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Friday, May 31, 2013

Ind. Decisions - 7th Circuit decides one Indiana case today

In SAMS HOTEL GROUP, LLC, dba HOMEWOOD SUITES HOTEL v. ENVIRONS, INC. (SD Ind., Pratt), a 14-page opinion, Judge Hamilton writes:

Plaintiff SAMS Hotel Group, LLC appeals the district court’s determination that a limitation of liability clause in its contract with defendant Environs, Inc. for a building design is enforceable against SAMS in this case alleging that Environs breached the contract by providing poor quality services that led to the demolition of the building. Pursuant to that clause, SAMS’s damages were limited to just $70,000 of a claimed loss of $4.2 million after a judgment in its favor on its breach of contract claim. We affirm. * * *

Environs does not contest the district court’s findings of breach, but SAMS appeals the district court’s determination that the limitation of liability provision is enforceable. The interpretation of this written contract is a question of law that we review de novo. See Court would. See Clark v. State Farm Mutual Auto. Ins. Co., 473 F.3d 708, 712 (7th Cir. 2007). Ace American Ins. Co. v. RC2 Corp., 600 F.3d 763, 766 (7th Cir. 2010). Indiana law applies, and our task is to apply Indiana law as we believe the Indiana Supreme Court would. See Clark v. State Farm Mutual Auto. Ins. Co., 473 F.3d 708, 712 (7th Cir. 2007). * * *

We must therefore predict how the Indiana Supreme Court would answer the following question: Is a limitation of liability clause in a professional services contract that generally refers to liability for “negligence” and breach of contract, and that was freely bargained by two sophisticated commercial entities, enforceable in favor of a breaching party even though the clause does not specifically refer to that party’s own negligence? We predict that the Indiana Supreme Court would say yes, so we affirm the district court’s judgment. * * *

“[T]he general rule of freedom of contract includes the freedom to make a bad bargain.” Indiana Bell Tel. Co. v. Mygrant, 471 N.E.2d 660, 664 (Ind. 1984) (internal quotation omitted). Without any indication in the Indiana case law that the Indiana Supreme Court would extend the specificity rule to a limitation of liability clause that was freely and knowingly negotiated by two sophisticated commercial entities in a dispute in which the underlying cause of action is for breach of contract and not negligence, we conclude that the district court properly held SAMS to the terms of its contract. The judgment of the district court is AFFIRMED.

Posted by Marcia Oddi on May 31, 2013 02:48 PM
Posted to Ind. (7th Cir.) Decisions