Community Bank of Trenton v. Schnuck Markets, Incorporated
887 F.3d 803 | Court of Appeals for the Seventh Circuit | 2018
What This Case Means for Subcontractors
Banks sued Schnucks grocery chain after a 2012 data breach exposed 2.4 million credit and debit cards, costing banks millions in fraud losses and card reissuance. The appeals court ruled that banks cannot sue for economic losses from the breach because they have contractual relationships with Schnucks that already allocate risk and provide remedies. The court held that tort law should not override existing contracts between parties in a commercial network. For subcontractors, this means courts will enforce contract terms that limit liability rather than allowing additional lawsuits for indirect financial harm.
Key Takeaways
- •If your contract with a general contractor or client includes indemnification and insurance clauses, courts will enforce those terms and reject separate tort claims for economic losses
- •Make sure your subcontracts clearly allocate risk and specify who bears costs for breaches, data loss, or other incidents—vague contracts invite litigation
- •Broad indemnification and flow-down clauses in your contracts are enforceable; use them to protect yourself from downstream claims
Tort law should not supplant a consensual network of contracts.
Frequently Asked Question
Can I sue a contractor for economic losses if they breach a contract, or am I limited to what the contract says?
Courts will enforce the contract's terms and reject additional tort claims if the contract already allocates risk and provides remedies. This means your indemnification and insurance clauses are your primary protection—make sure they are clear and comprehensive. Vague or missing clauses invite disputes.
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