Opinion ID: 2974777
Heading Depth: 3
Heading Rank: 2

Heading: Tennessee Contract-Law Principles

Text: The Agreement between the parties calls for it to be interpreted according to Tennessee principles of contract law. In interpreting contracts, Tennessee law requires courts to “ascertain the intention of the parties based upon the usual, natural, and ordinary meaning of the contractual language.” Guiliano v. CLEO, Inc., 995 S.W.2d 88, 95 (Tenn. 1999). “If a contract’s language is clear and unambiguous, then the literal meaning of the language controls the outcome of the contract dispute.” Teter v. Republic Parking Sys., 181 S.W.3d 330, 342 (Tenn. 2005). “The courts do not concern themselves with the wisdom or folly of a contract . . . and are not at liberty to relieve parties from contractual obligations simply because these obligations later prove to be burdensome or unwise.” Tenn. Div. of the United Daughters of the Confederacy v. Vanderbilt Univ., 174 S.W.3d 98, 118 (Tenn. Ct. App. 2005) (internal citations omitted). Courts “will not make a new contract for parties who have spoken for themselves.” Id.; see also Braden v. Strong, No. M2004-02369-COAR3-CV, 2006 Tenn. App. LEXIS 104,  (Tenn. Ct. App. Feb. 16, 2006) (stating that courts cannot rewrite contracts for the parties “but can only enforce the contract which the parties themselves have -8- No. 06-5107 Grubb & Ellis/Centennial, Inc. v. Gaedeke Holdings, Ltd. and Gaedeke Landers, LLC made”). 3. Paragraph 8.4 of the Agreement Controls the Resolution of the Parties’ Dispute This case involves a straightforward contract dispute. Paragraph 8.4 of the Agreement says that Gaedeke will pay Grubb & Ellis a commission if, within ninety days of the Agreement’s termination, “the property is leased to, or negotiations continue or resume leading to the execution of a lease with any person or entity with whom [Grubb & Ellis] has negotiated.” These are the only requirements to fulfillment of paragraph 8.4. Moreover, the contractual language does not admit of any exceptions permitting Gaedeke to withhold the payment of a commission, provided that the foregoing requirements are satisfied. See Grubb & Ellis I, 401 F.3d at 774 (referring to paragraph 8.4 and commenting that “[t]he relevant terms of the contract between Gaedeke and Grubb & Ellis leave little room for interpretation regarding the right to a commission after the agreement has ended”). There is no dispute that while the contract was in force, Grubb & Ellis negotiated with Bridgestone, first directly and then in support of Gaedeke’s efforts. There is no dispute that Gaedeke negotiated with Bridgestone during the ninety-day post-termination period, which expired on May 3, 2002. Finally, there is no dispute that Gaedeke successfully executed a lease with Bridgestone on September 6, 2002. Based on these uncontroverted facts, and the plain language of the Agreement, the district court correctly concluded that Grubb & Ellis is entitled to a commission on the lease transaction between Gaedeke and Bridgestone. 4. Gaedeke’s Challenges to the District Court’s Order -9- No. 06-5107 Grubb & Ellis/Centennial, Inc. v. Gaedeke Holdings, Ltd. and Gaedeke Landers, LLC Gaedeke raises several assignments of error, none of which has merit. Each of Gaedeke’s arguments are discussed in turn. a) Gaedeke is Not Relieved of its Obligation to Pay Grubb & Ellis by Virtue of Grubb & Ellis’s Purported Breach of the Agreement As an initial matter, Gaedeke argues that Grubb & Ellis breached its duties under paragraphs 6, 8.1, and 9.1 of the Agreement and that therefore, under Tennessee law, Grubb & Ellis forfeited its right to a commission. These provisions specify the brokerage services that Grubb & Ellis was obliged to provide. Under paragraph 6.1, Grubb & Ellis agreed to market Gaedeke’s rental property to prospective tenants: “Broker agrees to diligently investigate and develop such offers or inquiries, to canvass, solicit and otherwise employ its best efforts and services to lease space in the Building.” Paragraph 8.1 conditions Grubb & Ellis’s receipt of a commission on Grubb & Ellis’s “agreement to professionally use its best efforts to lease space in the Building.” Paragraph 9.1 enumerated Grubb & Ellis’s specific duties, including, among other things, staffing an on-site leasing office with a licensed agent; preparing promotional materials; working with outside brokers who represented prospective tenants; presenting Gaedeke with lease proposals submitted by prospective tenants; and assisting Gaedeke in negotiating and executing leases. According to Gaedeke, once Smith separated from Grubb & Ellis, Grubb & Ellis failed to perform any of its brokerage duties under the Agreement with respect to Bridgestone and other prospective tenants. As a result, Gaedeke was not able to draw on Smith’s expertise and assistance and Gaedeke was left in a materially worse negotiating posture relative to Bridgestone than it would have been in had Smith remained at Grubb & Ellis. - 10 - No. 06-5107 Grubb & Ellis/Centennial, Inc. v. Gaedeke Holdings, Ltd. and Gaedeke Landers, LLC Gaedeke argues that it cannot be held liable for the commission because Grubb & Ellis committed the first material breach of the contract. Gaedeke supports its argument by citing to section 237 of the Restatement (Second) of Contracts, which says that “[a] material failure of performance . . . prevents performance of those duties from becoming due, at least temporarily, and it discharges those duties if it has not been cured during the time in which performance can occur.” Even if Grubb & Ellis breached the Agreement, Gaedeke is still required to pay the commission. As the district court correctly concluded, paragraph 8.4 in no way conditions receipt of the commission upon Grubb & Ellis’s performance of its duties under the contract. Had Gaedeke intended to ensure that Grubb & Ellis could not recover a commission if Grubb & Ellis committed a material breach of the contract, Gaedeke could have drafted paragraph 8.4 to reflect this intention. See Giuliano, 995 S.W. 2d at 95. Gaedeke did not do so, either expressly or implicitly, and this Court is powerless to insert a contractual term into the Agreement, which the plain language of the Agreement forecloses. Braden, 2006 Tenn. App. LEXIS at . Furthermore, Gaedeke’s allegations of a breach are not supported by the record. Gaedeke never notified Grubb & Ellis that it believed Grubb & Ellis had breached the Agreement, nor did it give Grubb & Ellis an opportunity to correct that breach. When Gaedeke informed Grubb & Ellis that it was terminating the Agreement, it stated that it had enjoyed [its] collaboration with Grubb & Ellis,” and that it would give Grubb & Ellis an opportunity to present a new leasing team in Smith’s stead within a few weeks. Neither of these statements is consistent with the view that Grubb & Ellis failed to perform under the Agreement. Similarly, although Grubb & Ellis characterizes Smith as having abdicated his responsibilities to continue to support Gaedeke’s negotiations with Bridgestone, - 11 - No. 06-5107 Grubb & Ellis/Centennial, Inc. v. Gaedeke Holdings, Ltd. and Gaedeke Landers, LLC Gaedeke apparently went to great pains to persuade Smith to continue handling Gaedeke’s brokerage needs by either coming to work directly for Gaedeke as a Gaedeke broker, or by affiliating with another brokerage house of national repute and taking the Gaedeke account there. In short, the record no where reflects contemporaneous charges of breach that Gaedeke now levels against Grubb & Ellis. Finally, because Grubb & Ellis’s purported breach of the Agreement does not relieve Gaedeke of paying a commission, Gaedeke’s argument that Grubb & Ellis may only recover in quantum meruit, i.e., for the value of the work Grubb & Ellis actually performed, is meritless. b) Paragraph 7 Does Not Exempt Gaedeke from Paying Grubb & Ellis a Commission Gaedeke next argues that it is not required to pay a commission to Grubb & Ellis because Bridgestone insisted upon dealing directly with Gaedeke. Gaedeke acknowledges that paragraph 7 of the Agreement preserves Grubb & Ellis’s right to a commission even where Gaedeke conducts negotiations directly with the prospective tenant. Nonetheless, Gaedeke claims that Grubb & Ellis is only entitled to the protection of this provision where Gaedeke intercedes in the negotiations of its own volition, not where Gaedeke is drawn into the negotiations by the insistence of the prospective tenant. This argument borders on the frivolous. The plain language of paragraph 7 does not make the distinction that Gaedeke urges upon this Court. Moreover, Bridgestone is not a party to the Agreement. Bridgestone could not exercise the right of Gaedeke to preempt Grubb & Ellis in the negotiations; only Grubb & Ellis could do that. c) Gaedeke’s Lease with Bridgestone Did Not Result from New Negotiations - 12 - No. 06-5107 Grubb & Ellis/Centennial, Inc. v. Gaedeke Holdings, Ltd. and Gaedeke Landers, LLC Gaedeke next contends that the lease with Bridgestone resulted from totally separate negotiations that did not commence until the ninety-day post-termination period had expired. As proof, Gaedeke argues that the terms of the executed lease were substantively different from those discussed while the Agreement was in effect and during the post-termination period: Whereas the initial negotiations centered on Gaedeke’s purchasing Bridgestone’s buildings and Bridgestone renewing and expanding its lease in Highland Ridge I, the terms of the July 3, 2002 letter of intent executed by Gaedeke and Bridgestone instead entailed Bridgestone’s leasing space exclusively in The Tower and arranging a sub-lease with the TVA. Thus, according to Gaedeke, the lease that was ultimately agreed to had nothing to do with the negotiations that were underway during the pendency of the Agreement and during the post-termination period. Once again, the plain language of the Agreement contradicts Gaedeke’s argument. Paragraph 8.4 simply says that Grubb & Ellis is entitled to a commission if a lease is either executed within ninety days of the termination of the Agreement, or if negotiations “continue or resume leading to the execution of a lease” during this period. There is no dispute that the lease was executed after the ninety-day post-termination period but only a question as to whether the negotiations “continued” during this period. Even if Gaedeke is right that the negotiations stalled in mid-March 2002 and did not re-start until May, after the expiration of the ninety-day post-termination period, the negotiations that occurred during the post-termination period ultimately culminated in the execution of the lease. This is sufficient to entitle Grubb & Ellis to a commission. Moreover, paragraph 8.4 does not extinguish Grubb & Ellis’s right to a commission just because the negotiations altered in character - 13 - No. 06-5107 Grubb & Ellis/Centennial, Inc. v. Gaedeke Holdings, Ltd. and Gaedeke Landers, LLC or substance over time. Indeed, it would contradict the meaning of the word “negotiations,” which signifies trade-offs and compromise, if the Agreement conditioned the receipt of a commission upon the substance of the negotiations remaining static. See Merriam Webster’s Collegiate Dictionary, 10th ed. (1995) (defining “negotiate” as “to arrange for or bring about through conference, discussion, and compromise”). In addition to the plain language of the Agreement not supporting Gaedeke’s “new” negotiations argument, the record does not substantiate it. The record shows that Gaedeke rejected the idea of purchasing Bridgestone’s buildings before the end of the ninety-day post-termination period. In fact, proposals circulated by Bridgestone and Gaedeke on January 21, 2002, February 15, 2002, and March 12, 2002 make no mention of Gaedeke acquiring Bridgestone’s buildings. Similarly, discussions about Bridgestone entering into a sublease with the TVA first occurred during, not after, the expiration of the ninety-day post-termination period. In an email dated February 28, 2002, Bridgestone broker Cherry asked Gaedeke to be prepared to discuss how much space Bridgestone could take over from the TVA. The TVA sublease is also referenced in emails dated April 19, 2002 and April 24, 2002. Thus, the facts simply do not support the proposition that the terms that ultimately comprised the executed lease did not surface until after the ninety-day posttermination period had run. d) Paragraph 8.4 Does Not Contain a Time Limitation and There is no Basis Upon Which This Court Could Engraft Such a Limitation onto this Provision Gaedeke next argues that the district court’s ruling has the perverse consequence of enabling Grubb & Ellis to obtain a commission “into perpetuity.” Gaedeke asks this Court to read a - 14 - No. 06-5107 Grubb & Ellis/Centennial, Inc. v. Gaedeke Holdings, Ltd. and Gaedeke Landers, LLC reasonable time limitation into paragraph 8.4, such that if its lease with Bridgestone was not executed within this reasonable time, Grubb & Ellis would not be entitled to a commission. Conveniently, Gaedeke defines a “reasonable time” as ninety days. Gaedeke’s argument is unavailing. Its preferred reading of paragraph 8.4 defies that provision’s plain language, which, by its terms, sets no outside boundaries beyond which Grubb & Ellis is precluded from receiving a commission. To read a ninety-day limitation into paragraph 8.4 would violate this Court’s duty to refrain from re-writing the parties’ contract and would eviscerate paragraph 8.4’s command that Grubb & Ellis is entitled to a commission so long as the negotiations “continue[d] or resume[d]” within ninety days of the Agreement’s termination. Confronted with a losing hand under the plain language of paragraph 8.4, Gaedeke cites to this Court’s interpretation in Grubb & Ellis I of the Tennessee Supreme Court’s memorandum opinion in Marx & Bensdorf, Inc. v. Hall as support. Grubb & Ellis I considered Marx & Bensdorf solely to determine whether Tennessee law required Grubb & Ellis to be a “procuring cause” of Gaedeke’s lease with Bridgestone in order to recover a commission. Grubb & Ellis I did not rule that contractual terms that allow brokers to collect commissions on deals consummated after the termination of the contract, and that do not impose any deadlines for doing so, are impermissible. Moreover, nothing in Marx & Bensdorf itself suggests that courts should modify contractual language to impute a reasonable time limitation into brokerage contracts that are silent with respect to how long after the expiration of the contract a broker is entitled to a commission. For the foregoing reasons, we affirm the grant of summary judgment to Grubb & Ellis. B. The Pre-Judgment Interest and Attorneys’ Fees Award - 15 - No. 06-5107 Grubb & Ellis/Centennial, Inc. v. Gaedeke Holdings, Ltd. and Gaedeke Landers, LLC In a Report and Recommendation dated December 22, 2005, the magistrate judge awarded Grubb & Ellis a commission of $270,254.46, pre-judgment interest of $49,634.21, and attorneys’ fees and expenses of $109,253.56. In an order entered on January 6, 2006, the district judge adopted