Key Points

  • The Tennessee Court of Appeals affirmed a $3.9 million punitive damages award to Commercial Painting Company Inc. on its intentional misrepresentation claim against The Weitz Company LLC.
  • The subcontract's Item 11.6, a general limitation of damages, does not specifically address fraud or misrepresentation and therefore does not bar punitive damages tied to the tort claim.
  • The panel held the clause fails under both the traditional rule that fraud vitiates contract protections and the approach that enforces only clear and specific disclaimers.
  • Weitz's condonation and ratification arguments fall outside the Tennessee Supreme Court's remand and were waived because they were never pleaded or briefed in the original appeal.
  • The court's earlier holding that the subcontract bars punitive damages on a breach-of-contract theory remains the law of the case.

The Tennessee Court of Appeals on Oct. 28 upheld a $3.9 million punitive damages award against general contractor The Weitz Company LLC, holding that a broad damages waiver in its subcontract with a drywall company did not shield Weitz from punishment for misrepresenting a construction project's schedule.

Judge Jeffrey Usman wrote for a unanimous three-judge panel that also included Presiding Judge J. Steven Stafford and Judge Carma Dennis McGee. The panel affirmed the Shelby County Chancery Court's punitive damages judgment for the subcontractor, Commercial Painting Company Inc. Usman wrote that "the contractual waiver in this case does not operate to bar punitive damages awarded pursuant to the misrepresentation claim."

The ruling answers the last question the Tennessee Supreme Court sent back in a lawsuit filed in 2006, now before the intermediate court for a fifth time. The panel found that a general limit on damages, one that never mentions fraud, does not reach tort damages for a contractor's own intentional misrepresentation. It reached that result under both of the competing approaches courts nationwide take to contract clauses that try to bar fraud claims, and so did not choose between them.

Usman opened by likening the case to "a relentless vine growing over the course of more than two decades of litigation" that has "become ever more tangled."

Weitz was the general contractor on a multi-building retirement community in Shelby County and agreed in 2004 to pay Commercial Painting $3,222,400 for drywall work. Commercial Painting alleged that Weitz signed the subcontract knowing the attached schedule was outdated and planning to compress the work and bring in extra crews. Weitz had negotiated a bonus from the project owner of $8,597 for each day, up to 45 days, that the project finished early.

In upholding the punitive award, the trial court found that Weitz wrongfully withheld more than half a million dollars and "back charged" Commercial Painting for work made necessary by Weitz or by other subcontractors. It found that after the project, Weitz employees joked that Commercial Painting "[s]hould be out of business by now." The court found that Weitz, which had annual revenues above $1.5 billion, intended to put the smaller company out of business.

An October 2018 jury returned an $8,359,863.83 verdict for Commercial Painting. The total included $1,272,952.46 in compensatory damages and $3.9 million in punitive damages, plus prejudgment interest and attorney's fees.

In 2022, the Court of Appeals threw out the punitive award under the economic loss doctrine, which it had read to confine sophisticated commercial parties to their contract remedies. In 2023, the Tennessee Supreme Court reversed and limited the doctrine to products liability cases; Justices Campbell and Bivens dissented. The majority, quoting earlier authority, wrote that contracting parties, even sophisticated ones, "cannot, and should not, be expected to anticipate fraud and dishonesty in every transaction."

On remand, the Court of Appeals in 2024 declined to decide whether the subcontract itself barred punitive damages on the fraud claim. It reasoned that it had already resolved that question. In a June 2025 order, the Supreme Court vacated that part of the ruling and directed the panel to decide "whether Commercial Painting contractually waived entitlement to punitive damages on its misrepresentation claim."

The clause at issue, Item 11.6, bars "anticipatory profit or indirect, special or consequential damages, however caused." It also waives "any other measure of damages" beyond those the subcontract specifically provides. Weitz argued that the clause barred any non-contractual or punitive recovery. It relied on Burd v. Richey, in which the Court of Appeals enforced a business partner's broad release against his later fraud claims. The panel noted that the release in Burd "was much broader."

Usman instead relied on a line of Tennessee cases refusing to let general releases defeat fraud claims. Among them was a 2005 decision declaring that "fraud vitiates all that it touches." He also described the national split recorded in the Dobbs torts treatise. The traditional approach rejects such clauses outright, while a contrary view enforces clauses that specifically disclaim reliance on misrepresentations.

Item 11.6 failed either test, the panel found. It "does not appear to set forth an explicit, specific waiver of damages for claims of fraud or misrepresentation or address the specific misrepresentations," Usman wrote. He added that the clause "appears to address remedies related to contract rather than tort."

Weitz had warned that refusing to enforce the clause would undercut parties' ability to limit their tort exposure by contract. Usman wrote that the modern approach "does not actually prevent parties from contracting so as to limit damages for claims of fraud or misrepresentation. It instead requires specificity in contracting to do so — specificity that is not present in this case."

The panel refused to consider Weitz's newer argument that Commercial Painting condoned, or ratified, the fraud by continuing to perform the contract. That position "cannot be reconciled with the jury's verdict, which is now the law of the case," Usman wrote. Ratification is an affirmative defense, he noted, and Weitz never pleaded it. The court added that the words "ratify," "ratification," "purged" or "condoned" appear nowhere in Weitz's 95-page 2020 brief, so the argument was waived.

The panel also rejected Commercial Painting's request to revisit its 2022 holding that the subcontract bars punitive damages on a breach-of-contract theory. The Supreme Court had not disturbed that ruling, the panel said, so it remains the law of the case. The only recovery before the panel was the punitive award attached to the fraud claim.

Philip E. Beck of Atlanta represented Weitz and its sureties, Federal Insurance Company and St. Paul Fire & Marine Insurance Company. Scott A. Frick of Memphis represented Commercial Painting and Liberty Mutual Insurance Company.

The panel taxed the costs of the appeal to Weitz. It remanded the case for any further proceedings "consistent with the appellate decisions in this case."