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Posted by: Landry Butler on May 31, 2018

Court: TN Court of Appeals

Attorneys 1:

Roger A. Maness, Clarksville, Tennessee, for the appellant, Louis A. McRedmond.

Attorneys 2:

John P. Branham, C. David Briley, and Mandy Strickland Floyd, Nashville, Tennessee, for the appellees, Linda McRedmond Orsagh and Anita McRedmond.

Richard K. Smith, Nashville, Tennessee, for the appellee, Estate of Edward Stephen McRedmond.

Judge(s): MCBRAYER

Sibling shareholders, unable to agree on the management of the family business, brought their dispute to court. Eventually, the brothers and sisters agreed that the business should be dissolved and, under the court’s supervision, sold as a going concern. After soliciting bids from the siblings, the court approved the sale of the business’s assets to one brother and two of his sisters. Pending the closing, the court ordered the siblings to continue to operate the business as usual and to preserve the goodwill of the business, including the relationships with employees, suppliers, and customers. The day after the closing, the brother who was not part of the winning bidder group opened a competing business. The winning bidders sought damages from the competing sibling, claiming that he willfully violated court orders, breached his fiduciary duty, and intentionally interfered with business relations. After a bench trial, the court awarded the winning bidders compensatory damages in an aggregate amount for all claims. In the first appeal, this Court reversed, holding that the winning bidders’ claims were derivative, not direct, and thus they lacked standing. In Keller v. Estate of McRedmond, 495 S.W.3d 852, 877 (Tenn. 2016), our supreme court adopted a new standard for determining whether a shareholder claim is direct or derivative and, applying that standard, held that the winning bidders had standing to pursue their claim that the competing sibling violated the court’s orders. So our supreme court affirmed in part, reversed in part, and remanded the case to this Court to review the remaining issues that were properly raised but not addressed in the first appeal. Id. at 882-83. We affirm the trial court’s decision to hold the competing sibling in contempt, but we vacate the aggregate award of compensatory damages.