Commercial Painting Company INC. v. The Weitz Company LLC

03/11/2022

IN THE COURT OF APPEALS OF TENNESSEE

AT JACKSON

February 16, 2021 Session

COMMERCIAL PAINTING COMPANY INC. v. THE WEITZ COMPANY

LLC ET AL.

Appeal from the Chancery Court for Shelby County

No. CH-06-1573 JoeDae L. Jenkins, Chancellor

___________________________________

No. W2019-02089-COA-R3-CV

___________________________________

This is the third appeal arising from a commercial construction project. Most recently, the

case went to trial before a jury, which awarded the plaintiff subcontractor $1,729,122.46

in compensatory damages under four separate theories and $3,900,000.00 in punitive

damages. The trial court further awarded the plaintiff pre- and post-judgment interest and

attorney’s fees and costs. We conclude the economic loss rule is applicable to construction

contracts negotiated between sophisticated commercial entities and that fraud is not an

exception under the particular circumstances of this case. Because punitive damages and

interest are not authorized under the parties’ agreement, those damages are reversed. The

compensatory damages of $1,729,122.46 awarded for breach of contract are affirmed. The

award of attorney’s fees incurred at trial are vacated for a determination of the attorney’s

fees incurred in obtaining the compensatory damages award. No attorney’s fees are

awarded on appeal. We therefore reverse in part, affirm in part, and vacate in part.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed

in Part; Affirmed in Part; Vacated in Part and Remanded

J. STEVEN STAFFORD, P. J., W.S., delivered the opinion of the court, in which D. MICHAEL

SWINEY, C.J. and CARMA DENNIS MCGEE, J., joined.

Philip E. Beck, Atlanta, Georgia; Jeffrey C. Smith, Memphis, Tennessee; John A. Templer,

Jr., Des Moines, Iowa, for the appellants, Federal Insurance Company (NJ), St. Paul Fire

& Marine Insurance Company, and The Weitz Company, LLC.

Scott A. Frick, Memphis, Tennessee, for the appellees, Commercial Painting Company,

Inc., and Liberty Mutual Insurance Company (MA).

Gregory L. Cashion, Nashville, Tennessee, for the Amicus Curae, Associated General

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Contractors of America and Associated General Contractors of Tennessee, Inc. In support

of Defendants/Appellants

OPINION

I. BACKGROUND

This is the third appeal in this case. See Com. Painting Co., Inc. v. The Weitz Co.,

LLC, No. W2013-01989-COA-R3-CV, 2016 WL 3519015, at *1 (Tenn. Ct. App. June 20,

2016) (“Commercial Painting II”); Com. Painting Co. v. Weitz Co., LLC, No. W2013-

01989-COA-R3-CV, 2014 WL 6453799, at *1 (Tenn. Ct. App. Nov. 18, 2014)

(“Commercial Painting I”). The genesis of this lawsuit is a contract dispute between

general contractor, Defendant/Appellant The Weitz Company, Inc. (“Weitz”), and its dry-

wall subcontractor, Plaintiff/Appellee Commercial Painting Company, Inc. (“Commercial

Painting”). Around the end of 2003, Weitz entered into a contract (“the Prime Contract”)

with the owner of the project to construct a continuing care retirement community (“the

Project”). In connection with the Prime Contract, Weitz and its sureties (together with

Weitz, “Appellants”), issued a payment bond that obligated them to pay for labor,

materials, and equipment furnished for use in the performance of the Prime Contract. The

payment bond, however, became void if Weitz made prompt payment for all sums due.

The payment bond was properly registered.

In October 2003, Commercial Painting bid on the drywall portion of the project.

Weitz decided to award the drywall work to Commercial Painting after receiving this bid.

Eventually, Mark Koch, on behalf of Commercial Painting as its President, executed a

subcontract with Weitz (“the Subcontract”) on November 1, 2004, with an effective date

of September 28, 2004. At that time, Mr. Koch reviewed the terms of the Subcontract,

made some changes to it, and initialed every page of the 93-page document.

The Subcontract establishes a “Subcontract Sum” of $3,222,400.00 as the agreed-

upon price that Commercial Painting was entitled to in exchange for full performance on

the Subcontract. The Subcontract referenced various drawings and specifications from the

Prime Contract to which Commercial Painting’s work was required to adhere. In some

areas, Commercial Painting was required to perform a Level 3 drywall finish, while in

other areas a Level 5 drywall finish was required. Whether Commercial Painting actually

performed at this level would become an issue of much dispute as the project progressed.

The Subcontract also required that Commercial Painting’s work be performed

according to Weitz’s project schedule and authorized Weitz to add extra work to

Commercial Painting’s scope of work. In order to do so, however, the Subcontract

indicated that the work would be “authorized in writing in advance” by Weitz. The

Subcontract also addressed the payment process and authorized Weitz to deduct from its

payments to Commercial Painting any amount necessary to protect Weitz or the owner

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from losses related to Commercial Painting’s untimely, defective, or non-conforming

work. The Subcontract further provided that the Project schedule could be updated

periodically to reflect actual job progress. But the Subcontract obligated Commercial

Painting to provide sufficient crews, materials, and equipment to maintain or improve

Weitz’s schedule and gave Weitz the authority to reschedule or re-sequence Commercial

Painting’s work. Finally, the Subcontract contained the following provisions related to

damages:

5.6 Adjustments to Subcontract Time

[Commercial Painting] shall be entitled to an extension of the Subcontract

Time and/or reimbursement for delay damages only to the extent that the

[Weitz] actually receives an extension of time and/or reimbursement for

delay damages under the Prime Contract for events pertaining to the

[Commercial Painting’s] Work. Except to the extent of the foregoing

passthrough rights, [Commercial Painting] hereby waives and releases

[Weitz] from any and all Claims for such delay damages including without

limitation Claims attributable to breach of contract or tort and whether caused

by [Weitz], Owner or other persons for any reason or cause whatsoever, and

regardless of whether any such delay or other conduct on the part of [Weitz],

Owner or other person may be deemed unreasonable or was not contemplated

by the parties.

* * *

11.6 Contract Terms Control

In no event shall [Weitz] be obligated to pay [Commercial Painting] any

anticipatory profit or indirect, special, or consequential damages, however

caused, and [Commercial Painting] hereby waives all such Claims. Without

limiting the generality of the foregoing, [Commercial Painting] specifically

agrees that it shall not be entitled to assert, and it hereby waives, any Claims

in quantum meruit, interest on late payments, or any other measure of

damages other than as specifically provided in items 11.4 and 11.5 above.

Item 11.4 governed termination of the relationship by Weitz for cause; this section

generally entitled Commercial Painting to the unpaid balance on the Subcontract Sum

minus Weitz’s expenses in completing the project.1 If these expenses exceeded the unpaid

1

Specifically, item 11.4 provides as follows:

11.4 Consequences of Termination for Cause

Upon termination of [Commercial Painting’s] continuing performance under the

Agreement for cause, [Weitz] may without limitation of any other available remedies,

proceed as follows: (i) direct [Commercial Painting] to immediately leave the site, but to

give possession of all materials and supplies at the site and stored off-site, to [Weitz] for

use in completing [Commercial Painting’s] work; in the event of such a directive to leave

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balance, then Commercial Painting’s surety was obligated to pay the difference. Item 11.5

provided that if the agreement was terminated by Weitz without cause, then Commercial

Painting was entitled to pro-rata payment of the Subcontract Sum for work timely and

properly performed and for proven loss with respect to materials, equipment, machinery,

and tools, to the extent that Weitz is able to recover these sums from the owner.2

According to our prior Opinion,

Allegedly, at the time the parties entered into the subcontract, Weitz

was already approximately six to eight months behind schedule on the

project. Commercial Painting would later assert that Weitz improperly and

unreasonably compressed construction schedules in order to make up for the

delay on the project. According to Weitz, however, the project became

further behind once Commercial Painting began working on the project in

the winter of 2004 due to Commercial Painting’s allegedly poor

the site, [Commercial Painting] agrees to do so immediately, even if it disputes the grounds

for the directive; [Weitz] shall also provide or cause to be provided such other materials,

supplies, tools, equipment, machinery, labor, services and other items as may be necessary

to complete [Commercial Painting’s] Work; or (ii) by registered or certified mail addressed

to [Commercial Painting’s] surety, if any, require the surety to provide such materials,

supplies, tools, equipment, machinery, labor, services and other items as may be necessary

to complete [Commercial Painting’s] work in strict compliance with the Subcontract

Documents. [Weitz] shall apply any unpaid balance of the Subcontract Sum to pay for such

completion costs; provided, that [Weitz] may first require [Commercial Painting] or its

surety, if any, to fund any anticipated excess completion costs. In all such events, if the

unpaid balance of the Subcontract Sum exceeds the costs of completing [Commercial

Painting’s] Work together with interest on such costs and together with any offsets and

deductions available to [Weitz], such excess shall be paid to [Commercial Painting].

However, if such costs, interest, deductions, and offsets exceed such unpaid balance,

[Commercial Painting] or [Commercial Painting’s] surety shall pay the difference to

[Weitz] upon demand.

2

Item 11.5 provides as follows:

11.5 Convenience

[Weitz] may terminate the Agreement at any time for the convenience of [Weitz] (i.e,

without cause), upon written notice thereof to [Commercial Painting]. In such event,

[Commercial Painting] shall be entitled to pro-rata payment of the Subcontract Sum for

[Commercial Painting’s] work properly and timely performed and for proven loss with

respect to unused materials, equipment, machinery, and tools, to the extent recoverable by

[Weitz] from the Owner. If [Weitz] is found to have improperly terminated [Commercial

Painting’s] continuing performance under items 11.1, 11.2, or 11.3, it shall be deemed to

have elected to terminate the Agreement for convenience under this item 11.5.

Item 11.1 deals with a default in performance by Commercial Painting; item 11.2 deals with the bankruptcy

or dissolution of Commercial Painting; item 11.3 deals with issues of labor relations and work stoppages.

4

worksmanship and failure to provide enough workers to timely complete the

project. Because of this, Weitz allegedly began negotiating with the project

owner regarding an extension on the contract completion date. It appears that

the project owner eventually allowed a six-month extension, but Commercial

Painting was only informed that an extension of approximately four months

had been granted. According to Commercial Painting, Weitz intentionally

and fraudulently failed to disclose the full extent of the extension, in violation

of the letter and spirit of the contract. Even with the extension, however,

Commercial Painting alleged that Weitz continued to compress its schedules

and improperly supplement its work because the extension did not entirely

mitigate the eight-month delay on the project.

As previously discussed, the parties also disagreed as to the level of

work required by the contract, and both parties asserted that they incurred

additional delays and additional costs to bring the work to the desired level.

Eventually, Weitz hired additional workers to supplement the work done by

Commercial Painting, alleging that it was required due to Commercial

Painting’s delays. Commercial Painting objected to the supplementation and

later alleged that they were required to perform even more work to correct

the work of the supplemental workers. At the conclusion of the contract,

Weitz paid Commercial Painting on Pay Applications 1 through 12.

However, Weitz refused to pay Commercial Painting on Pay Applications 13

through 17, which allegedly included previously agreed-upon work, as well

as additional work beyond the contract amount.

Commercial Painting filed a complaint for damages on August 11,

2006, seeking an award of $1,929,428.74, constituting damages for unpaid

progress payments, interest on retainage, extra work, unjust enrichment, plus

attorney’s fees and interest. In addition to its claims against Weitz,

Commercial Painting also sought a judgment against Weitz’s sureties

[Federal Insurance Company and St. Paul Fire & Marine Insurance Company

“Weitz’s sureties,” and together with Weitz, “Appellants”].[3] [Appellants]

filed an Answer and Counterclaim on January 24, 2007, seeking $500,000

for costs incurred on the project due to delays caused by Commercial

Painting. [Appellants] claimed an additional $233,217.51, representing

damages under the liquidated damages provisions of the parties’ contract, as

well as increased management expenses resulting from the need for

additional supervision of the supplemental workers retained by Weitz to

complete the project.

Commercial Painting I, 2014 WL 6453799, at *1–2 (footnote omitted).

3

Other parties were named as defendants in the original complaint. They are not at issue in this appeal.

5

The trial court granted partial summary judgment to Appellants on Commercial

Painting’s tort, rescission, and punitive damages claims. A bench trial commenced in

January 2012. Eventually, the trial court awarded Commercial Painting a judgment of

$450,464.26, but later reduced the judgment to $448,874.26. The trial court further

awarded Commercial Painting $75,000.00 in attorney’s fees, and $50,000.00 in expert’s

fees, thus increasing the total amount of the judgment to $573,874.26. Id. at *3.

The Court of Appeals vacated the trial court’s judgment and remanded for

reconsideration in light of Smith v. UHS of Lakeside, Inc., 439 S.W.3d 303 (Tenn. 2014).

See id. at * 6. The Tennessee Supreme Court subsequently granted Appellants’ application

for permission to appeal and remanded the case to the Court of Appeals for reconsideration

under the new summary judgment standard announced in Rye v. Women’s Care Center of

Memphis, MPLLC, 477 S.W.3d 235 (Tenn. 2015). See Commercial Painting II, 2016 WL

3519015, at *2. In Commercial Painting II, we reversed the trial court’s decision to grant

partial summary judgment to Weitz on the claims for both negligent and intentional

misrepresentation. As a result, the judgment entered following the bench trial was vacated

and the case was remanded back to the trial court for further proceedings. Id. at *12.

Commercial Painting thereafter obtained leave of court to file a Second Amended

Complaint, which was filed on June 16, 2017. Appellants filed an answer and counterclaim

on July 17, 2017, which answer raised several new defenses. Commercial Painting

responded with an answer to the counterclaim and a jury demand on July 20, 2017. On

August 2, 2017, Appellants filed a motion to strike the jury demand. Eventually, the trial

court denied Appellants’ motion to strike by order of October 19, 2017.

A jury trial began on September 17, 2018, on claims of negligent and intentional

misrepresentation, breach of contract, unjust enrichment, as well as a request for damages

pursuant to the payment bond. Commercial Painting presented proof that Weitz misled

them from the very beginning of the relationship with regard to the bids made by other

subcontractors, how far behind the Project was, and the fact that Weitz had received an

extension on the time contracted for completion of the Project. In addition, before the

Subcontract was signed, a representative from Weitz urged Commercial Painting to

expedite delivery of Commercial Painting’s payment and performance bonds. According

to Commercial Painting, the execution of these bonds meant that Commercial Painting was

required to complete work on the Project no matter what Weitz demanded.

According to Commercial Painting, the delays on the Project only got worse as time

went on. In order to recover from the delays, by at least November 2004, Commercial

Painting claimed that Weitz decided to compress the schedule on the work to be completed,

which involved allegedly improper supplementation of Commercial Painting’s work and

the work of other contractors. Mr. Koch testified that he would not have signed the

Subcontract had he known that Weitz was contemplating compressing the construction

schedule to make up for delays in the Project that were not attributable to Commercial

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Painting. Moreover, the compression of the schedule led Commercial Painting to perform

extra work that was not contemplated under the Subcontract. According to the proof

submitted by Commercial Painting, however, Weitz refused to execute change orders

reflecting the extra work performed and thereafter refused to pay for such work.

As for the schedule attached to the Subcontract, Mr. Koch admitted that he was

aware when he signed the Subcontract in November 2004 that the attached schedule was

“ten months out-of-date[.]” Mr. Koch also admitted that he knew before the Subcontract

was signed that Weitz wanted to complete the Project early. But Mr. Koch testified that he

relied not necessarily on the final completion date for the Project, but the durations allowed

to complete certain tasks. When Weitz compressed the schedule, he asserted, it altered the

durations under the contract to Commercial Painting’s detriment.

At trial, Mr. Koch presented an exhibit that he asserted calculated the amounts due

under the Subcontract, which included the revised Subcontract Amount, fully executed

change orders, and change order requests for extra work. The calculation then subtracted

amounts related to work that was not performed by Commercial Painting due to

supplementation. Thus, Commercial Painting claimed that it suffered $1,835,075.56 in

actual damages as a result of Weitz’s conduct. Weitz disputed much of the damages,

including all extra work that was not authorized by signed change orders, as it argued was

required under the Subcontract.

On October 5, 2018, the trial court entered an order denying Appellants’ motion for

directed verdict as to Commercial Painting’s claims. The trial concluded on October 18,

2018, when the jury found in favor of Commercial Painting, awarding $1,729,122.46 in

compensatory damages in addition to prejudgment interest. Specifically, the jury found in

favor of Commercial Painting on four of the theories alleged: breach of contract;4 unjust

enrichment/quantum meruit; intentional misrepresentation;5 and under the payment bond.6

The jury further concluded that Weitz was liable for punitive damages. After a second

hearing, the jury awarded Commercial Painting $3,900,000.00 in punitive damages.

Several post-trial orders were entered throughout the end of 2018. First, on October

11, 2018, the trial court entered an order granting the parties’ motions to amend the

pleadings to conform to the evidence. On the same day, the parties filed a stipulation

regarding a $456,170.00 extrajudicial payment that would be credited against the

4

No claim for rescission was submitted to the jury.

5

The verdict form gave the jury the choice of either intentional misrepresentation or negligent

misrepresentation. The jury chose the former. As such, the claim of negligent misrepresentation is not at

issue in this appeal.

6

Specifically, the verdict form asked the jury, once it found a material breach of the Subcontract, to “enter

the amount of damages [the sureties] are liable for under the terms of the surety bond they issued at the

request of [Weitz] for the [] Project.” The jury answered with the full amount of damages awarded against

Weitz.

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compensatory damages, which reduced the amount owed on the compensatory damages to

$1,272.952.46. The next day, the trial court entered an order approving the jury verdict. On

October 15, 2018, the trial court entered an order denying Appellants’ motion for a directed

verdict that was lodged after the close of all proof.

On October 29, 2018, Commercial Painting filed a motion to determine pre-

judgment and post-judgment interest, which was later supported by the affidavits of

counsel and Commercial Painting’s accountant. Commercial Painting amended this motion

on November 16, 2018. On November 19, 2018, Commercial Painting filed a motion for

an award of attorney’s fees and costs, as well as for the entry of a final judgment; this

motion was also later supplemented with affidavits.

On December 12, 2018, the trial court entered an order captioned as follows:

Order Adopting Findings Of Facts And Conclusions Of Law Supporting

Punitive Damages Award, Granting Motion To Determine Amount Of

Prejudgment Interest To Be Added To Final Judgment And Determination

Of Post-Judgment Interest Rate, Granting Motion For Award Of Attorney’s

Fees, Expenses And Costs And For Entry Of Final Judgment And Order Of

Final Judgment.

This order approved the punitive damages awarded by the jury in their entirety. In addition,

the trial court award Commercial Painting a $2,083,362.16 judgment for pre-judgment

interest, as well as costs and attorney’s fees in the amount of $1,103,549.00. In addition,

the trial court ruled that Commercial Painting was entitled to post-judgment interest. Thus,

the trial court awarded Commercial Painting a total judgment of $8,359,863.83, plus post-

judgment interest.7

On January 11, 2019, Commercial Painting filed a motion to alter or amend the

judgment to include revocation of Weitz’s contractor’s license. On the same day,

Appellants filed three motions: (1) to alter or amend the order approving the second

application of the Special Master for compensation and expenses; (2) a motion for

judgment notwithstanding the verdict; and (3) a motion for new trial. Both parties

responded to each other’s post-trial motions. A hearing on the post-trial motions occurred

on February 13, 2019.

On October 31, 2019, the trial court entered separate orders denying Commercial

Painting’s motion to alter or amend, as well as Appellants’ motion to alter or amend,

motion for new trial, and motion for judgment notwithstanding the verdict. On November

20, 2019, the trial court entered an order setting an appeal bond. On November 26, 2019,

Appellants filed their notice of appeal with this Court.

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Weitz was liable for the entire judgment; the sureties were not held liable for the punitive damages or the

attorney’s fees and costs, but were jointly and severally liable for the remainder of the award.

8

II. ISSUES PRESENTED

Appellants raise the following issues for review, which are taken, with slight

restatements, from their brief:

1. Whether the trial court’s decision must be reversed because it is internally

inconsistent and it is irreconcilable with Tennessee law.

2. Whether the trial court erred in awarding non-contractual damages,

including punitive damages, against Weitz in this breach of contract case.

a. Whether the award of non-contractual and punitive damages in

this case is barred by the Economic Loss Doctrine.

b. Whether the award of non-economic and punitive damages in this

case is barred by the Independent Duty Doctrine.

c. Whether the award of punitive damages in this case is

inappropriate given that Tennessee law prohibits an award of

punitive damages in a breach of contract case except in very

unusual and narrow circumstances, which are not present here.

d. Whether the award of non-economic and punitive damages in this

case is inappropriate given that they are expressly barred by the

undisputed terms of the fully integrated written subcontract, which

governed and which established the parties’ relationships, rights,

and responsibilities, and included a waiver of non-contractual and

punitive damages.

3. Whether the trial court erred in deferring to the jury without properly

fulfilling the trial court’s role.

a. Whether the trial court erred by failing to follow this Court’s

directions in remanding the case on June 20, 2016.

4. Whether the trial court’s jury instructions and verdict form were defective

and confused the jury, resulting in an inconsistent and flawed jury verdict;

and whether the trial court erred in blindly entering a judgment based

upon that inconsistent and flawed jury verdict, given that:

a. The defective jury instructions and verdict form led the jury to

believe that it could and should award some damages under

multiple, inconsistent, and conflicting legal theories against

different defendants.

b. The trial court failed to fulfill its responsibility to evaluate the

jury’s verdict, in violation of Tennessee law.

c. The trial court simply adopted the jury’s verdict and adopted

Plaintiff’s proposed Findings of Fact, Conclusions of Law, Order,

and Judgement virtually verbatim (changing only one word in a

43-page Order), without a hearing; without any critical, objective

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determination of whether Tennessee law supports them; and in

violation of the Lakeside rule and Tennessee law.

5. Whether the trial court erred in awarding prejudgment interest, post-

judgment interest, attorney’s fees, and costs contrary to the terms of the

Subcontract and Tennessee law.

6. Whether the trial court’s award of $3.9 million in punitive damages in

this case was reversible error even if the Court were to conclude that

punitive damages can be awarded in a case of this type under Tennessee

law.

In the posture of appellee, Commercial Painting seeks an award of attorney’s fees incurred

on appeal.

III. ANALYSIS

A.

We begin with Appellants’ argument that the verdict is internally inconsistent and

irreconcilable with Tennessee law.8 As we perceive it, Appellants’ argument is two-fold.

First, they focus on the jury’s finding that Commercial Painting had proven both a breach

of contract claim and a claim for quantum meruit, which Appellants argue is a legal

impossibility. Second, they take issue with the jury’s decision to award the exact same

amount of damages under four different theories.

To start, Appellants first argue that the jury’s verdict violates the election of

remedies doctrine. “The election of remedies doctrine . . . is a recognized part of

Tennessee’s jurisprudence. The doctrine prohibits and estops a plaintiff from seeking

inconsistent remedies once a clear choice has been made to pursue a specific

remedy.” Wimley v. Rudolph, 931 S.W.2d 513, 515 (Tenn. 1996) (citing Barger v.

Webb, 216 Tenn. 275, 391 S.W.2d 664 (1965)). Respectfully, we disagree that any error

as to this doctrine is present in this case.

8

Appellants essentially raise this argument, with slight differences, twice in their appellate brief.

Specifically, in addressing the jury instructions provided to the jury in their initial brief, Appellants point

to only two examples as evidence that the jury was confused: (1) that the jury awarded damages under

inconsistent theories; and (2) that the jury awarded the same amount of damages under multiple theories.

We therefore will not tax the length of this Opinion with a second analysis of these concerns. In their reply

brief, Appellants raise an additional argument concerning the lack of jury instruction delineating Weitz’s

duty to disclose. Reply briefs, however, are not vehicles for raising new arguments. See Clayton v. Herron,

No. M2014-01497-COA-R3-CV, 2015 WL 757240, at *3 (Tenn. Ct. App. Feb. 20, 2015) (“ It would be

fundamentally unfair to permit an appellant to advance new arguments in the reply brief, as the appellee

may not respond to a reply brief.”).

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As an initial matter, we note that Rule 8.05 of the Tennessee Rules of Civil

Procedure permits alternative pleading:

A party may set forth two or more statements of a claim or defense

alternatively or hypothetically. When two or more statements are made in the

alternative and one of them if made independently would be sufficient, the

pleading is not made insufficient by the insufficiency of one or more of the

alternative statements. A party may also state as many separate claims or

defenses as he or she has, regardless of consistency.

Tenn. R. Civ. P. 8.05(b). Moreover, this Court has expressly held that the sole purpose of

the election of remedies doctrine is to prevent double compensation for the same wrong:

As an initial matter, although Tennessee recognizes

the election of remedies doctrine, its “sole purpose is to ‘prevent double

redress for a single wrong.’” Rolen v. Wood Presbyterian Home, Inc., 174

S.W.3d 158, 162 (Tenn. Ct. App. 2005) (quoting Concrete Spaces, Inc. v.

Sender, 2 S.W.3d 901 (Tenn. 1999)). As such, this Court has recognized on

multiple occasions that alternative theories may be maintained as late as

presentation to the jury or even following verdict. See Concrete Spaces, 2

S.W.3d at 906 (stating that election of remedies comes into play when

the jury finds two types of damages may be awarded); Cascade Ohio, Inc. v.

Modern Mach. Corp., No. E2009-01948-COA-R3-CV, 2010 WL 4629467,

at *13 (Tenn. Ct. App. Nov. 15, 2010) (“A buyer that is damaged by a breach

of contract involving a misrepresentation can elect, as late as after

the verdict comes in, between rescission of the contract and recovery of the

purchase price, or damages.”); Goodman v. Jones, No. E2006-02678-COA-

R3-CV, 2009 WL 103504 at *9–10 (Tenn. Ct. App. Jan. 12, 2009) (“If an

election must be made in order to avoid a ‘double recovery,’ it should be

made after the jury has rendered its verdict with its answers to specific

questions.”).

Dallas v. Shelby Cty. Bd. of Educ., 603 S.W.3d 32, 46–47 (Tenn. Ct. App. 2019), perm.

app. denied (Tenn. Apr. 1, 2020). Thus, alternative theories may be maintained “even

following verdict.” Id. at 47 (citing Concrete Spaces, 2 S.W.3d at 906). Indeed, this

holding is entirely consistent with our statements in Commercial Painting II, which

explained that

Commercial Painting is entitled to just one recovery to the extent damages

from more than one cause of action overlap, but it should not be precluded

from proceeding on multiple theories of liability if it is able to make out a

prima facie case under more than one cause of action.

11

Commercial Painting II, 2016 WL 3519015, at *12. Appellants have not designated as an

issue that Commercial Painting received a double recovery in this case or that it failed to

make out a prima facie case as to either the breach of contract or quantum meruit theories.

As such, there is no reversible error in the jury’s verdict in this regard.

Appellants next contend that the jury’s verdict is inconsistent and irreconcilable

with Tennessee law because it awarded the same amount under four different theories of

recovery, all of which have a different measure of damages. According to Appellants,

Commercial Painting only presented proof of damages under a single theory—breach of

contract. As a result, they argue that all damages resulting from the other theories must be

reversed as inconsistent.9

In considering this issue and many of the issues that follow, we keep the following

principles in mind:

Of course, in testing the validity of a plaintiff’s jury award we must view the

evidence in the light most favorable to plaintiff. This court has no right to

weigh the evidence in a jury case, but must indulge every reasonable

inference in favor of the plaintiff when there is material evidence in support

of the verdict. Houser v. Persinger, 57 Tenn.App. 401, 405, 419 S.W.2d 179,

181 ([Tenn. Ct. App.] 1967). We must look at all the evidence, take the

strongest legitimate view of it in favor of the plaintiff and allow all

reasonable inferences in plaintiff’s favor. Norman v. Liberty Life Assurance

Co., 556 S.W.2d 772, 773 (Tenn. [ct.] App. 1977); Truan v. Smith, 578

S.W.2d 73, 74 (Tenn. 1979). Our duty upon review of conflicting evidence

in a jury trial is not to determine where the truth lies, but only to determine

if there was any material evidence to support the verdict below. Davis v.

Wilson, 522 S.W.2d 872, 875 (Tenn. [Ct.] App. 1974); Chattanooga Gas

Co. v. Underwood, 38 Tenn.App. 142, 149, 270 S.W.2d 652, 655 (1954).

Even if we would have reached conclusions different from those reached by

the jury, if there is some material evidence to support the verdict, it must be

affirmed. Davis v. Wilson, supra; Chattanooga Gas Co. v. Underwood,

supra at 149–150, 270 S.W.2d at 655–656.

Mason v. Tennessee Farmers Mutual Insurance Co., 640 S.W.2d 561, 564 (Tenn. Ct.

App. 1982).

9

We note that Appellants frame this issue as related to an inconsistent jury verdict. They did not designate

an issue that the jury’s verdict as to any particular theory was unsupported by material evidence. To the

extent that Appellants allude to this issue in the body of their brief, such arguments are waived, as discussed

infra. See Childress v. Union Realty Co., 97 S.W.3d 573, 578 (Tenn. Ct. App. 2002) (“We consider an

issue waived where it is argued in the brief but not designated as an issue.”).

12

Commercial Painting asserts, however, that any argument concerning the same

damages amount for each theory was waived at trial by Appellants. Specifically,

Commercial Painting points, inter alia, to a colloquy that occurred after the jury asked the

precise question that is at issue here: “[C]an all the blanks be the same amount?” Counsel

for Appellants insisted that “[i]t could be zeros across the board.” When the trial court then

asked if everyone agreed that the answer to the above question was yes, counsel for

Appellants agreed.

In general, parties are not entitled to relief if they are responsible for the error or

failed to take corrective action that was available to prevent or nullify the error. See Tenn.

R. App. P. 36(a) (“Nothing in this rule shall be construed as requiring relief be granted to

a party responsible for an error or who failed to take whatever action was reasonably

available to prevent or nullify the harmful effect of an error.”). Here, Appellants readily

agreed that the jury could choose the same figure for each theory of relief in the hope that

the figure the jury chose would be zero. Alas, the jury did not choose to award nothing to

Commercial Painting. But in Appellants’ efforts to secure its most favorable outcome, they

waived any objection to the jury’s decision to award the same figure to Commercial

Painting for all its theories. As a result of Appellants’ own acquiescence, there is no

reversible error.10

B.

We next consider whether the trial court erred in allowing Commercial Painting to

amend its complaint to include a jury demand. Although the right to a jury trial is

guaranteed by the Tennessee Constitution, see Tenn. Const. art. I, § 6, “the right is not self-

enforcing.” Nagarajan v. Terry, 151 S.W.3d 166, 174 (Tenn. Ct. App. 2003). Instead, a

party must request a jury trial pursuant to Rule 38.02 of the Tennessee Rules of Civil

Procedure:

Any party may demand a trial by jury of any issue triable of right by jury by

demanding the same in any pleading specified in Rule 7.01 or by endorsing

the demand upon such pleading when it is filed, or by written demand filed

with the clerk, with notice to all parties, within 15 days after the service of

the last pleading raising an issue of fact.

Tenn. R. Civ. P. 38.02. “The failure of a party to make demand as required by this rule

constitutes a waiver by the party of trial by jury.” Tenn. R. Civ. P. 38.05. As a result,

Issues not demanded for trial by jury as provided in Rule 38 shall be tried by

the court; but, notwithstanding the failure of a party to demand a jury as to

10

We will revisit the proof presented of damages, however, later in this Opinion with regard to issues that

were properly preserved on appeal.

13

any issue with respect to which demand might have been made of right, the

court in its discretion upon motion may order a trial by jury of any or all

issues.

Tenn. R. Civ. P. 39.02; see also Nagarajan, 151 S.W.3d at 175 (“Trial courts may, in their

discretion, order a trial by jury notwithstanding a party’s failure to demand a jury in the

interest of justice.”).

Courts interpreting these rules have held that “[i]t is now well settled that where the

amendment creates new jury issues, a party upon timely demand therefor is entitled to a

jury trial, if the amended pleading sets forth new factual issues and not merely a different

legal theory.” BVT Lebanon Shopping Ctr., Ltd. v. Wal-Mart Stores, Inc., 48 S.W.3d 132,

135 (Tenn. 2001) (quoting Trimble v. Sonitrol of Memphis, Inc., 723 S.W.2d 633, 640

(Tenn. Ct. App. 1986)). An amended claim does not raise new factual issues if it merely

contains “‘a more detailed statement of the same charge’ as in the original complaint.”

Trimble, 723 S.W.2d at 640 (quoting Trixler Brokerage Co. v. Ralston Purina Co., 505

F.2d 1045 (9th Cir. 1974)).

There is no dispute that Commercial Painting did not demand a jury trial in its first

complaint, first amended complaint, or second amended complaint. Indeed, this case

originally was tried by bench trial. Following the remand in Commercial Painting II,

however, Appellants filed an amended answer and counterclaim. Therein, Appellants

raised a number of new defenses. Appellants assert, however, that these new defenses

raised only new issues of law, not of fact. Respectfully, we disagree. Some of Appellants’

new defenses raise factual, rather than legal, issues that triggered Commercial Painting’s

right to request a jury. Take for example, Appellants’ “Fourteenth Defense.” In the 2010

amended answer, this defense merely stated that Appellants reserved the right to amend

their answer to assert new defenses. The 2017 amended answer, however, asserted the

following: “Statements in construction schedules regarding future planned activities and

completion dates do not constitute statements of material fact and cannot form the basis for

either Commercial Painting’s intentional misrepresentation or its negligent

misrepresentation claim.”

Appellants offer no legal authority for their assertion that the issue of whether a

statement constituted a material fact is a question of law to be resolved by the court. Instead,

our research has revealed support for the opposite conclusion. See Ladd by Ladd v. Honda

Motor Co., 939 S.W.2d 83, 101 (Tenn. Ct. App. 1996) (citing Stamp v. Honest Abe Log

Homes, Inc., 804 S.W.2d 455, 458 (Tenn. Ct. App. 1990); Mackie v. Fuqua, 14 Tenn.

App. 176, 185 (Tenn. 1931)) (“A misrepresentation claim should be submitted to the jury

when the representation at issue may reasonably be interpreted either as an expression

of opinion or as a statement of fact.”). As such, we must conclude that the 2017 amended

answer, the last pleading before Commercial Painting demanded a jury trial, did raise new

factual issues that triggered Commercial Painting’s right to seek a new jury trial. See BVT

14

Lebanon, 48 S.W.3d at 135. As such, we cannot conclude that the trial court abused its

discretion in allowing Commercial Painting to demand a jury trial at such a late date.11

Even if the 2017 amended answer raised new factual issues, Appellants contend that

the trial court erred in allowing the jury trial because to do so was beyond the scope of the

remand. In support, Appellants cite two cases from 1993 in which we declined to conclude

that the trial court had abused its discretion in denying a party’s request for a jury trial

following a remand. Respectfully, we conclude that both cases are distinguishable.

First, in Zaharias v. Vassis, No. 01-A-01-9207-CH00266, 1993 WL 11709, at *2

(Tenn. Ct. App. Jan. 22, 1993) (“Zaharias II”), the case was remanded “for the

presentation of proof excluded by the Chancellor and the consideration by him of such

proof to determine the derivative rights of the plaintiff, if any, and any other proof or

proceedings that may be required and enter such decree as justice requires.” Zaharias v.

Vassis, 789 S.W.2d 906, 911 (Tenn. Ct. App. 1989). On remand, the defendant insurance

company requested a jury trial, which was denied by the trial court. Zaharias II, 1993 WL

11709, at *1. We concluded that the denial was proper “because the second proceeding

was merely a continuation of the first at which the insurance company waived its jury

demand.” Id. at *2. Indeed, nothing in the Zaharias II Opinion indicates that any party

filed an amended pleading raising new factual issues. Thus, the requirements outlined

above were not met. The same is generally true in the other case cited by Appellants, St.

Clair v. Evans, 857 S.W.2d 49, 50 (Tenn. Ct. App. 1993). There, the case was remanded

solely to add the plaintiff’s mother as a party. Other than this change, “the amended

complaint [wa]s identical to the original complaint[.]” Id. at 50.

The same is not true in this case. As previously discussed, the parties were permitted

to file amended pleadings. Appellants’ 2017 amended answer raised new factual issues.

Moreover, the original judgment following the bench trial was vacated by this Court and

remanded for further proceedings. Specifically, we “vacate[d] the trial court’s judgment

and award of damages following the trial, and remand[ed] the case for further proceedings

consistent with this opinion.” Commercial Painting II, 2016 WL 3519015, at *12. The

term “vacate” means “[t]o nullify or cancel; make void; invalidate.” Black’s Law

Dictionary 1688 (9th ed. 2009). Thus, the judgment from the prior trial was nullified by

the decision in Commercial Painting II. The remand was therefore not simply a

continuation of the prior proceeding, but more akin to a fresh start.

Moreover, the trial court’s compliance with our mandate must be measured in light

of “the larger opinion of the appellate court.” Larry E. Parrish, P.C. v. Strong, No. M2020-

11

Appellants do not argue in their appellate brief that the right to a jury trial triggered under Rule 38.02

applies only to the new issues, rather than all the issues in the case. Instead, they argue only that there were

no new factual issues alleged and that a jury trial should not have been permitted as to any issue. As such,

this Opinion should not be read to offer any opinion on that question.

15

01145-COA-R3-CV, 2021 WL 4471113, at *4 (Tenn. Ct. App. Sept. 30, 2021). The trial

court “‘may examine the rationale of an appellate opinion in order to discern the meaning

of language in the court’s mandate.’” Id. (quoting In re Estate of McCants, No. E2019-

01159-COA-R3-CV, 2020 WL 1652572, at *4 (Tenn. Ct. App. Apr. 3, 2020)).

Commercial Painting II clearly envisioned that a new trial would take place. Specifically,

the Opinion states that Commercial Painting “should not be precluded from proceeding on

multiple theories of liability if it is able to make out a prima facie case under more than

one cause of action.” Commercial Painting II, 2016 WL 3519015, at *12. Moreover, the

panel explained that “[i]f Commercial Painting is successful on its intentional

misrepresentation claim against Weitz, it may be entitled to recover punitive damages in

addition to compensatory damages.” Clearly, this language indicates that a future trial in

which proof would be presented would likely be necessary. Under these circumstances, we

discern no abuse of discretion in the trial court’s decision to allow Commercial Painting to

demand a jury trial in the pleading following Appellants’ 2017 amended answer.

C.

The next issue presented involves the decision to allow Commercial Painting to

recover in tort, rather than solely under the contract. Commercial Painting argues that this

case does not involve only contractual claims, but a claim of intentional

misrepresentation—a tort.12 As such, Commercial Painting contends that its ability to

recover is not limited by the parties’ contract but may include all damages that flow from

the wrong, including punitive damages. In response, Appellants contend that Commercial

Painting may not recover under tort theories under two separate doctrines—the

independent duty rule and the economic loss doctrine.

We begin with the independent duty rule, as this argument is easily disposed of.

Appellants contend that this doctrine provides that “[a] tort action only arises when the act

constituting the contract breach also constitutes a breach of a common law

duty independent of the contractual relationship.’” E Sols. for Buildings, LLC v. Knestrick

Contractor, Inc., No. M2018-02028-COA-R3-CV, 2019 WL 5607473, at *9 (Tenn. Ct.

App. Oct. 30, 2019) (quoting Yinghong Mach. Int’l Ltd. v. Wholesale Equip., Co., No.

2:13-cv-02671-JTF-cgc, 2014 WL 12887673, at *4 (W.D. Tenn. Oct. 17, 2014)

(citing Green v. Moore, No. M2000-03035-COA-R3-CV, 2001 WL 1660828, at *3 (Tenn.

Ct. App. 2001))); see also 21 Tenn. Prac. Contract Law and Practice § 1:4 (citing Weese

v. Wyndham Vacation Resorts, No. 3:07-CV-433, 2009 WL 1884058 (E.D. Tenn. 2009))

12

As the Tennessee Supreme Court has explained, “‘intentional misrepresentation,’

‘fraudulent misrepresentation,’ and ‘fraud’ are different names for the same cause of action. In this Opinion,

we will refer to the cause of action as a claim for intentional misrepresentation, and, in order to avoid

confusion, we suggest that this term should be used exclusively henceforth.” Hodge v. Craig, 382 S.W.3d

325, 342–43 (Tenn. 2012) (citation and footnote omitted). Thus, fraud and intentional misrepresentation

are used interchangeably in this Opinion.

16

(“Only where the act constituting a breach of contract also constitutes a breach of a

legal duty independent of the contract does an action arise in tort and not in contract.”).

The independent duty rule is closely related to the economic loss rule to the extent that

these rules may be interdependent. See Eastwood v. Horse Harbor Found., Inc., 170

Wash. 2d 380, 393, 241 P.3d 1256, 1264 (2010) (“In sum, the economic loss rule does not

bar recovery in tort when the defendant’s alleged misconduct implicates a tort duty that

arises independently of the terms of the contract.”); cf. Milan Supply Chain Sols., Inc. v.

Navistar, Inc., 627 S.W.3d 125, 147 (Tenn. 2021) (discussing certain approaches in which

fraud is not an exception to the economic loss rule because the duty to not commit fraud is

independent from the contract itself). Still, to the extent that that the independent duty rule

provides a separate basis for Appellants’ arguments, we conclude that it is waived.

Under Rule 3 of the Tennessee Rules of Appellate Procedure,

In all cases tried by a jury, no issue presented for review shall be predicated

upon error in the admission or exclusion of evidence, jury instructions

granted or refused, misconduct of jurors, parties or counsel, or other action

committed or occurring during the trial of the case, or other ground upon

which a new trial is sought, unless the same was specifically stated in a

motion for a new trial; otherwise such issues will be treated as waived.

Tenn. R. App. P. 3(e) (emphasis added). In this case, Appellants assert that they did ask for

a jury instruction on the independent legal duty doctrine, which instruction was refused by

the trial court. The problem is that Appellants thereafter did not specifically raise this ruling

as an error in their motion for new trial.

Appellants did raise the trial court’s failure to provide a “complete and

comprehensive” instruction to the jury. The only specific failure mentioned in the motion

for new trial, however, was the trial court’s alleged failure to fully instruct the jury on “the

law of fraud and misrepresentation” as well as Weitz’s reasonable beliefs that it was

permitted to supplement Commercial Painting’s work under the contract. The motion for

new trial does not mention any error surrounding the independent duty rule. Although the

motion for new trial’s argument was more fully addressed in the memorandum of law

accompanying it, Appellants did not specifically raise the issue of the independent duty

doctrine in their memorandum. Instead, they once again confined their jury instruction

arguments to the question of fraud and Weitz’s reasonable beliefs under the contract.

Because this issue was not raised in Appellants’ motion for new trial, it is waived under

Rule 3(e).13

13

To the extent that the independent duty rule is part of the economic loss rule, however, we will consider

it, infra.

17

We therefore must turn to the much more difficult question of whether the economic

loss rule is applicable in this case, as this issue was properly raised in Appellants’ motion

for new trial. The economic loss doctrine, or economic loss rule, is a judicially-created rule

that was developed in response to concerns that “tort law

would erode or consume contract law.” Milan Supply Chain Sols., Inc. v. Navistar, Inc.,

627 S.W.3d 125, 142 (Tenn. 2021) (citing Lincoln General Ins. Co. v. Detroit Diesel

Corp., 293 S.W.3d 487, 488 (Tenn. 2009)). “It has been described as a ‘judicially-created

remedies principle that operates generally to preclude contracting parties from pursuing

tort recovery for purely economic or commercial losses associated with the contract

relationship.’” Id. (quoting Plourde Sand & Gravel v. JGI E., Inc., 154 N.H. 791, 917

A.2d 1250, 1253 (N.H. 2007)). In other words, the rule “‘prevents a party who suffers

only economic loss from recovering damages under a tort theory.” Milan Supply Chain

Sols. Inc. v. Navistar Inc., No. W2018-00084-COA-R3-CV, 2019 WL 3812483, at *3

(Tenn. Ct. App. Aug. 14, 2019), aff’d in part on other grounds, 627 S.W.3d 125 (Tenn.

2021) (hereinafter Milan Supply Chain COA) (quoting Jeffrey L. Goodman et al., A Guide

to Understanding the Economic Loss Doctrine, 67 Drake L. Rev. 1, 2 (2019)); see also

Ins. Co. of N. Am. v. Cease Elec. Inc., 2004 WI 139, ¶ 24, 276 Wis. 2d 361, 372, 688

N.W.2d 462, 467 (“In general, tort offers a broader array of damages than contract. The

economic loss doctrine precludes parties under certain circumstances from eschewing the

more limited contract remedies and seeking tort remedies.”).

The rule was first adopted by the California Supreme Court. See generally Seely v.

White Motor Co., 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145 (Cal. 1965). Over two decades

later, it was adopted by the United States Supreme Court in an admiralty case. E. River

S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865

(1986). The Court described the rule as having become the “majority land-based approach”

by that time. Id. at 868. The purpose of the rule, according to the Supreme Court, was to

prevent contract law from “drown[ing] in a sea of tort.” Id.

Tennessee courts were not quick to adopt the economic loss doctrine. In 1991, the

Tennessee Supreme Court first mentioned the doctrine, “but only fleetingly” in the context

of an exception to the rule outlined in the Restatement (Second) of Torts § 552. Milan

Supply Chain, 627 S.W.3d at 151 (citing John Martin Co. v. Morse/Diesel, Inc., 819

S.W.2d 428 (Tenn. 1991)). Then, in 1995, the Tennessee Supreme Court declined to extend

that exception to claims involving products liability. Id. (citing Ritter v. Custom

Chemicides, Inc., 912 S.W.2d 128, 132 (Tenn. 1995) (“Section 552 does not apply to

products liability cases . . . .”)). The Tennessee Supreme Court did not formally adopt the

economic loss rule until 2009 in response to a certified question from a federal court. Id.

(citing Lincoln General, 293 S.W.3d at 488). In that case, the plaintiff urged the Court to

adopt an exception to the economic loss rule “when the defect renders the product

unreasonably dangerous and causes the damage by means of a sudden, calamitous event[.]”

Lincoln General, 293 S.W.3d at 488. The Tennessee Supreme Court declined to adopt

18

such an exception, but did formally adopt the economic loss rule as it applied to defective

products. Id. at 491–92.

Specifically, the court adopted the majority approach, which provides a bright-line

rule precluding recovery of purely economic losses when a product damages itself without

causing personal injury or damage to other property. Id. at 489. In choosing this version of

the economic loss rule, our high court agreed with the East River court

that the owner of a defective product that creates a risk of injury and was

damaged during a fire, a crash, or other similar occurrence is in the same

position as the owner of a defective product that malfunctions and simply

does not work. It follows that the remedies available to these similarly

situated product owners should derive from the parties’ agreements, not from

the law of torts, lest we disrupt the parties’ allocation of risk. To hold

otherwise would make it more difficult for parties to predict the

consequences of their business transactions, the cost of which ultimately falls

on consumers in the form of increased prices.

Id. (citations omitted). The court concluded that the rule was appropriate because it “fairly

balances the competing policy interests and clearly delineates between the law of contract

and the law of tort.” Id. at 492. Thus, when the economic loss rule is applicable, a party

may not “recover[] in tort.” Milan Supply Chain, 627 S.W.3d at 146 (quoting R. Joseph

Barton, Drowning in A Sea of Contract: Application of the Economic Loss Rule to Fraud

and Negligent Misrepresentation Claims, 41 Wm. & Mary L. Rev. 1789, 1811 (2000)).

Instead, a party in that situation is limited to its contractual remedies. See Milan Supply

Chain COA, 2019 WL 3812483, at *4 (quoting Goodman et al., supra, at 7) (noting that

the “economic loss doctrine prevents parties from subverting their contract and recovering

in tort what they could not obtain through their contractual remedies”).

Although the majority of jurisdictions have now adopted the economic loss rule in

some form, it remains a confusing morass of permutations. Milan Supply Chain, 627

S.W.3d at 144 (citing David v. Hett, 293 Kan. 679, 683, 270 P.3d 1102, 1105 (2011);

Barton, supra, at 1801). Instead, the Tennessee Supreme Court has cited favorably one

commentator that described the rule as “a ‘constellation of somewhat similar doctrines that

tend to limit liability’ but work in different ways in different contexts, for not necessarily

identical reasons, ‘with exceptions where the reasons for limiting liability were absent.’”

Id. at 145 (quoting Oscar S. Gray, Some Thoughts on “The Economic Loss Rule” and

Apportionment, 48 Ariz. L. Rev. 897, 898 (2006) (footnotes omitted)).

One source of confusion is the proper context of the doctrine—either limited to the

product liability context in which it originated or expanded to other contexts. Id.

(citing Barton, supra, at 1802 (“Although the rule originated in the context of products

liability, the current trend expands the rule to apply in other contexts, most notably in real

19

property transactions and service contracts.” (footnote omitted))); see also, e.g., East River,

476 U.S. at 866 (involving a claim in the product liability realm); Seely, 403 P.2d at 149

(same). Although the Tennessee Supreme Court noted that “many jurisdictions now apply

the economic loss doctrine in a wide array of circumstances beyond the products liability

context,” it emphasized that it had yet to do so. Milan Supply Chain, 627 S.W.3d at 153.

As such, this Court has previously held that Tennessee courts have essentially recognized

two situations in which the economic loss rule is applicable: (1) “a rule that

prevents purely economic losses for negligence when the plaintiff lacks privity of contract

with the defendant”; and (2) a “rule that applies when a defective product damages itself

without causing personal injury or damage to other property.” City of Franklin v. W.L.

Hailey & Co., 634 S.W.3d 16, 28 (Tenn. Ct. App. 2019) (citing Lincoln General, 293

S.W.3d at 488–89 (adopting the second version of the rule); John Martin, 819 S.W.2d at

431 (involving a case where the Tennessee Supreme Court was invited to adopt the first

version of the rule)); see also United Textile Workers of Am., AFL-CIO v. Lear Siegler

Seating Corp., 825 S.W.2d 83, 87 (Tenn. Ct. App. 1990) (applying the first version of the

rule). Courts outside Tennessee, however, have either modified the second scenario or

added a third variation to encompass situations outside the product liability context. This

formulation applies “when a contract exists between the parties” and “declares that when

a conflict arises between parties to a contract regarding the subject matter of that contract,

the contractual relationship controls, and parties are not permitted to assert actions in tort.”

Healthbanc Int’l, LLC v. Synergy Worldwide, Inc., 435 P.3d 193, 195 (Utah 2018)

(discussed in detail, infra)).

Another relatively unsettled area of law is at issue when the plaintiff raises claims

of intentional or negligent misrepresentation. Some jurisdictions have adopted exceptions

to the economic loss rule in these contexts. Recently, Tennessee courts have also been

tasked with determining the viability and application of these so-called exceptions in

Tennessee courts. First, in City of Franklin v. W.L. Hailey & Co., this Court held that

Tennessee law does not recognize an exception to the economic loss doctrine for negligent

misrepresentations in the product liability context. 634 S.W.3d at 34–37. Second, the

Tennessee Supreme Court adopted a more nuanced rule when fraud is claimed: “for

situations . . . involving a contract between sophisticated commercial business entities and

a fraudulent inducement claim seeking recovery of economic losses only, the economic

loss doctrine applies if the only misrepresentation[s] by the dishonest party concern[] the

quality or character of the goods sold.” Milan Supply Chain, 627 S.W.3d at 153–54.

Because the claims in this case likewise implicate fraud, we focus on the Milan Supply

Chain opinion.

In Milan Supply Chain, the plaintiff, a commercial trucking company purchased a

number of diesel engine trucks from the defendant seller. During the negotiations, the

defendant made certain representations about the trucks, including as to the amount of

testing that had occurred on them and as to the reliability of the engines. Id. at 132–33. The

parties eventually entered into a contract that required the defendant to repair or replace

20

defective truck components, but waived all other warranties. The contract further excluded

liability for loss of time or use of the vehicle, loss of profits, inconvenience, or incidental

or consequential damages. Id. at 133.

Eventually, the plaintiff experienced issues that led it to believe that the trucks did

not meet the representations of reliability that the defendant had given. When these issues

increased, the plaintiff filed suit against the defendant seller, alleging both contract claims,

negligent and fraudulent misrepresentation, and a violation of the Tennessee Consumer

Protection Act (“TCPA”). Id. at 134. The trial court granted the defendant summary

judgment as to the contract claims, concluding that the defendant had met its obligations

to repair or replace the truck parts as required by the contract. The trial court further found

that the contract disclaimed warranties and that the negligent misrepresentation claim was

barred by the economic loss doctrine. The case went to trial only on the fraud and TCPA

claims. The jury found for the plaintiff as to both claims, awarding plaintiff $8,236,109.00

in benefit-of-the-bargain damages and $2,549,481.00 in lost profit damages, for a total of

$10,785,590.00 in compensatory damages. The jury also found that the plaintiff was

eligible for an award of punitive damages. Following a second hearing, the jury warded

$20,000,000.00 in punitive damages. Id. at 140. The defendant filed several post-trial

motions arguing, inter alia, that the fraud claim was barred by the economic loss doctrine.

The trial court denied the motions and entered judgment on the jury’s verdict. Id. at 141.

Both parties appealed. As is relevant to this case, we held that the economic loss doctrine

barred the plaintiff’s fraud claim. See generally Milan Supply Chain COA, 2019 WL

3812483, at *7–9. The Tennessee Supreme Court thereafter granted the plaintiff’s

application for permission to appeal.

One of the central questions before the Tennessee Supreme Court was whether

Tennessee should recognize an exception to the economic loss doctrine for fraud. Milan

Supply Chain, 627 S.W.3d at 145. In order to resolve that issue, the court looked at the

three approaches that courts in other jurisdictions had taken to that question—the strict

approach, the broad fraud exception, and the limited or narrow fraud exception. Id. at 146.

As the Tennessee Supreme Court explained, the strict approach bars all fraud

claims. “In other words, under this approach, fraud claims are not an exception to the

economic loss doctrine.” Id. The rationale for this approach is that “the need to provide a

plaintiff with tort remedies is ‘diminished greatly when (1) the plaintiff can be made whole

under contract law, and (2) allowing additional tort remedies will impose additional costs

on society.’” Id. (quoting Werwinski v. Ford Motor Co., 286 F.3d 661, 680 (3d Cir.

2002), abrogated by Earl v. NVR, Inc., 990 F.3d 310 (3d Cir. 2021)). The court noted,

however, that the continued viability of this approach was unclear, “as the cases initially

recognizing it have been overruled, abrogated, or called into question by subsequent state

court decisions.” Id. (citing cases).

21

The majority approach, the broad fraud exception, allows plaintiffs to assert

fraudulent inducement claims notwithstanding the economic loss rule “because the duty

not to commit fraud exists independent of any contract.” Id. at 147. The rationale for this

exception was explained by our supreme court as follows:

These courts acknowledge that in essence, the parties to a contract

create a mini-universe for themselves, in which each voluntarily chooses his

contracting partner, each trusts the other’s willingness to keep his word and

honor his commitments, and in which they define their respective

obligations, rewards and risks. Under such a scenario, it is appropriate to

enforce only such obligations as each party voluntarily assumed, and to give

each party only such benefits as that party expected to receive, because this

is the function of contract law. However, this universe of expectations does

not merit protecting if one party commits fraud to induce the contract because

a party to a contract cannot rationally calculate the possibility that the other

party will deliberately misrepresent terms critical to that contract. While

parties, perhaps because of their technical expertise and sophistication, can

be presumed to understand and allocate the risks relating to negligent product

design or manufacture, those same parties cannot, and should not, be

expected to anticipate fraud and dishonesty in every transaction.

Id. (citations, brackets, and quotation marks removed). The allowance of tort damages,

including punitive damages, is also appropriate in order to deter fraud. Id. (citing Robinson

Helicopter Co. v. Dana Corp., 34 Cal. 4th 979, 992, 102 P.3d 268, 275 (2004)) (“[F]raud

is socially undesirable conduct that should be punished and deterred.”).

The broad fraud exception, like the economic loss rule itself, is not uniformly

devised. Compare Robinson Helicopter, 102 P.3d at 276 (articulating a narrow and limited

version of the broad fraud exception that requires proof that the plaintiff was exposed to

“liability for personal damages independent of the plaintiff’s economic loss”), with

Formosa Plastics Corp. USA v. Presidio Engineers & Contractors, Inc., 960 S.W.2d 41,

47 (Tex. 1998) (“Allowing the recovery of fraud damages sounding in tort only when a

plaintiff suffers an injury that is distinct from the economic losses recoverable under a

breach of contract claim is inconsistent with this well-established law, and also ignores the

fact that an independent legal duty, separate from the existence of the contract itself,

precludes the use of fraud to induce a binding agreement.”).

Finally, the Tennessee Supreme Court discussed three cases involving the third

permutation, the narrow or limited fraud exception. According to the supreme court, this

permutation originated in Huron Tool & Engineering Co. v. Precision Consulting

Services, Inc., 209 Mich. App. 365, 532 N.W.2d 541, 545 (1995), where the Michigan

Court of Appeals recognized an exception for fraud-in-the-inducement claims, but only if

the fraud is “extraneous to the contract,” not “interwoven with the breach of contract.”

22

Milan Supply Chain, 627 S.W.3d at 148 (quoting Huron Tool, 532 N.W.2d at 545). The

rationale behind this exception was explained by the Michigan court as follows:

Fraud in the inducement presents a special situation where parties to a

contract negotiate freely—which normally would constitute grounds for

invoking the economic loss doctrine—but where in fact the ability of one

party to negotiate fair terms and make an informed decision is undermined

by the other party’s fraudulent behavior.

Huron Tool, 532 N.W.2d at 545.

The Wisconsin Supreme Court adopted this narrow exception in Kaloti Enters., Inc.

v. Kellogg Sales Co., 283 Wis.2d 555, 699 N.W.2d 205, 220 (2005). That court held that

the narrow exception balances the purposes underlying the economic loss doctrine—i.e.,

the distinction between contract and tort and the protection of freedom to contract—with

the need for parties to have a background of truth and fair dealing in commercial

relationships. The court formulated the exception narrowly, however: “[t]ort law will apply

only under circumstances . . . where one party induces another to enter into a contract by

representing (or failing to disclose) a fact that would be material to the other party’s

decision to enter into the contract, but that concerns matters extraneous to the contract’s

terms.” Id. (emphasis added). Thus, the fraud must be “extraneous to, rather than

interwoven with, the contract.” Id. at 219.

The most recent case involving the narrow fraud exception discussed by the

Tennessee Supreme Court was Healthbanc Int’l, LLC v. Synergy Worldwide, Inc., 435

P.3d 193, 194 (Utah 2018). Citing both Huron Tool and Kaloti, the Utah Supreme Court

held that “there is no fraud exception that applies where the alleged fraudulent inducement

arises out of the very grounds alleged as a basis for a breach of contract action.” Id. In

reaching this conclusion, the court noted that Utah courts had previously recognized two

contexts in which to apply the economic loss rule: (1) “when no contractual relationship

exists between the parties and the plaintiff fails to prove either physical damage to other

property or bodily injury”; and (2) “when a contract exists to bar the parties from asserting

actions in tort when a conflict between the parties involves the subject matter of the

contract.” Milan Supply Chain, 627 S.W.3d at 150 (citing Healthbanc International, 435

P.3d at 196).

Under this second category of cases, a “blanket exception for fraud in the

inducement would undermine the central premises of the economic loss rule[.]” Id. (citing

Healthbanc International, 435 P.3d at 196). In other words, a broad exception “would

open the door to tort claims that directly overlap breach of contract claims. This blurring

of the line between tort and contract law is precisely what the economic loss rule is

designed to prevent.” Id. at 197. And with regard to the concerns of some courts as to

fraudulent inducements to enter into contracts, the Utah Supreme Court found such a

23

distinction “‘illusory’ ‘[w]hen the subject matter of the inducing promises [is] later

negotiated for and included in the contract.’” Milan Supply Chain, 627 S.W.3d at 150

(citing Healthbanc International, 435 P.3d at 197 (“To claim that a promise is independent

of a contract simply because it was spoken prior to the formation of a contract would open

the door to tort liability for all pre-contractual negotiations that were eventually enshrined

in a contract. This exception would swallow the rule. And we decline to endorse such an

exception.”)). Likewise, the court rejected a claim that a broad exception was necessary to

“avoid shielding intentional tortfeasors from liability[.]” Id. (citing Healthbanc

International, 435 P.3d at 197 (“Intentional bad acts are insufficient by themselves to

justify an exception to the economic loss rule. If the ‘bad acts’ (even intentional ones) are

covered by a contract, they remain in the realm of contract law. And contract law remains

sufficient to ‘punish’ the breaching party.”)).

Having detailed the forgoing options, the Tennessee Supreme Court “follow[ed] the

Utah Supreme Court” by declining “to announce a broad rule either extending the

economic loss rule to all fraud claims or exempting all fraud claims from the economic loss

rule.” Id. at 153. Instead, the Court held that where a situation involves a contract between

sophisticated commercial entities and the plaintiff seeks to recover economic losses only,

“the economic loss doctrine applies if the only misrepresentation[s] by the dishonest party

concern[ ] the quality or character of the goods sold.” Id. at 154 (quoting Huron Tool, 532

N.W.2d at 545). This rule, according to the supreme court, strikes “a careful balance”

between the “freedom of contract and the abhorrence of fraud.” Id.

Appellants have maintained since the outset of this appeal that Commercial

Painting’s claim for intentional misrepresentation is barred by the economic loss rule

because the only losses that Commercial Painting alleges it suffered were economic.

Appellants therefore argue that Commercial Painting should be limited to the damages

authorized under the contract and that the claimed damages that were not authorized by the

parties’ contract but flow from the tort claim—namely the award of punitive damages and

pre- and post-judgment interest—should be reversed.

Commercial Painting does not appear to assert in this appeal that it is seeking

recovery of anything other than economic losses. Cf. Trinity Indus., Inc. v. McKinnon

Bridge Co., 77 S.W.3d 159, 173 (Tenn. Ct. App. 2001), abrogated on other grounds

by Bowen ex rel. Doe v. Arnold, 502 S.W.3d 102 (Tenn. 2016) (defining purely economic

losses as “essentially damages for failed commercial expectations, or loss of the benefit of

the bargain”). To be sure, Commercial Painting does not assert that it suffered any damage

as a result of property damage or personal injury. Instead, Commercial Painting has always

maintained that the economic loss rule simply did not bar it from raising a claim for

intentional misrepresentation regardless of the fact that it suffered only economic losses.

The core of Commercial Painting’s argument on this issue, however, has been

something of a moving target. In its initial brief, Commercial Painting’s central argument

24

was that the economic loss rule did not apply to any intentional torts. Following the Milan

Supply Chain opinion, however, Commercial Painting’s supplemental briefing focused not

on the tort that occurred in this case, but on the context of the claim, i.e., outside the realm

of products liability. And Commercial Painting pointed to the express holding of Milan

Supply Chain that there is no fraud exception if the misrepresentation that allegedly

induced a party to enter into a contract concerns “the quality or character of the goods

sold.” Id. Thus, Commercial Painting asserts in this appeal that neither the economic loss

rule nor the limited fraud exception recognized in Milan Supply Chain apply outside of

the products liability realm. Because this case does not involve the sale of goods or product

liability, Commercial Painting argues that the economic loss rule should not prohibit its

intentional misrepresentation claim and any of the damages that flow therefrom.

We are therefore called to determine two interrelated questions: (1) whether

Tennessee should adopt a version of the economic loss rule that limits a party to contractual

damages, rather than tort damages, in a case outside the product liability context; and if so

(2) whether the Milan Supply Chain limited fraud exception should apply in that situation.

To be sure, the Milan Supply Chain decision does not address this question directly. As a

result, we are essentially left to “read[] our [s]upreme [c]ourt’s tea leaves” to determine the

proper result in this case. Dolan v. USAA Cas. Ins. Co., No. 107247, 1998 WL 246409, at

*4 (Conn. Super. Ct. Apr. 6, 1998) (internal quotation marks omitted)

(“[R]eading our Supreme Court’s ‘tea leaves,’ this court holds that the FFR does not bar

the present action.”) (quoting State v. Brown, 14 Conn. App. 605, 629, 543 A.2d 750, 762

(1988) (“This court on occasion has taken the step of reading our Supreme Court’s

“tea leaves” and predicting that, because of intervening decisions, the court would overrule

prior cases and change its position.”); State v. Cooke, No. IN-05-06-1529, 2010 WL

3734113, at *31 (Del. Super. Ct. Aug. 19, 2010) (“One has to be careful

when reading tea leaves. If there were an opportunity for the Supreme Court to announce

a per se recusal rule, however, as Cooke argues, that was it, but it did not.”); E.H. by &

through Hemenway v. Auto. Club Inter-insurance Exch., 57 Kan. App. 2d 109, 118, 447

P.3d 382, 389 (2019) (“Our reading of the tea leaves in our Supreme Court’s O’Donoghue

opinion suggests that it would agree with ACIIE’s position.”).

Each party points to evidence in the Milan Supply Chain opinion of its own

position.14 Commercial Painting points, of course, to the express language of the supreme

court’s holding, which applies only to transactions involving goods. Milan Supply Chain,

627 S.W.3d at 154. Commercial Painting notes that this limitation harmonizes with the

court’s statement that it “has never applied the economic loss doctrine outside the products

liability context, in which it originated.” Id. at 153. Moreover, the court noted the confusion

that is engendered by applying the rule outside of the products liability context. Indeed, our

14

The Milan Supply Chain decision was issued following the close of briefing in this case. Both parties

were thereafter permitted to file supplemental briefs as to its effect, if any, on the issues presented in the

case-at-bar.

25

supreme court quoted several authorities that appear to take a dim view of the doctrine. Id.

at 145 (citing Tiara Condo. Ass’n, Inc. v. Marsh & McLennan Cos., Inc., 110 So. 3d 399,

407 (Fla. 2013) (calling the expansion of the doctrine “unwise and unworkable in

practice”)); Grams v. Milk Prods., Inc., 283 Wis.2d 511, 699 N.W.2d 167, 181 (2005)

(Abrahamson, C.J., dissenting) (comparing the doctrine to a villainous alien life form). As

a result, Commercial Painting argues that the Milan Supply Chain opinion “may well have

signaled that th[e] bounds [of the economic loss rule] need to be further limited in the

future.”

Appellants read the Tennessee Supreme Court’s tea leaves differently. Importantly,

Appellants point out that after discussing three different permutations of the narrow fraud

exception, the Tennessee Supreme Court favored the reasoning of the Utah Supreme Court

most heavily. Healthbanc International, of course, is itself a case outside the realm of

products liability. 435 P.3d at 194. As Appellants point out, the rationale behind the

adoption of a limited exception utilized by the Utah Supreme Court is therefore equally

applicable to other types of contracts.

Appellants also point out that while the Tennessee Supreme Court has not applied

the economic loss doctrine outside the products liability context, it has mentioned the

doctrine outside this context. See John Martin, 819 S.W.2d at 431 (considering whether

the plaintiff was entitled to recover for purely economic losses even though “[t]his is not a

products liability case.”). Following that lead, this Court has previously considered the rule

outside of the products liability arena. See Acuity v. McGhee Eng’g, Inc., 297 S.W.3d 718,

734 (Tenn. Ct. App. 2008) (holding that a claim for negligent misrepresentation was not

barred by the economic loss rule even though the plaintiff and defendant lacked privity);

United Textile Workers, 825 S.W.2d at 87 (barring a claim by plaintiffs for purely

economic losses caused by negligence when the plaintiffs had no contractual relationship

with the defendant).15 As a result of these and similar cases, at least one federal court has

concluded that the Tennessee Supreme Court would apply the economic loss rule in cases

that did not involve the sale of goods. See Ladd Landing, LLC v. Tennessee Valley Auth.,

874 F. Supp. 2d 727, 731 (E.D. Tenn. 2012) (disagreeing with Ham v. Swift Transp. Co.,

694 F. Supp. 2d 915, 922 (W.D. Tenn. 2010); Lott v. Swift Transportation, Inc., 694 F.

Supp.2d 923, 930–31 (W.D. Tenn. 2010)). All of our cases cited above, however, involve

the first type of fact-pattern outlined by the Utah Supreme Court where a party seeks to

hold another liable for economic damages in the absence of privity. See Healthbanc

International, 435 P.3d at 196. This case, of course, involves the second fact pattern where

the parties have a contract governing their rights and responsibilities.16 As such, these

authorities are not particularly helpful in resolving the dispute at issue here.

15

Again, however, these cases deal with the non-contractual economic loss rule.

16

The John Martin Opinion certainly cuts both ways in this case, as the Tennessee Supreme Court held

that the plaintiff could assert a claim for negligent misrepresentation despite a lack of privity. This Court,

however, has held that in the products liability context, no claim for negligent misrepresentation is viable.

See City of Franklin, 634 S.W.3d at 35.

26

While we agree that each party has valid and compelling arguments, we believe that

Appellants’ argument is more persuasive. First, we note that even the Tennessee Supreme

Court recognized that “most states have not limited the doctrine to the products liability

context[.]” Milan Supply Chain, 627 S.W.3d at 145. As the Milan Supply Chain opinion

readily reveals, Tennessee courts do not always adopt the majority approach to an issue.

Id. (adopting a non-majority narrow fraud exception). But Tennessee courts have found

persuasive the fact that a majority of jurisdictions have adopted a proposed rule. See, e.g.,

Morris v. State, 21 S.W.3d 196, 200 (Tenn. Ct. App. 1999) (“No Tennessee case has

recognized a parental cause of action for loss of society and companionship of an

emancipated adult child. The majority rule in sister jurisdictions is persuasive that no such

cause of action is viable.”).

One of those cases following the majority rule is Flagstaff Affordable Hous. Ltd.

P’ship v. Design All., Inc., 223 Ariz. 320, 223 P.3d 664 (2010). In Flagstaff, the Arizona

Supreme Court considered, as a matter of first impression, whether to extend the economic

loss rule to cases involving construction contracts. First, the court defined its preferred

definition of the doctrine as “a common law rule limiting a contracting party to contractual

remedies for the recovery of economic losses unaccompanied by physical injury to persons

or other property.” Id. at 667.

After detailing the history of the doctrine in Arizona, the Court considered whether

“the underlying policies of tort and contract law in the construction setting” support

application of the doctrine in that context. Id. at 669. According to the Arizona Supreme

Court,

The contract law policy of upholding the expectations of the parties

has as much, if not greater, force in construction defect cases as in product

defect cases. Construction-related contracts often are negotiated between the

parties on a project-specific basis and have detailed provisions allocating

risks of loss and specifying remedies. In this context, allowing tort claims

poses a greater danger of undermining the policy concerns of contract law.

That law seeks to encourage parties to order their prospective relationships,

including the allocation of risk of future losses and the identification of

remedies, and to enforce any resulting agreement consistent with the parties’

expectations.

Moreover, in construction defect cases involving only pecuniary

losses related to the building that is the subject of the parties’ contract, there

are no strong policy reasons to impose common law tort liability in addition

to contractual remedies. When a construction defect causes only damage to

the building itself or other economic loss, common law contract remedies

provide an adequate remedy because they allow recovery of the costs of

remedying the defects, and other damages reasonably foreseeable to the

parties upon entering the contract.

27

Id. at 669 (paragraph markers and citations omitted). Other courts have found this

reasoning persuasive or adopted similar reasoning. See Indianapolis-Marion Cty. Pub.

Libr. v. Charlier Clark & Linard, P.C., 929 N.E.2d 722, 735 (Ind. 2010) (citing Flagstaff);

Terracon Consultants W., Inc. v. Mandalay Resort Grp., 125 Nev. 66, 78, 206 P.3d 81,

89 (2009) (applying the economic loss rule in the context of a business construction

contract); see also Anderson Elec. v. Ledbetter Erection Corp., 115 Ill. 2d 146, 153, 503

N.E.2d 246, 249 (1986) (applying the economic loss rule to a services contract because the

only loss involved “disappointed commercial expectations” that could be recovered

through a breach of contract action).

Of course, some jurisdictions have taken a dimmer view of the economic loss rule

outside the product liability context. See, e.g., NM-Emerald, LLC v. Interstate Dev., LLC,

2021-NMCA-020, 488 P.3d 707, 712, ¶ 12 (declining to expand the economic loss rule to

construction cases not based on any analysis of the policy considerations at play, but based

on the inadequate briefing of the parties); Ins. Co. of N. Am. v. Cease Elec. Inc., 2004 WI

139, ¶ 32, 276 Wis. 2d 361, 375, 688 N.W.2d 462, 469 (relying on the Uniform

Commercial Code (“UCC”) to hold that the economic loss doctrine does not apply to

services contracts) (discussed in detail, infra). In particular, the Florida Supreme Court

fairly recently “return[ed] the economic loss rule to its origin in products liability.” Tiara

Condo. Ass’n, Inc. v. Marsh & McLennan Cos., Inc., 110 So. 3d 399, 407 (Fla. 2013).

While Commercial Painting apparently views the Tennessee Supreme Court’s reference to

this Opinion as signaling the limiting of the economic loss doctrine, we must view the

reference to Tiara Condominium Association in the context of the Milan Supply Chain

Opinion as whole. Id. at 153–54. Importantly, our high court declined to apply a broad

fraud exception even after noting that it had been adopted in more jurisdictions than the

narrow exception. Id. at 149. In Florida, however, their supreme court had previously held

that the economic loss rule did not bar claims for fraud. See id. at 402–03 (citing Indem.

Ins. Co. of N. Am. v. Am. Aviation, Inc., 891 So. 2d 532, 537 (Fla. 2004) (“Although

parties in privity of contract are generally prohibited from recovering in tort for economic

damages, we have permitted an action for such recovery in certain limited circumstances.

One involves torts committed independently of the contract breach, such as fraud in the

inducement.”); HTP, Ltd. v. Lineas Aereas Costarricenses, S.A., 685 So.2d 1238 (Fla.

1996)). The Tennessee Supreme Court, then, apparently does not share the same level of

distaste for the economic loss doctrine as the Florida Supreme Court.

Instead, we must conclude that the reasoning employed by the Tennessee Supreme

Court in Milan Supply Chain hews most closely to the reasoning of those jurisdictions that

have extended the economic loss rule beyond its origination. For example, in Milan

Supply Chain, the Tennessee Supreme Court discussed the “scope and rationale” of the

economic loss rule as an attempt not to “disrupt the parties’ allocation of risk.” Milan

Supply Chain, 627 S.W.3d at 154 (quoting Lincoln General, 293 S.W.3d at 491).

According to the Arizona Supreme Court, this policy has even greater force in the

construction contract context, as contracts of this type are typically negotiated to have

28

specific provisions detailing the allocations of risks and specifying remedies. Flagstaff,

223 P.3d at 669.

The Tennessee Supreme Court also relied heavily on the Utah Supreme Court’s

reasoning that contract law provides an adequate remedy in this situation:

We are persuaded by the reasoning articulated by the Utah Supreme

Court, which, as noted earlier, recently explained:

Contract law seems sufficient to make wronged parties whole. When

the contract terms contain the grounds for the tort claim, we see no

reason to conclude that recovery under contract law is insufficient—

“when a party is merely suing to recover the benefit of its contractual

bargain, there is no inherent unfairness in limiting that party to a

breach-of-contract claim.” Wronged parties will still have access to

traditional contract damages for breach, including expectation

damages. And such parties will also have access to exceptional

contract remedies—liquidated damages, rescission, etc.—where

applicable. The possibility of liquidated damages seems particularly

salient. If the parties to a contract with express warranties are

concerned about the insufficiency of expectation damages[,] they can

bargain for liquidated damages. And where they fail to do so it seems

problematic for a court to make a better contract for them than the one

they negotiated—by importing tort remedies into the deal.

HealthBanc International, 435 P.3d at 197–98 (quoting [Louisburg Bldg. &

Dev. Co. v.] Albright, [45 Kan.App.2d 618,] 252 P.3d 597,] 622 [Kan. Ct.

App.] 2011).

Milan Supply Chain, 627 S.W.3d at 155. In fact, the Tennessee Supreme Court apparently

judged this particular passage from Healthbanc International so important as to quote it

in full twice in the Milan Supply Chain Opinion.

Like the Flagstaff court, we conclude that the concerns of the Utah Supreme Court,

as echoed by our own high court, apply with equal force in the products liability context as

in other commercial transactions between sophisticated parties. See Flagstaff, 223 P.3d at

669. Importantly, Tennessee law recognizes that our “‘public policy is best served

by freedom of contract. . . .’” Baugh v. Novak, 340 S.W.3d 372, 383 (Tenn. 2011) (quoting

Chazen v. Trailmobile, Inc., 215 Tenn. 87, 91, 384 S.W.2d 1, 3 (Tenn. 1964)). As the

supreme court has explained:

Tennessee, both in its statutory and case law, “recognize[s] a strong public

policy of individual autonomy, i.e. freedom of contract, as courts allow

29

parties to strike their own bargains, absent a supervening legal reason to

restrict that economic liberty.” 21 [Steven W.] Feldman[, Tennessee

Practice: Contract Law and Practice] § 1:6, at 17. [(2006)]. The course of

development of “[c]ontract law in Tennessee plainly reflects the public

policy allowing competent parties to strike their own bargains.” Ellis v.

Pauline S. Sprouse Residuary Trust, 280 S.W.3d 806, 814 (Tenn. 2009).

Baugh, 340 S.W.3d at 383.

As a result, Tennessee law has long held that courts cannot rewrite the contracts of

parties, even when the terms negotiated therein later prove burdensome or foolhardy. This

principle applies with equal force to contracts outside the sale of goods arena; indeed, it is

oft cited in cases involving construction contracts. See, e.g., Cameron Gen. Contractors,

Inc. v. Kingston Pike, LLC, 370 S.W.3d 341, 346 (Tenn. Ct. App. 2011) (“It is not the role

of the courts, even courts of equity, to rewrite contracts for dissatisfied parties.”); Baptist

Mem’l Hosp. v. Argo Const. Corp., 308 S.W.3d 337, 345 (Tenn. Ct. App. 2009) (“[T]his

is the allocation of risk to which the parties agreed in the sales contract, and this Court

cannot rewrite the parties’ contract because its terms later prove to be burdensome”).

When sophisticated commercial entities negotiate specific terms that waive certain types

of damages and remedies, no additional unfairness results when the transaction falls outside

the realm of products liability. Instead, in both cases, a party is merely suing to recover the

benefit of its bargain. Id. at 155 (quoting HealthBanc International, 435 P.3d at 197). And

according to the Arizona Supreme Court, when the breakdown of a construction contract

causes only economic losses, contract remedies provide an adequate remedy regardless of

the fact that products liability is not at issue. Flagstaff, 223 P.3d at 669.

Moreover, a party to a commercial construction contract is just as free as a party to

a sales contract to negotiate exceptional contract remedies, such as liquidated damages,

should they see fit. See id. (noting that a party to a construction contract can negotiate for

“other damages reasonably foreseeable to the parties upon entering the contract”). A focus

on remedies available under the UCC is therefore misguided. For example, in Ham v. Swift

Transp. Co., 694 F. Supp. 2d 915 (W.D. Tenn. 2010), a federal district court concluded

that the economic loss doctrine should not apply to services contracts on the basis that

parameters of the doctrine were laid out by the UCC. Id. at 922–23 (citing Ins. Co. of

North Am. v. Cease Elec. Inc., 276 Wis.2d 361, 688 N.W.2d 462, 467 (2004))

(“Application of the economic loss doctrine to cases involving defective products is not

surprising, the court reasoned, because the [UCC] sets forth the full series of rights and

remedies available to an aggrieved purchaser who suffers only economic losses.”).17

17

Although services contracts are specifically exempted from the economic loss doctrine under Wisconsin

law, it is not clear that all non-products liability contracts are exempted from the ambit of the rule.

Specifically, in Digicorp, Inc. v. Ameritech Corp., 2003 WI 54, 262 Wis. 2d 32, 662 N.W.2d 652, the

Wisconsin Supreme Court applied the economic loss rule to a case involving a contract authorizing the

plaintiff to sell and distribute the defendant’s products to consumers. Id. at 655. Although the case

30

Because the Tennessee Supreme in Ritter “echoe[d] that rationale” of the Wisconsin

Supreme Court, the district court declined to apply the economic loss rule to the services

contract at issue. Id. (citing Ritter, 912 S.W.2d at 133 & n.8).18 Thus, to this particular

federal district court, it is the UCC that provides the “justification” for the application of

the economic loss rule; where the UCC is inapplicable, neither should the economic loss

rule be applied. Id. at 923.

The Milan Supply Chain Opinion, however, does not bear out this reasoning. To

be sure, the Milan Supply Chain Opinion makes clear that the economic loss rule

originated in the context of products liability, where the UCC is applicable. Milan Supply

Chain, 627 S.W.3d at 153. But the Opinion does not in any way rely on UCC principles in

adopting its rule. In fact, the UCC is not mentioned in any fashion in the discussion of the

economic loss rule. Instead, the rationale echoed upon by the Milan Supply Chain court

was that of the Utah Supreme Court, which held that parties should be held to the damages

that they bargained for. Id. at 155 (quoting HealthBanc International, 435 P.3d at 197).

This rationale does not rest on the existence of UCC damages, but on contract principles

that are applicable even outside the products liability context. Cf. Argo Construction 308

S.W.3d at 345; see also Flagstaff, 223 P.3d at 669.

Moreover, at least one scholar has suggested that allowing the economic loss rule

to apply in any way when fraud is alleged would be to go against the UCC principles upon

which the economic loss rule was founded. Specifically, in Steven W. Feldman, The

Economic Loss Doctrine: Rescuing Contract from Drowning in A ‘Sea of Tort’, Tenn. B.J.,

April 2008, at 24, the author argued that Tennessee would and should “adopt the broad

position allowing full recovery for fraudulent inducement[.]” Id. at 28. The basis for this

prediction was the fact that the economic loss doctrine originated with the UCC:

The primary reason for this suggestion is the UCC itself, which marks the

boundaries of the economic loss doctrine. Tenn. Code Ann. § 47-1-103 says

that unless displaced by the UCC, the principles of law and equity pertaining

to fraud and misrepresentation “shall supplement its provisions.” To

the same effect, Tenn. Code Ann. § 47-2-721 says that remedies for material

misrepresentation or fraud include all remedies available under title 47,

chapter 2, for nonfraudulent breach. Therefore, it would violate Tennessee

statutory law and our state’s strong anti-fraud policy to deprive a plaintiff of

a full remedy for fraud because of the economic loss doctrine.

Id. (footnotes and some punctuation omitted).

tangentially involved products, the contract was not for the sale of goods and the theory of liability against

the defendant was not related to a defective product. Id. at 656. Although the Cease Electric court cites

Digicorp, it does not address this issue or explicitly overrule the prior case.

18

The same federal district court judge also came to this conclusion in Lott v. Swift Transportation, Inc.,

694 F. Supp.2d 923, 930–31 (W.D. Tenn. 2010). The reasoning in both Opinions is identical.

31

In Milan Supply Chain, however, the Tennessee Supreme Court chose not to look

to the roots of the economic loss doctrine to adopt a broad fraud exception. The

requirements of the UCC, then, were not the most important considerations for the

Tennessee Supreme Court in deciding how to apply the rule. Instead, when faced with

several viable choices, it chose to rely on “a version of the narrow fraud exception” adopted

outside the products liability context. See Milan Supply Chain, 627 S.W.3d at 155 (quoting

HealthBanc International, 435 P.3d at 197). Thus, while the UCC may have been the

progenitor of the economic loss rule, it is clear that Tennessee’s version of the economic

loss doctrine has expanded outside its origins.

Moreover, there is no dispute that in this case, like in Milan Supply Chain, the

contract was negotiated by sophisticated commercial entities. Thus, the only question

presented in this appeal is whether the economic loss rule should be extended to apply to

non-products liability contracts between sophisticated commercial entities, and, if so,

whether Commercial Painting’s fraud claim is an exception to the rule. And like the

Tennessee Supreme Court, our holding is limited only to that situation. See Milan Supply

Chain, 627 S.W.3d at 153–54 (limiting its narrow fraud exception to contracts “between

sophisticated commercial business entities”). Doing so defuses some of the concerns that

led other courts to conclude that the economic loss rule should not apply to non-sales

contracts. As explained by the United States Court of Appeals for the Seventh Circuit, the

concerns that prompted the Wisconsin Supreme Court to exempt services contracts from

the ambit of the economic loss rule are as follows:

Most service contracts, the Wisconsin Supreme Court reasoned (like those to

mow the lawn or unclog a drain), are oral and informal and parties rarely hire

attorneys to allocate risks and limit remedies. In many service contracts,

furthermore, the information disparities between the parties make it unlikely

that each party can negotiate the terms with the same level of bargaining

power.

Cerabio LLC v. Wright Med. Tech., Inc., 410 F.3d 981 (7th Cir. 2005) (internal citations

omitted) (citing Cease Elec., 688 N.W.2d at 470–71). But these “policy considerations . .

. are simply not at play” when “well-represented, sophisticated business parties drafted

complex, detailed agreements which could and indeed did allocate risks and assign

remedies.” Id. This court has previously expressed a similar sentiment that business

plaintiffs should not be permitted to avoid their contractual obligations by inventing a tort

action where a contract action suffices. See Trinity Industries, 77 S.W.3d at 172 (quoting

James J. White & Robert S. Summers, Uniform Commercial Code § 10–5, 580, 582–83

(4th ed. 1995)) (noting, in dicta, that “[c]ourts should be particularly skeptical of business

plaintiffs who—having negotiated an elaborate contract or having signed a form when they

wish they had not—claim to have a right in tort whether the tort theory is negligent

misrepresentation, strict tort, or negligence”). Because our holding is limited to contracts

negotiated by sophisticated commercial entities, these policy considerations are more than

32

accounted for without having to take a “sledgehammer” to destroy the rights and

obligations contained in the parties’ contract. Goff v. Elmo Greer & Sons Const. Co., 297

S.W.3d 175, 187 (Tenn. 2009) (“In circumstances where public policy imposes limitations

on the freedom of contract, Tennessee’s courts are well-advised to wield a scalpel rather

than a sledgehammer.”)

In sum, the Tennessee Supreme Court’s reasons for adopting a limited fraud

exception to the economic loss rule apply with equal force outside the products liability

context when the contract at issue was negotiated between sophisticated commercial

entities.19 Here, both parties are sophisticated commercial business entities. The parties’

contract was drafted after negotiation and investigation by the parties. The

misrepresentations as issue here clearly involved the subject matter of the parties’

agreement. Specifically, the question presented to the jury concerning Weitz’s intention

misrepresentation asked whether Weitz made false misrepresentations about the length of

time Commercial Painting would have to perform its work or about the amount of work

Commercial Painting would be required to perform. Issues of time, duration, and the scope

of work were covered by the Subcontract. There can also be little dispute that the damage

that allegedly resulted from Weitz’s tortious conduct completely overlaps with the damage

that resulted from their breach of contract; indeed, Commercial Painting insists in this

appeal that a single damage calculation included in an exhibit is proof of the damage that

resulted from all the various causes of action that it asserts. As a result, we must conclude

that Commercial Painting’s fraud claim is barred by the economic loss rule and must be

dismissed.

D.

Commercial Painting asserts that even if the economic loss rule is applicable to bar

it from raising a tort against Weitz, punitive damages may still be recovered under a

contract theory. In support, Commercial Painting first asserts that Commercial Painting II

“clearly stated that [] Commercial Painting had demonstrated a factual basis for an

intentional misrepresentation claim, and that if successful, [] Commercial Painting would

be entitled to pursue a claim for punitive damages.” Thus, Commercial Painting appears to

suggest that we are bound by that statement to allow punitive damages because the jury

found that Weitz committed fraud. What was actually stated by the Commercial Painting

II panel was that “[i]f Commercial Painting is successful on its intentional

misrepresentation claim against Weitz, it may be entitled to recover punitive damages in

addition to compensatory damages.” 2016 WL 3519015, at *12 (emphasis added). But

there was no discussion in that case of the economic loss doctrine, which we have held is

applicable to bar Commercial Painting from raising its intentional misrepresentation claim.

19

Like our supreme court, we decline to announce a broad rule that expands the economic loss rule to all

contracts that do not involve such parties.

33

As such, Commercial Painting II’s intentional misrepresentation claim is barred by

operation of law, and therefore not “successful.”

Commercial Painting next asserts that Tennessee law does not recognize a “blanket

prohibition against an award of punitive damages in a contract case.” We generally agree

with this statement. Punitive damages, while typically “not available in a breach of contract

case,” may be awarded in a breach of contract action under “certain

circumstances.” Rogers v. Louisville Land Co., 367 S.W.3d 196, 211 n.14 (Tenn. 2012)

(citations omitted). “[B]ecause punitive damages are to be awarded only in the most

egregious of cases, a plaintiff must prove the defendant’s intentional, fraudulent, malicious,

or reckless conduct by clear and convincing evidence.” Hodges v. S.C. Toof & Co., 833

S.W.2d 896, 901 (Tenn. 1992). Thus, the Tennessee Supreme Court appeared to equate

egregious conduct with conduct that was committed intentionally, fraudulently,

maliciously, or recklessly, so long as that culpability is proven by “evidence in which there

is no serious or substantial doubt about the correctness of the conclusions drawn from the

evidence.” Id. at 901 n.3; see also Vic Davis Constr., Inc. v. Lauren Engineers &

Constructors, Inc., No. E2017-00844-COA-R3-CV, 2019 WL 1300935, at *7 (Tenn. Ct.

App. Mar. 20, 2019) (“Punitive damages may be awarded for breach of contract but only

in the most egregious cases. The egregious cases are those with clear and convincing

evidence that the defendant acted intentionally, fraudulently, maliciously, or recklessly in

breaching the contract.”) (internal citation omitted) (citing Rogers, 367 S.W.3d at 211

n.14). But see Sanford v. Waugh & Co., 328 S.W.3d 836, 849 (Tenn. 2010) (suggesting

that egregiousness may be a separate issue from the culpable mental state: “[W]e agree

with the trial court that . . . a reasonable jury could not find by clear and convincing

evidence that the Waughs’ conduct was intentional, fraudulent, malicious, or reckless to

such an extent as to justify punitive damages, nor could it possibly be found to involve the

most egregious of wrongs.”).

Because the jury found that Weitz had engaged in the conduct meeting that

culpability level under the clear and convincing evidence standard, Commercial Painting

argues that this is the type of case in which punitive damages should be awarded.

Specifically, Commercial Painting asserts that our only inquiry should be whether material

evidence supports the jury’s finding that Weitz engaged in egregious conduct intentionally,

fraudulently, maliciously, or recklessly. See Flax v. DaimlerChrysler Corp., 272 S.W.3d

521, 532 (Tenn. 2008) (holding that even where the burden of persuasion at trial is clear

and convincing evidence, as in the case of the award of punitive damages, we utilize the

material evidence standard to review the jury’s verdict and do not reweigh the evidence).

We respectfully disagree. Importantly, as previously discussed, because the

economic loss rule is applicable here, Commercial Painting is limited to its own contract

remedies. See Milan Supply Chain, 627 S.W.3d at 152 (quoting Lincoln General, 293

S.W.3d at 491 (“[T]he remedies available . . . should derive from the parties’

agreements[.]”)); Milan Supply Chain COA, 2019 WL 3812483, at *3–4 (citing Goodman

34

et al., supra, at 55–56) (noting that the economic loss doctrine limits parties to “their

contractual remedies”). Unlike the typical cases in which punitive damages have been

awarded in breach of contract cases, the parties here agreed to specific provisions related

to the damages that could be recovered in relation to the Project. See, e.g., Goff v. Elmo

Greer & Sons Const. Co., 297 S.W.3d 175, 187 (Tenn. 2009) (affirming an award of

punitive damages in a nuisance/contract case, noting the four arguments against the award,

none of which involved any limitation on liability contained in the parties’ contract);

Concrete Spaces, Inc. v. Sender, 2 S.W.3d 901, 909 (Tenn. 1999) (holding that the plaintiff

could elect between statutory penalties and punitive damages, but mentioning no limitation

on liability contained in the parties’ contract nor any argument that the punitive damages

were barred by any such contractual provision); Dog House Invs., LLC v. Teal Properties,

Inc., 448 S.W.3d 905, 916 (Tenn. Ct. App. 2014) (mentioning no limitation on liability nor

any argument that the punitive damages were barred by such a contractual provision);20

Riad v. Erie Ins. Exch., 436 S.W.3d 256 (Tenn. Ct. App. 2013) (same); Mohr v.

DaimlerChrysler Corp., No. W2006-01382-COA-R3-CV, 2008 WL 4613584, at *14

(Tenn. Ct. App. Oct. 14, 2008) (same); see also Rogers, 367 S.W.3d at 212 (Tenn. 2012)

(holding that the breach of contract was not egregious enough to support a claim for

punitive damages; including no discussion of the terms of the contract vis-à-vis a limitation

on damages); cf. Sprint Sols., Inc. v. LaFayette, No. 2:15-CV-2595-SHM-CGC, 2018 WL

3097027, at *16 (W.D. Tenn. June 22, 2018) (awarding punitive damages with no

discussion of a contractual provision limiting liability or an argument based on such a

provision).21

In this case, item 11.6 of the Subcontract contains a rather broad limitation on

damages that precludes recovery of anticipatory profit or indirect, special, or consequential

damages. Even further, this section provides that Commercial Painting “specifically agrees

that it shall not be entitled to assert, and it hereby waives, any Claims in quantum meruit,

interest on late payments, or any other measure of damages other than as specifically

provided in items 11.4 and 11.5 above.” Items 11.4 and 11.5, however, authorize

Commercial Painting generally only to receive the agreed upon Subcontract Sum. Finally,

item 5.6 of the Subcontract provides that Commercial Painting is not entitled to any delay

damages attributable to breach of contract, tort, or conduct not contemplated by the parties.

20

We also note that some of the cases involving punitive damages in a breach of contract action suggest

that an accompanying tort may be required. See Vic Davis Construction, 2019 WL 1300935, at *7 (citing

Restatement (Second) of Contracts § 355 (Am. Law Inst. 1981) (“Punitive damages are not recoverable for

a breach of contract unless the conduct constituting the breach is also a tort for which punitive damages are

recoverable.”)); Dog House Investments, 448 S.W.3d at 916 (granting the punitive damages not on the

breach of contract, but on a claim of promissory fraud); Next Generation, Inc. v. Wal-Mart, Inc., 49

S.W.3d 860, 866 (Tenn. Ct. App. 2000) (“[I]n the absence of fraud, there is no basis for punitive

damages[.]”). In this case, the economic loss doctrine prevents Commercial Painting from asserting a tort

claim.

21

Likewise, none of the foregoing cases contained any indication that the economic loss rule was considered

by the court.

35

Commercial Painting argues in its brief, however, that item 5.6 does not waive

punitive damages and that item 11.6 only concerns “termination rights.” Appellants

contend that these provisions affect a waiver of punitive damages. In resolving this dispute,

we keep the following principles in mind:

The central tenet of contract construction is that the intent of the contracting

parties at the time of executing the agreement should govern. The purpose

of interpreting a written contract is to ascertain and give effect to the

contracting parties’ intentions, and where the parties have reduced their

agreement to writing, their intentions are reflected in the contract

itself. Therefore, the court’s role in resolving disputes regarding

the interpretation of a contract is to ascertain the intention of the parties

based upon the usual, natural, and ordinary meaning of the language used.

Pylant v. Spivey, 174 S.W.3d 143, 151 (Tenn. Ct. App. 2003) (internal quotation marks

and citations omitted). “All provisions in the contract should be construed in harmony with

each other, if possible, to promote consistency and to avoid repugnancy between the

various provisions of a single contract.” Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn.

1999).

The damages allowed under the Subcontract are governed by items 5.6, 11.4, 11.5,

and 11.6. It is true that items 11.4 and 11.5 appear to apply only in the event of termination

of the contract by Weitz—11.4 applying to termination for cause, while 11.5 applies to

termination without cause. But item 11.6 is not so limited. Instead, it provides that “[i]n no

event” shall Weitz be liable for damages for anticipatory profit, or indirect, special, or

consequential damages. Further, the item states that Commercial Painting waives “any”

damages not specified in items 11.4 and 11.5. Nothing in this particular provision indicates

that these waivers apply only in the event of termination of the contract. Thus, we must

conclude that item 11.6 provides for a limitation on damages that applies even outside the

context of termination by Weitz.

Furthermore, we must conclude that the limitations contained in items 11.4, 11.5,

and 11.6 constitute a broad and unqualified waiver of damages that are not among those

permitted under the Subcontract. Cf. Peregrine Pharms., Inc. v. Clinical Supplies Mgmt.,

Inc., No. SACV 12-1608 JGB ANX, 2014 WL 3791567, at *6 (C.D. Cal. July 31, 2014)

(citing Food Safety Net Servs. v. Eco Safe Sys. USA, Inc., 209 Cal.App.4th 1118, 1128,

147 Cal.Rptr.3d 634 (2012)) (holding that contractual language that “‘in no event’ is

[defendant] liable for consequential, incidental, special or indirect damages” was

“broad and unqualified language” that constituted a valid limitation on the plaintiff’s

claims). Specifically, item 11.6 limits the damages that can be recovered to only those

damages specified in items 11.4 and 11.5. These items limit the types of damages that may

be recovered to amounts related to the unpaid balance of the Subcontract Sum and for

“work properly and timely performed and for proven loss with respect to unused materials,

36

equipment, machinery, and tools[.]” Thus, these provisions clearly entitled Commercial

Painting to compensation for the work it performed and its own costs.22 Punitive damages,

however, are not intended to compensate a wronged party; they serve as punishment for

bad conduct. Coffey v. Fayette Tubular Prod., 929 S.W.2d 326, 328 (Tenn. 1996)

(“[P]unitive damages are not intended to compensate an injured plaintiff but may be

awarded by the jury for the purposes of punishing wrongdoers and deterring them from

similar conduct in the future.”). Because the Subcontract clearly provides that the damages

that are permitted are compensatory in nature and “any” other measure of damages was

waived by Commercial Painting, we must conclude that the award of punitive damages is

barred by the plain language of the parties’ agreement.

Commercial Painting offers no authority to suggest that a contractual waiver of

punitive damages is wholly unenforceable under any circumstances. Indeed, limitations on

liability are not disfavored in Tennessee:

Historically, the “freedom of contract” has insured “that parties to an

agreement have the right and power to construct their own bargains.” Blake

D. Morant, Contracts Limiting Liability: A Paradox with Tacit Solutions, 69

Tul. L. Rev. 715, 716 (1995). As with other types of contracts, the “terms of

a lease should be binding on the parties thereto unless there is some

overriding social policy that would be undermined by their

enforcement.” Restatement (Second) of Property, § 5.6 (1977). This Court

has consistently recognized that the right of parties to allocate liability for

future damages through indemnity clauses, generally, is not contrary to

public policy. See Crawford v. Buckner, 839 S.W.2d 754, 756 (Tenn.

1992); Houghland v. Security Alarms & Services, Inc., 755 S.W.2d 769,

773 (Tenn. 1988) (liability of burglar alarm service was limited by an

exculpatory clause); Turner, 503 S.W.2d at 191 (customer assumed the risk

of injury from negligence of a health spa); Chazen v. Trailmobile, Inc., 215

Tenn. 87, 384 S.W.2d 1 (1964) (commercial lease absolved both landlord

and tenant from liability for a loss resulting from fire); Moss v. Fortune, 207

Tenn. 426, 340 S.W.2d 902 (1960) (renter assumed the risk incident to injury

from the hiring and riding of a horse). Indeed, the allocation of risk agreed

to by parties with equivalent bargaining powers in a commercial setting

serves a particularly valid purpose where, as here, the contract delineates the

parties’ duty to obtain and bear the cost of insurance. See Evco Corp. v.

Ross, 528 S.W.2d 20, 23 (Tenn. 1975); Kellogg Co. v. Sanitors, Inc., 496

S.W.2d 472, 473 (Tenn.1973). Thus, even broad transfers of liability, where

unambiguous, should be honored.

22

Item 11.5 further provides that that the damages are limited to those recovered by Weitz from the owner.

This provision has no relevancy to the question of punitive damages, but only to the compensation that is

owed under the Subcontract.

37

Planters Gin Co. v. Fed. Compress & Warehouse Co., 78 S.W.3d 885, 892–93 (Tenn.

2002). Although the Planters Gin case speaks often in terms of indemnity clauses, this

Court has applied the rule to limitations on liability, such as are present in this case. See

Underwood v. Nat’l Alarm Servs., Inc., No. E2006-00107-COA-R3-CV, 2007 WL

1412040, at *5 (Tenn. Ct. App. May 14, 2007) (applying the Planters Gin framework to a

case involving a “limitation of liability/liquidated damages clause”). Courts from other

states have specifically held that contractual waivers of punitive damages may be upheld

in commercial contracts. See Bombardier Aerospace Corp. v. SPEP Aircraft Holdings,

LLC, 572 S.W.3d 213, 232 (Tex. 2019) (holding that a limitation of damages clause in a

commercial contract that prohibited the award of punitive damages was enforceable, even

where fraud occurred, because the party complaining did not seek to rescind the agreement

in its entirety, but chose to attempt to enforce the agreement without being bound by the

limitation on damages).23

There are, of course, some exceptions to this rule. See Planters Gin, 78 S.W.3d at

893 (discussing exceptions related to indemnity agreements in construction settings,

landlord/tenant agreements, and in medical settings). In a fashion, Commercial Painting

argues that one exception is present in this case: fraud. Specifically, Commercial Painting

argues that it defies logic to allow a party to take advantage of the limiting terms of a

contract when the contract was procured by fraud. Commercial Painting is correct, in part.

Specifically, the Tennessee Supreme Court has held that “[l]imitations against liability for

negligence or breach of contract have generally been upheld in this state in the absence of

fraud or overreaching.” Houghland, 755 S.W.2d at 773. The problem, of course, with this

argument is that under economic loss rule and the limited fraud exception adopted by the

Tennessee Supreme Court, Commercial Painting cannot utilize a claim of fraud to avoid

the consequences of its own contractual agreements. See Milan Supply Chain, 627 S.W.3d

at 155. Indeed, limiting parties to their agreed upon contractual remedies is the very

purpose of the economic loss rule when applicable to a situation that is governed by a

contract. See Milan Supply Chain COA, 2019 WL 3812483, at *4. And, when the rule is

applicable, this limitation applies even where fraud is present if the contract is between

sophisticated commercial entities and results in only economic losses, as is the case here.

See Milan Supply Chain, 627 S.W.3d at 155. As such, to allow punitive damages that have

been clearly waived under the Subcontract would essentially be to negate the entire purpose

of the economic loss rule as it applies in this specific case. We decline to do so. Because

Commercial Painting offers no other basis from which to avoid the consequences of its

own agreements, we reverse the award of punitive damages as not authorized by the

23

The parties agree that Commercial Painting abandoned its claim for rescission. Specifically, in its brief,

Commercial Painting asserts that it had the choice to either seek rescission of the contract “or take the

benefits of the contract it was fraudulently induced to enter, and pursue its damages available under the

contract.” According to Commercial Painting, it could not pursue rescission because it could not be placed

in the same position it occupied prior to the transaction. But as this case clearly shows, neither was

Commercial Painting satisfied with the “damages available under the contract.”

38

Subcontract. All remaining issues related to the punitive damages award are therefore

pretermitted.

E.

We next address Appellants’ contention that the trial court failed to independently

evaluate the jury’s verdict or act as the thirteenth juror in this case. In particular, Appellants

urge us to reverse the trial court’s ruling because “the record provides no insight into the

trial court’s decision-making process[,]” citing Smith v. UHS of Lakeside, Inc., 439

S.W.3d 303 (Tenn. 2014). Respectfully, Appellants’ argument misapprehends the proper

framework applicable to this question.

Importantly, UHS of Lakeside involved a question of summary judgment. Id. at

304. Under Rule 56.04 of the Tennessee Rules of Civil Procedure, “[t]he trial court shall

state the legal grounds upon which the court denies or grants [a] motion” for summary

judgment. The rule in UHS of Lakeside requiring the trial court to thoroughly explain its

reasoning applies as a result of this mandate. We have also expanded this rule to other cases

in which trial courts are required to explain their rulings, such as bench trials. See, e.g., In

re Colton B., No. M2017-00997-COA-R3-PT, 2017 WL 6550620, at *3 (Tenn. Ct. App.

Dec. 22, 2017) (“Thus, it appears that the holding in [UHS of Lakeside] is equally

applicable in other cases where trial courts are required to make findings of fact and

conclusions of law, such as following bench trials in termination proceedings.”).

It is true that trial courts are required to make findings of fact and conclusions of

law in support of punitive damages awards. See Hodges v. S.C. Toof & Co., 833 S.W.2d

896, 902 (Tenn. 1992) (“After a jury has made an award of punitive damages, the trial

judge shall review the award, giving consideration to all matters on which the jury is

required to be instructed. The judge shall clearly set forth the reasons for decreasing or

approving all punitive awards in findings of fact and conclusions of law demonstrating a

consideration of all factors on which the jury is instructed.”). But we have reversed the

award of punitive damages in this case. As such, the only remaining damages awarded by

the jury are the compensatory damages.

Appellants are correct that when the motion for new trial was filed, the trial court

was then “under a duty to independently weigh the evidence and determine whether the

evidence ‘preponderate[d]’ in favor of or against the verdict.” Blackburn v. CSX Transp.,

Inc., No. M2006-01352-COA-R10-CV, 2008 WL 2278497, at *6 (Tenn. Ct. App. May 30,

2008) (footnote omitted) (citing Woods v. Herman Walldorf & Co., Inc., 26 S.W.3d 868,

873 (Tenn. Ct. App. 1999); Shivers v. Ramsey, 937 S.W.2d 945, 947 (Tenn. Ct. App.

1996); Witter v. Nesbit, 878 S.W.2d 116, 121 (Tenn. Ct. App. 1993)). This role is referred

to as the “thirteenth juror.” Id. (citing Holden v. Rannick, 682 S.W.2d 903, 904–05 (Tenn.

1984)). When the trial court fulfills this duty, however, it is not required to make detailed

findings of fact or conclusions of law explaining its reasoning:

39

The discretion permitted a trial judge in granting or denying a new trial is so

wide that our courts have held that he or she does not have to give a reason

for his ruling. If the trial judge does give reasons, the appellate court will

only look to them for the purpose of determining whether the trial court

passed upon the issue and was satisfied or dissatisfied with the verdict. If the

trial judge does not give a reason for her action, the appellate courts will

presume she did weigh the evidence and exercised her function as thirteenth

juror.

Buckley v. Elephant Sanctuary in Tennessee, Inc., -- S.W.3d --, 2021 WL 2450456, at *5

(Tenn. Ct. App. June 16, 2021), perm. app. denied (Tenn. Oct. 14, 2021) (quoting

Blackburn, 2008 WL 2278497, at *7 (citation omitted)). Thus, a trial court need not make

detailed findings to support its approval of a jury verdict.

From our reading of Appellants’ brief, they do not take issue with the trial court’s

order approving the jury’s verdict or the order denying the motion for new trial. Instead,

they are primarily concerned with the December 12, 2018 order approving the award of

punitive damages; we, however, have reversed the award of punitive damages on other

grounds. Given that Appellant’s argument under UHS of Lakeside does not appear directed

specifically at the orders approving the compensatory damages and the law clearly provides

the trial court with wide discretion in approving a jury verdict, we decline to assign error

as to those orders. See Sneed v. Bd. of Pro. Resp. of Supreme Ct., 301 S.W.3d 603, 615

(Tenn. 2010) (“It is not the role of the courts, trial or appellate, to research or construct a

litigant’s case or arguments for him or her, and where a party fails to develop an argument

in support of his or her contention or merely constructs a skeletal argument, the issue is

waived.”).

Thus, we are left with the jury’s verdict awarding Commercial Painting

compensatory damages for breach of contract in the amount of $1,729,122.46. Although

the economic loss rule bars Commercial Painting from recovering in tort, it is clearly

entitled to seek compensation for breach of contract against Weitz. Throughout their brief,

Appellants take issue with the award of compensatory damages in various respects. For

example, in the facts section of their brief, Appellants question whether Commercial

Painting should be entitled to any compensatory damages when it made a profit on the

Project. In their conclusion, Appellants ask that the verdict from the 2016 bench trial of

$450,000.00 be reinstated. We note, however, that Appellants have not designated any

issue that the jury’s award of $1,729,122.46 for breach of contract was unsupported by

material evidence. See Crabtree Masonry Co. v. C & R Const., Inc., 575 S.W.2d 4, 5

(Tenn. 1978) (“It is the time honored rule in this State that in reviewing a judgment based

upon a jury verdict the appellate courts are not at liberty to weigh the evidence or to decide

where the preponderance lies, but are limited to determining whether there

is material evidence to support the verdict[.]”). Nor have they properly raised and argued

that this award is somehow barred by the Subcontract. As we previously explained, errors

40

are generally waived when they are not designated as issues, but merely argued in the body

of a brief. Childress v. Union Realty Co., 97 S.W.3d 573, 578 (Tenn. Ct. App. 2002).

Because Appellants designated no issue that would undermine the jury’s verdict for

compensatory damages, other than the issues we have already analyzed, we must affirm

the verdict of $1,729,122.46 in favor of Commercial Painting for breach of contract.

F.

The parties next dispute whether the trial court erred in awarding pre- and post-

judgment interest in this case. In support of its argument that an award of interest was not

authorized by the Subcontract, Appellants again cite item 11.6, which expressly provides

that Commercial Painting waives “any Claims . . . [for] interest on late payments, or any

other measure of damages other than as specifically provided in items 11.4 and 11.5

above.” In support of its claim for interest, however, Commercial Painting relies on

provisions of the Prime Contract that it argues were expressly incorporated into the

Subcontract. Specifically, Commercial Painting cites item 11.7 of the Prime Contract,

which specifically allows interest on “[a]ny amounts payable hereunder which are not paid

when due.” As support for its argument that this provision is applicable to a claim under

the Subcontract, Commercial Painting cites item 1.2 of the Subcontract, which provides

that Commercial Painting “shall be entitled to the same benefits and rights which [Weitz],

under the Prime Contract, is granted against the Owner.” Commercial Painting also cites a

portion of item 1.8, which provides that the “Subcontract Documents,” including the Prime

Contract, “form the contract between the parties thereto, and are as fully a part of the

Agreement as is attached therefore or repeated therein.”

The problem with Commercial Painting’s argument, however, is that it omits key

language from item 1.8 of the Subcontract. Specifically, item 1.8 states that “[i]n the event

of any conflicts in the Subcontract Documents, the provisions shall govern in priority in

the order listed in this Section 8.”24 Item 11.6 governing the damages available is contained

in Exhibit D to the Subcontract and is therefore fifth in the order of priority; the Prime

Contract is listed as ninth in the order of priority.25 So the Subcontract clearly provides that

where a conflict arises between the language of the Prime Contract and item 11.6, item

11.6 controls. Thus, the Subcontract clearly and unequivocally waives any claim for

24

Item 1.8 contains some caveats to this rule regarding issues of performance and conflict with large-scale

drawings. Neither is at issue here.

25

Specifically, item 1.8 states as follows:

The “Subcontract Documents” consist of (i) Exhibit F, any Modifications to the Standard

Form subcontract Agreement Between [Weitz] and [Commercial Painting] (“Agreement”)

entered into after the date of the Agreement; (ii) Exhibit A; (iii) the Agreement; (iv) Exhibit

C; (v) Exhibit D; (vi) Exhibit B; (vii) any other Exhibits to the Agreement in letter order;

(viii) [Commercial Painting’s] payment bond and its performance bond, if required; and

(ix) the Prime Contract.

41

interest on late payments. Again, Commercial Painting raises no argument that such an

agreement is unenforceable. Indeed, Commercial Painting points to a statute that generally

permits parties to contract regarding interest. See Tenn. Code Ann. § 47-14-123 (“In

addition, contracts may expressly provide for the imposition of the same or a different rate

of interest to be paid after breach or default within the limits set by § 47-14-103.”); see also

Tenn. Code Ann. § 47-14-103 (providing for maximum interest rates). As such, we must

conclude that Commercial Painting waived any claim for interest in this case. The award

of pre- and post-judgment interest is therefore reversed.

G.

The next issue involves attorney’s fees. The trial court awarded Commercial

Painting costs and attorney’s fees in the amount of $1,103,549.00. It is undisputed that the

Subcontract provides as follows:

In the event it shall become necessary for either party to institute legal

proceedings against the other party for recovery of any amounts due and

owing under the Agreement, it is expressly agreed that the prevailing party

in any such action shall be entitled to recover from the non-prevailing party

all costs, including reasonable attorney’s fees, of pre-suit collection attempts,

suit, and post judgment or settlement collection including those incurred on

appeal.

As our high court has explained of “mandatory fee award provision[s]” of this type:

Our courts long have observed at the trial court level that parties are

contractually entitled to recover their reasonable attorney’s fees when they

have an agreement that provides the prevailing party in a litigation is entitled

to such fees. In such cases, the trial court does not have the discretion to set

aside the parties’ agreement and supplant it with its own judgment. The sole

discretionary judgment that the trial court may make is to determine the

amount of attorney’s fees that is reasonable within the circumstances.

Eberbach v. Eberbach, 535 S.W.3d 467, 478 (Tenn. 2017) (citations omitted). When

attorney’s fees are limited to a “prevailing party,” however, the trial court must also

determine which party prevailed. According to the Tennessee Supreme Court:

A “prevailing party” is “[a] party in whose favor a judgment is rendered,

regardless of the amount of damages awarded.” Buckhannon [Board &

Care Home, Inc. v. West Virginia Department of Health & Human

Resources], 532 U.S. [598,] 603, 121 S.Ct. 1835 [149 L.Ed.2d 855 (2001)].

The Court has also noted that a party need not attain complete success on the

merits of a lawsuit in order to prevail. Rather, a prevailing party is

42

one who has succeeded “‘on any significant issue in litigation which

achieves some of the benefit the parties sought in bringing suit.’” Hensley v.

Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 76 L.Ed.2d 40

(1983) (quoting Nadeau v. Helgemoe, 581 F.2d 275, 278–79 (1st Cir.

1978)).

Fannon v. City of LaFollette, 329 S.W.3d 418, 431 (Tenn. 2010).

Commercial Painting contends that it was the prevailing party in the trial court. As

such, it asserts that the attorney fees award by the trial court should be affirmed, and asks

that it be awarded attorney’s fees on appeal. In contrast, Appellants assert that Commercial

Painting should not be awarded any attorney’s fees; Appellants do not, however, seek an

award of attorney’s fees in their favor, either at trial or on appeal.

We conclude that despite the reversal of much of the damages in this case,

Commercial Painting did prevail in the trial court, in that it was awarded substantial

compensatory damages. Because the costs and attorney’s fees awarded by the trial court

do not segregate those costs and fees solely associated with the compensatory damages

award, however, we deem it necessary to vacate the award and remand to the trial court for

reconsideration. On remand, the trial court shall determine the reasonable costs and

attorney’s fees incurred by Commercial Painting in securing the award of compensatory

damages in the trial court proceedings. We must conclude, however, that in obtaining

reversal of a significant portion of the damages awarded by the jury in this appeal,

Appellants are properly termed the prevailing party of this appeal. Commercial Painting is

therefore not entitled to attorney’s fees incurred on appeal.

IV. CONCLUSION

The judgment of the trial court is affirmed in part, reversed in part, vacated in part,

and remanded for further proceedings consistent with this Opinion. Costs of this appeal are

taxed to Appellee Commercial Painting, Inc., for which execution may issue if necessary.

S/ J. Steven Stafford

J. STEVEN STAFFORD, JUDGE

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