Be Our Guest Investments, LLC v. Piedmont Park Conservancy, Inc.

• Court: Court of Appeals of Georgia
• Decided: July 17, 2024
• Docket: A24A0618
• Status: Published

Opinion

FIFTH DIVISION MERCIER, C. J., MCFADDEN, P. J., and RICKMAN, J.

NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. https://www.gaappeals.us/rules

July 17, 2024

In the Court of Appeals of Georgia A24A0618. BE OUR GUEST INVESTMENTS, LLC v. PIEDMONT PARK CONSERVANCY, INC.

MERCIER, Chief Judge.

Be Our Guest Investments, LLC (“BOG”) appeals from the trial court’s order

granting partial summary judgment to Piedmont Park Conservancy, Inc. (“the

Conservancy”) in this contract dispute. For reasons that follow, we vacate the grant

of partial summary judgment and remand for further proceedings.

Summary judgment is appropriate when no genuine issues of material fact

remain and the moving party is entitled to judgment as a matter of law. See Johnson

County School Dist. v. Greater Savannah Lawn Care, 278 Ga. App. 110, 111 (629 SE2d

271) (2006). We review the grant of summary judgment de novo, construing the evidence and all reasonable inferences drawn from it in the light most favorable to the

non-moving party. See id.

So viewed, the evidence shows that at the time of this dispute, the Conservancy

owned the Piedmont Park Community Center, a building at the entrance to Piedmont

Park that housed the Conservancy’s environmental education camp and several

restaurants. Through an entity known as G&M Acquisition Group, LLC (“GMA”),

Katherine Drolett and David Duley, via individual limited liability corporations,

owned The Nook, a popular and successful restaurant that had been in operation since

2008.1 The Nook was located across the street from Piedmont Park, approximately

two blocks from the Community Center.

When two Community Center restaurant spaces became available in 2014, the

Conservancy asked The Nook’s management team to submit a lease proposal for the

spaces. The team prepared a proposal and was one of the final four candidates, but the

Conservancy initially selected another option for the restaurant spaces. That option

ultimately fell through, and the Conservancy requested that The Nook team resubmit

1 A third individual, George Egerton, was also a profit sharing owner of the Nook. 2 its proposal in August 2016. After considering several submissions, the Conservancy

awarded the lease opportunity to The Nook team in early 2017.

The team’s proposal called for operation of two restaurants in the Community

Center: a full service, American bistro-style restaurant called Walker’s 1834, and a

grab-and-go concept to be called Soulshine. According to Drolett, the plan was for

Walker’s 1834 and Soulshine to “share the same successful ownership and

management team as The Nook,” sell similar products as The Nook, and offer some

of the same menu items originally developed for The Nook. Particularly with respect

to Walker’s 1834, the proposal described the new venture as an “expansion” by The

Nook’s management team.

With Drolett as the managing member and Duley as a minority owner, BOG

was established as a single-purpose entity to develop, own, and operate Walker’s 1834

and Soulshine. On June 15, 2017, BOG and the Conservancy entered into a lease

agreement for BOG to rent the spaces at the Community Center for the new

restaurants. The Conservancy delivered the leased property to BOG in “as is,” “base

building” condition, with BOG having responsibility for designing and finishing out

the spaces as necessary subject to the Conservancy’s design approval. The lease

3 required BOG to substantially complete construction “on or before three hundred

(300) days after [the Conservancy] approves [BOG’s] Plans and Specifications.” The

lease further provided that BOG would be in default if it failed to complete the work

and begin restaurant operations “within three hundred sixty (360) days (as extended

by any delay attributable to an Event of Force Majeure)” after the Conservancy

approved the design. Under the lease, the Conservancy was charged with keeping

“the exterior walls . . . , the foundations and roof of the Building in good and

tenantable repair, provided that [BOG] shall give [the Conservancy] written notice of

the necessity for such repairs[.]”

Construction commenced in June 2018, with an anticipated duration of 16

weeks to build out both restaurants. On July 11, 2018, BOG’s general contractor, JM

Williams (“JMW”), cut into the concrete slab foundation of the Soulshine location

to install new plumbing As JMW continued its work, the slab collapsed and fell into

a large sinkhole beneath the floor. BOG informed the Conservancy about the sinkhole

and also contacted the project’s geotechnical engineering firm, which evaluated the

situation and recommended further investigation. The project’s structural engineering

firm also recommended additional investigation to determine the cause and extent of

4 the sinkhole, noting that voids could exist under other portions of the building slab,

potentially impacting the structural integrity of the entire building and its systems.

BOG provided the geotechnical and structural engineering reports to the

Conservancy.

Although BOG requested that JMW lead the sinkhole inquiry, the Conservancy

asked the City of Atlanta to investigate whether the void resulted from issues with an

old sewer line running beneath the Community Center. The Conservancy and the City

took over the investigation, and BOG understood that it should not investigate further

or conduct any repairs in the Soulshine space. BOG continued construction on the

Walker’s 1834 space, which was located on the other side of the Community Center,

away from the sinkhole, with the caveat that it would stop construction if its team

concluded that the site was unsafe.

On September 7, 2018, JMW informed BOG that the sinkhole was “definitely

growing.” BOG reported the growth to the Conservancy, noting JMW’s concern

regarding the structural integrity of the Community Center and fear that the City

might condemn the building. BOG also advised the Conservancy that its lender and

insurance agent had instructed BOG “to stop construction immediately, pending

5 repair of the sinkhole and certification from the City that the building is structurally

sound.”

Later that month, the Conservancy told BOG that “the City [had] completed

repair of the void under [the] slab” using a specialized grout back-fill mixture. When

BOG requested the City’s engineering reports, the Conservancy provided a

memorandum prepared by the City that described the repair work, but contained no

engineering analysis and did not identify the cause of the sinkhole. On October 22,

2018, the Conservancy’s attorneys sent BOG a letter demanding that BOG resume

construction. After consulting with its engineers and contractors, BOG responded that

it would only resume work if the cause of the sinkhole was determined, the sinkhole

was repaired under the supervision of a geotechnical engineer, and the geotechnical

engineer certified that the affected area and the Community Center were safe. The

Conservancy never provided BOG with an engineering report identifying the cause

of the sinkhole or certifying the area as safe, and work did not recommence. Citing

BOG’s failure to complete construction and open the restaurants within the required

time period, the Conservancy terminated the lease on May 31 2019.

6 BOG initiated this litigation in March 2020, alleging that the Conservancy had

not adequately addressed issues caused by the sinkhole and raising claims for breach

of contract, unjust enrichment, quantum meruit, and litigation expenses The

Conservancy answered and counterclaimed for breach of contract against BOG and

Drolett. The parties filed cross-motions for summary judgment, which the trial court

denied after finding that material issues of fact remained for trial.

As the trial date approached, the Conservancy moved in limine to exclude

evidence of lost profits that BOG allegedly suffered when Soulshine and Walker’s

1834 did not open. After reviewing that motion, the trial court revisited the

Conservancy’s summary judgment request, concluding that, with respect to damages

for lost profits, the Conservancy was entitled to partial summary judgment based on

the “new business rule.” As explained by the trial court: “Because these restaurants

were new businesses that never opened their doors, the [c]ourt is compelled to find

as a matter of law that no evidence exists to satisfy a ‘proven track record of

profitability’ and to provide a basis for the computation of damages as a matter of

law.” It thus granted the Conservancy partial summary judgment as to any claim for

7 lost profits damages and, as requested in the motion in limine, excluded evidence

regarding such damages. This appeal followed.

The new business rule “provides that, as a matter of law, a new or

unestablished business cannot recover lost profits because absent a history of past

profits, future profits are too uncertain, contingent, and speculative.” O’Tool v.

Genmar Holdings, 387 F.3d 1188, 1204 (III) (10th Cir. 2004) (citation and punctuation

omitted). The trial court found this rule applicable here, citing its belief that “current

law bars consideration of lost profits for an unopened business[.]” As the trial court

recognized, “[t]he trend in most states . . . has been away from strict application of the

new business rule.” Id. Nevertheless, because it located no Georgia precedent

rejecting strict application of the new business rule, the trial court concluded that any

recovery for lost profits was necessarily barred.

Georgia has never explicitly adopted the new business rule, and it is mentioned

by name only one time in a prior appellate decision — when our Supreme Court

declined to address whether the rule prohibited the recovery of lost profits in a

particular case. See General Electric Co. v. Lowe’s Home Centers, 279 Ga. 77, 80 (2)

(608 SE2d 636) (2005). We have explained, however, that “[a]lthough recovery for

8 lost profits is not necessarily precluded in a tort action, such loss must be capable of

reasonably accurate computation.” Molly Pitcher Canning Co. v. Central of Ga. R. Co.,

149 Ga. App. 5, 11 (4) (253 SE2d 392) (1979) (citation omitted). Thus, “unless the

anticipated profits are capable of ascertainment, and the loss of them traceable directly

to the defendant’s wrongful act, they are too speculative to afford a basis for the

computation of damages.” Id. at 10-11 (4).

Applying these principles, we have determined in various circumstances that

new businesses were unable to present sufficient evidence to support an award of lost

profits. See, e.g., Johnson County School Dist., 278 Ga. App. at 113 (“The record

before us is void of any competent evidence from which a jury could calculate . . . lost

profits [of a newly established lawn care business] with reasonable certainty.”);

Market Place Shopping Center v. Basic Business Alternatives, 227 Ga. App. 419, 422-423

(2) (489 SE2d 162) (1997) (no grounds for ascertaining lost profit damages with

reasonable certainty where expert testified that “his calculations were based on

expectations and assumptions and that he was required to make these assumptions

because the new business did not provide him with a sufficient ‘database’”); Molly

Pitcher Canning Co., 149 Ga. App. at 11-12 (4) (no basis for reasonably calculating lost

9 profits for new canning business). And we have noted that “generally speaking, lost

profits may be recovered by a business only if the business has a proven track record

of profitability.” EZ Green Assoc. v. Georgia-Pacific Corp., 331 Ga. App. 183, 188 (2)

(770 SE2d 277) (2015) (citation and punctuation omitted; emphasis supplied).

This does not mean, however, that Georgia law bars a new business from

recovering lost profits as a matter of law in all cases. To the contrary, “the new

business rule is simply an extension of the general rule that lost profits are only

recoverable if proved to a reasonable degree of certainty.” Jacked Up, LLC v. Sara Lee

Corp., 854 F.3d 797, 817 (III) (C) (5th Cir. 2017) (citation and punctuation omitted);

see also Johnson County School Dist., 278 Ga. App. at 112 (“To recover lost profits, a

party must show with great specificity the probable gain as well as the expenses

incurred in realizing such gain.”). Without a history of profitability, a new business

faces difficulty presenting the proof necessary to support a lost profits claim. See

Radlo of Ga. v. Little, 129 Ga. App. 530, 534 (2) (199 SE2d 835) (1973) (“The general

rule is that evidence of expected profits from a new business is too speculative,

uncertain, and remote to be considered, and does not meet the legal standard of

reasonable certainty.”) (citation and punctuation omitted). But we cannot foreclose

10 the possibility that, under some circumstances, a new business might be able to offer

reliable proof of prospective profits. See, e.g., O’Tool, 387 F.3d at 1204 (III) (“Instead

of a strict bar on such claims, many courts now hold that, regardless of whether a

business is new or is established, lost profits can be recovered if it is possible to show

by competent evidence and with reasonable certainty that profits would have been

made and the amount of those profits.”); Eljer Mfg. v. Kowin Development Corp., 14

F.3d 1250, 1256 (IV) (B) (2) (7th Cir. 1994) (“The premise of the so-called ‘new

business’ rule is that the success of a new enterprise is ordinarily uncertain. Where,

however, the enterprise is simply an absorption or extension of a previously

established successful operation and the venture’s future is less in doubt, the awarding

of future lost profits is not, as a matter of law, forbidden.”).

The key inquiry is whether lost profits are capable of reasonably accurate

computation. See Johnson County Sch. Dist., 278 Ga. App. at 112. BOG argued below

that Walker’s 1834 and Soulshine were to be extensions of The Nook, a pre-existing

business with a lengthy history of profitability that provides a reasonable basis for

calculating lost profits. It also submitted an expert affidavit from a certified public

accountant, who averred that in her professional opinion, lost profits for Walker’s

11 1834 and Soulshine could be calculated with a reasonable degree of certainty. The trial

court, however, did not consider the particular facts here or assess whether competent

evidence offered a sufficient basis for determining lost profits. Instead, it applied an

absolute rule of exclusion, concluding that BOG could not recover such profits solely

because the restaurants were “new businesses” that never opened.

We cannot agree with this mechanical, bright-line approach. Our case law

requires consideration of whether evidence exists to permit a calculation of lost

profits. See, e.g., Johnson County School Dist., 278 Ga. App. at 113 (referencing a “void

of any competent evidence”); Market Place Shopping Center, 227 Ga. App. at 422 (2)

(the “evidence did not provide a basis for ascertaining lost profit damages with

reasonable certainty”); Interstate Dev. Svcs. of Lake Park, Ga. v. Patel, 218 Ga. App.

898, 899 (463 SE2d 516) (1995) (“Where, as here, the evidence shows the claimant

was a new business with no history of profits and, in fact, was operating at a loss, the

loss of prospective profits is too remote and speculative to support a recovery of

damages.”) (citation and punctuation omitted). A decision that automatically bars a

new business from recovering lost profit erodes this fact-based inquiry. Accordingly,

12 we vacate the trial court’s summary judgment ruling and remand for further

proceedings consistent with this opinion.2

Judgment vacated and case remanded with direction. McFadden, P. J., and

Rickman, J., concur.

2 We express no opinion as to whether competent evidence offers a sufficient basis for determining lost profits in this case. Rather, we remand for the trial court to consider the issue. 13