TFS always creates conflict when rename is involved, even if it's only on server/source branch. We expanded Automerge All, so it can automatically resolve those conflicts. We exclude from this, conflicts on folders, as those are rare and user should review them.
If you can think of other ways of expanding "Automerge All", please let us know - sometimes a few hours of work invested in the tool can save days of work spent duirng big merges :)