Court Opinion

ID: 9901350
Source: CourtListenerOpinion
Date Created: 2023-11-21 17:15:16.344465+00
Date Added: 2024-06-11T09:21:31.289853
License: Public Domain

11/20/2023
                IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                                  June 22, 2023 Session

    BENJAMIN L. FOLKINS ET AL. v. HEALTHCARE GROUP (HONG
                  KONG) CO., LIMITED ET AL.

                Appeal from the Chancery Court for Hamilton County
                     No. 17-0175       Kyle E. Hedrick, Judge
                      ___________________________________

                            No. E2022-00264-COA-R3-CV
                        ___________________________________

The defendants appeal a jury verdict rendered after several days of trial. The parties are
former business associates, individuals and entities, who worked together in the
manufacturing, importing, distribution, and sale of memory foam mattresses. When one
of the plaintiffs withdrew from the business in 2016, he invoked a buyout provision in the
parties’ operating agreement. The defendants disputed, among other things, the validity of
the operating agreement and refused to pay the buyout. A protracted dispute followed,
with both the plaintiffs and the defendants alleging several causes of action against one
another. Following cross-motions for summary judgment in 2020, the trial court ruled that
the operating agreement was not invalid for fraud or unconscionability. The case
proceeded to trial on August 3, 2021. The trial lasted several days, and the jury returned a
verdict largely in favor of the plaintiffs. The plaintiffs were awarded compensatory and
punitive damages, as well as almost a million dollars in attorney’s fees. The defendants
appealed to this Court, raising a host of issues. We conclude, however, that the trial court
erred in refusing to grant the defendants a mistrial on the first day of trial. For the reasons
stated herein, we vacate the jury’s verdict and the trial court’s judgment entered in this
matter and remand the case for a new trial.

 Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Vacated;
                                 Case Remanded

KRISTI M. DAVIS, J., delivered the opinion of the Court, in which JOHN W. MCCLARTY and
THOMAS R. FRIERSON, II, JJ., joined.

W. Neil Thomas, III, and Michael M. Thomas, Chattanooga, Tennessee, for the appellant,
China Beds Direct, LLC.

A. Philip Lomonaco, Lenoir City, Tennessee, for the appellant, Healthcare Company
Limited.
Robin Ruben Flores, Chattanooga, Tennessee, for the appellant, Healthcare Group (Hong
Kong) Co., Limited.

George T. Lewis, Memphis, Tennessee, and Nicholas W. Diegel, Knoxville, Tennessee,
for the appellant, Zhanggen (James) Ni.

Gary R. Patrick, Susie Lodico, Cara J. Alday, and McKinley S. Lundy, Jr., Chattanooga,
Tennessee, for the appellees, Benjamin L. Folkins and Upward Mobility, Inc.

                                       OPINION

                                      BACKGROUND

       This case arises from a business divorce. Ben Folkins and his wife, Andrea Folkins,
have worked in mattress sales and distribution for many years. Their Tennessee-based
business is Upward Mobility, Inc. d/b/a Bed Boss (“Bed Boss”). In approximately 2009,
Bed Boss began ordering its mattresses from Healthcare Company, Limited (“Healthcare
Co.”), a manufacturer in China. At that time, Zhanggen “James” Ni (hereinafter, “Ni”)
owned Healthcare Co., and it was not a publicly traded corporation. Ni’s memory foam
pillow and mattress line, MLILY, was already successful in China and Europe but lacked
presence in the United States market. After meeting in 2009, Ni and Mr. Folkins decided
to go into business together to bring MLILY mattresses to the United States. While Ni
handled manufacturing, Mr. Folkins spearheaded the marketing and distribution of MLILY
in the United States.

       Healthcare Group (Hong Kong) Co., Ltd. (“Group”) is a wholly owned subsidiary
of Healthcare Co. Ni describes Group as a holding company and investment platform that
made it easier for Ni to manufacture and export mattresses made by Healthcare Co. to the
United States. When Ni and Mr. Folkins decided to go into business together, they did so
by forming China Beds Direct, LLC (“CBD”). Group and Mr. Folkins were CBD’s only
members. Mr. Folkins contributed $45,000 and initially had a 45% membership interest
in CBD, while Group contributed $55,000 and had a 55% membership interest in CBD. In
2011, the parties signed an operating agreement drafted by Mr. Folkins. Early in their
relationship, Ni explained that he wished to take Healthcare Co. public on the Shanghai
Stock Exchange and that CBD’s success would help with Healthcare Co.’s initial public
offering (“IPO”). Accordingly, CBD’s financial success was very important.

       CBD earned approximately 2.5 million dollars in profits in its first year and
approximately 6.9 million dollars in profits in 2013. In order to make CBD and MLILY a
quick success, Mr. Folkins diverted a lot of resources from his own mattress business, Bed
Boss, to CBD. For example, Mr. Folkins persuaded various Bed Boss customers to
purchase from CBD, and CBD used Bed Boss’s United States Customs and Border
Protection and FedEx accounts to efficiently import products from China. CBD also
                                           -2-
utilized Bed Boss employees. Healthcare Co. produced mattresses for both CBD and Bed
Boss, and Ni ensured that CBD had favorable payment terms so CBD could turn a profit
quickly.

        Although CBD was successful and the parties worked together with relative ease
for a few years, problems eventually arose. According to Mrs. Folkins, Ni and Healthcare
Co. unfairly competed with CBD by selling MLILY and/or MLILY knockoffs in CBD’s
target markets. This angered CBD’s distributors and put the Folkinses in a difficult
position. Nonetheless, the parties soldiered on. At some point prior to 2015, Ni asked Mr.
Folkins to hire an attorney to draft an opinion letter about CBD in preparation for
Healthcare Co.’s IPO. Mr. Folkins hired Tennessee attorney John Huisman (“Mr.
Huisman”), with whom Mr. Folkins had an existing relationship, in December of 2015.
Mr. Huisman advised Mr. Folkins that CBD’s operating agreement needed updating
because, inter alia, the CBD operating agreement referred to Ni and Mr. Folkins as
partners, when CBD was a member-managed LLC.

       Mr. Huisman drafted a new operating agreement for CBD (the “2016 operating
agreement”) and sent it to Mr. Folkins on January 7, 2016. Mr. Folkins signed the 2016
operating agreement, and Mr. Huisman then emailed it to Ni for his signature. Mr. Folkins
and Healthcare Co. employees were included as recipients on the email. Ni dated the 2016
operating agreement January 9, 2016, and signed his name along with a stamp labeled
“Healthcare Co., Ltd.” Although the 2016 operating agreement bears Ni’s signature, it is
undisputed that Ni did not actually read the contract.

       According to Mrs. Folkins’ testimony, as Healthcare Co.’s IPO approached in the
fall of 2016, Healthcare Co. continued selling MLILY knockoffs, angering CBD’s
distributors. As CBD’s distributors continued complaining to Mr. Folkins about their
prices being undercut by MLILY knockoffs and market competition by Healthcare Co.,
tension between the parties came to a head. The parties hit an impasse in the fall of 2016.
In October of 2016, Group purchased ten percent of Mr. Folkins’ membership interest in
CBD for a million dollars, shifting the ownership split in Group’s favor. As part of the
transaction, Mr. Folkins and Ni entered into a purchase agreement (the “2016 stock
agreement”). Around the same time, Healthcare Co. launched its IPO on the public market.

        In addition to the hostilities over Healthcare Co.’s competition with CBD, tensions
also flared over new business demands made by Ni. Specifically, in 2016, Ni demanded
that CBD pay Healthcare Co. on quicker payment terms, stating in a message to Mr. Folkins
that CBD needed to grow by itself. Ni also explained that CBD had to raise its prices to
its distributors by three to five percent, increase the number of mattresses CBD bought
from Healthcare Co. every month, and triple CBD’s profits within a year. According to
Mr. Folkins, these terms caused him and Mrs. Folkins great stress and created further

                                           -3-
problems with CBD’s distributors. On the other hand, Ni maintained at trial that the price
of raw materials increased significantly in 2016.

       In a letter drafted by Mr. Huisman dated December 8, 2016, Mr. Folkins informed
Ni that Mr. Folkins was withdrawing as a member of CBD effective September 31, 2017.
The letter also reserved Mr. Folkins’ rights under a membership buyout provision in the
2016 operating agreement, which provides:

       5.6 Mandatory Offer on Withdrawal. On the Withdrawal of any Member
       (“Withdrawing Member”), the remaining Member(s) shall purchase the
       Shares of the Withdrawn Member on a pro rata basis. The purchase price
       shall be payable by the delivery of 25% of the purchase price, in cash, at the
       closing, with the unpaid balance of the purchase price payable over three (3)
       years. The unpaid balance of the purchase price shall be evidenced by a
       promissory note of the purchaser(s) that shall provide for commercially
       reasonable terms and provisions, including security. The purchase price to be
       paid at the time of the death or withdrawal of a Member shall be five times
       the average of the two highest years of net earnings of the Company over the
       immediately preceding five year period.

        As a result, Ni ceased Healthcare Co.’s shipping of products to CBD. This upset
CBD distributors who no longer had access to MLILY products. CBD’s vice president
testified there was a breakdown in communication with the Healthcare Co. factory in China
following Mr. Folkins’ letter. In a February 7, 2017 email to CBD distributors and
employees, Ni admitted to stopping orders from Healthcare Co. to CBD but said that the
stoppage was because of Mr. Folkins. In response, Mr. Folkins decided to leave CBD
effective immediately instead of staying on until September of 2017; accordingly, he sent
an email to Ni on February 7, 2017, resigning. While Mr. Folkins maintained that he was
entitled to over three million dollars pursuant to the buyout provision of the 2016 operating
agreement, Group did not pay.

       Mr. Folkins and Bed Boss (hereinafter collectively “Plaintiffs” or “Appellees”) filed
suit against Ni, Healthcare Co., and Group on March 17, 2017. Mr. Folkins sought to
enforce the buyout provision of the 2016 operating agreement, claiming that Group owed
him $3,122,500. Plaintiffs also alleged claims for unjust enrichment, breach of contract as
to a separate distribution agreement, breach of fiduciary duties owed to CBD, intentional
interference with business relationships, procurement of breach of contract, defamation,
and conversion. Plaintiffs alleged that punitive damages were appropriate and that Mr.
Folkins was entitled to recover his attorney’s fees pursuant to another provision in the 2016
operating agreement.

                                            -4-
         Ni, Healthcare Co., and Group answered and countersued Plaintiffs in October of
2017, adding Mrs. Folkins as a third-party defendant.1 The parties engaged in protracted
litigation, with both sides filing voluminous motions and several amended complaints.
Plaintiffs filed their operative complaint on July 17, 2020. Therein, Plaintiffs alleged
claims for breach of contract, unjust enrichment, intentional interference with business
relationships, procurement of breach of contract, and conversion. Plaintiffs also alleged
that the corporate veil should be pierced as to Healthcare Co., Ni, and Group, asserting that
“[a]t the time of the events and transactions described above, Healthcare Co. and/or Ni
dominated and controlled both [Group’s] finances and its policy and business practices
relating to the transactions so that [Group] had no separate mind, will, or existence of its
own.”

        Healthcare Co., Group, Ni, and CBD2 (hereinafter collectively “Defendants” or
“Appellants”) answered and also filed counter-complaints. Initially, Ni and Healthcare Co.
alleged claims for breach of fiduciary duty, conversion, fraud, and unjust enrichment.
Group and CBD alleged claims for conversion, unjust enrichment, civil conspiracy, and
breach of fiduciary duty. Defendants thereafter filed several amended complaints, the
operative complaint filed January 13, 2020.3 Therein, Healthcare Co., Ni, Group, and CBD
alleged claims against Mr. Folkins and Bed Boss for breach of fiduciary duty, conversion,
breach of contract, tortious interference with contractual relationships, fraud, and civil
conspiracy.

      In the interim, the parties disputed the validity of the 2016 operating agreement
through cross-motions for summary judgment. Defendants claimed that Mr. Folkins, in

        1
         All claims against Mrs. Folkins were later dismissed, and she is not a party to this appeal. Mr.
Huisman was also sued by the defendants at one point in the litigation but was later dismissed. For ease
and brevity, discussion of the litigation involving Mrs. Folkins and Mr. Huisman is largely omitted.
        2
         Mr. Folkins originally brought derivative claims on behalf of CBD; however, those were later
dismissed in an order entered December 23, 2020.
        3
           The many amended answers and amended counter-complaints filed by various combinations of
the Defendants render the record difficult to parse. Compounding the confusion is the fact that Defendants
have, at various times, been represented by different combinations of counsel, as well as the fact that both
Plaintiffs and Defendants initially brought claims on behalf of CBD. The counter-complaint filed on
January 13, 2020, was brought by Ni, Healthcare Co., Group, and CBD. Defendants sought and received
the trial court’s permission to file this complaint. Defendants sought to amend their complaint again on
November 6, 2020, specifically seeking leave to file their third amended counter-complaint. No order on
this request appears in the record, however. Defendants then filed a successive motion to amend several
months later, on March 31, 2021, attempting to add antitrust claims. The trial court denied this request in
an order entered May 5, 2021, concluding that it was far too late for another amendment. Consequently,
the last counter-complaint filed by Defendants for which they had the requisite leave to amend was the
complaint filed January 13, 2020. As best we can discern from the arduous record, the January 13, 2020
counter-complaint is the Defendants’ operative complaint.

                                                   -5-
concert with Mr. Huisman, fraudulently induced Ni to sign the 2016 operating agreement.
According to Defendants, this was part of a larger scheme by Mr. Folkins to obtain a
substantial buyout upon his later withdrawal from CBD.

        Emails in the record establish that Mr. Huisman sent a copy of the 2016 operating
agreement first to Mr. Folkins. Upon receiving Mr. Folkins’ approval, Mr. Huisman then
sent the agreement to Ni and several of Ni’s employees. Ni testified in depositions that he
did not read the 2016 operating agreement and opined at trial that he did not do so because
he trusted Mr. Folkins. Accordingly, on November 2, 2020, Plaintiffs filed a motion for
partial summary judgment asking the trial court to determine that the buyout provision of
the 2016 operating agreement was valid and not void due to fraud. Plaintiffs asserted that
Ni was foreclosed from claiming that the 2016 operating agreement was entered into
fraudulently because Ni admitted to signing without reading it. Plaintiffs argued that
“[p]arties who sign contracts cannot disclaim their obligations simply because they failed
to read them, nor can they claim fraud to escape liability when the alleged undisclosed fact
is an unhidden provision in the contract.” Plaintiffs also challenged Defendants’ contention
that the buyout provision rendered the 2016 operating agreement unconscionable, noting
that “it is a mutually applicable clause that was signed by sophisticated businessmen in a
contract that Ni was not forced to accept as written.”

       Defendants filed their own motion for summary judgment on November 12, 2020,
claiming that Ni, individually, was not a party to the 2016 operating agreement and that
the agreement was invalid “as a matter of law based upon the misconduct of Plaintiffs and
[Mr.] Huisman, which rendered the operating agreement and the distribution agreement at
issue in this matter unconscionable and thus void.” Defendants also responded to
Plaintiffs’ motion on December 17, 2020. Generally, they maintained that genuine disputes
of material fact remained regarding whether Mr. Folkins fraudulently induced Ni, on behalf
of Group, to sign the 2016 operating agreement. Additionally, Defendants claimed that
ambiguity in the buyout provision rendered summary judgment inappropriate. They also
claimed that the September 21, 2016 stock sale agreement supplanted the buyout provision
and settled in full Mr. Folkins’ claim to any buyout upon withdrawal, arguing as follows:

       When he executed the Membership Purchase Agreement, [Mr.] Folkins
       agreed that the terms of the Membership Purchase Agreement would replace,
       supplant and invalidate the Withdrawing Member Buyout Provision
       contained in the 2016 Operating Agreement. Accordingly, [Mr.] Folkins no
       longer has any legal basis for seeking to enforce the Withdrawing Member
       Buyout Provision.

       *      *      *

                                            -6-
       [T]he parties confirmed their understanding and agreement that [Mr.] Folkins
       would not receive any further payment from [Group] in exchange for the
       transfer of his remaining membership interest in CBD and that any
       sale/transfer provision contained in any prior agreement of the parties was
       null and void:

           E. This Agreement contains the entire agreement between the parties
           regarding the sale of CBD ownership interest. All prior understanding,
           agreements, promises and representation are of no force or effect,
           except as specifically set forth in this Agreement.

(Footnote omitted).

        The trial court held a hearing on the motions for summary judgment on December
21, 2020. An order was entered by the trial court on January 19, 2021, granting Plaintiffs’
motion for partial summary judgment. The trial court noted that Ni admitted to receiving,
but not reading, the 2016 operating agreement and determined that the agreement was
neither fraudulently induced nor unconscionable. The trial court did not address
Defendants’ argument regarding the September 21, 2016 stock purchase agreement.
Accordingly, Group filed a motion asking the trial court to reconsider its ruling, which the
trial court denied. Then, on May 3, 2021, Group filed its own motion for partial summary
judgment “on [the] issue of accord and satisfaction.” Group reiterated the argument that
the 2016 stock purchase agreement rendered the buyout provision of no effect, again
pointing to language in the stock purchase agreement:

               The Sale Agreement drafted by Huisman states at paragraph 5 “This
       agreement contains the entire agreement between the parties regarding the
       sale of CBD ownership interest. All prior understandings, agreements,
       promises and representations are of no force and effect except as specifically
       set forth in this agreement.”

       *       *      *

       Section 5.6 of the Operating Agreement was a prior, understanding,
       agreement, promise and representation regarding the sale of CBD ownership
       interest. However, the Sale Agreement rendered § 5.6 of the Operating
       Agreement a clause without any force and effect.

While the full transcript does not appear in the record, the trial court held a hearing on
Group’s motion on June 11, 2021. The trial court entered an order denying said motion on
July 13, 2021. In pertinent part, this order provides:

                                            -7-
       This Court received and reviewed the Defendants’ motion and statement of
       undisputed material facts as well as the Plaintiffs’ response in opposing and
       response to the statement of undisputed material facts. This Court also heard
       and considered argument of counsel and reviewed the record as a whole. The
       Court finds that there is no written document reflecting the Defendants’ claim
       for accord and satisfaction, there is a sale agreement and a resolution of CBD,
       neither of which mention any accord and satisfaction, and there is a prior
       acknowledgement by the Defendants that there is a question of fact
       related to any claim for accord and satisfaction. Based on these findings,
       set forth in more detail in the transcript of the Court’s ruling attached hereto
       as Exhibit A, it is hereby

             ORDERED that the Defendants’ Motion for Summary Judgment
       based on accord and satisfaction is denied.

(Emphasis added).

Trial was set for August 3, 2021, and the parties filed pre-trial briefs in preparation for
same. The parties acknowledged that accord and satisfaction was an issue for trial,
Plaintiffs opining in their brief filed July 27, 2021, as follows:

       The Court has already ruled as a matter of law that Section 5.6 of the 2016
       Operating Agreement, which governs the withdrawal of [CBD’s] members,
       is enforceable. Therefore[,] the only issues remaining on [Mr.] Folkins’
       claim for breach of that contract are, (1) the sum of the buy-out to which
       [Mr.] Folkins is entitled, and (2) whether the Defendants’ theory of
       accord and satisfaction is applicable and, if so, whether [Mr.] Folkins’
       buy-out should be reduced on account of that theory.

(Emphasis added).

       Trial began as scheduled on August 3, 2021, and problems quickly arose. During
opening statements, counsel for Healthcare Co. and Ni addressed Defendants’ accord and
satisfaction argument, explaining that

       [I]n September of 2016, James Ni met Andrea Folkins, Ben Folkins, and John
       Huisman, the attorney, in the back yard of Ben Folkins’s yard, and he agreed
       to give them a million dollars. The agreement states that this makes all prior
       agreements null and void.

Plaintiffs’ counsel objected and, outside the presence of the jury, the trial court held a long,
confusing colloquy with all parties’ counsel regarding whether accord and satisfaction was

                                             -8-
actually a question at issue for the jury. After asking the parties to re-submit the pertinent
filings and orders for the trial court’s review, the trial court at one point conceded that it
had never ruled on accord and satisfaction:

       THE COURT: So here is -- here is where we are and this is what the Court
       is going to do as follows: Number one, accord and satisfaction is available as
       a defense because it has never been ruled out by this Court.

Later in the same bench conference, however, the following exchange occurred:

       MR. FLORES: Okay. Judge, so just so I’m clear, does the purchase
       agreement in toto go to the jury? Is any of it going to be extracted out,
       redacted, or anything?

       THE COURT: I don’t even know what you’re asking me.

       MR. FLORES: Okay.

       THE COURT: The purchase agreement is a document in this case.

       MR. FLORES: Okay.

       THE COURT: But you cannot argue that the purchase agreement is a
       satisfaction of 5.6.

       MR. NEIL THOMAS: I thought he just said we could.

       THE COURT: No, I did not say that. I have never -- there is no -- the purchase
       agreement is clear on its face. The only thing under the purchase agreement
       that was exchanged is 100 units for a million dollars, not 100 units for an
       accord and satisfaction of 5.6.

       MR. FLORES: Well, we’re right back to square one, then, Judge. So I --

       THE COURT: Well, that’s just -- listen, you can take that up to the Court of
       Appeals.

       MR. NEIL THOMAS: I know, but --

       MR. LOMONACO: Can we do it right now?

                                            -9-
MR. NEIL THOMAS: -- I’m sorry. I thought you just said, I wrote down, we
can argue that the purchase agreement is a satisfaction of 5.6.

THE COURT: No. I never said that.

MR. NEIL THOMAS: Well, my hearing --

THE COURT: I have stated so many times the purchase agreement is
unambiguous. There was no merger of 5.6 into the purchase agreement. The
purchase agreement was a sale according to the clear language of 100 units
for a million dollars and it so states. And the Court has already ruled that the
purchase agreement may not be used to say that this was a purchase of 450
shares or that it’s a satisfaction of 450 shares because it was a purchase of
100 shares.

Later still during this exchange, the following:

THE COURT: All right. Now, having said all of that, the last thing we’re
going to do is we’re going to bring the jury in. I’m going to instruct them
with regard to the statement that was made of null and void and that that was
simply a misstatement, that the argument is that 5.6 was satisfied, not that it
was null and void and that’s all the Court is going to say.

MR. PATRICK: And, Your Honor, I think I requested --

THE COURT: And that 5.6 is valid and binding and the question is not
whether or not it’s not null and void, but whether or not it’s been satisfied
and the argument that was intended to be made was that it was satisfied.

MR. PATRICK: Thank you.

MR. FLORES: Okay. Judge, we’re now back to whether it’s satisfied or not.

THE COURT: No. We’re back to what he was arguing. All I’m trying to do
is -- and if you want to make a suggestion as to a curative instruction, I’m
happy to hear it, but he made an argument that it was null and void. Now, I
can just simply say that was an inappropriate statement and it’s stricken. The
only reason I was putting in the other was to lessen the blow on the curative
instruction.

MR. NEIL THOMAS: But I thought you just said that the issue is whether
5.6 is satisfied. I thought that’s what you just said.

                                     - 10 -
       THE COURT: Well, what I’m saying is he was speaking to that, whether or
       not 5.6 was satisfied, not whether it was null and void. That’s all he was
       saying on his opening statement.

        All of the Defendants moved for a mistrial, arguing that their case was severely
prejudiced by the trial court’s ruling. Defendants pointed out that a large portion of their
case was prepared around the understanding that accord and satisfaction was an issue for
trial, noting that even Plaintiffs proceeded up to the first day of trial with the same
understanding. The trial court did not grant a mistrial and instead gave the jury a curative
instruction to disregard counsel’s statement that section 5.6 was null and void. Trial
proceeded and the jury heard from several witnesses, including Mr. and Mrs. Folkins, Ni,
various current and former CBD and Bed Boss employees, CBD distributors, and forensic
accountants. Defendants were excluded from arguing or putting forth proof that the
September 2016 stock purchase was an accord and satisfaction of the section 5.6 buyout
provision in the 2016 operating agreement.

         The trial lasted over a week. Following deliberations, the jury returned its verdict,
finding largely in favor of Plaintiffs. In relevant part, the jury found that the corporate veil
should be pierced as to Group, Healthcare Co., and Ni; Group breached the 2016 operating
agreement by refusing to pay Mr. Folkins pursuant to the buyout provision; Defendants
intentionally interfered with Bed Boss’s business relationships; CBD was unjustly enriched
at Bed Boss’s expense; Defendants acted intentionally or maliciously; and Bed Boss owed
CBD over a million dollars for unpaid goods shipped to Bed Boss. The trial court entered
a final judgment on August 30, 2021. Defendants then timely filed motions for new trial
and judgment notwithstanding the verdict and engaged in further litigation regarding
attorney’s fees in front of a special master. On February 8, 2022, the trial court entered an
amended final judgment adopting the special master’s report and awarding Mr. Folkins
$977,634 in attorney’s fees and $74,744 in litigation expenses. The trial court also assessed
$11,516,067.58 in punitive damages against Healthcare Co. and Ni. Defendants timely
appealed to this Court.

                                               ISSUES

       The parties raise several issues on appeal, which are restated slightly.
       Ni presents the following issues for review:

   1. Whether the trial court erred in denying Ni’s motion for directed verdict and new
      trial where

           a. Plaintiffs provided no evidence to support piercing the corporate veil of any
              entity in which Ni was a shareholder.

                                             - 11 -
      b. Plaintiffs provided no proof at trial establishing that Ni’s conduct caused
         distributors to terminate their business relationships with Bed Boss.

2. Whether the jury’s finding regarding veil piercing must be reversed where the
   verdict form made a finding of veil piercing mandatory.

3. Whether the admission of Plaintiffs’ expert’s testimony on causation was erroneous
   and requires new trial.

4. Whether the trial court erred in awarding punitive damages against Ni because the
   verdict was not supported by clear and convincing evidence as required by
   Tennessee law.

5. Whether the punitive damages verdict was entered against the wrong defendant.

6. Whether the punitive damages verdict was also entered as to the wrong plaintiff.

7. Whether the jury verdict form itself is internally inconsistent and demonstrative of
   jury confusion.

8. Whether the Tennessee punitive damages statute was misapplied.

9. Whether, as calculated and as applied, the punitive damages verdict was
   unconstitutional.

10. Whether the jury’s verdict was tainted by the inclusion of an erroneous jury
    instruction in the jury charge, the inclusion of which was procured by
    misrepresentation.

   CBD presents the following issues:

11. Whether any claim of interference by Bed Boss against CBD was pled.

12. Whether the claim of interference by Bed Boss against CBD was supported by proof
    of causation.

13. Whether the language of the 2016 operating agreement permits a claim for
    attorney’s fees by one member of a limited liability company against another
    member of the limited liability company based upon an individual claim of that
    member not involving a claim by or against the limited liability company.

                                        - 12 -
   14. Whether the calculation of attorney’s fees by the court below was flawed because

          a. The court awarded attorney’s fees to Bed Boss for fees it never paid; and

          b. The court failed to segregate reimbursable fees from non-reimbursable fees.

       Group raises the following issues for review:

   15. Whether the trial court erred in granting partial summary judgment to Mr. Folkins
       on Group’s defense that Mr. Folkins fraudulently induced the buyout provision as
       part of an overall scheme of fraud when evidence of fraud was abundant in the
       record.

   16. Whether the trial court’s last-minute rulings reversing itself at trial regarding accord
       and satisfaction, which stripped Group of any defense on the buyout, require a
       mistrial.

   17. Whether the trial court improperly altered the jury verdict form when it sua sponte
       set a start date for the interest on the damages.

   18. Whether the trial court erred when it refused to allow a jury charge on “absurd
       result” when there was evidence at trial to support such a jury charge.

   19. Whether the trial court’s refusal to conduct a McDaniel Hearing, and its decisions
       not to exclude Plaintiffs’ expert, which allowed impermissible expert testimony,
       constitutes reversible error.

       Healthcare Co. presents the following issues for review:

   20. Whether the trial court erred in piercing the corporate veils of Co-Defendants’
       businesses to reach Defendant/Appellant Healthcare Co.

   21. Whether the trial court erred in failing to declare a mistrial after its ruling on and
       handling of Defendants/Appellants’ accord and satisfaction defense.

   22. Whether the trial court erred by awarding breach of warranty damages against
       Healthcare Co.

      In his posture as appellee, Mr. Folkins raises the issue of whether he should be
awarded attorney’s fees on appeal under the indemnity clause in CBD’s operating
agreement, which the trial court relied upon to award Mr. Folkins his attorney’s fees below.

                                            - 13 -
                                            DISCUSSION

       This case was tried by a jury. The standard of review for a jury’s findings is
well-settled:

       Regarding the review of a trial by jury, we have previously explained that
       [w]ith the constitutional underpinning of the right to a jury trial framing the
       appellate process, Tennessee Rule of Appellate Procedure 13(d) narrowly
       limits the role of appellate courts in reviewing the factual findings of a jury.
       Duran v. Hyundai Motor Am., Inc., 271 S.W.3d 178, 204 (Tenn. Ct. App.
       [2008]). When the factual foundation of a jury verdict is challenged on
       appeal, it will only be set aside when there is no material evidence to support
       it. Tenn. R. App. P. 13(d). Nevertheless, we review the trial court’s
       conclusions of law de novo with no presumption of correctness. See Elchlepp
       v. Hatfield, 294 S.W.3d 146, 149 (Tenn. Ct. App. 2008).

Smith v. Benihana Nat’l Corp., 592 S.W.3d 864, 869 (Tenn. Ct. App. 2019) (quoting In re
Estate of Link, 542 S.W.3d 438, 451 (Tenn. Ct. App. 2017)). While Defendants raise
several issues on appeal regarding the ultimate verdict in this case, we have determined
that a more threshold issue is dispositive. We therefore first address the issue regarding
the trial court’s handling of Defendants’ accord and satisfaction defense, which is raised as
an issue by both Healthcare Co. and Group.

        As discussed at length above, the trial court determined on the first day of trial that
accord and satisfaction of section 5.6 of the 2016 operating agreement was not an issue for
the jury. Defendants moved for a mistrial, which the trial court denied. Whether to grant
a mistrial is well within the discretion of the trial court, and the decision will not be
overturned unless the trial court abused that discretion. DeLapp v. Pratt, 152 S.W.3d 530,
539 (Tenn. Ct. App. 2004) (citing State v. Dellinger, 79 S.W.3d 458, 494 (Tenn. 2002)).
“We should not reverse for ‘abuse of discretion’ a discretionary judgment of a Trial Court
unless it affirmatively appears that the Trial Court’s decision was against logic or
reasoning, and caused an injustice or injury to the party complaining.” McCullough v.
Johnson City Emergency Physicians, P.C., 106 S.W.3d 36, 47–48 (Tenn. Ct. App. 2002)
(citing Marcus v. Marcus, 993 S.W.2d 596 (Tenn. 1999)).

       “[N]ormally, a mistrial should be declared only if there is a manifest
       necessity for such action.” State v. Saylor, 117 S.W.3d 239, 250–51 (Tenn.
       2003); State v. Reid, 91 S.W.3d 247, 279 (Tenn. 2002). In making the
       determination whether a mistrial is warranted, “‘no abstract formula should
       be mechanically applied and all circumstances should be taken into
       account.’” State v. Mounce, 859 S.W.2d 319, 322 (Tenn.1993) (quoting
       Jones v. State, 218 Tenn. 378, 403 S.W.2d 750, 753 (1966)).

                                            - 14 -
State v. Nash, 294 S.W.3d 541, 546 (Tenn. 2009). The party seeking a mistrial bears the
burden of establishing that a mistrial is necessary. Teague v. Kidd, No. E2016-01995-
COA-R3-CV, 2017 WL 2299059, at *4 (Tenn. Ct. App. May 25, 2017) (citing State v.
Moss, No. M2014-00746-CCA-R3-CD, 2016 WL 5253209, at *24 (Tenn. Crim. App. Sept.
21, 2016)).

        In this case, the trial court’s decision denying Defendants the opportunity to present
a defense that all parties prepared to go forward with was both against logic and reasoning,
and caused prejudice to the complaining parties. See McCullough, 106 S.W.3d at 48. In
an order dated July 13, 2021, the trial court expressly stated that genuine disputes of
material fact existed regarding the issue of accord and satisfaction. Consequently, all
parties prepared for trial under this assumption. Tellingly, Plaintiffs opined in their own
trial brief, filed mere days before the start of trial, that “the only issues remaining on [Mr.]
Folkins’ claim for breach of [the 2016 operating agreement] are, (1) the sum of the buyout
to which [Mr.] Folkins is entitled, and (2) whether the Defendants’ theory of accord and
satisfaction is applicable and, if so, whether [Mr.] Folkins’ buyout should be reduced on
account of that theory.” The trial court ultimately found, however, that it had already ruled
this theory out, notwithstanding the fact that the trial court previously ruled that the defense
was an issue for trial. The trial court opined in the August 3, 2021 bench conference that
it may have indicated, in an oral ruling, a disinclination towards the accord and satisfaction
argument. Nonetheless, as pointed out by Defendants at the time, such an oral ruling is
inapposite. It is well-settled that a trial court speaks not through oral rulings, but through
its written orders. See Williams v. City of Burns, 465 S.W.3d 96, 119 (Tenn. 2015)
(collecting cases). To the extent the trial court expected the parties to proceed pursuant to
an oral ruling in a transcript instead of the written orders in the record, the law was
misapplied. See State ex rel. Flowers v. Tenn. Trucking Ass’n Self Ins. Grp. Tr., 209
S.W.3d 602, 610 (Tenn. Ct. App. 2006) (noting that an abuse of discretion can occur when
a “trial court has misconstrued or misapplied the controlling legal principles” (citing
Overstreet v. Shoney’s, Inc., 4 S.W.3d 694, 695 (Tenn. Ct. App. 1999))).

       To be sure, trial courts may revise interlocutory, or non-final, orders prior to the
entry of a final judgment. Harris v. Chern, 33 S.W.3d 741, 744 (Tenn. 2000); see also
Tenn. R. Civ. P. 54.02. That is not what happened in this case, however. Here, the trial
court entered a written order providing that there were genuine disputes of material fact
regarding accord and satisfaction that should be decided by the jury. It then disregarded
that order at trial, positing that the written order was not actually what the trial court meant.
As evidenced by the confusing colloquy quoted above, the trial court seems to have simply
misunderstood or misremembered its previous ruling regarding accord and satisfaction.
Further, the transcript suggests confusion over the difference in accord and satisfaction and
Defendants’ argument that the 2016 operating agreement was void due to fraudulent
inducement or unconscionability. Defendants’ fraud and unconscionability arguments
were, undisputedly, disposed of in the trial court’s January 19, 2021 order granting

                                             - 15 -
Plaintiffs’ motion for partial summary judgment on those defenses. Stated differently,
there is no dispute that Defendants were foreclosed, well before trial, from arguing that
there was an issue with the formation of the 2016 operating agreement. Nothing in that
ruling, however, provides that Defendants were then foreclosed from arguing alternative
contract defenses at trial. Indeed, the July 13, 2021 order provides just the opposite.

        On appeal, Plaintiffs argue that Healthcare Co. and Group have waived this issue
by failing to properly object in the trial court, failing to address the issue in post-trial
motions, and failing to brief the issue in their principal briefs. We disagree. As reflected
in the transcript quoted above, which is a snapshot of what fully transpired the first day of
trial, Defendants all vehemently objected to the trial court’s handling of the accord and
satisfaction defense; indeed, almost two volumes of transcript are devoted to the
disagreement. Moreover, Group, Ni, and Healthcare Co. all sufficiently raised this issue
in their post-trial motions. Plaintiffs also posit that Defendants’ briefing on this issue is
deficient pursuant to Tennessee Rule of Appellate Procedure 27, which provides that brief
arguments shall contain, inter alia, “the contentions of the appellant with respect to the
issues presented, and the reasons therefor, including the reasons why the contentions
require appellate relief, with citations to the authorities and appropriate references to the
record[.]” Plaintiffs point out that Defendants cite no legal authority supporting their
position. While we do not disagree, the present case is factually anomalous, particularly
the events that transpired the first day of trial. Indeed, our own research revealed no
binding case law factually analogous to the case at bar. Moreover, the doctrine of waiver,
among other reasons, “generally exists to prevent litigants from raising issues to which
their opponents have no opportunity to respond.” Cousins v. Hutton Constr., Inc., No.
E2021-01251-COA-R3-CV, 2023 WL 1815660, at *10 n.5 (Tenn. Ct. App. Feb. 8, 2023),
perm app. denied (May 11, 2023) (quoting Jackson v. Burrell, No. W2018-00057-COA-
R3-CV, 2019 WL 237347, at *7 (Tenn. Ct. App. Jan. 16, 2019) (Stafford, J., dissenting),
rev’d on other grounds by Jackson v. Burrell, 602 S.W.3d 340 (Tenn. 2020)). Inasmuch
as the parties spent almost a full day litigating this issue in the trial court, which was also
addressed in post-trial motions, Plaintiffs have had fair notice and opportunity to argue
their position. The issue is not waived.

       Plaintiffs also argue that “the trial court’s accord-and-satisfaction rulings at trial
reconfirmed orders from well before the trial began,” and that the trial court merely
“readvised the [Defendants’] attorneys that they could not prove their theory solely with
parol evidence.” Respectfully, Plaintiffs’ own pre-trial brief and the transcript of the bench
conference from August 3, 2021 reflect otherwise. Again, the only order in the record
squarely addressing Defendants’ accord and satisfaction argument clearly states that the
issue remained a disputed fact for trial.

                                            - 16 -
        While we acknowledge that retrial is a harsh result, particularly given the
complexity of this case,4 we also have no difficulty concluding that the trial court abused
its discretion in this instance. Notwithstanding the deferential standard for review, “[t]rial
courts’ adjudicative decision-making is never completely shielded from appellate review.”
Gooding v. Gooding, 477 S.W.3d 774, 779 (Tenn. Ct. App. 2015) (citing Knaffl v.
Knoxville Banking & Tr. Co., 201 S.W. 775, 776 (Tenn. 1918)). The trial court disregarded
its previous written order and, as a result, confused the issues regarding formation of
contracts versus accord and satisfaction. Defendants5 prepared for trial under the entirely
reasonable belief that accord and satisfaction would be a central issue for the jury and
Defendants would have prepared differently but for that belief. As such, the trial court’s
handling of the accord and satisfaction issue “caused an injustice or injury to the part[ies]
complaining.” McCullough, 106 S.W.3d at 48.

       “The trial of a lawsuit is not a game of fox and hounds[,]” Lowe v. Taylor, No.
01-A-01-9404-CV00179, 1994 WL 570078, at *2 (Tenn. Ct. App. Oct. 19, 1994), yet in
this case, Defendants were taken entirely by surprise at the very last hour. This was a
significant, foundational error, and the trial court erred in refusing to grant Defendants a
mistrial. As such, we vacate the jury’s verdict and the trial court’s judgment and remand
the case for a new trial. All other issues not specifically addressed are pretermitted.

                                                CONCLUSION

       For the reasons stated herein, the jury’s verdict and the trial court’s judgment are
vacated, and the case is remanded for a new trial and any other further proceedings
consistent with this Opinion. Costs on appeal are assessed to the appellees, Benjamin L.
Folkins and Upward Mobility, Inc.

                                                               KRISTI M. DAVIS, JUDGE

        4
           The complexity of this case, however, is also partly why a retrial is necessary. While the breach
of contract action was only one of several claims that went to the jury, the Defendants and the claims are
inextricably intertwined. While we express no opinion on the merits of this argument, Plaintiffs’ theory of
the case is that Ni, Healthcare Co., and Group are one and the same. And as Defendants aptly pointed out,
they all prepared for trial under the impression that accord and satisfaction was a central issue for the jury
and would have allocated their time differently but for the trial court’s July 13, 2021 order. Thus, given the
complex nature of this particular case, it would be inordinately difficult to vacate and remand one claim for
retrial and review the remaining issues.
        5
            Based on their pre-trial brief, Plaintiffs prepared for trial in the same manner.

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