                 IN THE COURT OF APPEALS OF TENNESSEE
                            AT KNOXVILLE
                                  October 17, 2001 Session


        LANE-DETMAN, L.L.C., ET AL. v. MILLER & MARTIN, ET AL.

                     Appeal from the Circuit Court for Hamilton County
                     No. 99C1483    Buddy Perry, Judge by Interchange

                                   FILED JANUARY 9, 2002

                                 No. E2001-00444-COA-R3-CV




In 1995, Lane-Detman, LLC, Clara Lane, and Darlene Lane-Detman (“Plaintiffs”), invested
$600,000 in two businesses in which Samuel Cooper (“Cooper”) had an ownership interest. This
investment soured, and in December 1997, Plaintiffs obtained a default judgment against Cooper.
Before Plaintiffs invested with Cooper, Plaintiffs’ attorney, defendant W. Scott McGinness, Jr.
(“Defendant McGinness”), performed a background search on Cooper at the request of Plaintiff
Darlene Lane-Detman (“Plaintiff Lane-Detman”). In addition to other investigative efforts,
Defendant McGinness had the co-defendant, Equifax Services, Inc. (“Defendant Equifax”), perform
a background search on Cooper. Defendant Equifax’s report revealed no questionable or negative
history on Cooper. After Plaintiffs obtained their default judgment against Cooper, Plaintiffs hired
other counsel to assist with collection of the judgment. In 1998, Plaintiffs’ new counsel uncovered
an abundance of questionable and negative history on Cooper. Thereafter, in 1999, Plaintiffs sued
Defendant McGinness and his law firm, Miller & Martin (“Defendant Miller & Martin”), and
Defendant Equifax. The Trial Court granted summary judgment to the defendants, finding that
Plaintiffs’ claim against Defendant Equifax was barred by an exculpatory clause in the contract
between Defendant Equifax and Defendant Miller & Martin and that Plaintiffs’ claim against
Defendants Miller & Martin and McGinness was barred by the statute of limitations. Plaintiffs
appeal. We affirm.


                Tenn. R. App. P. 3; Judgment of the Circuit Court Affirmed;
                                      Case Remanded.


D. MICHAEL SWINEY , J., delivered the opinion of the court, in which CHARLES D. SUSANO, JR., J.
and WILLIAM H. INMAN , Sr. J., joined.

J. Harvey Cameron, Jasper, Tennessee, for the Appellants, Lane-Detman, LLC, Clara Lane and
Darlene Lane-Detman.
Gary S. Napolitan and D. Scott Bennett, Chattanooga, Tennessee, for the Appellees, Miller &
Martin, Miller & Martin, LLP, and W. Scott McGinness, Jr.

Samuel L. Felker and Anna M. Grizzle, Nashville, Tennessee, for the Appellee, Choicepoint
Services, Inc., f/k/a Equifax Services, Inc.


                                             OPINION

                                            Background

               In January 1995, Plaintiff Lane-Detman hired Defendant McGinness to represent her
in connection with an investment with PCM Holdings, LLC, and to perform a background check on
PCM Holdings, LLC, and its principal, Samuel Cooper. The record on appeal contains an
engagement letter dated January 12, 1995, sent from Defendant McGinness and received by Plaintiff
Lane-Detman. Debbie Souders, an employee of Defendant Miller & Martin, then contacted
Defendant Equifax and requested that it perform a background check on Cooper. Souders provided
Defendant Equifax with Cooper’s name, personal address and position as president and director of
PCM Holdings, LLC.

               Thereafter, on February 2, 1995, Defendant McGinness sent correspondence to
Plaintiff Lane-Detman regarding his investigative efforts which included interviewing Cooper,
Cooper’s personal attorney, and others who had been associated with Cooper in business
transactions. This correspondence stated the following:

                       We had a Dunn & Bradstreet report run on the Company, but
               since it is still in the start-up stage, the results of the check were not
               meaningful. We have also ordered a background check on Mr.
               Cooper by EquiFax, which should be completed by the end of next
               week.

(emphasis added). This correspondence ended with the following paragraph:

                       In summary, none of the contacts I have made to date in the
               course of my investigations has revealed any adverse information
               concerning either the Company or Mr. Cooper. Please do not hesitate
               to contact me if you have any questions in this regard.

                 The Trial Court found that on February 13, 1995, Defendant Equifax reported the
findings of its investigation to Debbie Souder over the telephone. Souder then requested Defendant
Equifax to close its investigation of Cooper and stated that if she received additional leads on
Cooper, she would order an additional report from Defendant Equifax so that a more thorough
investigation could be performed. On that same date, Defendant Equifax sent a final, written report
to Souder regarding its investigation. The Equifax report essentially reiterated the information

                                                  -2-
Souder received over the telephone which included its finding that Cooper owned no real property
in Shelby County, had no UCC filings in Shelby County, and had not been involved in any lawsuit
in Shelby County state or federal court. The report also contained qualifying language that since the
investigator did not have Cooper’s date of birth and social security number, the results could not be
verified.

                 The record on appeal shows it is undisputed that Plaintiffs never received the Equifax
report. It is disputed whether the results of the Equifax report were verbally reported to Plaintiffs
by Defendant McGinness. The record contains an affidavit of Defendant McGinness in which he
states that after receiving the Equifax report, he contacted Plaintiff Lane-Detman and requested
Cooper’s social security number so that Defendant Equifax could confirm its results. According to
Defendant McGinness’ affidavit, Plaintiff Lane-Detman thereafter advised him on several occasions
that she had asked Cooper for his social security number but Cooper refused to provide it to her.
While Plaintiff Lane-Detman disputes that Defendant McGinness requested Cooper’s social security
number or date of birth from her, the Trial Court found, in its Memorandum Opinion, that Plaintiff
Lane-Detman admitted that she did not request Cooper’s social security number.

                On February 28, 1995, Plaintiffs transferred a total of $600,000 to two companies in
which Cooper had an ownership interest, PCM Media Fund, LLC, and PCM Clinic of Cleveland,
LLC. Plaintiffs later became concerned about how Cooper was handling their investment and on
December 14, 1995, demanded a financial accounting. Around this time, Plaintiff Lane-Detman
withdrew her authorization allowing Cooper’s daughter, acting as Cooper’s agent, to sign checks on
behalf of Plaintiff Lane-Detman. In August 1997, Plaintiffs filed suit against Cooper, PCM Media
Fund and PCM Clinic of Cleveland, alleging intentional misrepresentation and fraud. In preparation
of filing this lawsuit, Plaintiff Lane-Detman learned from her new counsel that $500,000 of
Plaintiffs’ investment was not reflected in any bank records.

                On December 23, 1997, Plaintiffs obtained a default judgment in excess of $2 million
against Cooper.1 Plaintiffs, thereafter, in an attempt to collect on their default judgment, retained
the services of another attorney, Lori Keen, of Memphis, Tennessee. Memphis was the last known
location of Cooper. Attorney Keen used a private investigation service, Investigations Unlimited,
to perform an asset search. The record on appeal contains an affidavit of the investigator who
conducted this asset search, Gene Milner. Milner’s affidavit states that on July 20, 1998, he
provided an attorney in Attorney Keen’s law firm the results of his preliminary search and on August
17, 1998, a final report. The record on appeal shows that Attorney Keen sent correspondence to
Plaintiff Lane-Detman dated August 19, 1998, in which Keen apparently enclosed Milner’s findings
and advised the following:




         1
        Plaintiffs also obtained a default judgm ent again st the other de fendants: $500 ,000 d efault judg ment against
PCM Media Fund, LLC, and $100,000 default judgm ent again st PCM Clinic of Cleveland , LLC , plus attorney ’s fees.

         For simplicity’s sake, we use round numbers in this opinion.

                                                          -3-
                  After an extensive review of these materials, it is obvious that Mr.
                  Cooper is a professional con-artist scam extraordinaire [sic] from way
                  back. He has had more corporations than you could imagine. He is
                  not really showing any assets according to this report and please note
                  that at one time, at least he did have a Swiss bank account.

The Trial Court, in its Memorandum Opinion, found that Attorney Keen’s investigator reported that
Cooper had been using a false social security number and had a federal tax lien filed against him in
1992 in the amount of approximately $31,700.

                 The record on appeal shows that Defendant Miller & Martin entered into a services
contract with Defendant Equifax in September 1988. It is undisputed that this contract (“Contract”)
was in effect when Defendant McGinness hired Defendant Equifax to conduct a background check
on Cooper in 1995. The Contract contains an exculpatory clause (“Exculpatory Clause”) which
states, in pertinent part, the following:

                  Recognizing that information is secured by and through fallible
                  human sources and that for the fee charged you cannot be an insuror
                  [sic] of the accuracy of the information, we understand and agree that
                  the accuracy of any information furnished is not guaranteed by you,
                  and we release you and your affiliated companies and your and their
                  offices, agents, employees, and independent contractors from liability
                  for any negligence in connection with the preparation of such reports
                  and from any loss or expense suffered by us resulting directly or
                  indirectly from your reports or those of your affiliated companies.

(emphasis added).

               On August 12, 1999, Plaintiffs filed suit against Defendants Miller & Martin and
McGinness for legal malpractice, negligence, and breach of contract, alleging that the attorneys
failed to properly perform a background check on Cooper. Thereafter, in January 2000, Plaintiffs
filed an Amended and Restated Complaint (“Amended Complaint”) in which they named Equifax,
Inc., as a defendant, and alleged that Defendant Equifax was liable for negligence, negligent
misrepresentation, and breach of contract. Plaintiffs alleged in their Amended Complaint that
because they were third party beneficiaries of the Contract, Defendant Equifax was liable to them
under the theories of breach of contract and negligent misrepresentation2

                Defendants Miller & Martin and McGinness filed a Motion to Dismiss or, in the
Alternative, for Summary Judgment, in which they argued that Plaintiffs’ claims against them were
barred by the statute of limitations found at Tenn. Code Ann. § 28-3-104. Defendants Miller &

         2
            The technical record on appeal shows that an Agreed Order was entered in which Plaintiffs were allowed
to substitute ChoicePo int Services, Inc., in place of Defendant Equifax. In this opinion, however, to avoid confusion,
we refer to this defendant as Equifax.

                                                         -4-
Martin and McGinness argued Plaintiffs had actual and constructive notice of their injury by
December 23, 1997, the date Plaintiffs obtained the default judgment against Cooper. They further
contended Plaintiffs’ new counsel knew, by July 20, 1998, of the negative information regarding
Cooper that the 1995 investigation did not uncover. Defendants Miller & Martin and McGinness
argued that, accordingly, Plaintiffs’ lawsuit filed against them on August 12, 1999, was barred by
the one-year statute of limitations.

                 In response, Plaintiff Lane-Detman, in her affidavit, stated that while she was aware
that Cooper had fraudulently taken Plaintiffs’ money, she was not aware that Cooper “had a history
of such . . . dealings, nor did [she] know of the judgments against him . . .” until she received
Attorney Keen’s August 19, 1998, correspondence. Moreover, Plaintiff Lane-Detman stated in her
affidavit that she had no reason to believe that Defendant McGinness failed to properly perform the
background check of Cooper until she received Attorney Keen’s letter.

                 Defendant Equifax also filed a motion for summary judgment in which it contended
it was entitled to judgment as a matter of law because Plaintiffs’ breach of contract claim is barred
by the Exculpatory Clause and because the undisputed material facts show that Plaintiffs could not
establish their breach of contract claim or an essential element of their negligent misrepresentation
claim, reliance.

               The Trial Court granted both motions for summary judgment filed by the defendants.
The Trial Court entered two separate Memorandum Opinions and Orders and incorporated its
Memorandum Opinions by reference thereto in each of its Orders. In granting Defendant Equifax’s
motion for summary judgment, the Trial Court held that the Exculpatory Clause barred Plaintiffs’
claim against Equifax. In its Memorandum Opinion, the Trial Court held the following:

                       The language of the contract between Equifax and Miller &
               Martin is routine for such business transactions. Without the
               agreement, Miller & Martin could not get information from Equifax.
               A principal expects its agent to do what is necessary in the ordinary
               course of business to obtain necessary information. For the Court to
               find that third party beneficiaries can assert legal rights denied to the
               contract’s principal is neither fair nor reasonable. Third party
               beneficiaries cannot avoid defenses available to Miller & Martin
               ....

                The Trial Court held that Defendants Miller & Martin and McGinness were entitled
to judgment as a matter of law because the one-year statute of limitation, Tenn. Code Ann. §28-3-
104(a)(2), barred Plaintiffs’ claims. The Trial Court, in its Memorandum Opinion, found that the
statute of limitations began running by December 23, 1997, the date that Plaintiffs obtained their
default judgment against Cooper.

               Plaintiffs appeal.


                                                 -5-
                                             Discussion

                On appeal and although not exactly stated as such, Plaintiffs raise the following issues
on appeal: (1) did the Trial Court err in granting summary judgment to Defendant Equifax because
the Exculpatory Clause is unenforceable as being against public policy and because there are genuine
issues of material fact regarding Plaintiffs’ claims of negligent misrepresentation and breach of
contract which preclude a grant of summary judgment; and (2) did the Trial Court err in granting
summary judgment to Defendants Miller & Martin and McGinness because Plaintiffs timely filed
their Complaint since they had no reason to believe they had a claim against these defendants until
they received Attorney Keen’s August 19, 1998, correspondence.

               Before we consider the issues on appeal, we first address a motion to consider post-
judgment facts filed by Defendants Miller & Martin and McGinness. These defendants, in their
motion, request this Court to consider Plaintiff Lane-Detman’s entry of guilty pleas in 2001, to
federal charges of bank fraud and perjury for conduct occurring between August 1995 and May
1998. In their motion, defendants contend these post-judgment facts are evidence that Plaintiff
Lane-Detman had a high level of business acumen and that due to her level of sophistication, she
should have known of Cooper’s efforts to defraud her more than one year prior to her filing this suit
in August 1999. Exercising our discretion, we hold this motion is not well-taken, and it is denied.
Tenn. R. App. P. 14(a).

               Plaintiffs’ appeal was precipitated by the Trial Court’s granting of Defendants’
motions for summary judgment, and, therefore, we will use the standard of review applicable to
summary judgment. Our Supreme Court, in Staples v. CBL & Assoc., 15 S.W.3d 83 (Tenn. 2000),
provided this standard of review as follows:

                The standards governing an appellate court's review of a motion for summary
                judgment are well settled. Since our inquiry involves purely a question of
                law, no presumption of correctness attaches to the lower court's judgment,
                and our task is confined to reviewing the record to determine whether the
                requirements of Tenn. R. Civ. P. 56 have been met. See Hunter v. Brown,
                955 S.W.2d 49, 50-51 (Tenn.1997); Cowden v. Sovran Bank/Central South,
                816 S.W.2d 741, 744 (Tenn.1991). Tennessee Rule of Civil Procedure 56.04
                provides that summary judgment is appropriate where: (1) there is no genuine
                issue with regard to the material facts relevant to the claim or defense
                contained in the motion, see Byrd v. Hall, 847 S.W.2d 208, 210 (Tenn.1993);
                and (2) the moving party is entitled to a judgment as a matter of law on the
                undisputed facts. See Anderson v. Standard Register Co., 857 S.W.2d 555,
                559 (Tenn.1993). The moving party has the burden of proving that its motion
                satisfies these requirements. See Downen v. Allstate Ins. Co., 811 S.W.2d
                523, 524 (Tenn.1991). When the party seeking summary judgment makes a
                properly supported motion, the burden shifts to the nonmoving party to set
                forth specific facts establishing the existence of disputed, material facts


                                                  -6-
               which must be resolved by the trier of fact. See Byrd v. Hall, 847 S.W.2d at
               215.

               To properly support its motion, the moving party must either affirmatively negate an
               essential element of the non-moving party's claim or conclusively establish an
               affirmative defense. See McCarley v. West Quality Food Serv., 960 S.W.2d 585, 588
               (Tenn.1998); Robinson v. Omer, 952 S.W.2d 423, 426 (Tenn.1997). If the moving
               party fails to negate a claimed basis for the suit, the non-moving party's burden to
               produce evidence establishing the existence of a genuine issue for trial is not
               triggered and the motion for summary judgment must fail. See McCarley v. West
               Quality Food Serv., 960 S.W.2d at 588; Robinson v. Omer, 952 S.W.2d at 426. If the
               moving party successfully negates a claimed basis for the action, the non-moving
               party may not simply rest upon the pleadings, but must offer proof to establish the
               existence of the essential elements of the claim.

               The standards governing the assessment of evidence in the summary
               judgment context are also well established. Courts must view the evidence
               in the light most favorable to the nonmoving party and must also draw all
               reasonable inferences in the nonmoving party's favor. See Robinson v. Omer,
               952 S.W.2d at 426; Byrd v. Hall, 847 S.W.2d at 210-11. Courts should grant
               a summary judgment only when both the facts and the inferences to be drawn
               from the facts permit a reasonable person to reach only one conclusion. See
               McCall v. Wilder, 913 S.W.2d 150, 153 (Tenn.1995); Carvell v. Bottoms, 900
               S.W.2d 23, 26 (Tenn.1995).

Staples, 15 S.W.3d at 88-89; see also Madison v. Love, No. E2000-01692-COA-RM-CV, 2000 WL
1036362, at * 2 (Tenn. Ct. App. July 28, 2000), no appl. perm. app. filed, (holding that “[m]aterial
supporting a motion for summary judgment must do more than ‘nip at the heels’ of an essential
element of a cause of action; it must negate that element”).

                We now address Plaintiffs’ arguments on appeal regarding Defendant Equifax.
Plaintiffs contend on appeal that the Trial Court erred in granting summary judgment to Defendant
Equifax based upon the Exculpatory Clause. Plaintiffs contend the Exculpatory Clause is not
enforceable because it is counter to public policy. Plaintiffs further contend that Defendant
McGinness, as Plaintiffs’ counsel, could not ethically bind Plaintiffs to such a provision.

                In Tennessee, parties are free to contract that one party’s negligence will not subject
him to liability. Crawford v. Buckner, 839 S.W.2d 754, 756 (Tenn. 1992). There are, however,
exceptions to this rule, including that one cannot avoid liability for gross negligence. Id.; Adams v.
Roark, 686 S.W.2d 73, 75-76 (Tenn. 1985). In addition, an exculpatory clause is not enforceable
where the provision affects the public interest. Crawford v. Buckner, 839 S.W.2d. at 757 (quoting
Olson v. Molzen, 558 S.W.2d 429, 431 (Tenn. 1977)). To determine whether an exculpatory



                                                 -7-
provision affects the public interest, courts are to use six factors which have been outlined by our
Supreme Court as follows:

                (a) It concerns a business of a type generally thought suitable for
                public regulation.

                (b) The party seeking exculpation is engaged in performing a service
                of great importance to the public, which is often a matter of practical
                necessity for some members of the public.

                (c) The party holds himself out as willing to perform this service for
                any member of the public who seeks it, or at least for any member
                coming within certain established standards.

                (d) As a result of the essential nature of the service, in the economic
                setting of the transaction, the party invoking exculpation possesses a
                decisive advantage of bargaining strength against any member of the
                public who seeks his services.

                (e) In exercising a superior bargaining power the party confronts the
                public with a standardized adhesion contract of exculpation, and
                makes no provision whereby a purchaser may pay additional
                reasonable fees and obtain protection against negligence.

                (f) Finally, as a result of the transaction, the person or property of the
                purchaser is placed under the control of the seller, subject to the risk
                of carelessness by the seller or his agents.

Id.

                 For a court to find that a particular exculpatory provision affects the public interest,
it is not necessary for all six of these factors be present. Id. Using these factors, Tennessee courts
have found that contracting parties may not agree to release one party from liability for professional
medical negligence through an exculpatory clause and have determined that exculpatory clauses in
residential leases and residential construction loan contracts are void. Olson v. Molzen, 558 S.W.2d
429, 431 (Tenn. Ct. App. 1977); Crawford v. Buckner, 839 S.W.2d. at 757, 759; Lomax v. Headley
Homes, No. 02A01-9607-CH-00163, 1997 WL 269432, at * 7 (Tenn. Ct. App. May 22, 1997) no
appl. perm. app. filed. Courts have also used these factors to render void exculpatory clauses
affecting safety deposit boxes; a patron’s use of a health spa; and a cosmetology school’s customer’s
receipt of hair straightening treatment. Smith v. The Peoples Bank of Elk Valley, No. 01A01-9111-
CV-00421, 1992 WL 117061, at * 4 (Tenn. Ct. App. June 3, 1992) no appl. perm.app. filed; Olson
v. Molzen, 558 S.W.2d at 430 (citations omitted). Our Supreme Court, however, has declined to
render void an exculpatory clause in a contract between a provider of a telephone directory and a


                                                   -8-
business who contracted for a listing in the yellow pages. Affiliated Prof’l Serv., Inc. v. South
Central Bell Tel. Co., 606 S.W.2d 671, 672 (Tenn. 1980).

                In support of their argument that Defendant Equifax’s business is of a “type generally
thought suitable for public regulation[,]” Plaintiffs cite to the federal Fair Credit Reporting Act,
arguing that Defendant Equifax, in the preparation of background investigative reports, must comply
with the Act’s requirements that consumer reports be accurate. Crawford v. Buckner, 839 S.W.2d
at 757; 15 U.S.C. §1681e(b). We find, however, the definition of “consumer report” provided by
the Act does not include the type of report that Defendant Equifax prepared in this matter. 15 U.S.C.
§ 1681a(d). Moreover, Plaintiffs cite no case law, nor have we located any, which has interpreted
this definition to include a background investigative report like the one provided by Defendant
Equifax.

               With respect to the second factor, we find that Defendant Equifax provides a “service
of great importance to the public . . .” and that this service is “of practical necessity for some
members of the public.” Crawford v. Buckner, 839 S.W.2d at 757. We find that the third factor is
also met since it appears from the record that Defendant Equifax performs “this service for any
member of the public who seeks it, or at least for any member coming within certain established
standards.” See id.

               The fourth and fifth factors, however, are not established by the proof contained in
the record on appeal. The proof does not support a finding that Defendant Equifax “possesse[d] a
decisive advantage of bargaining strength . . .” against Defendant Miller & Martin, a law firm. Id.
Moreover, the record contains no proof applicable to the fifth factor since the record is silent as to
whether Defendant Miller & Martin could have avoided the exculpatory provision by paying
additional reasonable fees. See id.

               With respect to the sixth factor, and while the evidence in the record is unclear, after
drawing all reasonable inferences in Plaintiff’s favor, we find that the facts and circumstances
presented by the record on appeal at least arguably establish the sixth factor. See id.

                Accordingly, at most, three out of six factors are present in this matter. While no one
factor necessarily is given more weight than any other, of particular significance here are the facts
that both parties involved in the Contract are sophisticated, commercial entities and that the service
that Defendant Equifax provides has not yet been regulated by legislation. See Parton v. Mark Pirtle
Oldsmobile-Cadillac-Isuzu, 730 S.W.2d 634, 636 (Tenn. Ct. App. 1987) (holding that the rule in
Olson v. Molzen should not be extended to apply to transactions between “‘tradesmen in the market
place’”); compare Olson v. Molzen, 558 S.W.2d at 431 (voiding exculpatory provision in contract
provided by physician to patient for abortion); Crawford v. Buckner, 839 S.W.2d. at 757, 759
(holding exculpatory clause was against public interest in residential property lease); Lomax v.
Headley Homes, 1997 WL 269432, at * 7 (holding that exculpatory provision in residential
construction loan agreement was void). Although all factors need not be present to render an
exculpatory clause void, we hold that the proof contained in the record on appeal does not support
a finding that the Exculpatory Clause in this commercial contract between Defendant Equifax and

                                                 -9-
Defendant Miller & Martin, a law firm, is against public policy. See Crawford v. Buckner, 839
S.W.2d at 757.

                 Plaintiffs also contend on appeal that their attorney, Defendant McGinness, for ethical
reasons, was barred from binding them to the Exculpatory Clause. Plaintiffs contend that Defendant
McGinness was ethically prohibited from binding Plaintiffs to the Exculpatory Clause without their
express permission, citing Tenn. R. S. Ct. 7 EC 7-7 and DR 7-101(A)(4), because the clause
substantially prejudices their rights as clients. The Trial Court, citing Garrett v. Corry Foam Prod.,
Inc., 596 S.W.2d 808, 810-11 (Tenn. 1980), held that while Plaintiffs correctly contend that an
attorney is prohibited from “substantially reducing a client’s interests without the client’s express
permission[,]” this prohibition does not “address the issue of an attorney’s authority in a contractual
relationship where the client is a third-party beneficiary of the contract.” We agree. See id.
Plaintiffs, as third party beneficiaries to the Contract, are subject to the Exculpatory Clause since
their rights “depend upon ‘and are measured by’, the terms of the contract.” Petty v. Sloan, 277
S.W.2d 355, 358 (Tenn. 1955) (quoting 12 Am.Jur. Contracts § 289); see also Rentenbach
Constructors, Inc. v. Bowen, No. E2000-1213-COA-R3-CV, 2000 WL 1690286, at * 3 (Tenn. Ct.
App. Nov. 13, 2000), appl. perm. app. denied May 21, 2001.

                The evidence contained in the record on appeal shows that the undisputed material
facts support the Trial Court’s grant of Defendant Equifax’s motion for summary judgment. In light
of our finding that the Exculpatory Clause is not against public policy and our finding that Plaintiffs,
as third party beneficiaries, are subject to the Exculpatory Clause, we affirm the Trial Court’s
holding that Defendant Equifax is entitled to judgment as a matter of law.

                We next consider Plaintiffs’ argument on appeal that the Trial Court erred in granting
summary judgment to Defendants Miller & Martin and McGinness based upon their statute of
limitations defense. As discussed, the Trial Court held that the statute of limitations was triggered
on December 23, 1997, the date Plaintiffs obtained their default judgment against Cooper. Plaintiffs,
however, argue that the first time they were aware they had a claim against their former attorney and
his law firm was when they received Attorney Keen’s letter dated August 19, 1998. Plaintiffs
contend they timely filed this action on August 12, 1999, which was within one year of discovery
of their claim.

               The statute of limitations applicable to Plaintiffs’ legal malpractice claim is found at
Tenn. Code Ann. § 28-3-104(a)(2), which provides for a one-year limitations period after the cause
of action accrues. When a cause of action for legal malpractice accrues is determined by the
“discovery rule.” John Kohl & Co. P.C. v. Dearborn & Ewing, 977 S.W.2d 528, 532 (Tenn. 1998).
Our Supreme Court held that the discovery rule has two elements, stating as follows:

                (1)     the plaintiff must suffer legally cognizable damage – an actual
                        injury – as a result of the defendant’s wrongful or negligent
                        conduct, and



                                                 -10-
                  (2)      the plaintiff must have known or in the exercise of reasonable
                           diligence should have known that this injury was caused by
                           the defendant’s wrongful or negligent conduct.

Id.

                  At issue in this appeal is when, under the appropriate summary judgment standards,
Plaintiffs knew or should have known that their alleged injury was caused by the allegedly negligent
background search performed by Defendants Miller & Martin and McGinness.3 Under the discovery
rule, a plaintiff’s cause of action accrues when she had actual knowledge or constructive knowledge
of her injury. Id. A plaintiff is deemed to have constructive knowledge “whenever the plaintiff
becomes aware or reasonably should have become aware of facts sufficient to put a reasonable
person on notice that an injury has been sustained as a result of the defendant’s negligent or wrongful
conduct.” Id. This definition, however, is refined by our Supreme Court’s determination that a
plaintiff is not required to “actually know the specific type of legal claim he or she has, or that the
injury constituted a breach of the appropriate legal standard.” Id. at 533. “Whether the plaintiff
exercised reasonable care and diligence in discovering the injury or wrong is usually a fact question
for the jury to determine.” Wyatt v. A-Best Co., Inc., 910 S.W.2d 851, 854 (Tenn. 1995).

                 The Trial Court determined that the statute of limitations period was triggered when
Plaintiffs obtained their default judgment against Cooper on December 23, 1997, and held, therefore,
that Plaintiffs’ lawsuit in this matter, filed on August 12, 1999, was time-barred. The record shows
that in response to Defendants’ Tenn. R. Civ. P. 56.03 statement of undisputed material facts,
Plaintiffs contend they had actual and constructive knowledge of their injury only once they received
Attorney Keen’s August 19, 1998, correspondence.

                 We respectfully disagree with the Trial Court’s determination that December 23,
1997, is the triggering date of the statute of limitations. After viewing the evidence in the record in
the light most favorable to Plaintiffs, and drawing all reasonable inferences in Plaintiffs’ favor, we
do not believe that a reasonable person could reach only the one conclusion that Plaintiffs became
aware or reasonably should have been aware as of that date of facts sufficient to put a reasonable
person on notice that Plaintiffs’ injury had been sustained as a result of these Defendants’ alleged
negligent or wrongful conduct. This, however, does not necessarily resolve this issue in Plaintiffs’
favor.

               The undisputed material facts contained in the record on appeal show that Plaintiffs
hired Attorney Keen, who practices in Memphis, Tennessee, to assist with the collection of their
default judgment against Cooper. Keen’s office hired a private investigation firm, Investigations
Unlimited, to conduct a search of Cooper’s assets. The investigator who worked on this asset check
was Gene Milner. The record on appeal contains Milner’s affidavit which Defendants Miller &


         3
            The Trial Court, in its Memorandum Opinion, did not address the date that Plaintiffs suffered their injury,
and Plaintiffs, on appeal, do not raise this as an issue.

                                                        -11-
Martin and McGinness filed in support of their motion to dismiss and/or motion for summary
judgment. The Tenn. R. Civ. P. 56.03 reply statement filed by Plaintiffs does not dispute Milner’s
affidavit.

               Milner’s affidavit and supporting exhibits establish that by July 20, 1998, Milner,
using various internet search methods, found that a federal tax lien had been filed against Cooper
in 1992 in Dallas, Texas; Cooper had been using a social security number issued to someone else
who had died in 1985; and evidence existed of Cooper’s ownership of a Swiss bank account.
Moreover, Milner found that Cooper had operated several Tennessee-based corporations, five of
which had been administratively dissolved. Likewise, Milner found that Cooper had been involved
in several other non-Tennessee corporations, most of which had their charters suspended, revoked
or canceled. Milner states in his affidavit that upon his discovering this information on July 20,
1998, he immediately took his printed search results to Attorney Cox, an attorney who practices in
Attorney Keen’s law firm.

                Thereafter, on August 10, 1998, Milner received a complete report for an asset search
from Advanced Research, Inc., another investigative service used by Milner, which showed the
assets held by Cooper in Tennessee. In his affidavit, Milner states that he delivered this report to the
attorneys’ office on August 17, 1998. Thereafter, on August 19, 1998, Attorney Keen prepared
correspondence to Plaintiffs regarding the results of Milner’s investigation.

               The undisputed material facts contained in the record on appeal establish that
Plaintiffs’ Memphis counsel, Attorneys Keen and Cox, received Milner’s internet search results on
July 20, 1998. The knowledge of Plaintiffs’ counsel is imputed to Plaintiffs under basic agency
theory. Batchelor v. Heiskell, Donelson, Bearman, Adams, Williams & Kirch, P.C., 828 S.W.2d
388, 394 (Tenn. Ct. App. 1991). In holding that an attorney’s knowledge is charged to his client,
this Court held as follows:

                “[A] person generally is held to know what his attorney knows and
                should communicate to him, and the fact that the attorney has not
                actually communicated his knowledge to the client is immaterial. So,
                the facts constituting knowledge, or want of it, on the part of an
                attorney, are proper subjects of proof, and are to be ascertained by
                testimony as in other cases; but when ascertained, the constructive
                notice thereof to the client is conclusive, and cannot be rebutted by
                showing that the attorney did not in fact impart the information so
                acquired.”

Smith v. Petkoff, 919 S.W.2d 595, 597-98 (Tenn. Ct. App. 1995) (quoting 7A C.J.S. Attorney and
Client § 182 (1980) (emphasis added).

               We find that the undisputed material facts contained in the record on appeal show that
by July 20, 1998, Plaintiffs’ Memphis counsel acquired information from Milner which would have
placed a reasonable person on notice that the 1995 background search performed by Defendants

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Miller & Martin and McGinness was inaccurate. Since this information is imputed to Plaintiffs, we
hold that the statute of limitations began running on July 20, 1998, and that Plaintiffs’ Complaint
filed against Defendants Miller & Martin and McGinness is time-barred. Tenn. Code Ann. § 28-3-
104(a)(2). Accordingly, we hold the Trial Court did not err in granting summary judgment as a
matter of law to Defendants Miller & Martin and McGinness.

                                           Conclusion

               The judgment of the Trial Court is affirmed, and this cause is remanded to the Trial
Court for such further proceedings as may be required, if any, consistent with this Opinion and for
collection of the costs below. The costs on appeal are assessed against the Appellants, Lane-
Detman, LLC, Clara Lane, and Darlene Lane-Detman, and their surety.



                                                      ___________________________________
                                                      D. MICHAEL SWINEY, JUDGE




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