Plaintiff Permitted to Proceed on Multiple Theories of Liability

In Commercial Painting Co., Inc. v. The Weitz Co., LLC, No. W2013-01989-COA-R3-CV (Tenn. Ct. App. June 20, 2016), the Court of Appeals reversed a trial court’s grant of summary judgment on claims for negligent and intentional misrepresentation.

Plaintiff was a drywall subcontractor, and defendant was a general contractor with whom plaintiff had entered into an agreement to perform work on a construction project. According to the complaint, plaintiff alleged that:

  • Defendant had revised the project schedule with the project owner to show that a longer construction timeline was needed, yet the “out-of-date and erroneous schedule” was used when negotiating with plaintiff;
  • Defendant knew that the scheduled attached to the contract “was outdated by a period of approximately eight months;”
  • Defendant told plaintiff that it would be the only company performing drywall work, “even thought the Defendant knew, or otherwise intended to supplement” plaintiff’s work with another subcontractor;
  • When plaintiff was eventually given a revised schedule, the schedule given was “fraudulent and unrealistic” and did not actually reflect the dates agreed to by the property owner;
  • Defendant “improperly supplemented the work of Plaintiff, falsely claiming that the Plaintiff was not completing its work according to schedules promulgated by [defendant] and which [defendant] knew created false and improper guidance for completion of the project;”
  • Defendant used the supplementation by another subcontractor to back charge plaintiff and pay less than the contracted amount.

Plaintiff brought suit for breach of contract and misrepresentation, and the trial court granted defendant’s motion for summary judgment as to the misrepresentation claims. The trial court ruled that plaintiff could not “establish it justifiably relied upon any representations with regard to the construction schedules, durations, or sequencing of the construction project at issue here or that it suffered damages as a result of the alleged fraud above and beyond those damages allegedly incurred for breach of contract.” The Court of Appeals reversed.

Plaintiff made claims for both intentional and negligent misrepresentation, both of which required plaintiff “to prove that it reasonably relied on a misrepresentation made by [defendant].” Defendant argued that plaintiff presented no evidence regarding its reliance, so the Court of Appeals reviewed the evidence offered by plaintiff. In support of its claims, plaintiff pointed out that an amendment to the original agreement with defendant “required [defendant] to pass on to [plaintiff] the full amount of the six-month contract extension that [defendant] obtained from the project owner,” but that defendant only passed along an extension of 4+ months. In an affidavit, plaintiff’s president stated that had plaintiff known that defendant intended to “supplement and accelerate [plaintiff’s] work on the project in order to make up for construction delays that were not the responsibility of [plaintiff],” or had it known that defendant would not pass on construction extensions as agreed, plaintiff “would not have submitted its bid on the project nor executed the subcontract.”

Plaintiff also submitted an expert affidavit that explained that certain statements from defendant were “very misleading,” and that defendant “attempted to achieve early completion by wrongfully compressing the durations for [plaintiff’s] remaining work and failing to pass through to [plaintiff] the time extension granted” by the owner.

Plaintiff asserted on appeal that a claim for misrepresentation could be based on “the creation of a false impression about a material fact.” The appellate court apparently endorsed this argument, finding that plaintiff “relied on the overall performance duration set forth in the initial schedule and reasonably anticipated that it would have the opportunity to perform the entire project without having its work accelerated and supplemented by others due to a compression in the overall schedule that [defendant] intended to impose before it even executed the subcontract[.]” The Court ultimately held that, viewing the evidence in the light most favorable to plaintiff, plaintiff had “shown there [was] a genuine issue of material fact with regard to each element of its intentional misrepresentation claim and its negligent misrepresentation claim.”

Importantly, the Court noted that the fact that plaintiff had won at trial on its breach of contract claim should not impact its ability to assert misrepresentation claims. The Court stated that plaintiff was “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.” The Court pointed out that plaintiff was not required to “choose between various causes of action just because the damages available may overlap,” which was especially important here because a successful claim of intentional misrepresentation may entitle a plaintiff to punitive damages.

The Court of Appeals clearly got this case right—plaintiff had well documented, well supported claims for misrepresentation. From the trial court’s short ruling, it appeared that its decision was based at least partially on the fact that the misrepresentation and breach of contract damages would overlap, but that is an inappropriate reason to grant summary judgment. The Court of Appeals correctly reinstated these misrepresentation claims to move forward to trial.