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Keywords

contractdamagesmotionsummary judgmentbankruptcychapter 11 bankruptcyobjection
contractdamagesmotionsummary judgmentbankruptcychapter 11 bankruptcyobjection

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In re ADI Liquidation, Inc., 555 B.R. 423, 90 UCC Rep.Serv.2d 233

Facts

On September 9, 2014, the Debtors filed for Chapter 11 bankruptcy and subsequently rejected a supply agreement with Fairway Group Central Services LLC. Fairway filed a proof of claim for damages totaling $1,290,779.66, which included claims for lost profits and additional costs incurred due to the rejection of the supply agreement. The Debtors objected to the claim, arguing that Fairway had waived its right to consequential and incidental damages under the terms of the supply agreement.

On September 9, 2014, the Debtors filed for Chapter 11 bankruptcy and subsequently rejected a supply agreement with Fairway Group Central Services LLC.

Issue

Whether Fairway's claims for lost profits and additional costs due to the rejection of the supply agreement are barred by the waiver of consequential and incidental damages in the contract.

Whether Fairway's claims for lost profits and additional costs due to the rejection of the supply agreement are barred by the waiver of consequential and incidental damages in the contract.

Rule

The court applied the principle that parties may waive their right to consequential and incidental damages in a contract, and that such waivers are enforceable unless the contract is ambiguous or a contract of adhesion.

The court applied the principle that parties may waive their right to consequential and incidental damages in a contract, and that such waivers are enforceable unless the contract is ambiguous or a contract of adhesion.

Analysis

The court found that the waiver of consequential and incidental damages in the supply agreement was clear and unambiguous. It determined that the lost profits claimed by Fairway were consequential damages, which were barred by the waiver. However, the court also recognized that certain additional costs incurred by Fairway due to emergency purchases were direct damages that could be included in the rejection damages claim.

The court found that the waiver of consequential and incidental damages in the supply agreement was clear and unambiguous.

Conclusion

The court granted the debtor's motion for partial summary judgment in part, disallowing Fairway's claims for lost profits and lost deals, but allowing the claims for additional freight and upcharges stemming from emergency purchases.

The court granted the debtor's motion for partial summary judgment in part, disallowing Fairway's claims for lost profits and lost deals, but allowing the claims for additional freight and upcharges stemming from emergency purchases.

Who won?

The Debtors prevailed in part, as the court upheld their objection to Fairway's claims for lost profits and lost deals based on the waiver of consequential damages in the supply agreement.

The Debtors prevailed in part, as the court upheld their objection to Fairway's claims for lost profits and lost deals based on the waiver of consequential damages in the supply agreement.

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