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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE

AT KNOXVILLE

Civil Action No.
3:13-cv-141-JMH



MEMORANDUM OPINION & ORDER


KEVIN CARROLL, et. al.,

Plaintiffs,

v.

CMH HOMES, INC., et. al.,

Defendants.






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This matter is before the court on Defendants’ Motion

for Entry of Judgment under Rule 54(b) and Motion for
Summary Judgment. [D.E. 100, 101]. Plaintiffs have
responded [D.E. 112, 110], and Defendants have replied
[D.E. 117, 119]. Thus, these motions are now ripe for
review. For the reasons which follow, Defendants’ Motion
for Entry of Judgment [D.E. 100] will be denied, and their
Motion for Summary Judgment [D.E. 101] will be granted.

FACTUAL AND PROCEDURAL BACKGROUND


Prior to October 2008, Kevin Carroll and his brother,
Hollis Carroll, were co-owners of Carroll’s Mobile Homes,
Inc. (“Carroll’s”), a mobile home dealership located in
Georgetown, Indiana. [D.E. 102 at 1; D.E. 89 at 1—2].
Carroll’s received the majority of its supply of mobile
homes from a manufacturing plant owned by Defendant CMH

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Homes, Inc. (“CMH”) in Hodgenville, Kentucky. [D.E. 102 at
4; D.E. 111 at 2].

Sometime in 2008, Kevin Carroll decided to buy out his
brother to become the sole owner of Carroll’s, but needed
to obtain a loan to do so. [D.E. 102 at 5; D.E. 111 at 3].
After two banks refused to loan the money for the buyout,
Kevin Carroll told Kevin Clayton, the Chairman of the Board
of CMH and the Chief Executive Officer of Clayton Homes,
Inc., the indirect parent corporation of CMH and Defendant
21st Mortgage, that he needed financing for the buyout.
[D.E. 102 at 6; D.E. 111 at 3]. Clayton arranged for Kevin
Carroll to obtain the necessary money for the buyout with a
loan from 21st Mortgage. [D.E. 102 at 6; D.E. 111 at 3—4].

Kevin Carroll accepted the loan on behalf of
Carroll’s, and was represented by an attorney in the weeks
leading up to the loan closing. [D.E. 102 at 7; D.E. 111
at 4]. As security for the loan, Carroll’s and James
Hurst, principles of Carrolls’ Properties, LLC, executed
two mortgages on three parcels of real estate on October 1,
2008. [D.E. 102 at 9; D.E. 111 at 4]. Kevin Carroll also
executed a personal guaranty agreement in connection with
one of the mortgages. [D.E. 102 at 9; D.E. 111 at 4]. The
parties closed on the loan on October 1, 2008. [D.E. 102
at 7; D.E. 111 at 4].



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On October 15, 2008, Defendants announced that they
would be closing their Hodgenville Plant, a fact about
which Defendants had not previously informed Plaintiffs
even though Plaintiffs obtained eighty-five percent of
their total inventory from the Hodgenville plant, and had
just indebted themselves to 21st Mortgage fourteen days
prior. [D.E. 102 at 10; D.E. 111 at 6]. However, Kevin
Carroll admitted that no one represented to him during the
loan negotiations that the Hodgenville Plant would stay
open, either, and no guarantee that it would remain open
was included in the loan agreement. [D.E. 102 at 10; D.E.
111 at 5]. Further, Kevin Carroll admits that he did not
ask anyone during the loan negotiations whether the
Hodgenville Plant would remain open. [D.E. 102 at 10; D.E.
111 at 5]. Shortly after October 15, Kevin Carroll
contacted Defendants and complained that he believed that
their failure to tell him about the plant closure was a
deliberate scam to take his business. [D.E. 101-2 at 54—
55].

After the Hodgenville Plant closed, Plaintiffs had to
obtain their inventory from a plant in Tennessee. [D.E. 89
at 2]. According to Plaintiffs, these homes were of lower
quality and caused Plaintiffs to experience a sharp drop in
sales. [D.E. 89 at 2]. CMH did make efforts to help



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Plaintiffs with their financial struggles, including
selling some of the last manufactured homes from the
Hodgenville Plant below invoice price and expediting
rebates to help Carroll’s with cash flow. [D.E. 102 at 13;
D.E. 111 at 6]. However, by February 2010, Carroll’s
defaulted on the loan agreement for the second time, and
21st Mortgage threatened to foreclose. [D.E. 102 at 14;
D.E. 111 at 7].

Instead of foreclosing, CMH offered to acquire the
assets of Carroll’s and Carroll’s Properties in exchange
for nearly two million dollars and a release on the
mortgage lien on James Hurst’s property. [D.E. 102 at 15;
D.E. 102 at 15; D.E. 111 at 7]. Although they claim they
did so under economic duress, Plaintiffs agreed to the
deal, and, over the course of several weeks, the terms of
the Asset Purchase Agreement (“APA”) were negotiated
between Plaintiffs’ self-selected attorney and Defendants.
[D.E. 102 at 15; D.E. 111 at 7]. The APA included a forum
selection and choice of law clause, which reads as follows:

This agreement shall be interpreted in accordance
with the laws of the State of Tennessee without
reference to any choice of law provisions. Any
action filed in connection with this Agreement shall
be brought in the United States District Court for
the Eastern District of Tennessee and each of the
parties irrevocably submits to the exclusive
jurisdiction of such court, waives any objection,
present or future, to venue and convenience of forum



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and agrees not to bring any action in any other
court.


[D.E. 101-1 at 10]. The APA also contained a broad release
clause, which reads as follows:

parent

directors,

Effective upon the execution of this agreement, and
in consideration of this Agreement, Seller, Seller
Principals, its subsidiaries and other affiliates,
for themselves, and for its officers, directors,
employees, successors and assigns hereby do release
and forever discharge CMH [Homes], 21st Mortgage, and
their
officers,
representatives,
successors,
assigns and any subsidiary thereof, from any and all
claims,
covenants,
contracts, including the Asserted Claims the Seller
or Seller Principals ever had, now has or which its
successors or assigns hereafter, can, shall or may
have, for upon or by reason of any matter or thing
whatsoever.

employees,
accounts,

companies,
agents,

actions,

suits,


[D.E. 101-1 at 9]. Kevin Carroll signed the APA both
individually and in his capacity as principal of Carroll’s.
[D.E. 101-1]. The parties also signed a Real Estate Sales
Agreement by which Plaintiffs conveyed James Hurst’s
property to Defendants and Defendants released the
mortgage. [D.E. 26].

On February 14, 2012, Plaintiffs filed suit in the
Circuit Court of Floyd County, Indiana, for fraud and
constructive fraud arising out of the 2008 buyout loan, and
Defendants timely removed the action to the United States
District Court for the Southern District of Indiana. [D.E.
1]. Defendants also filed a counterclaim that sought a



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declaration that the release contained within the APA
barred Plaintiffs’ claims. [D.E. 3]. On April 10, 2012,
Defendants filed a motion requesting the Indiana district
court to transfer the action to the Eastern District of
Tennessee pursuant to 28 U.S.C. 1404(a), but the court
denied the motion. [D.E. 40]. Then, after Plaintiff filed
an amended complaint, the district court granted
Defendants’ motion to dismiss the amended complaint for
improper venue under Federal Rule of Civil Procedure
12(b)(3), and ordered the clerk to “transfer the case to
the United States District Court for the Eastern District
of Tennessee, consistent with the parties’ agreement in the
APA.” [D.E. 89 at 15].



STANDARD OF REVIEW

Under Rule 56(c), summary judgment is proper “if the

pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a
matter of law.” Fed. R. Civ. P. 56(c). In deciding a
motion for summary judgment, the factual evidence and all
reasonable inferences must be construed in the light most
favorable to the nonmoving party. Anderson v. Liberty



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Lobby, Inc., 477 U.S. 242, 255 (1986); Summers v. Leis, 368
F.3d 881, 885 (6th Cir. 2004).

The judge's function on a summary judgment motion is
not to weigh the evidence, but to decide whether there are
genuine issues of material fact for trial. Anderson, 477
U.S. at 249; Multimedia 2000, Inc. v. Attard, 374 F.3d 377,
380 (6th Cir. 2004). A material fact is one that may
affect the outcome of the issue at trial, as determined by
substantive law. Anderson, 477 U.S. at 242. A genuine
dispute exists on a material fact, and thus summary
judgment is improper, if the evidence shows “that a
reasonable jury could return a verdict for the nonmoving
party.” Id. at 248; Summers, 368 F.3d at 885.

ANALYSIS

A. MOTION FOR ENTRY OF JUDGMENT UNDER RULE 54(b)

Defendants ask this court to certify under Federal
Rule of Civil Procedure 54(b) that the Southern District of
Indiana’s order [D.E. 89] dismissed Plaintiffs’ claims in
their entirety, leaving Defendants’ counterclaim as the
only live claim in this action. The court disagrees.
In its order, the Indiana district court granted

Defendants’ motion to dismiss for improper venue under
Federal Rule of Civil Procedure 12(b)(3), and “transfer[ed]
the case to the United States District Court for the



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Eastern District of Tennessee, consistent with the parties’
agreement in the APA.” [D.E. 89 at 15]. The court gave no
indication whatsoever that it was dismissing Plaintiffs’
claims with the expectation that Plaintiffs would have to
re-file their claims in the Eastern District of Tennessee.
Nor, as Defendants suggest, did the court state that it was
only transferring Defendant’s counterclaim. Instead, the
court acknowledged that, pursuant to the valid forum
selection clause in the APA, the Eastern District of
Tennessee is the proper forum for Plaintiffs’ claims, and
chose to “transfer the case” (not counterclaim) to the
Eastern District of Tennessee. [D.E. 89 at 15].

Defendants argue that this language operated as a
dismissal of Plaintiffs claims. However a more likely
conclusion from this language, and the conclusion that this
court adopts in the absence of explicit instruction from
the Indiana district court, is that it transferred the case
pursuant to 28 U.S.C. § 1406, which provides that a
“district court of a district in which is filed a case
laying venue in the wrong division or district shall
dismiss, or if it be in the interest of justice, transfer
such case to any district or division in which it could
have been brought.”



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This interpretation of the Indiana district court’s
action is reinforced by the court’s language in its May 22,
2013 order denying Plaintiff’s motion for reconsideration.
[D.E. 117-1]. Indeed, in the order, the district court
explicitly concluded that it did not have jurisdiction to
entertain Plaintiff’s motion because the “cause was
transferred to the Eastern District of Tennessee on March
12, 2013.” [D.E. 117-1 at 2]. Thus, Defendants’ motion to
certify the dismissal of Plaintiffs’ claims pursuant to
Rule 54(b) is denied.

B. SUMMARY JUDGMENT MOTION

In the APA, the choice of law clause states that the
APA “shall be interpreted in accordance with the laws of
the state of Tennessee without reference to any choice of
law provisions,” and that “[a]ny action filed in connection
with this Agreement shall be brought in the United States
District Court for the Eastern District of Tennessee” and
subject to the “exclusive jurisdiction of such court.”
[D.E. 101-1 at 10]. Defendants argue, among other things,
that because this choice of law clause governs the parties’
transaction, the three year statute of limitations in
Tennessee on claims of this nature applies to bar
Plaintiffs’ cause of action. In response, Plaintiffs
contend that the six-year Indiana statute of limitations



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1. Validity of the Choice of Law Clause

applies because the transaction has a more significant
relationship with Indiana than with Tennessee. The court
agrees with Defendants that the choice of law clause is
valid; therefore, Tennessee’s three year statute of
limitations applies to this case, and Plaintiffs’ claims
must be dismissed as time-barred.


“Because this court is sitting in diversity, the

validity of the choice-of-law clause is governed by
Tennessee choice-of-law rules.” English Mtn. Spring Water
Co., Inc., v. AIDCO Intern., Inc., No. 3:07-cv-324, 2008 WL
2278627, at *2 (E.D. Tenn. May 30, 2008) (citing Day v.
Zimmerman, Inc. v. Challoner, 423 U.S. 3, 4 (1975)). “In
Tennessee, ‘parties ordinarily are free to contract that
the law of some jurisdiction other than that of the place
of making will govern their relationship.” Id. (quoting
Goodwin Bros. Leasing, Inc. v. H & B, Inc., 597 S.W.2d 303,
306 (Tenn. 1980)). If the parties so contract, then their
intent will be honored under Tennessee law if 1) the chosen
jurisdiction bears a material relationship to the
transaction; 2) the basis of the choice is reasonable; 3)
the parties’ choice does not subvert the policy of a state
having a materially greater interest and whose law would
otherwise govern; and 4) the choice of law provision was



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executed in good faith. Invisible Fence, Inc. v. Fido’s
Fences, Inc., 687 F. Supp. 2d 726, 742 (E.D. Tenn. 2009);
see also Carefree Vacations, Inc. v. Brunner, 615 F. Supp.
211, 215 (W.D. Tenn. 1985) (“In a multi-state transaction,
the contracting parties’ choice-of-law provision is valid
absent contravention of public policy of the forum state or
a showing that the selected forum does not bear a
reasonable relationship to the transaction.”).

These four factors have been met in this case. First,
Tennessee bears a material relationship to the transaction
since Defendants CMH, 21st Mortgage Corporation, and Kevin
Clayton are all domiciled in Tennessee. Cf. Carefree
Vacations Inc. v. Brunner, 615 F. Supp. 211, 215 (W.D.
Tenn. 1985) (invalidating a choice of law provision that
specified that Texas law would control the transaction
because the transaction bore no substantial relationship to
Texas since the contract was executed elsewhere and the
parties were domiciled elsewhere). Defendants’ location in
Tennessee also makes the choice to apply Tennessee law a
reasonable and foreseeable one, thereby meeting the second
factor.

Moreover, the choice of law clause does not subvert
the policy of a state that has a materially greater
interest in the transaction and whose law would otherwise



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govern, mainly because Tennessee’s statute of limitations
would apply to this case regardless of the choice of law
clause. When a diversity case is transferred to another
jurisdiction under § 1406(a), such as in this case, the
transferee district court applies the choice of law rules
of the forum state of which it sits. Martin v. Stokes, 623
F.2d 469, 472 (6th Cir. 1980) (“[F]ollowing a transfer
under § 1406(a), the transferee district court should apply
its own state law rather than the state law of the
transferor district court.”). Therefore, because this
action was transferred to the Eastern District of Tennessee
under § 1406, and because statutes of limitation are
considered procedural rules in Tennessee, the Tennessee
statute of limitations would apply to this transaction
regardless of whether Indiana law applied to the substance
of Plaintiffs’ claims. Elec. Power Bd. of Chattanooga v.
Monsanto Co., 879 F.2d 1368, 1375 (6th Cir. 1989)
(“[S]tatutes of limitations are procedural rules and thus
the statute of limitations of the forum state-Tennessee-
apply to the claims brought by both the Tennessee and the
Alabama plaintiffs.”). Thus, Plaintiffs’ insistence that
Indiana law has a materially greater interest in the
transaction is irrelevant for this court’s purposes.



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Finally, there is no indication that the APA was
entered into in bad faith, as the provision was clear and
explicit that the law of Tennessee would apply to any
dispute related to the contract. Plaintiffs argue that
they were forced to enter into the transaction under
economic duress because they were forced to choose between
agreement to the APA or financial ruin through Defendants’
exercise of their default rights. [D.E. 110 at 9; 13—16].

However, Plaintiffs were represented by an attorney
who was given the time and opportunity to read the
contract. See Wallace Hardware Co., Inc. v. Abrams, 223
F.3d 382, 393—94 (6th Cir. 2000) (holding that a choice of
law clause was enforceable when the parties to the contract
were represented by attorneys, and where there was nothing
in the record to suggest that the parties were unaware of
the provision or lacked an opportunity to consider its
ramifications.). Kevin Carroll admitted in his deposition
that he was free to walk away from the transaction, albeit
with financial consequences. [D.E. 101-2 at 95]. Further,
Tennessee courts have refused to recognize that asserting
an intention to pursue a legal remedy, such as a lender
choosing to exercise their default rights under a loan
agreement, constitutes economic duress. Flynt Engineering
Co. v. Cox, 99 S.W.3d 99, 102 (Tn. Ct. App. 2002) (“[T]he



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assertion of an intention to pursue a legal remedy is not
ordinarily economic duress . . . and to do what one has a
legal right to do is insufficient to create duress.”)
(internal citations omitted). Notably, Defendants offered
to hire Kevin Carroll as the manager of the new CMH sales
center, and, two days after Kevin signed the APA, he
applied for employment and stated in his application that
he “voluntarily” left Carroll’s when CMH acquired its
assets. (D.E. 101-2 at 93-95]. When all of these facts
are considered together, there is no indication that the
APA nor the choice of law clause were entered into in bad
faith, particularly since Plaintiffs accepted the benefits
of the contract and waited so long to seek to avoid it.

See Cumberland & Ohio Co. of Texas, Inc. v. First American
Nat. Bank, 936 F.2d 846, 850 (6th Cir. 1991) (“In general,
a party seeking to avoid a contract induced by economic
duress must act promptly upon the removal of the duress to
avoid the contract” or, under Tennessee law, they will be
found to have “ratified it, and [will be] estopped from
claiming economic duress to avoid the agreement’s terms.”)
(internal citations omitted).



Because the choice of law provision in the APA is
valid, Tennessee law applies to this transaction. In

2. Application of the Statute of Limitations



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Tennessee, actions for injury to property, including
actions in fraud, must be commenced within three years of
the date on which the action accrues. Tenn. Code. Ann. §
28-3-105; Elec. Power Bd. of Chattanooga v. Monsanto Co.,
879 F.2d 1368, 1375 (6th Cir. 1989). “[A] claim accrues
when the plaintiffs discover their injury or ‘through the
exercise of reasonable care and diligence it should have
been discovered.’” Id. at 1376 (quoting McCroskey v.
Bryant Air Conditioning Co., 524 S.W.2d 487, 491 (Tenn.
1975)) (internal alterations omitted).

In this case, Plaintiffs were aware of the fraud of
which they complain on October 15, 2008, the date that
Defendants announced that the Hodgenville plant would
close. Indeed, Kevin Carroll admitted that, soon after the
October 15 announcement, he contacted Defendants and
complained that he believed that their failure to tell him
about the plant closure was a deliberate scam to take his
business. [D.E. 101-2 at 54—55]. Thus, there is no
question that Plaintiffs’ claims accrued in 2008. However,
Plaintiffs did not file the present action until February
14, 2012. As a result, their claims are barred by
Tennessee’s statute of limitations, and must be dismissed.





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C. COUNTERCLAIM


In the counterclaim, Defendants sought a declaration
that pursuant to the broad release located in the APA,
Plaintiffs’ claims were barred and should be dismissed.
[D.E. 3 at 12—13]. Because the court has dismissed
Plaintiffs’ claims as untimely, Defendants’ counterclaim is
dismissed as moot.1

CONCLUSION

For the reasons stated above, IT IS ORDERED:
(1) that Defendant’s Motion for Entry of Judgment



under Rule 54(b) [D.E. 100] is DENIED;

(2) that Defendant’s Motion for Summary Judgment [D.E.
101] is GRANTED and Plaintiffs’ claims are DISMISSED WITH
PREJUDICE;

MOOT.


(3) that Defendant’s Counterclaim is DISMISSED AS

This the 4th day of June, 2013.




1 The court notes that Defendants requested costs and
reasonable attorney’s fees in their prayer for relief in
the counterclaim. [D.E. 13]. Because this request has
been omitted from the present motions, the court presumes
that if Defendants still wish to seek such relief, they
will file a separate post-judgment motion to this court.





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