IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

August 8, 2018 Session

MELO ENTERPRISES, LLC ET AL. v. D1 SPORTS HOLDINGS, LLC

Appeal from the Chancery Court for Williamson County

No. 46199 Deanna B. Johnson, Judge

___________________________________

No. M2017-02294-COA-R3-CV

___________________________________

This appeal follows the trial court’s denial of a motion to compel arbitration as to a claim 

for fraudulent inducement. For the reasons stated herein, namely that there was no 

agreement to arbitrate such a claim, we affirm.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed 

and Remanded

ARNOLD B. GOLDIN, J., delivered the opinion of the Court, in which RICHARD H.

DINKINS J., joined and W. NEAL MCBRAYER, J joined and filed a separate concurring 

opinion.

Ryan A Kurtz, Atlanta, Georgia, and Robert F. Parsley and Megan B. Welton, 

Chattanooga, Tennessee, for the appellant, D1 Sports Holdings, LLC.

Garrett P. Swartwood, Knoxville, Tennessee, for the appellees, Melo Enterprises, LLC, 

Austin Sports & Entertainment, Inc., OACM Sports Holdings,LLC, and D1 Sports 

Training of Baltimore, LLC.

OPINION

BACKGROUND AND PROCEDURAL HISTORY

The genesis of this case is traceable to July 18, 2014, when the Appellant D1 

Sports Holdings, LLC (“D1 Holdings”), a Tennessee limited liability company, organized 

another Tennessee limited liability company, D1 Sports Training of Baltimore, LLC (“D1 

Baltimore”). D1 Baltimore was organized for the purpose of establishing an athletic 

training facility in Baltimore, Maryland, and subsequent to its formation, three of the 

Appellees in this matter purchased membership interests in the new legal entity. 

Appellee Austin Sports & Entertainment, Inc. (“Austin Sports”), a Maryland corporation, 

01/25/2019
- 2 -

acquired its membership interests the same month that D1 Baltimore was formed. In its 

Unit Purchase Agreement, Austin Sports acquired 300 units of membership interests for a 

purchase price of $200,000 and other consideration. In October 2014, Appellee Melo 

Enterprises, LLC (“Melo Enterprises”), a company formed under the laws of Delaware, 

entered into its own Unit Purchase Agreement, acquiring 550 units of membership 

interests in D1 Baltimore for $500,000 and other consideration. Following the purchase 

agreements entered into by Austin Sports and Melo Enterprises, an additional acquisition 

of membership interests in D1 Baltimore occurred in June 2015, when Orthopaedic 

Associates of Central Maryland, P.A., entered into a Unit Purchase Agreement on behalf 

of its to-be-formed affiliate OACM Sports Holdings, LLC (“OACM Sports”). This latest 

agreement involved the purchase of 150 units of membership interests in D1 Baltimore 

for $150,000. OACM Sports was duly organized in Maryland on June 9, 2015. 

According to Austin Sports, Melo Enterprises, and OACM Sports (collectively the 

“Investor Plaintiffs”), D1 Holdings made certain representations prior to the entry of the 

Unit Purchase Agreements that all or some of their investments would be paid to and held 

by D1 Baltimore and used for its benefit. The present dispute ensued as a result of these 

alleged representations. On May 10, 2017, a complaint was filed against D1 Holdings in 

the Williamson County Chancery Court by the Investor Plaintiffs and D1 Baltimore. The 

filed complaint contained a count for fraudulent misrepresentations, wherein it was 

asserted that “D1 Holdings intended its fraudulent misrepresentations to induce the 

Investor Plaintiffs to enter into the Unit Purchase Agreements,” a count for declaratory 

relief, and an alternative count for conversion on behalf of D1 Baltimore. Among other 

things, the Investor Plaintiffs sought to have the trial court rescind the Unit Purchase 

Agreements. 

Specifically regarding the fraud that allegedly precipitated the entry of the Unit 

Purchase Agreements, the complaint stated in part as follows:

15. Despite the representations of D1 Holdings, and unknown to the 

Investor Plaintiffs, D1 Holdings had no intention at the time of making its 

representations . . . of using the investor contributions for the benefit of D1 

Baltimore or to establish, construct or operate a training facility in 

Baltimore, Maryland. Instead, D1 Holdings engaged in a fraudulent 

scheme to divest money from the Investor Plaintiffs for the use and benefit 

of D1 Holdings and not for the business of D1 Baltimore.

16. At or about the time the Unit Purchase Agreements were signed, 

D1 Holdings requested that the Investor Plaintiffs each wire funds directly 

to an account owned by D1 Holdings for the purchase price of the 

membership interests in D1 Baltimore. D1 Holdings represented at that 

time that all or a portion of the purchase price funds would be transferred to 

D1 Baltimore for use in the commencement of its operations. In reliance 
- 3 -

upon the representations of D1 Holdings, Austin Sports caused the full 

amount of the purchase price under its Unit Purchase Agreement to be 

wired to D1 Holdings on or about July 21, 2014; Melo Enterprises caused 

the full amount of the purchase price under its Unit Purchase Agreement to 

be wired to D1 Holdings on or about October 29, 2014; and OACM Sports 

caused the full amount of the purchase price under its Unit Purchase 

Agreement to be wired to D1 Holdings on or about June 22, 2015.

17. Upon information and belief, D1 Holdings never transferred to 

D1 Baltimore any portion of the purchase price paid by the Investor 

Plaintiffs. 

18. Instead, D1 Holdings kept the funds paid by the Investor 

Plaintiffs for its own use and benefit. 

Although D1 Holdings subsequently filed an answer to the complaint raising 

several defenses on its behalf, one of these defenses—that the Plaintiffs’ claims were 

subject to binding arbitration—soon became the central focus of the litigation. In a filing 

submitted contemporaneous with its answer, D1 Holdings moved the trial court to 

compel arbitration, stating that the “parties contractually agreed to arbitrate this dispute.” 

Although D1 Holdings acknowledged that the Unit Purchase Agreements did not 

themselves contain arbitration provisions, it noted that arbitration provisions were 

included in D1 Baltimore’s Operating Agreement, a Management Agreement between 

D1 Baltimore and D1 Holdings, and amendments thereto. It further argued that the “Unit 

Purchase Agreements . . . incorporate[d] the Operating Agreement, or . . . the Amended 

Operating Agreement” and that said operating agreements “incorporate and attach as 

exhibits the Management Agreement and Amended Management Agreement, 

respectively.” When the Investor Plaintiffs and D1 Baltimore filed a response opposing 

D1 Holdings’ motion to compel arbitration, they set forth two principal arguments: (1) 

the Unit Purchase Agreements did not contain or incorporate any agreement to arbitrate 

and (2) in any event, because the agreements that D1 Holdings relied on contained a 

Tennessee choice of law provision, Plaintiffs had the right to assert claims of fraudulent 

inducement in a judicial forum. 

Following a hearing on D1 Holdings’ motion to compel arbitration, the trial court 

entered a “Memorandum and Order” granting D1 Holdings partial relief. First, the trial 

court concluded that the Unit Purchase Agreements contained language which was “an 

unambiguous incorporation by reference of the terms, conditions, provisions, and 

limitations of D1 Baltimore’s Operating Agreement or . . . the Amended Operating 

Agreement.” As a result, the court held that the parties had agreed to arbitration and the 

claims for conversion and declaratory relief should be arbitrated. However, in noting that 

the underlying agreement contained a Tennessee choice of law provision, the trial court 

cited to Frizzell Construction Co., Inc. v. Gatlinburg, L.L.C., 9 S.W.3d 79 (Tenn. 1999), 
- 4 -

and its progeny, and held that “Plaintiffs are entitled to a judicial determination of their 

fraudulent inducement claim.” A timely notice of appeal was thereafter filed in this 

Court by D1 Holdings pursuant to Tennessee Code Annotated section 29-5-319, allowing 

an immediate interlocutory appeal of a decision denying arbitration. 

DISCUSSION

Scope of Appellate Review 

As a preliminary matter, it is necessary to consider the limits of our appellate 

review. See Tenn. R. App. P. 13(b) (“The appellate court shall . . . consider whether the 

trial and appellate court have jurisdiction over the subject matter, whether or not 

presented for review[.]”). Broadly speaking, two general issues are raised for our 

consideration in the present appeal. Whereas Appellant D1 Holdings challenges the trial 

court’s failure to send the fraudulent inducement claim to arbitration, the Appellees 

submit that the trial court’s decision to compel arbitration as to the remaining claims 

should be reversed. In our opinion, the only cognizable issue in this appeal relates to 

whether the trial court erred in declining to send the fraudulent inducement claim to 

arbitration.

In reaching the conclusion that the propriety of the trial court’s decision to compel 

arbitration of claims is beyond our jurisdiction in this appeal, we observe that Tennessee 

Code Annotated section 29-5-319 provides as follows:

(a) An appeal may be taken from:

(1) An order denying an application to compel arbitration made under § 29-

5-303;

(2) An order granting an application to stay arbitration made under § 29-5-

303(b);

(3) An order confirming or denying confirmation of an award;

(4) An order modifying or correcting an award;

(5) An order vacating an award without directing a re-hearing; and

(6) A judgment or decree entered pursuant to this part.

Tenn. Code Ann. § 29-5-319. Although the Appellees concede that an appeal of a grant 

of a motion to compel arbitration “may not be initiated” under this statute, they note that 

the present appeal was initiated by Appellant D1 Holdings. They argue, as a result, this 

allows them to raise their own issues pursuant to the Tennessee Rules of Appellate 

Procedure. Specifically, the Appellees point to Rule 13(a) of the Tennessee Rules of 

Appellate Procedure, which provides that “any question of law may be brought up for 

review and relief by any party.” Tenn. R. App. P. 13(a).
- 5 -

We certainly do not question that the appellate rules of procedure permit an 

appellee to raise his or her own appellate issues in response to an appeal initiated by 

another party. This right, however, has no bearing on whether the raised issues are, in 

fact, amenable to appellate review. If our consideration of an issue would run afoul of a 

jurisdictional prohibition, then we cannot entertain it. 

Here, the Appellees seek to appeal the trial court’s decision to compel certain 

claims to arbitration, but such a right is not afforded pursuant to the appeal provisions of 

Tennessee Code Annotated section 29-5-319. See Peters v. Commonwealth Assocs., No. 

03A01-9508-CV-00295, 1996 WL 93768, at *2-3 (Tenn. Ct. App. Mar. 5, 1996) 

(discussing the limitations of Tennessee Code Annotated section 29-5-319 and noting 

that appeal was premature when litigant sought to challenge the trial court’s order 

compelling arbitration); Blue Water Bay at Center Hill, LLC v. Hasty, No. M2016-02382-

COA-R3-CV, 2017 WL 5665410, at *4 (Tenn. Ct. App. Nov. 27, 2017) (noting that the 

first opportunity the appellant had to challenge the trial court’s prior decision to compel 

arbitration came in an appeal following the trial court’s confirmation of the arbitrator’s 

award). Therefore, we dismiss the appeal of the Appellees. 

Fraudulent Inducement Claim

Turning to D1 Holdings’ appeal, we begin by noting that the merits of the Investor 

Plaintiffs’ fraudulent inducement claim are not before us. We are only concerned with 

whether the trial court erred in denying D1 Holdings’ motion to compel arbitration as to 

that claim. Where, as in this case, the basic facts do not appear to be in dispute, we 

review the denial of a motion to compel arbitration de novo, with no presumption of 

correctness. Wofford v. M.J. Edwards & Sons Funeral Home Inc., 490 S.W.3d 800, 807 

(Tenn. Ct. App. 2015) (citation omitted). 

At its core, arbitration is a matter of contractual consent. Indeed, “[a] party cannot 

be compelled to arbitrate in the absence of a contractual obligation.” River Links at Deer 

Creek, LLC v. Melz, 108 S.W.3d 855, 859-60 (Tenn. Ct. App. 2002) (citations omitted); 

see also Frizzell Constr. Co., Inc., 9 S.W.3d at 84 (“[P]arties may agree that only certain 

issues will be submitted to arbitration or that they will not arbitrate at all.”). As explained 

below, a contractual predicate for arbitration of the fraudulent inducement claim is 

simply absent in this case.

The Investor Plaintiffs’ fraudulent inducement claim involves allegations that “D1 

Holdings intentionally made misrepresentations . . . to the Investor Plaintiffs,” that it 

“knew . . . its misrepresentations . . . were false when made,” and that it intended its 

misrepresentations to “induce the Investor Plaintiffs to enter into the Unit Purchase 

Agreements.” The Investor Plaintiffs’ grievances are thus tied to the Investor Plaintiffs’ 

purchases of membership interests in D1 Baltimore and D1 Holdings’ conduct that 

allegedly induced such purchases. Inasmuch as the Investor Plaintiffs are complaining 
- 6 -

about D1 Holdings’ conduct attendant to the entry of the Unit Purchase Agreements, we 

look to see whether those agreements contain any provisions providing for arbitration of 

disputes arising therefrom or related thereto. Notably, they do not. 

There is no dispute that the Unit Purchase Agreements are themselves devoid of 

any specific arbitration provisions. Yet, the trial court concluded that an agreement to 

arbitrate had been incorporated into those agreements by virtue of a provision that 

provided as follows: “By purchasing the herein contemplated Units, Purchaser agrees to 

be subject to and bound by the terms, conditions, provisions and limitations of this 

Agreement, as well as the Operating Agreement of D1 Sports Training of Baltimore, 

LLC.”1 According to the trial court, such language represented “an unambiguous 

incorporation by reference of the terms, conditions, provisions, and limitations of D1 

Baltimore’s Operating Agreement or, in the case of Melo Enterprises, LLC, the Amended 

Operating Agreement.” Because the referenced operating agreements contained 

arbitration provisions, the trial court reasoned that there had been a “clear expression” to 

submit disputes to mandatory and binding arbitration.2

Having reflected on the trial court’s holding that an arbitration provision was 

incorporated into the purchase agreements, we have come to the conclusion that our view 

of the language cited by the trial court is decidedly different. No doubt, each of the Unit 

Purchase Agreements references the “Operating Agreement” of D1 Baltimore. These 

references, however, do not actually incorporate the terms of the Operating Agreement 

(or amendment thereto) into the Unit Purchase Agreements. The language of the Unit 

Purchase Agreements without question makes the Investor Plaintiffs bound by the 

“Operating Agreement,” but importantly, the language does not state that the terms of the 

“Operating Agreement” are incorporated into or are supposed to inform the Unit 

Purchase Agreements. Properly understood, the purchase agreements merely include an 

obligation to be bound by a separate agreement; they do not evidence an intent that the 

provisions of the referenced separate agreement define and shape the understanding of 

the purchase agreements. 

Certainly, the Unit Purchase Agreements could have contained language whereby 

the arbitration provision of the Operating Agreement properly became a term that 

augmented the meaning and application of the purchase agreements. As the federal 

Eighth Circuit observed in a recent case that applied Tennessee law:

 

1 The language in Melo Enterprises’ Unit Purchase Agreement was only marginally different with 

respect to this provision, as it merely omitted the qualifying phrase “of D1 Sports Training of Baltimore, 

LLC.” 

2 Of course, as has been referenced previously, the trial court ultimately denied the motion to

compel arbitration with respect to the fraudulent inducement claim, stating that “Tennessee courts may 

not delegate fraudulent inducement claims to arbitration when, as here, the underlying agreement contains 

a Tennessee choice of law provision.” 
- 7 -

Contracting parties can incorporate an entire agreement by, for example, 

referring to an attached agreement and saying its “terms” are incorporated 

without specifying the terms, or saying “both parties” are bound by its 

terms. See Staubach Retail Servs.–Se., LLC v. H.G. Hill Realty Co., 160 

S.W.3d 521, 523–25 (Tenn. 2005) (agreement incorporated all terms of a 

brokerage agreement by stating “[t]he terms and provisions of that certain 

Brokerage Agreement, an unexecuted photocopy of which is attached 

hereto ... and incorporated by reference, are incorporated into this Lease 

and made a part hereof” (emphasis in original)); Roger Miller [Music v. 

Sony/ATV Publ’g], 477 F.3d [383,] at 393 [(6th Cir. 2007)] (agreement 

incorporated all terms of Exhibit A, even those not addressing royalties, by 

stating that “the signing of separate [Exhibit A] agreements is hereby 

waived, and the terms and conditions as to royalties and the payment 

thereof shall be deemed part of the main agreement,” where previous 

agreements calling for the execution of Exhibit A agreements stated “both 

[parties] are to be bound by the terms, covenants, and conditions of [the 

Exhibit A agreement] as if herein fully set forth” (emphasis added)).

First Dakota Nat’l Bank v. Eco Energy, LLC, 881 F.3d 615, 618–19 (8th Cir. 2018). 

Here, however, we are of the opinion that there is insufficient language to incorporate the 

arbitration provision of the Operating Agreement into the Unit Purchase Agreements. 

Again, the purchase agreements do not provide that the terms of the Operating 

Agreement are incorporated3into them, nor do the purchase agreements specify that the 

purchasers are bound by additional terms as if set forth therein. The purchase agreements 

simply include the obligation to be bound by a separate agreement, and there is 

insufficient language included to reach the conclusion that the Operating Agreement is to 

be considered a part of the purchase agreements. In other words, although the signatory 

purchaser is deemed to be “subject to” and “bound by” the Operating Agreement by dint 

of the purchaser’s decision and agreement to buy membership interests in D1 Baltimore, 

the purchase agreements do not say that they, the purchase agreements, are actually

subject to such additional terms.

In light of our conclusion that the Unit Purchase Agreements do not contain 

arbitration provisions, whether by incorporation or otherwise, the fraudulent inducement 

claim properly remains subject to judicial determination. The trial court’s ultimate denial

of the motion to compel arbitration of that dispute is therefore affirmed on that basis.

 

3 Elsewhere the Unit Purchase Agreements do specifically incorporate terms of another document 

by reference. In section 5, the Unit Purchase Agreements provide that the Investor Representations and 

Warranties “are incorporated herein by reference.” 
- 8 -

CONCLUSION

Although we do not have jurisdiction to specifically entertain the Appellees’ 

asserted grievances, we affirm the trial court’s holding that the fraudulent inducement 

claim is not arbitrable.

_________________________________

ARNOLD B. GOLDIN, JUDGE