Rodman v. Safeway Inc.
2015 U.S. Dist. LEXIS 115705, 2015 WL 5117616, 125 F. Supp. 3d 922 (2015)
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Rule of Law:
A contractual limitation of liability clause that caps damages for a 'claimed injury' to the value of the transaction 'immediately prior to the claimed injury' is construed on a per-claim, not per-customer, basis. Consequently, when a contract is breached multiple times through systematic overcharges, each overcharge constitutes a separate 'claimed injury,' and the liability for each is limited only by the value of the specific transaction in which that breach occurred.
Facts:
- Safeway, Inc. operated an online grocery delivery service, Safeway.com, which required customers to register and agree to 'Special Terms'.
- The Special Terms promised customers that, with certain disclosed exceptions, the prices for products on Safeway.com would be the same as those charged in the physical store from which the groceries were delivered.
- The Special Terms also contained a 'Limitation of Liability' clause, limiting Safeway's liability for any 'claimed injury, loss, or damage' to the amount paid by the customer in their 'most recent use of the online shopping service immediately prior to the claimed injury'.
- Beginning in April 2010, Safeway began systematically applying a secret markup to the prices of non-promotional items sold on Safeway.com, making them higher than the in-store prices.
- The prices displayed on the website were the marked-up prices, but Safeway did not inform customers of the markup or the difference from the in-store price.
- Plaintiff Michael Rodman used the Safeway.com service, paid the marked-up prices, and subsequently discovered the price discrepancy.
- On November 15, 2011, Safeway amended its Special Terms to state that online and in-store prices 'may differ,' but did not notify existing registered users of this change.
Procedural Posture:
- Michael Rodman filed a class-action lawsuit against Safeway, Inc. in the U.S. District Court for the Northern District of California in June 2011.
- On March 10, 2014, the trial court certified a class of plaintiffs on the breach of contract claim.
- On December 10, 2014, the court granted partial summary judgment for the plaintiff class, finding Safeway had breached its contract with customers who registered after 2006.
- Following a motion for reconsideration by Safeway, the court amended its order to clarify that its liability finding did not apply to customers who registered before 2006.
- Safeway filed a motion to decertify the class, arguing that individualized damages issues now predominated, which the court denied.
- Safeway then filed a motion for partial summary judgment seeking to limit its total liability based on a clause in its terms, while Rodman filed a motion for summary judgment on the total measure of damages and a separate motion to establish liability for pre-2006 registrants.
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Issue:
Does a limitation of liability clause that caps damages for a 'claimed injury' to the aggregate dollar amount paid in the 'most recent use of the online shopping service immediately prior to the claimed injury' limit a party's total liability across multiple, distinct breaches to the value of only the single last transaction?
Opinions:
Majority - Jon S. Tigar
No. A limitation of liability clause tied to the transaction immediately prior to a specific 'claimed injury' does not cap a party's aggregate liability for all past injuries at the value of the final transaction. The court strictly construed the ambiguous clause against Safeway, the drafter. The plain language limits liability on a per-claim basis, not a per-customer basis. Each time Safeway applied the markup, it constituted a separate breach and a distinct 'claimed injury.' Therefore, the liability for each overcharge is limited by the total amount of the purchase in which that specific overcharge occurred. Since the markup amount for any given transaction is by definition less than the total value of that transaction, the clause has no practical limiting effect on the total damages owed to the class. The court further held that the proper measure of damages for this breach of contract is the 'benefit of the bargain,' which equals the full aggregate amount of the markup, approximately $31 million. Safeway’s affirmative defenses of waiver and consent were rejected because Safeway failed to produce any competent evidence, let alone meet the 'clear and convincing' standard, to show that any class member knew of their right to price parity and intentionally relinquished it.
Analysis:
This decision reinforces the judicial principle of construing ambiguous limitation of liability clauses strictly against the drafting party, particularly in consumer contracts. It establishes that a 'per-injury' limitation does not function as a total cap on liability for a series of breaches. The case also clearly distinguishes the 'benefit of the bargain' damage calculation for breach of contract from the restitutionary damages often seen in consumer fraud cases, solidifying that the proper remedy for a price promise breach is the full difference between the price promised and the price paid. Finally, the court's rejection of Safeway's affirmative defenses serves as a strong precedent against defendants who, after concealing a breach, attempt to avoid liability by speculating that customers somehow discovered the breach and consented to it without any concrete proof.
