The United States Court of Appeals for the Sixth Circuit affirmed a jury verdict of over $33 million in a breach of contract case tried before a jury in the Western District of Michigan. In Whitesell Corp. v. Whirlpool Corp., Case Nos. 10-1702 and 10-1761, the primary issue before the court on appeal was the legal effect of a liability-limiting clause in the contract between Whitesell and Whirlpool. Whitesell had contracted to be Whirlpool's supplier of its volume requirements for cold-headed/threaded fasteners. Whirlpool relied heavily in its defense on a liability-limiting clause in the contract that provided the following:
In no event shall Buyer be liable to Seller for anticipated profits or for incidental or consequential damages for a claim of any kind, or for any loss or damage arising out of or in connection with this agreement, or from any performance or breach, termination or expiration of this agreement or any order.
The Sixth Circuit affirmed the district court's conclusion that the liability-limiting clause was invalid because it "deprives Whitesell of any form of damages resulting from Whirlpool's failure to purchase." The court held that the provision "effectively bars Whitesell from recovering direct damages from Whirlpool's failure to purchase. . . . While parties are free to negotiate the specific terms of an agreement, it is the very essence of a sales contract that at least minimum adequate remedies be available." Because the contract failed to provide Whitesell with minimum adequate remedies, the liability-limiting clause was stricken from the agreement and replaced by the remedies provided by the Uniform Commercial Code, which allow a seller to recover lost profits after a breach of contract.© 2014 Varnum LLP