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Bb Syndication Services, Inc v. Lm Consultants

March 7, 2011


The opinion of the court was delivered by: Judge Joan B. Gottschall


Plaintiff BB Syndication Services, Inc. ("BBSS") brought this diversity action against defendant LM Consultants, Inc. ("LM") alleging breach of contract, negligence, professional negligence, and negligent misrepresentation. Currently before the court is LM's motion for partial summary judgment requesting that the court enforce a limitation of liability clause in LM's consulting contract with BBSS.*fn1 For the foregoing reasons, the court grants LM's motion. Because the court finds that the limitation of liability clause is valid and enforceable, LM's potential liability is limited to an amount below the statutorily required threshold for diversity jurisdiction. Therefore, the court dismisses the action for lack of subject matter jurisdiction under 28 U.S.C. § 1332(a).


BBSS is a Wisconsin corporation, with its principal offices in Madison, Wisconsin; LM is an Illinois corporation with its principal offices in Vernon Hills, Illinois. (LM's Statement of Undisputed Material Facts ("Statement of Facts") ¶¶ 1-2.)*fn2 BBSS and LM entered into an Agreement for Construction Evaluation and Monitoring Services (the "LM Agreement") on December 12, 2005, in connection with the Park Condominiums project located at 222 South Caldwell Street, Charlotte, North Carolina (the "Project"). (Statement of Facts ¶ 5.) The LM Agreement provided that LM would perform certain services related to the Project's pre-construction ("pre-construction phase services"), and construction phases ("construction phase services"). (Statement of Facts, Ex. B, (the LM Agreement) at 1-3.) Pre-construction phase services included reviewing certain Project documents and conducting a construction cost review. (LM Agreement at 1-2.) The construction phase services required LM to provide field reports that reviewed "construction progress, compliance with the Project Schedule, Appropriateness of the Contractor's Application for Payment, Change of Orders, Compliance with Project Documents, and Quality of the work." (LM Agreement at 2.)

In its complaint, BBSS alleges that, based on LM's representations and certifications to BBSS that the Project could be constructed for $33,937,000, BBSS "entered into numerous agreements with other parties to become the lender for the Project," including entering into a Construction Loan Agreement with 222 South Caldwell Street Limited Partnership, the Project's owner. (Am. Compl. ¶¶ 7-8.) BBSS asserts that it advanced a total sum of $26,168,876 in connection with the Project based on LM's representations made pursuant to the LM Agreement. (Id. ¶ 10.) BBSS claims that while LM initially represented that the Project was approximately seventy percent complete in February 2008, in March 2008 the Project's owner and contractor informed BBSS that additional funds were needed. (Id. ¶¶ 11-12.) In April 2008, LM reviewed the owner's representations and reported that $34,500,000 in additional funds would be needed to complete the Project. (Id. ¶ 12.) Because the Project's owner had defaulted under the Construction Loan Agreement, BBSS ceased advancing funds in connection with the Project, the Project's owner was placed into an involuntary bankruptcy proceeding, and the Project was foreclosed. (Id. ¶ 13.) BBSS subsequently filed this lawsuit against LM.

The LM Agreement contained the following provision (hereinafter the "LM limitation of liability clause"):

Client [BBSS] and persons claiming through Client agree to limit the liability of the Consultant [LM] for all claims arising out of, in connection with, or resulting from the performance of this Agreement to the amount of fees paid under this Agreement. (Statement of Facts ¶ 11; LM Agreement at 4.) Defendants argue that this clause limits their potential liability to BBSS to the amount of fees BBSS paid to LM under the LM Agreement. BBSS paid a total of $43,500 in fees to LM. (Statement of Facts ¶ 12.) Presently at issue is whether the LM limitation of liability clause is valid and enforceable and if it applies to all of BBSS's claims against LM. If so, BBSS's potential recovery from LM is capped at $43,500.

BBSS's amended complaint consists of four state-law-based claims against LM: breach of contract, "ordinary negligence," "professional negligence," and negligent misrepresentation. BBSS requests relief for each claim "in an amount sufficient to fully compensate [BBSS] for all damages, costs and other expenses as proven." (Am. Compl. ¶ 27.) There is complete diversity of citizenship between the parties.


Summary judgment is proper "if the movant shows that 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). Rule 56 "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

At the summary judgment stage, the court should view the evidence in the light most favorable to the nonmoving party, drawing all inferences in that party's favor. Cedillo v. Int'l Ass'n of Bridge and Structural Iron Works, Local Union No. 1, 603 F.2d 7, 11 (7th Cir. 1979).


Because there are no disputes as to any material fact pertaining to the LM limitation of liability clause, the issue of its validity and enforceability is ripe for ...

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