Opinion ID: 714979
Heading Depth: 2
Heading Rank: 2

Heading: Procedural History and Rulings at Issue

Text: 7 In connection with the breach of contract issue, the Defendants asserted in their eighth affirmative defense that Life Care had violated the following provisions of the management agreement: 8 1.1 Control Retained in Board. Owner, acting through its duly elected officers, shall at all times exercise control over the assets and operation of the nursing home and [Life Care] shall perform the duties herein required to be performed by it as the agent of Owner and in accordance with the reasonable policies and directives of Owner. 9 1.2 Methods of Operation. [Life Care] shall make substantial changes in the method of operating the nursing home only after timely notification to, and with consent of Owner. Changes made to conform to governmental laws, regulations and ordinances shall not be deemed substantial for the purposes of this agreement. 10 On March 17, 1993, Life Care filed a motion to strike, in which it challenged the efficacy of the Defendants' eighth affirmative defense. In support of this position, Life Care asserted that it only owed a fiduciary duty to the partnership as a whole--not to the individual partners. The district court agreed, holding that the Defendants had not shown that Life Care's solicitation efforts had violated its fiduciary duty to Charles Town. In its ruling, the district court concluded that the challenged activity of Life Care was not implicated by the solicitation of proxies from the limited partners because the pertinent sections of the management agreement only referred to the methods by which it could implement procedures for its day to day operation of the nursing home. 11 The Defendants asked the district court to reconsider its decision, arguing that (1) the issue of the fiduciary duty of a limited partnership's agent was novel and, thus, should not have been decided on a motion to strike, (2) their eighth affirmative defense was legally sufficient as pleaded, and (3) genuine issues of a material fact remained as to whether Life Care's actions were detrimental to Charles Town and, hence, violative of its fiduciary duty. On August 13, 1993, the Defendants' motion for reconsideration was denied. 12 Acting on the belief that the district court had turned Life Care's motion to strike into a motion for summary judgment without giving them an opportunity to demonstrate that a genuine issue of a material fact existed, the Defendants filed a motion to supplement the record on August 27, 1993. On February 7, 1994, the district court granted their motion, but declared that these additional matters did not create a genuine issue of any material fact to warrant the reversal of its earlier rulings.
13 In one of their affirmative defenses, the Defendants charged Life Care with mismanagement of the Jeffersonian Manor in violation of the management agreement. On February 10, 1994, Life Care filed a motion in limine in which it requested the district court to preclude the Defendants from introducing any evidence of mismanagement, contending that it had neither received any notice of an alleged breach of their management agreement nor had it been given an opportunity to correct any of the perceived deficiencies. The district court granted Life Care's motion in limine in part, and, as a result, precluded the Defendants from introducing any evidence of Life Care's alleged mismanagement. 14
15 Claim of Tortious Interference with a Contract 16 On March 2, 1994, the Defendants filed a motion which sought the entry of a summary judgment as to Life Care's claims of tortious interference with a contract. The Defendants argued that these claims were deficient as a matter of law because, in terminating Life Care as the managing agent, they were acting within the scope of their positions as general partners of Charles Town. The Defendants maintained that they, as agents of Charles Town, were not third parties to the management agreement and could not have tortiously interfered with the contractual relationship about which Life Care complained. In its opposition papers, Life Care contended that a general partner or agent could tortiously interfere with a partnership's contract if the act was committed with legal malice (i.e., not for the benefit of the partnership). Life Care claimed, in part, that the Defendants had failed to show that the termination of its services were in the best interests of Charles Town. 17 The district court granted the Defendants' motion for summary judgment and dismissed Life Care's claims of tortious interference after concluding that the Defendants were not third parties to the management contract inasmuch as they had acted within the scope of their authority as general partners. 2 18
Lack of Personal Liability 19 The Defendants moved for a directed verdict, contending that Life Care had failed to present any evidence during its case in chief that their administrative decisions had been made in bad faith and against Charles Town's best interests. The district court disagreed and, thereafter, denied their motion. 20
Lack of Defenses 21 At the close of the Defendants' case, Life Care moved for a directed verdict on its breach of contract claim. The Defendants had no legal defense to this claim because the district court had (1) held that Life Care's solicitation had not violated any fiduciary duties to Charles Town and (2) precluded them from introducing any evidence in support of their allegation relating to the mismanagement of Jeffersonian Manor. Nevertheless, the Defendants opposed the motion, contending that Life Care had failed to demonstrate that it had fully complied with the management agreement. However, the district court rejected this argument, granted Life Care's motion, and left the issue of damages to be resolved by the jury. 22
23 The Defendants argued that Tennessee law required Life Care to mitigate its damages by accepting their offer of continued employment, which had been conditioned upon its cessation of the bid to become Charles Town's new managing general partner. The district court disagreed and instructed the jury as follows: 24 Life Care was under no obligation to withdraw its solicitation in order to minimize or mitigate its damages, and you may not consider Life Care's refusal to withdraw its solicitation as a basis for reducing any damages to which you find Life Care is entitled.