Westlake Financial Group, Inc. v. CDH-Delnor Health System , 2015 IL App (2d) 140589 ( 2015 )

Illinois Official Reports
Appellate Court
Westlake Financial Group, Inc. v. CDH-Delnor Health System,
2015 IL App (2d) 140589Appellate Court WESTLAKE FINANCIAL GROUP, INC., Plaintiff-Appellant, v.
Caption CDH-DELNOR HEALTH SYSTEM, f/k/a Delnor Community
Health System, Defendant-Appellee.
District & No. Second District
Docket No. 2-14-0589
Filed January 6, 2015
Held The trial court’s dismissal of plaintiff’s complaint for breach of
(Note: This syllabus contract arising from a brokerage agreement under which defendant
constitutes no part of the hired plaintiff to act as defendant’s insurance broker to procure
opinion of the court but benefits for defendant’s employees was reversed, since the trial court
has been prepared by the erred in determining that a termination clause in a separate contract
Reporter of Decisions between the parties permitted defendant to terminate the contract at
for the convenience of issue without cause and that plaintiff’s damages were barred by a
the reader.) limitation-of-liability clause, especially when the two contracts dealt
with different subject matter and the termination clauses did not
equally apply to both contracts, and the limitation-of-liability clause
barred only consequential damages from lost profits, not direct
damages from lost profits.
Decision Under Appeal from the Circuit Court of Lake County, No. 13-L-747; the
Review Hon. Diane E. Winter, Judge, presiding.
Judgment Reversed and remanded.
Counsel on Robert S. Reda and Kristina A. McClure, both of Reda & Des Jardins,
Appeal Ltd., of Lake Forest, for appellant.
Alison C. Conlon and Colleen J. Balek, both of Barnes & Thornburg
LLP, of Chicago, for appellee.
Panel JUSTICE SPENCE delivered the judgment of the court, with opinion.
Justices McLaren and Hudson concurred in the judgment and opinion.
OPINION
¶1 Plaintiff, Westlake Financial Group, Inc. (Westlake), appeals from the trial court’s
dismissal of its amended breach-of-contract complaint against defendant, CDH-Delnor
Health System, f/k/a Delnor Community Health System (Delnor). Westlake argues that the
trial court erred in ruling that: (1) a termination clause in a separate contract allowed Delnor
to terminate the agreement at issue without cause; and (2) all of Westlake’s damages were
barred under a limitation-of-liability clause. We conclude that, while the contracts should be
construed together, their termination clauses do not equally apply to both contracts, which
cover different subject matter. We also conclude that the limitation-of-liability clause bars
only consequential damages from lost profits and not direct damages from lost profits. We
therefore reverse and remand.
¶2 I. BACKGROUND
¶3 Westlake filed its initial complaint on October 2, 2013. The trial court granted Delnor’s
motion to dismiss the complaint, and Westlake was given leave to amend its complaint.
Westlake filed an amended complaint on March 18, 2014, alleging as follows in relevant
part. On January 1, 2008, Westlake and Delnor entered into a brokerage agreement (General
Service Agreement or GSA) whereby Delnor hired Westlake to, inter alia, act as its
insurance broker and procure benefits for its employees. Westlake agreed to create and/or
provide the following: a confidential and secure website branded and coded for Delnor’s
employees to manage their healthcare and benefits; use of Westlake’s “Online Enrollment
System” software through the Delnor website; confidential and secure administration of
benefits; a benefit call center; and confidential and secure access to and use of Westlake’s
“WITS Program,” subject to a “WITS Program Service Agreement” (WITS Agreement),
through which Delnor employees could track the resolution of issues concerning their
individual benefits and claims. In exchange for its services, Westlake would be paid certain
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fees and receive certain commissions. The terms of the agreement were to begin on January
1, 2010, and terminate on December 31, 2014.1
¶4 Westlake further alleged as follows. It performed all of its duties under the General
Service Agreement and the WITS Agreement, as well as a “Non-Disclosure Agreement,”
excepting only performance prevented by Delnor’s actions. The termination clause in
paragraph 3.2 of the GSA stated:
“Termination by Delnor. Delnor may terminate this Agreement at any time upon
sixty (60) days prior written notice if (i) WestLake[ 2 ] is unable to fulfill its
responsibilities under this Agreement, or WestLake is otherwise in material breach of
any provision of this Agreement, and (ii) Delnor has given WestLake written notice
of such failure or breach and WestLake has not cured such deficiency during such
sixty (60) day period.”
The WITS Agreement also had a termination clause, but its integration clause stated that the
termination clause was limited to the WITS Agreement only. On about March 31, 2011,
Delnor breached the GSA’s termination clause by one or more of the following acts: (1)
notifying Westlake in a letter dated April 18, 2011, that it had replaced Westlake as its
insurance broker effective March 31, 2011; (2) merging into CDH-Delnor Health System and
ceasing to exist as a separate corporate entity; and (3) hiring another company to provide it
brokerage services. Delnor confirmed the March breach on December 30, 2011, by
discontinuing use of Westlake’s brokerage services, switching to another broker, and
refusing to make any further payments under the GSA. As a direct result, Westlake suffered
the loss of at least 24 months of commissions on benefits as guaranteed by the GSA, leading
to damages exceeding $350,000. The costs saved by Westlake in not having to perform the
remainder of the agreement were nominal because it had already completed the Delnor
website and because Westlake’s support center and WITS program were already staffed as
fixed costs of Westlake’s operations. Alternatively, Westlake lost “the value of creating and
providing the Delnor Website and the WITS Service,” which Westlake believed exceeded
$100,000.
¶5 On April 15, 2014, Delnor filed a motion to dismiss the amended complaint under section
2-615 of the Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West 2012)). It argued that,
based on the GSA’s integration clause and the fact that the parties contemporaneously
executed both the GSA and the WITS Agreement, the agreements should be read together
and thus Delnor properly terminated the GSA by giving Westlake more than 60 days’ written
notice under the WITS Agreement’s termination clause, which stated:
“Term: Termination. This Agreement will commence on January 1, 2008, and
continue for a five year period until December 31, 2012, unless terminated earlier in
accordance with this Section 5 of the Agreement [(the same paragraph)]. Either party
may terminate this Agreement by written notice if the other party materially defaults
in the performance of any of its material duties or obligations hereunder, and such
default is not substantially cured within sixty (60) days after written notice from the
1
The GSA actually stated that it was effective through December 31, 2012, as Westlake
acknowledges in its brief’s statement of facts.
2
The contract refers to Westlake as “WestLake,” but we use the spelling Westlake applies to itself
in its briefs.
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other party describing the material default. Either party may terminate this Agreement
for any reason by providing sixty (60) days prior written notice to the other party.”
(Emphasis added.)
Delnor alternatively argued that Westlake could not recover for breach of contract because its
damages claim was uncertain, speculative, and limited by the GSA’s clear language.
¶6 The trial court granted Delnor’s motion to dismiss on May 21, 2014. The trial court found
as follows. The GSA and the WITS Agreement were to be read together, as they were
executed at the same time and by the same parties as part of the same transaction. Further,
the agreements’ termination clauses were not inconsistent or contradictory. Delnor was
allowed to terminate the contracts without cause by giving at least 60 days’ notice to
Westlake. Moreover, Westlake failed to sufficiently allege its damages, as lost profits were
not recoverable under the GSA’s limitation-of-liability clause.
¶7 Westlake timely appealed.
¶8 II. ANALYSIS
¶9 A. Standard of Review
¶ 10 On appeal, Westlake argues that the trial court erred in granting Delnor’s motion to
dismiss under section 2-615 of the Code. A section 2-615 motion to dismiss attacks the legal
sufficiency of the complaint. DeHart v. DeHart, 2013 IL 114137, ¶ 18. In ruling on a section
2-615 motion, a court must accept as true all well-pleaded facts in the complaint as well as all
reasonable inferences. Id. A cause of action should not be dismissed under section 2-615
unless no set of facts can be proved entitling the plaintiff to recover. Id. The central inquiry is
whether the allegations, when construed in the light most favorable to the plaintiff,
sufficiently state a cause of action upon which relief can be granted. Id. We review de novo
an order granting a section 2-615 motion to dismiss. Id.¶ 11 This case also involves the interpretation of contracts. In construing a contract, the
primary objective is to give effect to the parties’ intent, and we will first look to the
contract’s language to determine that intent. Thompson v. Gordon, 241 Ill. 2d 428, 441
(2011). We construe a contract as a whole, viewing each provision in light of other
provisions. Id. If the contract’s words are clear and unambiguous, they will be given their
plain, ordinary, and popular meaning. Id. We review a contract’s interpretation de novo. Carr
v. Gateway, Inc., 241 Ill. 2d 15, 20 (2011).
¶ 12 B. Termination Clauses
¶ 13 Westlake notes that, in Delnor’s April 18, 2011, letter, Delnor stated that effective March
31, 2011, Delnor Community Health System officially merged with Central Du Page Health
to form a new, yet-to-be-named health system. The letter stated that the new health system
had “engaged Towers Watson to facilitate and serve as Broker of Record for the benefits
integration process from this date forward.” The letter stated that any changes to the existing
program, including vendor relationships, would become effective January 1, 2012. Westlake
argues that the merger with another company, under which Delnor Community Health
System ceased to exist, and the replacement of Westlake with Towers Watson as broker of
record breached paragraph 3.2 of the GSA.
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¶ 14 As Westlake recognizes, Delnor does not argue that the termination was proper under
paragraph 3.2 of the GSA, under which there must have been a material breach with notice
and a 60-day opportunity to cure. Rather, Delnor relies on paragraph 5 of the WITS
Agreement, which allows termination with or without cause with 60 days’ notice. The issue
is whether the termination clause in the WITS Agreement also applies to the GSA.
¶ 15 Westlake points out that Delnor relied on Tepfer v. Deerfield Savings & Loan Ass’n, 118
Ill. App. 3d 77 (1983), among other cases, in the trial court. There, the court stated: “The
general rule is that in the absence of evidence of a contrary intention, where two or more
instruments are executed by the same contracting parties in the course of the same
transaction, the instruments will be considered together and construed with reference to one
another because they are, in the eyes of the law, one contract.” (Emphasis added.) Id. at 80.
Westlake argues that the crucial point here is that the instruments must not disclose a
contrary intention. Westlake notes that the Tepfer court stated that, where separate documents
are executed as part of a mortgage transaction, a stipulation or condition in one but not the
other is an effective part of the parties’ contract, as long as there is no necessary
inconsistency. Id. at 81. Westlake maintains that, if there is an inconsistency or contrary
intention in the documents, the limiting term will be given effect, as shown by the Tepfer
court’s statement that “[c]onstruing contemporaneous instruments together means simply that
if there are any provisions in one instrument limiting, explaining, or otherwise affecting the
provisions of another, they will be given effect.” Id. at 80.
¶ 16 Westlake argues that the two instruments here disclose obvious and contrary intentions of
the parties, as the GSA requires a material breach, notice, and a 60-day opportunity to cure,
whereas the WITS Agreement is much broader, allowing termination with or without cause.
Westlake argues that under Tepfer the court must give effect to the limiting termination
clause in the GSA and Delnor cannot rely on the unrestricted clause in the WITS Agreement.
Westlake argues that to reject the GSA’s limitations on termination would also violate the
principle that a court will not interpret a contract in a manner that would nullify provisions or
render them meaningless. See Thompson, 241 Ill. 2d at 442.
¶ 17 Westlake additionally argues that Delnor cannot rely on the contracts’ integration clauses
to support dismissal. Westlake argues that an integration clause is intended to prevent parties
from using parol evidence outside of the four corners of a contract (see W.W. Vincent & Co.
v. First Colony Life Insurance Co., 351 Ill. App. 3d 752, 758 (2004) (where contract contains
an integration clause, the court will not consider parol evidence of prior negotiations to create
an extrinsic ambiguity)), but that here the two termination clauses are inconsistent on their
face.
¶ 18 The GSA’s integration clause states, in pertinent part:
“Entire Agreement. This Agreement is the complete and exclusive agreement
between the parties with respect to the subject matter hereof, superseding and
replacing any and all prior agreements, communication, and understandings (both
written and oral) regarding such subject matter except for (i) that certain WITS
Program Service Agreement dates as of an even date herewith by and between
WestLake and Delnor and (ii) that certain Mutual NonDisclosure Agreement dates as
of an even date herewith by and between WestLake and Delnor. This Agreement may
be modified, or any rights under it waived, only by a written document executed by
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both parties. This Agreement may be executed in any number of counterparts, all of
which taken together shall construe a single instrument.” (Emphasis added.)
The WITS Agreement’s integration clause states:
“Entire Agreement. This Agreement is the complete and exclusive agreement
between the parties with respect to the subject matter hereof, superseding and
replacing any and all prior agreements, communication, and understandings (both
written and oral) regarding such subject matter. This Agreement may be modified, or
any rights under it waived, only by a written document executed by both parties. This
Agreement may be executed in any number of counterparts, all of which taken
together shall construe a single instrument.” (Emphasis added.)
¶ 19 Westlake argues that the WITS Agreement’s integration clause shows that the parties
clearly intended its provisions to apply only to the subject matter therein. According to
Westlake, the integration clauses do not allow Delnor to use the broad termination language
from the WITS Agreement to override the parties’ clear intent to restrict the termination of
the GSA to material breaches, with notice and a 60-day opportunity to cure.
¶ 20 For its part, Delnor argues that the GSA and the WITS Agreement must be construed
together as one agreement because (1) the GSA specifically incorporates the WITS
Agreement, and (2) the agreements were executed simultaneously by the same parties as part
of the same transaction. Regarding contractual language, Delnor notes that the GSA states
that it incorporates the WITS Agreement, as follows:
“WITS Service. WestLake shall allow the Delnor employees to participate in,
access, and use the WestLake Issue Tracking System (the ‘WITS Program’), as
further described in, and on the terms and conditions set forth in the WITS Program
Service Agreement. A copy of the WITS Program Service Agreement between
WestLake and Delnor is attached hereto as Exhibit B and incorporated herein by
reference.” (Emphases added.)
Delnor cites Wilson v. Wilson, 217 Ill. App. 3d 844, 853 (1991), where the court stated that, if
a contract shows an intent to incorporate another document by reference, the “additional
provisions become as much a part of the contract as if they were expressly written in it.”
Delnor also argues that the GSA’s integration clause confirms the parties’ intent to
incorporate the WITS Agreement’s terms into the GSA, because the integration clause
explicitly excludes the WITS Agreement from its statement that its provisions represent the
entire agreement. Cf. W.W. Vincent & Co., 351 Ill. App. 3d at 758-59 (where integration
clause referenced other documents as part of the main agreement, it was apparent that the
parties intended that their agreement include the subject matter of the additional documents).
¶ 21 Regarding the timing of the transaction, Delnor argues that the parties executed the GSA
and the WITS agreement at the same time, through the same representatives, and as part of
the same transaction to provide insurance brokerage services. Therefore, according to Delnor,
the contracts must be construed together in their entirety. Cf. In re Estate of Mayfield, 288 Ill.
App. 3d 534, 541 (1997) (where two or more instruments are executed by the same parties as
part of the same transaction, they will be considered together and construed with reference to
one another because the law views them as one contract).
¶ 22 We agree with Delnor that the GSA’s language shows that the parties intended that it be
construed together with the WITS Agreement, as the aforementioned language in the GSA
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expressly incorporates the WITS Agreement and the GSA integration clause states that it
contains the entire agreement but explicitly makes an exception for the WITS Agreement.
Based on this express intention, we do not need to reach the issue of whether the timing of
the transaction and the content of the documents would independently allow the documents
to be construed together. For this reason, Westlake’s arguments based on Tepfer are
unavailing, as the contracts in that case did not contain the same explicit incorporation
provisions present here. Even otherwise, Tepfer stated that, where there is no “contrary
intention,” documents signed at the same time by the same parties as part of the same
transaction would be construed together (Tepfer, 118 Ill. App. 3d at 80), and here the parties’
clear intention through their express language was that the agreements be construed together.
¶ 23 Although we agree with Delnor that the parties intended that the GSA and the WITS
Agreement be construed together, that intention does not establish that the WITS
Agreement’s termination clause serves as a means to terminate the GSA. Westlake argues
that the termination provisions cannot overlap because they are inconsistent, in that the GSA
requires a material breach, notice, and a 60-day opportunity to cure, whereas the WITS
Agreement is much broader, allowing termination with or without cause.
¶ 24 Indeed, the principle that the agreements should be “considered together and construed
with reference to one another” (id.) does not mean that provisions relating to one subject
automatically apply to every subject. The parties chose to make the WITS Agreement a
separate document, attached as an exhibit to the GSA. The GSA provision incorporating the
WITS Agreement specifically refers to the terms and conditions set forth in that agreement as
governing the WITS service, rather than the parties’ entire agreement. See 11 Richard A.
Lord, Williston on Contracts § 30:25 (4th ed. 2014) (“[W]hen incorporated matter is referred
to for a specific purpose only, it becomes a part of the contract for that purpose only, and
should be treated as irrelevant for all other purposes.”).
¶ 25 Also, as Westlake points out, the WITS Agreement’s integration clause states that the
agreement is the entire agreement between the parties with respect to its “subject matter.”
That subject matter is exclusively Delnor’s use of Westlake’s issue-tracking system, while
the GSA’s subject matter is Westlake’s serving as insurance broker for Delnor’s employees.
In this manner, this situation is distinguishable from the cases relied on by Delnor, as the
multiple contracts in those cases referred to exactly the same subject matter. See In re Estate
of Mayfield, 288 Ill. App. 3d at 536-37 (involving original and supplemental agreements);
Wilson, 217 Ill. App. 3d at 846-48 (involving original and restated agreements). We agree
with Westlake’s argument that, logically, Delnor could terminate the WITS Agreement at
any time without interrupting employee access to insurance benefits under the GSA.
¶ 26 Construing the plain language of both agreements as a whole, we conclude that the WITS
Agreement’s termination provision does not apply to the GSA. Such an interpretation is
consistent with the principle that when possible a court should give meaning and effect to
every provision and not nullify provisions or render them meaningless (see Board of
Managers of Hidden Lake Townhome Owners Ass’n v. Green Trails Improvement Ass’n, 404
Ill. App. 3d 184, 190 (2010)), in that it is the only interpretation that gives effect to the
parties’ stated intentions in both agreements. In other words, the parties chose to include
different termination language in the WITS Agreement and the GSA, and the aforementioned
interpretation gives effect to the distinction. As such, the trial court erred in granting the
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section 2-615 motion to dismiss on the basis that the without-cause termination provision in
the WITS Agreement applied to the GSA as well.
¶ 27 C. Damages
¶ 28 1. Limitation-of-Liability Clause
¶ 29 The trial court also granted the section 2-615 motion to dismiss on the alternative basis
that Westlake failed to adequately allege damages. The trial court reasoned that lost profits
were not recoverable under the GSA’s limitation-of-liability clause, which states:
“Limitation of Liability. Except with respect to the indemnification and
confidentiality obligations contained in this Agreement or any Exhibit hereunder,
without limitation to the foregoing, under no circumstances shall either party be liable
to the other party for any indirect, incidental, consequential, special, punitive or
exemplary damages, even if either party has been advised of the possibility of such
damages, arising from this Agreement, such as, but not limited to, loss of revenue or
anticipated profits or lost business.” (Emphases added.)
¶ 30 Contract damages are measured by the amount of money needed to place the plaintiff in
the same position as if the contract had been performed. In re Illinois Bell Telephone Link-Up
II & Late Charge Litigation, 2013 IL App (1st) 113349, ¶ 19. Clauses limiting damages are
enforced due to the strong public policy favoring freedom of contract, but such clauses are
not favored and will be strictly construed against a benefitting party. Hicks v. Airborne
Express, Inc., 367 Ill. App. 3d 1005, 1011 (2006). Damages are an essential element of a
breach-of-contract claim, so a plaintiff’s failure to prove damages entitles the defendant to
judgment as a matter of law. In re Illinois Bell Telephone Link-Up II, 2013 IL App (1st)
113349, ¶ 19; see also Palmolive Tower Condominiums, LLC v. Simon, 409 Ill. App. 3d 539,
547 (2011) (affirming trial court’s dismissal of counterclaims for failing to sufficiently allege
damages).
¶ 31 Westlake notes that there is a distinction between direct damages and consequential
damages. “Direct damages,” also called “general damages,” are “[d]amages that the law
presumes follow the type of wrong complained of.” Black’s Law Dictionary 394 (7th ed.
1999). “Consequential damages” are losses or injuries that do not flow directly and
immediately from a party’s wrongful act but rather result indirectly from the act. Hartford
Accident & Indemnity Co. v. Case Foundation Co., 10 Ill. App. 3d 115, 124 (1973); Black’s
Law Dictionary 394 (7th ed. 1999); see also 24 Richard A. Lord, Williston on Contracts
§ 64:12 (4th ed. 2014) (general damages are those that naturally flow from the breach while
consequential damages were not the invariable result of such a breach but were reasonably
foreseeable or contemplated by the parties as a probable result of a breach when the contract
was entered).
¶ 32 Westlake further notes that lost profits can be categorized as either direct or
consequential damages, depending on the situation. For example, in Midland Hotel Corp. v.
Reuben H. Donnelley Corp., 118 Ill. 2d 306, 319 (1987), the supreme court stated that, as a
matter of law, the plaintiff’s lost profits from the defendant’s breach of an oral contract to
properly include it in the first issue of a newly published telephone directory were a direct
result of the defendant’s breach. On the other hand, lost profits were deemed consequential
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damages in Burrus v. Itek Corp., 46 Ill. App. 3d 350, 358 (1977) (consequential damages
incurred where defective printing press caused decrease in output).
¶ 33 Delnor argues that there is no distinction in Illinois between direct and consequential lost
profits and that lost profits can form only consequential damages. It argues that Midland
Hotel Corp. is inapposite because that case involved an oral contract without a
limitation-of-liability clause. While we agree that the types of contracts involved are
distinguishable, Midland Hotel Corp., 118 Ill. 2d at 319, clearly held that the lost profits were
a direct result of the defendant’s breach of contract, thus supporting the proposition that lost
profits can be labeled as direct damages in some circumstances.
¶ 34 Having determined that lost profits can be categorized as either direct or indirect
damages, depending on the situation, we turn to the issue of whether the GSA’s
limitation-of-liability clause excluded any damages from lost profits. Westlake argues that
the ordinary and customary meaning of the phrase “such as, but not limited to,” which is
contained in the clause, is “for example.” We agree that this is the plain meaning of the
phrase. Cf. People v. Greene, 96 Ill. 2d 334, 339 (1983) (phrase “ ‘such as, but not limited
to’ ” provided guidance on the kinds of explosive devices prohibited by a statute).
¶ 35 Westlake argues that, while there is no Illinois authority directly on point regarding the
language contained in the limitation-of-liability clause, cases in other jurisdictions show that
the clause should be interpreted to prohibit only indirect damages from lost profits and allow
direct damages from lost profits. Westlake first cites cases with the phrase “including, but not
limited to,” which Westlake maintains is analogous. In Penncro Associates, Inc. v. Sprint
Spectrum, L.P., 499 F.3d 1151, 1156 (10th Cir. 2007), the court stated that direct damages
were the benefit of the bargain that the party lost from the contract itself, while consequential
damages were economic harm beyond the contract’s immediate scope. The contract at issue
prohibited the recovery of “ ‘consequential damages,’ specifying that they ‘include, but are
not limited to, lost profits, lost revenues and lost business opportunities.’ ” Id. at 1155-56.
The defendant argued that the language meant that any lost profits were consequential
damages and thus prohibited. Id. at 1156. The Tenth Circuit rejected this argument, stating
that the “more general term informs the subsequently listed examples, not the other way
around, and so lost profits here refer only to those that are ‘a part or component’ of the larger
group or class of consequential damages.” Id. It concluded that the language barred the
recovery of only consequential lost profits, not direct lost profits. Id. Specifically, it stated:
“We hold that, in keeping with plain meaning and legal norms, where parties to an agreement
exclude liability only for consequential damages, profits lost as a direct result of a breach
may be recovered.” Id. at 1162.
¶ 36 Westlake also cites other cases applying analogous reasoning to clauses containing
similar language. See In re First Magnus Financial Corp., No. AZ-10-1006-JuMkKi, 2010
WL 6452904, at *6 (B.A.P. 9th Cir. Aug. 31, 2010) (limitation clause prohibiting
consequential damages including lost profits did not apply to direct loss of anticipated profits
arising from the debtor’s breach of contract); Peter Kiewit Sons’ Inc. v. ATSER, LP, No.
8CV541, 2010 WL 1417811, at *3 (D. Neb. Apr. 1, 2010) (lost profits and lost revenue were
not, by definition, consequential damages); Claredi Corp. v. SeeBeyond Technology Corp.,
No. 4:04CV1304 RWS, 2010 WL 1257946, at *6 (E.D. Mo. Mar. 26, 2010) (plain reading of
limitation clause limited only indirect loss of profits and not profits that were direct
damages).
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¶ 37 Westlake argues that the same result has been reached with another analogous term,
“including, without limitation.” Westlake cites Optimal Interiors, LLC v. HON Co., 774 F.
Supp. 2d 993 (S.D. Iowa 2011). There, the contract stated that there would be no liability for
“ ‘SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES INCLUDING,
WITHOUT LIMITATION, LOST PROFITS OR REVENUES.’ ” (Emphasis omitted.) Id. at
1008. The court stated that lost profits or revenues as used in the clause were illustrative of
the types of special, incidental, or consequential damages that were disclaimed, and that the
clause did not preclude the recovery of direct lost profits. Id. at 1010.
¶ 38 Westlake argues that the above examples are readily distinguishable from the contract
language found in Quicksilver Resources, Inc. v. Eagle Drilling, L.L.C., No. H-08-868, 2009
WL 1312598, at *5 (S.D. Tex. May 8, 2009), which stated that the parties would hold each
other harmless for special, indirect, or consequential damages, which “ ‘shall be deemed to
include, without limitation, the following: loss of profit or revenue.’ ” The court
distinguished that language from the phrase “ ‘includ[ing], but *** not limited to, lost
profits,’ ” which it stated implied that other, unlisted damages also might be consequential
damages. (Emphasis omitted.) Id. at *6-7. The court stated that, in contrast, the agreement
before it “manifest[ed] a clear intent by the parties to modify the legal meaning and breadth
of the term ‘consequential damages,’ ” such that the specifically enumerated types of
damages were barred from recovery. Id. at *7.
¶ 39 Delnor counters that Reuben H. Donnelley Corp. v. Krasny Supply Co., 227 Ill. App. 3d
414 (1991), controls here. In that case, the plaintiff sued the defendant for failing to pay the
cost of an advertisement it placed in the plaintiff’s telephone yellow pages directory. The
defendant filed a counterclaim for consequential damages from lost profits on the basis that
the plaintiff had erroneously printed the advertisement with the phone number of the
defendant’s competitor. The contract contained an exculpatory clause stating that the plaintiff
“[u]nder no circumstances shall *** be liable for special consequential or exemplary
damages.” (Internal quotation marks omitted.) Id. at 417. The trial court ruled that the clause
barred the counterclaim, and it entered partial summary judgment for the plaintiff. Id. at 416.
The appellate court agreed with the trial court’s reasoning and affirmed. Id. at 421.
¶ 40 Delnor argues that it agreed to pay commissions to Westlake under the GSA and that the
lost commissions Westlake now seeks are considered lost profits under Illinois law. See
Equity Insurance Managers of Illinois, LLC v. McNichols, 324 Ill. App. 3d 830, 837 (2001)
(equating lost commissions to lost profits). Delnor argues that, as in Reuben H. Donnelley
Corp., the limitation-of-liability clause plainly shows the parties’ intent to bar the recovery of
lost profits.
¶ 41 As for the federal cases relied on by Westlake, Delnor points out that lower federal court
decisions are not binding on Illinois courts. See Wilson v. County of Cook, 2012 IL 112026,
¶ 30. Delnor also argues that Westlake’s reliance ignores the GSA’s plain language in favor
of cases involving very different circumstances and very different state laws. It contends that,
even if we were to consider the cases persuasive, each is distinguishable in that: (1) Penncro
Associates, Inc., 499 F.3d 1151, and In re First Magnus Financial Corp., 2010 WL 6452904,
each involved a party’s promise to pay fixed minimums during the contract term, the loss of
which the court construed as direct damages, but here there were no fixed minimums or
guaranteed commissions; (2) the court in Claredi Corp., 2010 WL 1257946, held that lost
profits may be direct damages under California law, but there was a question of fact about
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damages; (3) in Peter Kiewit Sons’ Inc., 2010 WL 1417811, the court allowed the plaintiff to
present to the jury its theory that lost profits were direct damages, but the actual language of
the clause was not fully recited in the opinion; and (4) in Optimal Interiors, LLC, 774 F.
Supp. 2d 993, the court ultimately characterized lost profits as consequential or indirect
damages.
¶ 42 Delnor argues that Quicksilver Resources, 2009 WL 1312598, is the most factually
analogous case. Delnor maintains that here, as in Quicksilver Resources, the parties agreed to
a broadly worded limitation-of-liability clause that included all “loss of revenue or
anticipated profits or lost business” as consequential damages. Delnor argues that, regardless
of whether the result of the clause seems harsh, Westlake accepted the risk by preparing and
executing the agreements.
¶ 43 Again, the GSA’s limitation-of-liability clause states that neither party shall “be liable to
the other party for any indirect, incidental, consequential, special, punitive or exemplary
damages, even if either party has been advised of the possibility of such damages, arising
from this Agreement, such as, but not limited to, loss of revenue or anticipated profits or lost
business.” (Emphases added.) As stated, we agree with Westlake that the plain meaning of
the phrase “such as, but not limited to,” is “for example.” Supra ¶ 34. We further agree with
the reasoning in the federal cases that Westlake cites, which construe similar language as
prohibiting damages for consequential or indirect lost profits but not direct lost profits. While
cases from lower federal courts are not binding, we may consider them as persuasive
authority. Wilson, 2012 IL 112026, ¶ 30.
¶ 44 Delnor’s attempts to distinguish these cases fall flat. Contrary to Delnor’s argument,
Peter Kiewit Sons’ Inc. did include the agreement’s language, in a footnote; the agreement
stated that the parties would not “be liable for consequential, incidental, indirect or special
damages, including but not limited to lost profits,” which is similar to the language at issue
here. Peter Kiewit Sons’ Inc., 2010 WL 1417811, at *3 n.1. Regarding the remaining cases,
Delnor largely focuses on the courts’ ultimate conclusions as to whether the plaintiffs proved
that they suffered lost profits as direct damages. Such an inquiry is premature here, as the
trial court dismissed the amended complaint on the basis that the limitation clause barred any
damages from lost profits. We recognize that in Optimal Interiors, LLC, 774 F. Supp. 2d at
1012-13, the court ultimately determined that Iowa law categorized all lost profits as
consequential damages, but the same is not true in Illinois. See Midland Hotel Corp., 118 Ill.
2d at 319.
¶ 45 We also find without merit Delnor’s argument that this case is most akin to Quicksilver
Resources, 2009 WL 1312598, at *5, as the language there stated that the parties would hold
each other harmless for special, indirect, or consequential damages, which “ ‘shall be deemed
to include, without limitation, the following: loss of profit or revenue.’ ” (Emphasis added.)
The “without limitation” language is not present here, and not all courts even agree with the
interpretation there. See, e.g., Optimal Interiors, LLC, 774 F. Supp. 2d at 1010 (disagreeing
with Quicksilver Resources and stating that there is no material distinction between the
phrases “including, but are not limited to” and “includ[ing], without limitation”);
cf. Gardensensor, Inc. v. Stanley Black & Decker, Inc., No. 12-CV-03922 NC, 2014 WL
4764628, at *2 (N.D. Cal. Sept. 24, 2014) (clause precluding liability for indirect damages,
“including without limitation” lost profits, did not bar recovery of direct damages for lost
profits). Delnor’s reliance on Reuben H. Donnelley Corp., 227 Ill. App. 3d at 416, also does
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not change our result, as the party there sought only consequential damages in the first
place.3
¶ 46 The plain language of the GSA’s limitation-of-liability clause bars “indirect, incidental,
consequential, special, punitive or exemplary damages,” and it provides examples of
subcategories of these groups, like lost profits. As in Penncro Associates, Inc., 499 F.3d at
1156, the “more general term informs the subsequently listed examples, not the other way
around, and so lost profits here refer only to those that are ‘a part or component’ of the larger
group or class of consequential damages.” Therefore, the limitation-of-liability clause does
not bar direct damages from lost profits, which are, at a minimum, arguably present here, so
the trial court erred in relying on the clause as an alternative basis to grant the section 2-615
motion to dismiss.
¶ 47 2. Term of Damages
¶ 48 Implicitly recognizing that we may affirm the trial court’s judgment on any basis
provided by the record, regardless of whether the trial court relied on that basis or whether its
reasoning was correct (Bjorkstam v. MPC Products Corp., 2014 IL App (1st) 133710, ¶ 23),
Delnor argues that, even if the limitation-of-liability clause is inapplicable, Westlake’s
request for 24 months of commissions is not supported by the agreements as a matter of law,
because the unambiguous termination letter and a confirmation e-mail demonstrate that the
termination was effective January 1, 2012. Therefore, argues Delnor, when it terminated
Westlake effective January 1, 2012, only one more year remained under the five-year
contract. However, as stated, a cause of action should not be dismissed under section 2-615
unless no set of facts can be proved entitling the plaintiff to recover. DeHart, 2013 IL
114137, ¶ 18. Therefore, even if Westlake miscalculated the exact timeframe for which it
could obtain damages, it would not serve as a basis for a section 2-615 dismissal, as dismissal
would be appropriate on this basis only if no damages could be proven.
¶ 49 3. Whether Damages Are Speculative
¶ 50 Delnor additionally argues that dismissal under section 2-615 is proper because
Westlake’s alleged damages are highly speculative based on the agreements’ language.
Delnor argues that it did not promise or guarantee any minimum number of commissions to
Westlake and that Westlake bore the clear contractual risk of receiving no commissions
during any year when the agreements were in effect. Delnor argues that, recognizing this
risk, Westlake included in the GSA a clause stating that, if the number of transactions
became too low, Westlake had a right to terminate the agreement. 4 Delnor maintains that, as
3
We similarly find Lockwood v. Standard & Poor’s Corp., 289 Ill. App. 3d 194 (1997), a case not
cited by either party, distinguishable. There, the court, which was applying New York law, stated, in
dicta, that the contract precluded “recovery of consequential damages, including lost profits, arising out
of the license agreement.” Id. at 198-99. However, the plaintiff was seeking lost profits due to the
defendant’s alleged failure to correct a closing stock index value (id. at 195), which would necessarily
be categorized as consequential profits, unlike the profits from commissions arising out of the contract
at issue here.
4
The referenced clause in the GSA provides, in relevant part, “WestLake may also terminate this
Agreement at any time upon sixty (60) days written notice if Delnor fails to continue or materially
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a matter of law, based on the contract language, Westlake had no expectation of future
commissions.
¶ 51 “Damages are speculative when uncertainty exists as to the fact of their existence”
(Thornhill v. Midwest Physician Center of Orland Park, 337 Ill. App. 3d 1034, 1051 (2003)),
as opposed to the amount of damages (Goran v. Glieberman, 276 Ill. App. 3d 590, 595
(1995)). Lost profits by their nature cannot be calculated with mathematical precision and
therefore do not have to be proven with absolute certainty; instead, the evidence needs to
provide only a reasonable basis for the computation of damages. Belleville Toyota, Inc. v.
Toyota Motor Sales, U.S.A., Inc., 199 Ill. 2d 325, 361 (2002). To allow defendants to escape
liability because the amount of damages they have caused is uncertain would immunize the
defendants from the consequences of their wrongful conduct. Id.¶ 52 Relevant to our analysis is Kay v. Prolix Packaging, Inc., 2013 IL App (1st) 112455, ¶ 34.
There, the court held that a salesperson’s estimation of his damages from unpaid
commissions did not amount to speculation and conjecture, but rather constituted reasonable
inferences based on his personal knowledge and sales numbers from the relevant time period.
The court stated that the sufficiency of the evidence of damages went to the weight of the
salesperson’s testimony but not its admissibility. Id. Kay is distinguishable from this case in
that the salesperson there was seeking damages from past commissions that he was allegedly
owed but did not receive, not lost profits from future commissions. However, Kay’s
reasoning still applies, as Westlake had been receiving commissions from Delnor for the
previous four years and therefore had a concrete basis on which to estimate how much it
would have received in commissions for the fifth year. Any shortcomings in its estimates
would go to the weight to be given to the evidence of damages rather than its admissibility.
Accordingly, Westlake’s alleged damages were not speculative as a matter of law, and this
argument does not support the grant of the section 2-615 motion to dismiss.
¶ 53 Delnor argues that, even if Westlake could reasonably allege its right to recover some lost
profits, Westlake impermissibly claims that any costs saved from not performing are
nominal, already incurred, or fixed. Delnor cites S.A. Maxwell Co. v. DeSoto, Inc., 73 Ill.
App. 3d 844, 850 (1979), for the proposition that a party cannot simply recover gross profits
but must deduct all costs saved from nonperformance. However, we have already determined
that Westlake’s damages are not speculative as a matter of law and that disagreements about
the amount of damages cannot serve as a basis for dismissal. See Dienstag v. Margolies, 396
Ill. App. 3d 25, 36 (2009) (determining the amount of damages is a function reserved for the
trier of fact); cf. Anzalone v. Kragness, 356 Ill. App. 3d 365, 372 (2005) (it is not appropriate
to dismiss a complaint under section 2-615 simply because the plaintiff’s prayer for relief
was deemed extravagant).
¶ 54 4. Damages as Quasi-Contractual
¶ 55 Last, Delnor argues that Westlake improperly seeks quasi-contractual damages in its
alternative allegation that it lost the value of creating the Delnor website. Delnor argues that
Westlake cannot pursue this theory of recovery because Westlake has already conceded that
there was a valid contract between the parties. Delnor cites Barry Mogul & Associates, Inc. v.
reduces its coverage under or the service purchased from WestLake under the Covered Benefits
Program.”
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Terrestris Development Co., 267 Ill. App. 3d 742, 750 (1994), where the court stated that, in
general, a plaintiff cannot pursue a quasi-contractual claim where the parties have an
enforceable express contract. Westlake disputes that its alternative theory seeks
quasi-contractual relief. We need not resolve this issue, because we have already determined
that Westlake has sufficiently alleged damages from lost profits. Therefore, even if Westlake
is improperly seeking quasi-contractual damages in its alternative theory, it would not justify
dismissing Westlake’s amended complaint under section 2-615.
¶ 56 III. CONCLUSION
¶ 57 For the reasons stated, we reverse the judgment of the Lake County circuit court granting
Delnor’s section 2-615 motion to dismiss, and we remand the cause for further proceedings
consistent with this opinion.
¶ 58 Reversed and remanded.
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