Supreme Court Opinion interprets contract renewal

November 20, 2012

In a unanimous opinion, the Tennessee Supreme Court ruled today that a subsequent contract between parties that shares provisions similar to a previous contract does not necessarily constitute a renewal of the earlier agreement.

At issue in BSG, LLC v. Check Velocity, Inc. is Check Velocity’s payment of fee residuals to BSG for referring clients to Check Velocity’s check re-presentment services. The parties executed two contracts that governed business they did together from early 2004 until early 2009. During that time, BSG referred Weight Watchers to Check Velocity. Check Velocity and Weight Watchers entered into an “Electronic Check Recovery Agreement” that expired June 29, 2007 although they continued to operate under the terms of that agreement until August 2008. During that time, Check Velocity continued to pay fee residuals to BSG.

In August 2008, Check Velocity and Weight Watchers entered into a “Collection Services Agreement” in which Check Velocity continued to provide electronic re-presentment services but under different terms and with added responsibilities. Check Velocity ceased payments to BSG after September 15, 2008.

BSG filed a complaint alleging Check Velocity’s failure to pay fee residuals on the Weight Watchers contract constituted a breach of their 2006 agreement.

The trial court awarded summary judgment in favor of Check Velocity, which was reversed by the Court of Appeals, holding that the 2008 agreement between Weight Watchers and Check Velocity was a renewal of the previous agreement and therefore required Check Velocity to pay BSG fee residuals under the terms of their 2006 agreement.

The Supreme Court reverses the Court of Appeals and affirms the trial court, holding today that, under the terms of the contract between BSG and Check Velocity, the second agreement between Weight Watchers and Check Velocity was not a renewal of the first agreement that would require Check Velocity to pay fee residuals to BSG.

To read the BSG, LLC v. CHECK VELOCITY, INCopinion, authored by Justice Janice M. Holder, visit ­­­­­­­­­­­­­­­­­­ TNCourts.gov.