Court Opinion

ID: 9517468
Source: CourtListenerOpinion
Date Created: 2023-08-07 00:18:04.760991+00
Date Added: 2024-06-11T09:43:54.862179
License: Public Domain

BROWN, J.
(concurring). The issue, as I see it, is this: Should enforcement of a liquidated damages clause *266be denied where it is manifestly inadequate to compensate the victim of the breach ?1
The telephone company, it seems to me, has a risk aversion to lawsuits resulting from erroneous yellow pages advertisements. The company fears that expected damages are uncertain or too difficult to determine. If the ascertainment of damages were left to the judicial arena, the risk would be magnified. This juridical risk carries with it the danger that a court or jury may be swayed by “irrational factors” to decide against a powerful client.2
Because it is too difficult to determine whether a particular injury is attributable to a yellow pages ad, the telephone company negotiates a liquidation clause with its customers. Certainly, the costs of negotiating are less than the expected costs resulting from reliance on the standard damage rule for breach.3 After all, it is much better to return the cost of the ad than to face exposure to a high jury award.
Negotiation of this liquidation clause is not necessarily unconscionable because the customer gets something out of it as well. Because potential costs are down, output expands and consumers are better off. The transaction costs in ordering an ad in the yellow pages are reduced. Thus, both the telephone company and the customer receive a benefit from the liquidated damages agreement. If the agreement were to be declared unconscionable, costs would rise and the “protected” customers would find it more expensive to contract on their own behalf.
I would agree that, in the absence of unfairness or other bargaining abnormalities, efficiency would be maximized by the enforcement of the agreed risks embodied in *267a liquidation clause.4 Here there is a failure of proof that the agreement is either unfair or abnormal.
True, the telephone company has a virtual monopoly on yellow pages advertisements. Its own studies, made part of the record here, show that it has more advertising advantage and reaches more people and in a more direct manner than television, radio or newspaper and at a fraction of the cost. It is an important tool for commercial business, whether small or large. We cannot say, therefore, that if a customer does not like the liquidation clause, he or she can go to a competitor, or a different advertising medium, because there is no worthy competitor or other medium. The consumer, therefore, is in an inferior bargaining position. The contract must be signed with the liquidation clause included or the contract will not be signed at all.
Just because the telephone company has a superior bargaining position, however, this does not mean that the liquidation clause should be held unconscionable. There must first be evidence that the telephone company has taken advantage of its one-sided privilege so that it insensitively breaches its promise to provide a correct ad, caring only that there will be little or no attendant risk of having to pay for its mistake.
In fact, there has been no proof in this case that the telephone company is guilty of deliberate or even non-deliberate insensitivity due to its monopolistic insulated position. Rather, there is proof that the telephone company is ninety-nine percent accurate with respect to its yellow pages advertisements, which hardly shows abnormality, unfairness or insensitivity. It would seem that the *268consumer should be willing to take the risk that his or her ad might be inaccurate, a risk of one percent, in return for low prices.
I differ from the majority, however, in that I would limit the decision to the facts in this case. I would leave the door open for plaintiffs who can make a factual showing that the telephone company refused to provide safeguarding service which was economically viable. In a different case, there may clearly be a showing of insensitivity by the telephone company due to its monopolistic position. For instance, if it can be shown that telephone companies in other states provide better proofreading at a viable cost but this is ignored by the Wisconsin Telephone Company, insensitivity might be shown; if a company refuses to be cost effective simply by nature of its position, its liquidation clause should be subject to judicial scrutiny. The telephone company should not be able to do anything it wants. It may not enact private legislation by contract. If that were the case, allowance of a liquidation clause might come at too great a price. In most cases, the mutual interests of parties tend to lead them to bargain their way to the most efficient allocation of risks. The proof does not suggest otherwise in this case. Where the monopoly is shown to abuse its power to the detriment of cost effectiveness of the whole market, this case should not stand as precedent for allowing abuse to continue.

 R. Posner, Economic Analysis of Law § 4.10 (2d ed. 1977).

 Kessler, Contracts of Adhesion — Some Thoughts About Freedom of Contract, 43 Colum. L. Rev. 629, 631 (1943).

 Goetz & Scott, Liquidated Damages, Penalties and the Just Compensation Principle: Some Notes on an Enforcement Model *267and a Theory of Efficient Breach, 77 Colum. L. Rev. 554, 559 (1977).

 Goetz & Scott, Liquidated Damages, Penalties and the Just Compensation Principle: Some Notes on an Enforcement Model and a Theory of Efficient Breach, 77 Colum. L. Rev. 564, 578 (1977).