:
Anderson, C.J.
Drowota, Birch, and Barker, J.J.
4
Amend ments to the Te nnessee Ru les of Civil Procedure are made via the Ad visory
Comm ission on Rules of Civil and Appellate Procedure, with input from interested members of the
bar and the public.
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