In Hometown Folks, LLC, v. S & B Wilson, Inc., et al., — F.3d –, 2011 WL 2566825 (C.A. 6, June 30, 2011 (Tenn.)), the Sixth Circuit Court of Appeals held, under Tennessee law, that a seller of several Burger King franchises could lawfully terminate the purchase agreement because of environmental issues. However, the Sixth Circuit affirmed the jury’s finding of seller’s liability to the prospective purchaser for seller’s breach of its duty of good faith and fair dealing. The Sixth Circuit found that the duty was breached by seller’s delays in (i) granting purchaser access to properties for due diligence inspections, and (ii) delivering financial documents to the purchaser. This case serves notice that proper termination of a purchase and sale agreement may not serve as a defense to a claim for breach of the duty of good faith and fair dealing for behavior prior to contract termination.
For more information, please contact Kim Burke or any member of Taft’s Environmental Practice Group.