Opinion ID: 8704066
Heading Depth: 3
Heading Rank: 1

Heading: Whether the Counterclaims are Barred by the Exculpatory Clauses

Text: The Custodial Agreement between BOA, TBW, and Colonial contains the following two provisions: [I0.]A. Limitation of Liability. Neither' [BOA] nor any of its directors, officers, employees or agents ... shall be liable for any action taken or omitted to be taken by it or them under or in connection ivith this Agreement or the Participated Mortgage Loans, except for its or their oum gross negligence or willful misconduct, breach of this Agreement by [BOA] that constitutes bad faith or a material breach that is not cured within 10 days of notice from the other parties or if such breach is a of [SIC] a nature that is not unable [SIC] within such 10-day period and [BOA] is diligently and in good faith working on curing same, then within 30 days of such notice or within such other reasonable period, or other malfeasance by [BOA] hereunder. The duties of [BOA] hereunder shall be mechanical and administrative in nature and nothing in this Agreement or any of the Participated Mortgage Loans, express or implied, is intended to or shall be so construed as to impose upon [BOA] any obligations in respect of this Agreement or any of the Participated Mortgage Loans except as expressly set forth herein. Subject to the foregoing, in performing its functions and duties hereunder on behalf of [Colonial] and/or [TBW], [BOA] shall not (a) be responsible in any manner to [Colonial] or the [TBW] for the effectiveness, enforceability, genuineness, validity, due execution, collectability, priority or sufficiency of this Agreement or any of the Participated Mortgage Loans, or for any recital, representation, warranty, document, certificate, report or statement herein or therein made or furnished under or in connection with this Agreement or the Participated Mortgage Loans, or for the sufficiency of the Collateral or the validity, perfection or priority of any security agreement on the part of [TBW], or the financial condition of [TBW] or the existence or possible existence of any event of default under any such loan or security agreement or any other document or agreement of [TBW] or [Colonial]. [BOA] shall act as the agent of [Colonial] and [TBW] in performing its obligations as Custodian hereunder and with respect to the Participated Mortgage Loans and nothing herein contained shall be deeded to create a fiduciary relationship among or between [BOA], [TBW] or [Colonial], 11. LIMITATION ON OBLIGATIONS OF CUSTODIAN. [BOA] agrees to act in accordance with any direction given it pursuant to this Agreement in good faith in the performance of any obligations and duties required pursuant to this Agreement and shall incur no liability to [Colonial] or [TBW] for any acts or omissions on the part of [BOA] except as may result from [BOA’s] gross negligence or willful misconduct occurring in connection with the performance of the duties, responsibilities and obligations to be performed by [BOA] under this Agreement. [BOA] shall also be entitled to rely upon any notice, document, correspondence, request or directive received by it from [Colonial] or [TBW], as the case may be, which [BOA] believes to be genuine and to have been signed or presented by the proper and duly authorized officer or representative thereof, and shall not be obligated to inquire as to the authority or power of any Person so executing or presenting such documents or as to the truthfulness of any statement set forth therein. [BOA] shall have no duties or responsibilities to [TBW] or [Colonial] except as expressly provided in this Agreement or by law or by any other agreements to which [BOA] is a party, and [BOA] shall not be obligated to recognize, nor have any liability or responsibility to, [Colonial] or [TBW] under any instrument to which [BOA] is not a party. (Custodial Agreement at ¶¶ 10A, 11, attached as Ex. A Myles Decl., Dkt. No. 36-2) (emphasis added). BOA argues that the above language forms an exculpatory provision that precludes the FDIC’s claims for breach of the Custodial Agreement and/or Bailee Letters. (Dkt. No. 43 at 2.). BOA contends that the exculpatory language limits BOA’s liability to instances of gross negligence, willful misconduct, material breach, bad faith, or “other malfeasance,” and precludes liability for “material breach” unless the parties have given BOA notice of the breach and an opportunity to cure, all of which, BOA asserts, the FDIC failed to plead in its Counterclaims. (Dkt. No. 43 at 3 (citing the Custodial Agreement at ¶ 10A)). BOA concedes that the language in paragraph 10A “is more specific” than that of paragraph 11, but argues that both paragraphs preclude liability “under the circumstances” alleged in the Counterclaims. (Id. at 3.). According to BOA, the exculpatory language “could not be clearer or less equivocal.” (Dkt. No. 36 at 14.). Under Florida law, 18 exculpatory clauses are disfavored and strictly construed against the party claiming to be relieved from liability. Murphy v. Young Men’s Christian Ass’n of Lake Wales, Inc., 974 So.2d 565, 567-68 (Fla.Dist.Ct.App. 2008); see also, Hackett v. Grand Seas Resort Owner’s Ass’n Inc., 93 So.3d 378, 380 (Fla.Dist.Ct.App.2012) (noting that exculpatory clauses are disfavored). “Such clauses are enforceable only where and to the extent that the intention to be relieved was made clear and unequivocal in the contract, and the wording must be so clear and understandable that an ordinary and knowledgeable party will know what he is contracting away.” Murphy, 974 So.2d at 568 (quoting Southworth & McGill, P.A. v. S. Bell Tel. and Tel. Co., 580 So.2d 628, 634 (Fla.Dist.Ct.App.1991)); see also, Dynair Tech of Fla. v. Cayman Airways Ltd., 558 So.2d 30, 32 (Fla.Dist.Ct.App. 1989) (holding that exculpatory clauses had “no force and effect” because they contradicted each other). The FDIC argues that the exculpatory language in question here is anything but clear. Indeed, according to the FDIC, the exculpatory language is unenforceable because the language contained in both paragraphs 10A and 11 is unclear and contradictory, thereby making it impossible for this Court to ascertain the parties’ intent. The FDIC also points to other alleged contradictions between provisions in the Custodial Agreement. For instance, the FDIC alleges, on the one hand, the Custodial Agreement requires BOA to “exercise reasonable care in the custody and preservation” of Colonial’s loans, but on the other hand, it purports to release BOA for its failure to exercise such care with respect to the Loans. (Dkt. No. 41 at 8 (citing the Custodial Agreement at ¶¶ 4D, 11).). The Court finds that, viewing the facts in the light most favorable to the FDIC as it is required to do, the exculpatory language in the Custodial Agreement is simply too ambiguous to be “so clear and understandable that an ordinary and knowledgeable person will know what he is contracting away.” Murphy, 974 So.2d at 568. First, the Court does not find — as BOA urges it to do — that paragraph 10A shelters BOA from liability except for actions constituting gross negligence, willful misconduct, and bad faith, or for an uncured material breach. Paragraph 10A actually opens BOA up to far greater liability: [BOA] ... shall [not] be liable for any action taken or omitted to be taken by it ... in connection with this Agreement or the Participated Mortgage Loans, expect for [BOA’s] ... own gross negligence or willful misconduct, breach of this Agreement ... that constitutes bad faith or a material breach that is not cured within 10 days of notice ..., or other malfeasance by [BOA] hereunder. 0Custodial Agreement at ¶ 10A.) (emphasis added). The term “other malfeasance” as used in paragraph 10A is undefined and is simply too broad to constitute “clear and unequivocal” notice of what Colonial contracted away when it entered into the Custodial Agreement. Under Florida law, “malfeasance” means the commission of some act that is unlawful. See, e.g., Bent v. Ballantyne, 368 So.2d 351, 353 (Fla. 1979) (defining malfeasance as the “commission of some act which is positively unlawful,” citing Black’s Law Dictionary 1109 (rev. 4th ed.1968)); Thompson v. Napotnik, 923 So.2d 537, 540 (Fla.Dist.Ct. App.2006) (defining malfeasance in the context of recall petitions); Moultrie v. Davis, 498 So.2d 993, 995 (Fla.Dist.Ct.App. 1986) (same). Whatever its meaning, the term “malfeasance” is certainly broad enough to include the allegations brought in the FDIC’s Counterclaims. In fact, it is difficult to imagine a more broadly defined scope of liability. In addition, there is the nonsensical sentence in paragraph 10A (and repeated in section D of the same paragraph): a material breach that is not cured within 10 days of notice from the other parties or if such breach is a of a[SIC] nature that is not unable [SIC] within such 10-day period and Custodian is diligently and in good faith working on curing same, then within 30 days of such notice or within such other reasonable period.... ('Custodial Agreement, 1110A.)(emphasis added). It is clear that the sentence, “if such breach is a of a nature that is not unable within such 10-day period,” contains several clerical errors. The clerical errors render the sentence unintelligible. This is significant because the sentence is meant to set forth one of the exceptions to the limitation on BOA’s liability, a limitation that is meaningless due to its unintelligibility. Likewise, the exculpatory language in paragraph 11 is ambiguous. BOA argues that paragraph 11 limits its liability to breaches for gross negligence and/or willful misconduct, but a careful reading of paragraph 11 shows that it actually opens the door to much greater liability. The last sentence of paragraph 11 states: “[BOA] shall have no duties or responsibilities to [TBW] or [Colonial] except as expressly provided in this Agreement or by law or by other agreements to which [BOA] is a party----” (Custodial Agreement> ¶ 11.) (emphasis added). By imposing on BOA any duties or responsibilities provided “by law or by other agreements to which [BOA] is a party,” this sentence can reasonably be interpreted as leaving BOA’s liability open to limitless possibilities. The question before the Court is whether the language attempting to limit BOA’s liability is “so clear and understandable that an ordinary and knowledgeable person will know what he is contracting away.” Cain v. Banka, 932 So.2d 575, 578 (Fla.Dist.Ct.App.2006). That is not the case here. Accordingly, the Court determines that the exculpatory language in paragraphs 10A and 11 is ambiguous and, therefore, unenforceable. 19