The Arkansas Court of Appeals has overturned a lower court’s decision in a case involving Kelley’s Restaurant and Richard Baughn Construction (RBC), a contractor on a highway project. The original case, filed by Wynne-Ark., Inc., d/b/a Kelley’s Restaurant (Kelley’s), alleged negligence and sought damages from RBC due to the impact of the construction on their business. The appeals court found that the lower court erred in granting RBC’s motion for a directed verdict, effectively dismissing the case.
Background of the Case
The legal battle has a history, with this being the third time a part of the case has been reviewed by the court. The initial complaint, filed in 2014, claimed that Kelley’s suffered financial losses due to RBC’s negligent handling of a construction project on Highway 1 and Highway 64. The construction was part of an Arkansas Highway Transportation Department (AHTD) project. The case has previously involved disputes over the disclosure of a confidential settlement agreement and further appeals.
The Trial and Key Testimony
A trial was held in November 2023. Shannon Kelley, the manager of Kelley’s Restaurant, testified first. He presented financial records, including “Kelley’s Restaurant Summary Reports,” showing a significant decline in meal sales during the construction period (2011-2014) compared to the years before. He attributed the loss of business to several factors related to the construction:
* Restricted Access: The construction blocked or rerouted the restaurant’s driveways, making it difficult for customers to enter the parking lot, especially those with trailers or large vehicles.
* Poor Conditions: The driveways were often replaced with gravel and dirt which became muddy, creating hazards for vehicles.
* Traffic Backups: The construction caused traffic congestion, further deterring customers.
* Construction Delays: The project took longer than the projected timeframe.
Kelley testified that the restaurant had previously experienced consistent sales growth, but the construction project led to a decline, forcing the owner to take out a substantial loan to keep the business running.
Richard Baughn, co-owner of RBC, also testified. He stated that his company had a contract with the AHTD to maintain access to businesses during construction. He denied that the access issues were as severe as Kelley’s claimed. He also said that RBC had permission to use the property behind the restaurant for dumping materials.
Don Pagan, Kelley’s CPA, presented financial analysis and testified that the restaurant saw a decrease in revenue and gross profit during the construction period. While he admitted to a mathematical error in his initial calculations, he maintained that the decline in sales resulted in lost profits.
Other witnesses, including the AHTD’s resident engineer and several customers, provided additional evidence supporting Kelley’s claims. The engineer testified that contractors were required to minimize inconvenience to businesses. Customers testified that they stopped going to the restaurant because of the access problems.
The Lower Court’s Decision
RBC moved for a directed verdict, arguing that Kelley’s failed to prove negligence and damages. The lower court granted the motion, stating that there was no proof of causation and that the damages were too speculative. The court found that RBC was under the direct control of the primary contractor and the AHTD, the latter of which had immunity.
The Appeals Court’s Reasoning
The Court of Appeals disagreed with the lower court’s decision. They reviewed the evidence presented and concluded that Kelley’s had presented substantial evidence that RBC’s actions breached the AHTD’s specifications, and directly caused the restaurant’s financial losses.
The appeals court stated that the question of whether RBC complied with its contractual obligations was a matter for the jury to decide. They determined that a reasonable jury could find a causal connection between RBC’s actions and Kelley’s lost profits.
The court also found that the evidence of damages, including the drop in meal sales, the testimony of witnesses, and the loan taken out to keep the business afloat, was not speculative. They cited a previous case where a business’s loss of profits was deemed not speculative based on similar evidence.
Writ of Mandamus and Acquired Immunity
Kelley’s also asked the appeals court to issue a writ of mandamus, which would have ordered the lower court to properly record all proceedings. The court determined that it did not have jurisdiction to address this point.
RBC argued that the lower court’s decision should be affirmed based on the doctrine of “acquired immunity.” The appeals court rejected this argument, stating that whether RBC adhered to the contract specifications was a question for the jury.
The Outcome
The Court of Appeals reversed the lower court’s decision and sent the case back for a trial on the merits. This means that a jury will now decide whether RBC was negligent and whether Kelley’s suffered damages as a result.