ENGSTROM v. MAYFIELD (2005)

ORDER

Pursuant to Tennessee Supreme Court Rule 23, on February 24, 2005, this Court accepted from the United States Court of Appeals for the Sixth Circuit certification of the following question of law:

Does the Pullman exception to the “American Rule” apply only in cases where an indemnitee incurred attorneys' fees in the defense of suits resulting from the indemnitor's fault, or does it also apply to situations in which the indemnitee incurred fees prosecuting such suits against third parties?

Oral argument was held before this Court on June 7, 2005.¹

In Pullman Standard, Inc. v. Abex Corp., 693 S.W.2d 336 (Tenn.1985), this Court recognized two distinct exceptions to the American Rule that attorneys' fees are not recoverable in the absence of a statute or contract specifically providing for such recovery or a recognized ground of equity. As we stated in Pullman, the “first theory of recovery of litigation expenses and attorneys' fees is under an indemnity agreement implied by law.” Id. at 337. Addressing this theory as a question of first impression in Tennessee, id. at 338, we expressly recognized the implied indemnity agreement exception, holding that “the right of indemnity which arises by operation of law, based upon the relationship of the parties, includes the right to recover attorneys' fees and other litigation costs which have been incurred by the indemnitee in litigation with a third party,” id. (citation omitted).

We then addressed in Pullman a “second theory of recovery of attorneys' fees and litigation expenses” which posed a separate question of first impression in Tennessee-whether to recognize a cause of action for recovery of attorneys' fees based upon an independent tort theory. Id. at 339. We stated as follows:

It appears that attorneys' fees and costs are recoverable under an independent tort theory in most jurisdictions which have considered the issue. Indeed, we have been cited to no case, and have discovered none in our own research, which has refused to recognize the theory of recovery. As stated in the annotation to 45 A.L.R.2d 1183 (1956),

“It appears to be well settled that where the natural and proximate consequence of a tortious act of defendant has been to involve plaintiff in litigation with a third person, reasonable compensation for attorneys' fees incurred by plaintiff in such action may be recovered as damages against the author of the tortious act.” Id. at 1186.

The Restatement (Second) of Torts, [section] 914(2) (1979), cites a similar rule:

“One who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover reasonable compensation for loss of time, attorney fees and other expenditures thereby suffered or incurred in the earlier action.”

See also 22 Am.Jur.2d Damages § 166 (1965). We adopt the prevailing rule and recognize the cause of action set forth above.

Id. at 340. We thus expressly recognized the independent tort theory as a second exception to the American Rule. Accord Whitelaw v. Brooks, 138 S.W.3d 890 (Tenn.Ct.App.2003) (applying independent tort exception of Pullman ), application for permission to appeal denied (Tenn. June 21, 2004).

In this Court, the petitioners William B. Engstrom, et al. (the plaintiffs-appellants) have insisted that they do not base their claim for attorneys' fees upon the implied indemnity agreement exception, but rather that they base it upon the independent tort exception.² Conversely, the respondents Jack Mayfield, et al. (the defendants-appellees) seem to suggest in their brief that Tennessee recognizes only a single exception to the American Rule, the implied indemnity agreement exception. Upon careful review and in light of the persisting dispute between the parties as to whether the certified question is “determinative of the cause,” see Tenn. R. Sup.Ct. 23 § 1, we respectfully decline to answer the certified question. Consequently, this certification is dismissed. See Tenn. R. Sup.Ct. 23 § 9. Costs in this Court are taxed one-half to the petitioners and one-half to the respondents, for which execution shall issue if necessary.

FOOTNOTES

1.  We note that on November 12, 2004, plaintiffs-appellants William B. Engstrom, et al., filed in the United States Court of Appeals for the Sixth Circuit a Motion to Clarify And/Or Amend Order Certifying Questions to the Supreme Court of Tennessee, which was denied on December 15, 2004.

2.  In their brief before this Court, the petitioners state as follows: “[T]he question certified to this Court appears to assume that the plaintiffs seek recovery under [an implied indemnity agreement] theory. Plaintiffs do not seek recovery under an implied indemnity agreement theory. Instead they seek recovery of their attorneys' fees and litigation expenses incurred in Engstrom I under the ‘independent tort rule.” ’ The petitioners reiterated this point during oral argument before this Court.

PER CURIAM.