Atlantic City Associates, LLC v. Carter & Burgess Consultants, Inc.
453 F. App'x 174
3rd Cir.2011Background
- ACA hired C&B to oversee The Walk project in Atlantic City, with delays leading ACA to sue and recover about $13 million including fees, costs, and interest.
- The Proposal and two post-Proposal Agreements contain parallel damage-limitation and indemnity provisions with governing New Jersey law.
- Key contract terms include: (i) total liability capped at fees received; (ii) mutual waiver of consequential damages; (iii) provision allowing ACA to recover attorneys’ fees.
- The District Court treated some provisions as non-incorporated or in conflict, and awarded substantial damages and fees.
- On appeal, the Third Circuit vacates and remands for consistent application of the incorporated provisions and proper damages classification.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether consequential damages were recoverable under the Agreements and Proposal. | ACA asserts damages beyond value of performance. | C&B argues such damages are excluded by 1.3.6 and 1.3. Conclude non-recoverable. | Consequential damages barred; only direct damages retained. |
| Whether Paragraph 2.9.2.2 applies to this first-party dispute and thus limits recovery. | ACA contends indemnity clause applies to damages from C&B’s negligent acts. | Travelers and NJ cases require third-party liability for indemnification to trigger. | 2.9.2.2 does not apply; Paragraph F1 incorporated via 1.3.6, and Section H governs fees. |
| Whether Section H (attorneys’ fees provision) is incorporated and available. | ACA seeks fees under Section H. | Fees are damages or subject to the general damages limitation. | Section H is incorporated; attorneys’ fees recoverable; not treated as consequential damages. |
| How Section F, Paragraph 1 interacts with Section H and whether pre-judgment interest is subject to the limitation. | Fees and costs may exceed compensation if Section H applies. | Limitation may apply to some components; interest unclear. | Fees under Section H not subject to the limitation; pre-judgment interest may require remand for clarification. |
Key Cases Cited
- Jaasma v. Shell Oil Co., 412 F.3d 501 (3d Cir.2005) (consequential damages limited by foreseeability under New Jersey law; Hadley v. Baxendale standard cited)
- Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89 (2d Cir.2007) (lost profits can be consequential or direct depending on the breach context)
- Penncro Assocs., Inc. v. Sprint Spectrum, L.P., 499 F.3d 1151 (10th Cir.2007) (lost profits may be direct or consequential depending on if they’re ‘benefit of the bargain’ or collateral losses)
- Travelers Indemnity Co. v. Dammann & Co., 594 F.3d 238 (3d Cir.2010) (indemnification clauses require third-party liability absent by terms; not applicable to first-party disputes)
- Investors Savings Bank v. Waldo Jersey City, LLC, 418 N.J.Super. 149, 12 A.3d 264 (N.J.Super.Ct.App.Div.2011) (indemnification requires third-party liability; not triggered here)
- McNally Wellman Co. v. N.Y. State Elec. & Gas Corp., 63 F.3d 1188 (2d Cir.1995) (contractual damages scope; defined exclusionary language in contracts)