Designer Direct, Inc. v. DeForest Redevelopment Authority

The Village of DeForest, Wisconsin, wished to revitalize its downtown area. It created an entity called the DeForest Redevelopment Authority (DRA) (defendant) to manage the redevelopment of DeForest’s downtown. DRA entered into a contract with Levin Associates Architects (Levin) (plaintiff) to create and implement a three-phase plan. Phase I was to generate the redevelopment plan. Phase II involved constructing the infrastructure necessary to redeveloping downtown properties. Phase III related to the sale of properties from the DRA to Levin and Levin’s subsequent construction of buildings on those properties. DRA failed to fulfill many of its obligations under the contract. DRA did not provide a full-time liaison to work with Levin on implementing the project. Additionally, DRA constantly changed the parcel sizes of the land it was supposed to sell to Levin and failed to build the infrastructure improvements that DRA had promised to make prior to conveying the properties to Levin. Finally, DRA did not include Levin in key meetings relating to construction of a public library. Levin spent $490,000 on architectural design, drawings, and engineering plans in preparation for Phase III. However, DRA’s failure to obtain building and zoning permits and to make infrastructure improvements caused Levin to terminate its relationship with DRA prior to implementing Phase III. Levin sued DRA for breach of contract, seeking fees and the return of earnest money that Levin had paid for the properties that it ultimately did not purchase. Additionally, Levin sought reliance damages of $490,000 to reimburse Levin for the preparations it made to implement Phase III. DRA counterclaimed for failure to perform certain of Levin’s contractual obligations. The district court found in favor of Levin and dismissed DRA’s claims. The court awarded Levin the fees and return of earnest money but denied Levin reliance damages. Levin and DRA appealed.