## Facts

- Frank E. Coghlan III and Joanna L. Coghlan purchased an Aquasport 205 recreational fishing boat manufactured by Wellcraft Marine Corporation.
- Wellcraft marketed the Aquasport 205 as having “all‑fiberglass” construction, a feature commonly associated with better rot resistance, durability, and resale value than wood‑fiberglass hybrids.
- The Coghlans alleged they relied on those marketing representations in deciding to buy the boat and in paying the price they paid.
- After the purchase, the Coghlans learned that part of the boat (including the deck) incorporated plywood encased in fiberglass rather than being entirely fiberglass.
- The Coghlans sued Wellcraft (and related entities) in federal court, asserting state-law claims including fraud, negligent misrepresentation, and breach of contract (and additional related theories in the complaint).
- The district court dismissed the complaint at the pleading stage, reasoning that the Coghlans had not alleged any “real damages” because the boat still functioned and the complaint did not allege physical failure or repair costs.
- The Coghlans appealed.

## Issues

1. Whether allegations that plaintiffs paid for an “all‑fiberglass” boat but received a boat containing concealed plywood adequately plead legally recognized damages (such as overpayment/diminished value) for fraud, negligent misrepresentation, and contract-based claims.
2. Whether the district court properly dismissed the action at the pleading stage on the ground that no “real damages” were alleged absent physical deterioration, failure, or repair expenses.
3. Whether the district court properly disposed of the entire case (including claims beyond those targeted by the defendants’ motion) based on its own damages analysis.

## Decision

- The Fifth Circuit reversed the dismissal in substantial part and remanded, holding that the complaint plausibly alleged legally recognizable economic damages.
- The court explained that the alleged injury was not limited to repair costs or physical failure; it included the difference between the value of an all‑fiberglass boat as represented and the value of a boat that used plywood in its construction, along with alleged diminished resale value.
- The court affirmed the dismissal only as to claims that were independently deficient (including claims the plaintiffs did not plausibly state under the governing pleading and substantive standards), while allowing the core misrepresentation and contract theories to proceed.

## Legal Principles

- Allegations of benefit‑of‑the‑bargain loss—overpayment and diminished value based on the difference between the product as represented and as received—can constitute legally sufficient damages at the pleading stage, even if the product has not yet failed.
- A court evaluating a Rule 12(b)(6) dismissal must accept well‑pleaded facts as true and cannot require proof of physical malfunction or out‑of‑pocket repair costs to recognize economic injury where diminished value is plausibly alleged.
- Fraud and negligent misrepresentation claims based on pre‑sale statements may proceed alongside contract theories when the alleged wrong is the inducement to buy based on misstatements, not merely failure to perform the contract.
- A district court’s sua sponte dismissal of claims not addressed by a defendant’s motion is improper when the complaint plausibly alleges an accepted damages theory for those claims.

## Conclusion

The Fifth Circuit held that the Coghlans’ allegations that they paid for an “all‑fiberglass” Aquasport 205 but received a boat with concealed plywood stated a plausible claim of economic injury measured by overpayment and diminished value, so the district court erred in dismissing the case for lack of “real damages”; the court reversed and remanded most claims while affirming dismissal only of those claims that were otherwise inadequately pleaded.


Coghlan v. Wellcraft Marine Corp., 240 F.3d 449 (2001)