Endless River Techs. LLC v. Trans Union LLC, 2023

The parties had entered into a development agreement and contract for services for “the  joint development and commercialization of a method for providing insurers on-line, real time comparison price quotes to consumers (‘Quote Exchange’).” Trans Union LLC (the defendant) admitted having breached the contract by not recognizing the ownership rights of Endless River LLC (the plaintiff) to quote exchange. A jury trial on damages followed.

Trans Union LLC had a motion for judgment as a matter of law. This motion was subsequent  to the court’s determination that Trans Union did breach its contract with Endless River. “[A]  jury was instructed to determine whether damages had been proven on the breach of  contract claim, and if so, in what amount.” The jury determined that Endless River proved by a preponderance of the evidence that it had suffered damages in the amount of $18.3  million proximately caused by Trans Union’s breach of contract (i.e., not returning source code for the quote exchange). Trans Union argued that the damages were barred by Section  8.2 of the contract. “Section 8.2 of the Contract between the parties contains this type of limiting clause in the form of a waiver of liability barring recovery of any consequential or indirect damages, including lost profits or revenue.” Illinois courts have read similar language to mean that precluded recovery was allowed only when they constituted “consequential damages” and not direct damages.

The parties did not agree on whether the $18.3 million in damages were consequential,  which the contract barred, or direct, which the contract allowed.

In contract cases, direct damages were those “arising naturally and usually from the breach” or “loss of bargain” damages stemming from the failure of the promised performance itself  (Corbin on Contracts—2022). Illinois further defined direct contractual damages as “utterly  foreseeable, indeed certain to stem from a breach of the contract.”

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.” (Aculocity, LLC v. Force Mktg.  Holdings, LLC) “Consequential damages must still be proximately caused by the breach and  must be foreseeable, but they are not the invariable result of a breach.” The difference in the two types of damages lied in the degree to which the damages were foreseeable.

Contrary to the plaintiff’s assertion, the agreement was not formed to allow Endless River to monetize the quote exchange. Rather it was a service contract where Endless River would use its expertise to help Trans Union to develop quote exchange. Trans Union was not required to market or sell the product, and Trans Union had the right to terminate the contract, which it did. The contract did allow Endless River to “continue to market and monetize the TU developed code,” should TransUnion terminate the agreement. Endless  River was to be an independent contractor and to receive the contract-defined compensation.

The actual breach that Endless River proved was that Trans Union failed to timely return the quote exchange source code. The direct damages related to this breach would have been a portion of the value of the quote exchange source code. Endless River did not seek that value as damages. The damages claimed were reliant on future transactions with third parties. “The opportunities lost were not in existence at the time TransUnion terminated.”

The lost profits the plaintiff claimed could only have been based on evidence the plaintiff’s expert presented. The damages could only have included consequential damages and were, therefore, barred by Section 8.2 of the contract. The defendant’s motion for judgment as a matter of law was granted.

“The Court enters Judgment in favor of the Plaintiff and against the Defendant on Count  One (Breach of Contract) of its Second Amended Complaint in the amount of zero dollars.”