Ladd Landing, LLC v. Tenn. Valley Auth.

• Decision Date: 14 June 2012
• Docket Number: No. 3:11–CV–596.,3:11–CV–596.
• Citation: 874 F.Supp.2d 727
• Parties: LADD LANDING, LLC, et al., Plaintiffs, v. TENNESSEE VALLEY AUTHORITY, Defendant.
• Court: U.S. District Court — Eastern District of Tennessee

874 F.Supp.2d 727

LADD LANDING, LLC, et al., Plaintiffs,

v.TENNESSEE VALLEY AUTHORITY, Defendant.

No. 3:11–CV–596.

United States District Court, E.D. Tennessee.

June 14, 2012.

Elizabeth A. Alexander, Elizabeth J. Cabraser, Mark P. Chalos, Lieff, Cabraser, Heimann & Bernstein, LLP, Nashville, TN, Wayne A. Ritchie, II, Ritchie, Dillard, Davies & Johnson, P.C., Knoxville, TN, for Plaintiff.

Brent R. Marquand, Edwin W. Small, Peter K. Shea, David D. Ayliffe, Elizabeth A. Ward, James S. Chase, Tennessee Valley Authority, Knoxville, TN, for Defendant.

MEMORANDUM OPINION

THOMAS A. VARLAN, District Judge.

This civil action is before the Court on defendant, Tennessee Valley Authority's (“TVA's”), Motion for Judgment on the Pleadings as to Three Plaintiffs, Eye Centers of Tennessee, LLC, Browder Hardware Inc., and Sean D. Stephens, for Failure to State a Claim Upon Which Relief Can Be Granted [Doc. 13]. In the motion, TVA asserts that these plaintiffs cannot recover for solely economic loss without any allegation of injury to person or physical damage to property. Plaintiffs have responded in opposition [Doc. 21] to TVA's motion, and TVA has filed a reply brief [Doc. 36]. After carefully considering the parties' arguments and the relevant law, and for the reasons stated herein, TVA's motion [Doc. 13] will be GRANTED and the claims of plaintiffs, Eye Centers of Tennessee, LLC, Browder Hardware Inc., and Sean D. Stephens, will be DISMISSED from this action.

I. Relevant Facts

This action, brought by forty-four plaintiffs, arises out of the December 22, 2008 failure of a coal ash containment dike at TVA's Kingston Fossil Plant (the “KIF plant”). See Mays v. TVA, 699 F.Supp.2d 991, 1000–04 (E.D.Tenn.2010). As a result of this dike failure, approximately 54 million cubic yards of coal ash sludge spilled from an 84–acre containment area to an adjacent area of about 300 acres, consisting of primarily the Watts Bar Reservoir, the Clinch and Emory Rivers, and government and privately owned shoreline properties. Id. In general, plaintiffs allege that they own property and/or own and conduct business in the area of the coal ash spill and that TVA is liable to them in tort under theories of negligence, gross negligence, trespass, strict liability, nuisance, and negligence per se for alleged damages to real and personal property, diminution in value of real property and/or lost rental value, lost revenue and profit, loss of income, and loss of use and enjoyment of real property and/or business losses, all arising and caused by the coal ash spill [ See Doc. 1].

II. Standard of Review

A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) is subject to the same standard of review as a motion brought under Federal Rule of Civil Procedure 12(b)(6). Penny/Ohlmann/Nieman, Inc. v. Miami Valley Pension Corp., 399 F.3d 692, 697 (6th Cir.2005). In reviewing either a motion to dismiss under Rule 12(b)(6) or a motion for judgment on the pleadings under Rule 12(c), the Court “must construe the complaint in a light most favorable to plaintiffs, accept all well-pled factual allegations as true, and determine whether plaintiffs undoubtedly can prove no set of facts in support of those allegations that would entitle them relief.” Bishop v. Lucent Technologies, Inc., 520 F.3d 516, 519 (6th Cir.2008) (citing Harbin–Bey v. Rutter, 420 F.3d 571, 575 (6th Cir.2005)). Thus, the “complaint must contain either direct or inferential allegations respecting all material elements to sustain a recovery under some viable legal theory.” Id. (quoting Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir.2005)).

Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). This pleading standard does not require “ ‘detailed factual allegations.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). However, “[a] pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do’ ”; “[n]or does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Id., 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 555, 557, 127 S.Ct. 1955). Rather, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id., 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955). Moreover, “[a]lthough for the purposes of a motion to dismiss [a court] must take all of the factual allegations in the complaint as true, [it] ‘[is] not bound to accept as true a legal conclusion couched as a factual allegation.’ ” Iqbal, 129 S.Ct. at 1949–50 (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955) (internal quotation marks omitted).

III. Analysis

Only three of the forty-four plaintiffs in this action are the subject of TVA's motion: Eye Centers of Tennessee, LLC (“Eye Centers”), an eye care center, Browder Hardware Inc. (“Browder”), a convenience store, and Sean D. Stephens (“Stephens”), a real estate agent. TVA asserts that, according to the allegations in the complaint, as of December 22, 2008, the date of the ash spill, plaintiffs did not own any real property that was physically damaged by the spill. TVA asserts that plaintiffs only allege that the “business income” of their respective businesses “diminished in value” as a result of the spill [Doc. 1, ¶¶ 37, 48, 64]. TVA argues that per the economic loss rule recognized in Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303, 48 S.Ct. 134, 72 L.Ed. 290 (1927) and absent allegations of personal injury or physical damage to property, plaintiffs cannot recover solely for alleged economic losses.

Plaintiffs disagree, arguing that TVA's motion is premature and that their complaint contains sufficient factual allegations that TVA's conduct leading up to the coal ash spill caused damage to plaintiffs' businesses and property interests, all of which are located near and around the area of the spill. Plaintiffs point to factual allegations contained in the complaint and affidavits from plaintiffs or their principals and/or agents which allege that since the ash spill, their businesses have not grown at projected rates and that their income, business revenues, and profits have decreased as a result of the spill [ See Doc. 21–1]. Plaintiffs also argue that the economic loss rule is inapplicable to their claims because under Tennessee law, that rule is limited to claims for products liability or claims involving the sale of goods.

In United Textile Workers of Am., AFL–CIO v. Lear Siegler Seating Corp. ( “Lear Siegler” ), 825 S.W.2d 83 (Tenn.Ct.App.1990), perm. app. denied, the Tennessee Court of Appeals traced the origins of the economic loss rule to Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303, 48 S.Ct. 134, 72 L.Ed. 290 (1927), noting that in Robins, the “rule was expressed that liability is not legally recognized for indirect economic damages.” Lear Siegler, 825 S.W.2d at 83–84. In Robins, the defendant, a dry dock company, negligently damaged a ship's propeller while the ship was at dry dock, resulting in a delay in the ship being returned to service. Id., 275 U.S. at 307–08, 48 S.Ct. 134. As a result of the defendant's negligence, the plaintiff, who was the time charterer of the ship, lost the use of the ship for the period of the delay and sued the defendant in tort for economic losses. Id. The United States Supreme Court reversed the court of appeals, which had allowed the plaintiff to recover, noting that “as a general rule ... a tort to the person or property of one man does not make the tort-feasor liable to another merely because the injured person was under a contract with that other unknown to the doer of the wrong. The law does not spread that far.” Id. at 309, 48 S.Ct. 134 (internal citation omitted); see also Lear Siegler, 825 S.W.2d at 83–84.

The issue identified by the Tennessee Court of Appeals in Lear Siegler was “whether the policy of the State of Tennessee should permit recovery for indirect economic loss absent personal injury or property damage.” Id., 825 S.W.2d at 83. The plaintiffs, hourly workers at a facility in an industrial park, had brought the action for lost earnings against the defendant, a factory located in the industrial park. Id. Inside the defendant's factory, the defendant had stacked metal racks next to a propane tank storage area. Id. The metal racks eventually fell into the tank storage area, causing a tank to leak and resulting in the evacuation of the industrial park, including the facility where the plaintiffs worked. Id. The plaintiffs sued the defendant, arguing that the defendant was liable for lost wages they sustained for the day the park was closed. Id. Notwithstanding the defendant's negligence, the trial court denied recovery based on the economic loss rule “because no physical harm accompanied the economic loss.” Id. at 84. Citing Robins, the Tennessee Court of Appeals affirmed that ruling, concluding “that this Court should follow the majority rule and disallow recovery for purely economic loss absent physical injury or property damage.” Id. at 87.

As noted by plaintiffs, a group of cases from a federal court sitting in Tennessee address the economic loss rule under Tennessee law. See Ham v. Swift Transp. Co., 694 F.Supp.2d 915 (W.D.Tenn.2010); Loft v. Swift Transp. Co., 694 F.Supp.2d 923 (W.D.Tenn.2010); Pascarella v. Swift Transp. Co., 694 F.Supp.2d 933 (W.D.Tenn.2010); Broadnax v....