8 F.4th 642
7th Cir.2021Background:
- Reid Hospital contracted with Dell (later assigned to Conifer) to manage its revenue cycle — billing, coding, processing, and collections — under an 80‑page commercial services agreement.
- The contract capped direct damages at fees paid and disclaimed recovery of indirect/"consequential" damages (expressly including "lost profits, lost revenue") except for claims arising from willful misconduct.
- Reid alleges Conifer materially underperformed after acquiring the contract: severe understaffing, slow/incorrect billing and discharge processing, and other lapses that caused tens of millions in lost revenue.
- Conifer moved for summary judgment arguing (1) the contract bars recovery of lost revenue as consequential damages, (2) no willful misconduct occurred (only business decisions to cut costs), and (3) causation/damages are speculative.
- The district court granted summary judgment for Conifer; the Seventh Circuit reversed and remanded, holding that (a) lost revenue can be direct in a revenue‑collection contract, (b) the parenthetical did not clearly re‑define all lost revenue as consequential, and (c) willful misconduct, causation, and damages present factual disputes inappropriate for summary judgment.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the contract precludes recovery of lost revenue as consequential damages | Lost revenue is the natural, direct loss from failing to perform revenue‑collection services and therefore recoverable | The contract’s consequential‑damages exclusion ("including...lost revenue") bars recovery of all lost revenue absent willful misconduct | Reversed: exclusion covers only indirect/consequential lost revenue; in a revenue‑collection contract some lost revenue can be direct and recoverable; remanded |
| Whether the parenthetical ("including...lost revenue") redefines consequential damages to include all lost revenue | The parenthetical references only consequential/indirect lost revenue; no bespoke redefinition appears in the contract’s definitions | The parenthetical shows the parties deliberately redefined consequential damages to sweep in all lost revenue | Court adopts ordinary meaning; no clear contract‑specific redefinition; parenthetical does not foreclose direct lost‑revenue claims |
| Whether Conifer’s conduct constituted "willful misconduct" (contract exception) as a matter of law | Evidence (understaffing after complaints, emails declining needed staffing) permits inference that Conifer knowingly disregarded probable harm to Reid | Conifer’s staffing cuts were business decisions to limit losses, not malicious or tortious conduct | Reversed: genuine factual disputes exist about knowledge/recklessness; willful misconduct is for the factfinder |
| Whether Reid can't prove causation or damages with sufficient specificity | Reid need not prove exact dollar‑for‑dollar causation at summary judgment and has evidence of significant undercollection tied to Conifer’s performance | Analyses show net revenue rose 1–2% under Conifer; claimed losses are speculative and not tied to specific breaches | Court: causation/damages are disputed factual issues; not appropriate to resolve on summary judgment; remand required |
Key Cases Cited
- Penncro Associates, Inc. v. Sprint Spectrum, L.P., 499 F.3d 1151 (10th Cir. 2007) (lost profits in a business‑services contract can be direct, not necessarily consequential)
- Rexnord Corp. v. DeWolff Boberg & Associates, 286 F.3d 1001 (7th Cir. 2002) (distinction between direct and consequential damages turns on foreseeability and contract context)
- Witham v. Norfolk & Western Ry. Co., 561 N.E.2d 484 (Ind. 1990) (willful misconduct can include conscious disregard of probable consequences; used to define contractual exception)
- Sharp v. Egler, 658 F.2d 480 (7th Cir. 1981) (discusses Indiana standards for wanton/willful misconduct; motive need not be malice)
- BRC Rubber & Plastics Inc. v. Continental Carbon Co., 981 F.3d 618 (7th Cir. 2020) (efficient breach does not relieve a breacher of the obligation to make the non‑breaching party whole)
- IBM v. Indiana, 51 N.E.3d 150 (Ind. 2016) (courts enforce sophisticated parties’ contract terms; parties may displace default rules by clear contract language)
- Kerr Steamship Co. v. Radio Corp. of America, 157 N.E. 140 (N.Y. 1927) (explains that whether a damage is direct or special is relative to the contract’s nature)