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Timestamp: 2020-02-25 13:10:47
Document Index: 449845510

Matched Legal Cases: ['§ 12', '§ 12', '§ 12', '§ 12', '§ 12', '§ 12', '§ 12', '§ 12', '§ 12', '§ 12']

FindACase™ | Pier 1 Cruise Experts v. Revelex Corp.
Pier 1 Cruise Experts v. Revelex Corp.
PIER 1 CRUISE EXPERTS, a Brazil corporation, Plaintiff-Appellee-Cross-Appellant,
REVELEX CORPORATION, a Florida corporation, Defendant-Appellant-Cross-Appellee.
Appeals from the United States District Court for the Southern District of Florida D.C. Docket No. 9:16-cv-80567-WPD
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?
Pier 1 Cruise Experts is a Brazilian travel agency that specializes in cruises and cruise packages. Pier 1 sells both through sub-agencies-approximately 300 individual travel agencies located around Brazil-and directly to customers. Hoping to grow its business, Pier 1 wanted a first-of-its-kind website with an online distribution channel for booking options in Portuguese and payment in Brazilian reais.
To build the website, Pier 1 hired Revelex Corporation, a Florida-based company that provides customized software to travel companies. Revelex promised to deliver on each of Pier 1's requirements-content in Portuguese, prices in reais, and sub-agent booking capabilities-and indicated that, once work started, the website software could be completed in approximately six months.
Almost a year later, following multiple rounds of negotiations, the two companies executed a Service Agreement. The Service Agreement was dated August 6, 2013-for reasons we'll explain, the date could turn out to matter-and in general, it stated that Revelex would provide Pier 1 access to a proprietary booking engine in exchange for licensing fees. Section 12 of the Service Agreement, titled "Limitation of Liability," is at the heart of this litigation, so we'll pause to take a closer look at its three constituent provisions. First, and most importantly here, § 12.1 sets forth an unusually broad exculpatory clause. In relevant part, that clause reads 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.
Second, § 12.2 provides that "[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) relating in any way to this agreement exceed one hundred dollars ($100.00)." If § 12.2 seems a little clunky, that's because it is. 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." Finally, § 12.3 states, in relevant part, that "[t]he limitations of liability and disclaimers of warranties provided in this agreement form an essential basis of the bargain between the parties."
Separately (but alongside) the Service Agreement, the parties also negotiated and executed a Scope of Work, which we'll (inelegantly) call the "SOW." The SOW memorialized the necessary customizations for the website and indicated that the total cost of the software was $100, 097. It explained that the website would entail two primary components-a business-to-business feature that would allow travel agents to book and manage cruise reservations, and a direct-to-consumer feature that would enable customers to book and pay for cruises online. Notably- and potentially importantly, for reasons we'll explain-the Service Agreement and the SOW included reciprocal cross-references. Section 5.1 of the Service Agreement contemplated that the parties would "enter into written Statement(s) of Work … for the performance of certain professional services by Revelex." Section 7 of the SOW, in turn, stated that it was "issued pursuant to the terms and conditions of the Contract"-i.e., the Service Agreement-and that "the services set forth within this [SOW] are within the scope of the services authorized in the Contract." Also notably-again, for reasons that will become clear-discussions concerning the SOW overlapped the negotiations and execution of the Service Agreement; the parties began conferring about the SOW on April 22, 2013, executed the Service Agreement on August 6, 2013, and then finalized the SOW on January 15, 2014.
As of December 2015, the software still wasn't complete. Pier 1 ceased making its ongoing licensing payments, and Revelex terminated Pier 1's access to the software.
Pier 1 sued Revelex in the Southern District of Florida, raising four claims: breach of contract, fraudulent misrepresentation, negligent misrepresentation, and unjust enrichment. Pier 1 eventually dropped its fraudulent-misrepresentation and unjust-enrichment claims, so we focus here on breach of contract and negligent misrepresentation.
The parties filed dueling motions for summary judgment, each contending that § 12.1 of the Service Agreement should be read in its favor. For its part, Revelex argued that the exculpatory clause-which, again, purported to shield it from "any … damages regardless of kind or type … whether in contract, tort (including negligence), or otherwise"-barred Pier 1's claims. The breadth of the clause's language, Revelex's president explained in his deposition, was intentional: "Revelex is priced in the manner with which we cannot afford to take on any liability. It is a pay-as-you-go service. So the customers that use our service benefit from paying less. What that means is that we are not going to be financially liable. Your remedy with us is to not do business with us." Alternatively, Revelex asked the district court to correct a scrivener's error in § 12.2-so as to insert the phantom "shall not"-and cap its exposure at $100, or, as a last resort, to construe the exculpatory clause to limit its liability to direct damages only. Finally, Revelex asserted that the SOW couldn't stand independently of the Service Agreement and, therefore, that Pier 1's SOW-based claims provided no stand-alone basis for relief.
Pier 1, by contrast, principally asserted that the Service Agreement's broad exculpatory clause rendered the contract unenforceable against Revelex and thus illusory. Separately, and in response to Revelex, Pier 1's managing director testified that he believed § 12.1 merely shielded Revelex from liability to third parties for damages caused by Pier 1 or its sub-agencies. As for § 12.2, he testified that it actually limited Pier 1 to seeking damages in excess of $100-which, he said, "seemed reasonable" because "any problems less than $100 would not be worth pursuing."
The district court granted partial summary judgment for Pier 1 and held that, as a matter of law, the exculpatory clause rendered the entire Service Agreement illusory. As the court explained it, "the Service Agreement binds [Pier 1] to perform certain duties," but Revelex "is free to breach the contract because there will never be recourse for the breach"; accordingly, the court concluded, the "arrangement does not create a binding contract." Without mutuality of obligation, the court reasoned, "there is no valid contract and neither side may be bound." The court refused to reform or sever § 12.1, because it said that it could not "re-write or sever th[e] provision in a way that would achieve the intent of the parties."
Both parties sought clarification with respect to whether the SOW was part and parcel of the (now nonexistent) Service Agreement or, instead, survived independently. The district court issued a supplemental order reiterating that the entire Service Agreement was unenforceable both (1) because § 12.1 rendered the contract illusory, and (2) in the alternative, because it was "an unenforceable agreement to agree." The court clarified, though, that its earlier order "didn't speak to the claim for breach of contract related to the SOW," which the court explained survived as a separate contract independent of the Service Agreement.
The case then proceeded to trial on a SOW-related breach-of-contract claim and a negligent-misrepresentation claim. At trial, Pier 1 presented a live demonstration of the software, which revealed that key functionalities were never completed. For example, Pier 1 showed that although the website logged more than 10, 000 visits, not a single potential customer was able to purchase a cruise. Revelex nonetheless asserted that it had satisfied its contractual obligations- pointing, for instance, to an email from Pier 1's principal stating that "I'm hereby to confirm that all services described on SOW were done." Pier 1 countered that it sent the email because Revelex had requested it for its auditors-not because Pier 1 actually believed that Revelex had fulfilled its contractual duties.
Through its financial manager, Mariana Peres, Pier 1 presented damages evidence pertaining to alleged lost profits. Using Pier 1's financial reports and general economic conditions, Peres determined that Pier 1's expected revenue during the damages period was $12.7 million. She estimated that total expenses would have increased by 10% annually over the same timeframe, and then compared that to the inflation rate in Brazil. Peres calculated that, on average, each cruise that Pier 1 sold generated $1, 000 in revenue. Pier 1 was selling 50 cruises per month before the advent of online booking capabilities, Peres said, and she estimated that a properly functioning website would have increased sales by at least 100 cruises per month, to a total of 150.
Having heard Peres's testimony, the district court asked her to clarify her methodology. When Peres explained that her estimates were based, in part, on the e-commerce market in Brazil, Revelex objected that she, as a lay witness, was impermissibly offering expert testimony. The court held that although Peres could "give an opinion as to what her company is worth, or what the expenses were," it was "too speculative" for her to "pick a number out of thin air" and determine that sales would double "based on looking on the internet and looking at e-commerce." Because Pier 1 introduced no additional evidence pertaining to lost profits, the court granted judgment as a matter of law for Revelex with respect to Pier 1's lost-profits claim.
Pier 1's SOW-based breach-of-contract claim and its negligent-misrepresentation claim were submitted to the jury. The jury found that Revelex (1) breached the SOW and (2) made negligent misrepresentations to Pier 1. It awarded Pier 1 $100, 097 in damages-the software cost as specified in the SOW. Because the district court had concluded that the Service Agreement was void- and because there was therefore no valid contract clause on which to predicate attorneys' fees-it denied Pier 1's request for $485, 779.50 in fees.
Revelex appealed the district court's entry of judgment against it, and Pier 1 cross-appealed the court's rejection of its lost-profits claim and its fee request.
There's a lot going on here. We have an appeal and a cross appeal, and together the parties have presented a series of interconnecting issues. Three of those issues are pretty straightforward, and we feel well-equipped to decide them. The fourth issue, however-in candor, the biggest and hardest one-is better resolved by the Florida Supreme Court than by us, and so we will certify it.[1]
We can make relatively quick work of three issues: (1) Revelex's contention that the district court erred in concluding that the SOW is independent of, and therefore survived that court's invalidation of, the Service Agreement; (2) Pier 1's contention that the district court erred in rejecting its claim for lost profits; and (3) Pier 1's ...