Emigrant Savings Bank wanted to expand its operations by launching an on-line bank. In early 2004, Emigrant met with Metavante Corp. The Metavante team presented its system, emphasizing its ability to service a great number of accounts. The Emigrant team knew that certain capabilities were still being developed and that the system lacked some desired traits. Nevertheless, Metavante submitted a proposal referencing existing clients and indicated that its product was in current use. It even identified Capital One as a client reference. The parties negotiated an agreement over the next several months and signed it in August. Under the agreement, Metavante was to provide electronic banking and funds transfer services. Metavante warranted that it would provide those services in a "commercially reasonable manner." Certain services were exempt from the warranty because they contained their own service-level target measurements. Finally, the agreement allowed termination for cause (but with broad cure rights), termination for convenience (for a fee), and termination for convenience and migrating the process to an in-house solution (with a lower termination fee). The program went live in early 2005. It had many flaws – for example, it could not ensure that a customer had sufficient funds to make a particular transfer, it generated error messages, it could not complete online applications, and it failed to process some transactions. On the other hand, Emigrant landed 250,000 new accounts and over $6 billion in deposits. It advertised its bank as "the most successful" bank of its type. Metavante brought suit against Emigrant in September 2005 and gave notice of termination for non-payment. Emigrant objected but made the payments. Several months later, Metavante again gave notice of termination for nonpayment. Emigrant countered that it was terminating for cause for Metavante 's "flawed and inadequate" performance. Metavante amended its complaint to add breach of contract claims. Emigrant counterclaimed for fraud in the inducement. After a bench trial, Judge Stadtmueller (E.D. Wis.) ruled that Metavante had not materially breached the contract but awarded the lower termination fee, finding that Emigrant had migrated the system to an in-house solution. The court also awarded approximately $10 million in attorneys' fees to Metavante. Emigrant appeals.

In their opinion, Judges Ripple, Manion, and Tinder affirmed. First, although criticizing the district court for its oral decision and verbatim adoption of many of Metavante 's proposed findings of fact, the Court declined Emigrant's invitation to apply a less deferential standard of review. Second, although criticizing the district court for its inadequate reliability determination with respect to Metavante's expert, its de novo review led it to conclude that the testimony was relevant and reliable. Third, with respect to whether Metavante breached its "commercially reasonable" warranty, the Court concluded that the district court did not err in considering the venture's success as probative evidence. Although a venture's success may not conclusively establish the commercial reasonableness of a party's performance, a court is certainly entitled to consider it. Here, the district court considered it as one factor, albeit a significant one, of many. Fourth, the Court found no clear error in the district court's finding of commercial reasonableness. The Court specifically cited the working relationship between the parties, the fact that both parties understood they were dealing with a new technology, and the fact that Metavante undertook diligent efforts to correct problems when they occurred. Fifth, the Court concluded that the record supported the district court's conclusion that there was no breach of the implied duty of good faith and fair dealing. Sixth, with respect to Emigrant's fraud claims, the Court found that Emigrant failed to prove reliance or falsity. The Court concluded that it was unreasonable for Emigrant to rely on any of the early "sales pitch" statements, given that these two sophisticated businesses proceeded to negotiate over several months a complex arms-length transaction. The negotiation process and the contract itself made the expectations and capabilities of the parties very clear -- Emigrant may not rely on any earlier inconsistent statements. With respect to falsity, the Court concluded that the district court did not err in its finding that none of the representations at issue amounted to fraud. Finally, the Court turned to the fee award. Several issues were presented related to the fee award. The fee shifting provision in the contract provided that the "prevailing party" is entitled to fees. The Court concluded that Emigrant's partial success in the court's awarding of the $3.8 million lower termination fee instead of the $20.7 million higher termination fee did not make it a prevailing party on that issue and entitle it to fees. The Court also concluded that the submission of redacted bills was sufficient under Medcom. Although a request for fees must be reasonable under a fee shifting provision, the Court noted that market considerations normally render unnecessary line by line scrutiny of individual time entries. The district court acted within its discretion in awarding the fees.