BlogLine

Tennessee Court of Appeals reduces $1.3 million verdict in construction dispute over shipping container apartments

6/11/25

By: Jason M. Pannu

On Thursday, 5 June 2025, the Tennessee Court of Appeals issued an opinion involving a unique shipping container apartment project in Nashville, Tennessee. The case – 83 Freight LLC v. C4 Sourcing Solutions LLC et al. – involved a dispute over payment for prefabricated shipping containers used to build an apartment complex in Nashville. While the project was innovative, the decision highlights the calculation of damages and common risks in construction agreements, especially with non-traditional materials or supply chains. 

The Project 

83 Freight, a developer, hired Capital City Construction to build an apartment complex made from steel shipping containers. Capital City, in turn, subcontracted C4 Sourcing Solutions to supply 171 custom containers. 

The Dispute 

1. Damages Were Overstated 

The appellate court found that only $301,309 of the $866,991 verdict was supported by the testimony and accompanying exhibits and reduced the verdict accordingly. In reaching this conclusion, that court discussed how permissible damages for breach of contract included expectation damages and consequential damages. The court reviewed the law on expectation damages: “Award the injured party the profits it would have made had the contract been completed.” The court also stated the law on consequential damages as those damages that “are the normal and foreseeable results of a breach of contract.” The court confirmed its authority on appeal to suggest or require a reduction of damages awarded at trial based on a review of the trial record and determining whether the verdict was supported by material evidence. In this case, the $866,991 verdict could not be supported by the material evidence presented at trial. Claims for payment must be clearly documented and proven with precision. 

2. Prompt Pay Act Claims Survived—and Triggered Fees 

The jury found that Capital City acted in bad faith by not paying for containers it accepted. It was undisputed in this case that Capital City withheld payment for nine shipping containers that were delivered and installed into the 83 Freight project. Although Capital City and 83 Freight contended that payment was withheld in good faith, the appellate court held it was up to the jury to decide that fact. The finding of bad faith allowed C4 to collect attorneys’ fees and other relief under the Prompt Pay Act. Delays in paying subcontractors, especially when goods are delivered and used, can lead to enhanced financial exposure, including legal fees and statutory interest. The presence of bad faith is a question of fact. 

3. Lien Enforcement Was Upheld—Despite Technical Flaws 

C4’s lien claim wasn’t filed under oath, and the legal description was arguably incomplete. But the court allowed the lien to stand because it substantially complied with Tennessee’s lien statutes and did not have “nonprejudicial errors or omissions.” The Court did not permit Capital City and 83 Freight to use technicalities to invalidate C4’s lien because they were unable to show prejudice. 

4. Bonding Off a Lien Doesn’t Preserve All Defenses 

83 Freight extinguished the lien by posting a bond through SureTec Insurance. But by doing so, they waived challenges to the lien’s validity, extent and amount—even though the bond included language attempting to preserve those defenses. When bonding off a lien, understand what rights you are giving up with respect to challenging the validity of the lien. 

There were numerous other interesting issues raised on appeal that the appellate court declined to address because it found those issues were waived as the Appellant did not fully develop the arguments in their brief. 

For more information on the topic, contact Jason M. Pannu at jason.pannu@fmglaw.com or your local FMG Attorney. 

Information conveyed herein should not be construed as legal advice or represent any specific or binding policy or procedure of any organization. Information provided is for educational purposes only. These materials are written in a general format and are not intended to be advice applicable to any specific circumstance. Legal opinions may vary when based on subtle factual distinctions. All rights reserved. No part of this presentation may be reproduced, published or posted without the written permission of Freeman Mathis & Gary, LLP.