ENERGY PLUS CONSULTING V. ILLINOIS FUEL CO. 371 F.3d 907 (7th Cir. 2004) CASE BRIEF

ENERGY PLUS CONSULTING V. ILLINOIS FUEL CO.

371 F.3d 907 (7th Cir. 2004)

NATURE OF THE CASE: Energy (P) sued Illinois Fuel (D) alleging breach of contract and sought $720,000 in damages. The Court granted summary judgment in favor of Ds on the grounds that the $720,000 liquidated damages provision was an unenforceable penalty clause. P appealed.

FACTS: Washington County, Illinois' entered into a contract with P granting P the exclusive right, for eighteen months, to contract with third parties to develop a coal reserve. P solicited several companies. Ds and P signed an agreement which provided that P would present Ds to the County as a potential candidate interested in exploring the reserve. In turn, upon entering into an option contract with the County providing Ds an exclusive right to explore the reserve, Ds would pay P $100,000. The Agreement also included a clause that Ds shall pay to P $720,000 upon whichever shall occur first; the expiration of ninety days from the date of execution of the Option, unless Ds has released the Option, or the execution of a Mining Lease. The Agreement further specified that if Ds executed a mining lease with the County, Ds would also pay P $720,000 on the date of execution for the next four years. County executed an option contract granting Ds the exclusive right to explore and lease the reserve. Ds paid P $100,000. Four days after the expiration of the ninety-day deadline in the Agreement, P and D amended the Agreement extending the ninety-day deadline for Fuels to either pay $720,000 or release the option until December 31, 2001. Ds paid $50,000 for the extension. The Amendment also stipulated that Ds could extend the deadline to February 13, 2002 if Ds paid P another $50,000 by no later than December 31, 2001. On January 4, 2002, four days after the deadline to release the option agreement expired, Ds notified the County by letter that it would not exercise the option and also informed P of its decision by telephone. P demanded that Ds pay it $720,000 pursuant to the Amendment's provision which required the payment if Ds did not release the option on or before December 31, 2001. Ds refused to pay. P sued. The district court denied P's motion but granted summary judgment in favor of Ds, finding that the clause calling for the $720,000 payment was an unenforceable penalty. P appeals.

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