The Defendant signed a promissory note and borrowed $500,000 from the Plaintiffs, with the loan secured by his home. Months later, the parties entered into a note modification agreement that increased the principal to $900,000. The Defendant did not pay back the loan, making no payments, so the Plaintiffs sued to recover under the agreements. Over two years after the original answer was filed, the Defendant moved to amend his answer to add several affirmative defenses. The trial court denied the motion to amend. After a trial, the trial court found that the Defendant owed the Plaintiffs $843,011.47. The Defendant appeals the denial of his motion to amend and raises multiple other issues primarily relating to the amount owed. We find no error and affirm the trial court.

The U.S. Department of Labor (DOL) has issued a Request for Information (RFI) regarding potential revisions to Schedule A of the permanent labor certification process to include occupations in Science, Technology, Engineering and Mathematics (STEM) and other non-STEM occupations experiencing labor shortages. The DOL is seeking comments from employers and other interested parties through May 13. More information and instructions on how to submit comments can be found on the DOL's website.

This appeal arises from a petition for declaratory judgment concerning a quit claim deed. By the quit claim deed, the grantor, now deceased, conveyed to the respondent an undivided one-half interest in the property. Following the property description and derivation clause, the deed expressly provided that it was the intention of the grantor and the grantee to create a joint tenancy with a right of survivorship. The respondent filed a motion for summary judgment, asserting that the survivorship language in the deed was sufficient to create a right of survivorship in the respondent. The trial court entered an order denying the respondent’s motion for summary judgment and granting the petition for declaratory judgment in favor of the petitioner. The respondent appealed. We reverse.

“Never incorporate your company in the state of Delaware,” proclaimed Elon Musk, celebrity tech billionaire and recent corporate governance aficionado, in a Jan. 30, 2024 social media post.

“Oh boy, here we go…” I thought, in a contemplative moment after reading the post and correspondingly remembering why I made a New Year’s resolution to ramp down my social media use.

Promptly following the Jan. 30 comment, Musk published another post on X, the social medial platform f/k/a Twitter, requesting an informal public vote of X users as to whether Tesla — a Musk-affiliated Delaware corporation — should convert to a Texas corporation. The X users, who may or may not actually hold Tesla stock, voted “unequivocally in favor of Texas!” according to a follow-up post by Musk. Of course, if social media polls constituted acceptable corporate governance procedure under Delaware General Corporation Law, then Musk’s distaste for Delaware law might be more widely accepted than it is today. Nevertheless, it is a safe assumption that Musk’s commentary has generated a historic level of interest throughout the general public in corporate domicile matters.

No less than two weeks later, Musk, who has in the last 24 months consistently provided a buffet of lesson-plan fodder for corporate law professors, announced the conversion[1] of his SpaceX venture (a/k/a Space Exploration Technologies Corp., originally incorporated in Delaware in 2002, for those Secretary of State records detectives) from a Delaware corporation to a Texas corporation. The conversion was recorded with Texas Secretary of State on Feb. 14.[2] Happy Valentine’s Day, Delaware Division of Corporations!

Timing and related commentary suggests that these moves, which are in addition to another recent conversion-out by Musk-related entity Neuralink[3], were the result of a recent Delaware Court of Chancery decision that invalidated a compensation package between Tesla and Musk.[4] (Such decision which stemmed from a derivative lawsuit filed by Tesla shareholders, who probably weren’t participants in the aforementioned social media poll . . .)

The nuance in the recent decision, and Musk’s reaction, is beyond the scope of this article (see this[5] commentary for an excellent deep dive), but at a high-level, some of Musk’s alleged issues with Delaware law relate to how the court has handled “controlling shareholder” transactions. (See also Musk’s Jan. 30 post on the X platform stating that “I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters,” which seemingly ignores, among other issues such as the unauthorized practice of law, Nevada Revised Statute 78.120(1) providing, in pertinent part, that “the board of directors [of a Nevada corporation] has full control over the affairs of the corporation.”)

How will these recent headlines impact us as Tennessee practitioners? I expect that, at least in the near term, we may see an uptick in client requests (especially from clients who may characterize themselves as Elon-following “Musk-eteers”) for guidance on re-domiciling existing Delaware entities under the entity laws of other states, including Tennessee. We should be prepared to provide guidance on the distinctions between Delaware and Tennessee entity laws (also beyond the scope of this article), especially as it relates to fiduciary duties, exculpation of officers and conflict-of-interest transactions. I would wager that, while historically clients have generally been satisfied with the customary guidance that Delaware is a preferred state of domicile due to its breadth of entity-specific case law and sophisticated business-focused courts providing certainty as to application of Delaware’s statutes, we may be faced with more and more questions around nuanced distinctions between various states’ business entity regimes. At the very least, we have the ethical obligation as Tennessee business lawyers to accurately respond to our client’s questions regarding jurisdiction of domicile with thoughtful comparisons and guidance, even if the client’s question is as simple and legitimate as “if Elon is doing it, then why shouldn’t I?”

Nathan Harris, a corporate partner in the Nashville office of Bradley Arant Boult Cummings, LLP, is a former chair and current executive council member of the TBA Business Law Section. His practice covers the entire business lifecycle, from assisting with entity formation and providing guidance on commercial transactions and fundraising to advising buyers and sellers in connection with complex M&A transactions. He has experience representing clients in a wide variety of industries, including technology startups, electronic payments companies, pharmaceutical wholesalers, veterinary practices, community banks and restauranteurs.

If you are a business lawyer with a practice that is primarily transactional, you may not have given much thought to personal jurisdiction since you took the bar exam. However, if your business clients operate in states other than Tennessee, you should take notice of the U.S. Supreme Court’s decision earlier this year in Mallory v. Norfolk Southern Railway Co. Mallory increases the likelihood that corporations and other entities doing business outside their home states will have to defend suits brought in state courts elsewhere, even if the suits are unrelated to their business contacts in those states.

Under the traditional rule of Pennoyer v. Neff (1878), defendants could only be sued in states where they had a presence (like their domicile or principal place of business) or had consented to jurisdiction. Recognizing the nationalization of our modern economy, the U.S. Supreme Court held in International Shoe Co. v Washington (1945) that due process permitted personal jurisdiction over out-of-state defendants even without presence or consent, so long as those defendants have “certain minimum contacts with [the forum state such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’”

Language in International Shoe led courts to develop two types of personal jurisdiction: specific jurisdiction and general jurisdiction. Specific jurisdiction over an out-of-state defendant can exist anywhere, but only if the court determines that the plaintiff’s claims arise out of or relate to the defendant’s contacts with the forum state. General jurisdiction is broader, because it allows the defendant to face any cause of action in a particular jurisdiction. Because of that, the Supreme Court in Goodyear Dunlop Tires Ops. S.A. v. Brown (2011) and Daimler AG v. Bauman (2014) limited general jurisdiction to states where defendants are “at home.” For a corporate defendant, barring extraordinary circumstances, that means the state where it is incorporated or has its principal place of business.

This seemed like settled law until Mallory. The plaintiff, Robert Mallory, alleged he contracted cancer during his 20-year career working for Norfolk Southern railroad, which is incorporated and has its corporate headquarters in Virginia. Norfolk Southern typically could be subject to general jurisdiction only in Virginia and to specific jurisdiction on Mallory’s claims only in Ohio and Virginia, where he had worked for the railroad. However, Mallory filed his lawsuit in state court in Pennsylvania, where Norfolk Southern has 2,000 miles of tracks and 5,000 employees.

Mallory’s hook to sue Norfolk Southern in Pennsylvania was that the railroad is registered to do business there, and Pennsylvania has a corporate registration statute that is broader than most states. Specifically, the statute says that by registering to do business in Pennsylvania, out-of-state corporations consent to general personal jurisdiction in the Pennsylvania courts to the same extent as corporations that are headquartered in the state. Thus, Mallory argued, Pennsylvania courts should exercise personal jurisdiction over Norfolk Southern under the traditional basis of consent.

Mallory found support in Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Mining & Milling Co. (1917), which had upheld the use of corporate registration statutes like this one to confer general jurisdiction over out-of-state businesses. However, Norfolk Southern argued, and the Pennsylvania Supreme Court agreed, that Pennsylvania Fire had been implicitly overruled by the U.S. Supreme Court’s due process decisions in International Shoe and subsequent cases. The Pennsylvania Supreme Court struck down the Pennsylvania corporate registration statute as violating the due process clause.

In a slim majority opinion authored by Justice Neil Gorsuch, the U.S. Supreme Court reversed the state supreme court and upheld Pennsylvania’s corporate registration statute. The court held that Pennsylvania Fire was still good law and controlled Mallory’s case. More specifically, International Shoe and its progeny that are based upon the due process clause only apply when the out-of-state defendant is not present in the forum state or has not consented to jurisdiction in the forum state. Here, Norfolk Southern had consented to general jurisdiction in Pennsylvania by the terms of the state’s corporate registration statute, and that ended the inquiry. In a dissent written by Justice Amy Comey Barrett, four justices expressed their view that the Pennsylvania corporate registration statute “clearly, palpably and plainly” violates the due process clause as interpreted in International Shoe and Daimler.

The dissenting justices are correct that if more states follow Pennsylvania’s lead and pass broad corporate registration statutes, then the Mallory decision would effectively gut the court’s previous decisions on general jurisdiction. Those states could then require a corporate defendant to defend any civil suit, even when that defendant is not “at home” in the forum state. Of course, defendants have the option of not doing business in a state that has such a statute, but that is not realistic for a railroad like Norfolk Southern or countless other businesses with a national infrastructure and customer base. This will bear watching as state legislatures around the country consider their next move.

This article was contributed by Matt Lyon. He is a member of the TBA Business Law Section’s Executive Council and vice president and dean of the Lincoln Memorial University Duncan School of Law in Knoxville. He teaches contracts, business associations, civil procedure and payment systems. Prior to joining the LMU Law faculty in 2011, Lyon served as senior judicial clerk to Justice Gary R. Wade of the Tennessee Supreme Court and was a commercial litigation associate at Sidley Austin LLP in Chicago. Matt can be reached at Matthew.Lyon@lmunet.edu or 865-545-5318.

The dismissal of a company for lack of jurisdiction is not necessarily noteworthy, but with the U.S. Supreme Court decision in Mallory v. Norfolk Southern Railway Co., the often-mundane consideration of personal jurisdiction over corporations is back in the spotlight for business law practitioners. (An analysis of the opinion is available for TBA members.) Perhaps axiomatically, Tennessee business lawyers are rarely called upon to analyze personal jurisdiction issues for entities domiciled in the state. However, clients with operations outside of Tennessee are likely to seek out Tennessee business lawyers for advice about whether Tennessee courts would find jurisdiction for a certain transaction or proposed business activity. (Although, in doing so, that may beg the question — perhaps for another day — is seeking out legal advice from a Tennessee lawyer a “contact” for jurisdictional analysis?)

As the Supreme Court noted in the Mallory decision, there are certain circumstances that render such an analysis a foregone conclusion, the inclusion of a forum selection clause in a contract being one of those. In certain states, consent through registration as a foreign corporation — the primary issue in the Mallory case — is another. While the issue how a federal or state court in Tennessee would apply the Mallory general jurisdiction analysis warrants a more detailed discussion than can be provided here, Tennessee appellate court opinions on corporate entity jurisdictional issues perhaps deserve more consideration post-Mallory, particularly when analyzing the existence or absence of specific jurisdiction.

The recent Tennessee Court of Appeals opinion in Williams, et al. v. Collins, et al. presents such an opportunity. In the case, the sole member of a Texas-domiciled limited liability company (LLC) and the LLC were sued in Davidson County. While noting that Tennessee permits jurisdiction to the extent constitutionally permissible under the federal Due Process Clause of the 14th Amendment, the court found that there was no jurisdiction over the defendant company because the LLC was not registered as a foreign company in Tennessee (and additionally, had no agent for service of process), had no physical presence or bank account in Tennessee, and had not advertised its services in Tennessee. In focusing the analysis on the defendant’s relationship with Tennessee, and not the relationship between the defendant and the plaintiff, the court noted that the only relevant contact that the defendant company had with Tennessee was sporadic communication with the plaintiff, who had moved to Tennessee after the contract was executed. The appellate court upheld the dismissal for lack of personal jurisdiction over both the LLC and its sole member.

While the Mallory court stated the matter at issue was “not a new one” but rather “a very old question” which had been resolved over a century ago, many commentators viewed the opinion as an expansion of personal jurisdiction jurisprudence applicable to corporations.[1] As recently noted, the 6th Circuit has yet to address this issue, under Tennessee law or any state within the circuit.[2] Regardless of whether the Mallory Court answered a new question or reminded us about an old one previously decided, many lawyers probably agree that the issue of personal jurisdiction over a corporation, which, prior to the Mallory opinion, was generally regarded as well-settled, has been somewhat disrupted by the recent U.S. Supreme Court decision. Decisions by Tennessee appellate courts analyzing the circumstances that do and do not give rise to specific personal jurisdiction over entities domiciled in foreign states but sued in here may be more in the spotlight because of the jurisdictional jurisprudence waters churned in the wake of the Mallory opinion.

Justin Joy is a shareholder in the Memphis office of Lewis Thomason PC, and he is a former chair and current executive council member of the TBA Business Law Section. In addition to a range of experience in information privacy, cybersecurity and health law matters, Joy has a variety of experience in various civil litigation matters, including business and commercial litigation, insurance coverage disputes and business torts. He also provides counsel to small and midsize private businesses in various governance, operational and strategic matters.

Sign up now for "Avoiding Pitfalls in Immigration Court" webcast on March 25 from 12:30-1:30 p.m. CDT. Two lawyers with extensive experience in immigration court and a retired immigration judge will explore some ways to avoid pitfalls in immigration court. Participants will be provided a copy of the Immigration Court Practice Manual and will have an opportunity to ask questions of the panelists. Pre-submit your questions here.

Bass, Berry & Sims announced that Russell Stair has been appointed to serve as the managing partner of the firm’s office in Knoxville. Stair succeeds G. Mark Mamantov, who served in the role since the Knoxville office officially opened in 1991. Prior to coming to Bass, Berry & Sims, Stair worked with the U.S. Securities and Exchange Commission and practiced as a CPA for Ernst & Young. He was a member of the TBA’s Leadership Law Class of 2011 and he is active with the National Association of Bond Lawyers and the AHLA. 

The House today passed HB 1692 which seeks to allow records from the Tennessee Department of Tourist Development to be exempt from public records laws if the tourism commissioner and attorney general deem them “sensitive,” reports the Tennessean. The bill, proposed by the Lee administration and sponsored by House Majority Leader William Lamberth, R-Portland, is modeled after a similar exemption for the Tennessee Department of Economic and Community Development that passed in 1988 and keeps records deemed sensitive secret for five years, with the possibility of an extension for a second five-year term. Rep. Andrew Farmer, R-Sevierville, presented the bill in the House and stated, "This would allow the department of tourism, in their negotiations with businesses and tourism interests with the state of Tennessee, to keep their trade secrets and proprietary information safe while the negotiations are going on.” The House passed the legislation, on a 69-14 vote. The bill has not yet been heard in a Senate committee.

The Toronto-based legal research startup Bench IQ, which claims to use artificial intelligence (AI) to help lawyers understand how individual judges think, announced today it raised $2.1 million in a pre-seed funding round, reports Reuters. The announcement claims Bench IQ uses large language model-based AI technology to offer "comprehensive insights into the decision-making patterns of judges, covering 100% of their rulings." The company will offer both "on-demand," per-hour pricing and annual subscription plans depending on the size of the firm and their billing rates.