The Consequences of Waiving Consequential Damages: District Court Overturns 18-Million Dollar Award

On January 3, 2023, Judge Donald Nugent of the United States District Court of the Northern District of Ohio, applying Illinois law, granted Defendant TransUnion, LLC’s Motion for Judgment as a Matter of Law, and overturned an 18 million dollar jury award in favor of Plaintiff Endless River Technologies, LLC. The lawsuit arose from a 2014 contract, where TransUnion and Endless River agreed to develop a “Quote Exchange.”

The Quote Exchange was designed to allow insurers to provide real-time comparison price quotes for insurance to consumers. Per the terms of the contract, TransUnion had the option to terminate the contract with 180 days prior notice if the Quote Exchange did not meet TransUnion’s expectations. In addition, ownership of the source code for the Quote Exchange would revert to Endless River if TransUnion terminated the contract.

On October 4, 2017, TransUnion exercised its right to terminate the contract, but

did not recognize Endless River’s ownership of the Quote Exchange’s source

code and did not timely return it to Endless River after the contract was

terminated. After extensive litigation and trial, the jury awarded Endless River 18

million dollars against TransUnion on its breach of contract claim.

In overturning the jury’s damages award, the Court enforced a provision of the

contract that barred recovery of any consequential or indirect damages,

including lost profits or revenue. It held that the damages awarded to Endless

River were consequential damages because they were not sufficiently

foreseeable or contemplated under the contract.

In coming to this conclusion, the Court found that Endless River’s damages

calculation reflected lost market opportunities, i.e., opportunities that Endless

River might have realized through sale or marketing of the Quote Exchange.

Judge Nugent specifically noted that the contract was not formed for the direct

purpose of allowing Endless River to monetize the Quote Exchange, but rather,

as a service contract to provide its expertise to TransUnion to assist in the

development of the Quote Exchange. The contract did not discuss obtaining

customers, did not define an expected amount of profit or minimum value, and

did not impose on TransUnion any obligations post-termination. In addition, the

contract relied on future transactions with third parties, not in existence at the

time that the agreement was terminated.

The Court found that while Endless River might have been able to recover the

direct damages arising out of its consulting fee under the contract, or even the

value of the source code that TransUnion failed to return, it did not allege either

as a basis for recovery. Accordingly, the Court reduced the jury’s damages

award to zero.

As courts continue to apply consequential damage waiver provisions to

encompass a wide array of damages calculations, commercial entities should

be aware of the consequences of such provisions on obtaining recovery. If you

have any questions regarding Judge Nugent’s ruling, or any other questions,

please feel free to contact Chedid & Co.

This has been prepared for informational purposes only. It does not contain

legal advice or legal opinion and should not be relied upon for individual

situations. Nothing herein creates an attorney-client relationship between the

Reader and Associates Now. The information in this document is subject to

change and the Reader should not rely on the statements in this document

without first consulting legal counsel.

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