Westlake Financial Group, Inc. v. CDH-Delnor Health System
25 N.E.3d 1166
Ill. App. Ct.2015Background
- Westlake and Delnor executed a General Service Agreement (GSA) and an incorporated WITS Program Service Agreement (WITS Agreement) for Westlake to act as Delnor’s insurance broker and provide an employee benefit website/WITS system. The GSA term was through Dec. 31, 2012 (disputed), with commissions payable to Westlake.
- The GSA’s termination clause required written notice of a material breach and a 60‑day cure period. The WITS Agreement contained a separate termination clause allowing termination by either party for any reason on 60 days’ notice and an integration clause limiting that agreement to its subject matter.
- Delnor sent a letter in April 2011 stating it had engaged a new broker effective March 31, 2011, and later discontinued Westlake’s services and payments, which Westlake alleged breached the GSA.
- Westlake sued for breach of contract seeking lost commissions (at least 24 months of commissions) and the value of the website/WITS service; Delnor moved to dismiss under 735 ILCS 5/2‑615 on grounds the WITS termination clause allowed without‑cause termination of the GSA and the GSA’s limitation‑of‑liability clause barred lost‑profits damages.
- The trial court granted dismissal. On appeal the Second District reversed and remanded, holding the WITS termination clause did not apply to the GSA and the limitation clause barred only consequential (not direct) lost‑profit damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the WITS Agreement’s without‑cause 60‑day termination clause applies to the GSA | Westlake: WITS governs only WITS subject matter; GSA’s termination (material breach + 60‑day cure) controls GSA | Delnor: GSA incorporates WITS and both were executed together; provisions construed together so WITS termination applies | Court: Agreements are construed together but WITS termination applies only to WITS subject matter; it does not permit terminating the GSA without cause |
| Whether the GSA’s limitation‑of‑liability clause bars recovery of lost profits | Westlake: Clause disclaims only indirect/consequential damages (examples), so direct lost profits remain recoverable | Delnor: Clause broadly bars lost profits as consequential damages; Westlake’s lost commissions are lost profits and thus barred | Court: Clause bars indirect/consequential damages (including consequential lost profits) but does not bar direct lost profits; dismissal on this ground was improper |
| Whether alleged damages (lost commissions for 24 months) are speculative or legally unsupported | Westlake: Prior commission history gives a reasonable basis to plead lost profits; amount and offsets are factual issues for trial | Delnor: No guaranteed commissions; calculation speculative and contractual language shows Westlake bore the risk | Court: Damages were not speculative as a matter of law; factual disputes go to proof and weight, not dismissal |
| Whether Westlake may assert alternative quasi‑contract damages for website/WITS value | Delnor: Quasi‑contract recovery barred when an express contract governs | Westlake: Alternative pleading; regardless, sufficient breach and contract damages alleged | Court: No need to decide quasi‑contract point because contract‑based lost‑profit claim survives dismissal |
Key Cases Cited
- Thompson v. Gordon, 241 Ill. 2d 428 (Ill. 2011) (contract interpretation gives effect to parties’ intent; view contract as whole)
- Carr v. Gateway, Inc., 241 Ill. 2d 15 (Ill. 2011) (review of contract interpretation is de novo)
- Tepfer v. Deerfield Sav. & Loan Ass’n, 118 Ill. App. 3d 77 (Ill. App. Ct. 1983) (contemporaneous instruments may be construed together absent contrary intent)
- Wilson v. Wilson, 217 Ill. App. 3d 844 (Ill. App. Ct. 1991) (incorporation by reference makes additional provisions part of the contract)
- Midland Hotel Corp. v. Reuben H. Donnelley Corp., 118 Ill. 2d 306 (Ill. 1987) (lost profits can be direct damages depending on the circumstances)
- Reuben H. Donnelley Corp. v. Krasny Supply Co., 227 Ill. App. 3d 414 (Ill. App. Ct. 1991) (limitation clause barred consequential damages where plaintiff sought only consequential lost profits)
- Penncro Associates, Inc. v. Sprint Spectrum, L.P., 499 F.3d 1151 (10th Cir. 2007) (where contract excludes consequential damages and lists lost profits as an example, direct lost profits may still be recoverable)