text:
    Michael SANFORD v. WAUGH & COMPANY, INC. et al.
    Supreme Court of Tennessee, at Nashville.
    June 4, 2010 Session.
    Dec. 17, 2010.

      Joseph A. Woodruff and S. Keenan Carter, Nashville, Tennessee, for the appellants, Troy Waugh, Carol Waugh, and Waugh & Company, Inc.
    Timothy L. Warnock and Elizabeth 0. Gonser, Nashville, Tennessee, for the ap-pellee, Michael Sanford.
   OPINION

SHARON G. LEE, J.,

delivered the opinion of the Court,

in which CORNELIA A. CLARK, C.J., and JANICE M. HOLDER, GARY R. WADE, and WILLIAM C. KOCH, JR., JJ„ joined.

The primary issue presented in this appeal is whether an individual creditor of an insolvent corporation may bring a direct cause of action for breach of fiduciary duty against the corporate directors and officers. We hold that a creditor of an insolvent corporation may not bring a direct claim, only a derivative claim, against officers and directors for breach of the fiduciary duties they owe to the corporation. We adopt the reasoning of the Delaware Supreme Court in North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, 930 A.2d 92 (Del.2007), observing that corporate creditors are adequately protected by existing law, and that recognizing a new direct cause of action is unnecessary and would impede corporate governance. We further hold that the trial court properly excluded evidence of conspiracy to interfere with contract and dismissed the claim for punitive damages. The judgment of the Court of Appeals is reversed.

Factual and Procedural Background

In 1995, Michael Sanford and Bruce Prow formed a company called SecureOne, Inc. Mr. Sanford and Mr. Prow each owned a one-half interest in SecureOne, a company that sold and serviced residential and non-residential security systems. In December 2002, following a dispute over the management of the company, Mr. Sanford sold his 50% interest in SecureOne to Mr. Prow and his wife, Leslie Prow, for $3,000,000. Based on their written agreement executed December 19, 2002, Mr. Sanford received $1,000,000 in cash at the closing, a secured promissory note for the remaining $2,000,000 (the “Sanford note”), and a security interest in SecureOne’s assets. The Sanford note, executed by the Prows and SecureOne, provided that Mr. Sanford was to receive thirty equal monthly payments of $70,166.50.

To obtain funds to buy Mr. Sanford’s interest in SecureOne, Mr. Prow consulted with Troy and Carol Waugh (Mrs. Prow’s parents and the defendants in this case). Before the SecureOne stock sale to the Prows, the Waughs bought 25% of Mr. Prow’s SecureOne stock for $100,000 and loaned the company an additional $900,000. On December 19, 2002, SecureOne executed two promissory notes: one to the Waughs in the amount of $425,000 and another to Waugh & Co. (Mr. Waugh’s consulting and marketing training business for accountants) in the amount of $475,000. SecureOne also executed a security agreement (the “Waugh agreement”) detailing the $900,000 loan and listing the Prows as guarantors secured by their 75% stock ownership interest. Mr. Sanford was not advised of these transactions.

After the sale, Mr. Waugh convened a meeting of SecureOne’s board of directors, at which the following officers were elected: Mr. Prow — president/CEO; Mrs. Prow — vice-president of finance/treasurer; Mr. Waugh — chairman of the board of directors; and Mrs. Waugh — secretary. The Waugh agreement anticipated and required these elections and officer appointments.

In 2003, SecureOne’s sales diminished significantly, and the size of its workforce and scope of operations decreased. The Waughs loaned SecureOne additional money, including $70,000 in August of 2003. In October of 2003, SecureOne defaulted on its obligations under the Waugh agreement, and the Waughs foreclosed on the Prows’ shares of SecureOne stock and obtained 100% ownership in SecureOne. In December of 2003, the Waughs loaned Sec-ureOne an additional $120,000 and took a security interest in SecureOne’s “house accounts” to secure the debt.

From February through December of 2003, SecureOne made monthly payments to Mr. Sanford in the amount of $70,166.50. In early 2004, however, the Waughs advised Mr. Sanford that Secu-reOne could no longer afford to make its payments to him. To settle the remaining debt, the Waughs offered Mr. Sanford approximately $650,000, SecureOne’s house accounts, and the company’s vehicles. Mr. Sanford declined the offer.

At about the same time, in early 2004, the Waughs decided to wind down Secu-reOne and began closing its branch locations. SecureOne did not renew its franchise agreement with ADT Security Systems and, in January 2004, received $1,173,213 from ADT, an amount representing the lifetime equity built over the course of SecureOne’s agreement with ADT. The remaining operations of Sec-ureOne were moved to the Prows’ home, although the Waughs controlled the decisions pertinent to SecureOne’s winding down process.

Also in 2004, the Prows started another company, Security Networks, that sold security systems in direct competition with SecureOne. The Prows operated Security Networks out of their home, based in the same room where they operated Secu-reOne. Mr. Prow brought furniture, equipment, and vehicles from SecureOne and stored additional equipment belonging to SecureOne in his garage. The Prows transferred SecureOne’s phone number directly to Security Networks. In 2004, Sec-ureOne paid consulting fees totaling $75,000 to Mr. Waugh and $30,000 to Mrs. Waugh. In 2003 and 2004, SecureOne paid the Waughs a total of $55,991 in interest and paid Waugh & Co. a total of $48,883 in interest.

On February 13, 2004, Mr. Sanford sued Mrs. Prow and SecureOne to enforce the Sanford note that was in default. Mr. Sanford did not sue Mr. Prow, as he had filed for bankruptcy. Mrs. Prow and SecureOne answered and counterclaimed, alleging, among other things, that Mr. Sanford intentionally and/or negligently misrepresented SecureOne’s financial condition at the time of the stock sale by stating that all of SecureOne’s debts were current and there were no liabilities other than those reflected on SecureOne’s balance sheet. Mrs. Prow and SecureOne alleged that SecureOne actually had past due liabilities in the amount of $434,981.55. This cause of action against SecureOne and the Prows concluded in April of 2006 when the trial court awarded Mr. Sanford a judgment in the amount of $1,560,000. Mrs. Prow filed for bankruptcy shortly thereafter. Mr. Sanford received approximately $170,000 from SecureOne in satisfaction of the judgment. Mr. Waugh testified that the $170,000 represented the proceeds from sales of the company’s vehicles in which Mr. Sanford held a security interest pursuant to the security agreement executed with the Sanford note.

On April 15, 2004, the Waughs and Waugh & Co. filed a separate action against Mr. Sanford, asserting allegations of fraudulent misrepresentation that essentially mirrored the allegations in Mrs. Prow and SecureOne’s countercomplaint. The Waughs voluntarily dismissed this action on March 11, 2005.

On April 13, 2005, Mr. Sanford filed his complaint in the action presently on appeal, asserting claims against the Waughs and Waugh & Co. for abuse of process, malicious prosecution, and breach of fiduciary duty. In September of 2006, Mr. Sanford amended his complaint against the Waughs to assert causes of action for fraudulent conveyance, conspiracy, and conversion, and sought compensatory and punitive damages. The Waughs moved for summary judgment on all claims. The trial court granted summary judgment and dismissed Mr. Sanford’s claims for abuse of process, conversion, and breach of fiduciary duty, and granted partial summary judgment to the Waughs on the fraudulent conveyance claim with respect to some of the alleged fraudulent transactions. The trial court denied summary judgment on the remaining claims of fraudulent conveyance with respect to consulting fees and interest payments made by SecureOne to the Waughs, conspiracy, and malicious prosecution.

During the discovery process, the Waughs propounded an interrogatory requesting that Mr. Sanford “[ijdentify with specificity the tort underlying the conspiracy claim alleged in ... the Amended Complaint.” ■ Mr. Sanford answered by stating, “Sanford has asserted claims against Defendants for breach of fiduciary duty, malicious prosecution, fraudulent conveyance and conversion, all of which resulted from the Waughs’ and the Prows’ plan to keep from paying Sanford the money he was owed under the Settlement Agreement and Note.” Shortly before trial, on August 7, 2007, the Waughs filed a motion in limine requesting that the trial court exclude any evidence of conspiracy to commit any underlying torts or bad acts other than fraudulent conveyance and malicious prosecution. In response, Mr. Sanford alleged for the first time that the Waughs were guilty of conspiring with the Prows to commit the tort of interference with contract and that he should be allowed to put on evidence of such conspiracy. The trial court granted the Waughs’ motion in limine, finding that the plaintiff had failed to plead the tort of interference with contract and that no discovery had been conducted on this cause of action. The trial court prohibited Mr. Sanford from offering proof of interference with contract as an underlying tort or bad act to establish a conspiracy.

The case was tried before a jury on August 20-24, 2007. At the close of Mr. Sanford’s proof, the Waughs moved for a directed verdict on the claims of fraudulent conveyance, malicious prosecution, and punitive damages. The trial court dismissed the claim for punitive damages and denied the motion for directed verdict on the remaining claims. The Waughs presented no additional proof.

The jury returned a verdict in favor of Mr. Sanford on the malicious prosecution claim, with Mr. Waugh, Mrs. Waugh, and Waugh <& Co. each liable in the amount of $17,000; in favor of Mr. Sanford on the fraudulent transfer of assets claim with Waugh & Co. liable for $109,733, Mrs. Waugh liable for $48,248, and Mr. Waugh liable for $18,249; and found that the defendants conspired together to commit the torts of malicious prosecution and fraudulent conveyance, resulting in the trial court entering a judgment of joint and several liability against the defendants in the amounts awarded by the jury.

Both parties appealed. The Court of Appeals held that the trial court erred by: (1)granting the Waughs summary judgment on Mr. Sanford’s claim for breach of fiduciary duty; (2) granting the Waughs’ motion in limine and refusing to allow Mr. Sanford to present evidence supporting a claim of conspiracy to commit interference with contract; and (3) granting a directed verdict and dismissing the punitive damages claim. Sanford v. Waugh & Co., No. M2007-02528-COA-R3-CV, 2009 WL 1910957, at *19 (Tenn.Ct.App. June 30, 2009). The Waughs appealed all three of these rulings by the intermediate court.

Issues Presented

We address the following issues:

(1) whether an individual creditor of an insolvent corporation may assert a direct claim for breach of fiduciary duty against the corporation’s officers and directors;

(2) whether the trial court erred in granting the Waughs’ motion in limine and thereby refusing to allow Mr. Sanford to present evidence supporting a claim of conspiracy to commit the tort of interference with contract; and

(3) whether the trial court erred in granting the Waughs a directed verdict on the claim for punitive damages.

Analysis

Direct Cause of Action by Creditor of Insolvent Corporation for Breach of Fiduciary Duty

Mr. Sanford brought a direct claim for breach of fiduciary duty against the Waughs, as officers and directors of the insolvent corporation, SecureOne. The trial court dismissed the claim and the Court of Appeals reversed, holding that a creditor of an insolvent corporation could bring a direct claim for breach of fiduciary duty against corporate officers and directors. Sanford, 2009 WL 1910957, at *13-14. The question of whether an individual creditor of an insolvent corporation may bring a direct cause of action against the directors and officers for breach of fiduciary duty has not been directly addressed by the courts in Tennessee. This determination presents an issue of law, and therefore we view the trial court’s decision de novo with no presumption of correctness. Madden v. Holland Grp. of Tenn., Inc., 277 S.W.3d 896, 898 (Tenn.2009).

We begin with a brief review of the role and responsibilities of corporate officers and directors. A corporation is governed by its directors and officers. Tennessee Code Annotated section 48-18-101 (2002) establishes the position and general role of a corporate director, stating as follows:

(a) Except as provided in subsection (c), each corporation must have a board of directors.
(b) All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of, its board of directors, subject to any limitation set forth in the charter.
(c) A corporation having fifty (50) or fewer shareholders may dispense with or limit the authority of a board of directors by describing in its charter who will perform some or all of the duties of a board of directors; provided, that any such person or persons shall be subject to the same standards of conduct that this chapter imposes on directors in the performance of their duties.

Similarly, Tennessee Code Annotated section 48-18^401 (2002) governs corporate officers by stating that “[a] corporation has the officers described in its bylaws or designated by its board of directors in accordance with the bylaws; provided, that every corporation shall have a president and a secretary.” The corporation’s officers are appointed or elected by the board of directors unless its charter or bylaws provide otherwise. Id.

In a solvent corporation, there is a clear distinction between the fiduciary duty the officers and directors owe to shareholders of the corporation and the duty the officers and directors owe to creditors. The directors and officers of a corporation owe a fiduciary duty to the corporation and to its shareholders. Deadrick v. Bank of Commerce, 100 Tenn. 457, 45 S.W. 786, 788 (1898) (observing that a corporation’s “officers or agents stand in a fiduciary relation to both” the corporate entity and shareholders); Neese v. Brown, 218 Tenn. 686, 405 S.W.2d 577, 581 (1964) (observing that “a director, or other officer, of a corporation, although not responsible for errors of judgment^] is a fiduciary charged with the duty of caring for the property of the corporation and managing its affairs honestly and in good faith”) (internal quotation marks omitted); Knox-Tenn Rental Co. v. Jenkins Ins., Inc., 755 S.W.2d 33, 36 (Tenn.1988) (stating “[a] corporate officer must at all times be loyal to his trust and act in good faith and unselfishly toward the corporation and its stockholders”) (quoting Hayes v. Schweikart’s Upholstering Co., 55 Tenn. App. 442, 402 S.W.2d 472, 483 (1965) (citing 19 C.J.S. Corporations § 761b)). A fiduciary is a person holding the character of a trustee who bears the duty to act primarily for the benefit of another. See McRedmond v. Estate of Marianelli, 46 S.W.3d 730, 738 (Tenn.Ct.App.2000). As fiduciaries, corporate officers and directors must act in good faith, as observed by the McRedmond court:

With respect to directors in a close corporation, “They are required to act in the utmost good faith, and ... they impliedly undertake to give to the enterprise the benefit of their care and best judgment and to exercise the powers conferred solely in the interest of the corporation ... and not for their own personal interests.” A fiduciary is not an insurer, but is bound to exercise good faith and due diligence.

Id. (internal citations omitted).

Tennessee Code Annotated section 48-18-301 (2002) (pertaining to directors) and section 48-18-403 (2002) (pertaining to officers) require that directors and officers discharge all duties under their discretionary authority: “(1) In good faith; (2)With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and (3) In a manner the director [or officer] reasonably believes to be in the best interests of the corporation.” Id. Although shareholders, as “owners” of the corporation, cannot exercise any control over the corporation’s ordinary business operations, they are properly protected by the fiduciary duty owed to them and the corporation by the directors and officers. “[A]lthough the shareholder bears the risk, it is the director and officer who, through their decisions, can directly affect the value of the firm. Thus directors must act as custodians entrusted with the management of the shareholders’ assets.” Cory Dean Kan-destin, Note, The Duty to Creditors in Near-Insolvent Firms: Eliminating the “Near-Insolvency” Distinction, 60 Vand. L.Rev. 1235, 1242 (2007) (internal quotation marks omitted).

Officers and directors, however, do not owe a fiduciary duty to creditors of a solvent corporation. Deadrick, 45 S.W. at 788; Merriman v. Smith, 599 S.W.2d 548, 555 (Tenn.Ct.App.1979). Unlike shareholders, creditors are able to protect their interests by contracts, including loan and security agreements, before lending money to the firm. “Creditors have fixed claims against the corporation, entitling them to receive repayment of their principal, with interest, at a specified time. Shareholders have the right to participate in firm profits through dividends ... and to share in residual assets ... upon dissolution.” J. William Callison, Why a Fiduciary Duty Shift to Creditors of Insolvent Business Entities is Incorrect as a Matter of Theory and Practice, 1 J. Bus. & Tech. L. 431, 431 (2007).

The directors of a corporation or a majority of its shareholders, acting for the corporation, are the proper parties to bring a claim on behalf of a corporation. House v. Estate of Edmondson, 245 S.W.3d 372, 381 (Tenn.2008). Also to protect their rights, corporate shareholders may bring a derivative action. “A derivative action is a suit brought by one or more shareholders on behalf of a corporation to redress an injury sustained by, or to enforce a duty owed to, the corporation.” Id. at 381-82.

In contrast, creditors may not directly sue officers and directors of a corporation because they allegedly failed to properly manage corporate affairs. In Merriman, the court observed the general rule that “to become directly liable to a creditor, a statutory duty must devolve upon the director or there must be some conduct which creates privity of contract between them or which results in tortious injury to the creditor for which an action ex delicto will lie.” 599 S.W.2d at 555; accord Schlater v. Haynie, 833 S.W.2d 919, 924 (Tenn.Ct.App.1991). The Merriman court cited and applied the following general principles observed by this Court in Deadrick:

That directors are liable in an action at law to their principal, the corporation, for losses resulting to it from their malfeasance, misfeasance, or their failure or neglect to discharge the duties imposed by their office, and, in equity, to the stockholders for these losses, the corporation declining to bring suit, is clear.... Though the corporation is the legal entity, yet the stockholders are interested in the operations of the corporation while in a state of activity, and, upon its dissolution, in the distribution of its property, after all debts are paid; and so its officers or agents stand in a fiduciary relation to both. But it is otherwise as to creditors.... It is true that the creditors may extend credit upon the faith that the company has assets to pay its debts, and that these assets are prudently managed; yet they are strangers to the directors; they maintain no fiduciary relation with them; there is a lack of privity between the two.
To enable the creditors to sue the defendants directly, they must have some independent right of action, either legal or equitable.

45 S.W. at 788-89. The Deadrick Court emphasized that “we are not now dealing ... with a case where directors have unlawfully or fraudulently appropriated to their own use, or otherwise wrongfully de-vested the assets of the bank,” but only with allegations of ordinary negligent mismanagement of the corporation. Id. at 787.

When a corporation becomes insolvent, additional protection is afforded to corporate creditors, including the power to initiate a derivative action on behalf of the corporation, because upon a corporation’s insolvency, “its creditors take the place of the shareholders as the residual beneficiaries of any increase in value.” N. Am. Catholic Educ. Programming Found., Inc. v. Gheewalla, 930 A.2d 92, 101 (Del.2007); cf. Intertherm, Inc. v. Olympic Homes Sys., Inc., 569 S.W.2d 467, 468 (Tenn.Ct.App.1978) (derivative action by certain creditors on behalf of all creditors against directors of insolvent corporation).

Creditors are further protected by the application of the “trust fund” doctrine which allows creditors of an insolvent or dissolved corporation to collect payment of their debts before distributions to shareholders, as noted by this Court as follows:

Under this doctrine, as it has been applied in Tennessee, the creditors of an insolvent or dissolved corporation “are entitled in equity to payment of their debts before any distribution of corporate property is made among stockholders,” and these creditors also possess “a right to follow its assets or property into the hands of [anyone] who is not a holder in good faith in the ordinary course of business.” See Jennings, Neff & Co. v. Crystal Ice Co., 128 Tenn. 231, 236, 159 S.W. 1088, 1089 (1913).

Kradel v. Piper Indus., 60 S.W.3d 744, 756 (Tenn.2001).

Mr. Sanford is asking this Court to recognize a new direct, not derivative, cause of action by a single creditor against the corporate directors and/or officers of an insolvent corporation. The trial court dismissed Mr. Sanford’s direct claim for breach of fiduciary duty, finding the reasoning of the Delaware Supreme Court in the Gheewalla case to be persuasive. In Gheewalla, the Court addressed as a matter of first impression the same issue presented here and concluded that “the creditors of a Delaware corporation that is either insolvent or in the zone of insolvency have no right, as a matter of law, to assert direct claims for breach of fiduciary duty against the corporation’s directors.” Id. at 94. The Gheewalla Court provided two reasons that we find persuasive in support of its conclusion. First, the Court noted that creditors of corporations are already provided with adequate legal protections and safeguards and observed that an additional layer of protection via a direct claim for breach of fiduciary duty would be unnecessary and problematic:

It is well established that the directors owe their fiduciary obligations to the corporation and its shareholders. While shareholders rely on directors acting as fiduciaries to protect their interests, creditors are afforded protection through contractual agreeihents, fraud and fraudulent conveyance law, implied covenants of good faith and fair dealing, bankruptcy law, general commercial law and other sources of creditor rights.

Id. at 99 (footnotes omitted). The Court, observing that the recognition of a new direct right to assert breach of fiduciary claims by creditors of corporations that are insolvent or in the zone of insolvency may involve ‘“using the law of fiduciary duty to fill gaps that do not exist,’ ” id. at 100 (quoting Production Resources Group L.L. v. NCT Group, Inc., 863 A.2d 772, 790 (Del.Ch.2004)), stated that

creditors’ existing protections — among which are the protections afforded by their negotiated agreements, their security instruments, the implied covenant of good faith and fair dealing, fraudulent conveyance law, and bankruptcy law— render the imposition of an additional, unique layer of protection through direct claims for breach of fiduciary duty unnecessary.

Gheewalla, 930 A.2d at 100.

Secondly, the Gheewalla Court observed that allowing a direct breach of fiduciary duty claim would create problems with corporate governance, causing uncertainty and potential conflicts of interest for officers and directors:

Recognizing that directors of an insolvent corporation owe direct fiduciary duties to creditors, would create uncertainty for directors who have a fiduciary duty to exercise them business judgment in the best interest of the insolvent corporation. To recognize a new right for creditors to bring direct fiduciary claims against those directors would create a conflict between those directors’ duty to maximize the value of the insolvent corporation for the benefit of all those having an interest in it, and the newly recognized direct fiduciary duty to individual creditors. Directors of insolvent corporations must retain the freedom to engage in vigorous, good faith negotiations with individual creditors for the benefit of the corporation.

Id. at 103.

We agree with and adopt the Delaware Supreme Court’s reasoning and holding in Gheewalla. Mr. Sanford’s rights as an individual creditor of Secu-reOne were adequately protected by state law and federal bankruptcy law. Although Mr. Sanford did not have a direct breach of fiduciary duty claim, he could have initiated a derivative claim on behalf of all of the insolvent SecureOne’s creditors. See Gheewalla, 930 A.2d at 101 (stating that “the creditors of an insolvent corporation have standing to maintain derivative claims against directors on behalf of the corporation for breaches of fiduciary duties”) (emphasis in original); cf. Intertherm, 569 S.W.2d at 468-69 (derivative action on behalf of all creditors against directors of insolvent corporation). Mr. Sanford’s rights as a creditor were further protected by his contractual and security agreements with SecureOne, the implied covenant of good faith and fair dealing, see Intertherm, 569 S.W.2d at 471, federal bankruptcy law, Tennessee’s version of the Uniform Fraudulent Transfer Act, Tenn. Code Ann. §§ 66-3-301 to -313 (2004), and the trust fund doctrine. Indeed, Mr. Sanford was able to successfully prosecute and obtain a judgment in this ease for those transfers made by SecureOne that the jury found to be fraudulent. Mr. Sanford admits in his appellate brief that “[ojfficers and directors are already prohibited from self-dealing and from preferring their own debt over the debt of other creditors” in the absence of a direct breach of fiduciary duty claim. In summary, we hold that as a matter of law, individual creditors of an insolvent corporation have no right to assert direct claims for breach of fiduciary duty against corporate officers and/or directors. The judgment of the Court of Appeals is therefore reversed, and the judgment of the trial court granting the Waughs summary judgment on this claim is reinstated.

Exclusion of Evidence of Conspiracy to Interfere With Contract

Shortly before trial, the Waughs filed a motion in limine requesting that the trial court refuse to allow Mr. Sanford to put on evidence of conspiracy to commit any underlying torts or bad acts other than fraudulent conveyance and malicious prosecution, because the court had previously granted summary judgment on the rest of Mr. Sanford’s claims. Mr. Sanford responded by alleging for the first time, less than two weeks before the trial was scheduled to begin, that the Waughs conspired with the Prows to commit the tort of interference with contract. Mr. Sanford did not plead interference with contract in his complaint or his amended complaint, The trial court granted the Waughs’ motion in limine on the grounds that “the plaintiff did not plead the tort of interference with contract and no discovery was exchanged on this cause of action.” The Court of Appeals reversed, and the Waughs argue on appeal that it erred in doing so.

In our review of the trial court’s decision to admit or exclude evidence, we apply a deferential abuse of discretion standard. Biscan v. Brown, 160 S.W.3d 462, 468 (Tenn.2005). The trial court’s ruling was based on the facts that (1) Mr. Sanford never pled interference with contract, and (2) Mr. Sanford’s response to the Waughs’ interrogatory requesting him to “[i]dentify with specificity the tort underlying the conspiracy claim” did not include any suggestion of an interference with contract claim, stating instead that “Sanford has asserted claims against Defendants for breach of fiduciary duty, malicious prosecution, fraudulent conveyance and conversion....” Consequently, as the trial court noted, the Waughs did not take any further discovery relating to a potential claim of interference with contract and had no notice of such a potential claim until Mr. Sanford’s response to their motion in limine on the eve of trial.

Tennessee Rules of Civil Procedure 8.01 and 8.05 require parties to plead their claims in short, plain, simple, concise, and direct language. As the Court of Appeals correctly noted in this case, “[o]ne purpose of pleadings is ‘to give notice of the issues to be tried so that the opposing party can adequately prepare for trial.’ ” Sanford, 2009 WL 1910957, at *6 (quoting Keisling v. Keisling, 92 S.W.3d 374, 377 (Tenn.2002)). Similarly, “[p]retrial discovery is intended to bring out the facts prior to trial, thereby eliminating surprise and enabling the parties to decide what is at issue.” Wright v. United Servs. Auto. Ass’n, 789 S.W.2d 911, 915 (Tenn.Ct.App.1990); accord Se. Fleet Leasing, Inc. v. Gentry, 57 Tenn.App. 162, 416 S.W.2d 773, 776 (1966) (stating that the purpose of the discovery process is “to promote the ascertainment of truth by aiding a party in preparing for trial, to prevent surprise and insure as far as possible a trial on the merits, rather than upon fortuitous and unforeseen developments at the trial”). Because Mr. Sanford did not plead a cause of action for interference with contract, and because he failed to include such a tort or bad act in his answer to the interrogatory directly requesting him to state with specificity the underlying torts supporting his conspiracy claim, the Waughs had a reasonable argument that they were unfairly surprised on the eve of trial at Mr. Sanford’s last-minute claim of conspiracy to commit interference with contract. Under these circumstances, we hold that the trial court did not abuse its discretion by granting the Waughs’ motion in limine. The judgment of the Court of Appeals is reversed on this issue.

Punitive Damages Claim

At the conclusion of Mr. Sanford’s proof, the trial court granted the Waughs’ motion for directed verdict on the punitive damages claim, finding that “the plaintiff has not met the clear and convincing burden that is required with [punitive] damages.” The final issue on appeal is the correctness of this ruling.

In reviewing a trial court’s disposition of a motion for directed verdict, the appellate court must “take the strongest legitimate view of the evidence in favor of the non-moving party, construing all evidence in that party’s favor and disregarding all countervailing evidence.” Johnson v. Tenn. Farmers Mut. Ins. Co., 205 S.W.3d 365, 370 (Tenn.2006). To be entitled to an award of punitive damages, a plaintiff must prove by clear and convincing evidence that the defendant “acted either (1) intentionally, (2) fraudulently, (3) maliciously, or (4) recklessly.” Hodges v. S.C. Toof & Co., 833 S.W.2d 896, 901 (Tenn.1992). Consequently, “[w]hen presented with a motion seeking a directed verdict on a punitive damage claim, a court must determine whether there is sufficient evidence, using the clear and convincing evidence standard, to submit the punitive damage claim to the jury.” Duran v. Hyundai Motor Am., Inc., 271 S.W.3d 178, 207 (Tenn.Ct.App.2008); accord Hughes v. Lumbermens Mut. Cas. Co., 2 S.W.3d 218, 227 (Tenn.Ct.App.1999); Wasielewski v. K Mart Corp., 891 S.W.2d 916, 919 (Tenn.Ct. App.1994).

This Court has held that because punitive damages “are intended to ‘punish a defendant, to deter him from committing acts of a similar nature, and to make a public example of him,’ ” Goff v. Elmo Greer & Sons Construction Co., 297 S.W.3d 175, 187 (Tenn.2009) (quoting Huckeby v. Spangler, 563 S.W.2d 555, 558-59 (Tenn.1978)), they are available in “cases involving only the most egregious of wrongs.” Hodges, 833 S.W.2d at 901. We have carefully reviewed the proof presented by Mr. Sanford in this case, and we agree with the trial court that, taking the strongest legitimate view of the evidence in favor of Mr. Sanford, a reasonable jury could not find by clear and convincing evidence that the Waughs’ conduct was intentional, fraudulent, malicious, or reckless to such an extent as to justify punitive damages, nor could it possibly be found to involve the most egregious of wrongs.

Our review of the trial court’s directed verdict is limited to the question of whether the evidence supporting Mr. Sanford’s malicious prosecution was sufficiently egregious to justify punitive damages, because as the Court of Appeals observed, “[t]he trial court previously ruled that punitive damages were not recoverable on Sanford’s fraudulent conveyance claim and Sanford did not appeal this issue.” Sanford, 2009 WL 1910957, at *17 n. 18. Although there is clearly material evidence supporting the jury’s verdict against the Waughs on his malicious prosecution claim, the level of malice required to prove a claim for malicious prosecution is considerably less than the level of malice that must be demonstrated to recover punitive damages. Compare Hodges, 833 S.W.2d at 901 (requiring plaintiff to prove defendant was “motivated by ill will, hatred, or personal spite” to recover punitive damages based on malicious conduct) with Wright Med. Tech., Inc. v. Grisoni, 135 S.W.3d 561, 582 (Tenn.Ct.App.2001) (stating that the “claimant need not prove ill will or personal hatred, so long as he demonstrates an improper motive” to recover for malicious prosecution). If it were otherwise, any plaintiff winning a malicious prosecution case would automatically be entitled to punitive damages, which is clearly not the law in Tennessee. See Levy v. Franks, 159 S.W.3d 66, 86 (Tenn.Ct.App.2004) (observing that “punitive damages in the context of malicious prosecution are analyzed as any other claim for punitive damages”); Jarmakowicz v. Suddarth, No. M1998-00920-COA-R3-CV, 2001 WL 196982, at *13 (Tenn.Ct.App. Feb. 28, 2001) (rejecting the notion that “in every case where the underlying cause of action requires a showing of ... malicious ... conduct, a directed verdict for defendants on punitive damages is never appropriate where liability for compensatory damages is allowed to go to the jury” and stating that “malicious ... conduct which warrants an award of compensatory damages does not necessarily qualify for an award of punitive damages.”). One important difference lies in the differing standards of proof required to demonstrate a claim for malicious prosecution as opposed to a punitive damages claim. The proof by “clear and convincing evidence” standard is obviously higher than the “preponderance” standard required to win a malicious prosecution case. Hodges, 833 S.W.2d at 901; Goff, 297 S.W.3d at 187. If a plaintiff who successfully states a claim for malicious prosecution were automatically entitled to place a punitive damages claim before the trier of fact, our admonition in Hodges, 833 S.W.2d at 901, recently reiterated in Goff, 297 S.W.3d at 187, that “punitive damages are to be awarded only in the most egregious of cases” would be seriously undermined.

There is no evidence that clearly and convincingly demonstrates that the Waughs’ lawsuit against Mr. Sanford alleging misrepresentation was motivated by-personal ill will, hatred, or spite. The Waughs voluntarily dismissed their action on advice of their counsel less than a year after it was filed. Mr. Sanford testified that the only document he had “in which either of these folks [the Waughs] said anything nasty or malicious” to him was a check in the amount of $18.75 written by Mrs. Waugh after Mr. Sanford received his $1,560,000 judgment in his action against SecureOne to enforce the Sanford note, with the notation “balance 0” written on the memo line, delivered in an envelope decorated with a red heart-shaped sticker. The check, however, was written in 2006, significantly after the commencement of the malicious prosecution action in April of 2004 and its voluntary dismissal in March of 2005. Finally, in examining the totality of the Waughs’ conduct toward Mr. Sanford, the settlement offer made by the Waughs on behalf of SecureOne shortly after they told him they could not afford to continue payments on the Sanford note bears consideration. Mr. Sanford testified that the Waughs offered him between $600,000 and $700,000 in cash, SecureOne’s house accounts, and the vehicles owned by the company in settlement of the amount owed under the Sanford note. The house accounts subsequently sold for $330,000. The vehicles sold for approximately $170,000, and the proceeds later went to Mr. Sanford in satisfaction of his judgment against SecureOne and the Prows. Thus, the Waughs made Mr. Sanford an offer of cash and assets worth between $1 million and $1.1 million, in satisfaction of a debt totaling approximately $1,300,000 at that time.

In summary, the proof offered by Mr. Sanford fails to clearly and convincingly demonstrate that the Waughs’ conduct in maliciously prosecuting their claim of misrepresentation was motivated by such ill will, hatred, or spite as to render it among “the most egregious of wrongs” justifying an award of punitive damages. The decision of the Court of Appeals on this issue is reversed; the trial court’s directed verdict is affirmed and reinstated.

Conclusion

As a result of our holding that individual creditors of an insolvent corporation have no right to assert direct claims for breach of fiduciary duty against corporate officers and/or directors, the judgment of the Court of Appeals reversing the trial court’s summary judgment on Mr. Sanford’s direct claim for breach of fiduciary duty is reversed. The judgment of the Court of Appeals reversing the trial court’s ruling on the Waughs’ motion in limine and granting a directed verdict on the punitive damages claim is also reversed. Costs on appeal are assessed to the appellee, Michael Sanford, and his surety, for which execution may issue if necessary.

      . SecureOne sold and installed security systems to residential and non-residential customers. If the customer met ADT’s credit requirements, SecureOne sold the service contracts to ADT Security Systems, Inc. If a customer did not meet ADT’s credit requirements, SecureOne retained and serviced the account directly for a monthly fee of $30. These accounts were SecureOne's "house accounts.” In 2003, SecureOne’s house accounts generated a monthly revenue of about $30,000.

      . The quoted language is identical in the two cited statutory sections, except that section 48-18-301 uses the word "interests” and section 48-18-403 uses the singular "interest.”

      . "Ex delicto” is defined as "[a]rising from a crime or tort." Black's Law Dictionary 649 (9th ed.2009).

      . Courts in several other jurisdictions presented with the same issue have similarly adopted Gheewalla's rationale and ruling. See Master-Halco, Inc. v. Scillia, Dowling & Natarelli, LLC, 739 F.Supp.2d 100, 2010 WL 1729172, at *2-3 (D.Conn. Apr. 5, 2010); RSL Commc'ns PLC v. Bildirici, 649 F.Supp.2d 184, 206 (S.D.N.Y.2009) (stating that "many courts — including this one — appropriately look to the views of Delaware's learned jurists when analyzing issues of corporate law” and concluding that it "agrees with tire Delaware Supreme Court’s position in Gheewalla ”); see also Donald J. Detweiler & Sandra G.M. Selzer, Scope of Directors' Fiduciary Duties to Creditors: New Delaware Decision Sets Bright-

        Line Limit, 26-AUG Am. Bankr.Inst. J. 1, *55 (2007) (noting that "[a]s directors and their insolvency professionals navigate these potentially difficult waters, they can rest assured that in financially troubled times the Delaware Supreme Court has provided them with a bright-line rule that will aid them in their decision-making: the creditors of a Delaware corporation that is either insolvent or in the 'zone of insolvency’ have no right, as a matter of law, to assert direct claims for breach of fiduciary duty against its directors”).


source: Caselaw Access Project

author: CORNELIA A. CLARK, C.J.,

license: Public Domain

text:
    Dawn BROWN et al. v. TENNESSEE TITLE LOANS, INC.
    Supreme Court of Tennessee, at Knoxville.
    Sept. 2, 2010 Session.
    Nov. 29, 2010.

      J. Bartlett Quinn, Stephen D. Barham, and Justin L. Furrow, Chattanooga, Tennessee, for the appellant, Tennessee Title Loans, Inc.
    James R. Kennamer, Chattanooga, Tennessee, for the appellees, Dawn Brown, Anne Devries, Carly Hahn, and Greg Walton.
   OPINION

CORNELIA A. CLARK, C.J.,

delivered the opinion of the Court,

in which JANICE M. HOLDER, GARY R. WADE, WILLIAM C. KOCH, JR., and SHARON G. LEE, JJ., joined.

We granted this interlocutory appeal to answer a single question of first impression: whether the Tennessee Title Pledge Act, Tenn.Code Ann. §§ 45-15-101 to -120 (2000), permits a private right of action on behalf of pledgors against title pledge lenders who allegedly charged excessive interest and prohibited fees. The trial court granted the defendant’s motion to dismiss plaintiffs’ Title Pledge Act allegations for failure to state a claim, and the Court of Appeals reversed. We hold that the Title Pledge Act does not expressly create an individual private right of action, and plaintiffs have not carried their burden of establishing that the legislature intended to imply such a right. Accordingly, we reverse the judgment of the Court of Appeals and reinstate the judgment of the trial court.

Background

Dawn Brown, Anne Devries, Carly Hahn, and Greg Walton (“Plaintiffs”) filed the initial complaint in this action on October 27, 2004, and then filed an amended complaint on January 31, 2005. Because the case comes to us in the posture of Tennessee Title Loans, Inc.’s (“Defendant”) motion to dismiss the amended complaint for failure to state a claim, we accept the allegations of the amended complaint as true. See Leach v. Taylor, 124 S.W.3d 87, 90 (Tenn.2004). Plaintiffs brought this case as a putative class action on behalf of all those who had a title pledge loan with Defendant and paid interest or fees on that loan “within the year preceding the filing of this Complaint and thereafter.” In the title pledge transaction, Defendant loaned money to each Plaintiff in exchange for a security interest in Plaintiffs motor vehicle. Each Plaintiff delivered the certificate of title for his/her vehicle to Defendant while retaining possession of the vehicle for the duration of the loan agreement. Upon paying the total amount due within a specified period of time, each Plaintiff had the right to redeem his/her vehicle title. If any Plaintiff defaulted on the loan, Defendant had the right to take possession of that Plaintiffs vehicle and to sell the vehicle after the expiration of a grace period.

The amended complaint alleged that Plaintiffs and putative class members were charged interest in excess of the statutory maximum set forth in the Tennessee Title Pledge Act (“TTPA”) and/or charged fees not allowed by the TTPA. See Tenn.Code Ann. § 45-15-lll(a) (2000). Specifically, Defendant allegedly charged a prohibited “redemption premium fee” for redeeming the loan, calculated based on the date the loan was paid. The amended complaint alleged a violation of the TTPA because the redemption premium fee was not allowed. See id. It also alleged a violation of the Tennessee Consumer Protection Act (“TCPA”), TenmCode Ann. §§ 47-18-101 to -125 (2001), because Defendant misrepresented to Plaintiffs that the redemption premium fee was lawful under the TTPA. Plaintiffs sought class certification pursuant to Tennessee Rule of Civil Procedure 23. Among their requested remedies, Plaintiffs requested rescission of the title pledge loan agreements and an award of punitive damages for Defendant’s fraud.

Defendant originally moved to compel arbitration, citing identical clauses in the title pledge agreements signed by each of the Plaintiffs. The trial court granted the motion to compel arbitration. Subsequently, the trial court granted Plaintiffs’ application for permission to file an interlocutory appeal, see Tenn. R.App. 9. The Court of Appeals granted Plaintiffs’ request for an interlocutory appeal and ultimately reversed, holding that the arbitration clause was unconscionable and unenforceable because it reserved access to a judicial forum for Defendant but restricted Plaintiffs to arbitration. See Brown v. Tenn. Title Loans, Inc., 216 S.W.3d 780, 787 (Tenn.Ct.App.2006) (citing Taylor v. Butler, 142 S.W.3d 277 (Tenn.2004)), perm. app. denied (Feb. 26, 2007).

Defendant filed its motion to dismiss for failure to state a claim on April 26, 2007. Defendant argued that the facts alleged by Plaintiffs, including the contents of the loan agreements that Plaintiffs attached as exhibits to their pleadings, established that Defendant did not violate the TTPA by charging prohibited fees or excessive interest.

Although the parties had not originally raised the issue, the trial court subsequently requested that the parties file supplemental briefs on the question of whether a private right of action existed under the TTPA. On May 19, 2008, the trial court issued an order dismissing the individual and classwide TTPA claims because the TTPA provided no private right of action. The trial court also dismissed the class allegations under the TCPA in light of this Court’s holding that TCPA claims are inappropriate for class certification. See Walker v. Sunrise Pontiac-GMC Truck, Inc., 249 S.W.3d 301, 313 (Tenn.2008). The trial court did not dismiss the individual TCPA claims.

The trial court then granted Plaintiffs’ application for permission to file an interlocutory appeal pursuant to Tennessee Rule of Appellate Procedure 9 on the issue of whether the TTPA provides a private right of action. , The Court of Appeals granted Plaintiffs’ application for permission to appeal and stayed proceedings in the trial court. The intermediate court then reversed the judgment of the trial court, holding that the TTPA “does create a private right of action in favor of pled-gors for violations of the [TTPA] by predatory lenders.” See Brown v. Tenn. Title Loans, Inc., No. E2008-01758-COA-R9-CV, 2009 WL 2213487, at *6 (Tenn.Ct.App. July 24, 2009).

Standard of Review

A motion to dismiss a complaint for failure to state a claim filed pursuant to Tennessee Rule of Civil Procedure 12.02(6) ‘admits the truth of all of the relevant and material allegations contained in the complaint, but it asserts that the allegations fail to establish a cause of action.’ ” Freeman Indus., LLC v. Eastman Chem. Co., 172 S.W.3d 512, 516 (Tenn.2005) (quoting Leach, 124 S.W.3d at 90). We accept as true all factual allegations in the complaint. Id. We review de novo the trial court’s legal conclusions, including the determination that the TTPA does not contain a private right of action. Tenn. R.App. P. 13(d); Stein v. Davidson Hotel Co., 945 S.W.2d 714, 716 (Tenn.1997).

Analysis

Determining whether a statute creates a private right of action is a matter of statutory construction. Premium Fin. Corp. of Am. v. Crump Ins. Servs. of Memphis, Inc., 978 S.W.2d 91, 93 (Tenn. 1998). Our essential duty in statutory construction is to determine and implement the legislature’s intent without limiting or expanding the statute’s coverage beyond what the legislature intended. Id.; Hawks v. City of Westmoreland, 960 S.W.2d 10, 16 (Tenn.1997). When the existence of a private right of action depends on the contents of the statute, “our courts are not privileged to create such a right under the guise of liberal interpretation of the statute.” Premium Fin. Corp., 978 S.W.2d at 93; see Hogan v. McDaniel, 204 Tenn. 235, 319 S.W.2d 221, 223 (1958) (“Judicial legislation has long been regarded by the legal profession as unwise, if not dangerous business.”). The authority to create a private right of action pursuant to statute is the province of the legislature. Premium Fin. Corp., 978 S.W.2d at 93; Reed v. Alamo Rent-A-Car, Inc., 4 S.W.3d 677, 689 (Tenn.Ct.App.1999).

To determine whether the legislature intended to create a private right of action for excessive interest and prohibited fees, we begin with the express statutory language. See Ergon, Inc. v. Amoco Oil Co., 966 F.Supp. 577, 584 (W.D.Tenn.1997); Premium Fin. Corp., 978 S.W.2d at 93. Here, there is no dispute that the express language of the TTPA does not create such a right of action on behalf of a title pledgor against a title pledge lender— whether in the specific section prescribing the interest and fees that title pledge lenders may charge, Tenn.Code Ann. § 45-15-111(a), or elsewhere.

If a statute does not expressly create a private right of action, our next inquiry is whether the legislature otherwise indicated an intention to imply such a right in the statute. Premium Fin. Corp., 978 S.W.2d at 93; Reed, 4 S.W.3d at 689. In this analysis, we look to the statutory structure and legislative history. Id. Appropriate factors to consider include (1) whether the party bringing the cause of action is an intended beneficiary within the protection of the statute, (2) whether there is any indication of legislative intent, express or implied, to create or deny the private right of action, and (3) whether implying such a remedy is consistent with the underlying purposes of the legislation. Ergon, 966 F.Supp. at 583-84; Buckner v. Carlton, 623 S.W.2d 102, 105 (Tenn.Ct.App.1981), superseded by statute on other grounds, Act of May 24,1984, ch. 972,1984 Tenn. Pub. Acts 1026, as recognized in Lucas v. State, 141 S.W.3d 121, 129, 137 (Tenn.Ct.App.2004); see Premium Fin. Corp., 978 S.W.2d at 93. The burden ultimately falls on the plaintiff to establish that a private right of action exists under the statute. Premium Fin. Corp., 978 S.W.2d at 93 (citing Ergon, 966 F.Supp. at 585); Gillespie v. City of Memphis, No. W2007-01786-COA-R3-CV, 2008 WL 2331027, at *9 (Tenn.Ct.App. June 5, 2008).

Overview of Statutory Scheme

The General Assembly originally enacted the TTPA in 1995, following a United States Bankruptcy Court decision holding that a title pledge loan did not satisfy the requirements of a “pawn transaction” under the Tennessee Pawnbrokers Act, Tenn.Code Ann. §§ 45-6-201 to -220 (1993). See Act of April 20, 1995, ch. 186, § 13, 1995 Tenn. Pub. Acts 266, 270-76 (codified as amended at Tenn.Code Ann. §§ 45-15-101 to -120 (2000)); Lynn v. Fin. Solutions Corp. (In re Lynn), 173 B.R. 894, 900 (Bankr.M.D.Tenn.1994). According to the TTPA’s original statement of purpose:

The making of title pledge loans vitally affects the general economy of this state and the public interest and welfare of its citizens. It is the policy of this state and the purpose of this chapter to:
(1) Ensure a sound system of making title pledge loans through licensing of title pledge lenders;
(2) Provide for licensing requirements;
(3) Ensure financial responsibility to the public; and
(4) Assist local governments in the exercise of their police power.

Tenn.Code Ann. § 45-15-102 (2000). These purposes are regulatory and penal in nature. See Premium Fin. Corp., 978 5.W.2d at 94.

The TTPA legalizes loans by licensed title pledge lenders on pledges of personal property certificates of title and pledges of titled personal property. Id. § 45-15-104(a) (2000). Among other provisions, the TTPA sets forth the eligibility requirements necessary to obtain a license, id. § 45-15-106 (2000), and prescribes the contents of the petition for the license that the would-be lender must submit to the county clerk in the county where the lender will operate, id. § 45-15-107 (2000). Lenders must record all loan agreements that they execute, making those records available for inspection by municipal and county law enforcement, id. § 45-15-109(a), (c) (2000), and must also record all liens on the certificate of title in a title pledge transaction, id. § 45-15-110 (2000). The TTPA further caps the length of pledge agreements at thirty (30) days, permitting renewals for thirty-day periods in most circumstances; allows the lender to take possession of titled property if the pledgor defaults; and prescribes a twenty-day holding period before the lender may sell the unredeemed property. Id. §§ 45-15 — 113(a), -114(b) (2000).

Section 45-15-lll(a), the provision that Defendant allegedly violated in this case, caps the interest that title pledge lenders may charge at two percent (2%) per month. It also allows lenders to charge “a customary fee to defray the ordinary costs of operating a title pledge office.” Id. That fee must not exceed one-fifth of the original principal amount of the loan, or of the total unpaid balance due at the beginning of any renewal. Id. The TTPA separately enumerates other “[p]rohibited actions” by title pledge lenders in section 45-15-115 (2000). The legislative councils of incorporated municipalities, cities, and tax districts may adopt additional rules and regulations, although they may not regulate in certain enumerated areas already covered by the statute. Id. § 45-15-118 (2000).

At the time Plaintiffs filed this action, the TTPA provided for enforcement of its provisions entirely through criminal and administrative penalties. Id. § 45-15-117 (2000). A knowing violation of the TTPA is a class A misdemeanor. Id. § 45-15-117(a). Additionally, through the 1996 amendments, the county clerk, at the direction of the department of financial institutions, shall suspend the license of a title pledge lender who knowingly violates department rules that require the lender to issue a standardized notification and disclosure form prior to executing a loan agreement. Act of Mar. 21, 1996, § 3, 1996 Tenn. Pub. Acts at 227 (codified at Tenn.Code Ann. § 45 — 15—117(b)(1)). A repeated, persistent pattern of knowing violations of those rules will result in a longer suspension and potentially a revocation of the license altogether. Id. We have previously stated, “[w]here an act as a whole provides for governmental enforcement of its provisions, we will not casually engraft means of enforcement of one of those provisions unless such legislative intent is manifestly clear.” Premium Fin. Corp., 978 S.W.2d at 94; see Thomas & Assocs., Inc. v. Metro. Gov’t, No. M2001-00757-COA-R3-CV, 2003 WL 21302974, at *10 (Tenn.Ct.App. June 6, 2003); Reed, 4 S.W.3d at 690.

Having concluded our overview of the statutory structure, we now turn to the three factors relevant to deciding whether the legislature intended to imply a private right of action in the TTPA.

Plaintiffs as Intended Beneficiaries

The first factor is whether the party bringing the cause of action is an intended beneficiary within the protection of the statute. Pledgors such as Plaintiffs are within the protection of the TTPA and stand to benefit from its provisions. The TTPA prohibits the title pledge lender from “[a]ccept[ing] any waiver ... of any right or protection accorded a pledgor” under the statute. Tenn. Code Ann. § 45-15-115(4). The legislative history confirms that pledgors are the intended beneficiaries of the TTPA. In particular, Senator Cooper, the sponsor of the 1995 Act, explained that section 45-15-lll(a)’s cap on the interest and fees that lenders could charge incidental to the loan was intended to protect the pledgor-consumer.

The mere fact that the legislature enacted the TTPA to protect and benefit pled-gors is not alone sufficient, however, to imply a private right of action. See Ellison v. Cocke Cnty., Tenn., 63 F.3d 467, 470 (6th Cir.1995); Reed, 4 S.W.3d at 689-90. We must also consider the remaining two factors in the inquiry.

Legislative Intent

The second factor is whether there is any indication of legislative intent, express or implied, to create or deny a private right of action. Plaintiffs bear the burden of establishing the evidence of legislative intent to create such a right.

We have reviewed the TTPA’s entire legislative history and found nothing that would support Plaintiffs’ contention that the legislature intended to imply a private right of action in the TTPA. As noted previously, the stated purposes were regulatory and penal in nature. According to Senator Cooper, the cap on fees came about after district attorneys general had threatened prosecution of title pledge lenders for price-gouging if the lenders did not “clean up their act.” Nothing in Senator Cooper’s comments suggests that, in addition to the criminal penalties for knowing violations of the TTPA, the legislature intended to allow private enforcement of the fee cap. Therefore, Plaintiffs can point to nothing in the legislative history that would make it “manifestly clear” that the legislature intended to engraft a private right of action onto the governmental means of enforcement provided for in the TTPA. See Premium Fin. Corp., 978 S.W.2d at 94.

While we recognize that “legislative inaction is generally irrelevant to the interpretation of existing statutes,” Freeman Indus., LLC, 172 S.W.3d at 519, we also note that “nonaction by a legislative body ... may become significant where proposals for legislative change have been repeatedly rejected.” Jo Ann Forman, Inc. v. Nat’l Council on Comp. Ins., Inc., 13 S.W.3d 365, 373 (Tenn.Ct.App.1999). To that end, Defendant directs our attention to at least eight bills introduced since the enactment of the 2005 amendments that would expressly grant a private right of action to title pledge borrowers against title pledge lenders but that have not become law. See 2009 Tenn. S.B. 1766; 2009 Tenn. S.B. 1765; 2009 Tenn. H.B. 1498; 2009 Tenn. H.B. 1497; 2007 Tenn. S.B. 1584; 2007 Tenn. S.B. 1558; 2007 Tenn. H.B. 2132; 2007 Tenn. H.B.1984. As a representative example, House Bill 1984, originally introduced in the 105th General Assembly on February 15, 2007, would replace the existing section 45-15-119 with a new provision that begins as follows:

In addition to the administrative remedies provided in the preceding section, any title pledge borrower aggrieved by a violation of any of the provisions of this title by a title pledge lender shall be entitled to bring a civil lawsuit against such title pledge lender in a court of competent jurisdiction within two (2) years of the reasonable date discovery [sic] of such violation.

Speaking before the Utilities, Banking, and Small Business Subcommittee of the House Commerce Committee and before a summer study committee, Webb Brewer, who drafted the model legislation that became House Bill 1984 at the request of Deputy Speaker Turner, stated his understanding that the TTPA lacked an express right of action as presently written. He further opined that the TTPA was ambiguous as to whether such right of action existed because the TTPA “doesn’t speak to that at all.” In the 106th General Assembly, House Bill 1498, containing identical language on the express private right of action, failed in the Utilities and Banking Subcommittee of the House Commerce Committee. Therefore, following the enactment of the 2005 amendments, despite the legislature’s knowledge of the ambiguous silence in the existing statute, it has repeatedly considered and ultimately refused to adopt a provision that would expressly create a private right of action under the TTPA and establish a two-year statute of limitations for a title pledgor to bring a civil action against a title pledge lender for a TTPA violation.

Ultimately, we conclude that the TTPA’s history does not indicate a legislative intent, whether express or implied, to create a private right of action for excessive interest and prohibited fees. We now turn to the third and final factor of the inquiry.

Underlying Purposes

The third and final factor is whether an implied right of action would be consistent with the purposes of the statute. The TTPA was enacted to establish a “sound system of making title pledge loans through licensing of title pledge lenders,” which included the creation of “licensing requirements.” Tenn.Code Ann. § 45 — 15—102(1)—(2). While the TTPA sought to “[e]nsure financial responsibility to the public,” it achieved that financial responsibility by “[a]ssist[ing] local governments in the exercise of their police power.” Id. § 45-15-102(3)-(4). The TTPA empowers local governments to exercise their police power by criminal sanctions. A knowing violation of “any of the provisions” of the TTPA is a class A misdemeanor, id. § 45-15-117, punishable by imprisonment and/or fine, id. § 40-35-111(e)(1) (2010). In addition to these criminal penalties, a knowing violation of rules concerning the issuance of standardized forms prior to executing a pledge agreement will result in the suspension and potentially the revocation of the lender’s license. Id. § 45-15-117(b). In short, the TTPA was designed to regulate the title pledge lending industry, especially through the licensure of lenders, and was govern-mentally enforced through criminal and administrative sanctions.

The courts of this state have refused to imply a private right of action in regulatory statutes enforced through governmental remedies. Our jurisprudence reflects the United States Supreme Court’s maxim that “it is an elemental canon of statutory construction that where a statute expressly provides a particular remedy or remedies, a court must be chary of reading others into it.” Transam. Mortg. Advisors, Inc. v. Lewis, 444 U.S. 11, 19, 100 S.Ct. 242, 62 L.Ed.2d 146 (1979); see Ellison, 63 F.3d at 470 (describing courts as “especially reluctant” to imply additional remedies in a statute that expressly provides a remedy). Accordingly, in Premium Finance Corp., we determined that the Premium Finance Company Act was “structured so as to evince a clear design to regulate the premium finance industry” and accomplished that regulatory function through many of the same mechanisms used in the TTPA: requiring companies to be licensed, prescribing the contents of financial agreements, and setting interest rates. 978 S.W.2d at 94. The act’s enforcement provisions were limited to criminal sanctions and administrative penalties. Id. Because the “act as a whole provide[d] for governmental enforcement of its provisions,” we declined to “casually engraft means of enforcement of one of those provisions unless such legislative intent is manifestly clear.” Id. We found no such manifestly clear intention and dismissed a premium finance company’s claim under the act against the defendant insurers for failure to return unearned premiums. Id.

Similarly, in Petty v. Daimler/Chrysler Corp., the Court of Appeals reviewed Tennessee’s motor glass vehicle safety statute. 91 S.W.3d 765, 768 (Tenn.Ct.App.2002), perm. app. denied (Sept. 9, 2002). That statute was codified “[a]s part of the equipment and lighting regulations for motor vehicles,” required the use of safety glass in motor vehicles, and authorized the commissioner of the department of safety to approve particular types of glass as safety glass. Id. The statute’s sole remedy lay with the commissioner, who had the authority to suspend the registration of a motor vehicle that did not comply. Id. Because “[t]he only remedy provided by the statute [was] to be had by the State,” the Court of Appeals held that the plaintiff car purchaser had no private right of action against the defendant car manufacturer. Id.

Finally, in Reed v. Alamo Rent-A-Car, Inc., the Court of Appeals reviewed a provision of the Tennessee Workers’ Compensation Law concerning the commissioner of labor’s establishment of a case management system to coordinate medical care. 4 S.W.3d 677, 689 (Tenn.Ct.App.1999), perm, app. denied (Oct. 4, 1999). The intermediate court explained that, “[v]iewed in its entirety, the Workers’ Compensation Law provides for governmental enforcement of its provisions,” including the department of labor’s establishment and collection of penalties for certain violations. Id. at 690. Therefore, even though the Court of Appeals acknowledged that the plaintiff employee was an intended beneficiary of the statute, it “decline[d] to ... engraft additional requirements onto the enforcement scheme designed by the legislature.” Id. Accordingly, the court held there was no implied private right of action against plaintiffs employer for negligent performance of case management duties. Id.

Like the statutory schemes analyzed in these cases, the TTPA is a regulatory statute enforced through governmental remedies. Accordingly, the implication of a private right of action would be inconsistent with the TTPA’s purposes as set forth by the legislature.

Existence of Statute of Limitations

Notwithstanding the analysis above, Plaintiffs attempt to satisfy their burden of establishing that the legislature intended to imply a private right of action by invoking the TTPA’s statute of limitations: “[n]o action shall be brought by a pledgor against a title pledge lender in connection with a title pledge agreement or property pledge agreement more than one (1) year after the date of the alleged occurrence of any violation of this chapter.” TenmCode Ann. § 45-15-104(b). In other words, Plaintiffs argue that the mere inclusion of a statute of limitations is tantamount to implied legislative intent to create a private right of action.

Plaintiffs provide no case law to support the proposition that a statute of limitations provision should be alone sufficient to imply a private right of action. Indeed, Plaintiffs rely on a case involving a statutory scheme that, by their own admission, did not have a statute of limitations. In Pratt v. Smart Corp., the Court of Appeals held that the Medical Records Act of 1974 authorized a private cause of action by a patient against the independent copying service that processed the plaintiffs request for her hospital records and allegedly charged unreasonable fees. 968 S.W.2d 868, 872-73 (Tenn.Ct.App.1997). The Court of Appeals held that the Medical Records Act “clearly contemplates private actions to remedy violations of its terms” because the statute contained a “provision for the recovery of ‘actual damages in a civil action for willful or reckless or wanton’ violations” of the statute. Id. at 872-73 (quoting Tenn.Code Ann. § 68 — 11— 311(b) (1992)). Because the Medical Records Act has no statute of limitations and because the version of the TTPA in effect here had no provision for the recovery of actual damages for violations of any of its terms, Pratt is unhelpful in resolving the question before us.

Additionally, Plaintiffs have not cited, and we have not independently discovered, any Tennessee decision inferring a private right of action in a statutory scheme with its own statute of limitations. Therefore, we have reviewed decisions from other jurisdictions concerning implied rights of action in statutory schemes that contain a limitations provision (or some other language prescribing the time in which suit may be brought). The results, admittedly, are mixed. Compare Davenport v. Wash. Educ. Ass’n, 147 Wash.App. 704, 197 P.3d 686, 691, 695 (2008) (holding that statutory provision did not confer express or implied right of action, where another provision in the statutory scheme imposed a five-year statute of limitations), cert. granted, 166 Wash.2d 1005, 208 P.3d 1124 (Wash.2009), and Miller v. Weaver, 66 P.3d 592, 598 (Utah 2003) (refusing to find implied private right of action for statutory violations on the basis of “mere allusion” to bringing a civil action in a staying provision), with Bailey v. Defenbaugh & Co. of Cleveland, Inc., 513 F.Supp. 232, 240-41 (N.D.Miss.1981) (finding an implied right of action because the statutory scheme contained a limitations provision and, therefore, exclusive enforcement by the state would defeat legislative intent).

As we stated in Premium Finance Corp., “[although the decisions of our sister states are persuasive, they do not substitute for our own stated principles for determining whether a statute creates a cause of action.” 978 S.W.2d at 93. “We must give effect to every word, phrase, clause, and sentence in constructing a statute.” Cohen v. Cohen, 937 S.W.2d 823, 828 (Tenn.1996). The legislative history is entirely silent concerning the statute of limitations provision in section 45 — 15—104(b). Here, instead of creating a private right of action, the TTPA’s statute of limitations has the effect of modifying the general statutes of limitations that would otherwise apply to causes of action that title pledgors can bring under the common law “in connection with” a title pledge agreement. See Tenn.Code Ann. § 45-15-104(b). Pursuant to Tennessee Code Annotated section 28-3-101 (2000), “[a]ll civil actions ... shall be commenced after the cause of action has accrued, within the periods prescribed in this chapter, unless otherwise expressly provided.” (Emphasis added).

Accordingly, if the TTPA did not have its own limitations provision, the statutes of limitations set forth in Title 28, Chapter 3 would control. For example, without the TTPA’s statute of limitations, title pledgors would have six years after the accrual of a cause of action for breach of contract to bring suit against the title pledge lender. See Tenn.Code Ann. § 28-3 — 109(a)(3) (2000). Similarly, title pled-gors would ordinarily have three years from accrual to bring an action for common-law fraud, see id. § 28-3-105(1) (2000), and/or conversion, see id. § 28-3-105(2). However, the TTPA “otherwise expressly provide[s]” the time in which title pledgors may bring then* actions. Therefore, when the title pledgor brings a common law action against a title pledge lender “in connection with a title pledge agreement,” id. § 45-15-104(b), the specific one-year statute of limitations in the TTPA prevails over the general statutes of limitations in Title 28, Chapter 3. See Dobbins v. Terrazzo Mach. & Supply Co., 479 S.W.2d 806, 809 (Tenn.1972); see also Brewer v. Lincoln Brass Works, Inc., 991 S.W.2d 226, 229-30 (Tenn.1999). This construction gives effect to the TTPA’s statute of limitations while respecting the legislature’s decision to enforce the statute through criminal penalties and its silence concerning its intentions whether to create a private right of action.

The subsequent history of the TTPA supports the conclusion that the legislature did not intend to imply a private right of action in the version of the statute that was in effect when Plaintiffs filed this action. The 2005 amendments included express private rights of action in two specific circumstances. First, where the title pledge lender makes a loan without a license, that loan is void, and the statute allows the pledgor to bring an action against the lender to recover the sums paid and the property pledged, as well as attorney’s fees and costs. Act of May 27, 2005, ch. 440, § 4, 2005 Tenn. Pub. Acts 1045, 1047-48 (codified at Tenn.Code Ann. § 45-15-105(b) (2007)). Second, the 2005 amendments require an applicant for a title pledge license to obtain a surety bond or irrevocable letter of credit in specified amounts. Id. § 5, 2005 Tenn. Pub. Acts at 1049 (codified at Tenn.Code Ann. § 45-15-106(d)(3) (2007)). The subparagraph then goes on to state that, in the event of the title pledge lender’s non-payment, the unpaid person may sue the lender on the surety bond or irrevocable letter of credit. Id., 2005 Tenn. Pub. Acts at 1049-50. Upon enacting the 2005 amendments to the TTPA, the legislature was presumptively aware of the statute of limitations that it had already enacted. See Lee Medical, Inc. v. Beecher, 312 S.W.3d 515, 527 (Tenn.2010); Colonial Pipeline Co. v. Morgan, 263 S.W.3d 827, 836 (Tenn.2008). Nonetheless, the legislature explicitly authorized pledgors to sue unlicensed lenders and unpaid persons to sue lenders on the surety bond or irrevocable letter of credit. The subsequent inclusion of certain express private rights of action in the 2005 amendments cuts against Plaintiffs’ argument that, by previously including a statute of limitations, the legislature expressed its manifestly clear intent to imply a private right of action on behalf of title pled-gors to enforce the TTPA’s provisions.

Conclusion

Since the Tennessee Title Pledge Act provides no express private right of action on behalf of pledgors against title pledge lenders for charging excessive interest and prohibited fees, Plaintiffs bear the burden of establishing that the legislature was “manifestly clear” in its intent to imply a private right of action. Plaintiffs have not carried that burden, and we “are not privileged to create such a right under the guise of liberal interpretation of the statute.” Premium Fin. Corp., 978 S.W.2d at 93.

Therefore, we hold that, at the time Plaintiffs filed this action, the Tennessee Title Pledge Act contained no private right of action on behalf of pledgors against title pledge lenders for charging excessive interest and prohibited fees. Accordingly, we reverse the judgment of the Court of Appeals and reinstate the trial court’s judgment granting Defendant’s motion to dismiss Plaintiffs’ cause of action under the Tennessee Title Pledge Act for failure to state a claim. We remand this case to the Hamilton County Circuit Court for the litigation of Plaintiffs’ remaining claims, including them individual claims pursuant to the Tennessee Consumer Protection Act. We tax the costs of this appeal to Plaintiffs Dawn Brown, Anne Devries, Carly Hahn, and Greg Walton, and their surety, for which execution may issue if necessary.

      . According to Defendant’s supplemental briefing in the trial court, the issue regarding the private right of action first arose during a February 26, 2008 hearing on Plaintiffs’ motion to compel discovery. Plaintiffs’ counsel informed the trial court that he intended to dismiss the TCPA claim because it could not be certified on a classwide basis. Defendant’s counsel then asked the trial court to dismiss the entire litigation, arguing that the TTPA did not provide for a private right of action. The trial court deferred its ruling until the parties filed their supplemental briefs. The transcript of the February 26, 2008 hearing is not part of the record.

      . This issue has not been appealed.

      . By contrast, the legislature expressly granted a private right of action in the TCPA. Under that statute, ”[a]ny person who suffers an ascertainable loss ... as a result of the use or employment by another person of an unfair or deceptive act or practice declared to be unlawful by this part, may bring an action individually to recover actual damages.” Tenn.Code Ann. § 47-18-109(a)(1) (2001); see Myint v. Allstate Ins. Co., 970 S.W.2d 920, 925 (Tenn.1998).

      . These factors originally appeared in the United States Supreme Court’s opinion in Cort v. Ash, which set forth the standard for determining whether a private right of action is implicit in a federal statute. See 422 U.S. 66, 78, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975). Cort also articulated a fourth factor- — whether the cause of action is traditionally relegated to state law — which is inapplicable to the interpretation of state statutes and, therefore, omitted from the analysis. See Ergon, 966 F.Supp. at 584 n. 9. Buckner was the first Tennessee decision to analyze the three applicable Cort factors to determine whether a Tennessee statute implied a private right of action.

      . Plaintiff filed the original complaint on October 27, 2004 and then filed the amended complaint on January 31, 2005. The TTPA was amended later in 2005. See Act of May 27, 2005, ch. 440, 2005 Tenn. Pub. Acts 1045. The parties do not dispute that, in determining whether a private right of action existed when Plaintiffs filed this action, we consider the version of the TTPA that existed before the enactment of the 2005 amendments. Accordingly, we discuss that prior version of the statute in our overview of the statutory scheme.

      . Pledge agreements may not be renewed if the pledgor has redeemed the property or title certificate, surrendered all interest in the property to the lender, or defaulted on the agreement, or if the lender has previously notified the pledgor in writing that the agreement will not be renewed. Tenn.Code Ann. § 45-15-113(a)(lM4).

      .Title pledge lenders are prohibited from: (1) accepting pledges from underaged or intoxicated persons, or those known to have been convicted of certain felonies; (2) agreeing to any recourse other than taking possession of the titled property and selling the property if the pledgor defaults; (3) loaning more than $2,500 in pledge for any single certificate of title; (4) accepting a pledgor's waiver of any statutory right or protection; (5) failing to exercise reasonable care in protecting property in the lender’s possession; (6) purchasing titled personal property in business operations; (7) maintaining more titan one place of operation per lender per license; (8) remaining open outside of specified hours of operation; (9) knowingly violating the requirement to issue a disclosure and notification form prior to executing the loan agreement, in compliance with regulations promulgated by the department of financial institutions; and (10) entering a pledge agreement with a pled-gor who does not present clear title to the pledged property. Tenn.Code Ann. § 45-15-115.

      . Local governments cannot regulate in the areas of interest or fees, operating hours, nature of the title pledge lender's business or the types of agreements, pledgor eligibility, or license requirements. Tenn.Code Ann. § 45-15-118.

      . Accordingly, prior to the promulgation of the department’s regulations pursuant to the 1996 amendments, the TTPA "contain[ed] no [civil] sanctions for a violation” of the statute, Henley v. Cameron Auto Pawn (In re Henley), 228 B.R. 425, 427 (Bankr.E.D.Ark.1998), but was enforced entirely through criminal prosecution for knowing violations of its provisions.

      . At the time that Mr. Brewer appeared before these committees, he was Litigation Director for Memphis Area Legal Services.

      . This proposed language is similar to what the legislature included in the TCPA (and other statutes). That language has been available to the legislature even before it originally enacted the TTPA in 1995. Despite being presumptively aware of the language that it has used to create express private rights of action in other statutory schemes, the legislature has not yet included that language in the TTPA.

      . But see Owens v. Univ. Club of Memphis, No. 02A01-9705-CV-00103, 1998 WL 719516, at *11 (Tenn.Ct.App. Oct. 15, 1998) (inferring private right of action in tip statute, Tenn.Code Ann. § 50-2-107 (1991), on behalf of plaintiff service employees because statute was intended to protect them and private right would "complement[ ] the [criminal] remedy in the statute by providing a mechanism to make employees whole”) (no Tenn. R.App. P. 11 application filed).

      . The general statute of limitations for misdemeanors requires that a criminal prosecution commence within twelve months after the commission of the offense. Tenn.Code Ann. § 40-2-102(a) (2006). Therefore, the TTPA's statute of limitations does not alter the time frame for bringing a criminal action for a knowing violation of the TTPA, which is a class A misdemeanor.


text:
    Elizabeth Leanne HUDSON v. Larson Douglas HUDSON.
    Supreme Court of Tennessee, at Nashville.
    Oct. 6, 2010 Session.
    Dec. 17, 2010.
   ORDER

The matter before this Court arises from a petition to relocate filed by Elizabeth Leanne Hudson (“Mother”) following her divorce from Larson Douglas Hudson (“Father”) and the appeal from the trial court’s order of May 22, 2008, granting the petition and awarding attorney’s fees to Mother. We granted Father permission to appeal and scheduled the appeal for argument. Mother requests that Father’s appeal be dismissed as moot. For the reasons stated below, we grant Mother’s request. In addition, we vacate the trial court’s order of May 22, 2008.

The divorce decree, entered on January 29, 2007, incorporated a Marital Dissolution Agreement and a Parenting Plan for the parties’ two minor daughters. The Parenting Plan designated Mother as the primary residential parent and provided that the children would reside with Father for 135 days each year. The Parenting Plan also included stipulations as to the manner in which Mother and Father would share parenting responsibilities for them children, specifically with regard to schooling and child support.

On June 21, 2007, Mother filed a petition to relocate from Nashville, Tennessee, to Hopkinsville, Kentucky. Father opposed the petition. Tennessee Code Annotated section 36-6-108(d)(l) (Supp.2008) governs this action and provides in pertinent part:

The parent spending the greater amount of time with the child shall be permitted to relocate with the child unless the court finds:
(A) The relocation does not have a reasonable purpose;
(B) The relocation would pose a threat of specific and serious harm to the child that outweighs the threat of harm to the child of a change of custody; or
(C) The parent’s motive for relocating with the child is vindictive in that it is intended to defeat or deter visitation rights of the non-custodial parent or the parent spending less time with the child.

The trial court conducted a hearing on the petition on April 14 and 15, 2008. On May 22, 2008, the trial court granted the petition to relocate and amended the Parenting Plan to accommodate Mother’s new residence. The trial court also granted Mother attorney’s fees. Father appealed. The Court of Appeals affirmed the trial court’s judgment granting Mother’s petition but reversed the trial court’s award of attorney’s fees. We granted Father’s application for permission to appeal.

After we granted permission to appeal, Mother filed with this Court a “Motion to Consider Post-Judgment Facts and To Dismiss Appeal.” She requested that the Court consider the following facts, for which she provided evidence:

(1) Mother remarried on May 28, 2010, in Sumner County, Tennessee, and
(2) Mother has relocated to Sumner County, Tennessee, and has filed ... a Petition to Relocate to Tennessee, to Modify Parenting Plan, and for Other Relief.

Based on these facts, Mother asserts that Father’s appeal is moot because the controversy that initiated Mother’s petition to relocate no longer exists.

We will dismiss an appeal as moot when a case loses its controversial character. West v. Vought Aircraft Indus., Inc., 256 S.W.3d 618, 625 (Tenn.2008) (quoting McCanless v. Klein, 182 Tenn. 631, 188 S.W.2d 745, 747 (1945)). The party asserting that the case is moot has the burden of producing facts showing that the case lost its controversial character because of the voluntary cessation of the conduct challenged by the legal action. Norma Faye Pyles Lynch Family Purpose LLC v. Putnam Cnty., Tenn., 301 S.W.3d 196, 206 (Tenn.2009).

Father does not dispute Mother’s proffered facts. These facts are sufficient to show that this matter has lost its controversial character because Mother has returned to Tennessee and is residing in Sumner County. Father asserts, however, that dismissal of this appeal would leave the trial court’s order unchallenged and would permit Mother to return to Kentucky if she desired to do so. He contends that Mother’s move therefore “could be of such short duration that it could evade judicial review.” In addition, he alleges that he has suffered collateral consequences from the trial court’s decision to permit Mother to relocate.

This Court may refrain from dismissing an appeal as moot when “the challenged conduct is capable of repetition and of such short duration that it will evade judicial review.” Id. at 204. Father is correct that dismissal of the appeal without more would leave the Amended Parenting Plan in effect and would not prevent Mother from returning to reside in Kentucky. Our decision to vacate the trial court’s order, however, will remove this possibility and will ensure that matters concerning the future relocation of either parent will be governed by the parties’ original Parenting Plan entered on the date of the divorce and by Tennessee Code Annotated section 36-6-108(d)(l). Modifications to the parenting plan will continue to require mediation or approval by the trial court pursuant to the parties’ Parenting Plan. Accordingly, there is little risk that judicial remedies will not be sufficient if Mother again attempts to relocate out of state.

We also may refrain from dismissing an appeal as moot when collateral consequences remain following the dismissal of the appeal. Norma Faye Pyles Lynch Family Purpose LLC, 301 S.W.3d at 204. This exception applies to prejudicial collateral consequences. See, e.g., EEOC v. Fed. Express Corp., 558 F.3d 842, 847 (9th Cir.2009) (quoting Super Tire Eng’g Co. v. McCorkle, 416 U.S. 115, 122, 94 S.Ct. 1694, 40 L.Ed.2d 1 (1974)); Hamilton ex rel. Lethem v. Lethem, 119 Hawai'i 1, 193 P.3d 839, 845-48 (2008). Such collateral consequences can include the continued effect of an order that has expired or is invalid. See, e.g., Putman v. Kennedy, 279 Conn. 162, 900 A.2d 1256, 1263 (2006) (holding as a collateral consequence the effect of an expired domestic violence restraining order on the reputation of an appellant and on subsequent child custody issues); May v. Carlton, 245 S.W.3d 340, 344 & n. 3 (Tenn.2008) (citing Carafas v. LaVallee, 391 U.S. 234, 239, 88 S.Ct. 1556, 20 L.Ed.2d 554 (1968)) (holding as a collateral consequence restrictions on voting, holding public office, or serving as a juror that remain following an invalid conviction for which the petitioner is no longer in custody).

Father asserts that the trial court’s oi*-der granting the petition has the collateral consequences of depriving him of twenty-eight days of residential time with his children and removing the children from the school designated in the Parenting Plan. Additionally, the trial court’s order awarded Mother attorney’s fees and costs related to her petition to relocate, and Father contends that he is entitled to attorney’s fees and costs because Mother’s motive for relocating was vindictive. While we are sympathetic to Father’s arguments, he has not described prejudicial collateral consequences necessary to invoke this exception to the mootness doctrine. The consequences that Father has suffered will not prejudice him in future litigation with Mother regarding his child-related issues and will not subject him to the continued effect of an order that is no longer valid. Our order vacating the trial court’s order of May 22, 2008, restores the parties, to the extent possible, to their original positions prior to the entry of the trial court’s order. Father therefore has not shown that we should refrain from dismissing his appeal as moot.

Father requests that we remand the case to another trial judge because the actions of the current trial judge demonstrate a bias against Father. Father did not file a motion for disqualification of the trial judge. During the hearing on the petition to relocate, Father’s attorney stated to the trial court, “Judge, if I thought you couldn’t [give Father a fair trial] I would have asked you to recuse yourself, and I didn’t ask you to do that.” We are unwilling to assign a new trial judge on remand when no motion for recusal was filed in the trial court. Bailey v. Blount Cnty. Bd. of Educ., 303 S.W.3d 216, 239-40 (Tenn.2010).

We therefore grant Mother’s motion to consider post-judgment facts and dismiss Father’s appeal as moot. We further vacate the trial court’s order of May 22, 2008, and remand this case to the trial court for proceedings consistent with this order. Costs of this appeal are assessed against petitioner and appellee, Elizabeth Leanne Hudson, for which execution may issue if necessary.

/s/ Janice M. Holder JANICE M. HOLDER, Justice