Court Opinion

ID: 9897596
Source: CourtListenerOpinion
Date Created: 2023-11-14 19:18:30.809252+00
Date Added: 2024-06-11T09:14:34.983297
License: Public Domain

09/28/2023
                 IN THE SUPREME COURT OF TENNESSEE
                             AT JACKSON
                              November 9, 2022 Session

COMMERCIAL PAINTING COMPANY INC. v. THE WEITZ COMPANY
                      LLC ET AL.

                  Appeal by Permission from the Court of Appeals
                        Chancery Court for Shelby County
                  No. CH-06-1573 JoeDae L. Jenkins, Chancellor
                      ___________________________________

                             No. W2019-02089-SC-R11-CV
                         ___________________________________

The economic loss doctrine generally precludes a contracting party who suffers only
economic losses from recovering damages in tort. In Tennessee, the application of this
doctrine is limited to products liability cases. In this appeal, we consider whether the
economic loss doctrine should be expanded to apply outside the products liability context.
A jury awarded compensatory and punitive damages to a drywall subcontractor in a suit
against a general contractor under theories of breach of contract and tort. The Court of
Appeals applied the economic loss doctrine to preclude the recovery of damages in tort in
a suit between sophisticated commercial entities. The intermediate court, in part, affirmed
the award of compensatory damages for breach of contract, dismissed the tort claim, and
reversed the award for punitive damages. We hold the economic loss doctrine only applies
in products liability cases and should not be extended to other claims.

  Tenn. R. App. P. 11 Appeal by Permission; Judgment of the Court of Appeals
Reversed; Judgment of the Trial Court Affirmed in Part; Remanded to the Court of
                                    Appeals

SHARON G. LEE, J., delivered the opinion of the Court, in which ROGER A. PAGE, C.J., and
HOLLY KIRBY, J., joined. SARAH K. CAMPBELL, J., filed a dissenting opinion, in which
JEFFREY S. BIVINS, J., joined.

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

Philip E. Beck, Atlanta, Georgia, John A. Templer, Jr., Des Moines, Iowa, and Jeffrey C.
Smith, Germantown, Tennessee, for the appellees, The Weitz Company, LLC, Federal
Insurance Company, and St. Paul Fire & Marine Insurance Company.
Gregory L. Cashion, Nashville, Tennessee, and Leah Pilconis, Arlington, Virginia, for the
Amici Curiae Associated General Contractors of America and Associated General
Contractors of Tennessee, Inc.

                                                 OPINION

                                                       I.

       This case stems from a contract dispute between a general contractor, The Weitz
Company, LLC, and its drywall subcontractor, Commercial Painting Company, Inc. Weitz
was the general contractor on a multi-building retirement community in Shelby County. In
December 2004, the parties entered into a contract for Commercial Painting to perform
drywall work on the project.1 The contract included a schedule detailing the phases and
timing of construction. Weitz agreed to pay Commercial Painting $3,222,400 for its work.
Change orders later increased the amount to $3,315,189. The parties had various disputes
as the project progressed.

       By the end of the contract, Weitz had paid Commercial Painting twelve of its
seventeen pay applications. Weitz refused to pay the remaining five applications, claiming
they were submitted untimely and contained improper change order requests.

       In August 2006, Commercial Painting sued Weitz2 and its sureties, Federal
Insurance Company and St. Paul Fire & Marine Insurance Company, and The Village at
Germantown in the Shelby County Chancery Court seeking $1,929,428.74 in damages for
breach of contract, including attorney’s fees.3 Commercial Painting alleged that Weitz
        1
          The work included installation of exterior ceiling insulation; exterior wall metal framing; exterior
wall insulation; light gauge metal partitions; gypsum board walls, ceilings, and soffits; and suspended
ceilings. The contract, with an effective date of September 28, 2004, was signed by the president of
Commercial Painting on November 1, 2004, and by Weitz’s representative on December 7, 2004.
        2
           The defendant named in the complaint’s caption was The Weitz Company, Inc., but the first
paragraph of the complaint referenced the defendant as The Weitz Company-National. These entities are
referred to herein collectively as “Weitz.”
        3
            Section 12.1 of the contract provides:

                  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.

                                                      -2-
failed to properly sequence, coordinate, monitor, and inspect the work of the various
subcontractors on the project, which caused Commercial Painting extra work and forced it
to work in a more inefficient and costly manner. The complaint also included claims for
payment under the performance bond issued by Weitz’s sureties, interest on retainage
under section 66-11-144 of the Tennessee Code,4 unjust enrichment, enforcement of
Commercial Painting’s mechanic’s and materialman’s lien, and interest and attorney’s fees
under the Prompt Pay Act of 1991.5

      Weitz answered and counterclaimed against Commercial Painting and its surety for
“no event less than” $500,000 in damages for costs allegedly incurred on the project due
to Commercial Painting’s delay and defective workmanship.

        In a later amendment to its complaint, Commercial Painting asserted additional
claims for fraud, intentional and negligent misrepresentation, rescission/reformation of the
contract, and $10,000,000 in punitive damages. Commercial Painting alleged Weitz
negotiated a six-month extension with the project owner before executing the contract with
Commercial Painting, but the construction schedule attached to the contract did not reflect
the extension. Commercial Painting also claimed Weitz signed the contract knowing the
schedule was outdated by about eight months and that the actual length of the delay was
eight to twelve months. Commercial Painting alleged that Weitz knew when it executed
the contract that to make up for the delay, it would have to compress the construction
schedule and hire extra workers to supplement the work of various subcontractors,
including Commercial Painting’s drywall work. Commercial Painting also asserted that
after negotiating the six-month extension with the project owner, Weitz issued an amended
construction schedule that was “fraudulent and unrealistic” in order to earn an early
completion bonus.6 According to Commercial Painting, Weitz continued to issue
construction schedules that were unrealistic, and required the subcontractors to adhere to
those schedules, never revealing the actual length of the extension until near the end of the
project when it became clear that Weitz could not complete construction in time to earn the
early completion bonus. Commercial Painting contended that Weitz improperly
supplemented Commercial Painting’s work by falsely claiming Commercial Painting was
not completing its work according to a schedule that Weitz knew contained false

        4
          Transferred to section 66-34-104 of the Tennessee Code by 2008 Public Acts, chapter 804, section
2, effective July 1, 2008.
        5
            Tenn. Code Ann. §§ 66-34-101 to -704.
        6
         The extension agreement negotiated by Weitz and the project owner included a bonus to Weitz of
$8,597 for each day, up to forty-five days, that the project was completed early.

                                                    -3-
information about the project completion date and that Weitz fraudulently charged
Commercial Painting for the cost of the supplemental drywall work. Weitz generally
denied the allegations in the amended complaint and reiterated the allegations in its
counterclaim that Commercial Painting was in breach of the subcontract and did not
perform its contractual duties in a timely and workmanlike manner.

       The trial court granted partial summary judgment in favor of Weitz on Commercial
Painting’s    claims     for    intentional/negligent  misrepresentation    and      fraud,
rescission/reformation of the contract, and punitive damages. After a bench trial, the trial
court awarded Commercial Painting $450,464.26 for breach of contract, finding that
Commercial Painting was entitled to $600,464.26 less a $150,000 offset to Weitz for
having to supplement Commercial Painting’s work.

       The Court of Appeals vacated the trial court’s award of partial summary judgment
to Weitz, concluding that Commercial Painting established a genuine issue of material fact
regarding the intentional and negligent misrepresentation claims. Com. Painting Co. v.
Weitz Co., LLC, No. W2013-01989-COA-R3-CV, 2016 WL 3519015, at *2 (Tenn. Ct.
App. June 20, 2016).

      After remand from the Court of Appeals, Commercial Painting filed a second
amended complaint including additional alleged facts. The second amended complaint
sought compensatory damages of $1,929,428.74, less a payment of $456,170 made by
Weitz in June 2013, and increased the punitive damages claim to $200,000,000.

       In September and October 2018, a jury heard the case. Commercial Painting
presented evidence that Weitz misled it from the outset of the relationship by
misrepresenting how far behind schedule the project was, bids submitted by other
subcontractors, and the existence of the agreement for extension of time to complete the
project. The jury also considered evidence that Weitz tried to compress the work schedule
by improperly supplementing Commercial Painting’s drywall work, and wrongfully
refused to pay for extra work done by Commercial Painting’s employees.

      The jury awarded Commercial Painting $1,729,122.46 in compensatory damages
on each of the claims—breach of contract, unjust enrichment, and intentional
misrepresentation, as well as its claim under Weitz’s payment bond.7 The jury also awarded
Commercial Painting $3,900,000 in punitive damages. The trial court reduced the

       7
         The jury verdict form showed awards to Commercial Painting of $1,729,122.46 on its intentional
misrepresentation claim; $1,729,122.46 on its breach of contract claim; and $1,729.122.46 on its unjust
enrichment claim.

                                                 -4-
compensatory damages by $456,170, the amount of Weitz’s earlier payment. The trial court
also awarded Commercial Painting $2,083.362.16 in pre-judgment interest and
$1,103,549.27 for litigation costs and attorney’s fees. The total judgment was
$8,359,863.83.8

        Weitz appealed, and the Court of Appeals held that the economic loss doctrine
applied outside the products liability context when the contract was negotiated between
sophisticated commercial entities. The intermediate appellate court affirmed the trial
court’s judgment for compensatory damages for breach of contract; dismissed the tort
claim for intentional misrepresentation and reversed the punitive damages award based on
the economic loss doctrine; reversed the trial court’s award of pre- and post-judgment
interest after finding that interest was not an available remedy under the parties’ contract;
and vacated the trial court’s award of attorney’s fees in part after determining that
Commercial Painting was entitled only to attorney’s fees incurred in obtaining the
compensatory damages award. Com. Painting Co. v. Weitz Co., LLC, No. W2019-02089-
COA-R3-CV, 2022 WL 737468, at *1 (Tenn. Ct. App. Mar. 11, 2022). The Court of
Appeals analyzed and attempted to apply the principles stated in Milan Supply Chain Sols.,
Inc. v. Navistar, Inc., 627 S.W.3d 125 (Tenn. 2021), concluding that “the reasoning
employed by” Milan “hews most closely to the reasoning of those jurisdictions that have
extended the economic loss rule beyond its origination.” Com. Painting, 2022 WL 737468,
at *21.

      We granted Commercial Painting’s Rule 11 application for permission to appeal to
consider two issues:

              1. Whether the Court of Appeals erred in applying this Court’s
       holding in Milan Supply Chain Solutions, Inc. v. Navistar, Inc., 627 S.W.3d
       125 (Tenn. 2021), and expanding the application of the economic loss
       doctrine to the circumstances of this case.

             2. Whether the Court of Appeals erred in vacating the trial court’s
       award of attorney’s fees and in limiting the scope of recoverable fees on

       8
           The judgment for compensatory damages and pre-judgment interest in the amount of
$3,356,314.62 was entered against The Weitz Company, LLC, Federal Insurance Company, and St. Paul
Fire & Marine Insurance Company, jointly and severally. Punitive damages were awarded solely against
Weitz. There was no verdict against The Village at Germantown, Inc. The trial court dismissed Commercial
Painting’s claims against The Village at Germantown and The Weitz Company, Inc. with prejudice, and
these entities are not parties to this appeal. The trial court also dismissed with prejudice Weitz’s
counterclaims against Commercial Painting and its surety. Commercial Painting withdrew its claim for
rescission/reformation before trial.

                                                 -5-
       remand, and whether the Court of Appeals erred in denying Commercial
       Painting Company an award of costs and fees on appeal.

                                            II.

       The question of whether the economic loss doctrine applies in this case is a matter
of law which we review de novo. Milan, 627 S.W.3d at 141 (citing Lincoln Gen. Ins. Co.
v. Detroit Diesel Corp., 293 S.W.3d 487, 488 (Tenn. 2009)).

                                 Economic Loss Doctrine

       The economic loss doctrine is a judicially-created rule that “operates generally to
preclude contracting parties from pursuing tort recovery for purely economic or
commercial losses associated with the contract relationship.” Milan, 627 S.W.3d at 142
(quoting Plourde Sand & Gravel v. JGI E., Inc., 917 A.2d 1250, 1253 (N.H. 2007)). The
purpose of the rule is to “preserve[] the important distinction between contract and tort
law” and to “prevent the ‘tortification’ of contract law.” Jeffrey L. Goodman, Daniel R.
Peacock & Kevin J. Rutan, A Guide to Understanding the Economic Loss Doctrine, 67
Drake L. Rev. 1, 3–4 (2019).

        In 2009, the economic loss doctrine was adopted when this Court answered the
certified question of whether “Tennessee law recognize[s] an exception to the economic
loss doctrine under which recovery in tort is possible for damage to the defective product
itself when the defect renders the product unreasonably dangerous and causes the damage
by means of a sudden, calamitous event.” Lincoln Gen., 293 S.W.3d at 488.

      The Court in Lincoln General noted that the “economic loss doctrine is implicated
in products liability cases when a defective product damages itself without causing
personal injury or damage to other property.” Id. at 489. Lincoln General for the first time
examined “the proper application of the economic loss doctrine when only the defective
product is damaged.” Id. Relying on the United States Supreme Court’s opinion in East
River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858 (1986), the Court
concluded 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.” Lincoln Gen.,
293 S.W.3d at 491. Thus, “the remedies available to these similarly situated product owners
should derive from the parties’ agreements, not from the law of torts.” Id.

        This Court most recently examined the economic loss doctrine in Milan, a products
liability case where the manufacturer and seller of allegedly defective trucks asserted the

                                            -6-
doctrine as a defense to a fraud claim brought by a commercial trucking company. Milan,
627 S.W.3d at 129, 140–41. The Court examined three different approaches of other states
in applying the economic loss doctrine to fraud claims: (1) a strict approach in which “the
economic loss doctrine bars all fraud claims,” id. at 146; (2) a broad exception under which
“fraudulent inducement claims seeking economic losses are excepted because the duty not
to commit fraud exists independent of any contract,” id. at 147; and (3) a narrow exception
in which fraud claims are barred in certain situations involving contracts between
sophisticated business entities. Id. at 148–51. We adopted the narrow exception to bar a
purely economic loss claim in cases where “the alleged fraud concerns pre-contractual
misrepresentations and nondisclosures about the quality, reliability, and character of the
goods that are the subject of a contract between sophisticated business entities.” Id. at 154
(emphasis added).

       The Milan Court “expressly stop[ped] short of resolving the broad question of
whether there may ever be a fraudulent inducement exception to the economic loss rule in
Tennessee.” Id. at 155 (internal quotation marks omitted). Importantly, Milan did not
contemplate the application of the economic loss doctrine outside of the products liability
context. In fact, this Court stated in Milan that the economic loss doctrine “has been aptly
described as ‘one of the most confusing doctrines in tort law,’” and “[t]he confusion is
compounded because most states have not limited the doctrine to the products liability
context, in which it originated.” Id. at 144–45 (quoting R. Joseph Barton, Note, Drowning
in a Sea of Contract: Application of the Economic Loss Rule to Fraud and Negligent
Misrepresentation Claims, 41 Wm. & Mary L. Rev. 1789, 1789 (2000)).

        Legal scholars generally agree that the inconsistent application of the economic loss
doctrine and the wide array of exceptions applied by different states have resulted in a
“confusing morass.” Goodman et al., supra, at 56. This is in part because the results of the
cases “vary depending on the fact pattern of the particular case and the variation of the
doctrine utilized by the jurisdiction.” Id. Consequently, “application of the doctrine now
involves applying copious exceptions, numerous tests, and exhaustive mental gymnastics.”
Id. at 8. As one law professor put it, “[s]ome courts have suggested, in effect, that the
‘economic loss rule’ means there is no recovery in tort for pure economic loss, except when
there is.” Ward Farnsworth, The Economic Loss Rule, 50 Val. U. L. Rev. 545, 571 (2016).

       The widespread confusion and lack of clarity resulting from the unwarranted
expansion of the economic loss doctrine is far from the only concern raised by such a
decision. As further discussed below, applying the economic loss doctrine in cases beyond
product liability actions would threaten contracting parties for services, who are not
covered by the significant protections afforded by the Uniform Commercial Code. This is
particularly true for less sophisticated individuals who enter into more informal, often

                                            -7-
unwritten, agreements for a variety of services. As numerous expert commentators have
observed, the expansion of the doctrine also threatens to extinguish tort claims, long
recognized as legitimate and viable, for people entering into such commonplace informal
contracts for services.

            Application of Economic Loss Doctrine Beyond Products Liability Cases

       Here, we are not presented with claims of defective products or buildings. Instead,
a provider of construction services on a project sued the general contractor, asserting
various claims, including intentional misrepresentation. Although the cost of materials was
a significant portion of the price to be paid to Commercial Painting under the contract, the
description of the scope of Commercial Painting’s work on the project clearly shows it is
a contract for services.9 The description of Commercial Painting’s work makes it clear that,
regardless of the price of materials, the contract was not for the sale of goods. The question
thus presented is whether Tennessee should expand the application of the economic loss
doctrine to contractual relationships outside the products liability context.

        Courts in some jurisdictions have applied the economic loss doctrine to services
contracts but have carved out numerous and varying exceptions. These exceptions include
claims arising out of contracts with providers of professional services, such as attorneys,
accountants, and doctors, among others. See, e.g., Flagstaff Affordable Hous. Ltd. P’ship
v. Design All., Inc., 223 P.3d 664, 673 (Ariz. 2010) (holding the economic loss doctrine
applied to construction contracts, but noting an exception for attorneys and fiduciaries);
Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256, 1263 (Colo. 2000) (expressly adopting
the economic loss doctrine and applying it to a services contract, but recognizing
exceptions for “special relationships” such as attorney-client, doctor-patient, or
insurer-insured and situations where a duty independent of any contractual obligations
exists, such as fraud or negligent misrepresentation); Taylor v. Taylor, 422 P.3d 1116, 1125
(Idaho 2018) (stating that economic loss doctrine applies in all negligence cases, including
actions based on a services contract, unless there is a special relationship between the
parties or “unique circumstances require a reallocation of the risk”); Congregation of the
Passion v. Touche Ross & Co., 636 N.E.2d 503, 514–15 (Ill. 1994) (holding that the
economic loss doctrine does not apply to a contract that results in something intangible,
such as the services of an accountant or an attorney, because “[w]hether the professional
produces a legal brief or a financial statement, the value of the services rendered lies in the
        9
          Section 1.1 of Exhibit D to the contract, under the heading “Subcontractor’s Work,” states as
follows: “Subcontractor’s Work includes all labor; supervision; materials; equipment; services; supplies;
tools; facilities; transportation; storage; receiving; licenses; inspections; certifications; overhead; profit;
insurance; and other items required or reasonably inferable from the Subcontract Documents to properly
and timely perform and complete the Subcontractor’s Work.”

                                                     -8-
ideas behind the documents, not in the documents themselves,” and noting the doctrine
does not apply to a breach of duty that exists outside of the contract); Indianapolis-Marion
Cnty. Pub. Libr. v. Charlier Clark & Linard, P.C., 929 N.E.2d 722, 742 (Ind. 2010)
(holding that the economic loss doctrine generally applied to a contract for design and
inspection services on a construction project, but stating that the rule “is a general rule that
admits of exceptions for contracts for services in appropriate circumstances” such as,
possibly, legal malpractice, breach of fiduciary duty, breach of an insurer’s duty to settle a
claim, or negligent misstatement); David v. Hett, 270 P.3d 1102, 1114 (Kan. 2011) (holding
economic loss doctrine does not bar claims for economic damages “against a service
contractor in the residential construction context”); Terracon Consultants W., Inc. v.
Mandalay Resort Grp., 206 P.3d 81, 87, 90 (Nev. 2009) (holding that the economic loss
doctrine applies to contracts for architectural and engineering services, but noting
exceptions to the doctrine for “certain categories of cases, such as negligent
misrepresentation and professional negligence actions against attorneys, accountants, real
estate professionals, and insurance brokers”); Sapp v. Ford Motor Co., 687 S.E.2d 47, 49
(S.C. 2009) (recognizing a “narrow exception to the economic loss rule to apply solely in
the residential home context” because a home is usually the largest investment a person
will make, it is different than any other manufactured good a person will buy, and the
business transaction between a home builder and a home buyer “involves inherently
unequal bargaining power”); LAN/STV v. Martin K. Eby Constr. Co., 435 S.W.3d 234,
243–46 (Tex. 2014) (noting that professional malpractice claims are not barred by the
economic loss doctrine, regardless of the existence of a contract, and stating that “the
application of the rule depends on an analysis of its rationales in a particular situation”).10

        As these cases show, applying the economic loss doctrine outside the products
liability context to services contracts necessitates finding and justifying “very numerous
and confusing” exceptions. Farnsworth, supra, at 571. Consequently, “judges, lawyers, and
legal scholars struggle to track the doctrine’s meaning, application, and scope within their
jurisdiction.” Goodman et al., supra, at 1; see also Andrew Gray, Note, Drowning in a Sea
of Confusion: Applying the Economic Loss Doctrine to Component Parts, Service
Contracts, and Fraud, 84 Wash. U. L. Rev. 1513, 1513 (2006) (noting the “vast confusion
over this area of the law” resulting in part from “the doctrine’s wide-ranging impact”);

        10
           Many of these cases are cited and relied upon by Weitz in support of its various arguments in
favor of affirming the Court of Appeals’ decision. Weitz has also cited other cases, including New London
Tobacco Market, Inc. v. Kentucky Fuel Corp., 44 F.4th 393 (6th Cir. 2022); Hamon Contractors, Inc. v.
Carter & Burgess, Inc., 229 P.3d 282 (Colo. Ct. App. 2009); United Textile Workers of America, AFL-CIO,
CLC v. Lear Siegler Seating Corp., 825 S.W.2d 83 (Tenn. Ct. App. 1992); Mechanical, Inc. v. Venture
Electrical Contractors, Inc., 944 N.W.2d 1 (Wis. Ct. App. 2020). We have considered these and other cases
cited by Weitz and the amici and find them inapplicable, distinguishable, or unpersuasive.

                                                  -9-
Milan, 627 S.W.3d at 144–45 (discussing concerns of confusion and lack of clarity caused
by doctrine’s expansion).

        The federal district court decisions attempting to apply Tennessee law to this issue
are not in complete agreement. Weitz cites Ladd Landing, LLC v. Tennessee Valley
Authority, 874 F. Supp. 2d 727, 729 (E.D. Tenn. 2012) for its rejection of the plaintiffs’
argument “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.” However, at least eight federal district court opinions have reached the
contrary conclusion, holding, based in part on rulings of this Court and the Tennessee Court
of Appeals, that the economic loss doctrine does not extend to services contracts. See SPO
Go Holdings, Inc. v. W & O Constr. Co., 187 F. Supp. 3d 887, 892–93 (M.D. Tenn. 2016)
(noting that “many federal courts have concluded that the doctrine should not be extended
beyond cases involving the sale of goods,” and following cases “predicting Tennessee law
[that] have held that the economic loss doctrine does not extend to contracts for the
provision of services”); Lick Branch Unit, LLC v. Reed, No. 3:13-cv-203, 2014 WL
546696, at *16 (E.D. Tenn. Feb. 10, 2014) (same; stating that economic loss doctrine
“typically applies in the products liability context”); Tan v. Wilbur Smith Assoc., Inc., No.
2:09-cv-25, 2011 WL 3421320, at *7 (E.D. Tenn. Aug. 4, 2011) (footnote omitted) (“[a]fter
reviewing the Ham case and its companion cases and noting the lack of extensive
Tennessee case law on this issue, the Court agrees that the economic loss rule is applicable
to the sale of goods, but does not extend equally to contracts for the provision of services”);
Ham v. Swift Transp. Co., 694 F. Supp. 2d 915, 922–23 (W.D. Tenn. 2010); Lott v. Swift
Transp. Co., 694 F. Supp. 2d 923, 930–31 (W.D. Tenn. 2010); Pascarella v. Swift Transp.
Co., 694 F. Supp. 2d 933, 945–46 (W.D. Tenn. 2010); Broadnax v. Swift Transp. Co., 694
F. Supp. 2d 947, 953–54 (W.D. Tenn. 2010); Corso Enters., Inc. v. Shop at Home Network,
Inc., No. 3:04-0260, 2005 WL 2346986, at *7 (M.D. Tenn. Sept. 26, 2005) (holding an
agreement was for services, “not a contract for the sale of goods governed by the UCC”
and thus the economic loss doctrine did not bar the plaintiffs’ tort-based claims).

       In the Ham, Lott, Pascarella, and Broadnax related quartet of cases, the court
carefully analyzed then-existing Tennessee caselaw on the issue of the potential application
of the economic loss doctrine outside of cases involving the sale of goods and stated:

       Application of the economic loss doctrine to cases involving defective
       products is not surprising . . . because the Uniform Commercial Code
       (‘‘UCC’’) sets forth the full series of rights and remedies available to an
       aggrieved purchaser who suffers only economic losses. . . . If the existence
       of UCC remedies provides the justification for not allowing the plaintiff to
       sue in tort, the absence of UCC remedies should counsel in favor of allowing

                                            - 10 -
       tort recovery. Thus, the Court believes that, like the Wisconsin Supreme
       Court, the Tennessee Supreme Court would rely on the fact that the economic
       loss doctrine has its origins in the UCC to preclude application of the doctrine
       to suits not involving UCC remedies, specifically those concerning the
       provision of services.

E.g., Ham, 694 F. Supp. 2d at 922–23 (citing Ins. Co. of N. Am. v. Cease Elec. Inc., 688
N.W.2d 462, 467–68 (Wis. 2004)).

       The Supreme Courts of Wisconsin, Florida, and Minnesota, and the Michigan Court
of Appeals, have all held that the economic loss doctrine does not apply to services
contracts.

       In Insurance Co. of North America v. Cease Electric Inc., 688 N.W.2d 462 (Wis.
2004), the Wisconsin Supreme Court held that the economic loss doctrine did not bar a tort
claim brought by a barn owner arising out of losses incurred due to the failure of a
ventilation system in the barn. Id. at 464. After determining that the contract for installation
of the ventilation system was for services and not for a product, the court examined the
applicability of the economic loss doctrine. Id. at 466–67. The Cease court rejected the
defendant’s argument that “contract law is better suited than tort law for dealing with
purely economic loss in the context of service agreements” because “the built-in warranty
provisions that the U.C.C. may provide in a contract for the sale of products or goods would
not apply to a contract for services.” Id. at 469. The court reasoned that, under the UCC,
when a product does not operate as it should, the purchaser has the option of filing a claim
for breach of warranty or revoking acceptance and suing for breach of contract. Id. at 468.
The manufacturer is also protected by its ability to disclaim warranties or limit remedies in
its contract with the purchaser. Id. But the UCC does not apply to services contracts, and
therefore the Cease court determined that the economic loss doctrine did not apply. Id. at
469.

       The Minnesota Supreme Court employed similar reasoning in McCarthy Well Co.
v. St. Peter Creamery, Inc., 410 N.W.2d 312 (Minn. 1987). There, the court held that
because the UCC does not apply to a services contract, the economic loss doctrine did not
bar the plaintiff from recovering purely economic losses under a negligence theory. Id. at
315.

       The Michigan Court of Appeals in 2002 noted that Michigan courts had only applied
the economic loss doctrine in cases involving a transaction for goods and had “declined to
apply the economic loss doctrine where the claim emanates from a contract for services.”
Quest Diagnostics, Inc. v. MCI WorldCom, Inc., 656 N.W.2d 858, 862–63 (Mich. Ct. App.

                                             - 11 -
2002). See also White Acres, LLC v. Shur-Green Farms, LLC, No. 354175, 2022 WL
4283105, at *4 (Mich. Ct. App. Sept. 15, 2022), perm. app. denied, 984 N.W.2d 196 (Mich.
Jan. 31, 2023) (quoting Quest Diagnostics, 656 N.W.2d at 863) (reiterating that “the
economic loss doctrine does not apply when ‘the claim emanates from a contract for
services’” but applying the doctrine because the contract involved the sale of goods rather
than services).

       The evolution of the Florida Supreme Court’s jurisprudence on this issue is
particularly instructive. That court eventually recognized that its “unprincipled expansion”
of the economic loss doctrine outside the realm of products liability had resulted in
confusion. Tiara Condo. Ass’n v. Marsh & McLennan Cos., 110 So.3d 399, 407 (Fla.
2013). The court ruled that in Florida, the application of the economic loss doctrine should
return to the rule’s origin and original purpose and be limited to products liability cases.
Id.

        Nine years earlier, the Florida Supreme Court “recognized the danger in an
‘unprincipled extension of the [economic loss] rule’” in Indemnity Insurance Co. of North
America v. American Aviation, Inc., 891 So.2d 532, 542 (Fla. 2004) (citing Moransais v.
Heathman, 744 So.2d 973, 981 (Fla. 1999)). The court in American Aviation “expressly
limited” the economic loss rule to “cases involving either privity of contract or products
liability.” Id. at 542–43. The court stated that the “other exceptions” to the rule––
professional malpractice, fraudulent inducement, negligent misrepresentation, and
freestanding statutory causes of action––would still apply. Id. at 543. The court also noted
that “[i]ntentional tort claims such as fraud, conversion, intentional interference, civil theft,
abuse of process, and other torts requiring proof of intent” remained viable claims even in
the context of products liability or privity of contract. Id. at 543, n.3. The express limitation
on the economic loss rule in American Aviation was necessary because, as the concurring
justice stated, “[t]he economic loss rule ha[d] become a confusing morass.” Id. at 544
(Cantero, J., concurring). Concurring Justice Cantero summarized the holding as follows:
“[T]he economic loss rule does not apply in the services context unless a contract exists
and none of the established exceptions to the rule apply.” Id.

       In Tiara Condominium Association, the Florida Supreme Court again lamented the
“unprincipled expansion” of the economic loss doctrine beyond products liability,
“recede[d] from [its] prior rulings to the extent that they have applied the economic loss
rule to cases other than products liability,” and “return[ed] the economic loss rule to its
origin in products liability.” Tiara Condo. Ass’n, 110 So.3d at 407. The court concluded:
“Our experience with the economic loss rule over time, which led to the creation of the
exceptions to the rule, now demonstrates that expansion of the rule beyond its origins was
unwise and unworkable in practice.” Id.

                                             - 12 -
       Professor Farnsworth summed up the problem recognized and addressed by the
Florida high court as follows:

       Stating a broad rule against recovery for pure economic loss in tort has an
       additional worrisome consequence beyond the confusion it has caused. It
       creates a presumption against liability in cases that don’t fit into one of the
       well-defined exceptions. This can cause legitimate claims to be snuffed out
       inadvertently by the sweep of the rule in the background. Trouble predictably
       results when a rule is recited and extended without attention to its rationale;
       sure enough, some states have found themselves in difficult and
       embarrassing positions when they stated aggressive versions of the economic
       loss rule and then discovered that the “rule” they had stated had implications
       they did not intend or came to regret.

Farnsworth, supra, at 550 (citing Tiara Condo. Ass’n, 110 So.3d at 404).

       We conclude that it would be unwise for this Court to travel down the same path the
Florida Supreme Court ultimately found to be an untenable “confusing morass.” See
American Aviation, 891 So.2d at 544 (Cantero, J., concurring). As expressly stated in
Milan, the widely recognized confusion about the economic loss doctrine has been
compounded “because most states have not limited the doctrine to the products liability
context, in which it originated.” Milan, 627 S.W.3d at 145. In sum, there is no compelling
reason to extend the economic loss doctrine to services contracts.

        Weitz argues that the Court of Appeals’ application of Milan to the facts in this case
does not constitute a modification of or deviation from Milan. But it does. Milan was a
products liability case. We indicated no interest in expanding the economic loss doctrine
beyond the products liability context. The application of the doctrine to a contract for
construction services is a modification by expansion of Milan. The amici curiae contend
that reversing the Court of Appeals’ decision “will materially change Tennessee law.” But
just the opposite is true. Our decision today does not change the current state of Tennessee
law regarding the application of the economic loss rule. Weitz and the amici are seeking a
material change in Tennessee law by extending the economic loss doctrine to services
contracts.

        Weitz asserts that this Court has never held the economic loss doctrine is limited to
products liability cases, pointing out that Milan adopted the reasoning of Healthbanc Int’l,
LLC v. Synergy Worldwide, Inc., 435 P.3d 193 (Utah 2018), which was not a products
liability action. See Milan, 627 S.W.3d at 153 (citing Healthbanc, 435 P.3d at 194).
However, in Milan, we followed the reasoning of Healthbanc in addressing fraud claims

                                            - 13 -
in products liability cases. We concluded that in cases “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’” because “[u]nder such circumstances, ‘the other party is still free to negotiate
warranty and other terms to account for possible defects in the goods.’” Id. at 153–54
(emphasis added).

       In Milan, this Court expressed no interest in expanding the doctrine to services
contracts and noted that such an expansion in other states had caused confusion about the
doctrine. Id. at 145. On this point, Milan is clear and unambiguous: “[T]his Court has never
applied the economic loss doctrine outside the products liability context, in which it
originated.” Id. at 153. The sole issue decided in Milan was whether to adopt a fraud
exception to the economic loss doctrine in a case involving a contract between two
sophisticated business entities for the sale of goods. Id. at 153–54.

         Weitz and the amici express the concern that allowing a contracting party to recover
tort damages would “frustrate[ ] the ability of contracting parties to reliably allocate risks
and costs during their bargaining and to then build cost considerations into their contracts.”
This Court explained in Milan that courts adopting a broad fraud exception to the economic
loss doctrine have stated that “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.’” Milan, 627 S.W.3d at 147 (quoting
Robinson Helicopter Co. v. Dana Corp., 102 P.3d 268, 275 (Cal. 1994)). In this scenario,
it is the function of contract law “to enforce only such obligations as each party voluntarily
assumed, and to give [each party] only such benefits as [that party] expected to receive.”
Id. (quoting Robinson Helicopter, 102 P.3d at 275) (alterations in original). But “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 the contract.’” Id. (quoting
Robinson Helicopter, 102 P.3d at 275).

        One party need not have to consider another party’s fraud among the potential risks
and costs when negotiating a contract in good faith. Parties to a contract––even
sophisticated commercial parties––“cannot, and should not, be expected to anticipate fraud
and dishonesty in every transaction.” Id. (quoting Robinson Helicopter, 102 P.3d at 277).
To hold otherwise would increase the risk of fostering a legal system tending to place the
risk of fraudulent behavior on the defrauded party rather than the perpetrator. Contracting

                                            - 14 -
parties in Tennessee, including those in the construction industry, should not have to factor
into their decision to enter a contract the potential for fraud or another party’s dishonesty.

        Weitz and the amici also urge us to recognize that the economic loss doctrine draws
“the line between warranty and contract on the one hand and the torts of strict liability,
negligence, fraud, and misrepresentation on the other hand.” In support, Weitz cites Trinity
Industries, Inc. v. McKinnon Bridge Co. Inc., 77 S.W.3d 159, 171–72 (Tenn. Ct. App.
2001), abrogated on other grounds by Bowen ex rel. Doe v. Arnold, 502 S.W.3d 102 (Tenn.
2016). But Trinity Industries was a case involving the sale of goods, and the economic loss
doctrine applied because a claim based on a contract for the sale of goods is governed by
the UCC. Trinity Indus., 77 S.W.3d at 171–73. The amici make the same argument, relying
on Messer Griesheim Industries, Inc. v. Cryotech of Kingsport, Inc., 131 S.W.3d 457
(Tenn. Ct. App. 2003). Like Trinity Industries, however, Messer Griesheim involved the
sale of goods. The economic loss doctrine was inapplicable because the product caused
damage to other property. Messer Griesheim, 131 S.W.3d at 466.

       Moreover, as observed by Professor Johnson,

              The boundary-line function of the economic loss rule is most clearly
       established in the field of products liability. . . .

              The economic loss rule operates sensibly in the products liability field
       because the commercial nature of the underlying transaction means that a
       contract-law remedy is not only feasible, but routinely available. The sale
       that produces the distribution of the defective product allows the parties to
       determine how economic risks relating to the quality of the product should
       be allocated and supplies default rules relating to warranties that resolve
       disputes if the parties do not specify particular terms of recovery. In addition,
       the ubiquitous adoption of the Uniform Commercial Code (UCC) means that
       there is a carefully crafted statutory mechanism available for resolving
       economic loss claims.

Vincent R. Johnson, The Boundary-Line Function of the Economic Loss Rule, 66 Wash. &
Lee L. Rev. 523, 549, 551 (2009).

        The expansion of the economic loss doctrine has raised concerns that “it is
traditional tort claims that are struggling to keep their heads above water.” Daniel Rapaport,
Kurt Olafsen, Sigmund D. Schutz & Jonathan Mermin, Tort Killer: The Applicability of
the Economic Loss Doctrine to Service Contracts, 20 Me. B.J. 100, 103 (2005). “The
extension of the economic loss doctrine to services threatens to engulf longstanding

                                            - 15 -
common law torts for the inadequate or incompetent performance of professional services.”
Id. In Milan, we noted this concern by quoting Chief Justice Abrahamson’s observation
that, like the alien in the classic horror film The Blob, “[a]t the current pace, the economic
loss doctrine may consume much of tort law if left unchecked.” Milan, 627 S.W.3d at 145
(quoting Grams v. Milk Prods., Inc., 283 Wis.2d 511, 699 N.W.2d 167, 181 (2005)
(Abrahamson, C.J., dissenting)).

       Weitz also cites other cases in which courts in Tennessee have held that a tort claim
cannot be based on a breach of contract. However, Commercial Painting’s claim of
intentional misrepresentation was not predicated merely on a breach of the contract; it was
predicated on the fact, as found by the jury, that Weitz deliberately made false
representations about the timing and amount of work involved in the subcontract “in order
to mislead Commercial Painting to obtain an undue advantage over it.”11 And, as stated
above, Commercial Painting could not be expected to factor into its decision to enter the
contract the possibility that Weitz was making false misrepresentations. See Milan, 627
S.W.3d at 147 (quoting Robinson Helicopter, 102 P.3d at 275–76).12

         In sum, the economic loss doctrine should only apply in products liability cases. We
decline to extend the doctrine to services contracts. Thus, the economic loss doctrine does
not bar Commercial Painting’s recovery of compensatory and punitive damages based on
its tort claim of intentional misrepresentation against Weitz. The Court of Appeals reversed
the punitive damages award based largely on its holding that the economic loss doctrine
precluded Commercial Painting’s tort claims and pretermitted all remaining issues related
to the punitive damages award. Com. Painting, 2022 WL 737468, at *28. We granted
review on the narrow issue of the applicability of the economic loss doctrine. Thus, we
remand to the Court of Appeals to review any pretermitted issues regarding the jury’s
award of punitive damages consistent with this opinion.

        11
         The amici assert there is no proof in the record of justifiable reliance on a misrepresentation or
damages resulting proximately from such a misrepresentation. We disagree. There is proof in the record
from which the jury found both.
        12
          Weitz contends that the implied duty of good faith and fair dealing that Tennessee law imposes
on parties to a contract provides sufficient protection to justify applying the economic loss doctrine to
services contracts, citing Dick Broadcasting Co. v. Oak Ridge FM, Inc., 395 S.W.3d 653 (Tenn. Ct. App.
2013) and APAC-Atlantic, Inc., Harrison Constr. Div. v. State, No. E2012-01536-COA-R3-CV, 2013 WL
5883697, at *1 (Tenn. Ct. App. Oct. 31, 2013). Neither of those cases, however, involved tort claims or the
economic loss doctrine. They are inapplicable.

                                                  - 16 -
                 Existing Safeguards against Disproportionate Liability

        We recognize the concerns of potential disproportionate or indeterminate liability
for defendants who cause purely economic harm, which in part gave rise to the doctrine in
the first place. But the common law of damages, contracts, and torts has developed to
adequately equip courts to guard against and reject claims that involve overly speculative,
excessive, or unforeseeable losses. As one legal scholar notes,

      general principles of damages and proximate causation already recognize
      these concepts, and rules are in place to guard against liability for speculative,
      excessive, or unforeseeable losses or losses outside the scope of risks that
      made the defendant’s conduct negligent. Because that is true, these
      considerations offer dubious justification for erecting a general economic
      loss rule. Moreover, while there is a risk that liability for negligent conduct
      might have a chilling effect on non-negligent conduct, “because the line
      between negligent and non-negligent conduct is not a clear one,” there is no
      reason to think that that problem is any greater in cases involving purely
      economic losses than in the great mass of cases in which liability for
      negligence (including economic loss damages) is routinely imposed.

Johnson, supra, at 543–44. It is reasonable to trust that Tennessee courts can apply
well-established limiting concepts, such as foreseeability and proximate causation, to
provide safeguards against disproportionate liability. As the Court of Appeals earlier
observed in this case,

      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. . . . “Whether the
      theory of recovery is breach of contract, intentional misrepresentation, or
      promissory fraud, if the damages claimed under each theory overlap, the
      Plaintiff is only entitled to one recovery.” Commercial Painting is not
      required to choose between various causes of action just because the damages
      available may overlap. See Concrete Spaces, Inc. v. Sender, 2 S.W.3d 901,
      909 (Tenn. 1999) (“If a defendant has been found liable under more than one
      theory of recovery, no inequity results from allowing the plaintiff to choose
      one of the claims upon which to realize its maximum recovery of enhanced
      damages.”).

                                            - 17 -
Com. Painting, 2016 WL 3519015, at *12 (quoting Shahrdar v. Global Housing, Inc., 983
S.W.2d 230, 238 (Tenn. Ct. App. 1998)). The law thus already precludes double or
excessive recovery for the same damages, which ultimately must be adequately proven to
the satisfaction of the trier of fact under whichever theory of liability has been validly
presented.

       The dissent discusses the possibility that the independent duty doctrine might be
used to counter some of the deleterious effects of expanding the economic loss rule. But
this Court has not adopted the independent duty doctrine, so any future role of the doctrine
in Tennessee remains theoretical.

        In short, there are adequate existing safeguards to protect against disproportionate
liability, and the extension of the economic loss doctrine beyond products liability cases is
not needed.

                                      CONCLUSION

       We hold the economic loss doctrine only applies in products liability cases and
should not be extended to other claims. Thus, the economic loss doctrine does not bar
Commercial Painting’s recovery of compensatory and punitive damages based on its tort
claim of intentional misrepresentation against Weitz. We reverse the Court of Appeals’
ruling as to the applicability of the economic loss doctrine. We remand to the Court of
Appeals to review any pretermitted issues regarding the jury’s award of punitive damages
consistent with this opinion. Because this ruling makes Commercial Painting the only
prevailing party, the second issue raised in this appeal about attorney’s fees is pretermitted.
We reverse the judgment of the Court of Appeals, affirm the judgment in part of the trial
court, and remand to the Court of Appeals for review of any pretermitted punitive damage
issues consistent with this opinion. The costs of this appeal are taxed to The Weitz
Company, LLC, Federal Insurance Company, and St. Paul Fire & Marine Insurance
Company, for which execution shall issue if necessary.

                                               _________________________________
                                               SHARON G. LEE, JUSTICE

                                            - 18 -