Members of the Memphis City Council have begun the process of eliminating the elected office of city court clerk and reinstating the Division of Traffic Violations under city administration, the Commercial Appeal reports. Council members are considering allowing voters to decide next year whether to recreate the elected position. City attorneys advised the Memphis City Council that the 1975 ordinance that created the office of city court clerk was never formerly adopted as a charter amendment. City Court Clerk Myron Lowery, whose term ends Jan. 1, 2024, said he had not been informed of the vote.

The TBA LGBT Forum 2023 will take place virtually on June 23, as a kick off to Pride weekend. This year’s forum will provide three dual hours of CLE on topics affecting the trans community. Join leaders from across the state who will provide essential updates on emerging issues, access to health care, trans-focused bills and much more. The first 10 registrants will receive a reserved seat on Nashville’s Big Drag Bus for a two-hour tour of the city with LGBT Section leadership and some of the city’s top drag performers! Learn more and register below.

When: Friday, June 23, 10 a.m. – 1:15 p.m. CDT
Where: Zoom webinar, connection info sent the week of the forum

Drag bus tour: Friday, June 23, 6 – 8 p.m. CDT, Nashville

REGISTER NOW

Make plans now for the annual TBA Health Law Primer and Health Law Forum CLE programs to be held in Nashville in November. The primer will take place Nov. 1 followed by the forum on Nov. 2-3. Watch for details soon on speakers and topics. Also, don't forget that you can save money when you register for these programs by using your prepaid CLE credits that come with your TBA Complete Membership!

On demand videos from this year's Business Law Forum: Business Transactions in the News — What Tennessee Lawyers Oughta Know are now available for purchase in the CLE Course Catalog. As a member of the TBA Business Law Section, you will always receive a discount on CLE programming produced by the section. This year’s program featured Tennessee practitioners commenting and interpreting many of these newsworthy developments, including issues related to artificial intelligence, crypto failures, non-competes and celebrity executives. The speakers examined ethical uses of AI-driven platforms such as ChatGPT in the legal profession, current concepts related to transactional non-competes (including the related impact of proposed federal policies), lessons learned from cryptocurrency bankruptcies like FTX, and the legal constraints that celebrity executives and directors must navigate when balancing their public image with regulatory obligations.

Check out the individual videos or purchase the convenient 1-click CLE package.

The Tennessee Court of Appeals recently explained, in the context of a corporate transaction, how an entity’s efforts to “right a wrong” won’t always render the victim’s cause of action to be moot. In Taylor v. Ionogen, LLC Et Al., No. E2022-01146-COA-R3-CV (Tn. Ct. App. Feb. 15, 2023), the defendant LLC fired its CFO/COO on May 26, 2021, and in the process, “revoked” the employee’s 120 LLC membership units. Evidently, although not explained in the opinion, the LLC did not have the right to revoke the units. On May 18, 2022, the employee sued the LLC for, among other things, “no less than $120,000” for the value of his units as of May 5, 2021, the date he alleged his units had been wrongfully redeemed. Almost two months after the suit was filed, the LLC’s board approved a resolution ratifying its prior issuance of 120 units to the plaintiff and affirming that, in fact, he still owned the units. The LLC then filed an answer describing its resolution and declaring that its affirmation of plaintiff’s continued ownership of the units rendered the lawsuit moot.
 
In holding that this resolution did not achieve mootness, the court correctly stated that the plaintiff did not demand the return of his units in the complaint. Rather, he demanded what he asserted was the value of the units at the time the LLC wrongfully divested him of the units. The court provides an excellent summary of the doctrine of mootness in the State of Tennessee, noting that much of it has been taken from precedents in the United States Supreme Court and federal courts (interestingly, some of which pertained to prisoners who had been released but demanded further relief). The court provides two basic rules for mootness. First, the requirements for litigation to continue are essentially the same as the requirements for litigation to begin. Second, a moot case is one that has lost its justiciability because it no longer presents a present, live controversy. The court craftily summed up the case by stating that instead of granting the plaintiff his requested monetary recompense, the defendant granted him something he did not request. Defendant’s failure to offer proof that the value of the units when restored to plaintiff was at least as much as the value when the units were divested from him proved fatal to their claim of mootness.
 
One takeaway from this case in the corporate law arena is that when a company attempts, in effect, to “unring the bell” with respect to a wrongful action taken against an employee/shareholder, it should strive to put the victim in precisely the same place he or she was in at the time; and, if the company has been sued, that any corrective action mirror what the plaintiff has demanded. Otherwise, the strategy of “act now and ask for forgiveness later” may be a very expensive one for the company.

Ward Nelson serves on the executive council of the TBA Business Law Section. He is an attorney at Miller & Martin in Chattanooga. He focuses in the areas of corporate, health care and transportation law, primarily for merger and acquisition transactions and contract negotiations.

Delaware has historically been viewed as a pro-business jurisdiction that enforces non-competes. Generally, Delaware Chancery Courts have enforced non-competes if the provision is reasonable in scope and duration, protects the employer’s legitimate protectable interests and survives a balance of equities. Additionally, Delaware Chancery Courts usually exercise discretion to modify or “blue pencil” a non-compete in order to make an unenforceable non-compete provision an enforceable one rather than strike it down entirely. Until recently, Delaware Chancery Courts have not scrutinized sale of business non-competes to the same degree as non-competes in an employment context. However, several recent cases before the Delaware Court of Chancery have resulted in decisions where the court refused to enforce sale of business non-competes entirely, suggesting a possible change in direction. 

In Kodiak Building Partners v. Adams, 2022 WL 5240507 (Del. Ch. Oct. 6, 2022), the Delaware Court of Chancery struck down a sale of business non-compete and further refused to blue pencil the provision to make it enforceable. The court stated that the agreement was overly broad because it prohibited sellers from competing against the buyer’s existing affiliated businesses outside the seller’s business and competing in territories in which the seller had not operated.  

In Ainslie v. Cantor Fitzgerald, L.P., 2023 WL 106924 (Del. Ch. Jan. 4, 2023), the Delaware Court of Chancery refused to enforce a provision that required former partners of a partnership to forfeit certain capital distributions if they competed with the partnership during the four year length of time that they were to receive said distributions. The court did not find this provision to be enforceable and found the four year time period to be too long. It also found the provision to be overbroad and again refused to blue pencil the non-compete to make it reasonable, although the agreement allowed modification. Instead, the court found that there was no evidence that the partner in question had access to propriety information that would necessitate a non-compete provision. 

In Hightower Holding v. Gibson, C.A. No. 2022-0089-LWW (Del. Ch. Feb. 9, 2023), the Delaware Court of Chancery stated that a Delaware choice of law clause in a sale of business transaction that contained a non-compete was unenforceable. Although the signed agreement specified Delaware law, the court applied Alabama law where both the business and defendant were based, and found that the non-compete in the agreement was unenforceable based on Alabama law.

Most recently, in Intertek Testing Services NA, Inc. v. Eastman, 2023 WL 2544236 (Del Ch. Mar. 16, 2023), the Delaware Court of Chancery again found that a non-compete was overbroad and again declined to blue pencil the provision to make it enforceable. The court found that the global non-compete referenced in the agreement was overly broad considering the company in question only operated nationally.

This trend of not enforcing sale of business non-competes suggests that the Delaware Court of Chancery is considering these provisions with increased scrutiny, even in the previously more lenient sale of business context. Additionally, Delaware Chancery Courts seem hesitant to blue pencil non-competes to make them enforceable. Considering these cases, it is important, now more than ever, for companies to ensure that any sale of business non-competes are drafted narrowly to support legitimate business interests, particularly if electing to be governed by Delaware law. 

Melanie Jayashankar is a senior associate at Wyatt Tarrant & Combs in Memphis. She is a member of the firm’s Litigation and Dispute Resolution team where she works in the areas of commercial litigation, intellectual property and employment law. Jayashankar earned her law degree from the University of Georgia College of Law and a bachelor of science degree in Industrial Engineering from the Georgia Institute of Technology.

Farrar & Bates LLP announced the firm will transition to be called Farrar, Bates & Berexa. Kristin Berexa, Laura Hight and Casey Crane have been named new partners in the firm following the retirement of Bill Bates. “I am extraordinarily pleased to have Kristin, Laura, and Casey join me in leading the firm as we continue to provide excellent service to our clients,” said founder Russ Farrar in a press release. Berexa joined Farrar & Bates in 1994 after serving as an assistant attorney general with the office of the Tennessee attorney general. Hight leads the firm’s real estate litigation department while Crane focuses on defending local governments and their employees in civil rights, employment and GTLA matters.

A group of parents whose children attend The Covenant School in Nashville where a deadly shooting killed three students and three teachers in March filed a motion Wednesday seeking to keep the shooter’s writings from public release, WSMV reports. The motion comes after Nashville police denied public records requests, claiming the material was protected from release during an open investigation. Last week, House Republican Caucus Chairman Jeremy Faison sent a letter to Metro Nashville Police Chief John Drake signed by 66 caucus members calling for the release of the writings, which are said to include the shooter’s other intended targets. In addition, The Tennessee Firearms Association, Star News Digital Media and the National Police Association have filed lawsuits seeking their release.

Gov. Bill Lee signed the Teacher Paycheck Protection Act Thursday aimed at recruiting more qualified teachers to the state, reported the Chattanoogan. The bill raises the minimum salary to $50,000 by 2026. The previous minimum of $35,000 was set in 2019. The new bill also calls for the end of automatic union membership deductions from teacher paychecks. 

Gov. Bill Lee signed legislation Wednesday to disband community led police oversight boards funded by taxpayers throughout the state, as reported by the Tennessean. In April, the House voted 67-19 to replace them with police advisory and review committees. Under the new legislation, review board members will be appointed by city mayors and approved by municipal governments. Review boards will only be allowed to review department-led investigations.