Aqua-Chem, Inc. v. D&H Machine Service, Inc. ( 2016 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
May 26, 2016 Session
AQUA-CHEM, INC. v. D&H MACHINE SERVICE, INC.
Appeal from the Circuit Court for Knox County
No. 1-306-14 Kristi M. Davis, Judge
No. E2015-01818-COA-R3-CV-FILED-OCTOBER 17, 2016
Aqua-Chem, Inc. contracted with D&H Machine Service, Inc. for D&H to machine three
large, identical pieces of equipment. The piece of equipment is referred to in the record
as a “cooler.”1 The work was not done properly, rendering them unusable. Aqua-Chem
sued D&H for breach of contract, seeking damages for the replacement cost of the
coolers and for lost profits. Aqua-Chem also sought attorney’s fees and expenses
pursuant to the terms of its agreement with D&H. Following a two-day bench trial, the
court awarded Aqua-Chem $191,870 in replacement costs, but declined to make an award
for lost profits. The court did award Aqua-Chem $50,000 in attorney’s fees and out-of-
pocket expenses. D&H appeals. Both sides raise issues. D&H argues that the trial court
erred when it held that the terms and conditions of the purchase orders presented to D&H
were applicable to the facts of this case. It also argues that the award of damages is not
supported by the evidence. Aqua-Chem contends that the trial court erred in refusing to
award damages for lost profits. It also asserts that the trial court should have awarded it
the full amount of its fees and expenses, the total of which was $64,739.48. We affirm
the trial court’s judgment in all respects.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
Affirmed; Case Remanded
CHARLES D. SUSANO, JR., J., delivered the opinion of the court, in which JOHN W.
MCCLARTY and THOMAS R. FRIERSON, II, JJ., joined.
John B. Dupree, Knoxville, Tennessee, for the appellant, D&H Machine Service, Inc.
W. Edward Shipe and Nicholas W. Diegel, Knoxville, Tennessee, for the appellee, Aqua-
Chem, Inc.
1
“Cooler” is shorthand for “titanium lube oil cooler.” It is a part of the compulsion
system on Navy destroyers. A cooler uses sea water flowing through it to reduce the temperature
of oil and reduction gears used in propelling the ship.
OPINION
I.
Aqua-Chem was contractually obligated to the United States Navy to provide
certain parts for use on destroyers. The contract extended to the three coolers at issue in
this case. The coolers had to be machined, a function that Aqua-Chem was not able to do
in-house. It contracted with D&H to perform the required machining. After some
discussion and D&H’s confirmation that it could perform the work, Aqua-Chem provided
three purchase orders to D&H, all of which state the following pertinent terms and
conditions:
For the purposes of these Terms and Conditions of Purchase,
the term “Purchase Order” shall mean the agreement and
binding contract between Aqua-Chem . . . and Seller arising
as a result of Seller’s submission of a fully executed
acknowledgment copy of the purchase order. This Purchase
Order shall be deemed to Incorporate and be governed by
these Terms and Conditions. Seller shall be bound by this
Purchase Order and its terms and conditions when it
executes and returns the acknowledgment copy, when it
otherwise indicates its acceptance of this Purchase Order,
when it delivers to Aqua-Chem any of the items ordered
herein or when it renders for Aqua-Chem any of the services
ordered herein. THE TERMS AND CONDITIONS OF
THIS PURCHASE ORDER TAKE PRECEDENCE OVER
ANY TERMS AND CONDITIONS WHICH ARE
PROPOSED BY SELLER. ALL TERMS PROPOSED BY
SELLER ARE REJECTED UNLESS EXPRESSLY
ASSENTED TO IN WRITING BY AQUA-CHEM. Aqua-
Chem’s failure to object to any provision contained in any
communication from Seller shall not be construed as a waiver
of these Terms and Conditions nor as an acceptance of any
such provision.
* * *
2
SERVICES & DELIVERABLES. Seller agrees to perform
the services . . . described in any purchase order, in
accordance with the applicable purchase order, scope of work
and with these Terms and Conditions (“Agreement”). Upon
acceptance of a purchase order, shipment of Goods or
commencement of a Service, Seller shall be bound by the
provisions of this Agreement, including all provisions set
forth on the face of any applicable purchase order, whether
Seller acknowledges or otherwise signs this Agreement or the
purchase order, unless Seller objects to such terms in writing
prior to shipping Goods or commencing Services.
* * *
MODIFICATION OF TERMS. This Purchase Order is
expressly subject to, and Seller’s acceptance is expressly
conditioned upon, Seller’s assent to each and all of the terms
and conditions contained on the face end reverse side hereof.
No addition to or modification of the terms and conditions
hereof shall be binding upon Aqua-Chem. . . . Where Seller’s
quotation, acknowledgement, invoice or other correspondence
contains terms or conditions contrary to or in addition to
Aqua-Chem’s terms and conditions, such contrary or
additional terms are hereby refused and rejected (and without
any requirement of further notice of such refusal and
rejection) and neither acceptance by Aqua-Chem of the goods
nor payment therefor shall constitute a waiver by Aqua-Chem
of any of the terms and conditions contained herein or assent
to any other conditions.
* * *
COMPLETE AGREEMENT AND MODIFICATIONS. This
contract constitutes the entire agreement between the parties
relating to the Services and any products produced in
connection with the Services and no addition to or
modification of any provision of said agreement shall be
binding upon Aqua-Chem unless agreed in writing by Aqua-
Chem.
(Capitalization in original; emphasis added.)
3
No one from D&H signed the purchase orders. However, it is undisputed that
D&H picked up the coolers, machined them, and sent them back to Aqua-Chem. It is
also undisputed that the work was incorrectly done, which rendered the coolers unusable.
Aqua-Chem filed a complaint for breach of contract. D&H answered and filed a
counterclaim, later amended, in which it alleged that D&H had orally rejected the terms
and conditions of the purchase orders in a telephone call between representatives of the
parties. D&H alleged that it orally agreed to machine the coolers, but disputed it was to
be on the terms and conditions in the purchase orders.
Aqua-Chem moved for partial dismissal of the counterclaim, arguing that the clear
and unambiguous terms of the purchase orders provided for acceptance by performance,
and precluded any oral modification or selective rejection of the terms and conditions.
The trial court granted the motion in an order, which stated:
[T]his Court . . . finds that [Aqua-Chem’s] terms and
conditions, which were either directly attached or
incorporated by reference into each purchase order, apply to
all transactions at issue in this case. Therefore, the Court
finds that [D&H] performed the work at issue for [Aqua-
Chem] subject to all of the terms and conditions, including
the contractual limitation of liability clause limiting any
potential recovery to the purchase price.
A bench trial followed. Three witnesses testified: two representatives from Aqua-
Chem and one from D&H. The trial court rejected D&H’s allegation that the plans
provided by Aqua-Chem for the machining work were incorrect or unclear, noting that
the plans are approximately 18 years old and that they are a
result of considerable testing that had to be approved by the
Navy. They have been used apparently for 19 years.
The court found “no evidence . . . of there being any problems with implementation of
the plans.” The trial court held that “it was ultimately incumbent upon D&H to ensure
that they did machine the coolers correctly and that its failure to do so is a breach of the
contract.” It awarded Aqua-Chem $191,870 – the cost of replacing the three coolers
according to the evidence presented by Aqua-Chem.
At trial, Aqua-Chem’s vice-president of quality, David Hansard, testified briefly
regarding its claim for the profits lost as a result of the breach of contract. He said Aqua-
4
Chem’s accounting department provided him with numbers showing 730.35 labor hours
spent by Aqua-Chem employees that would have not been necessary absent D&H’s
breach of contract. Hansard estimated that Aqua-Chem’s profit margin on labor was
$25.96 per hour, resulting in a lost profit claim totaling $18,960. No one from Aqua-
Chem’s accounting department testified. Hansard stated that “our CFO calculated this
for me, and I do not know the exact method that he used.” Because Aqua-Chem provided
no other proof regarding the basis or method of computing its lost profits, the trial court
held that the evidence of lost profits was not sufficient to justify an award. Accordingly,
the court denied Aqua-Chem’s claim for lost profits.
Aqua-Chem also submitted a claim for attorney’s fees in the amount of
$64,739.48. The trial court held that Aqua-Chem was entitled to attorney’s fees under
the contract and found that fees in the amount of $50,000 were reasonable and necessary
under the circumstances. D&H timely filed a notice of appeal.
II.
D&H raises the following issues:
Whether the trial court erred in holding that the terms and
conditions of the purchase orders were applicable when the
written offer to D&H was rejected and Aqua-Chem never
sued upon any alleged oral agreement or sought property
damages.
Whether the trial court erred by awarding Aqua-Chem
damages when Aqua-Chem failed to mitigate and when the
damages sought by Aqua-Chem were too speculative to
support an award.
Aqua-Chem raises these issues:
Whether the trial court erred by not awarding Aqua-Chem its
lost profits based upon profit margin records provided to
Aqua-Chem’s executive witness by its accounting department
and where the proof was admitted into evidence at trial
without objection.
Whether the trial court erred in granting Aqua-Chem
attorney’s fees in the amount of $50,000 instead of the full
amount of $64,739.48 requested.
5
Whether Aqua-Chem is entitled to attorney’s fees on appeal.
III.
In this non-jury case, our standard of review is de novo upon the record of the
proceedings below; however, the record comes to us with a presumption of correctness as
to the trial court’s factual determinations, a presumption we must honor unless the
evidence preponderates against those findings. Tenn. R. App. P. 13(d); Wright v. City of
Knoxville, 898 S.W.2d 177, 181 (Tenn. 1995). There is no presumption of correctness as
to the trial court’s legal conclusions. Kendrick v. Shoemake, 90 S.W.3d 566, 569 (Tenn.
2002); Campbell v. Fla. Steel Corp., 919 S.W.2d 26, 35 (Tenn. 1996).
IV.
A.
D&H argues that the trial court erred in granting Aqua-Chem’s Tenn. R. Civ. P.
12.02(6) motion to partially dismiss the counterclaim for failure to state a claim upon
which relief can be granted. Our standard of review is as stated by the Supreme Court:
A Rule 12.02(6) motion challenges only the legal sufficiency
of the complaint, not the strength of the plaintiff’s proof or
evidence. The resolution of a 12.02(6) motion to dismiss is
determined by an examination of the pleadings alone. A
defendant who files a motion to dismiss admits the truth of all
of the relevant and material allegations contained in the
complaint, but asserts that the allegations fail to establish a
cause of action.
In considering a motion to dismiss, courts must construe the
complaint liberally, presuming all factual allegations to be
true and giving the plaintiff the benefit of all reasonable
inferences. A trial court should grant a motion to dismiss
only when it appears that the plaintiff can prove no set of
facts in support of the claim that would entitle the plaintiff to
relief. We review the trial court’s legal conclusions regarding
the adequacy of the complaint de novo.
6
Webb v. Nashville Area Habitat for Humanity, Inc., 346 S.W.3d 422, 426 (Tenn. 2011)
(internal citations, quotation marks and ellipsis omitted).
D&H’s amended counterclaim alleges:
[O]n or about March 4, [2014,] Aqua-Chem emailed its first
purchase order to [D&H] along with engineering plans.
Shortly after the email was sent, Aqua-Chem’s purchasing
agent, Greg Cagle, called Brian Hillard at [D&H] and
requested that Mr. Hillard sign the purchase order and return
it to Aqua-Chem. Mr. Hillard advised Mr. Cagle that he
would not sign the purchase order because he could not
accept responsibility for the value of the part and did not
agree with the terms and conditions. Mr. Hillard also advised
Mr. Cagle that [D&H] could do the machining, but would not
accept the terms and conditions on the purchase order. Mr.
Cagle then acquiesced and advised Mr. Hillard to come to
Aqua-Chem to pick up the parts. [D&H] then picked up the
parts and performed the machining never having signed the
purchase order and never having agreed to the additional
onerous terms and conditions of any of the purchase orders.
Contrary to D&H’s allegations, the trial court held that the terms and conditions
were applicable because D&H accepted them by performance. The court stated as
follows:
I want to clarify for the record that . . . my interpretation of
this agreement is that an acceptance of the terms can occur by
performance. And that is what happened in this case, is that
by performing the work as requested in the purchase order,
that D&H did accept and is bound by the terms and
conditions contained within that contract.
It is undisputed that D&H received and read, or had an opportunity to read, the terms and
conditions of the purchase orders. Each of them provides that “[D&H] shall be bound by
this Purchase Order and its terms and conditions . . . when it renders for Aqua-Chem any
of the services ordered herein.” The terms and conditions also state that, “[u]pon . . .
commencement of a Service, [D&H] shall be bound by the provisions of this Agreement,
. . . whether [D&H] acknowledges or otherwise signs this Agreement or the purchase
order, unless [D&H] objects to such terms in writing prior to . . . commencing Services.”
(Emphasis added.)
7
Regarding the concept of acceptance by performance, this Court has observed,
Assent to a contract need not take the form of words, but may
instead be “manifested, in whole or in part, by the parties’
spoken words or by their actions or inactions.” Burton v.
Warren Farmers Co-op., 129 S.W.3d 513, 521 (Tenn. Ct.
App. 2002) (citations omitted). “[I]n some instances
performance or even preparation for performance may
suffice” to give notice of acceptance by a promise. 1
Farnsworth, [Farnsworth on Contracts,] § 3.15, at 300 [3d ed.
2004]; see Restatement (Second) of Contracts § 19(1)-(2)
(1981) (stating that assent may be made by acts other than
words so long as the party “intends to engage in the conduct
and knows or has reason to know that the other party may
infer from his conduct that he assents”). Whether an action
constitutes an acceptance must be assessed in terms of
whether it “would lead a reasonable person to conclude that
the offer has been accepted.” Overman v. Brown, 372
N.W.2d 102, 105 (Neb. 1985) (citing In re Mapes
Enterprises, Inc., 15 B.R. 192 (D. Nev. 1981)). It must be
noted, though, that mutuality of assent may not be inferred
from a party’s unilateral actions, from an ambiguous course
of dealing, or “solely [from] the uncommunicated intentions
or states of mind of the contracting parties.” Burton, 129
S.W .3d at 521 (citations omitted); see Balderacchi v. Ruth,
256 S.W.2d 390, 391 (Tenn. Ct. App. 1953).
* * *
Acting in a manner that indicates acceptance of a contract is
generally deemed to be acceptance ‒ at least in the absence of
a requirement that the acceptance take a different form.
Unless the other party has reason to know of it, contract law
does not typically credit a claim that, in spite of a party’s
objective manifestations of assent, it subjectively did not
intend to be bound.
Rode Oil Co. v. Lamar Adver. Co., No. W2007-02017-COA-R3-CV, 2008 WL 4367300,
at *8-9 (Tenn. Ct. App., filed Sept. 18, 2008).
8
Here, construing the counterclaim liberally, presuming all its factual allegations to
be true, and giving D&H the benefit of all reasonable inferences, it is undisputed that
D&H picked up the coolers, performed machining work on them, and returned them. In
addition, it is undisputed that all of this occurred without a written objection to any of the
terms and conditions. Furthermore, and as previously noted, the terms and conditions
expressly preclude any oral modification of the agreement, stating:
The terms and conditions of this purchase order take
precedence over any terms and conditions which are
proposed by [D&H]. All terms proposed by [D&H] are
rejected unless expressly assented to in writing by Aqua-
Chem.
This Purchase Order is expressly subject to, and [D&H’s]
acceptance is expressly conditioned upon, [D&H’s] assent
to each and all of the terms and conditions[.]
This Purchase Order supersedes completely any oral or
written communications unless the terms are expressly
incorporated herein.
No addition or modification of the terms and conditions
hereof shall be binding upon Aqua-Chem[.]
Where [D&H’s] quotation, acknowledgement, invoice or
other correspondence contains terms or conditions
contrary to or in addition to Aqua-Chem’s terms and
conditions, such contrary or additional terms are hereby
refused and rejected[.]
This contract constitutes the entire agreement between the
parties relating to the Services . . . and no addition to or
modification of any provision of said agreement shall be
binding upon Aqua-Chem unless agreed in writing by
Aqua-Chem.
(Capitalization in original omitted.) We agree with and affirm the trial court’s
determination that the undisputed pertinent facts establish, as a matter of law, that the
terms and conditions of the purchase orders were part of the parties’ agreement and,
hence, applicable to the facts of this case.
9
The trial court allowed D&H to make an offer of proof at trial regarding its
contention that the parties had orally agreed that the terms and conditions would not
apply. D&H employee Brian Hillard testified that he spoke with Aqua-Chem
representative Greg Cagle on the telephone and told him that “he did not agree to those
terms and conditions,” and “his response was when I could [sic] have the [coolers]
machined and to come and pick them up.” The trial court, after hearing this proffer,
reaffirmed its ruling that the written terms and conditions to the purchase orders were
applicable. This ruling constitutes an implicit rejection of D&H’s argument that the
proof established a distinct oral agreement, the terms of which differed from the written
contract.
B.
D&H argues that “Aqua-Chem failed to prove its damages with reasonable
certainty” and “it was impossible to make a fair and reasonable assessment of the
damages because Aqua-Chem failed to mitigate its damages.” At trial, Aqua-Chem
executive Hansard testified that Aqua-Chem incurred replacement cost damages in the
total amount of $191,870, the amount found and awarded by the trial court. D&H did not
object to this proof, nor did it introduce countervailing evidence suggesting that this
number was inaccurate or inflated. The evidence does not preponderate against the trial
court’s determination of replacement cost damages.
C.
“Under the doctrine of mitigation of damages, an injured party is enlisted with a
duty to exercise reasonable care and due diligence to avoid loss or minimize damages
after suffering injury.” JWT, L.P. v. Printers Press, Inc., No. M2001-02590-COA-R3-
CV, 2002 WL 31397317, at *5 (Tenn. Ct. App., filed Oct. 24, 2002). Mitigation of
damages is an affirmative defense. Maness v. Collins, No. W2008-00941-COA-R3-CV,
2010 WL 4629614, at *11 (Tenn. Ct. App., filed Nov. 17, 2010) (“The failure to mitigate
damages is an affirmative defense”); Allied Waste N. Amer., Inc. v. Lewis, King, Krieg
& Waldrop, P.C., 93 F. Supp. 3d 835, 863 (M.D. Tenn. 2015) (“the failure to mitigate
damages is an affirmative defense under Tennessee law”) (internal quotation marks
omitted). Therefore, mitigation must be pleaded under Tenn. R. Civ. P. 8.03, or else it is
waived under Tenn. R. Civ. P 12.08 (“A party waives all defenses and objections which
the party does not present either by motion . . . or . . . in the party’s answer or reply, or
any amendments thereto.”). See Vintage Health Res., Inc. v. Guiangan, 309 S.W.3d
448, 460 (Tenn. Ct. App. 2009). In this case, D&H did not plead the failure to mitigate
10
damages in any pleading filed with the trial court. Accordingly, D&H’s mitigation of
damages defense has been waived.2
D.
Aqua-Chem argues that the trial court erred by declining to award damages for
lost profits resulting from the breach of contract. This Court set forth the principles
governing a claim for lost profits in Waggoner Motors, Inc. v. Waverly Church of
Christ, 159 S.W.3d 42, 58-59 (Tenn. Ct. App. 2004), stating as follows:
[A]n injured party may recover lost anticipated profits when
their nature and occurrence have been established with
reasonable certainty. Baker v. Hooper, 50 S.W.3d 463, 470
(Tenn. Ct. App. 2001); Tire Shredders, Inc. v. ERM–North
Cent., Inc., 15 S.W.3d 849, 857 (Tenn. Ct. App. 1999); 1
RECOVERY OF DAMAGES FOR LOST PROFITS § 1.4, at 9.
The reasonable certainty standard applies chiefly to the
evidence regarding the existence of damages. 1 RECOVERY
OF DAMAGES FOR LOST PROFITS § 1.6, at 17. It is a flexible
standard that permits the courts to take the particular facts of
each case into consideration. The existence of damages has
been proven with reasonable certainty when the mind of a
2
Even if it had not been waived, or to the extent it could be argued that the issue was
tried by implied consent – an argument not made by D&H – it has failed to prove that Aqua-
Chem did not exercise reasonable care and due diligence to avoid further loss or minimize its
damages. “The burden is on the defendants who breached the contract to prove what amounts
should be offset in mitigation of damages.” State ex rel. Chapdelaine v. Torrence, 532 S.W.2d
542, 550 (Tenn. 1975), abrogation on other grounds recognized by Wells v. Tenn. Bd. of
Regents, 231 S.W.3d 912, 916-17 (Tenn. 2007); accord ABC Painting Co. v. White Oaks Apts.
of Hermitage, No. M2006-00280-COA-R3-CV, 2007 WL 14250, at *3 (Tenn. Ct. App., filed
Jan 2, 2007). David Ferris, Aqua-Chem’s manufacturing engineer over military products,
testified that the incorrectly-machined coolers were not salvageable or repairable, stating, “I
don’t see a way possible that these could ever be used.” He also explained that the design for the
coolers “is a Navy design. You can’t sell it to anybody else anyway. They own the design.”
The plans and designs for this important part for Navy warships are not publicly available
information and were placed under seal by the trial court. D&H’s argument that Aqua-Chem
should not recover because it did not mitigate its damages is without merit.
11
prudently impartial person is satisfied that the injured party
has been damaged.
Once an injured party proves that it has been damaged, the
amount of the damages need not be proved with certainty or
mathematical precision. McClain v. Kimbrough Constr. Co.,
806 S.W.2d 194, 200 (Tenn. Ct. App. 1990); see also
Authentic Architectural Millworks, Inc. v. SCM Group
USA, Inc., 262 Ga. App. 826, 586 S.E.2d 726, 731 (2003).
After the fact of damages ha[s] been established, less
certainty is required with regard to the amount of the
damages. The amount of lost profits damages may be based
on estimates. While definite proof regarding the amount of
damages is desirable as far as it is reasonably possible, it is
even more desirable that an injured party not be deprived of
compensation merely because it cannot prove the extent of
the harm suffered with complete certainty. Restatement
(Second) of Torts § 912 cmt. a (1979). This principle is
based on the policy that defendants should not be permitted to
complain about the lack of exactness or precision in the proof
regarding the amount of damages when their wrongdoing
created the damages in the first place. Walgreen Co. v.
Walton, 16 Tenn. App. 213, 223, 64 S.W.2d 44, 50 (1932); 1
RECOVERY OF DAMAGES FOR LOST PROFITS § 5.2, at 385.
An award for lost profits damages depends on whether the
evidence provides a satisfactory basis for estimating what the
injured party’s probable earnings and expenses would have
been had the wrongdoing not occurred. Since lost profits can
rarely be computed down to the last penny, the evidence
needed to support an award for lost profits need only provide
a reasonable or rational basis for calculating what the lost
profits would have been.
(Footnotes and some internal citations omitted.) In Waggoner Motors, 159 S.W.3d at 58
n.29, and more recently in Borla Performance Industries v. Universal Tool and
Engineering, Inc., No. E2014-00192-COA-R3-CV, 2015 WL 3381293, at *8 (Tenn. Ct.
App., filed May 26, 2015), we observed that “definite proof regarding the amount of
damages is desirable as far as it is reasonably possible,” and that “[p]arties seeking to
recover lost profits damages would be well advised to provide the best available proof as
to the amount of their loss that the particular situation permits.”
12
Aqua-Chem executive Hansard provided the following testimony about its lost
profits allegation:
The next row is lost profit. Let me explain. We consume 730
hours of our shop labor to rebuild these three units. This is a
lost opportunity for Aqua-Chem. Because we could have
used those hours for other pursuits, other customers, other
products. My accounting department gave me a figure of
every hour. We have the ability to make $25.96 of margin.
So as the math shows, we lost 730 hours, times 25.96. That’s
18,9603 hours of lost profit opportunities.
* * *
THE COURT: I’ve got a quick question for you. On your
damages summary, your lost profit section, that $25.96 an
hour, how was that ‒ do you know how that was calculated?
Was that like an average of profit for each job?
THE WITNESS: Well, our CFO calculated this for me, and I
do not know the exact method that he used.
THE COURT: Okay. Thank you.
(Footnote added.) In order to prevail on its claim for lost profits, Aqua-Chem had the
burden to present evidence that “provides a satisfactory basis for estimating what [its]
probable earnings and expenses would have been had the wrongdoing not occurred.”
Borla Perf. Indus., 2015 WL 3381293, at *10 (quoting Waggoner Motors, 159 S.W.3d
at 58-59). As can be seen from the above testimony, when Hansard was questioned on
this very point by the trial court, he was unable to provide the basis for such a calculation.
Neither the CFO nor anyone from Aqua-Chem’s accounting department testified. Under
these circumstances, the evidence does not preponderate against the trial court’s
judgment declining to award lost profits.
E.
Aqua-Chem requested a judgment for its attorney’s fees and expenses in the
amount of $64,739.48. The trial court reviewed the request and supporting
3
The calculation actually results in a figure of 18,951 hours.
13
documentation, and determined that $50,000 was a reasonable and necessary amount for
fees and expenses. Aqua-Chem argues on appeal that the court should have awarded it
the full amount requested. As the Supreme Court has observed,
The trial court’s determination of a reasonable attorney’s fee
is “a subjective judgment based on evidence and the
experience of the trier of facts,” United Med. Corp. of Tenn.,
Inc. v. Hohenwald Bank & Trust Co., 703 S.W.2d 133, 137
(Tenn. 1986), and Tennessee has “no fixed mathematical
rule” for determining what a reasonable fee is. Killingsworth
v. Ted Russell Ford, Inc., 104 S.W.3d 530, 534 (Tenn. Ct.
App. 2002). Accordingly, a determination of attorney’s fees is
within the discretion of the trial court and will be upheld
unless the trial court abuses its discretion. Kline v. Eyrich, 69
S.W.3d 197, 203 (Tenn. 2002); Shamblin v. Sylvester, 304
S.W.3d 320, 331 (Tenn. Ct. App. 2009). We presume that the
trial court’s discretionary decision is correct, and we consider
the evidence in the light most favorable to the decision.
Henderson v. SAIA, Inc., 318 S.W.3d 328, 335 (Tenn. 2010);
Keisling v. Keisling, 196 S.W.3d 703, 726 (Tenn. Ct. App.
2005). The abuse of discretion standard does not allow the
appellate court to substitute its judgment for that of the trial
court, Williams v. Baptist Mem’l Hosp., 193 S.W.3d 545,
551 (Tenn. 2006); Myint v. Allstate Ins. Co., 970 S.W.2d
920, 927 (Tenn. 1998), and we will find an abuse of
discretion only if the court “applied incorrect legal standards,
reached an illogical conclusion, based its decision on a clearly
erroneous assessment of the evidence, or employ[ed]
reasoning that causes an injustice to the complaining party.”
Konvalinka v. Chattanooga–Hamilton Cnty. Hosp. Auth.,
249 S.W.3d 346, 358 (Tenn. 2008); see also Lee Med., Inc. v.
Beecher, 312 S.W.3d 515, 524 (Tenn. 2010).
Wright ex rel. Wright v. Wright, 337 S.W.3d 166, 176 (Tenn. 2011).
Regarding the factors to be considered by the trial court in setting a reasonable
attorney’s fee, we have recently stated,
Tennessee Supreme Court Rule 8, Rule of Professional
Conduct 1.5(a) sets forth the factors to be considered in
determining the reasonableness of attorney’s fees, providing:
14
(a) A lawyer shall not make an agreement for, charge, or
collect an unreasonable fee or an unreasonable amount for
expenses. The factors to be considered in determining the
reasonableness of a fee include the following:
(1) the time and labor required, the novelty and difficulty of
the questions involved, and the skill requisite to perform the
legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance
of the particular employment will preclude other employment
by the lawyer;
(3) the fee customarily charged in the locality for similar legal
services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the
circumstances;
(6) the nature and length of the professional relationship with
the client;
(7) the experience, reputation, and ability of the lawyer or
lawyers performing the services;
(8) whether the fee is fixed or contingent;
(9) prior advertisements or statements by the lawyer with
respect to the fees the lawyer charges; and
(10) whether the fee agreement is in writing.
Beacon4, LLC v. I & L Inv., LLC, No. E2015-01298-COA-R3-CV, 2016 WL 4545736,
at *40 (Tenn. Ct. App., filed Aug. 30, 2016). “[A] trial court properly may exercise its
discretion and consider the applicable factors in determining a reasonable amount of
attorney’s fees even if an attorney’s affidavit of fees fails to address all of the factors to
be considered or, depending on the circumstances, even in the absence of an affidavit of
attorney’s fees.” Id.
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In this case, the trial court obviously was very familiar with the pleadings and
proceedings. As already noted, there were three witnesses presented over a two-day
bench trial. The issues presented and tried were not particularly complex. Based on our
review of the record and applicable factors, we find no abuse of discretion by the trial
court in awarding $50,000 in attorney’s fees and expenses.
F.
D&H has not appealed the trial court’s determination that it is liable to Aqua-
Chem for attorney’s fees under the terms of the parties’ agreement. Consequently, Aqua-
Chem’s request for attorney’s fees on appeal is granted. On remand, the trial court shall
hear proof and enter judgment for reasonable and necessary fees and expenses incurred
by Aqua-Chem on appeal.
V.
The judgment of the trial court is affirmed. Costs on appeal are assessed one-half
to the appellant, D&H Machine Service, Inc., and one-half to the appellee, Aqua-Chem,
Inc. The case is remanded for further action consistent with this opinion, and collection
of costs assessed below.
_______________________________
CHARLES D. SUSANO, JR., JUDGE
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