## Facts

- Children’s Surgical Foundation, Inc., an Illinois not-for-profit surgical practice, contracted with National Data Corporation, a billing and data-processing vendor, for medical billing and related services.
- The written agreement contained a limitation-of-liability provision allowing the vendor to reperform work and, regardless of cause, capping liability to the “total amount billed or billable” for services during the billing period when the services causing the loss were performed; the clause characterized the cap as liquidated damages and not a penalty.
- The Foundation alleged National Data breached the agreement by failing to properly code claims, post payments, and timely bill patients or third-party payors.
- The Foundation claimed more than $6 million in lost payments and sought damages exceeding the contractual cap.
- National Data moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss only the portion of the complaint seeking damages beyond the contractual limitation; the Foundation argued the clause was unconscionable and unenforceable.

## Issues

1. Whether, under Illinois law, the contract’s limitation-of-liability/liquidated-damages provision capping damages to the billed or billable amounts for the relevant billing period is enforceable or unconscionable.
2. Whether Rule 12(b)(6) permits dismissal at the pleading stage of claims seeking damages exceeding a contractual cap where the contract is attached to and central to the complaint.

## Decision

- The court granted National Data’s motion for partial dismissal.
- The limitation-of-liability provision was held valid and enforceable under Illinois law.
- The complaint was dismissed to the extent it sought damages beyond the contractual cap.
- The breach-of-contract claim otherwise remained pending, but only within the contractually limited measure of damages.

## Legal Principles

- Illinois law generally permits contracting parties to limit remedies or liability for breach unless the limitation violates public policy, is barred by statute, or is unconscionable.
- Unconscionability requires analysis of procedural factors (e.g., surprise, oppression, lack of meaningful choice) and substantive factors (oppressive one-sidedness); a bad bargain alone is insufficient.
- Liquidated-damages provisions are enforced when they reflect a reasonable estimate of anticipated loss at contracting and are not grossly disproportionate so as to function as a penalty.
- On a Rule 12(b)(6) motion, a court may consider a contract attached to the complaint; if the contract forecloses the relief sought as a matter of law, the claim may be dismissed to that extent.

## Conclusion

The court enforced a clearly stated contractual damages cap in a commercial billing-services agreement, rejected the plaintiff’s unconscionability challenge on the pleadings, and dismissed demands for damages exceeding the cap while allowing the underlying breach claim to proceed within the contract’s limits.


Children’s Surgical Found., Inc. v. Nat’l Data Corp., 121 F. Supp. 2d 1221 (N.D. Ill. 2000)