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Project Hawkeye, LLC v. Windlogics, Inc.

United States District Court, D. South Dakota, Northern Division

April 20, 2018

PROJECT HAWKEYE, LLC, AS THE ASSIGNEE OF CAMPBELL COUNTY WIND FARM, LLC; Plaintiff,
v.
WINDLOGICS, INC., Defendant.

          ORDER

          CHARLES B. KORNMANN UNITED STATES DISTRICT JUDGE

         BACKGROUND

         Plaintiff Project Hawkeye, LLC ("Project Hawkeye"), as the assignee of Campbell County Wind Farm, LLC ("CCWF"), filed suit against WindLogics, Inc. ("WindLogics") to recover damages incurred by CCWF as a result of WindLogics' alleged breach of contract to provide design services for CCWF's windfarm project in Campbell County, South Dakota. These are the "Parties." Project Hawkeye claims that WindLogics breached its requirement under the contract to site wind turbine towers in accordance with applicable setback restrictions, including SDCL 43-13-24, which requires wind turbine towers to be setback 500 feet or 1.1 times the height of the tower from any surrounding property line, absent an agreement otherwise with the property owner. The Parties are properly before this Court pursuant to 28 U.S.C, § 1332. The contract is governed by Florida law, as agreed.

         Both Parties moved for summary judgment regarding the interpretation of the indemnity and limitation of liability clauses in the contract. Project Hawkeye moved for partial summary judgment to request this Court to hold that the losses alleged in its complaint (1) either fall within the coverage of the indemnity clause or that the indemnity clause is ambiguous and should be interpreted against the drafter and (2) that the limitation of liability clause is either inapplicable or ambiguous and therefore unenforceable. Defendant filed a cross-motion for summary judgment requesting the Court to hold that (1) the damages plaintiff requests do not fall within the indemnification clause and (2) the limitation of liability clause excludes liability for consequential damages sought by the plaintiff.

         As this Court will be required to engage in a detailed reading of the indemnity and limitation of liability clauses in the contract, these clauses are set forth in full:

5. Indemnity. Customer shall, at its sole expense, defend, indemnify and hold WINDLOGICS, FPL Group, Inc., its affiliates, and their respective officers, employees, directors [sic] shareholders, members and agents harmless from and against liability or loss, including all reasonable costs, expenses and attorneys' fees, claims, suits or judgments in connection with alleged infringements of patens [sic], registered copyrighted or unregistered copyrighted works, trade secrets, patented or unpatented inventions, articles or appliances, or claims thereof pertaining to any materials, data, documentation, or equipment, or any parts or combinations thereof, provided hereunder to WINDLOGICS to facilitate WINDLOGICS's provision of Services. WINDLOGICS shall, at its sole expense, defend, indemnify and hold Customer harmless from and against liability or loss, including all reasonable costs, expenses, and attorneys' fees, claims, suits or judgments in connection with alleged infringements of patens [sic], registered copyrighted or unregistered copyrighted works, trade secrets, patented or un-patented inventions, articles or appliances, or claims thereof pertaining to WINDLOGICS's provision of Services or any deliverable related thereto.
6. Limitation of Liability. Except for indemnity obligations under this Agreement, neither Party shall be liable to the other Party for special, indirect, consequential or punitive damages, even if the Party has been advised that such damages are possible. Except for indemnity obligations under this Agreement, in no event shall WINDLOGICS's total aggregate liability exceed the Price set for [sic] in Section 3.1 for the Services.

         DECISION

         I. Standard of Review

         A motion for summary judgment is appropriate to resolve disputes involving the interpretation of unambiguous contracts. Howard v. Russell Stover Candies, Inc., 649 F.2d 620, 623 (8th Cir. 1981) (internal citations omitted). Summary judgment should be granted only . where there is "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The purpose of summary judgment is to determine whether there is a "genuine issue for trial" with regard to a claim or defense or "part of each claim or defense." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); and Fed.R.Civ.P. 56(a). If facts are disputed, "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc.. 477 U.S. 242, 248 (1986). Where the motion for summary judgment concerns issues that are "primarily legal rather than factual, " summary judgment is "particularly appropriate." Mansker v. TMG Life Ins, Co., 54 F.3d 1322, 1326 (8th Cir, 1995). Summary judgment may be granted for resolution of contract terms "if the 'documents supporting the Rule 56 motion are undisputed and reveal that there is no question as . to intent.'" Lillibridge v. Nautilus Ins. Co.. 2013 WL 870439, *4 (D.S.D. 2013) (quoting 10B Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, FEDERAL PRACTICE AND PROCEDURES § 2730.1 at 61 (3d ed. 1998)). The preliminary question of whether a contractual provision is ambiguous is a matter of law and therefore suitable for summary resolution by the court; however, if a provision is found to be ambiguous, summary judgment should not be granted where "issues are presented involving an inquiry into the state of mind of any of the contracting parties." 10B Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, FEDERAL PRACTICE AND Procedures § 2730.1 at 61 (3d ed. 1998). That is, summary judgment should not be granted if the intent of the parties is in question.

         This Court notes that the provisions at issue are contained in a contract negotiated between two sophisticated business entities, rather than a contract between consumer and provider or an adhesion contract. Contract clauses that limit, as in the instant case, a "design professionals' liability, 'once considered unprofessional, ' are today 'a fact of everyday business and commercial life.'" Buck S. Beltzer & Melissa A. Orien, Are Courts Limiting Design Professionals' Ability to Limit Liability? 30 CONSTRUCTION LAWYER 17 (Spring 2010). Limitation of liability clauses are not, as the Parties' motions suggest, identical to exculpatory clauses; the former limits the amount of damages that may be recovered for a party's negligent acts, while the latter exonerates a party from its negligent conduct. The enforceability of either the limitation of liability clause or indemnity clause does not render the remaining clause unenforceable: the contract also contains a severability provision, such that a defect in "one or more phrases, sentences, clauses or sections" contained in the contract does not invalidate "the remaining portions thereof." Severability clauses are enforceable as a general rule. See, e.g., Fonte v. AT&T Wireless Services. Inc.. 903 So.2d 1019, 1024 (Fla. 4th DCA 2005).

         At the crux of the Parties' dispute is the nature of the damages that plaintiff seeks. Plaintiffs Complaint requests "(A) Damages sufficient to compensate plaintiff for the losses it incurred; (B) Its costs and disbursements incurred herein, including reasonable attorney's fees; and (C) Such other and further relief as the Court deems just and proper under the circumstances." Plaintiffs Complaint also states that "Project Hawkeye paid confidential amounts of consideration" to secure consent for the placement of wind turbine towers and that "[a]s a result of WindLogics' breach of the parties' contract and negligence in failing to design the wind farm ... Project Hawkeye incurred liability and losses for which it is entitled to indemnity." The right to indemnity arises as the result of "an agreement by which the promisor agrees to protect the promisee against loss or damages because of liability to a third party." Rachel M. Kane, 12 Fla. Jur 2d Contribution, Etc. § 37 (February 2018) (citing Dade Cty. Sch. Bd. v. Radio Station WOBA, 731 So.2d 638 (Fla, 1999)). The damages plaintiff seeks for payments made to third parties to secure consent for the placement of the wind tower turbines, then, may properly be encompassed by an indemnity provision in the contract. The damages may also be characterized as consequential damages, as they "do not flow directly and immediately from an injurious act" but "result indirectly from the act." Damages, Black's Law Dictionary (10th Ed. 2014).

         II. The Limitation of Liability Clause

         The Court first addresses the applicability of the limitation of liability clause contained in the contract to the Parties' dispute. A contract "must be construed according to its own clear and unambiguous terms and applied as written, absent an ambiguity or some illegality." Tammy E. Hinshaw, et al., 11 Fla. JUR 2D CONTRACTS § 154 (February 2018) (citing Avis Rent A Car System, Inc. v. Monroe Cty.,660 So.2d 413 (Fla. 3d DCA 1995); McEnally v. Pioneer Woodlawn Utilities. Inc. By and Through Bd. of Cty. Com'rs. 587 So.2d 623 (Fla. 1st DCA 199H: and Hussmann Corp. v. UPS Truck Leasing. Inc..549 So.2d 215 (Fla. 5th DCA 1989)). Construing the contract in accordance with its clear terms, this Court notes that each statement in the limitation of liability clause begins with the phrase, "[e]xcept for indemnity obligations under this Agreement." The inclusion of this phrase clearly counters defendant's argument that the limitation of liability clause excludes any liability for consequential damages that may be available under the indemnity clause. I further note that, contrary to plaintiffs claim, the limitation of liability clause is not ambiguous: the first sentence limits the type of damages that maybe awarded to direct damages, while the second sentence sets the total ...


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