Court Opinion

ID: 4670488
Source: CourtListenerOpinion
Date Created: 2021-03-23 15:14:03.489907+00
Date Added: 2024-06-11T08:02:00.222651
License: Public Domain

03/22/2021
               IN THE COURT OF APPEALS OF TENNESSEE
                            AT JACKSON
                              February 16, 2021 Session

      AT-LAST, INC., D/B/A BLACKWATCH INVESTIGATION AND
          MITIGATION v. TERRY GLEN BUCKLEY, ET AL.

                Appeal from the Chancery Court for Shelby County
                 No. CH-19-0417-3 JoeDae L. Jenkins, Chancellor
                     ___________________________________

                          No. W2020-00249-COA-R3-CV
                      ___________________________________

This case involves a company’s claim for attorneys’ fees and expenses for the alleged
breach of a non-compete agreement by its former employee. After a temporary injunction
hearing, the trial court determined that the former employee breached the agreement and
granted the company a temporary injunction. The court did not consolidate the hearing on
the merits under Tennessee Rule of Civil Procedure 65.04(7). Later, the claims were
voluntarily dismissed, and the trial court awarded the company attorneys’ fees and
expenses under the “Remedies” section of the parties’ agreement. The former employee
appealed the trial court’s decision to grant the company attorneys’ fees and expenses. We
reverse the trial court’s award and remand.

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

CARMA DENNIS MCGEE, J., delivered the opinion of the court, in which D. MICHAEL
SWINEY, C.J., and J. STEVEN STAFFORD, P.J., W.S., joined.

William B. Ryan, Memphis, Tennessee, for the appellant, Terry Glen Buckley.

Ramon Damas and Charles Silvestri Higgins, Memphis, Tennessee, for the appellee, At-
Last, Inc., d/b/a Blackwatch Investigation and Mitigation.

                                       OPINION

                         I.     FACTS & PROCEDURAL HISTORY

      The dispute in this case stems from an employment relationship that involved a non-
compete agreement. In April 2017, Terry Glen Buckley was hired to be a private
investigator at At-Last, Inc., d/b/a Blackwatch Investigation and Mitigation
(“Blackwatch”). Blackwatch is a Tennessee corporation, headquartered in Memphis, that
specializes in private investigations for criminal defense attorneys and their clients.

       Prior to joining Blackwatch, Mr. Buckley worked for the Jackson Police Department
for approximately thirteen years. Mr. Buckley worked as an investigator for the last nine
years of his employment at the Jackson Police Department. As an investigator, Mr.
Buckley specialized in forensic examination of mobile devices. During his time in law
enforcement, Mr. Buckley frequently came into contact with criminal defense attorneys in
the Jackson community. After learning about Mr. Buckley’s professional background,
Blackwatch hired Mr. Buckley, in part, to expand its services to the Jackson community.

       During Mr. Buckley’s hiring process, Blackwatch became concerned that he would
eventually become a competitor of Blackwatch. Blackwatch wanted to ensure that its effort
in expanding into the Jackson market was protected. As a result, Mr. Buckley executed a
non-compete agreement (“the Agreement”) as a condition of his employment. The “Non-
Compete” portion of the Agreement stated:

             During this agreement [Mr. Buckley] shall not represent, provide
      services for, or engage in any other business of a similar nature to the
      business of BLACKWATCH (providing investigative or expert services to
      attorneys) without the written consent of BLACKWATCH. . . .

              [Mr. Buckley] warrants and guarantees that during this agreement and
      for the twelve month period following the termination of this agreement [he]
      shall not directly or indirectly engage in any similar business (Providing
      investigative or expert services to attorneys) with BLACKWATCH current
      clients or BLACKWATCH former clients. Nor shall [Mr. Buckley] solicit
      any client of BLACKWATCH for the benefit of [Mr. Buckley] or a third
      party that is engaged in a similar business to that of BLACKWATCH or hire
      any employees or staff of former employees or staff of BLACKWATCH.

             Furthermore, [Mr. Buckley] warrants and guarantees that for the
      twelve month period following the termination of this agreement [he] shall
      not directly or indirectly engage in any similar business (Providing
      investigative or expert services to attorneys) at all within a 100 mile radius
      of the princip[al] office of BLACKWATCH.

The Agreement also contained a “Remedies” section that stated:

             Should [Mr. Buckley] breach any of the provisions of this Agreement
      by . . . a breach of the non-compete provision, [Mr. Buckley] agrees to
                                        -2-
       reimburse [Blackwatch] for any loss or expense incurred by [Blackwatch] as
       a result of such . . . breach of the non-compete, including without limitation
       court costs and reasonable attorney’s fees incurred by [Blackwatch] in
       enforcing the provisions hereof.

       Mr. Buckley joined Blackwatch in April 2017. At the time Blackwatch hired Mr.
Buckley, he was not a licensed private investigator. Blackwatch helped Mr. Buckley obtain
his private investigator license by assisting him with the application and paying the
corresponding fees. Aside from providing financial assistance for Mr. Buckley’s license,
the parties dispute the amount of support and training that Mr. Buckley received.
Blackwatch asserts that it provided essential materials and in-depth training for Mr.
Buckley. In contrast, Mr. Buckley asserts that he did not receive unique training and that
the materials that he was provided were generic or publicly available.

       After Mr. Buckley joined Blackwatch, Blackwatch began to market him as a private
investigator in the Jackson legal community. Blackwatch created promotional materials
that highlighted Mr. Buckley’s credentials and organized events to help introduce him to
criminal defense attorneys. Mr. Buckley did not work as a private investigator for any
Jackson-area attorneys prior to joining Blackwatch. However, he claims that he had
previous relationships with all of the attorneys that he interacted with while employed at
Blackwatch. During his time at Blackwatch, Mr. Buckley performed investigative services
for several criminal defense attorneys in Jackson. Prior to Mr. Buckley being hired,
Blackwatch did not perform any work for Jackson-area attorneys.

       In December 2018, Mr. Buckley voluntarily resigned from Blackwatch. As part of
his resignation, Mr. Buckley drafted a resignation letter to the owners of Blackwatch,
LeAnna and Claiborne Ferguson.1 In the letter, Mr. Buckley indicated that he intended to
leave Blackwatch during the first quarter of 2019 to open his own private investigation
company in Jackson.

       In January 2019, Mr. Buckley began performing private investigative services for
C. Mark Donahoe, a criminal defense attorney who is based in Jackson. Mr. Buckley first
met Mr. Donahoe while he was employed at the Jackson Police Department. While he was
employed at Blackwatch, Mr. Buckley performed investigative services for Mr. Donahoe.
Later in January 2019, Mr. Buckley and Mr. Donahoe formed 731 Investigations, LLC.
Through 731 Investigations, Mr. Buckley performed investigative services for Mr.
Donahoe and other Jackson-area attorneys that were former clients of Blackwatch.

      Displeased with Mr. Buckley’s new business venture, Blackwatch sought to enforce
the non-compete portion of the Agreement. As a result, Blackwatch initiated the instant

       1
          Mr. Ferguson founded Blackwatch in 2009 but is no longer involved in the day-to-day operations
of the business. Instead, Mrs. Ferguson now operates the business.
                                                 -3-
case by filing a complaint for injunctive relief against Mr. Buckley and 731 Investigations.2
In its complaint, Blackwatch alleged that Mr. Buckley and 731 Investigations were located
within 100 miles of Blackwatch’s principal office. Thus, it further alleged that Mr. Buckley
was in violation of the Agreement by performing investigative or expert services to
criminal defense attorneys in West Tennessee. Based on these allegations, Blackwatch
requested that the trial court enter a temporary restraining order to prevent Mr. Buckley
from continuing to offer his services to attorneys in West Tennessee.

      On March 25, 2019, the trial court entered a temporary restraining order under
Tennessee Rule of Civil Procedure 65.03, stating that Mr. Buckley and 731 Investigations
were enjoined from soliciting or accepting new business in Jackson, Tennessee. To
determine whether a temporary injunction should be granted, the trial court conducted an
evidentiary hearing on March 29, 2019 and April 9, 2019.

       At the two-day evidentiary hearing, Mrs. Ferguson, Mr. Ferguson, Mr. Buckley, and
Mr. Donahoe testified. Eight exhibits were entered for the court’s consideration, including
a copy of the Agreement.

       Mr. and Mrs. Ferguson testified on the history of Blackwatch, the company’s
intention to expand into the Jackson area, the hiring and employment of Mr. Buckley, and
the events surrounding Mr. Buckley’s resignation. Specifically, Mrs. Ferguson asserted
that Blackwatch provided Mr. Buckley with specialized training and development as a
private investigator. However, she also admitted that Mr. Buckley’s responsibilities as a
private investigator were similar to his previous duties as a police investigator.

        Mr. Buckley testified on his background as a police officer and as a private
investigator. He emphasized that he had personal relationships with all of the Jackson-area
criminal defense attorneys before they became clients of Blackwatch. Many of those
relationships became professional when he was hired at Blackwatch. In contrast to the
statements made by Mrs. Ferguson, Mr. Buckley stated that Blackwatch did not provide
him with unique or specialized training. Similarly, he claimed that he acquired all of his
skills as an investigator prior to being hired. Mr. Buckley verified that he understood the
terms of the Agreement at the time he was hired, that he later formed the opinion that the
agreement was unenforceable, and that he began providing services to former clients of
Blackwatch when he formed 731 Investigations.

       Mr. Donahoe testified on his history with Blackwatch as a criminal defense attorney
and the evolution of his relationship with Mr. Buckley. Mr. Donahoe verified that he met
Mr. Buckley when he was an investigator for the Jackson Police Department, well before
Mr. Buckley was hired by Blackwatch. Mr. Donahoe was not a client of Blackwatch before

       2
        The complaint was also filed against Mr. Donahoe and his law firm, The Donahoe Firm, PLLC.
However, the claims asserted against these parties are not pertinent to this appeal.
                                              -4-
Mr. Buckley’s hire. However, he stated that he became a client of Blackwatch after Mr.
Buckley was hired because of their prior relationship. He also claimed that Blackwatch
would not have received any clients from Jackson without Mr. Buckley working as an
investigator. Joe H. Byrd, Jr.—a fellow criminal defense attorney in Jackson—also stated
that he only considered using Blackwatch’s services because of his admiration for Mr.
Buckley’s investigative skills.3

       At the conclusion of the evidentiary hearing, the trial court took the matter under
advisement. On May 16, 2019, the trial court entered a written order, granting a temporary
injunction in favor of Blackwatch.

        In its written order, the trial court made several findings of fact on the circumstances
surrounding the Agreement. Specifically, the court found that Mr. Buckley voluntarily
executed the Agreement after having adequate time to review and consider its terms.
Additionally, the court stated that Blackwatch did not provide Mr. Buckley with
specialized or unique training, but it did market his services to attorneys in the Memphis
and Jackson communities. The court also found that Mr. Buckley had previous
relationships with several criminal defense attorneys in Jackson but that they were not
professional relationships until he was hired at Blackwatch. The court further found that
Mr. Buckley and 731 Investigations were performing “investigative services” for former
clients of Blackwatch within 100 miles of Blackwatch’s principal office in Memphis.

       Addressing the terms of the Agreement, the court concluded that the geographic and
temporal scopes were unreasonable. Believing the geographic scope was too broad, the
court modified the agreement by eliminating the 100-mile geographic restriction. The
court modified the temporal scope by reducing the enforcement period from twelve months
to nine months. The court determined that the nine-month enforcement period began on
December 18, 2018, the date Mr. Buckley resigned.

        The trial court concluded that, as modified, the Agreement was valid and
enforceable and that Mr. Buckley breached the agreement by providing investigative
services to former clients of Blackwatch. Based on Blackwatch’s investment and efforts
to expand into the Jackson market, the court concluded that Blackwatch established a
protectable business interest under the Agreement. The court concluded that Blackwatch
had a strong likelihood of success on the merits and that the threat of irreparable harm to
Blackwatch in the absence of an injunction outweighed any potential harm to Mr. Buckley
if an injunction was granted. As a result, the trial court granted a temporary injunction in
favor of Blackwatch under Tennessee Rule of Civil Procedure 65.04(2). Mr. Buckley was
enjoined from providing private investigation or expert services to former clients of

        3
         A declaration of Joe Byrd was entered as an exhibit at the evidentiary hearing. In the declaration,
Mr. Byrd also stated that he would not have become a client of Blackwatch had it not been for Blackwatch
hiring Mr. Buckley.
                                                   -5-
Blackwatch, including Mr. Donahoe, Mr. Byrd, and several other Jackson-area attorneys.
The injunction was set to last until September 18, 2019, nine months after Mr. Buckley’s
resignation.

       On June 21, 2019, Blackwatch filed a motion for attorneys’ fees and expenses
against Mr. Buckley. Blackwatch argued that as the “prevailing party,” it was entitled to
fees and costs under the “Remedies” portion of the Agreement. Mr. Buckley opposed the
motion, claiming that it was premature. In his response, Mr. Buckley argued that because
the matter was not consolidated for a trial on the merits under Tennessee Rule of Civil
Procedure 65.04(7), the motion was premature because the court had yet to make a final
decision.

         The trial court heard Blackwatch’s motion for attorneys’ fees and expenses and
entered an order that stated the motion was “well taken.” In the order, the court also stated
that it reserved its ruling on the motion until the case had concluded.

        On October 28, 2019, after the nine-month enforcement period ended, Blackwatch
filed a renewed motion for attorneys’ fees and expenses. Blackwatch requested $26,748.00
in attorneys’ fees and $1,062.09 in expenses for enforcing the Agreement.

      In response, Mr. Buckley opposed the motion and again asserted that it was
premature because the matter was never consolidated for a trial on the merits pursuant to
Rule 65.04(7).

       On November 22, 2019, the trial court entered an order granting a voluntary
dismissal for all defendants. Despite the dismissal, the court specifically reserved its ruling
on the request for attorneys’ fees and costs.4

       On January 17, 2020, the trial court entered its final written order. In its final order,
the court granted Blackwatch’s renewed motion for attorneys’ fees and expenses. The
court awarded Blackwatch $20,000 in attorneys’ fees and $891.50 in litigation expenses to
be paid by Mr. Buckley.

       Mr. Buckley appealed.

                                       II.     ISSUE PRESENTED

       Mr. Buckley raises a single issue on appeal, which we have reworded:

       4
         After the court granted the voluntary dismissal of the defendants, Mr. Buckley filed a
supplemental response to Blackwatch’s motion, arguing that the court no longer had jurisdiction over the
case.
                                                 -6-
      Whether the trial court erred in assessing attorneys’ fees and expenses against Mr.
Buckley in favor of Blackwatch.

      For the reasons stated herein, we reverse the trial court’s decision to award
Blackwatch attorneys’ fees and expenses and remand.

                                III.    STANDARD OF REVIEW

        Whether a party is entitled to attorney’s fees under a contract is a question of law
that is reviewed de novo. Eberbach v. Eberbach, 535 S.W.3d 467, 473 (Tenn. 2017)
(stating the standard of review for awarding attorney’s fees under marital dissolution
agreement).

                                       IV.   DISCUSSION

        While the trial court proceedings centered on the enforceability of the Agreement,
on appeal, the sole issue is whether the trial court erred in awarding Blackwatch attorneys’
fees and expenses under the Agreement. Tennessee courts follow the “American Rule” on
attorney’s fees. Id. at 474. Under the American Rule, parties are responsible for their own
attorney’s fees. Id. (citing Cracker Barrel Old Country Store, Inc. v. Epperson, 284
S.W.3d 303, 309 (Tenn. 2009)). There are exceptions to this rule, one of which is a
“contractual or statutory provision [that] creates a right to recover attorney’s fees.” Id.
One contractual exception to the “American Rule” is enforceable non-compete agreements
that provide for an award of attorney’s fees. See Hogan v. Coyne Intern. Enters. Corp.,
996 S.W.2d 195, 204-05 (Tenn. Ct. App. 1998). However, we emphasize that this Opinion
does not address the enforceability or reasonableness of the non-compete provision in the
Agreement. The disposition of this appeal does not hinge on this inquiry. Instead, the
determinative factor here is the lack of finality of the proceeding. Although the parties had
a lengthy hearing on the temporary injunction, which resulted in several findings by the
court, it was not a trial on the merits of the case.

        “Rule 65.04(7) of the Tennessee Rules of Civil Procedure permits a trial court to
consolidate a [temporary] injunction hearing with the trial of the action on the merits.”
Clinton Books, Inc. v. City of Memphis, 197 S.W.3d 749, 755 (Tenn. 2006). Accordingly,
Rule 65.04(7) states, “[b]efore or after the commencement of the hearing of an application
for a [temporary] injunction, the Court may order the trial of the action on the merits to be
advanced and consolidated with the hearing of the application.” The United States
Supreme Court has stated that in order for a trial court to consolidate a temporary injunction
hearing with a trial on the merits, “the court must provide the parties with ‘“clear and
unambiguous notice . . . either before the hearing commences or at a time which will still
afford the parties a full opportunity to present their respective cases.”’” Clinton Books,
Inc., 197 S.W.3d at 755 (omission in original) (quoting Univ. of Tex. v. Camenisch, 451

                                             -7-
U.S. 390, 395 (1981)).5 Similarly, the Tennessee Supreme Court stated that courts “must
provide the parties with notice before issuing an order of consolidation in accordance with
Rule 65.04(7).” Id.

        In the order granting the temporary injunction, the trial court found that the
Agreement was “valid and enforceable as modified” and that Mr. Buckley “breached the
Agreement” by providing investigative services to former clients of Blackwatch. However,
temporary injunctions are “provisional in nature” and are “not to be used as a determination
of the rights of the parties involved.” Memphis Retail Inv’rs Ltd. P’ship v. Baddour, 1988
WL 82940, at *2 (Tenn. Ct. App. Aug. 10, 1988). Therefore, “findings of fact and
conclusions of law made by a court granting a preliminary injunction are not binding at
trial on the merits.” Univ. of Tex., 451 U.S. at 395 (citing Indus. Bank of Wash. v. Tobriner,
405 F.2d 1321, 1324 (D.C. Cir. 1968)).

       There is no dispute that there was never a trial on the merits because the trial court
did not consolidate the temporary injunction hearing under Rule 65.04(7). Instead, in
November 2019, more than six months after it granted Blackwatch a temporary injunction,
the court granted Blackwatch’s request to voluntarily dismiss the defendants. In its order
granting the voluntary dismissal, the trial court reserved ruling on Blackwatch’s motion for
attorneys’ fees and expenses. Approximately two months later, the court granted
Blackwatch attorneys’ fees and expenses under the “Remedies” section of the Agreement.
Without properly consolidating the temporary injunction hearing under Rule 65.04(7), this
award was erroneous. The trial court never made a final determination on the merits of the
case, and specifically on whether Mr. Buckley breached the non-compete agreement.
Therefore, we reverse the trial court’s grant of attorneys’ fees and expenses.

        For comparison, the terms of the Agreement in this case dictate a different outcome
than the non-compete agreement in Otter’s Chicken Tender, LLC v. Coppage, 2011 WL
2552663. In Coppage, the parties had a non-compete agreement that included an “attorney
fee” provision. Id. at *1. Unlike the Agreement in this case, the provision in Coppage
provided an award of attorney’s fees for the “prevailing party” in the event of litigation.
Id. After an evidentiary hearing, the trial court in Coppage issued a temporary injunction
that restrained the defendant-employee from being employed by a competitor of the
plaintiff. Id. Pursuant to a non-disclosure provision in the parties’ agreement, the
injunction also required the defendant to return copies of confidential information and trade
secrets. Id. Before a permanent injunction was issued, on cross motions for summary
judgment, the trial court resolved all of the asserted claims. Id. at *2. The court also
extended the temporary injunction to the final date of the parties’ non-compete provision.

       5
          Because Rule 65.04(7) and Federal Rule of Civil Procedure 65(a)(2) share identical language on
consolidating a temporary injunction hearing, Tennessee courts have relied on federal law as persuasive
authority for construing Rule 65.04(7). See id.; Total Garage Store, LLC v. Moody, No. M2019-01342-
COA-R3-CV, 2020 WL 6892012, at *7 (Tenn. Ct. App. Nov. 24, 2020).
                                                 -8-
Id.

       On appeal, this Court determined that the plaintiff-employer was entitled to
attorneys’ fees under the parties’ agreement as the “prevailing party.” Id. at *5-6. This
Court concluded that the plaintiff was the “prevailing party” because the temporary
injunction secured relief by enforcing the non-compete and non-disclosure provisions of
the parties’ agreement. Id. at *6.6

       Unlike the agreement in Coppage, in the present case, the “Remedies” section of
the Agreement does not contain language that permits an award of attorney’s fees for the
“prevailing party.” Instead, the section states that Mr. Buckley shall reimburse Blackwatch
for attorney’s fees and expenses if he breaches the non-compete provision. Meaning,
Blackwatch’s claim for attorneys’ fees is not determined by whether it succeeded in
limiting Mr. Buckley’s employment under the non-compete provision. Instead,
Blackwatch was only entitled to attorneys’ fees and expenses if Mr. Buckley was found to
have breached the Agreement.7 This holding is based on a plain reading of the Agreement.
See Dick Broad. Co., Inc. of Tenn. v. Oak Ridge FM, Inc., 395 S.W.3d 653, 659 (Tenn.
2013) (citing Allmand v. Pavletic, 292 S.W.3d 618, 630 (Tenn. 2009) (“The literal meaning
of the contract language controls if the language is clear and unambiguous.”)).

        In sum, the trial court never consolidated the temporary injunction hearing with a
trial on the merits under Rule 65.04(7), and a separate trial on the merits was never held.
As a result, the court never made a final determination on whether Mr. Buckley breached
the non-compete provisions of the Agreement. The court’s findings following the
temporary injunction hearing were non-final, subject to change, and cannot be used to
determine the rights of the parties without the proceedings being consolidated under Rule
65.04(7). See Univ. of Tex., 451 U.S. at 395 (stating “the findings of fact and conclusions
of law made by a court granting a preliminary injunction are not binding at trial on the
merits”); Clinton Books, Inc., 197 S.W.3d at 755 (stating “a court must provide the parties
with notice before issuing an order of consolidation in accordance with Rule 65.04(7)”);
Memphis Retail Inv’rs Ltd. P’ship, 1988 WL 82940, at *2 (stating a court’s temporary
injunction rulings are “not to be used as a determination of the rights of the parties
involved”).

        Without a determination on the merits of whether Mr. Buckley “breached” the

        6
           Although the defendant-employee succeeded on certain issues at the summary judgment phase,
“[t]he fact that [the] plaintiff did not succeed on all of the claims asserted is a factor to be addressed in the
trial court’s determination of a reasonable fee.” Id. at *2, *6. (citing Tenn. Sup. Ct. R. 8, RPC 1.5).
         7
           In its complaint and at trial, Blackwatch also asserted that Mr. Buckley improperly retained
confidential information belonging to Blackwatch. The “Remedies” section of the Agreement also entitled
Blackwatch to attorney’s fees and expenses if Mr. Buckley disclosed or used confidential information
belonging to Blackwatch without its consent. However, the trial court found that Mr. Buckley did not retain
confidential information belonging to Blackwatch. This determination is not challenged on appeal.
                                                     -9-
Agreement, Blackwatch had no basis to assert a claim for attorney’s fees and expenses.
See Dupuy v. Samuels, 423 F.3d 714, 723 (7th Cir. 2005) (stating that because the trial
court did not consolidate the preliminary injunction with a trial on the merits under Federal
Rule of Civil Procedure 65(a)(2), an “award of attorneys’ fees, even on an interim basis,
was premature”).

       Based on our foregoing discussion, the remaining arguments presented by the
parties are pretermitted.

                                     V.     CONCLUSION

       For the reasons stated herein, we reverse the trial court’s decision to require the
appellant, Terry Glen Buckley to pay the attorneys’ fees and expenses of the appellee, At-
Last, Inc., d/b/a Blackwatch Investigation and Mitigation.

       We remand for further proceedings as may be necessary. Costs of this appeal are
taxed to the appellee, At-Last, Inc., d/b/a Blackwatch Investigation and Mitigation, for
which execution may issue if necessary.

                                                    _________________________________
                                                    CARMA DENNIS MCGEE, JUDGE

                                           - 10 -