Argued March 31, 2014
[Copyrighted Material Omitted]
Appeal fro the United States District Court for the Eastern District of Wisconsin. No. 12-CV-848 -- Nancy Joseph, Magistrate Judge.
For Southern Financial Group Llc, Plaintiff - Appellant: Zach S. Whitney, Attorney, Kohner, Mann & Kailas, S.C., Milwaukee, WI.
For Mcfarland State Bank, Defendant - Appellee: Daniel C. W. Narvey, Attorney, Andrew S. Oettinger, Attorney, Godfrey & Kahn S.C., Milwaukee, WI.
Before WOOD, Chief Judge, and WILLIAMS and HAMILTON, Circuit Judges.
Wood, Chief Judge.
When sophisticated parties are able to bargain, it is rarely unfair to hold them to their contract. Southern Financial Group (SFG), a Texas firm specializing in distressed-asset investing, bought a loan portfolio from McFarland State Bank (McFarland) at cents on the dollar. Both parties were well represented during negotiations over the sale. The Loan Sale Agreement provided limited remedies in the event of a breach and disclaimed all other remedies. McFarland breached because one of its representations about the status of the collateral was false. When notified about the breach, McFarland disputed its liability. Months later, SFG sued McFarland, seeking damages beyond the limited remedies provided in the contract. Applying the contractual remedies limitation, whose formula resulted in zero recovery under the circumstances, the district court granted judgment for McFarland. We affirm.
McFarland acquired several assets formerly owned by the Evergreen State Bank. Among those assets was a loan portfolio with an unpaid balance of $4.42 million. Later, McFarland put this loan portfolio up at auction. A sophisticated player in the distressed-loan business, SFG was interested in the portfolio. It accordingly consulted some background materials that McFarland's sales agent, Mission Capital, put together about the portfolio. Those materials indicated that the portfolio was secured by 19 properties in Wisconsin, all real estate. SFG purchased the loan portfolio for $1.27 million (28.8% of the face value of the debt). In the agreement for the sale of the loans (somewhat confusingly called the Loan Sale Agreement by the parties), McFarland represented that " no material portion of the Collateral was released from the lien ... and no instrument of release, cancellation or satisfaction was executed." Loan Sale Agmt § 6.2(h). SFG was represented by counsel throughout negotiations leading to the purchase.
The Loan Sale Agreement limited available remedies in the event of breach. First, it provided that " [n]either party shall be liable to the other party for any consequential, special or punitive damages." Id. § 6.3. In the event of McFarland's breach of a non-monetary ...