Burying the Gravamen Dispute: The Tennessee Supreme Court Clarifies How to Determine the Applicable Statute of Limitations
In most cases, the applicable statute of limitations is clear – one year for a personal injury claim (Tenn. Code Ann. § 28-3-104(1)), three years for a claim for injury to real or personal property (Tenn. Code Ann. § 28-3-105(1)), six years for a breach of contract claim (Tenn. Code Ann. § 28-3-109(3)), etc. – or at least undisputed by the parties. When the applicable statute of limitations is not clear or disputed by the parties, e.g. in cases involving alternative claims and requests for relief, Tennessee courts analyze “the basis for which damages are sought,” i.e. the “gravamen” analysis.
Tennessee courts, however, have been inconsistent in their application of the gravamen analysis. For example, some courts focus “exclusively on the damages aspect of this formula and [give] little or no consideration to the basis aspect of it.” Benz-Elliott v. Barrett Enterprises, LP et al., No. M2013-00270-SC-R11-CV (Tenn. Jan. 23, 2015). Moreover, some courts apply this formula to the entire complaint while others focus on the “gravamen of the claim” at issue. In the recent opinion of Benz-Elliott v. Barrett Enterprises, LP et al., the Tennessee Supreme Court finally clarified that courts must only analyze the gravamen of the claim at issue, as opposed to analyzing the entire complaint, and should conduct this analysis by first examining the legal basis of the claim at issue and then examine the type of injuries for which damages are sought.
In Barrett, the plaintiff contracted to sell a portion of her real property along I-24 in Rutherford County to the defendant for expansion of the defendant’s firearm manufacturing facility. The contract provided for the plaintiff to retain a sixty-foot wide strip of property to provide her access to her remaining property. Upon closing and unbeknownst to the plaintiff, the defendant excluded the plaintiff’s contracted right-of-way from the warranty deed. When the plaintiff discovered the problem with the warranty deed, the plaintiff sued the defendant for breach of contract, intentional misrepresentation, and negligent misrepresentation.
At trial, the court dismissed the plaintiff’s claims of intentional and negligent misrepresentation. The court, however, ruled in favor of the plaintiff on the breach of contract claim, but rather than ordering specific performance as requested by the plaintiff, the court awarded the plaintiff $850,000 in damages for the diminution in value of her remaining property. On appeal, the defendants asserted that the plaintiff’s claim was governed and barred by the three-year statute of limitations applicable to actions for injuries to real property, Tenn. Code Ann. § 28-3-105(1), and not governed by the six year statute of limitations applicable to breach of contract claims, Tenn. Code Ann. § 28-3-109(3). The Tennessee Court of Appeals agreed with the defendants and “held that the gravamen of the claim…is an action for damages to real property.” In determining that the claim was an action for damages to real property, the court relied almost exclusively on the type of damages requested and awarded.
The Tennessee Supreme Court reversed, finding that that the Tennessee Court of Appeals erred by focusing only upon the type of damages requested and awarded. The court explained that the proper method for determining the applicable statute of limitations is to analyze the gravamen of each claim, not the complaint as a whole, and to utilize the following two-step approach when analyzing the gravamen of a claim:
[A] court must first consider the legal basis of the claim and then consider the type of injuries for which damages are sought. This analysis is necessarily fact-intensive and requires a careful examination of the allegations of the complaint as to each claim for the types of injuries asserted and damages sought.
Applying this analysis, the court concluded that the basis of the plaintiff’s claim was breach of contract because, as alleged and as found at trial, the defendants breached the contract when the plaintiff did not receive the property reserved by the plaintiff in the contract. The court further concluded that “the type of injuries for which [the plaintiff] sought to recover resulted from the breach of contract” as evidenced by the fact that the plaintiff initially sought specific performance as her relief, which “is available solely for breach of contract claims,” and as evidenced by the fact that the award for diminution in value to real property is an award for a “financial [injury], involving no injury to the real property itself.”
In conclusion, Tennessee practitioners engaged in a dispute over the applicable statute of limitations for a given claim should make their arguments within the framework established by the Tennessee Supreme Court in Benz-Elliott v. Barrett Enterprises, LP et al., No. M2013-00270-SC-R11-CV (Tenn. Jan. 23, 2015).