Opinion ID: 4486955
Heading Depth: 2
Heading Rank: 2

Heading: Contract Validity and Enforceability

Text: Claimants next attack the validity and enforceability of the Contract. In an appeal from an order granting dismissal under Federal Rule of Civil Procedure 12(b), we review such arguments de novo. Slater v. A.G. Edwards & Sons, Inc., 719 F.3d 1190, 1196 (10th Cir. 2013).
First, Claimants argue the Contract as a whole is unenforceable as an unconscionable adhesion contract. Under Kansas law, courts look to numerous factors in assessing unconscionability, including, (1) the use of printed form or boilerplate contracts drawn skillfully by the party in the strongest economic position, which establish industry wide standards offered on a take it or leave it basis to the party in a weaker economic position; (2) a significant cost-price disparity or excessive price; (3) a denial of basic rights and remedies to a buyer of consumer goods; (4) the inclusion of penalty clauses; (5) the circumstances surrounding the execution of the contract, including its commercial setting, its purpose and actual effect; (6) the hiding of clauses which are disadvantageous to one party in a mass of fine print trivia or in places which are inconspicuous to the party signing the contract; (7) phrasing clauses in language that is incomprehensible to a layman or that divert his attention from the problems raised by them or the rights given up through them; (8) an overall imbalance in the obligations and rights imposed by the bargain; (9) exploitation of the underprivileged, unsophisticated, uneducated and the illiterate; and (10) inequality of bargaining or economic power. Willie v. Sw. Bell Tel. Co., 549 P.2d 903, 907 (Kan. 1976) (internal citations omitted). -11- Claimants engage with only a subset of these factors, arguing principally that the Contract is unconscionable because the parties lacked equal bargaining power and the Contract was presented on a “take it or leave it” basis. Aplt. Br. at 18–19. Under Kansas law, more is required—for example, substantive unfairness or some form of deception in the contracting process—to render a contract unconscionable. See Willie, 549 P.2d at 906–07. As the Kansas Supreme Court clarified, the principle of unconscionability is aimed at preventing oppression and unfair surprise, not disturbing the allocation of risks resulting from an imbalance of bargaining power. See id. Here, the Contract’s significant limitation of liability must be viewed in context. Where monitoring services are concerned, liability-limiting provisions reflect appropriate risk allocations, especially where monthly premiums are low. See Leon’s Bakery, Inc. v. Grinnell Corp., 990 F.2d 44, 49 (2d Cir. 1993) (“[T]he price [of a fire or burglary alarm system] does not generally include a sum designed to anticipate the possible need to pay the purchaser the value of the property that the system is to protect.”). It is thus no surprise that many courts uphold monitoring services contracts with similar liability-limiting provisions. See, e.g., Corral v. Rollins Protective Servs. Co., 732 P.2d 1260, 1265 (Kan. 1987) (upholding a similar liability-limiting provision in a contract for burglary and fire alarm monitoring services); see also Peter’s Clothiers, Inc. v. Nat’l -12- Guardian Sec. Servs. Corp., 994 F. Supp. 1343, 1348 (D. Kan. 1998) (upholding similar liability-limiting provisions in a contract for security system monitoring services). Claimants also fail to show any “cost-price disparity” or that ADT charged an “excessive price.” Willie, 549 P.2d at 907. To the contrary, Frost’s $37.99 monthly fee is reasonable in light of the services. Where consumers pay small monthly premiums, it is hardly unconscionable for liability to be appropriately limited. See Greenspan v. ADT Sec. Servs. Inc., 444 F. App’x 566, 570 (3d Cir. 2011) (“The relatively low yearly service fee that the Greenspans paid reflects the fact that ADT was not the Greenspans’ insurer, it was not in the business of assessing risk, and its annual service fee could not have been reasonably based on the value of the real property protected by ADT’s alarm system.”). The Contract here does just that. Moreover, it does so conspicuously, with large, bolded and capitalized language on the first page stating that ADT is “NOT AN INSURER,” notifying the purchaser that the Contract contains a “Limitation of Liability,” and directing him to the appropriate subsections to find additional details. App. at 73–74 (emphasis in original). Claimants rely on John Deere Leasing Co. v. Blubaugh, 636 F. Supp. 1569 (D. Kan. 1986), but the analogy is unpersuasive. In John Deere, the court found certain lease terms unconscionable where they were contained in print so light -13- that they did not show up in a photocopy of the document and so small that the court had to read them with a magnifying glass. The terms also used “unreasonably complex” language. Id. In addition to this “near concealment” of the actual terms of the contract, the court found that the substantive remedy at issue was “unusually harsh” and that it resulted in the exaction of a “penalty.” Id. at 1574 (finding “both procedural and substantive unconscionability are present”). Unlike John Deere, here the complained-of provisions are contained in clear, conspicuous language and are referenced on the first page of the Contract. See Santana v. Olguin, 208 P.3d 328, 333 (Kan. Ct. App. 2009) (finding liabilitylimiting provision enforceable where it was “written in relatively plain language and set forth after an all-capital-and-bold heading that . . . signaled the importance” of the provision). Accordingly, John Deere fails to necessitate a finding of unconscionability. Because the Contract’s liability-limiting provisions are substantively reasonable in the context of a monitoring service agreement and were conspicuously presented, we find no substantive or procedural unconscionability.
Claimants also argue that ADT’s “wanton” behavior and “gross negligence” invalidate certain provisions of the Contract. Aplt. Br. at 23–25. To show wanton conduct, Claimants must establish (1) the alleged acts were performed -14- with a realization of imminent danger and (2) that the alleged acts were performed with a reckless disregard or complete indifference to the probable consequences. Wagner v. Live Nation Motor Sports, Inc., 586 F.3d 1237 (10th Cir. 2009). Claimants’ conclusory allegations fail this test. Despite receiving the alerts, ADT had little actual knowledge of the danger Frost faced at the time of the fire. See Messer v. Amway Corp., 210 F. Supp. 2d 1217, 1237 (D. Kan. 2002) (“Wantonness refers to the mental attitude of the wrongdoer rather than to a particular act of negligence.”). Moreover, nothing about ADT’s response indicates reckless disregard or complete indifference. ADT attempted to contact Frost and the next number listed on her account multiples times immediately after receiving the alerts in question. Regardless of whether ADT’s failure to then contact emergency services was negligent, this conduct does not rise to the higher bar of wanton or grossly negligent behavior. Accordingly, we refuse to invalidate the terms of the Contract on this basis.
Next, relying on a Kansas Supreme Court case, Pfeifer v. Federal Express Corp., 304 P.3d 1226 (Kan. 2013), Claimants argue that the contractual one-year suit-limitation provision abbreviates the applicable statute of limitations in a manner contrary to Kansas public policy and therefore is unenforceable. Generally under Kansas law, parties are free to contractually shorten otherwise -15- applicable statutes of limitations. Id. This principle recognizes the fact that Kansas public policy favors not interfering with parties’ freedom of contract. See Marshall v. Kan. Med. Mut. Ins., 73 P.3d 120, 128 (Kan. 2003). It is also warranted in light of the fact that “[s]uit limitation provisions serve a number of legitimate purposes which can ultimately lower costs to consumers.” B.S.C. Hold. Inc. v. Lexington Ins. Co., 625 F. App’x 906, 911 (10th Cir. 2015). In Pfeifer, the Kansas Supreme Court limited parties’ freedom to contract in this manner where doing so would violate a “strongly held public policy interest.” Pfeifer, 304 P.3d at 1234. Pfeifer involved a suit-limitation provision in an employment contract that restricted the time in which employees could bring retaliatory discharge claims based on the exercise of rights granted under the Kansas Workers Compensation Act. Under the contract at issue, the generally applicable period of two years was reduced to only six months. In considering the validity of the suit-limitation provision, the Kansas Supreme Court noted the issue “is lodged squarely between two long-standing public policy interests”—the freedom to contract and the “protections afforded injured workers against retaliatory discharge when exercising statutory workers compensation rights.” Id. at 1228. In recognizing the latter public policy interest, the court looked to Kansas case law discussing “a thoroughly established public policy supporting injured workers’ rights to pursue remedies for their on-the-job injuries and -16- opposing retaliation against them for exercising their rights.” Id. at 1232 (citing Hysten v. Burlington N. Santa Fe Ry. Co., 108 P.3d 437, 444 (Kan. 2004)). The court also noted that the recognition of the retaliatory discharge tort was essential to the protection of the statutory rights of the Workers Compensation Act, which, “exist only because of the legislature’s determination that such [rights are] in the public interest.” Id. Because it found contractually abbreviating the otherwise applicable two-year statute of limitations period to six months would have a “deterrent” effect on the exercise of such rights, the court found the public policy concerns sufficient to invalidate the contractual suit-limitation provision at issue. Id. at 1232–34. Claimants argue that a similar conclusion is warranted here because their “wrongful death, survival and consumer protection claims invoke public policy concerns of a greater magnitude than the retaliatory discharge claim protected by the Pfeifer court.” Aplt. Br. at 28. But Claimants fail to support this conclusory statement with sufficient evidence to demonstrate a “strongly held public policy interest” is at stake. Pfeifer, 304 P.3d at 1234. With respect to Claimants’ wrongful death claim and survival actions, Claimants point to Kansas case law recognizing these causes of action. None of these cases, however, explicitly state a Kansas public policy with respect to the claim at issue, much less one strong enough to outweigh the policy favoring parties’ freedom to contract. See Byrd v. -17- Wesley Med. Ctr., 699 P.2d 459, 468 (Kan. 1985); Flowers v. Marshall, 494 P.2d 1184, 1188 (Kan. 1972). We decline to read such Kansas public policy statements into these precedents. Finally, Claimants suggest that Section 9’s suit-limitation provision violates Kansas public policy because their claims stem from statutory authority. While statutory rights reflect the Kansas “legislature’s determination that such a right is in the public interest,” and thereby provide some evidence of a public policy interest, see Pfeifer, 304 P.3d at 1232, we decline to read Pfeifer so broadly as to invalidate suit-limitation provisions with respect to all statutory rights. Such a broad reading would contradict Pfeifer’s statement that its holding “is limited to the circumstances in which there is a strongly held public policy interest at issue.” Id. at 1234. Indeed, Pfeifer itself affirmed the general proposition that parties are free to shorten applicable statutes of limitations through contracts. See id. at 1231. Accordingly, we hold that the contractual limitations period at issue is neither void or unenforceable as contrary to Kansas public policy.