                                                                                          05/20/2019
               IN THE COURT OF APPEALS OF TENNESSEE
                           AT NASHVILLE
                                  April 2, 2019 Session

         DIALYSIS CLINIC, INC. ET AL. V. KEVIN MEDLEY ET AL.

                 Appeal from the Circuit Court for Davidson County
                   No. 14C4843      Joseph P. Binkley, Jr., Judge


                            No. M2018-00399-COA-R3-CV


The owner of four contiguous properties filed unlawful detainer actions against the
entities that were occupying the properties. The owner did not name as defendants the
individual who signed the lease or his company. A year and a half after the cases were
filed, the lessee moved to intervene, claiming that it was entitled to intervene pursuant to
Tenn. Rs. Civ. P. 24.01 and/or 24.02 and that it was a necessary party pursuant to Tenn.
R. Civ. P. 19.01. The trial court denied the lessee’s motion on the grounds of prior suit
pending and timeliness. The lessee appealed. Because the court failed to address the
lessee’s claim that it was a necessary party, we are unable to address that argument on
appeal. We vacate the trial court’s judgment and remand the case for further
proceedings.

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

ANDY D. BENNETT, J., delivered the opinion of the Court, in which D. MICHAEL SWINEY,
C.J., and FRANK G. CLEMENT, JR., P.J., M.S., joined.

L. Vincent Williams, Nashville, Tennessee, for the appellant, Outloud! Inc.

L. Vincent Williams, Nashville, Tennessee, for the appellees, Kevin E. Medley, Kevin
Medley, LLC, 3 Entertainment Group, LLC, and Canvas Lounge, LLC.

Peter C. Sales and Frankie Neil Spero, Nashville, Tennessee, for the appellee, Dialysis
Clinic, Inc.
                                      OPINION

                     I. FACTUAL AND PROCEDURAL BACKGROUND

       This case involves four contiguous properties owned by Dialysis Clinic, Inc.
(“DCI”) located on Church Street in Nashville: 1703, 1705, 1707, and 1709 (together,
“the Church Street Properties”). DCI purchased these properties from S. Ralph Gordon
in July 2012. In 2004, Mr. Gordon leased the Church Street Properties to Ted Jensen and
Outloud! Inc. (“Outloud!”) pursuant to two separate lease agreements. Mr. Jensen was
the registered agent, corporate secretary, and a member of the board of directors for
Outloud!, a Tennessee corporation. Kevin Medley was the president, chief executive
officer, and sole shareholder of Outloud! In 2005 and 2006 Mr. Jensen sublet the Church
Street Properties to Kevin Medley, who then sub-sublet them to OutCentral, Canvas
Lounge, LLC, and 3 Entertainment Group, LLC. When DCI purchased the Church Street
Properties, the leases between Mr. Gordon and Mr. Jensen and Outloud! were assigned to
DCI.

      DCI filed four unlawful detainer warrants against Mr. Jensen and Outloud! in the
general sessions court for Davidson County on June 21, 2013, one warrant for each of the
Church Street Properties (“2013 Action”). DCI asserted claims for rent, damages,
possession, and attorney’s fees. The court awarded possession and damages to DCI on
August 13, 2013. Mr. Jensen appealed the judgments to the circuit court for Davidson
County, but Outloud! did not. DCI and Mr. Jensen subsequently reached an agreement
whereby Mr. Jensen dismissed his appeals, and DCI entered into amended leases with
Mr. Jensen, individually and d/b/a Outloud!, with regard to the Church Street Properties.
As amended, the leases provided that the rental period of all the properties was to
terminate on August 31, 2014.

        When the termination date of the amended leases passed and the Church Street
Properties were not vacated, DCI filed three unlawful detainer warrants on October 6,
2014, against Kevin Medley, Kevin Medley, LLC, Canvas Lounge, LLC, OutCentral,
Inc., 3 Entertainment Group LLC, and all other occupants of the Church Street
Properties, seeking possession, damages, and interest (“2014 Action”). The three cases
were consolidated and removed to the circuit court for Davidson County. Once the cases
were consolidated and removed to the circuit court, DCI filed a complaint in accordance
with Tenn. R. Civ. P. 8. DCI’s causes of action included unlawful detainer, declaratory
relief pursuant to the Tennessee Declaratory Judgments Act, Tenn. Code Ann. §§ 29-14-
101-113, quantum meruit, and unjust enrichment.

       On April 1, 2016, more than two and a half years after judgments were entered
against Mr. Jensen and Outloud! in the 2013 Action, Outloud! filed a petition for writ of
certiorari, seeking review of the general sessions’ judgments dating from August 2013.
DCI moved to dismiss Outloud!’s petition, and the trial court granted the motion, ruling

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that the petition was time-barred. Outloud! appealed the trial court’s dismissal, and we
affirmed the trial court’s judgment. See Outloud! Inc. v. Dialysis Clinic, Inc., No.
M2016-01528-COA-R3-CV, 2017 WL 4004161 (Tenn. Ct. App. Sept. 11, 2017).

        On April 6, 2016, just a few days after filing its petition for writ of certiorari in the
2013 Action, Outloud!, which was not a party to the 2014 Action, filed a complaint
seeking a declaratory judgment and injunctive relief against DCI. DCI moved to strike or
dismiss the complaint because Outloud! had failed to comply with Tenn. R. Civ. P. 24.03
by filing a motion to intervene, and this prompted Outloud! to file a motion to intervene
on April 25, 2016. Outloud! filed an amended complaint on April 29, followed by a
revised motion to intervene and a second amended complaint on July 12, 2016. In its
initial and revised motion and memorandum of law, Outloud! argued, inter alia, that it
was a necessary party to the action pursuant to Tenn. R. Civ. P. 19.01.

       DCI opposed Outloud!’s motion to intervene on the grounds of prior suit pending
and Outloud!’s failure to satisfy the requirements of Tenn. R. Civ. P. 24. Following a
hearing on September 9, 2016, the trial court entered an order denying Outloud!’s motion
to intervene. The court based its decision on both the prior suit pending doctrine and
Tenn. R. Civ. P. 24. With regard to the prior suit pending doctrine, the court wrote, in
pertinent part:

       2. The prior-suit-pending doctrine requires a defending party to show (1)
       the two cases involve identical subject matter; (2) the two cases are
       between the same parties; (3) the former case remains pending in a court
       having subject matter jurisdiction over the dispute; and (4) the former case
       remains pending in a court having personal jurisdiction over the parties.
       West v. Vought Aircraft Indus., Inc., 256 S.W.3d 618, 623 (Tenn. 2008).

       3. With regard to the identical subject matter element, this Court finds that
       the action involving Outloud!’s Petition for Writ of Certiorari and
       subsequent appeal relating to General Sessions Case. Nos. 13GT5292,
       13GT5302, 13GT5303, and 13GT5304 (the “First Action”) and the present
       action involve identical subject matter.

       4. The relevant analysis of whether two actions have “identical subject
       matter” is the transactional test adopted by the Tennessee Supreme Court in
       Creech v. Addington, 281 S.W.3d 363 (Tenn. 2009), for the purpose of
       analyzing whether a second action is the “same cause of action” as the first
       action for res judicata purposes. As such, like the res judicata doctrine, the
       prior-suit-pending doctrine “applies not only to issues actually raised in the
       first suit, but also to issues that could have been raised regarding the same
       subject matter.” Fidelity & Guar. Life Ins. Co. v. Corley, 2003 WL
       23099685, at * 3 (Tenn. Ct. App. 2003).

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      5. From a review of Outloud!’s Petition for Writ of Certiorari in the First
      Action and Outloud!’s Proposed Intervening Complaint in this action, it is
      clear that the two pleadings raise identical issues. Accordingly, for purposes
      of the prior suit pending doctrine analysis, the First Action and this action
      involve the same subject matter.

      6. With regard to the second element of the prior suit pending doctrine
      analysis, this Court finds that this action and the First Action involve the
      same parties.

      7. Under Tennessee law, the prior suit pending doctrine still applies where
      the parties in the two cases are “sufficiently similar so as to make no
      practical difference.” Fid. & Guar. Life Ins. Co. v. Corley, 2003 WL
      23099685, at *5 (Tenn. Ct. App. 2003). Because this action and the First
      Action involve parties that are sufficiently similar as to make no practical
      difference, Dialysis Clinic, Inc. (“DCI”) has satisfied the second element.

      8. This Court further finds that the final two elements have been satisfied
      because the First Action remains pending in the Tennessee Court of
      Appeals, which has both subject matter jurisdiction and personal
      jurisdiction over the parties.

       The trial court then addressed DCI’s alternative basis for opposing Outloud!’s
motion to intervene into the case: that Outloud! had not satisfied the requirements of
Tenn. R. Civ. P. 24.01, to intervene as a matter of right, or Tenn. R. Civ. P. 24.02, to
intervene on a permissive basis. The court wrote:

      11. Both Rule 24.01 and 24.02 require that a motion to intervene be timely.
      See Tenn. R. Civ. P. 24.01, 24.02. A determination regarding “[W]hether a
      motion to intervene has been timely filed is determined by the facts and
      circumstances of the case, and equitable principals govern the trial court’s
      determination.” Am. Materials Techs., LLC v. City of Chattanooga, 42
      S.W.3d 914, 916 (Tenn. Ct. App. 2000).

      12. Tennessee courts consider the following factors in deciding whether a
      motion to intervene is timely: (1) the point to which the suit has progressed;
      (2) the purpose for which intervention is sought; (3) the length of time
      preceding the application during which the proposed intervener knew or
      reasonably should have known of his interest in the case; (4) the prejudice
      to the original parties due to the proposed intervener’s failure after he knew
      or reasonably should have known of his interest in the case to apply
      promptly for intervention; and (5) the existence of unusual circumstances
      militating against or in favor of intervention. Lee v. City of Memphis, No.

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       W2011-01643-COA-R3-CV, 2012 WL 1245665, at *3 (Tenn. Ct. App.
       Apr. 11, 2012).

       13. With regard to the first factor, the Court finds that the filing of this
       Motion to Intervene is untimely, as it was filed two years after this action
       commenced.

       14. With regard to the second factor, this Court finds that the relief sought
       in Outloud!’s Intervening Complaint is the same relief it seeks in the First
       Action and, therefore, there is no purpose for the intervention.

       15. With regard to the third factor, this Court finds that Outloud! knew or
       reasonably should have known of its interest on or around December 17,
       2014. Emails dated December 17, 2014, between Outloud!’s counsel and
       Kevin Medley clearly show that Outloud!’s counsel was discussing the
       First Action and as it pertains to Outloud!. Accordingly, Outloud! knew or
       should have known facts sufficient for it to seek to intervene in this action.

       16. Finally, with regard to the fourth and fifth factors, allowing Outloud! to
       intervene at this late stage in the litigation would prejudice DCI. Further,
       the only unusual circumstance in this case is that Outloud!’s intervention is
       barred by the prior suit pending doctrine.

       17. This Court finds that Outloud!’s Motion to Intervene is untimely under
       both Rule 24.01 and Rule 24.02.

       Outloud! appeals the trial court’s denial of its motion to intervene. It argues the
trial court erred in (1) denying its intervention as a matter of right; (2) denying its
intervention on a permissive basis; and (3) dismissing its motion based on the prior suit
pending doctrine. Outloud! also contends the trial court erred in failing to rule that it is a
necessary party because the validity of its leases is vital to the determination of the
validity of the leases belonging to Mr. Medley, Canvas Lounge, LLC, and 3
Entertainment, LLC.

                                       II. ANALYSIS

       The trial court’s order denying Outloud!’s motion to intervene did not address
Outloud!’s contention that it was a necessary party pursuant to Tenn. R. Civ. P. 19.01.
That rule provides:

       A person who is subject to service of process shall be joined as a party if
       (1) in the person’s absence complete relief cannot be accorded among those
       already parties, or (2) the person claims an interest relating to the subject of

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           the action and is so situated that the disposition of the action in the person’s
           absence may (i) as a practical matter impair or impede the person’s ability
           to protect that interest, or (ii) leave any of the persons already parties
           subject to a substantial risk of incurring double, multiple, or otherwise
           inconsistent obligations by reasons of the claimed interest. If the person has
           not been so joined, the court shall order that the person be made a party. If
           the person properly should join as a plaintiff but refuses to do so, he or she
           may be made a defendant, or in a proper case, an involuntary plaintiff.

TENN. R. CIV. P. 19.01.

       Outloud! relies on the case Adler v. Double Eagle Properties Holdings, Inc., No.
W2010-01412-COA-R3-CV, 2011 WL 862948 (Tenn. Ct. App. Mar. 14, 2011), to
support its claim that it is a necessary party to this litigation. That case involved the lease
of the rooftop portion of a building to a site management company in exchange for
$135,000. Adler, 2011 WL 862948, at *1. The site management company assigned its
interest in the agreement to its wholly-owned subsidiary. Id. When the owner of the
building (“the seller”) entered into an agreement to sell the building to a holdings
company (“the buyer”), a dispute arose prior to the closing regarding whether the seller
or the buyer was entitled to a portion of the $135,000 lease payment by the site
management company for the use of the rooftop portion of the building. Id. The seller
sued the buyer and failed to include either the site management company or its assignee
as parties to the action. Id. at *2. The trial court granted the buyer’s motion for summary
judgment, and the seller appealed. Id. at *2.

       Before addressing the issues the parties raised, this Court asked, sua sponte,
whether all necessary parties were included in the lawsuit. Id. at *3. Citing the
Declaratory Judgment Act, the Adler court determined that Tenn. Code Ann. § 29-14-
107(a)1 ‘“imposes stricter requirements than those imposed generally by Tennessee Rules
of Civil Procedure 19.01 and 19.02.’” Id. at *3 (quoting Huntsville Util. Dist. of Scott
Cnty., 839 S.W.2d 397, 403 (Tenn. Ct. App. 1992)). The Adler court wrote that “[a]
party to an agreement may be a necessary party to a declaratory judgment action
construing that agreement,” and referenced another case initiated by a landowner to
interpret a lease in which our Supreme Court held that “the original lessee and the
assignee of the entire lease were necessary parties.” Id. at *4 (citing David v. Coal Creek
Mining & Mfg. Co., 461 S.W.2d 29, 32 (Tenn. 1970)). Noting that “identifying the

1
    Tennessee Code Annotated section 29-14-107(a) states:

           When declaratory relief is sought, all persons shall be made parties who have or claim
           any interest which would be affected by the declaration, and no declaration shall
           prejudice the rights of persons not parties to the proceedings.



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necessary parties in a declaratory judgment action is fact intensive and depends on the
type of case and issues involved,” the Adler court concluded that the trial court had erred
by failing to include “the holder of current contractual rights under the Rooftop
Agreement in this declaratory judgment action” and vacated the trial court’s judgment.
Id. at *5, *7; see also Little v. City of Chattanooga, No. E2018-00870-COA-R3-CV,
2019 WL 1308264, at *8 (Tenn. Ct. App. Mar. 21, 2019).

       The parties to the lease agreements that DCI relies upon in this case are DCI and
Ted Jensen, individually and d/b/a Outloud!. Although the trial court denied Outloud!’s
motion on the basis of prior suit pending and Rule 24, it did not address Outloud!’s
argument that it is a necessary party pursuant to Tenn. R. Civ. P. 19.01. Until the trial
court rules on Outloud!’s argument, that issue is not ripe for review by this Court. As the
Adler opinion makes clear, the trial court should also consider whether Outloud! and Ted
Jensen are necessary parties pursuant to the Declaratory Judgments Act.

                                    III. CONCLUSION

       The trial court’s judgment is vacated and the case is remanded with instructions
that the trial court address Outloud!’s assertion that it is a necessary party. The court
should also determine whether the Declaratory Judgments Act requires that Outloud! and
Ted Jensen be made parties to the case. Costs of this appeal shall be split evenly between
Outloud!, Inc. and Dialysis Clinic, Inc.

                                                  ________________________________
                                                  ANDY D. BENNETT, JUDGE




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