The Tennessee Court of Appeals has issued a significant ruling in a real estate dispute, affirming the dismissal of third-party breach of contract claims but overturning a lower court’s decision to deny the defendants their mandatory attorney’s fees and costs. The case hinged on the interpretation of an agreed-upon deadline extension and the procedural requirements for seeking statutory fee awards.
The Core Dispute: Motion to Dismiss vs. “Responsive Pleading”
The dispute originated when TIMGMT Acquisitions, LLC sued 5D Development, Inc. 5D then filed a third-party complaint against several Electra-affiliated entities (collectively, the “Electra Defendants”) alleging breach of contract.
The Electra Defendants successfully sought an agreed order from the trial court that extended their deadline to file a “responsive pleading” to a specific date. Crucially, before this new deadline arrived, the Electra Defendants filed a motion to dismiss under Rule 12 of the Tennessee Rules of Civil Procedure, arguing that 5D had failed to state a valid claim.
5D immediately challenged this filing, arguing that by agreeing to an extension only for a “responsive pleading,” the Electra Defendants had implicitly waived their right to file a Rule 12 motion to dismiss. 5D contended that a Rule 12 motion was not strictly a “responsive pleading” in this context, and thus the Electra Defendants had forfeited their right to file it, leading 5D to seek contempt and default judgment against them.
No Waiver Found in Extension Agreement
The Court of Appeals reviewed the concept of waiver, noting it requires a “clear, unequivocal and decisive act” by a party showing intent to forgo a known right. Looking at the plain language of the agreed order, the appellate court found no evidence that the Electra Defendants intended to give up their right to seek dismissal.
Furthermore, the court referenced existing Tennessee precedent suggesting that, outside of specific rule contexts, motions to dismiss are generally recognized as constituting responsive pleadings. Since the motion to dismiss was filed before the extended deadline for any responsive pleading, the Court of Appeals concluded that the motion was timely filed. Consequently, the trial court was correct to dismiss the third-party complaint and deny 5D’s motions for contempt and default judgment as moot.
Mandatory Fees: Timing of the Request
The second, and ultimately successful, issue for the Electra Defendants concerned their request for attorney’s fees and costs under Tennessee Code Annotated § 20-12-119(c)(1). This statute mandates that when a court grants a motion to dismiss for failure to state a claim, it *shall* award the prevailing party the costs and reasonable attorney’s fees incurred due to those dismissed claims.
The trial court had granted the dismissal but denied the fees. The trial judge reasoned that because the Electra Defendants made their fee request orally during the motion hearing—without specifically citing the statute or requesting fees within their written motion to dismiss—they had failed to provide sufficient notice to 5D. The trial court suggested that this lack of written notice prevented 5D from exercising an exception under the statute that allows the plaintiff to amend their claim to avoid fees.
The Court of Appeals disagreed with this strict interpretation regarding the timing of the request. While acknowledging that fee claims must be properly presented—and that generally, motions must be in writing per Rule 7.02—the court pointed to the explicit exception in that very rule: motions made orally “during a hearing or trial” are permissible.
The appellate court reasoned that since the Electra Defendants requested the fees *during* the hearing set specifically to address the Motion to Dismiss, their oral request was “incidental to the matter set for hearing.” The notice function served by written motions was satisfied because the subject of the fees (the successful motion to dismiss) was already the focus of the proceedings.
The court also dismissed 5D’s argument that it needed notice to potentially amend its claims to avoid fees. The court stated that citizens are presumed to know the law, and therefore, the Electra Defendants were not required to notify 5D of its statutory right to withdraw or amend its claims to prevent a mandatory fee award.
Conclusion and Remand
In summary, the appellate court affirmed the trial court’s decision regarding the merits of the dismissal and the related procedural motions (upholding the dismissal of the third-party complaint). However, it reversed the denial of attorney’s fees and costs.
The case was remanded back to the Chancery Court for Davidson County with specific instructions to award the Electra Defendants their reasonable and necessary attorney fees and costs as mandated by state law. Costs for the appeal were assessed against 5D Development, Inc.