Jerry Duke, d/b/a Moscow Manor Apartments v. Browning-Ferris Industries of Tennessee, Inc. ( 2006 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
February 15, 2006 Session
JERRY DUKE, d/b/a MOSCOW MANOR APARTMENTS v. BROWNING-
FERRIS INDUSTRIES OF TENNESSEE, INC., ET AL.
A Direct Appeal from the Circuit Court for Fayette County
No. 3742 The Honorable Jon Kerry Blackwood, Judge
No. W2005-00146-COA-R3-CV - Filed May 31, 2006
Plaintiff/Appellant filed suit against Defendants/Appellees claiming that Defendants/
Appellees had violated the Tennessee Trade Practices Act, the Tennessee Consumer Protection Act,
and the common law doctrines of good faith and fair dealing, and unjust enrichment in its contracting
for commercial waste hauling services in the Memphis area. The trial court granted summary
judgment in favor of Defendants/Appellees on both the statutory violation claims and the common
law claims. We affirm.
Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Circuit Court Affirmed
W. FRANK CRAWFORD , P.J., W.S., delivered the opinion of the court, in which ALAN E. HIGHERS,
J. and HOLLY M. KIRBY , J., joined.
Gordon Ball of Knoxville, Tennessee and William E. Phillips II of Knoxville, Tennessee for
Appellant, Jerry Duke
R. Dale Grimes, David R. Esquivel and J. Brandon Miller of Nashville, Tennessee; Michael F.
Rafferty of Memphis, Tennessee; Michael W. Whitaker of Covington, Tennessee for Appellees,
Browning-Ferris Industries of Tennessee, Inc. and Browning-Ferris Industries, Inc.
OPINION
On July 3, 1996, Jerry Duke, d/b/a Moscow Manor Apartments (“Plaintiff,” or “Appellant”)
filed a “Class Action Complaint” in the Circuit Court for Fayette County, Tennessee. Mr. Duke
claimed that, from 1991 to 1996, Browning-Ferris Industries of Tennessee, Inc. and Browning-Ferris
Industries, Inc. (together “BFI,” “Defendants,” or “Appellees”) had entered into form contracts with
its commercial waste hauling customers in Memphis and that these contracts had prevented
competitors from entering the waste hauling market, and had caused the customers to pay more for
commercial waste hauling than they otherwise would have. Specifically, Mr. Duke alleged that the
pre-printed forms used by BFI contained certain anti-competitive terms, including a three-year initial
term, an automatic three-year renewal term, a requirement that the customer give sixty days notice
of non-renewal, and a provision for liquidated damages for early termination of the contract.
According to Mr. Duke, these terms made it difficult for customers to switch to BFI’s competitors,
and resulted in BFI having sixty percent of the commercial waste hauling market in Memphis.
According to the Complaint, these allegations amounted to unjust enrichment, monopolization or
attempted monopolization of the industry in violation of the Tennessee Trade Practices Act
(“TTPA”), T.C.A. § 47-25-101 et seq., the Tennessee Consumer Protection Act (“TCPA”), T.C.A.
§ 47-18-101 et seq., and the common law duties of good faith and fair dealing.
On August 1, 1996, the trial court conditionally certified a class. However, following BFI’s
filing of a motion for judgment on the pleadings and to vacate class certification, the trial court, by
Order of March 6, 1997, vacated its conditional class certification. Consequently, there is no class
certification in this case.
Following the filing of the Complaint, the parties engaged in extensive pre-trial discovery
and motions practice. During this time, in 1999, BFI was purchased by Allied Waste Industries, Inc.
On July 27, 2001, the trial court held a status conference at which time counsel for BFI noted the
challenges presented in defending the case due to this corporate acquisition. Specifically, the
purchase of BFI resulted in BFI coming under new management, and in many of BFI’s corporate
officers and employees leaving the company. The trial court ordered the parties to enter a scheduling
order, which was entered on November 1, 2001. On March 20, 2002, Mr. Duke sought leave to
amend his Complaint. As discussed above, the initial Complaint contained allegations concerning
the existence and competitive effects of BFI’s commercial customers’ contracts for waste hauling.
By amendment, Mr. Duke sought to add an allegation that BFI exercised monopoly power in
Memphis-area landfills. Because this case had already been in litigation for approximately six years,
and the proposed amendment was “in essence a new cause of action,” the trial court denied Mr.
Duke’s motion to amend the Complaint by Order of August 6, 2002. With the exception of the
taking of one deposition by Mr. Duke, the record indicates that there was no activity on this case
from August 6, 2002 until September 21, 2004 when BFI moved to dismiss Mr. Duke’s claims for
failure to prosecute. BFI simultaneously moved for summary judgment. Mr. Duke filed a brief in
opposition to BFI’s motion on December 1, 2004, and a responsive statement of undisputed material
facts on November 20, 2004. Thereafter, BFI prepared and filed a document styled “Defendant
BFI’s Reply in Support of its Statement of Undisputed Material Facts and Defendant BFI’s Response
to Plaintiff’s Statement of Additional Material Facts.” This document includes the original
statements of undisputed material fact filed by BFI, Mr. Duke’s responses thereto, and BFI’s reply.
The trial court heard oral argument on the motions on December 3, 2004. On December 10,
2004, the trial court entered an Order granting BFI’s motion for summary judgment. The December
10, 2004 Order contained the following typographical error: “[T]he Court concludes that there are
no material facts that are undisputed...” (emphasis added). Noting this typographical error, BFI
submitted a corrected Order to the trial court. On December 20, 2004, the trial court entered the
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corrected Order. On January 14, 2005, Mr. Duke filed a notice of appeal from the December 20,
2004 Order. BFI now contends that the appeal should be dismissed because Mr. Duke did not timely
appeal from the December 10, 2004 Order, which BFI asserts is the final order in this case. Before
reaching the substantive issues on appeal, we will first address whether Mr. Duke’s Notice of Appeal
is timely. It is well settled that parties seeking appellate review of a trial court's final decision in a
civil proceeding must file a timely notice of appeal. Tenn.R.App.P. 4(a) requires that the notice of
appeal be filed with, and received by, the clerk of the appellate court within thirty days after the entry
of the judgment appealed from. This requirement is mandatory and jurisdictional in civil cases.
McGaugh v. Galbreath, 996 S.W.2d 186, 189 (Tenn. Ct. App.1998); Dewees v. Sweeney, 947
S.W.2d 861, 863 (Tenn.Ct.App.1996). However, Tenn.R.App.P. 4(b) modifies Tenn.R.App.P. 4(a)'s
thirty-day time period when certain post-trial motions are timely filed. Specifically, Tenn.R.App.P.
4(b) provides:
In a civil action, if a timely motion under the Tennessee Rules of
Civil Procedure is filed in the trial court by any party: AAA (4) under
Rule 59.04 to alter or amend the judgment; the time for appeal for all
parties shall run from the entry of the order denying a new trial or
granting or denying any other such motion.
In the instant case, BFI presented the trial court with a proposed order, the purpose of which was to
alter or amend the December 10, 2004 Order. We perceive that the presentation of the proposed
order was tantamount to a motion to alter or amend the judgment, as contemplated by Tenn. R. Civ.
P. 59.04. The trial court’s adaptation and entry of the proposed order is paramount to its granting
the motion to alter or amend. Consequently, under Tenn. R. App. P 4(b), the time for Mr. Duke to
appeal ran from the entry of the December 20, 2004 Order, and his notice of appeal was, therefore,
timely.
Mr. Duke raises the following additional issues for review as stated in his brief:
1. Whether the trial court erred in awarding summary judgment to
BFI on Plaintiff’s Claim under the Tennessee Trade Practices Act
when the summary judgment record established genuine issues of
material fact as to whether BFI’s conduct lessened or tended to lessen
competition in the Memphis area small-containerized waste hauling
market.
2. Whether the trial court erred in awarding summary judgment to
BFI on Plaintiff’s Tennessee Consumer Protection Act claim when
(1) the Act applies to anti-competitive acts, and (2) Plaintiff brought
his claim under the Act in a timely manner.
3. Whether the trial court erred when it awarded summary judgment
to BFI on Plaintiff’s claim for breach of good faith and fair dealing
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when the summary judgment record demonstrates that genuine issues
of material fact exist with respect to whether BFI breached its duty of
good faith and fair dealing by prohibiting customers from switching
to competitors.
4. Whether the trial court erred in awarding summary judgment to
BFI on Plaintiff’s unjust enrichment claim notwithstanding the fact
that the summary judgment record establishes genuine issues of
material fact with respect to whether BFI’s customer agreements were
agreements in restraint of trade.
5. Whether the trial court erred by refusing to consider Plaintiff’s
complaint allegations and exhibits to Plaintiff’s Complaint, including
the Competitive Impact Statement, for summary judgment purposes,
despite the fact that many of those allegations and statements were
undisputed.
It is well settled that a motion for summary judgment should be granted when the movant
demonstrates that there are no genuine issues of material fact and that the moving party is entitled
to a judgment as a matter of law. See Tenn. R. Civ. P. 56.04. The party moving for summary
judgment bears the burden of demonstrating that no genuine issue of material fact exists. See Bain
v. Wells, 936 S.W.2d 618, 622 (Tenn.1997). On motion for summary judgment, the court must take
the strongest legitimate view of evidence in favor of the nonmoving party, allow all reasonable
inferences in favor of that party, and discard all countervailing evidence. See id. In Byrd v. Hall,
847 S.W.2d 208 (Tenn.1993), our Supreme Court stated:
Once it is shown by the nonmoving party that there is no genuine
issue of material fact, the nonmoving party must them demonstrate,
by affidavits or discovery material, that there is a genuine, material
fact dispute to warrant a trial. In this regard, Rule 56.05 provides that
the nonmoving party cannot simply rely upon his pleadings but must
set forth specific facts showing that there is a genuine issue of
material fact for trial.
Id. at 210-11 (citations omitted).
Summary judgment is only appropriate when the facts and the legal conclusions drawn from
the facts reasonably permit only one conclusion. See Carvell v. Bottoms, 900 S.W.2d 23, 26 (Tenn.
1995). Because only questions of law are involved, there is no presumption of correctness regarding
a trial court's grant or denial of summary judgment. See Bain, 936 S.W.2d at 622. Therefore, our
review of the trial court's denial of summary judgment is de novo on the record before this Court.
See Warren v. Estate of Kirk, 954 S.W.2d 722, 723 (Tenn.1997).
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Statutory violation claims
We will first address the issues concerning whether summary judgment was proper on the
TTPA and the TCPA claims.
TTPA
The TTPA prohibits anti-competitive conduct affecting the price of products to producers
and consumers, to wit:
All arrangements, contracts, agreements, trusts, or combinations
between persons or corporations made with a view to lessen, or which
tend to lessen, full and free competition in the importation or sale of
articles imported into this state, or in the manufacture or sale of
articles of domestic growth or of domestic raw material, and all
arrangements, contracts, agreements, trusts, or combinations between
persons or corporations designed, or which tend, to advance, reduce,
or control the price or the cost to the producer or the consumer of any
such product or article, are declared to be against public policy,
unlawful, and void.
T.C.A. § 47-25-101 (2005).
In addition, the TTPA provides consumers with a private right of action against those who
violate the provisions of the Act, to wit:
Any person who may be injured or damaged by any such
arrangement, contract, agreement, trust, or combination described in
this part may sue for and recover, in any court of competent
jurisdiction, from any person operating such trust or combination, the
full consideration or sum paid by the person for any goods, wares,
merchandise, or articles, the sale of which is controlled by such
combination or trust.
T.C.A. § 47-25-106 (2005).
In Bennett et al. v. Visa U.S.A., Inc., et al., No. E2005-00659-COA-R9-CV, 2006 WL
770467 (Tenn. Ct. App. March 27, 2006), this Court granted an interlocutory appeal to determine
whether claims of violation of the TTPA and the TCPA had properly been dismissed pursuant to
Tenn. R. Civ. P. 12.02(6). In Bennett, the plaintiff/merchants claimed that the defendant/credit card
companies had violated the TTPA and the TCPA by requiring merchants who accepted the
defendants’ credit cards to also accept the defendants’ debit cards. Plaintiffs alleged that this “tying
arrangement” constituted an attempt to monopolize the debit card market. The Bennett Court noted
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that “[t]he law is well settled that the TTPA applies only to tangible goods, not intangible services.”
Bennett at *3 (citing McAdoo Contractors, Inc. v. Harris, 439 S.W.2d 594 (Tenn. 1969)). In an
attempt to implicate the TTPA, the Bennett plaintiffs asserted that defendants’ conduct not only
involved payment card processing services, but also indirectly affected product prices, thus violating
the TTPA. The Court found that the “TTPA cannot be asserted every time product prices are
influenced by anti-competitive conduct in the service industries without effectively expanding the
TTPA’s scope to include those service industries.” Id. at *4.
In the instant case, Mr. Duke first alleges that BFI violated the TTPA by use of its form-
contracts for the purchase of waste hauling services. Mr. Duke alleges that BFI customers paid more
for BFI’s services during the period 1991 to 1996 than would have been paid absent BFI’s conduct.
From the record before us, we can only conclude that Mr. Duke’s claims apply solely to the
provision of services, not to the purchase of products or articles. Consequently, the TTPA is not
applicable to these service contracts. See also, Beaudreau v. Larry Hill Pontiac/Oldsmobile/GMC,
160 S.W.3d 187 (Tenn. Ct. App. 2004); Jo Ann Forman, Inc. v. Nat’l Council on Compensation
Ins., 13 S.W.3d 365 (Tenn. Ct. App. 1999).
Mr. Duke also alleges that BFI violated the TTPA because BFI “willfully acquired or
maintained...monopoly power” in the Memphis market for commercial waste hauling services. In
order to establish a claim for monopolization, a plaintiff must show "(1) the possession of monopoly
power in the relevant market and (2) the willful acquisition or maintenance of that power as
distinguished from growth or development as a consequence of a superior product, business acumen,
or historic accident." United States v. Grinnell Corp.et al., 384 U.S. 563, 570-71(1966). Monopoly
power is "the power to control prices or exclude competition," United States v. E.I. du Pont de
Nemours & Co., 351 U.S. 377, 391 (1956), and is also referred to as a high degree of "market
power," see, e.g., Tops Mkts., Inc. v. Quality Mkts., Inc., 142 F.3d 90, 97 (2d Cir.1998).
Consequently, in order to succeed on his claim, Mr. Duke must show that BFI has "engaged in
improper conduct that has or is likely to have the effect of controlling prices or excluding
competition, thus creating or maintaining market power." PepsiCo, Inc. v. Coca-Cola Co., 315 F.3d
101, 108 (2d Cir.2002) (per curiam).
To recover for attempted monopolization, a plaintiff must establish "(1) that the defendant
has engaged in predatory or anti-competitive conduct with (2) a specific intent to monopolize and
(3) a dangerous probability of achieving monopoly power." Spectrum Sports, Inc. v. McQuillan,
506 U.S. 447, 456 (1993). Because our analysis applies with equal force to Mr. Duke’s claim for
attempted monopolization, we need not treat that claim separately.
Here, Mr. Duke relies, inter alia, upon the Competitive Impact Statement (“CIS”) to
establish a genuine dispute of material fact concerning whether BFI exercised monopoly power in
Memphis’ waste hauling market. Specifically, Mr. Duke wishes to rely upon the CIS to show that
BFI’s market share was in excess of 60%. The CIS at issue was filed, on February 15, 1996, as part
of a consent decree in a federal court action between BFI and the Department of Justice, and was an
exhibit to the Complaint in this case. In its Order granting summary judgment, the trial court
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specifically states that it “did not consider the allegations of the complaint as well as the exhibits to
the complaint.” Even if we assume, arguendo, that the trial court erred in excluding the CIS, the
record in this case clearly shows that BFI’s market share actually declined during the relevant time
period. In his deposition, Waste Management representative Chris White testified, in pertinent part,
as follows:
Q. We talked about market shares. Do you know how the market
share for BFI has changed since 1995 to the present [January 9, 2002]
in commercial service?
* * *
A. My observation is that it has decreased.
Q. It has?
A. Decreased.
Q. What has decreased?
A. Well, you asked the question what is my perception of [BFI’s]
market share in the commercial service and my perception is,
unqualified, that their market share has decreased.
Q. And has–that’s been over the period ‘94, ‘95 to the present?
A. Yes.
There is no evidence in the record to refute Mr. White’s assertion that BFI’s market share actually
declined during the relevant period. In Arthur S. Langenderfer, Inc. v S.E. Johnson Co., 917 F.2d
1413 (6th Cir. 1990), our own Sixth Circuit made the following observation concerning
monopolization and declining market share:
Market strength is often indicated by market share. During the
relevant period, [defendant]'s market share declined from
approximately 40% to approximately 30%. Given the facts of the
case, such a share is not sufficient to establish [defendant]'s capacity
to monopolize. See United States v. Empire Gas Corp., 537 F.2d 296(8th Cir.1976), cert. denied,429 U.S. 1122, 97 S. Ct. 1158, 51 L. Ed. 2d
572 (1977) (50% market share does not establish dangerous
probability of success); Lektro-Vend Corp. v. Vendo Co., 660 F.2d
255 (7th Cir.1981), cert. denied,455 U.S. 921, 102 S. Ct. 1277, 71
L. Ed. 2d 461 (1982) (30% market share is not enough). The fact that
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[defendant]'s share of the market was declining also belies whatever
inference of capacity to monopolize that may be drawn from the size
of its market share. Forro Precision, Inc. v. International Business
Machines Corp., 673 F.2d 1045, 1058 (9th Cir.1982); Lektro-Vend
Corp. v. Vendo Co., 660 F.2d 255, 271 (7th Cir.1981), cert.
denied,455 U.S. 921, 102 S. Ct. 1277, 71 L. Ed. 2d 461 (1982); Nifty
Foods Corp. v. Great Atlantic & Pacific Tea Co., 614 F.2d 832, 841
(2d Cir.1980).
Id. at 1431 (quoting Richter Concrete Corp. v. Hilltop Concrete Corp., 691 F.2d 818, 826 (6th Cir.
1982)).
Furthermore, it is undisputed in the record that Waste Management was working in the
Memphis market as a BFI competitor, and that BFI’s price for commercial waste hauling was
generally cheaper than Waste Management’s price point:
Q [To Waste Management representative Chris White]. Now, just as
a general matter during the time that you have been at Waste
Management in Memphis, have Waste Management’s prices been to
your knowledge high relative to the other competitors in the market?
* * *
A. We’ve never been the low-cost provider in the market.
Q. To your knowledge, and I’m now referring specifically to the ‘94
to ‘96, ‘97 time period, to your knowledge were Waste
Management’s prices generally somewhat higher than BFI’s highest
prices in this area [commercial waste hauling]?
A. Yes.
In addition to BFI, the Memphis Yellow Pages for 1994 lists at least four other companies offering
commercial waste hauling services. The 1995-1996 Yellow Pages indicates that the four companies
listed in 1994 were still in business, and that at least one other commercial waste hauler had entered
the Memphis market. Concerning whether these other companies created a competitive environment
in the Memphis waste hauling arena, Mr. Mark Brantley, BFI’s former manager, testified as follows:
Q. Did you [Mr. Brantley] perceive the Memphis hauling market,
when you were here from 1992 to ‘95, to be competitive?
A. Yes.
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* * *
Q. In what way?
A. It was very competitive in terms of the competition in the
marketplace. It was very aggressive.
Q. Was that true for trying to get the business of commercial
customers within the Memphis area?
A. Yes.
Q. Would you describe it as–was it price competitive?
A. Extremely.
Mr. Brantley’s testimony is corroborated by the testimony of Mr. James Becher, president of ECO
Services, one of the competitor companies that came into the Memphis market in 1992. Mr. Becher
testified that his salespeople regularly made cold calls to seek out potential new customers.
In addition to the competition that existed in the market, the record also indicates that BFI
customers, including Mr. Duke, were able to negotiate the terms of the form-contracts used by BFI.
Mr. Duke’s deposition testimony reads, in pertinent part, as follows:
Q [To Mr. Jerry Duke]. What were the terms of the agreement that
you reached with the representative of BFI?
A. Their basic contract with a couple of changes.
Q. What changes?
A. The term of the initial contract from three years to one year and
the length of the automatic renewal time from three to two–excuse
me, three to one.
Q. Who asked for those changes?
A. I did.
Q. Were they [BFI] agreeable?
A. Well, it is the only way that I could see myself entering that
agreement.
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Q. My question is, did they agree to your changes?
A. Yes.
When asked if other commercial customers were able to negotiate their contracts with BFI, Mr.
Duke further testified as follows:
Q. Do you believe that there are other members of the class who, like
you, negotiated the initial three-year term down to one year or two
years?
A. I would think that there would be a number of them that did make
changes, were able to make changes.
Q. Why do you believe that?
A. Because I was able to make a change.
Q. And you were able to make a change because the standard
contract terms were negotiable?
A. We made the change, yeah.
Q. That means the terms were negotiable, right?
A. That’s correct.
Q. It is your belief that other members of the class also could
negotiate over the terms of the contract just like you did.
A. I’m sure they did.
From the record before us, it is undisputed that there were no barriers to entry into the Memphis
commercial waste hauling business during the relevant time period. Although BFI did, at times,
possess the lion’s share of the market, the record indicates that there was ample competition, and that
BFI’s share of the market decreased during the relevant period. In terms of BFI’s business tactics,
the record clearly indicates that BFI was open to negotiations in reaching agreements with its
commercial customers. From the undisputed facts in this record, we cannot conclude that BFI
violated the TTPA in its use of form-contracts, or in its monopolization or attempted monopolization
of the waste hauling market.
TCPA
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The TCPA prohibits “[u]nfair or deceptive acts or practices affecting the conduct of any trade
or commerce.” T.C.A. § 47-18-104(a) (2005). The TCPA also creates a private right of action, to
wit:
Any person who suffers an ascertainable loss of money or property,
real, personal, or mixed, or any other article, commodity, or thing of
value wherever situated, as a result of the use or employment by
another person of an unfair or deceptive act or practice declared to be
unlawful by this part, may bring an action individually to recover
actual damages.
T.C.A. § 47-18-109(a)(1) (2005).
In the instant case, Mr. Duke asserts that BFI’s alleged anti-competitive conduct (i.e.
monopolization or attempted monopolization of the Memphis commercial waste hauling market)
constitutes “an unfair and deceptive practice predominantly and substantially affecting the conduct
of trade and commerce in the State of Tennessee, in violation of the [TCPA].” Mr. Duke relies upon
the case of Blake v. Abbott Labs., Inc., No. 03A07-9509-CV-00307, 1996 WL 134947 (Tenn. Ct.
App. Mar. 27, 1996) for the proposition that the TCPA applies to anti-competitive conduct. In
Blake, the plaintiffs asserted claims under both the TTPA and the TCPA stemming from defendant’s
alleged conspiracy to fix the price of baby formula. After determining that the TTPA claim was
valid, this Court addressed the TCPA claim, and specifically “whether price fixing is an unfair and
deceptive act or practice.” The Court concluded that price fixing is an “unfair” practice forming the
basis of a TCPA claim, and that application of the TCPA is not inconsistent with application of the
TTPA.
Faced with a similar case in which the plaintiff also relied upon Blake, this Court, in the
Bennett case, distinguished Blake (in which anti-competitive conduct formed the basis for a TTPA
claim) from cases, such as the one at bar (in which defendant’s conduct is outside the scope of the
TTPA, see supra):
[T]he Blake Court held that anti-competitive conduct which forms the
basis for a TTPA claim necessarily forms a valid basis for a TCPA
claim. Anti-competitive conduct which falls outside the scope of the
TTPA cannot be used to form the basis for a TCPA claim. Rather
than supporting plaintiff's argument, Blake would bar the plaintiffs'
TCPA claim because plaintiffs allegations of anti-competitive
conduct failed to form the basis of a valid TTPA claim.
Bennett, 2006 WL 770467 at *6.
Having found that the TTPA is not implicated in this case, the Bennett Court’s reasoning also
applies here, and we conclude that the TCPA is not applicable. See also Sherwood v. Microsoft
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Corp., No. M2000-01850-COA-R9-CV, 2003 WL 21780975, *33 (Tenn. Ct. App. July 31, 2003)
(holding that “claims based on anticompetitive conduct are not cognizable under the TCPA”).
Common Law Claims
Breach of Duty of Good Faith and Fair Dealing
In addition to his statutory claims, Mr. Duke also asserts that BFI breached its contractual
duty of good faith and fair dealing. We first note that a “[b]reach of the implied covenant of good
faith and fair dealing is not an independent basis for relief,” but rather “may be an element or
circumstance of recognized torts, or breaches of contracts.” Solomon v. First Nat’l Bank, 774
S.W.2d 935, 945 (Tenn. Ct. App. 1989). Cf. T.C.A. § 47-1-203 note 2. The fact that Mr. Duke’s
Complaint asserts an independent claim for breach of good faith and fair dealing should negate that
cause of action. However, even if we assume arguendo that this claim can stand alone, we
nonetheless conclude that a claim for breach of good faith and fair dealing cannot lie in this case.
Mr. Duke’s Complaint specifically asserts that:
Defendant BFI[] in Memphis has entered into written
contracts with the vast majority of its existing small container
customers in those markets. Many of these contracts contain terms
that, when taken together in the relevant markets where Defendants
have market power, make it more difficult and costly for customers
to switch to a competitor of Defendants and allow Defendants to bid
to retain customers approached by a competitor. These contracts
enhance and maintain Defendants’ market power in the relevant
markets by significantly raising the cost and time required by a new
entrant or small incumbent firm to build its customer base and obtain
efficient scale and route density. Therefore, Defendants’ use and
enforcement of these contracts in the Memphis market raises entry
barriers in those markets.
Although the Complaint goes on to list the specific contract terms that allegedly violate BFI’s duty
of good faith and fair dealing, the Complaint does not specify any breach of this covenant in BFI’s
enforcement of the contract.
It is true that there is implied in every contract a duty of good faith and fair dealing in its
performance and enforcement, and a person is presumed to know the law. See Restatement (2d)
Contracts, § 205 (1979). What this duty consists of, however, depends upon the individual contract
in each case. In construing contracts, courts look to the language of the instrument and to the
intention of the parties, and impose a construction which is fair and reasonable. However, it should
be noted that the common law duty of good faith and fair dealing goes to the performance or
enforcement of the contract, not to its execution. See Restatement (Second) of Contracts, § 205
cmt. c (1979); Sanders v. First Nat’l Bank, 114 Bankr. 507 (M.D. Tenn. 1990), aff’d, 936 F.2d 273(6th Cir. 1991). Because Mr. Duke’s claim is based upon the terms of the contract, i.e. its formation,
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rather than the enforcement of the contract, we conclude that there has been no breach of good faith
and fair dealing in this case.
Unjust Enrichment
It is well settled that the theories of unjust enrichment, quasi contract, contracts implied in
law, and quantum meruit are essentially the same. Paschall's, Inc. v. Dozier, 407 S.W.2d 150, 154
(Tenn.1966). Unjust enrichment is a quasi-contractual theory or is a contract implied-in-law in which
a court may impose a contractual obligation where one does not exist. Whitehaven Community
Baptist Church v. Holloway, 973 S.W.2d 592, 596 (Tenn.1998) (citing Paschall's, 407 S.W.2d at
154-55). Such contracts are not based upon the intention of the parties but are obligations created
by law and are “founded on the principle that a party receiving a benefit desired by him, under the
circumstances rendering it inequitable to retain it without making compensation, must do so.”
Paschall's, 407 S.W.2d at 154. A contractual obligation under an unjust enrichment theory will be
imposed when: (1) no contract exists between the parties or, if one exist, it has become
unenforceable or invalid; and (2) the defendant will be unjustly enriched absent a quasi-contractual
obligation. Holloway, 973 S.W.2d at 596. In Paschall's, supra, the Court stated:
Each case must be decided according to the essential elements of
quasi contract, to-wit: A benefit conferred upon the defendant by the
plaintiff, appreciation by the defendant of such benefit, and
acceptance of such benefit under such circumstances that it would be
inequitable for him to retain the benefit without payment of the value
thereof.
407 S.W.2d at 155.
In this case, there is no dispute that the relationship between BFI and the Plaintiffs is
grounded in their contract. Nonetheless, Mr. Duke contends that the issue is not whether the parties’
relationship is governed by a contract, but rather “whether the contract is the subject matter of the
action.” Here, Plaintiffs argue that the subject matter of the action is the claim for unfair and
deceptive trade practices, not the contract. We disagree. The gravamen of the subject matter at issue
between these parties is BFI’s provision of waste hauling services, and that subject matter is
governed by the contract between the parties. Consequently, the equitable remedy of unjust
enrichment cannot be imposed where, as in this case, a valid contract exists on the same subject
matter.
Mr. Duke’s argument that he is entitled to a finding of unjust enrichment because the contract
between Mr. Duke and BFI may have been “unenforceable or invalid” is likewise unpersuasive.
Specifically, Mr. Duke asserts that the contract was void and unenforceable because “the form
contracts were themselves restraints on trade.” In order to show that the contract is unenforceable
or invalid as a restraint on trade, Mr. Duke would have to show that BFI’s contract led to
monopolization of the market (or an attempted monopolization of the market). As discussed above,
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there is insufficient evidence in this record to support such a finding. Consequently, summary
judgment was correct on the claim for unjust enrichment.
For the foregoing reasons, we affirm the Order of the trial court granting summary judgment
in favor of BFI. Costs of this appeal are assessed against the Appellant, Jerry Duke d/b/a Moscow
Manor Apartments, and his surety.
__________________________________________
W. FRANK CRAWFORD, PRESIDING JUDGE, W.S.
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