Pier 1 Cruise Experts, Corp. v. Revelex Corp.
929 F.3d 1334 (2019)
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Rule of Law:
A contractual exculpatory clause that purports to relieve a party of all liability for any damages, including for its own breach of contract, may render the entire contract illusory and unenforceable under Florida law, an unsettled question that requires certification to the state's highest court for resolution.
Facts:
- Pier 1 Cruise Experts, a Brazilian travel agency, hired Revelex Corporation, a Florida-based company, to build a customized online booking website.
- The parties executed a Service Agreement containing an exculpatory clause (§ 12.1) stating Revelex would not be liable for 'any ... damages regardless of kind or type (whether in contract, tort (including negligence), or otherwise).'
- The clause also contained a waiver by Pier 1 of 'any and all claims, now known or later discovered, that it may have against Revelex... arising out of this agreement and the services.'
- Alongside the Service Agreement, the parties executed a Scope of Work (SOW) that memorialized the necessary website customizations for a total cost of $100,097.
- After years of development, the website software was still not complete and did not function as required.
- As a result of the non-functional software, Pier 1 ceased making its ongoing licensing payments.
- In response, Revelex terminated Pier 1's access to the software.
Procedural Posture:
- Pier 1 Cruise Experts sued Revelex Corporation in the U.S. District Court for the Southern District of Florida for breach of contract and negligent misrepresentation, among other claims.
- On cross-motions for summary judgment, the district court held that the exculpatory clause in the Service Agreement rendered the entire agreement illusory and unenforceable.
- The court also ruled that a related Scope of Work (SOW) was a separate, independent contract that remained valid.
- The case proceeded to a jury trial on claims for breach of the SOW and negligent misrepresentation, resulting in a verdict for Pier 1 for $100,097.
- The district court granted Revelex's motion for judgment as a matter of law on Pier 1's separate claim for lost profits.
- The district court denied Pier 1's post-trial motion for attorneys' fees on the grounds that the contract containing the fee provision was void.
- Revelex appealed the adverse judgment to the U.S. Court of Appeals for the Eleventh Circuit, and Pier 1 cross-appealed the denial of lost profits and attorneys' fees.
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Issue:
Does a contractual exculpatory clause that purports to insulate a party from liability for 'any ... damages regardless of kind or type ... whether in contract, tort (including negligence), or otherwise,' render the entire contract in which it appears illusory and unenforceable under Florida law?
Opinions:
Majority - Newsom, J.
The court does not provide a definitive answer, as the issue presents an unsettled question of Florida law. The court certifies the question to the Florida Supreme Court after identifying three plausible but conflicting outcomes under existing state precedent. First, the clause could be enforced as written, barring all of Pier 1's claims. Second, the clause could be deemed so broad that it renders the entire Service Agreement illusory for lack of consideration, as it effectively allows Revelex to 'breach with impunity.' Third, the clause could be narrowly construed to bar only negligence claims while preserving the breach-of-contract claim, thereby saving the contract from being nugatory. The court reasoned that while some Florida cases enforce broad exculpatory clauses, others hold that a contract is illusory if it deprives a party of the ability to sue for damages, and a third line of cases suggests interpreting such clauses to preserve the core contractual bargain. Given this lack of controlling precedent on a determinative issue, certification is necessary to avoid an 'Erie guess' and to respect principles of federalism.
Analysis:
This decision highlights a critical tension in contract law between the principle of freedom of contract and the foundational requirement of consideration, specifically mutuality of obligation. By certifying the question, the Eleventh Circuit avoids creating federal precedent on a novel and significant state law issue, demonstrating judicial restraint and comity. The Florida Supreme Court's eventual answer will provide crucial clarity for commercial contracting in Florida, defining the boundary between an aggressive but permissible limitation of liability and an exculpatory clause so sweeping that it negates a party's promises, rendering the entire agreement an illusory nullity. This will directly impact how parties draft and negotiate risk allocation in service agreements and other commercial contracts.
