AMC Cobb Holdings, LLC v. Plaze, Inc.

AMC COBB HOLDINGS, LLC; AMC UPSON HOLDINGS, LLC;and AMC WHITFIELD HOLDINGS, LLC, Plaintiffs, v. PLAZE, INC. AND APOLLO AEROSOL INDUSTRIES LLC(d/b/a PLAZE GEORGIA), Defendants.

Civil Action No. 1:18-cv-04865-SDG

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION

December 11, 2019

ORDER

This matter is before the Court on Defendants Plaze, Inc. ("Plaze") and Apollo Aerosol Industries LLC's (d/b/a Plaze Georgia) ("Apollo") Partial Motion to Dismiss [ECF 5] Plaintiffs AMC Cobb Holdings, LLC ("AMC Cobb"), AMC Upson Holdings, LLC ("AMC Upson"), and AMC Whitfield Holdings, LLC's ("AMC Whitfield") Complaint [ECF 1]. For the reasons set forth below, Defendants' motion is DENIED.

I. BACKGROUND

Plaintiffs filed their 16-count Complaint on August 31, 2018, alleging contract and tort claims against Apollo and Plaze concerning the condition of three commercial properties owned by Plaintiffs and currently or previously leased by Apollo.¹ On October 22, 2018, Plaintiffs' Complaint was removed to this Court from the State Court of Cobb County, Georgia.²

The following facts are accepted as true for purposes of this motion.³ Apollo is a manufacturer of aerosol products and specialty chemicals.⁴ In 2015, Chris and Maria Callases sold Apollo to Plaze, which reorganized the company and operated Apollo thereafter as either its agent or joint venturer.⁵ The Callases retained ownership of the three commercial properties Apollo used for chemical manufacturing and leased these facilities back to Apollo through their holding companies.⁶ Specifically, AMC Cobb leased the Smyrna property, AMC Upson leased the Thomaston property, and AMC Whitfield leased the Dalton property.⁷The Smyrna lease expired on December 14, 2017; the Thomaston lease expired on December 14, 2016; and the Dalton lease will expire on December 14, 2020.⁸

According to the Complaint, Apollo violated each of the lease agreements and caused significant damage to the properties and surrounding areas by failing to keep the properties in good condition and failing to safely handle hazardous chemicals.⁹ The Complaint alleges numerous issues with the properties—many of which concern potentially severe environmental contamination problems. Those issues allegedly include, but are not limited to: the improper handling of a chemical spill at the Smyrna property;¹⁰ the failure to maintain air conditioning units and fans at the Thomaston property, as well as the "ransacking" of the Thomaston facility upon the termination of the lease;¹¹ and the dumping of hazardous chemicals onto the open ground at the Dalton property.¹² Plaintiffs seek damages for the breach of the three leases, the tort claims (including punitivedamages), and attorneys' fees.¹³

On March 15, 2019, Defendants filed a Partial Motion to Dismiss Plaintiffs' Complaint, arguing that Plaintiffs' tort claims for trespass, nuisance, and negligence (Counts III-V, VIII-X, and XIII-XV) must be dismissed because they are barred by Georgia's economic loss rule.¹⁴ Alternatively, Defendants argue that (1) Plaintiffs' trespass claims must be dismissed because Defendants had authority to enter and use the properties under the relevant lease agreements;¹⁵ and (2) Plaintiffs' claims for nuisance relating to the Smyrna and Thomaston properties must be dismissed because Plaintiffs fail to allege that Defendants engaged in any continuous or repetitious injurious acts at those properties, as required to maintain this cause of action.¹⁶ Plaintiffs responded to the motion on April 12, 2019;¹⁷ Defendants replied on May 3, 2019.¹⁸

II. LEGAL STANDARD

Federal Rule of Civil Procedure 8(a)(2) requires a pleading to contain a"short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). While this standard does not require "detailed factual allegations," the Supreme Court has held that "labels and conclusions" or "a formulaic recitation of the elements of a cause of action will not do." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

To withstand a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Am. Dental Ass'n v. Cigna Corp., 605 F. 3d 1283, 1289 (11th 2010) (quoting Twombly, 550 U.S. at 570). A complaint is plausible on its face when a plaintiff pleads sufficient factual content for the court to draw the reasonable inference that the defendant is liable for the conduct alleged. Id. (citing Twombly, 550 U.S. at 556). "A complaint does not state a facially plausible claim for relief if it shows only a sheer possibility that the defendant acted unlawfully." Waters Edge Living, LLC v. RSUI Indem. Co., 355 F. App'x 318, 322 (11th Cir. 2009). A complaint must also present sufficient facts to "'raise a reasonable expectation that discovery will reveal evidence' of the claim." Am. Dental Ass'n, 605 F.3d at 1289 (quoting Twombly, 550 U.S. at 556).

At the motion to dismiss stage, "all well-pleaded facts are accepted as true, and the reasonable inferences therefrom are construed in the light most favorable to the plaintiff." FindWhat Inv'r Grp. v. FindWhat.com, 658 F.3d 1282, 1296 (11th Cir. 2011) (quoting Garfield v. NDC Health Corp., 466 F.3d 1255, 1261 (11th Cir. 2006)). This principle, however, does not apply to legal conclusions. Iqbal, 556 U.S. at 678.

III. ANALYSIS

A. Georgia's Economic Loss Rule

Defendants argue that Plaintiffs' tort claims against Apollo should be dismissed because they are barred by Georgia's economic loss rule.¹⁹ Georgia's economic loss rule derives from O.C.G.A. § 51-1-11(a), which states:

[I]f the tort results from the violation of a duty which is itself the consequence of a contract, the right of action is confined to the parties and those in privity to that contract, except in cases where the party would have a right of action for the injury done independently of the contract.

Generally, the economic loss rule provides that "a contracting party who suffers purely economic losses must seek his remedy in contract and not in tort." Gen. Elec. Co. v. Lowe's Home Ctrs., Inc., 279 Ga. 77, 78 (2005). See also Unified Servs., Inc. v. Home Ins. Co., 218 Ga. App. 85, 87-88 (1995) ("If there is no liability exceptthat arising out of a breach of the express terms of the contract, the action must be in contract, and an action in tort cannot be maintained.") (quoting Commercial Bank & Trust Co. v. Buford, 145 Ga. App. 213, 214-15 (1978)); Hanover Ins. Co. v. Hermosa Const. Grp., LLC, 57 F. Supp. 3d 1389, 1395 (N.D. Ga. 2014) ("The economic loss rule provides that a plaintiff may not recover in tort for purely economic damages arising from a breach of contract.").

Notwithstanding its relatively expansive reach, there are instances where the economic loss rule does not apply. For example, the economic loss rule does not bar claims where the plaintiff identifies a statutory or common law duty that would have applied regardless of the existence of an underlying contract. Murray v. ILG Technd., 378 F. Supp. 3d 1227, 1243 (S.D. Ga. 2019); Hanover Ins. Co., 57 F. Supp. 3d. at 1396. This Court has interpreted the term "independent duty" to mean "separate and capable of standing alone" so that the "plaintiff could have asserted the breach of contract claim or the tort claim alone, because the claims were self-sufficient" and "not dependent on each other." Gross v. Conn. Gen. Life Ins. Co., No. 1:04-CV-1000-WSD, 2005 WL 8155650, at *5 (N.D. Ga. Sept. 1, 2005).

Additionally, the economic loss rule does not apply to claims where a plaintiff seeks to recover damages for harm to his person or property, because the duty breached in such situations generally arises independently. Murray, 378F. Supp. 3d at 1244 (citing Bates & Assocs., Inc. v. Romei, 207 Ga. App. 81, 83 (1993)). The conduct must also be a "misfeasance rather than a nonfeasance in failing to perform the contract for a tort to arise." Nw. Plaza, LLC (MI) v. Ne. Enters., Inc., 305 Ga. App. 182, 192 (2010) (citation omitted).²⁰

B. The Economic Loss Rule Does Not Bar Plaintiffs' Tort Claims.

Defendants argue that Plaintiffs' tort claims must be dismissed because "Plaintiffs only seek economic losses stemming from damage to property that is the subject of the underlying lease agreements between Plaintiffs and Apollo . . . [and] Plaintiffs can already pursue their sought-after damages through breach of contract claims asserted in the Complaint."²¹ Further, assuming an independent legal duty among the parties, Defendants argue that Plaintiffs allege only nonfeasance, not misfeasance as required under Georgia law.²²

The economic loss rule does not serve as a bar to Plaintiffs' tort claims because each of them (1) arise under an independent duty from the underlying lease agreements between the parties; (2) allege harm to Plaintiffs' property; and(3) sufficiently allege misfeasance, rather than nonfeasance, in failing to perform the contract.

Defendants cite to Silverpop Sys., Inc. v. Leading Market Technologies, Inc., No. 1:12-CV-2513-SCJ, 2014 WL 11164763 (N.D. Ga. Feb. 18, 2014), aff'd, 641 F. App'x 849 (11th Cir. 2016) and Home Depot U.S.A., Inc. v. Wabash National Corp., 314 Ga. App. 360, 366 (2012), for the proposition that a "contracting party can only recover in tort those economic losses resulting from an injury to his person or damage to property that is not the subject of the contract."²³ However, Silverpop and Home Depot are not as expansive as Defendants would like them to be and do not stand for the proposition that tort claims must always succumb to an underlying contract claim. Where, as here, the Plaintiffs allege tort claims for damage to their property caused by misfeasance that arise from statutory or common law duties independent of the contractual terms, the...