The opinion of the court was delivered by: Amy J. St. Eve, District Court Judge
MEMORANDUM OPINION AND ORDER
Plaintiff/Counter-Defendant BP Amoco Chemical Company ("BP Amoco") sued Defendant/Counter-Plaintiff Flint Hills Resources, LLC ("Flint Hills") seeking a declaratory judgment that it had not breached the Asset Purchase and Sale Agreement ("PSA") pursuant to which it had sold a chemical manufacturing plant (the "Joliet Plant") and related assets to Flint Hills. (R. 8-1, Am. Compl.) The sale price was over $300 million. Flint Hills filed counterclaims against BP Amoco for fraud and breach of contract. (R. 14-3, Answer & Countercls.) Flint Hills also asserts breach of contract against the guarantor of the PSA, BP Corporation North America Inc. ("BP North America"). (R. 103-1, Flint Hills' Third-Party Compl.) In this motion, BP Amoco and BP North America (collectively, "BP") seek partial summary judgment on Flint Hills' alleged "damages" claims. (R. 245-1, BP's Mot. for Partial Summ. J.) For the reasons discussed below, the Court denies BP's motion.
In light of the two summary judgment rulings already issued, the Court assumes the parties' intimate familiarity with the details of the case, the web of issues raised, and the Court's prior decisions. A brief rendition of the background facts relevant to the motion at hand follows.
According to Flint Hills, BP breached various representations and warranties contained in Section 7.1 of the PSA. BP represented, among other things, the production capacity of the production units at the Joliet Plant, the condition of certain assets, and that BP Amoco had not reduced spending in anticipation of the sale. The PSA also includes a number of environmental compliance warranties. Flint Hills contends that the PSA requires BP to indemnify Flint Hills for the damages caused by BP's alleged breach of these representations. Flint Hills seeks recovery of its costs of repair*fn1 and, in the alternative, the diminution in value caused by BP's alleged breaches of the PSA representations. (R. 360-1, Def.'s Supp'l Mem. at 2.)
BP promised to indemnify Flint Hills for any breach of a representation for which Flint Hills incurred losses greater than $75,000. As damages for its approximately fifty separate claims, Flint Hills seeks repair and replacement costs totaling over $125 million. (R. 324-1, Def.'s Resp. Br. at 19.) Alternatively, Flint Hills seeks $144 or $162 million as the diminution in value of the warranted property-the difference between its fair market value ("FMV") as warranted and its fair market value as received-caused by BP's alleged breach of contract and fraud. Flint Hills also seeks punitive damages on its fraud claims. In the motion now before the Court, BP requests partial summary judgment on Flint Hills' damages claims on the grounds that Flint Hills cannot satisfy the legal standards for proving damages. (R. 245-1 at 1.)
Section 13.2 of the PSA, "Indemnification by Seller," provides: To the fullest extent permitted by Law, Seller, in accordance with the terms of this Article 13, hereby agrees to Indemnify Buyer . . . from and against, any and all Losses incurred or required to be paid by any Buyer Indemnified Party . . . , which arise out of, relate to or result from any of the following: (a) any breach of any warranty or representation of Seller contained in Section 7.1 . . . . (R. 14-3 at 163, Ex. A to Answer & Countercls., Purchase & Sale Agreement § 13.2.) In Section 13.6 of the PSA, the parties agreed that, except for fraud, the remedies set out in Article 13 are the "sole and exclusive remedies" available for claims arising out of the PSA. (R. 322-1, Def.'s Rule 56.1 Stmt. Add'l Facts ¶ 1.) Specifically, Section 13.6 of the PSA states:
Except for . . . fraud, any claim or cause of action based on, arising out of or relating to this Agreement or Implementing Agreements must be brought by either Buyer or Seller, subject to the applicable provisions, conditions and limitations of this Agreement or Implementing Agreements, whether such claim arises out of contract, tort or otherwise. * * * Except for . . . fraud, the provisions of Article 13, Section 2.8(b) and Section 8.1(b) are intended to be the sole and exclusive remedies between the parties for the matters covered by such provisions.
SELLER WILL NOT BE LIABLE TO BUYER FOR ANY LOSS OF PROFIT, LOSS OF USE, SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES SUFFERED BY BUYER, HOWSOEVER ARISING UNDER THIS AGREEMENT, WHETHER BASED ON BREACH OF WARRANTY, BREACH OF AGREEMENT, STATUTE, STRICT LIABILITY OR OTHERWISE, INCLUDING WITHOUT LIMITATION NEGLIGENCE OF SELLER. . . . EACH PARTY AGREES THAT IT WILL NOT SEEK AND HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS TO OR FOR PUNITIVE OR EXEMPLARY DAMAGES AS TO ANY DIRECT CLAIM ARISING IN CONNECTION WITH THIS AGREEMENT.
(R. 14-3 at 188-89, PSA § 13.6 (capitalization in original).)
SUMMARY JUDGMENT STANDARD
Summary judgment is proper when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A genuine issue of material fact exists if the "evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed. 2d 202 (1986). In determining summary judgment motions, "facts must be viewed in the light most favorable to the nonmoving party only if there is a 'genuine' dispute as to those facts." Scott v. Harris, 550 U.S. 372, ---, 127 S.Ct. 1769, 1776, 167 L.Ed. 2d 686 (2007). The party seeking summary judgment has the burden of establishing the lack of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed. 2d 265 (1986). After "a properly supported motion for summary judgment is made, the adverse party must set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 255 (citing Fed. R. Civ. P. 56(e)(2)). "On summary judgment a court may not make credibility determinations, weigh the evidence, or decide which inferences to draw from the facts; these are jobs for a factfinder." Id.; Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003).
As a threshold matter, Flint Hills contends that this partial summary judgment motion is improper under Federal Rule of Civil Procedure 56 because it could dispose only of some portion of a claim less than the whole. (R. 324-1 at 29-30.) This argument fails. The Court may consider the damages issues raised in this summary judgment motion. See Dunkin' Donuts Inc. v. N.A.S.T., Inc., 428 F. Supp. 2d 761, 767 (N.D. Ill. 2005) (summarizing cases); Ace Hardware Corp. v. Marn, Inc., No. 06 CV 5335, 2008 WL 4286975, at *17 (N.D. Ill. Sept. 16, 2008) ("If Defendants cannot show that a genuine issue of material fact exists in relation to their damages sought in their counterclaim, summary judgment must be entered in favor of [Plaintiff]."). Since proof of damages is an essential element of both breach of contract and fraud claims, "a non-movant's failure to produce sufficient evidence of the damages element of its claim calls for the entry of summary judgment against that party." Dunkin' Donuts, 428 F. Supp. 2d at 767.
The Court first considers the breach of contract remedies available under the PSA and Illinois law. The Court will then evaluate BP's objections to the substance and sufficiency of Flint Hills' proposed evidence in support of its diminution-in-value damages (Part II) and cost-of-repair damages (Part III). Finally, the Court will take up whether punitive damages are available for Flint Hills' fraud claims.
I. Permissible Remedies Under the PSA and Illinois Law
Section 13.6 of the PSA provides that the remedies set out in Article 13 are the exclusive remedies available for breach of contract claims under the PSA. (Def.'s Stmt. Add'l Facts ¶ 1.) BP contends that, "[u]nder the PSA, cost-of-repair damages are the exclusive remedy, subject to the limitations and requirements imposed by the PSA and Illinois law." (R. 361-1, BP's Supp'l Mem. at 1.) According to BP, Article 13 of the PSA prohibits Flint Hills "from recovering damages based on diminished value or lost profits." (R. 247-1, BP's Br. Supp. Mot. for Partial Summ. J. at 6.) Flint Hills agrees that lost profits are not recoverable, but maintains that it can recover diminution-in-value damages.*fn2 (R. 324-1 at 13.) Although acknowledging that it cannot recover under both damages measures, Flint Hills contends that the PSA's exclusive remedy provision permits, among other things, both diminution-in-value and cost-of-repair damages.*fn3
A. Interpretation of the PSA
The PSA's plain language does not limit Flint Hills' recovery for breach of the representations in Section 7.1 to repair costs-both cost of repair and diminution in value are permissible measures of recovery under the PSA.*fn4 Section 13.2 of the PSA provides that "[t]o the fullest extent permitted by Law, Seller, in accordance with the terms of this Article 13, hereby agrees to Indemnify Buyer . . . from and against, any and all Losses incurred or required to be paid by" Flint Hills which arise out of any breach of Section 7.1. (R. 14-3 at 163, PSA § 13.2.) The PSA defines "Losses" to include, in relevant part, "any and all losses, damages, . . . and liabilities, costs and expenses." (Id. at 79, PSA Art. I: "Losses.") Thus, the PSA expressly and broadly provides that BP will indemnify Flint Hills for all "damages" "incurred" as a result of a breach of Section 7.1 "to the fullest extent permitted by Law." As discussed below, under Illinois law, which governs the interpretation and enforcement of the PSA, permissible "damages" include those for diminished value.
The PSA does not expressly bar diminution-in-value damages. BP, however, suggests that several PSA provisions preclude Flint Hills from ...