Environs Inc. is an architectural firm that designs commercial and business buildings. SAMS Hotel Group LLC signed a contract with Environs, under which Environs would provide architectural services for the design of a six-story hotel in Fort Wayne, Indiana, that SAMS planned to build. The contract contained a liquidated-damages clause that limited Environs' liability for breach of contract to $70,000.
When the building was almost complete, serious structural defects were discovered, the building department condemned the building, and it had to be destroyed. SAMS sued Environs, alleging they breached the contract by providing negligent architectural services, and seeking to recover $4.2 million in damages. The district court found that Environs had indeed been negligent and breached their contract, but because of the liquidated-damages clause, awarded the plaintiff only $70,000. SAMS appealed. How do you believe the appellate court ruled and why? [SAMS Hotel Group LLC, Inc. v. Environs, 716 F.3d 432, 2013 US App. LEXIS 11047 (2013).]