Lehman Brothers Holdings Inc. v. Campbell

Filing 17

ORDER denying 11 Defendant's Motion to Dismiss or in the Alternative, Motion for More Definite Statement. Signed by District Judge Tena Campbell on July 10, 2013. (AYB)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE

LEHMAN BROTHERS HOLDINGS,
INC.,
Plaintiff,
No. 3:12-cv-259
vs.

(Campbell/Shirley)

LANCE S. CAMPBELL, individually and
d/b/a/ Advanced Appraisals,
Defendant.

ORDER
In this negligence action, Defendant Lance S. Campbell has filed a motion to dismiss
under Rule 12(b)(6) of the Federal Rules of Civil Procedure, or, in the alternative, for a more
definite statement under Rule 12(e). (See Motion to Dismiss, or in the Alternative, Motion for
More Definite Statement (Docket No. 11).) Mr. Campbell (who does business as Advanced
Appraisals) contends that three tort claims brought by Plaintiff Lehman Brothers Holdings, Inc.
(LBHI) are barred by Florida’s economic loss rule.1 He also contends that the complaint does not
give him proper notice of the nature of LBHI’s claims against him. For the reasons set forth
below, the motion is DENIED.

1

Although the complaint was filed in federal court in Tennessee (the complaint alleges
that Mr. Campbell resides in Tennessee), both parties analyze the claims under Florida law,
apparently because the majority of events discussed in the complaint occurred in Florida.

BACKGROUND2
In 2006, Defendant Lance S. Campbell, doing business as Advanced Appraisals, was
hired by a mortgage lender to appraise two condominium units in Florida. He submitted two
appraisal reports, and the mortgage lender issued two residential loans to borrowers purchasing
the units.
After the mortgage lender issued the loans, Plaintiff Lehman Brothers Holdings, Inc.
(LBHI) purchased the residential mortgage loans on the secondary mortgage market in reliance
on the appraisal reports. In the Complaint, LBHI identifies the two loans by the borrower names,
property addresses, and property valuations. LBHI also identifies the appraisal reports by the
property name and the appraiser names.
Following LBHI’s purchase of the loans, the loans went into default and LBHI suffered a
“substantial [monetary] loss.” (Compl. ¶ 15.) LBHI now claims that the losses were “the direct
result of the substantial overvaluation of the Properties by Defendant, and/or Defendant’s other
misrepresentations of material fact.” (Id. ¶ 16.) In its complaint, LBHI lists specific
representations and warranties made by the Defendant. (See id. ¶¶ 9, 14.)
In an attempt to recover its losses, LBHI brought a complaint against Mr. Campbell, in
which LBHI asserts three claims: (1) Negligence/Professional Negligence; (2) Negligent
Misrepresentation; and (3) Negligence Per Se. LBHI does not assert a breach of contract claim,
and it does not allege that it was in privity of contract with the Defendant when it purchased the

2

The facts laid out in the Background section are taken from the complaint allegations,
which the court must accept as true for purposes of analyzing Mr. Campbell’s Rule 12(b)(6)
motion to dismiss. Evans-Marshall v. Bd. of Educ., 428 F.3d 223, 228 (6th Cir. 2005).
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loans.
ANALYSIS
Motion to Dismiss
In his motion to dismiss, Mr. Campbell asks the court to dismiss LBHI’s three
negligence-based claims. He incorrectly relies on Florida’s economic loss rule as the basis for
dismissal.
“[T]he economic loss rule is a judicially created doctrine that sets forth the circumstances
under which a tort action is prohibited if the only damages suffered are economic losses.” Tiara
Condominium Association, Inc. v. Marsh & McLennan Companies, Inc., 110 So. 3d 399, 401
(Fla. 2013). The rule has, in the past, been applied to situations in which the parties were in
privity of contract and the claims arose out of events covered by the contract. See, e.g.,
Indemnity Ins. Co. of N. Amer. v. American Aviation, Inc., 891 So. 2d 532, 536 (Fla. 2004),
abrogated by Tiara, 110 So. 3d 399 (Fla. 2013).
Based on a series of Florida cases, such as American Aviation, LBHI contends, in its
opposition to Mr. Campbell’s motion to dismiss, that the economic loss rule does not apply
because the parties are not in privity. LBHI is correct, but it need not go even that far in
opposing Mr. Campbell’s motion to dismiss. A recent (post-briefing) ruling by the Florida
Supreme Court in Tiara Condominium Association, Inc. v. Marsh & McLennan Companies, Inc.,
110 So. 3d 399 (Fla. 2013), substantially limited application of the economic loss rule by holding
that the rule only applies in the product liability context. Id. at 400. In its ruling, the Florida
Supreme Court “[c]orrect[ed] an ‘unprincipled expansion’ of the rule, [and] it receded from its
holdings in prior cases[.]” Altenel, Inc. v. Millennium Partners, LLC, ___ F. Supp. 2d ___, 2013
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WL 2363233 at *7 (S.D. Fla. Mar. 12, 2013) (quoting Tiara).
Whether under the “old” rule of law or the “new” rule of law (that is, regardless of
whether the Tiara decision curtails or refines and clarifies earlier decisions), Mr. Campbell’s
motion fails. LBHI and he were not in privity. And Mr. Campbell may not use the rule to
challenge LBHI’s negligence claims, which arise out of a loan purchase and appraisal reports, not
any product liability context.
The court recognizes that the parties completed briefing before the Tiara opinion was
issued, so they did not have the opportunity to analyze the issues under the new authority. But
the Tiara ruling is clearly applicable here. Because this case has nothing to do with product
liability, the court denies Mr. Campbell’s motion to dismiss.
Motion for More Definite Statement
Mr. Campbell moves in the alternative for “more definitive statements as to the dates of
the causes of action set forth in the Complaint[.]” (Docket No. 11 at 1.) He also maintains that
LBHI “fails to demonstrate the duty owed to [LBHI] since [LBHI] does not adequately show the
relationship between [LBHI] and the Appraisals.” (Id. at 9.) Mr. Campbell requests a more
definite statement of “the chain of title of this loan, the date that this loan was purchased by
[LBHI], and the amount that [LBHI] paid for such loans[.]”
Upon review of the Complaint, the court holds that LBHI has fulfilled its pleading duties
under Rule 8. What Mr. Campbell requests is appropriate for discovery, but is not necessary for
a complaint. The court denies Mr. Campbell’s request, both for the reasons set forth in LBHI’s
opposition memorandum (Docket No. 13) and because, to the extent any clarity was needed,
LBHI attached the specific appraisal reports to its opposition to the motion to dismiss. (See Exs.
4

A & B to Docket No. 13.)
SO ORDERED this 10th day of July, 2013.
BY THE COURT:

TENA CAMPBELL
U.S. District Court Judge

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