A dispute of several years between the owners of the downtown Westin Nashville hotel and its former managers, Wischermann Partners, is not yet over.
The legal battle began in 2017, when Westin developer Nashville Hospitality Capital fired Wischermann Partners, alleging the Minnesota-based hotel company was working inappropriately at a nearby hotel, The Joseph Nashville, in violation of non-competition and confidentiality clauses. The two sides continued, with Wischermann arguing that he was within his rights work on other projects and that he had cured all faults by halting work on The Joseph, seeking a termination fee of $1.66 million.
Campbell sided with Wischermann, but the appeals court panel disagreed with much of his decision.
The appeals panel wrote that, despite the trial court’s decision, the hotel owner had a potential claim that Wischermann owed a fiduciary duty to the owners, including with respect to prior charges of more than $2 million paid to the company. The appeals court ordered the trial court to consider whether Wischermann owed a fiduciary duty to NHC, whether he breached that duty, and whether forfeiture of fees was the appropriate remedy.
The Court of Appeal also challenged the lower court’s decision that the non-competition and confidentiality clauses in the contract could not be considered material because they were not specifically stated as such.
“The District Court appears to have relied on the erroneous assumption that a contractual provision is material only if the parties formally characterize it as material,” the panel wrote.
Additionally, the appeals court disagreed with the trial court’s ruling that Wischermann successfully cured its breaches of the confidentiality and non-competition clauses by halting work on The Joseph.
“The right to remedy sometimes requires a breaching party to refrain from future breaching activity and reverse or lessen the consequences of its prior breach or breaches of performance,” the panel wrote. “In this case, avoiding future wrongdoing was not sufficient, on its own, to remedy Wischermann’s alleged violation of the confidentiality and non-competition provisions.”
The appeals court ordered the trial court to reconsider the case in light of the new ruling.
Lawyers and representatives for both parties did not respond to requests for comment. Nashville Hospitality Capital is represented by attorneys from Bass, Berry & Sims, while Wischermann enlisted Hall Booth Smith and Dickinson Wright.