SPO Go Holdings, Inc. v. W & O Construction Co.
187 F. Supp. 3d 887
M.D. Tenn.2016Background
- SPO Go Holdings owned King’s Creek Golf Club (an Arnold Palmer Signature course) from 2009–2015; the City of Spring Hill contracted W&O to extend a sewer line that traversed the course.
- Plaintiff granted the city a 20-foot permanent sewer easement; the construction contract was between W&O and the city; the easement required contractors to restore property to a similar condition.
- Contract (with addendum) required Phase I (work affecting the course) to be completed in 120 days, required restoration by contractors familiar with turf/irrigation, and gave Plaintiff final approval of restoration work.
- Phase I began Nov. 2014, deadline extended from March 2, 2015 to May 4, 2015 without Plaintiff’s consent; W&O reduced manpower and did not finish until Aug. 7, 2015.
- W&O refused to use Plaintiff-approved golf-course restoration contractors and instead attempted restoration itself; Plaintiff hired Turf Company for $157,000 to complete restoration and seeks that and other damages (lost rounds, memberships, maintenance).
- Plaintiff sued Spring Hill and W&O alleging breach of contract and negligence; W&O moved to partially dismiss the negligence claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of a duty in negligence | W&O owed a duty to repair construction damage and use Plaintiff-approved, qualified restoration contractors; its conduct risked harm to Plaintiff’s property | W&O had no tort duty to Plaintiff beyond its contract with the city; deadlines and extensions governed by the contract and W&O was not party to the easement | Court: duty question not resolved at dismissal. Complaint alleges duty to restore property and refusal to use qualified contractors; similar precedents allow tort claims where contract/easement occasion the tort duty. Negligence claim survives. |
| Applicability of the economic loss doctrine | Plaintiff alleges property damage (not purely economic loss) plus lost profits; tort recovery is allowed for property damage caused by negligence | Economic loss doctrine bars tort recovery for purely economic losses arising from contract-related disputes; Plaintiff seeks only economic losses tied to delay | Court: economic loss doctrine does not bar claim at this stage. Plaintiff alleges property damage to the course and loss of use; doctrine is limited and may not extend to service contracts. Negligence claim survives. |
Key Cases Cited
- Fritz v. Charter Township of Comstock, 592 F.3d 718 (6th Cir. 2010) (pleading plausibility standard and taking well-pleaded facts as true on Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for complaints)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must state plausible claim, not mere labels/conclusions)
- McClung v. Delta Square Ltd. P’ship, 937 S.W.2d 891 (Tenn. 1996) (elements of negligence and duty as question of law)
- Oman Constr. Co. v. Tenn. Cent. Ry. Co., 370 S.W.2d 563 (Tenn. 1963) (contract/easement may furnish occasion for tort liability for property damage caused by construction)
- Lincoln Gen. Ins. Co. v. Detroit Diesel Corp., 293 S.W.3d 487 (Tenn. 2009) (discussion of economic loss doctrine and preservation of tort recovery for personal injury and property damage)
- John Martin Co. v. Morse Diesel, Inc., 819 S.W.2d 428 (Tenn. 1991) (negligent misrepresentation/economic loss in construction context)
- Acuity v. McGhee Eng’g, Inc., 297 S.W.3d 718 (Tenn. Ct. App. 2008) (economic loss doctrine bars negligence absent property/person injury and absent privity)