“Dear Florida Supreme Court”: Are Zero-Liability Exculpatory Clauses Enforceable?
In Pier 1 Cruise Experts v. Revelex Corp., 17-13956, 2019 WL 3024618, at *8 (11th Cir. July 11, 2019), the Eleventh Circuit Court of Appeals addressed the novel question of whether Florida law would enforce an exculpatory clause in a commercial contract that completely absolves one of the parties from all future liability.
In a modern-written scholarly decision that breaks the fourth wall,[1] Judge Newsom certified the following question to the Florida Supreme Court:
Dear Florida Supreme Court:
We need your help.… [T]his case presents a knotty and important state-law contract question that is more appropriately answered by you than by us
…
Is a contractual “exculpatory clause” that purports to insulate one of the signatories from “any … damages regardless of kind or type … whether in contract, tort (including negligence), or otherwise” enforceable? Or, alternatively, does the clause confer such sweeping immunity that it renders the entire contract in which it appears illusory? Or, finally, might the clause plausibly be construed so as to bar some but not all claims and thus save the contract from invalidation?
Id. at * 1 (emphasis added).
In sum, the issue presented in Pier 1 is to what extent, if any, and under what circumstances, will Florida law allow one contracting party to waive its right to sue the other for damages without rendering the contract itself illusory and therefore unenforceable?
A. Existing Law Regarding Exculpatory Clauses
Florida law recognizes the enforceability of “pre-event” or “pre-injury” liability waivers if the language is clear and specific — with the exception of waivers signed by parents on behalf of children in a for-profit context (i.e., non-school-related). See Sanislo v. Give Kids the World, Inc., 157 So. 3d 256, 260–61 (Fla. 2015) (“Exculpatory clauses are unambiguous and enforceable where the intention to be relieved from liability was made clear and unequivocal and the wording was so clear and understandable that an ordinary and knowledgeable person will know what he or she is contracting away.”); Kirton v. Fields, 997 So. 2d 349, 358 (Fla. 2008) (“[W]e hold that a pre-injury release executed by a parent on behalf of a minor child is unenforceable against the minor or the minor’s estate in a tort action arising from injuries resulting from participation in a commercial activity.”).
Florida law does not recognize pre-event releases of intentional torts. See Pier 1 Cruise Experts, 2019 WL 3024618, at *8 n. 5 (“Revelex has conceded that the exculpatory clause doesn’t cover intentional torts[.]”).
As observed by Judge Newsom, however, there is scant case law in Florida on the parameters for enforcing zero-liability exculpatory clauses negotiated between commercial parties of equal bargaining power, and no case addressing whether a zero-liability clause renders the contract itself illusory.
B. What’s New in Pier 1?
Pier 1 examines the outer limits of commercial exculpatory clauses.
The facts are simple: Pier 1, a Brazilian travel agency, hired Revelex to construct a website to allow customers to book cruises online in Portuguese and pay in Brazilian reais.
Revelex expressly negotiated for a zero-liability exculpatory clause because the potentially foreseeable damages vastly exceeded the modest $100,000 cost of the website project, and Revelex did not have the financial wherewithal to take on a potential multi-million-dollar liability. In other words, the zero-liability clause was a deal-breaker.
The clause provided as follows:
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 district court invalidated the clause, finding that it rendered the entire contract illusory and thus void ab initio. See Id. at * 10 (“The district court’s conclusion … was that by insulating Revelex from “any … damages regardless of kind or type … whether in contract, tort (including negligence), or otherwise,” the exculpatory clause here denied Pier 1 “[t]he ability to sue for damages” and “collect on [any] resulting judgment,” and thereby rendered the Service Agreement illusory.”).
The district court’s conclusion was influenced by the obvious inequity of permitting a contracting party to promise to perform a particular duty on the one hand and immunizing itself from the consequences of failing to perform that duty on the other. Thus, although the negligent misrepresentation claim remained viable, the district court found that Pier 1 could not assert a claim for breach of contract against Revelex– there being no valid contract on which to sue.
The Eleventh Circuit held that the exculpatory clause did not violate Florida public policy.
The Eleventh Circuit was unable to determine, however, whether and to what extent such a commercial zero-liability exculpatory clause renders a contract illusory, leaving open the possibility of three potential outcomes in the Florida Supreme Court:
1) Finding that the exculpatory clause bars all claims;
2) Finding that the exculpatory clause renders the contract illusory (resulting, ironically, in immunity from liability for breach of contract but allowing tort claims); or
3) Finding that the exculpatory clause only prohibits tort claims (other than intentional torts) and implicitly allows for breach of contract claims.
C. Takeaway for Practitioners
- For Transactional Lawyers. Although the district court invalidated the clause at issue, the Eleventh Circuit expressly held that a zero-liability exculpatory clause that is “crystal clear” and negotiated between parties of equal bargaining power does notviolate Florida public policy. Thus, parties to commercial contracts are free to negotiate zero-liability exculpatory clauses, assuming a legitimate need and with the understanding the risk that the entire contract could be rendered illusory and therefore unenforceable by either side depending on the Florida Supreme Court’s ruling.
- For Litigators. Litigators currently handling matters involving broad exculpatory clauses may wish to seek abatement until a final ruling from the Florida Supreme Court.
- For Doctors, Lawyer, Architects, and Other Licensed Professionals. It is doubtful that Florida public policy, or rules of professional ethics, would allow licensed professionals to “contract away” liability in advance of providing professional services.
The litigation and corporate attorneys of Fuerst Ittleman David & Joseph have extensive experience handling complex matters throughout Florida and the United States and can assist with a full range of litigation, transactional, compliance, and tax services from start-up to daily operations of your thriving business enterprise. Please contact us at 305-350-5690 or email us at contact@fuerstlaw.com.