Judge Kevin Newsom, U.S. Eleventh Circuit Court of Appeals. Courtesy photo. Judge Kevin Newsom of the U.S. Court of Appeals for the Eleventh Circuit. Courtesy photo.

The U.S. Court of Appeals for the Eleventh Circuit presented a head-scratcher to the Florida Supreme Court, certifying a question about damages and an exculpatory clause in a business contract.

“Dear Florida Supreme Court: We need your help,” began the opinion by Judge Kevin Newsom of Alabama. ”Among other much simpler issues, this case presents a knotty and important state law contract question that is more appropriately answered by you than us.”

The Eleventh Circuit wrestled with whether an “unusually broad” exculpatory clause in a business contract was legally enforceable, because the provision appears to protect one of the signatories from all damages.

“Does it confer such sweeping immunity that it renders the entire contract illusory?” the opinion asked. “Or might the clause be plausibly construed to bar some but not all claims, and thus save the contract from invalidation?”

The problem, according to the ruling, is that Florida law supports multiple outcomes, each of which come with different implications, pros and cons.

What does the clause say?

“Revelex shall not be liable … for any direct, special, indirect, incidental, consequential, punitive, exemplary or any other damages regardless of kind or type (whether in contract, tort (including negligence), or otherwise), including but not limited to loss of profits, data, or goodwill, regardless of whether Revelex knew or should have known of the possibility of such damages. … Customer waives any and all claims, now known or later discovered, that it may have against Revelex and its licensors and vendors arising out of this agreement and the services.”

The opinion also took issue with a second section of the clause, which read: ”[I]n any event, Revelex's total cumulative liability to customer or any third party for all damages, losses and causes of action (whether in contract, tort—including negligence—or otherwise) relation to this agreement exceed one hundred dollars.”

The confusion might be thanks to a typo, according to the opinion, which said Revelex noted a scrivener's error.

“If 2.2 seems a little clunky, that's because it is,” the opinion said. “No matter how you read it, the grammar just doesn't work, and the parties here dispute whether the provision is missing a 'shall not' between the words 'agreement' and 'exceed.'”

The third and final section of the clause in dispute said the limitations of liability and disclaimers of warranty “form an essential basis of the bargain between the parties.”

The question comes from a court duel between Brazilian travel agency Pier 1 Cruise Experts, which provides cruise vacation packages, and Florida software company Revelex Corp., hired to create website software for Pier 1.

The companies signed a service agreement in August 2013 and agreed to a scope of work in January 2014, which recorded what needed to be done to the website and how much it would cost — $100,097. But things went downhill from there.

Revelex had said the project would take six months, so when the software still wasn't finished in 2015, Pier 1 stopping making payments and Revelex cut it off from the product. Pier 1 sued in the Southern District of Florida, alleging breach of contract, fraudulent misrepresentation, negligent misrepresentation and unjust enrichment.

Jurors found that Revelex did breach the scope of contract and was liable for negligent misrepresentation, awarding $100,097 in damages — the cost of the software.

No attorney fees, lost profits

“There's a lot going on here,” as the appellate panel put it, addressing three other issues stemming from an appeal and cross appeal. It rejected them all.

Revelex claimed that the scope-of-work agreement should be scrapped along with the service agreement, as they belong together. The district court had tossed the service agreement, finding it “illusory” and unenforceable, but ruled that the scope of contract could stand on its own. The Eleventh Circuit opinion gave credence to Revelex's argument, but found the company had waived its right to make that claim.

Pier 1 also appealed for lost profits, claiming to have expected $12.7 million in revenue and 10% increased expenses during the damages period, but providing only “speculative” proof based on testimony from its financial manager, a “lay witness,” according to the opinion.

Pier 1 also moved for $485,779.50 in attorney fees, but the district court said no because it found the underlying service agreement was unenforceable. The Eleventh Circuit went further, ruling that even with the service agreement, Pier 1 wasn't entitled to fees because the contract language doesn't cover it.

Counsel to Revelex, Thomas Hunker of Cole, Scott & Kissane in Fort Lauderdale, would not comment on the remaining contractual question, but said via email, “Our client Revelex has a sterling record and reputation for over 20 years. We are pleased that we have already prevailed on the majority of issues and look forward to prevailing on the remaining issue in the Florida Supreme Court.”

Lawyers for Pier 1 — Humberto Ocariz of Shook, Hardy & Bacon in Miami and Michael Holt of Fisher & Phillips in Fort Lauderdale — did not respond to requests for comment by deadline.

Newsom wrote the opinion, with the backing of Judge William Pryor Jr. and U.S. District Judge Kathryn Vratil in the District of Kansas sitting by designation.

 

More appeals: 

11th Circuit Reaffirms $6.3M Godiva Settlement Over Credit Card Info Printed on Receipts

Coral Gables Lawyer, Sanctioned for Bad Faith, Gets Reprieve Over Elusive Witness in Insurance Case