Tag Archives: Savings Statute

A win for substance over form: Tennessee Supreme Court holds that Tennessee’s one-year savings statute applies to tolling agreements.

By Daniel Horwitz:

In an increasingly rare win for substantive law and justice over blind adherence to procedural technicalities, the Tennessee Supreme Court held in a 3-1 decision on Monday that Tennessee’s one-year savings statute applies to tolling agreements.

The case arose out of a legal malpractice dispute between a construction company and its law firm.  After the construction company found itself on the losing end of a $1.66 million judgment, the company notified its law firm that it was considering filing a malpractice claim against it.  Thereafter, the parties entered into an agreement that voluntarily extended the deadline for filing legal malpractice claims.  Pursuant to that agreement – known in legalese as a “tolling agreement” – the statute of limitations was extended by four months following the outcome of the company’s appeal.[1]  Notably, the tolling agreement also made no mention of Tennessee’s “savings statute,” the importance of which is discussed further below.

The company ultimately filed a legal malpractice lawsuit against its law firm on September 21, 2011.  Because the company’s appeal concerning its $1.66 million judgment had not yet been decided, there was also no doubt that based on the parties’ tolling agreement, the lawsuit was not time-barred.

Approximately seven months later, on April 16, 2012, the company voluntarily dismissed its lawsuit.  Like many other states, Tennessee has a “savings statute” that “allows a case that has been dismissed, for reasons other than a dismissal on the merits, to be refiled within a set period [of time]—even after the statute of limitations has run on the action.”[2]  Specifically, under Tennessee’s savings statute, a plaintiff that dismisses a lawsuit voluntarily is permitted to re-file the lawsuit “within one (1) year after” the dismissal.[3]

The Tennessee Supreme Court has explained on several occasions that the primary purpose of the savings statute is “to aid the Courts in administering the law fairly between litigants without binding them to minor and technical mistakes made by their counsel in interpreting the complexities of [Tennessee’s] laws of procedure.”[4]  In practice, though, the savings statute also provides several other benefits, such as giving parties an additional year to settle their claims, allowing a plaintiff to switch attorneys, or allowing an attorney to withdraw from a case after filing a lawsuit without unduly harming the plaintiff’s legal interests.  Thus, “the savings statute confers upon a plaintiff who files a second action within one year of a voluntary non-suit of a first action the same procedural and substantive benefits that were available to the plaintiff in the first action.”[5]

The company’s appeal was ultimately handed down on October 1, 2012.  Consequently, under the parties’ tolling agreement, the company’s (first) lawsuit had to be filed no more than four months later by January 29, 2013.  Because the company had already filed its first lawsuit and then taken a voluntary dismissal on April 16, 2012, however, the company relied on Tennessee’s savings statute for the proposition that it had an additional year after April 16, 2012 – meaning until April 16, 2013 – to re-file its claim.  Accordingly, the company re-filed its malpractice lawsuit on April 8, 2013.

The law firm ultimately filed a motion to dismiss the company’s second lawsuit on the basis that it had been filed too late.  According to the law firm, Tennessee’s savings statute did not apply to tolling agreements, and the company’s initial lawsuit had not been filed within the applicable statute of limitations.  Thus, the law firm argued, the merits of the company’s re-filed lawsuit could not be considered.

The hyper-technical justification offered to support the law firm’s position in this regard was that Tennessee’s savings statute applies only if an action “is commenced within the time limited by a rule or statute of limitation[.]”  Because, according to the law firm, the company’s lawsuit had only been commenced within the time permitted by the parties’ tolling agreement – rather than having been commenced within the time permitted by “a rule or statute of limitation” – Tennessee’s savings statute didn’t apply.

Upon review, a majority of the Tennessee Supreme Court summarily rejected this conclusion for several reasons.

First, the court explained, based on longstanding precedent, “the rights and obligations of contracting parties are governed by the law in effect when they entered into their contract, and existing law becomes as much a part of the contract as if specifically incorporated therein.”  Thus, the court reasoned, “in the absence of evidence of contrary intention, the parties must be held to have contemplated the application of [the savings statute] to the terms of their agreement.”

Second, the court held that even assuming that a tolling agreement itself doesn’t qualify as “a rule or statute of limitation,” the company’s first lawsuit had nonetheless been filed “within the time limited by [the] statute of limitation” because the parties’ tolling agreement had expressly “paused and extended the applicable statute of limitations.”  Accordingly, Tennessee’s savings statute had to be given effect.

Third, the court reiterated once again that “[b]ecause the savings statute is remedial, courts must give it a broad and liberal construction.”  Accordingly, the court concluded, when applying Tennessee’s savings statute, hyper-technical procedural claims should not prohibit a party’s lawsuit from going forward.

With these concerns in mind, the court held that “[i]f parties to a tolling agreement wish to foreclose application of the savings statute, they must include clear, explicit language in the tolling agreement to that effect.  Otherwise, without such explicit indication that the parties intend to circumvent the savings statute, it will normally apply.”  Accordingly, if parties that enter into tolling agreements wish to foreclose the application of Tennessee’s savings statute going forward, then the parties must specifically state in their tolling agreements that Tennessee’s savings statute is not intended to apply.

Commendably, the court’s majority decision in Circle C. Construction breaks a recent trend in decisions that have eschewed Tennessee’s longstanding tradition of “decid[ing cases] on the merits whenever possible,”[6] and have instead permitted “technical procedural hurdles to prevent otherwise valid claims from being adjudicated on their merits.”[7]  Specifically, following the recent retirements of Tennessee Supreme Court Justices Wade and Holder, civil plaintiffs have increasingly found themselves trapped by procedural obstacles that have prevented them from getting their claims past the courtroom door.  In particular, Justice Kirby has provided an especially reliable pro-civil defendant vote, having consistently voted to dismiss plaintiffs’ claims before a trial in employment cases, governmental tort cases, and in traditional tort cases like the one discussed above—in which Justice Kirby served as the court’s lone dissenter.

In fairness, however, Justice Kirby’s jurisprudential bent in favor of civil defendants can also be described as foreseeable in light of her tenure as a Court of Appeals judge.  For example, careful court-watchers will recall that one of the first cases decided by the Tennessee Supreme Court following Justice Kirby’s confirmation was a 4-0 decision by her future colleagues to reinstate a jury’s $3 million verdict in a retaliatory discharge action that then-Judge Kirby had dismissed while presiding as a member of the Court of Appeals.[8]  Where Justice Page – just confirmed by the General Assembly as the Tennessee Supreme Court’s fifth member – will come down on this increasingly prevalent dispute, however, only time will tell.

Read the Tennessee Supreme Court’s majority opinion in Circle C. Construction, LLC v. D. Sean Nilsen et al. here, and Justice Kirby’s dissenting opinion here.

Questions about this article?  Email Daniel Horwitz at daniel.a.horwitz@gmail.com.

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[1] Traditionally, legal malpractice claims must be filed within one year.  In this case, if it had not been extended, then the company’s lawsuit would have had to be filed by March 15, 2011.

[2] Decision at 6 (citing Clark v. Hoops, LP, 709 F. Supp. 2d 657, 669 (W.D. Tenn. 2010)).

[3] Tenn. Code Ann. § 28-1-105.  See also Rajvongs v. Wright, 432 S.W.3d 808, 811 (Tenn. 2013) (“The saving statute provides that if a timely filed action is dismissed without prejudice, a plaintiff may ‘commence a new action within one (1) year after’ the dismissal.”); Tenn. R. Civ. P. 41.01 (“Subject to the provisions of Rule 23.05, Rule 23.06, or Rule 66 or of any statute, and except when a motion for summary judgment made by an adverse party is pending, the plaintiff shall have the right to take a voluntary nonsuit to dismiss an action without prejudice by filing a written notice of dismissal at any time before the trial of a cause . . . .”).

[4] Gen. Acc. Fire & Life Assur. Corp. v. Kirkland, 356 S.W.2d 283, 285 (1962).

[5] Cronin v. Howe, 906 S.W.2d 910, 913 (Tenn. 1995)

[6] Moreno v. City of Clarksville, No. M201301465SCR11CV, 2015 WL 5526858, at *16 (Tenn. Sept. 18, 2015) (Wade, J., dissenting).

[7] Daniel A. Horwitz, The Law of Unintended Consequences: Avoiding the Health Care Liability Act Booby Trap, Vol. 15, No. 5 Nashville Bar Journal 14 (June 2015) (feature article), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2577156.

[8] See Ferguson v. Middle Tennessee State Univ., 451 S.W.3d 375 (Tenn. 2014) (reversing Ferguson v. Middle Tennessee State Univ., No. M2012-00890-COA-R3CV, 2013 WL 1304490 (Tenn. Ct. App. Mar. 28, 2013)).