McFadden One LLC v. Residences at Riverdale GP LLC et al

Filing 16

OPINION AND ORDER denying Nations's 7 Motion to Dismiss McFadden's amended complaint. Signed by Judge Susan Webber Wright on 2/6/12. (vjt)

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
McFADDEN ONE, LLC,
Plaintiff,
vs.

RESIDENCES AT RIVERDALE GP, LLC,
RESIDENCES AT RIVERDALE, LP,
NATIONS CONSTRUCTION
MANAGEMENT INCORPORATED, and
DAVID F. STAPLETON,
Defendants.

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No. 4:11-cv-00748-SWW

OPINION AND ORDER
Plaintiff McFadden One, LLC (McFadden), brings this action against defendants
Residences at Riverdale GP, LLC and Residences at Riverdale, LP (collectively, the RAR
entities), Nations Construction Management Incorporated (Nations), and David F. Stapleton
(Stapleton) seeking damages for breach of the duty of an adjoining landowner to provide lateral
support and for negligence. See Am. Compl. [doc.#3]. This action was originally filed in the
Circuit Court of Pulaski County, Arkansas, but was removed to this Court by the RAR entities
and Stapleton on October 14, 2011. The matter is now before the Court on motion of Nations to
dismiss McFadden’s amended complaint pursuant to Fed.R.Civ.P. 12(b)(6) [doc.#7].1 The RAR

1

McFadden filed its original complaint on September 15, 2011, and filed an amended complaint on
September 20, 2011, after which the action was removed to this Court. As “[i]t is well-established that an amended
complaint supercedes an original complaint and renders the original complaint without legal effect,” In re Wireless
Tel. Fed. Cost Recovery Fees Litig., 396 F.3d 922, 928 (8th Cir. 2005), the amended complaint is the sole basis of
this action.

entities and Stapleton join in and adopt Nations’s motion to dismiss [doc.#9].2 McFadden has
responded in opposition to Nations’s motion to dismiss and Nations has filed a reply to
McFadden’s response. For the reasons that follow, the Court denies Nations’s motion to dismiss
McFadden’s amended complaint.3
I.
According to the amended complaint, McFadden operates an apartment complex, known
as Holcombe Heights Apartments, at 2100 Rebsamen Park Road. Am. Compl. ¶ 8. The RAR
entities, owned in part by Stapleton, are the owners of property (the RAR property) immediately
adjacent to and north of the Holcombe Heights Apartments. Am. Compl. ¶¶ 9, 29-35. These
two properties are joined by a steep hillside that is directly underneath and to the south of certain
apartment units of Holcombe Heights Apartments. Am. Compl. ¶ 9.
McFadden states that in October 2008, the RAR entities, acting by and through their
contractor, Nations, and agents, began construction of an apartment complex on the RAR
property. Am. Compl. ¶ 10. McFadden states that during the early stages of the construction, it
became apparent that the hillside separating the RAR property from the McFadden property and
other adjoining neighbors may be subject to excavation. Am. Compl. ¶ 11. McFadden states
that the RAR entities were warned by adjacent property owners not to excavate or otherwise

2

The amended complaint also includes a third cause of action for piercing the corporate veil. This cause of
action is not asserted against Nations and, hence, is not included in Nations’s motion to dismiss that is adopted by
the RAR entities and Stapleton.
3

The Court notes that Nations, the RAR entities, and Stapleton are also defendants in another action
pending in this Court, Rivercliff Co., Inc. v. Residences at Riverdale GP, LLC, et al., No. 4:10-cv-00330-SWW
(E.D.Ark.), that is brought by a neighboring apartment complex of McFadden seeking damages, based on the same
excavation at issue in this action, for, inter alia, breach of the duty of an adjoining landowner to provide lateral
support, negligence, and piercing the corporate veil. That action has survived dispositive motions. See Rivercliff
Co., Inc. v. Residences at Riverdale GP, LLC, No. 4:10-cv-00330-SWW, 2011 WL 6013849 (E.D.Ark. Dec. 2,
2011).

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undermine the hillside and that the RAR entities affirmatively stated that they would not
excavate the hillside, apparently recognizing the risks involved. Am. Compl. ¶ 11.
McFadden states that on October 18, 2008, the RAR entities, by and through their
contractor, Nations, and other agents, excavated the hillside, violating their representation that
they would not do so. Am. Compl. ¶ 12. McFadden states that this excavation, done without
notice to McFadden, entailed the removal of soil, fill and vegetation at the bottom of the hillside
and along the face of the hillside, and that this excavation undermined the lateral support for
McFadden’s property and has caused instability to and movement of the property immediately
adjacent to and underneath the Holcombe Heights Apartments. Am. Compl. ¶¶ 12, 13.
McFadden states that the excavation and resulting instability has resulted in damage to its
property and will further damage its property as the instability continues, and that it and others
have observed continued movement in the hillside since the lateral support was removed by
defendants. Am. Compl. ¶¶ 13, 14. McFadden states that Nations, as general contractor, failed
to use the requisite care and was negligent in the excavation of the property immediately
adjacent to the McFadden property, and that the removal of lateral support and the resulting
hillside movement was the proximate cause of the damages suffered by McFadden and the
damages that McFadden continues to suffer related to the McFadden property. Am. Compl. ¶¶
15, 20.
McFadden states that the damages it has sustained as a result of the removal of lateral
support by defendants include, but are not limited to, the costs associated with testing the
hillside, remedial repairs to the hillside in order to stabilize it, and the diminution in value to the
McFadden property related to the removal of lateral support. Am. Compl. ¶ 15.

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II.
Nations, joined by the RAR entities and Stapleton, moves to dismiss McFadden’s
amended complaint on grounds that McFadden’s claims against Nations for breach of duty to
provide lateral support and for negligence are factually deficient, Nations had no duty to provide
lateral support, and a cause of action for breach of the duty to provide lateral support has not
accrued because there has been no substantial subsidence and, hence, no damages.
A.
In reviewing a motion to dismiss, the Court must accept as true all factual allegations in
the complaint, but is “not bound to accept as true a legal conclusion couched as a factual
allegation.” Ashcroft v. Iqbal, 556 U.S. 662, —, 129 S.Ct. 1937, 1950 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not suffice.” Id. 556 U.S. 662, —,
129 S.Ct. at 1949. “Nor does a complaint suffice if it “tenders ‘naked assertion[s]’ devoid of
‘further factual enhancement.’” Id. (quoting Twombly, 550 U.S. at 557). To survive a motion to
dismiss, a complaint must plead “enough facts to state a claim to relief that is plausible on its
face.” Twombly, 550 U.S. at 570. “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.” Iqbal, 556 U.S. 662, —, 129 S.Ct. at 1949. “The plausibility
standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility
that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556). A well-pleaded
complaint may proceed even if it appears that actual proof of those facts is improbable and that
recovery is very remote and unlikely. Twombly, 550 U.S. at 556. A complaint cannot, however,

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simply leave open the possibility that a plaintiff might later establish some set of undisclosed
facts to support recovery. Id. at 561. Rather, the facts set forth in the complaint must be
sufficient to nudge the claims across the line from conceivable to plausible. Id. at 570.
“[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged – but it has not ‘show[n]’ – ‘that the pleader is entitled to
relief.’” Iqbal, 556 U.S. 662, —, 129 S.Ct. at 1950 (quoting Fed.R.Civ.P. 8(a)(2)).
B.
1.
The Court first addresses Nations’s argument that McFadden’s claims against Nations for
breach of duty to provide lateral support and for negligence are factually deficient. Nations
argues that McFadden’s allegations are conclusory, speculative, and lack the requisite specificity
to state a claim upon which relief can be granted.
“[T]he owner of land has the right to the lateral support of his soil in the natural state, and
the law provides recourse for violation of this right.” Urosevic v. Hayes, 267 Ark. 739, 741, 590
S.W.2d 77, 79 (Ark.App. 1979). A landowner in Arkansas “owes a continuing duty to protect an
adjoining landowner’s property when the excavation removes lateral support.” Id. “One who
excavates on his own land, so that by the operation of the natural and ordinary causes which he
takes no precaution to guard against, the land of another falls into the excavation, is liable to the
latter for the injury to the land in its natural condition, but not for injuries to buildings or
improvements, without proof of actual negligence.” Paris Purity Coal Co. v. Pendergrass, 193
Ark. 1031, 104 S.W.2d 455, 457 (1937). To prove negligence, “the plaintiff must show a failure
to exercise proper care in the performance of a legal duty, which the defendant owed the plaintiff

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under the circumstances.” Kowalski v. Rose Drugs of Dardanelle, Inc., 2011 Ark. 44, at 6, —
S.W.3d —, 2011 WL 478601. The question of what duty, if any, is owed a plaintiff alleging
negligence is always a question of law and never one for the jury. Id. (quoting Marlar v. Daniel,
368 Ark. 505, 508, 247 S.W.3d 473, 476 (2007)).
Here, McFadden alleges in its amended complaint that Nations excavated the hillside,
that this excavation entailed the removal of soil, fill and vegetation at the bottom of the hillside
and along the face of the hillside, that this excavation undermined the lateral support for
McFadden’s property and has caused instability to and movement of the property immediately
adjacent to and underneath the Holcombe Heights Apartments, that the excavation and resulting
instability has resulted in damage to its property and will further damage its property as the
instability continues, that it and others have observed continued movement in the hillside since
the lateral support was removed by defendants, that Nations, as general contractor, failed to use
the requisite care and was negligent in the excavation of the property immediately adjacent to the
McFadden property, that the removal of lateral support and the resulting hillside movement was
the proximate cause of the damages suffered by McFadden and the damages that McFadden
continues to suffer related to the McFadden property, and that the damages McFadden has
sustained as a result of the removal of lateral support by defendants include the costs associated
with testing the hillside, remedial repairs to the hillside in order to stabilize it, and the diminution
in value to the McFadden property related to the removal of lateral support. The Court finds that
McFadden sufficiently describes at this time what Nations allegedly did that caused and
contributed to the alleged damage to McFadden’s property and that McFadden thus pleads

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enough facts against Nations for breach of duty to provide lateral support and for negligence to
state claims for relief that are plausible on their face. Twombly, 550 U.S. at 570.
2.
Nations argues that even if the breach of duty to provide lateral support claim is factually
sufficient, it has found no authority that imposes on a contractor a duty to provide lateral support
and that absent a duty to provide lateral support, there can be no breach.
The Restatement (Second) of Torts “makes it clear that the person liable [for injury to
lateral support of land] ‘is, the actor who withdraws the naturally necessary lateral support.’”
Keck v. Longoria, 28 Ark. App. 277, 281, 771 S.W.2d 808, 811 (1989) (quoting comment j. to
Restatement (Second) of Torts § 817(1) (1979)). “The cause of action exists against the person
who made the withdrawal of support causing subsidence” and “[t]he complaint is insufficient
unless it alleges that the defendant made the withdrawal of support.” Id. (quoting 5 Powell, The
Law of Real Property § 699, at 289 (1987)). Thus, an action for injury to lateral support of land
may be brought against the landowner, the owner’s agent or licensee, or any other person by
whom the injury was caused. See, e.g., Kimberly-Clark Corp. v. Power Authority of New York,
35 A.D.2d 330, 337, 316 N.Y.S.2d 68, 76 (1970).
Here, McFadden alleges that the RAR entities, “by and through [their] contractor,
Nations, and other agents, excavated the hillside” and “[t]his excavation undermined the lateral
support for McFadden’s property....” Am. Compl. ¶¶ 12-13. McFadden has thus stated a claim
against Nations for breach of duty to provide lateral support that is plausible on its face.
Twombly, 550 U.S. at 570.

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3.
Finally, Nations argues that a cause of action for breach of duty to provide lateral support
accrues only when there has been an actual substantial subsidence and that McFadden’s
amended complaint does not establish that subsidence has occurred, much less that a substantial
subsidence has occurred. Nations notes that “a rolling stone, even if caused by a defendant’s
action, does not equate to a cause of action.”
A subsidence is defined under the Restatement (Second) of Torts as “any movement of
the soil from its natural position.” Restatement (Second) of Torts § 817, comment h. (1979).
“This movement may be in any direction” and “[i]t may be of surface or subsurface soil.” Id.
“A shifting, falling, slipping, seeping or oozing of the soil is a subsidence....” Id. The
withdrawal of the naturally necessary lateral support subjects the actor to liability “but does not
make him liable in an action for damages unless, and until, a subsidence occurs.” Id. comment
i. “To make the actor liable, the subsidence must be substantial.” Id. “The rule that the law will
not concern itself with trifles is applicable.” Id. “Thus the fall of a few grains of sand is not
actionable.” Id.
The parties have not directed the Court to any Arkansas authority expressly addressing
whether subsidence (substantial or not) is an element of a cause of action for breach of duty to
provide lateral support. Nevertheless, the Restatement (Second) of Torts § 817 (1979) makes it
clear that subsidence is required for strict liability and, as previously noted, the Arkansas Court
of Appeals has relied on § 817 of the Restatement (Second) of Torts in a case involving the
withdrawal of lateral support and repeated the “general rule” that “[t]he cause of action exists
against the person who made the withdrawal of support causing subsidence.” See Keck, 28 Ark.

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App. at 281, 771 S.W.2d at 811 (emphasis added). In addition, the Arkansas Supreme Court has
provided that “[o]ne who excavates on his own land, so that by the operation of the natural and
ordinary causes which he takes no precaution to guard against, the land of another falls into the
excavation, is liable to the latter for the injury to the land in its natural condition....” Paris Purity
Coal Co., 193 Ark. 1031, 104 S.W.2d at 457 (emphasis added). Given these precedents, it is
clear that at least some physical change or disturbance to the plaintiff’s property, i.e., a
subsidence, must occur before the plaintiff may establish strict liability under Arkansas law for
damages for the withdrawal of naturally necessary lateral support. This contrasts with a
negligence claim under § 819 of the Restatement (Second) of Torts, which provides that “[o]ne
who negligently withdraws lateral support of land in another’s possession, or of artificial
additions to it, is subject to liability for harm resulting to the other’s land and to artificial
additions on it.” (Emphasis added).4
As to what extent of subsidence is necessary for a loss of lateral support claim for
damages and whether that subsidence may be deemed “substantial,” this will necessarily be a
case-by-case determination dependent upon the particular facts of that case. It is enough in the
case at bar, at least under standards governing motions to dismiss, that McFadden alleges, inter
alia, that Nations’s excavation undermined the lateral support for McFadden’s property and has
caused instability to and movement of the property immediately adjacent to and underneath the

4

The parties have pled and argued this action largely on whether and to what extent a subsidence occurred
and is occurring. Certainly, “[t]he liability stated in § 817 [of the Restatement (Second) of Torts] is for a subsidence
of land that was naturally dependent upon the lateral support withdrawn, and for harm to artificial additions that
results from the subsidence.” Restatement (Second) of Torts § 819, comment b. (1979). To the extent Nations is
arguing that McFadden may only recover if it proves there was a subsidence, McFadden also pleads negligence and
under that theory, McFadden need not necessarily prove a subsidence. Rather, the liability stated in § 819 “is for
harm to any land or artificial additions on it caused by the negligent conduct of the actor in withdrawing lateral
support whether it is naturally necessary or not.” Id. comment b. (emphasis added).

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Holcombe Heights Apartments, that the excavation and resulting instability has resulted in
damage to its property and will further damage its property as the instability continues, and that
it and others have observed continued movement in the hillside since the lateral support was
removed by defendants. McFadden, then, alleges that actual subsidence has occurred and is
occurring and Nations, in agreeing with the RAR entities and Stapleton to the removal of this
action to federal court based on diversity of citizenship, see Notice of Removal at ¶ 7 and Ex. 5
[doc.#1], acknowledges that the amount in controversy exceeds $75,000.00, a more than
insubstantial sum. The Court thus finds that McFadden pleads enough facts against Nations for a
loss of lateral support claim for damages that is plausible on its face. Twombly, 550 U.S. at 570.
III.
For the foregoing reasons, the Court denies Nations’s motion to dismiss McFadden’s
amended complaint pursuant to Fed.R.Civ.P. 12(b)(6) [doc.#7].
IT IS SO ORDERED this 6th day of February 2012.

/s/Susan Webber Wright
UNITED STATES DISTRICT JUDGE

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