Court Opinion

ID: 2995896
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:23:16.101074+00
Date Added: 2024-06-11T15:03:11.665191
License: Public Domain

In the
 United States Court of Appeals
                For the Seventh Circuit
                        ____________

No. 01-3860
SOUTHERN ILLINOIS RIVERBOAT CASINO CRUISES, INC.,
D/B/A PLAYERS ISLAND CASINO,

                                             Plaintiff-Appellant,
                               v.

TRIANGLE INSULATION AND SHEET METAL COMPANY,
                                             Defendant-Appellee.
                        ____________
           Appeal from the United States District Court
                for the Southern District of Illinois.
          No. 00 C 4303—G. Patrick Murphy, Chief Judge.
                        ____________
    ARGUED FEBRUARY 20, 2002—DECIDED AUGUST 23, 2002
                        ____________

 Before BAUER, RIPPLE, and MANION, Circuit Judges.
  MANION, Circuit Judge. Southern Illinois Riverboat
Casino Cruises, Inc. d/b/a Players Island Casino brought
a diversity action against Triangle Insulation & Sheet
Metal, alleging that Triangle was negligent and/or
breached an express or implied warranty when it recom-
mended and sold Players a certain maritime sealant for
the insulation covering the air conditioning ducts on its
casino vessel. Players also sought a declaratory judg-
ment that Triangle was liable for the economic damages
2                                               No. 01-3860

allegedly resulting from this negligence and/or breach of
warranty. The district court dismissed the negligence
claim with prejudice to refiling it in this action, but with-
out prejudice to filing a claim for contribution in an-
other pending civil action. The district court also granted
Triangle’s motion for summary judgment with respect to
Players’s breach of warranty claim, and dismissed its
declaratory judgment count for failure to state a claim.
Players appeals only the district court’s summary disposi-
tion of its breach of warranty claim, which we affirm.

                             I.
  Southern Illinois Riverboat Casino Cruises, Inc. d/b/a
Players Island Casino (“Players”) owns and operates
a casino river boat in Metropolis, Illinois. In March 2000,
Players installed new exterior air conditioning unit ducts
on the outside stern of its motor vessel, Players II, which
operates as a gaming casino. On July 20, 2000, Shay No-
lan, Players’s facilities manager, contacted Gary Holder, a
representative of defendant Triangle Insulation & Sheet
Metal (“Triangle”), regarding the need to acquire a water-
proof sealant or vapor barrier to protect the insulation
then covering the air conditioning ducts from the weather
and elements. Later that day, Holder went to the casi-
no vessel to examine and measure the ductwork and
                                               1
site where the sealant would be applied. During the
course of Holder’s visit, Nolan contends that she, along
with another Players employee, advised Holder of the
casino’s proposed use of the sealant. Specifically, they
informed Holder that Players intended to apply any seal-

1
  At that time, the ductwork was completely encased by the
insulation and was therefore not visible to Holder.
No. 01-3860                                                   3

ant he recommend “in the open air at the stern of the ves-
sel during casino business hours,” while the vessel was oc-
                                     2
cupied by patrons and employees. Players claims that
after Holder was informed of the circumstances in which
it intended to apply the sealant, he recommended the
type of sealant the casino should use and gave advice
                                                     3
regarding the proper application of the product. Tri-
angle disputes this assertion, contending that when Hold-
er visited the proposed application site “he provided no
instructions regarding the application of the product.”
   On July 21, 2000, Holder delivered to Players a catalog
page from the Childers Products Company (“Childers”),
listing five vapor barriers approved for maritime use un-
der applicable Coast Guard regulations. That same day,
Holder advised Nolan by telephone that Triangle had
two of the listed products in stock available for immedi-
ate purchase, one of which was Encacel V. On July 25, 2000,
Nolan ordered four five-gallon containers of Encacel V.
The containers were not delivered to the casino vessel,
but were instead picked up later that day by Players
at Triangle’s place of business in Paducah, Kentucky.
Each of the containers had identical labels which, among
other things, warned buyers that the product was a “flam-
mable liquid and vapor,” detailed the side effects a per-

2
  Players asserts that it wanted a product that would work
under these circumstances “to avoid closing the vessel and
thereby avoid interruption of business and concomitant loss of
revenue.”
3
  In Nolan’s affidavit, she also claims that Holder “never told
us we should not apply the product while patrons or employ-
ees were aboard the vessel,” or that “the boat needed to be
closed before using this product, or that we should evacuate the
vessel area before applying the product as intended.”
4                                               No. 01-3860

son might suffer if he inhaled or exposed himself to the
product, and gave certain emergency first aid instructions.
The container labels also included the following instruc-
tions: “FOR INDUSTRIAL USE ONLY BY TRAINED
CRAFTSPEOPLE! REFER TO TECHNICAL DATA AND
MSDS SHEETS FOR COMPLETE INSTALLATION IN-
STRUCTIONS AND PRODUCT INFORMATION.”
   On July 27, 2000, Players, having apparently read these
instructions, informed Triangle that at the time its rep-
resentatives picked up the Encacel V containers they were
not given a copy of the Material Safety Data Sheet (“Safety
Sheet”) for the product. Triangle immediately sent Play-
ers, via facsimile, a brief set of instructions regarding
the application of Encacel V, as well as a copy of the Safety
Sheet provided by Childers. The Safety Sheet extensively
elaborated on the warnings, application instructions, and
first aid information noted on the Encacel V container
labels.
  The label on the Encacel V containers also included the
following disclaimer of warranties and remedy limitation:
    IMPORTANT: Childers warrants that the materials
    herein contained, when shipped, conform to spec-
    ifications and are of first class materials and workman-
    ship. This product is sold upon the condition and
    agreement that there have been no representations or
    undertakings made by or on behalf of manufacturer
    and/or seller, and that there are no guarantees or
    warranties, express or implied in fact or by law, ex-
    cept as contained herein. Manufacturer and/or seller
    shall not be responsible, obligated or liable for any
    application or use of or to which the products may be
    put, either singly or in combination with other prod-
    ucts or ingredients. It being expressly understood and
No. 01-3860                                                 5

    agreed that manufacturer’s and/or seller’s liability
    shall in no event exceed the purchase price.
  On July 28, 2000, at approximately 9:00 a.m., Players
personnel began applying, in the open air, Encacel V to
the surface of the insulation covering the air condition-
                                                  4
ing ductwork at the stern of the casino vessel. Later that
afternoon, guests and employees of Players began com-
plaining that they felt ill from the air inside the vessel. At
approximately 4:00 p.m., Holder received a telephone
call from a representative of Players advising him of the
problem, expressing the opinion that Encacel V was the
cause, and requesting that he come to the vessel at once
to assess the situation. In response, Holder and two
other Triangle employees, Lewis Bowles and Kent Bu-
chanan, immediately traveled to the vessel and, upon
their arrival, inspected the site where the product had
been applied and recommended that the insulation be
removed. The Triangle representatives then removed the
insulation, placed it in “heavy” vinyl garbage bags, and
deposited the bags on a garbage scow behind the casi-
no vessel. According to Triangle, its representatives dis-
covered the following during the process of removing the
insulation: (1) that Players applied an excessive amount
of Encacel V to the air conditioning ductwork insulation;
(2) that “no seal had been applied [by Players] to the
joints in the sheet metal ductwork so as to prevent out-
side air from entering the intake portion of the duct”;
and (3) that a “diesel motor located on a work barge just
behind the aft portion of the boat . . . was emitting heavy
diesel fumes into the aft area of the boat where the

4
  Before applying the product, Players purchased and picked
up two additional five-gallon containers of Encacel V from
Triangle, both of which had the same label as the other four.
6                                                No. 01-3860

air conditioning ductwork was located.” Players disputes
that its employees applied an excessive amount of Encacel
V, and contends the lack of a seal to the joints of the
sheet metal ductwork is irrelevant because the air condi-
tioning units do not pull outside air into the vessel but
“simply recirculate air inside the boat.”
   As a result of the foregoing, Players closed the casi-
no vessel for several hours. The casino reopened for busi-
ness later that day, however, after the local fire marshal and
certain governmental agencies performed air quality test-
ing and other inspections to the vessel, determining that
it was safe for re-entry. Although no further Encacel V
was applied to the insulation of the air conditioning
ducts, the casino vessel was, nevertheless, closed again
when patrons and employees of Players continued to
complain of feeling ill from the air within the boat. The
casino vessel was then closed for two to three business
days, during which time Players employees, outside
vendors, and contractors all worked on cleaning the vessel
from the damage allegedly caused by Encacel V fumes.
According to Players, the cleanup “involved virtually
the entire vessel, including air conditioning coils and fan
motors on all of the air handlers on the boat,” and cost
thousands of dollars.
  On December 5, 2000, Players filed a three-count diver-
sity action, pursuant to 28 U.S.C. § 1332, against Triangle
in federal district court, alleging negligence, breach of
warranty, and requesting a declaratory judgment on the
issue of damages. In Count I, Players alleged that Triangle
was negligent in failing to warn or advise it of the “dan-
gerous nature of the ENCACEL V product” or the “risks
associated with the intended use.” In Count II, Players
averred that Triangle breached an express or implied
warranty of the parties’ sales contract by failing to use
No. 01-3860                                                          7

reasonable care in selling and recommending Encacel V as
the appropriate sealant for the insulation covering the
air conditioning ducts on its casino vessel. In Count III,
Players sought a declaratory judgment, pursuant to 28
U.S.C. § 2201, that Triangle was liable for all of the dam-
ages allegedly resulting from Counts I and II.
   On May 3, 2001, Triangle filed a combined motion
to dismiss and motion for summary judgment. On Sep-
tember 25, 2001, the district court dismissed the negli-
gence claim without prejudice, allowing Players to refile
it as a contribution claim in another pending civil ac-
     5
tion. The district court then granted Triangle’s motion
for summary judgment of Players’s breach of warranty
claim. In doing so, the district court held that Players could
not “as a matter of law, establish that [Triangle] breached
                                       6
any warranty, express or implied,” and “[m]oreover, the
label disclaims all warranties and limits [Triangle’s] liability
to the purchase price.” Finally, the district court dismissed
Players’s declaratory judgment count with prejudice for
failure to state a claim. Players appeals only the district
court’s decision granting Triangle summary judgment of
its breach of warranty claim.

5
   There is a separate civil action pending before the district
court involving plaintiffs who claim that they were personally
injured as a result of Players’s application of Encacel V—Howard,
et al. v. S. Ill. Riverboat Casino Cruises, S.D. Ill. Case No. 00-4321-
GPM.
6
  In reaching this conclusion, the district court noted “[Players]
claims that [Triangle] failed to warn it of the danger posed by
the ENCACEL V product. Yet both the label and the Material
Data Safety Sheet (MSDS) [i.e., Safety Sheet] accompanying
the product specifically warn of the dangers associated with
the product . . . .”
8                                                 No. 01-3860

                              II.
   We review a district court’s decision to grant a motion
for summary judgment de novo, construing all facts, and
drawing all reasonable inferences from those facts, in fa-
vor of Players, the non-moving party. See, e.g., Peele
v. Country Mut. Ins. Co., 288 F.3d 319, 326 (7th Cir. 2002).
Summary judgment is proper when “the pleadings, dep-
ositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there
is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of
law.” Fed. R. Civ. P. 56(c).
  We begin our analysis by noting that both parties
agree that Players’s breach of warranty claim is governed
by Illinois law, specifically that state’s version of the
Uniform Commercial Code. Because neither party con-
tends that Illinois’s choice of law rules require us to ap-
ply the substantive law of another state, see, e.g., ECHO,
Inc. v. Whitson Co., Inc., 52 F.3d 702, 707 (7th Cir. 1995),
and “there is a reasonable relation between the dispute
and the forum whose law has been selected,” see, e.g.,
Home Valu, Inc. v. Pep Boys, 213 F.3d 960, 963 (7th Cir. 2000),
we will apply Illinois law in this case. In doing so, “[i]t
is our duty to apply the law that we believe the Sup-
reme Court of Illinois would apply if the case were be-
fore that tribunal rather than before this court.” See, e.g.,
Help At Home, Inc. v. Med. Capital, L.L.C., 260 F.3d 748, 753
(7th Cir. 2001).
  On appeal, Players argues that the district court erred in
granting Triangle summary judgment of its breach of
warranty claim. Players contends that Triangle expressly or
impliedly warranted that Encacel V could be applied to
the insulation covering the casino vessel’s air condition-
ing ducts “in the open air at the stern of the vessel during
No. 01-3860                                                   9

[regular] business hours,” while patrons and employees
were aboard. Players claims that this contractual warranty
was breached when it applied Encacel V under the afore-
mentioned circumstances, and the product’s fumes seeped
into the interior of the vessel, resulting in the casino being
closed for two to three business days and necessitating
an extensive and costly cleanup of the vessel. Players
also maintains that the disclaimer of warranties, remedy
limitation, and warnings included on the label of the
Encacel V containers do not preclude it from recovering
any consequential damages arising from Triangle’s al-
leged breach of warranty.
  For the reasons that follow, we conclude that Players
cannot prevail on its breach of warranty claim. In reach-
ing this determination, we have made the following as-
sumptions: (1) that Players submitted evidence sufficient
to establish the breach of an express warranty, see 810
                7
ILCS § 5/2-313, or the implied warranty of fitness for a
                                            8
particular purpose. See 810 ILCS § 5/2-315; (2) that the
disclaimer of warranties on the Encacel V container label

7
   Section 5/2-313 provides that “[a]ny affirmation of fact
or promise made by the seller to the buyer which relates to
the goods and becomes part of the basis of the bargain creates
an express warranty that the goods shall conform to the affirma-
tion or promise.” 810 ILCS § 5/2-313.
8
  The implied warranty of fitness for a particular purpose is
created “where the seller at the time of contracting has reason
to know any particular purpose for which the goods are re-
quired and that the buyer is relying on the seller’s skill or
judgment to select or furnish suitable goods, there is unless
excluded or modified under the next section an implied war-
ranty that the goods shall be fit for such purpose.” 810 ILCS
§ 5/2-315.
10                                               No. 01-3860

is not included within the scope of the parties’ sales con-
tract; and (3) that a genuine issue of material fact remains
as to whether the warnings on the Encacel V container
label and corresponding Safety Sheet were sufficient to
adequately warn Players of the hazards allegedly giving
                                 9
rise to its economic damages. However, even with these
favorable assumptions in tow, Players is still precluded
from suing Triangle for any consequential damages aris-
ing from the alleged breach of warranty because the par-
ties’ sales contract contains a valid remedy limitation.
  As previously noted, each container label of Encacel V
included the following language:
     Manufacturer and/or seller shall not be responsible,
     obligated or liable for any application or use of or to
     which the products may be put, either singly or in
     combination with other products or ingredients. It be-
     ing expressly understood and agreed that manufac-
     turer’s and/or seller’s liability shall in no event ex-
     ceed the purchase price.
   Players contends that the remedy limitation is not in-
cluded in the parties’ sales contract because it was an
“additional term” under 810 ILCS § 5/2-207 (i.e., the “bat-
tle of the forms” section) that “materially altered” the
agreement. Section 5/2-207 provides that a:
     [D]efinite and seasonable expression of acceptance or
     a written confirmation which is sent within a reason-
     able time operates as an acceptance even though it
     states terms additional to or different from those of-
     fered or agreed upon, unless acceptance is expressly

9
  These assumptions have been made solely for purposes of
this case and should not be construed as expressing an opinion
on the merits of the underlying issues.
No. 01-3860                                                 11

     made conditional on assent to the additional or differ-
     ent terms.
§ 5/2-207(1).
   Between merchants such additional terms become part
                                         10
of an Article 2 sales contract unless: “(a) the offer ex-
pressly limits acceptance to the terms of the offer; (b)
they materially alter it; or (c) notification of objection to
them has already been given or is given within a reason-
able time after notice of them is received.” § 5/2-207(2)(a)-
(c) (emphasis added). But neither the text of § 5/2-207,
nor that of any other Illinois U.C.C. provision, explains
when an additional or different term will constitute a
material alteration of a sales contract. We, therefore, turn
to the statute’s corresponding comments for interpre-
tive guidance. See, e.g., Milledgeville Cmty. Credit Union
v. Corn, 716 N.E.2d 864, 868 (Ill. App. Ct. 1999) (holding
that Illinois courts “examine the pertinent ‘Uniform Com-
mercial Code Comment’ . . . in order to discern the leg-
islature’s intent.”). Comment 4 to § 5/2-207 provides that
an additional or different term materially alters a con-
tract when it “result[s] in surprise or hardship if incorpo-
rated without express awareness by the other party . . . .”
§ 5/2-207, U.C.C. cmt. 4. See also Clifford-Jacobs Forging Co.
v. Capital Eng’g & Mfg. Co., 437 N.E.2d 22, 25 (Ill. App.
Ct. 1982).
   Players argues that the remedy limitation on the Encacel
V container label is a per se material alteration of the par-
ties’ sales contract because any limitation on the right
to recover consequential damages causes a significant

10
  The district court concluded that the parties are “merchants”
within the meaning of 810 ILCS § 5/2-104. This finding is not
disputed on appeal.
12                                                    No. 01-3860

and substantial shift in the ordinary allocation of risk. In
support of this argument, Players relies heavily on the
case of Album Graphics, Inc. v. Beatrice Foods Co., 408
N.E.2d 1041 (Ill. App. Ct. 1st Dist., 4th Div. 1980). In Album
Graphics, a cosmetics company sued a glue manufacturer
for breach of warranty when a weak adhesive that it pur-
chased from the manufacturer caused its packages to
come undone. Id. at 1043. The glue manufacturer de-
fended the suit by contending that the warranty dis-
claimers and remedy limitations included on the glue
container labels, as well as the shipping invoices, limited
the cosmetic company’s damages to the purchase price
of the glue. Id. at 1044. The Album Graphics court held,
after assuming the parties formed their contract prior to
delivery of the product, that under § 5/2-207, “[a] term
disclaiming warranties, and we might add a term limiting
remedies, is undoubtedly a term that materially alters a con-
tract . . . [and] [t]hus . . . we necessarily conclude that . . . the
limitation of remedies language could [not] become part of
the contract under section 2-207(2).” Id. at 1048 (emphasis
added).
   The holding of Album Graphics was, however, recently
called into question by a different division of the same
Illinois district appellate court in Intrastate Piping & Con-
trols, Inc. v. Robert-James Sales, Inc., 733 N.E.2d 718 (Ill.
App. Ct. 1st Dist., 3d. Div. 2000). In Intrastate Piping, a
pipe installation company sued a pipe manufacturer and
“middleman” distributor for the cost of removing and
replacing allegedly defective pipe. Id. at 720. As in Album
Graphics, the Intrastate Piping parties disputed whether a
disclaimer of warranties and remedy limitation were
included in their sales contract by arguing over the time the
agreement was made. Id. at 722-23. The Intrastate Piping
court held that regardless of the time of contract formation,
“the remedy limitation—became part of the contracts by
No. 01-3860                                                    13

operation of statute” because the buyer failed to season-
ably object to it. Id. at 723. In reaching this conclusion, the
Intrastate Piping court rejected the Album Graphics court’s
determination that a remedy limitation is a per se material
alteration of a sales contract, noting that in Album Graphics
the court “ignored” Comment 5 to § 5/2-207, id., which
provides, in pertinent part, that “[e]xamples of clauses
which involve no element of unreasonable surprise and
which therefore are to be incorporated in the contract unless
notice of objection is seasonably given are . . . a clause . . .
otherwise limiting remedy in a reasonable manner (see
Sections 2-718 and 2-719).” § 5/2-207, U.C.C. cmt. 5.
Not surprisingly, Triangle argues that Intrastate Piping
controls our decision in this case.
  The Supreme Court of Illinois has not yet addressed
the issue before us: whether a remedy limitation may
constitute a material alteration of a sales contract under
§ 5/2-207. In the absence of a decision by the state’s high-
est court, “federal courts treat decisions by its intermedi-
ate appellate courts as authoritative, unless . . . a split
among those courts makes such treatment impossible,
or unless there is a compelling reason to doubt that the
courts have got the law right.” See, e.g., Rekhi v. Wild-
wood Indus., Inc., 61 F.3d 1313, 1319 (7th Cir. 1995). As we
have already noted, there are only two intermediate ap-
pellate court decisions that have specifically addressed
this issue, Album Graphics and Intrastate Piping. These
decisions were made by different divisions of the First
District Appellate Court of Illinois, and their holdings
                             11
are clearly not consistent. We must, therefore, deter-

11
  The First District Appellate Court of Illinois sits in Chicago,
and encompasses all of Cook County. See I.L. Const. art. VI, § 2.
                                                    (continued...)
14                                                    No. 01-3860

mine whether this split of authority makes it impossible
for us to give authoritative effect to either decision.
  At the outset of our analysis, we note that the Album
Graphics court and the Intrastate Piping court both con-
cluded that whether a remedy limitation materially alters
a contract under § 5/2-207 is purely a question of law.
The Album Graphics court held that a remedy limitation
is a per se material alteration of a contract under the stat-
ute. See Album Graphics, 408 N.E.2d at 1043. The Intra-
state Piping court, however, established a per se rule
against treating any remedy limitation as a material alter-
ation under § 5/2-207. Having carefully considered the
holdings of both cases, we believe there is a compelling
reason to doubt the correctness of the Album Graphics
decision, at least as it pertains to remedy limitations, giv-
en the plain meaning of Comment 5 to § 5/2-207. On

11
   (...continued)
Unlike the state’s other four district appellate courts, the
first district is divided into separate divisions (there are cur-
rently six). See J. Timothy Eaton et al., Illinois Civil Appellate
Practice Chapter 1 Reviewing Courts: State and Federal,
II.B(2)[1.8] (Ill. Inst. for Continuing Legal Educ. September 1997).
Therefore, the first district is the only intermediate appel-
late court in Illinois that can have an internal split of author-
ity. From what we can gather, a split of authority among the
first district’s six divisions can only be resolved by the Su-
preme Court of Illinois. See, e.g., Schiffner v. Motorola, Inc., 697
N.E.2d 868, 871 (Ill. App. Ct. 1st Dist., 6th Div. 1998) (holding
that “principles of stare decisis” did not require court to fol-
low a decision rendered by a separate division of the first dis-
trict, a court of “equal” authority, and noting that “a split
in authority between the divisions of the first district is not
unprecedented and has led to an ultimate resolution by the
supreme court.”).
No. 01-3860                                                    15

the other hand, the plain meaning of Comment 5 does
support the Intrastate Piping decision. As explained by
the court in In re Chateaugay Corp., 162 B.R. 949 (Bankr.
S.D.N.Y. 1994), a case relied upon by the Intrastate Piping
court:
     The literal provisions of the UCC appear to provide
     a straightforward basis for analyzing the inclusion of
     a remedy or damage limitation clause in a battle of
     the forms between merchants. Section 2-207, Official
     Uniform Comment No. 5 renders such clauses rea-
     sonable, and directs the parties and the court to § 2-719.
     Under the latter provision, limitations on remedies,
     including consequential damages, are reasonable as
     a matter of law, and do not materially alter the par-
     ties’ agreement, unless the limitation on the remedy,
     such as to repair or replacement, fails of its essential
     purpose, or the limitation on consequential damages
     is unconscionable . . . . This approach looks to § 2-719
     rather than § 2-207 for the result in the case.
Id. at 956 (emphasis added).
  Players argues that we should not consider Intrastate
Piping as authoritative because it “presents a wholly differ-
                       12
ent factual situation.” However, we have already noted

12
   Players argues that “in Intrastate Piping, the limitation of
remedy was agreed to by the buyer before any product was
shipped,” and “unlike the present case . . . the parties in Intra-
state Piping had a long course of dealing over several years
in which limitations of remedies was a part of every contract.”
We will briefly touch on these assertions. First, the buyer in
Intrastate Piping did not agree to the remedy limitation before
the goods were shipped. Had that been the case there would
have been no dispute. The court merely noted that “the remedy
                                                   (continued...)
16                                                 No. 01-3860

that whether a remedy limitation constitutes a material
alteration of a sales contract under § 5/2-207 is purely a
question of law. We recognize that other courts “analyze
the question of material alteration on a case-by-case basis
as purely a factual one,” see, e.g., Chateaugay Corp., 162
B.R. at 956, and that this circuit has utilized such an ap-
proach in prior U.C.C. cases, see, e.g., Union Carbide Corp.
v. Oscar Mayer Foods Corp., 947 F.2d 1333, 1336-37 (7th
Cir. 1991). However, to date, no Illinois court has ad-
opted such an approach with respect to remedy limita-
tions. As such, Intrastate Piping is the controlling case on
the issue before us, and we are required to give the deci-
sion preclusive effect because it is a permissible inter-
pretation of § 5/2-207. See, e.g., Rekhi, 61 F.3d at 1319

12
   (...continued)
limitation was sent the same day [the contract was made] . . .
and was received before any pipe was shipped.” Intrastate Piping,
733 N.E.2d at 723. The Intrastate Piping court made this ob-
servation to point out that the buyer in its case had an opportu-
nity to seasonably object to the remedy limitations in question,
whereas the buyer in Album Graphics did not. In any event,
as we note infra, Players does not allege that it seasonably ob-
jected to the remedy limitation, or that it was denied the oppor-
tunity to do so. Additionally, while the Intrastate Piping
court does make reference to the parties’ prior course of deal-
ing, it appears that it was mentioned as an aside, and, at best,
was as an alternative basis for its holding (i.e., that even in
the absence of Comment 5 to § 5/2-207, the remedy limita-
tion would have been part of the parties’ sales contract pursu-
ant to 810 ILCS §§ 5/1-205 and 5/1-201(3)). In any event, there
is nothing in the Intrastate Piping decision to support Players’s
suggestion that in the absence of a prior course of dealing a
remedy limitation is precluded from being automatically
incorporated into a contract, pursuant to § 5/2-207, see U.C.C.
cmt. 5, when a buyer fails to seasonably object to the clause.
No. 01-3860                                                     17

(holding that federal courts are, in the absence of a deci-
sion by the state’s highest court, required to treat an in-
termediate state appellate court decision as authoritative
unless it is abundantly clear that the case was wrongly
decided). We, therefore, conclude that after Intrastate
Piping a remedy limitation cannot, as a matter of Illinois
law, constitute a material alteration of a sales contract
                 13
under § 5/2-207.
   Furthermore, even were we persuaded that Album
Graphics and Intrastate Piping presented us with two op-
posing, yet equally plausible interpretations of state law,
it is well established that, for reasons of federalism and
comity, “we generally choose the narrower interpretation
which restricts liability, rather than the more expansive
interpretation which creates substantially more liability.”
Home Valu, 213 F.3d at 963. See also Birchler v. Gehl Co., 88
F.3d 518, 521 (7th Cir. 1996). In sum, we conclude that the
remedy limitation was not a material alteration of the
parties’ sales contract and became part of the agreement
by operation of law, i.e., § 5/2-207, when Players failed to
                         14
seasonably object to it.

13
  Like the Intrastate Piping court, this circuit has previously
recognized that the contract clauses listed in Comment 5 to
§ 5/2-207 are reasonable as a matter of law under the statute,
and therefore cannot constitute a material alteration of a sales
contract. See, e.g., Sethness-Greenleaf, Inc. v. Green River Corp.,
65 F.3d 64, 66 (7th Cir. 1995); Comark Merch., Inc. v. Highland
Group, Inc., 932 F.2d 1196, 1203 (7th Cir. 1991); Schulze &
Burch Biscuit Co. v. Tree Top, Inc., 831 F.2d 709, 712, 714 (7th
Cir. 1987).
14
   Because Players has not asserted that the remedy limitation
is to be excluded on either of the other grounds listed in § 5/2-
                                                   (continued...)
18                                                 No. 01-3860

  Having concluded that the remedy limitation is part of
the parties’ sales contract, we will now address the rea-
sonableness of the clause under 810 ILCS § 5/2-719. See
also Intrastate Piping, 733 N.E.2d at 723. Section 5/2-
719(1)(a) provides that a sales contract “may provide for
remedies in addition to or in substitution for those pro-
vided in this Article and may limit or alter the measure
of damages recoverable under this Article, as by limiting
the buyer’s remedies to return of the goods and repay-
ment of the price or to repair and replacement of non-
conforming goods or parts.” Id. If parties to a sales con-
tract expressly agree for a remedy to be the exclusive
remedy, it is the sole remedy available to the buyer, see
§ 5/2-719(1)(b), unless it fails of its essential purpose, § 5/2-
719(2), or is unconscionable. See § 5/2-719(3). See also Lara
v. Hyundai Motor America, 770 N.E.2d 721, 728 (Ill. App.
Ct. 2002); Intrastate Piping, 733 N.E.2d at 724.
  As previously noted, the remedy limitation in this case
confines Players’s recovery to the “purchase price” of the
Encacel V. This is clearly the type of exclusive rem-
edy contemplated by § 5/2-719(1). See, e.g., Intrastate
Piping, 733 N.E.2d at 724 (holding that “Illinois courts
have recognized and enforced exclusive remedy provi-
sions, even without the word ‘exclusive,’ when the contract
as a whole warrants such a construction.”). The only
question then is whether this remedy failed of its es-

14
  (...continued)
207(2)(a), (c), i.e., conditional offer or seasonable objection,
those issues have been waived. See, e.g., Hoffman v. Caterpillar,
Inc., 256 F.3d 568, 578 (7th Cir. 2001) (holding “[w]e will deem
an issue waived where the argument on appeal is undeve-
loped and not supported with pertinent authority.”); Gagan v.
American Cablevision, Inc., 77 F.3d 951, 965 (7th Cir. 1996).
No. 01-3860                                                      19

sential purpose or is unconscionable. Players does not,
however, challenge the validity of the remedy limitation
on either of these grounds, and therefore has waived this
issue as well. See, e.g., Hoffman, 256 F.3d at 578 (7th Cir.
2001); Gagan, 77 F.3d at 965.
  Players’s final argument is that the district court’s deci-
sion should be reversed because the court raised the issue
of the remedy limitation sua sponte, did not permit the
parties to substantively brief the issue, and then used
the remedy limitation as the primary basis for granting
Triangle’s motion for summary judgment of its breach of
warranty claim. The transcript from the motion hearing
confirms that the district court judge raised the remedy
                            15
limitation issue sua sponte. However, the district court’s
decision to raise this issue, in and of itself, was not er-
roneous. While district courts must be careful not to
create the impression that they are taking an advocacy
position on a particular issue, they are not required to
ignore contractual provisions or applicable law. Here, the
substance of the Encacel V container label is at the very
heart of the parties’ dispute in this case. The district court
judge did not scour the record searching for a reason
to dismiss Players’s breach of warranty claim—the rem-

15
   At the hearing, the district court judge made the following
statements, “Now you’ve got two things. You’ve got the dis-
claimer of warranties which may or may not be adequate; that’s
up in the air. But you also have something that’s even more
interesting and often overlooked. You have what’s called a
limitation of remedy. And the limitation of remedy is different
than the disclaimer of warranty . . . . [I]t seems to me . . . [that]
irrespective of the issue of warranties, you have a limitation
of remedy here which is an entirely different thing . . . . You’ve
got a limitation remedy which just kind of gets around all of
the issues concerning warranties.”
20                                                     No. 01-3860

edy limitation is contained in the same section as the
hotly contested disclaimer of warranties. Given the cur-
rent state of Illinois law, one could wonder why Triangle’s
attorney chose not to raise the remedy limitation issue.
Whatever the reason, the district court was certainly
permitted to do so. See, e.g., Jones v. Page, 76 F.3d 831, 850
(7th Cir. 1996) (holding that “while a judge should never
engage in advocacy from the bench, he or she has an
obligation to raise legal issues that the parties have over-
looked or neglected. After all, the judge is on the bench
in the first place (we trust) because of superior legal back-
ground, expertise, or credentials, and for that reason
‘[should] not sit as a passive observer who functions solely
when called upon by the parties.’ ”) (citation omitted).
  We agree with Players, however, that once the district
court raised the remedy limitation issue, it was required
to give Players a meaningful opportunity to address the
question before granting Triangle’s motion for summary
                           16
judgment on that basis. In the past, we have held
that sua sponte dismissals, in this case a decision granting

16
   Players’s counsel objected to the judge raising the issue sua
sponte, arguing “Judge, they haven’t argued that. They haven’t
raised it. They have not relied on it. It hasn’t been briefed. They
haven’t made that their argument . . . . It’s difficult for me to
address that because of the fact that they haven’t argued it,
haven’t briefed it, and it’s difficult for me to respond to a sec-
tion of the code that hasn’t been raised by anyone except
the court until this morning . . . .” The district court judge’s only
response to this objection was as follows: “Well, I understand,
but you haven’t either.” In dismissing the case, the district
court concluded, “[n]otwithstanding any argument Plaintiff
has concerning the viability of the disclaimer of warranties,
there is no question that the limitation of remedy provision is
sufficient and serves to bar the damages that Plaintiff seeks . . . .”
No. 01-3860                                                  21

summary judgment on a basis not argued by the parties,
are hazardous for three reasons: (1) they often conflict
with the traditional adversarial precepts of our system of
justice by tending to make the district court seem like
a proponent of one side as opposed to a neutral decision-
maker; (2) they may prejudice plaintiffs by depriving
them of the opportunity to amend their complaint or to
argue against dismissal; and (3) they tend to defeat the
very purpose they are designed to serve—judicial efficien-
cy. See, e.g., Ricketts v. Midwest Nat’l Bank, 874 F.2d 1177,
1184 (7th Cir. 1989). See also Stewart Title Guar. Co. v. Cadle
Co., 74 F.3d 835, 836-37 (7th Cir. 1996). Therefore, as a
general rule, “a district court lacks the power to grant
summary judgment sua sponte unless the party against
whom summary judgment was entered had (1) proper
notice that the district court was considering entering
summary judgment, and (2) a fair opportunity to present
evidence in opposition to the court’s entry of summary
judgment.” Simpson v. Merch. Recovery Bureau, Inc., 171
F.3d 546, 549 (7th Cir. 1999). See also Aviles v. Cornell Forge
Co., 183 F.3d 598, 604 (7th Cir. 1999).
   In this case, only the second prong of this test is at issue:
Was Players given a fair opportunity to present evidence
in opposition to the district court’s entry of summary
judgment on the basis of the remedy limitation? We think
it is clear from the record that such an opportunity was
not afforded to Players. Nevertheless, we see no reason
to remand the case because Players was given a full op-
portunity to make its argument on appeal, and, as indi-
cated in this opinion, the argument presented does not
allow it to prevail under Illinois law. If Players had demon-
strated that the remedy limitation was excluded from the
contract because of a conditional offer or a seasonable ob-
jection, or if it had shown that the clause failed of its
essential purpose or was unconscionable, there might have
22                                                 No. 01-3860

been a basis for remanding the case for further consider-
      17
ation. But in the absence of such assertions, we conclude
that the remedy limitation entitled Triangle to summary
judgment of Players’s breach of warranty claim. See, e.g.,
Aviles, 183 F.3d at 605 n.2 (declining to remand a “prema-
ture” sua sponte dismissal “for consideration of a fully
briefed summary judgment motion” where the district
court’s decision was based on “a purely legal issue,” subject
to de novo review, and “the interests of judicial economy”
dictated that the court address the issue on appeal). See
also Heder v. City of Two Rivers, 2002 WL 1467425, 295
F.3d 777, 783 (7th Cir. 2002) (holding that the defendant
was not entitled to remand where “district court’s orig-
inal calculations and legal theories did not correspond
directly to the parties’ arguments” because “[the defendant]
has made to us whatever arguments are available to it,
and as appellate review on summary judgment is plenary
it does not matter whether the district court’s research
was based on independent research.”). As such, we af-
firm the district court’s decision for the reasons outlined
in this opinion. See, e.g., Peele, 288 F.3d at 332 (holding
that we may “ ‘affirm the district court’s [decision] on
any ground supported by the Record . . . .’ ”) (citation
omitted).

17
  We note in passing that it is unclear from the record wheth-
er Players ever requested that Triangle reimburse it for the
purchase price of the Encacel V. Players does not raise the issue
on appeal, however, and we will therefore not remand on that
basis either.
No. 01-3860                                             23

                          III.
  The remedy limitation in the parties’ sales contract
precludes Players from recovering any consequential dam-
ages arising from Triangle’s alleged breach of warranty.
We, therefore, AFFIRM the district court’s grant of sum-
mary judgment on that basis.

A true Copy:
       Teste:

                        _____________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit

                  USCA-97-C-006—8-23-02