Insights & Events

In 2005, the U.S. Court of Appeals for the Eleventh Circuit issued its opinion vacating the judgment of the trial court and erasing an $18 million lost profits award against the Firm’s client, General Electric.

GE sought the assistance of Hollingsworth LLP’s appellate team after a Rome, Georgia, jury awarded Lowe’s Home Centers $18 million in lost profits related to the frustration of plans by Lowe’s to build a new superstore downhill from a GE manufacturing facility.  Lowe’s had claimed at trial that contamination from the GE facility was the proximate cause of its inability to build a superstore on a composite property tract owned in part by Lowe’s and in part by others not parties to the litigation.

The crux of the appeal involved convincing the reviewing courts that bedrock principles of tort law reflected in 100-year-old precedent from the United States Supreme Court and the Supreme Court of Georgia prevented Lowe’s from parlaying its recoverable property damage claim into a windfall claim for interference with business expectancies.  After an initial round of briefing and oral argument by Joe Hollingsworth, the Eleventh Circuit determined that the case turned on unresolved questions of Georgia law and thus certified questions to the Georgia Supreme Court for resolution.    The key question, as articulated by the Georgia Supreme Court, was “whether Georgia’s economic loss rule allows a plaintiff to recover in tort lost profits that would have been realized by using its damaged property and other damaged property that it did not own.”  After a second round of briefing and oral argument, the Georgia Supreme Court unanimously accepted GE’s position that “established Georgia law and policy considerations dictate that a plaintiff may only recover lost profits associated with damage to its own property.”  Accordingly, the Eleventh Circuit vacated the district court’s judgment awarding $18 million in lost profits to Lowe’s.

Claims for lost business opportunities and other contingent liabilities have become increasingly common in litigation involving alleged environmental damage to third party properties. The decisions in this case offer an important limitation on recovery for such claims. Collectively, the decisions also reaffirm the principle long enshrined in the “economic loss rule” that a party who suffers economic losses must generally seek a remedy in contract and not in tort.

Lowe’s Home Ctrs. Inc. v. Gen. Elec. Co., 381 F.3d 1091 (11th Cir. 2004)