Computrol v. Newtrend

Citation: Computrol, Inc. v. Newtrend, L.P., 203 F.3d 1064 (8th Cir. 2000),

Factual Background
Plaintiff Computrol, a custom software developer, contracted with defendant Newtrend, a provider of financial software packages, to reengineer several of defendant's packages. Named the “Alliance Agreement,” this contract was later amended to add an additional software package.

Both jobs ran into problems, the latter never getting past the planning stage. Newtrend sent Computrol a notice of default and termination of the Agreement. Computrol then filed this lawsuit, alleging breach of contract and a number of counts in tort.

“The Agreement allowed a party to terminate only in the event of a material or repeated breach and after the nonbreaching party provided the breaching party a detailed notice of deficiencies and a 90-day cure period for defaults other than payment.” Id. at 1068.

The contract also included a rather standard limitation of liability clause:


 * In no event will either party be liable to the other for any special, incidental or consequential damages arising out of this Alliance Agreement. Except as otherwise stated in this Alliance Agreement, each party's liability to the other for any cause whatsoever and regardless of the form of action and whether in contract or tort, or at law or equity shall in no event exceed the amounts actually paid to the other under this Alliance Agreement.

Trial Court Proceedings
After a 34-day trial, the jury awarded Computrol $2,663,000. On Newtrend's post-trial motion, the District Court ruled that the limitation of liability clause limited plaintiff's contract recovery to $469,206.88 and that damages for lost profits in excess of that amount were consequential damages and barred by the limitation clause. It also ruled that Computrol's proof of lost profits was “wholly speculative.”

The trial court also reduced Computrol's requested award of almost $3.2 million in attorneys’ fees, expenses and costs to $150,000, citing Fed. R. Civ. P. 54(d) and


 * “a contractual provision allowing the prevailing party to recover reasonable attorneys' fees. The amount of the fee award rests within the sound discretion of the court. . . . Computrol ignores the fact that the Agreement afforded only reasonable attorneys' fees. . . . Rule 54(d) is phrased in permissive terms and generally grants a federal court the discretion to refuse to tax costs in favor of the prevailing party.”

Id. at 1072.

The trial court ruled that the case was a “ ‘relatively straightforward breach of contract case’ which was unduly protracted by Computrol's painstakingly slow and complicated presentation of the evidence. The district court is in a better position than the Court of Appeals to assess the course of the litigation and the quality of work performed by the attorneys.” Id.

Appellate Court Decision
The Court of Appeals affirmed, finding there was sufficient evidence for the jury to find that Computrol performed its duties under the Agreement, even if it did not complete the work within the allotted time of 270 days, “in part because Newtrend delayed approving the program design. . . for more than ten weeks.”

Newtrend's witnesses admitted that defendant's notice of default was defective because it did not describe the deficiencies in detail. And Newtrend did not give Computrol the 90 days required by the Agreement to cure the deficiencies.

The Circuit Court reviewed the language of the Alliance Agreement de novo, applying Illinois law, which allows the parties to limit contract remedies and damages when not against public policy, saying:


 * ”We find that the district court was correct when it ruled post-trial that the limitation of liability clause unambiguously precluded Computrol from recovering the prospective lost profits. The limitation of liability provision in this case is fairly straightforward. In addition to prohibiting ‘special, incidental, or consequential damages,’ the limitation of liability clause dictates that contract damages ‘shall in no event exceed the amounts actually paid under the Agreement.’ When the Court considers both sentences of the limitation of liability provision in the context of the entire Agreement, [citation omitted], we find that Computrol and Newtrend intended to preclude liability in the form of prospective profits.”

Id. at 1070.