Opinion
Civil Action No. 03-0772 (JLL).
February 9, 2004
ROBERT M. RICH, Verona, NJ, (Attorney for Plaintiff).
DAVID Y. LOH, VAL WAMSER, Nicoletti Hornig Campise Sweeney Paige, Hackensack, NJ, (Attorneys for Defendant).
OPINION ORDER
This matter comes before the Court on the motion of Defendant UTI, United States, Inc. ("UTI") for partial summary judgment on certain issues related to damages and limitations of liability, and on the motion of Plaintiff Morgan Home Fashions ("Morgan Home") to strike certain defenses from Defendant's answer. Plaintiff commenced suit against Defendant for claims of negligence and breach of contract. The motions are resolved without oral argument. Fed.R.Civ.P. 78. For the reasons stated herein, the partial summary judgment motion is GRANTED and the motion to strike is DENIED.
Factual Background
Plaintiff Morgan Home is a New Jersey corporation that sells imported soft goods to wholesalers and retail chains in the United States. Beginning in November 2000, Morgan Home contracted with Defendant UTI, a New York corporation, to serve as Morgan Home's customs broker and thereby expedite the movement of imported goods through the customs process. UTI is a licensee of the United States Department of Homeland Security (formerly, the United States Customs Service). 19 C.F.R. § 111. UTI rendered customs services to Morgan Home approximately one hundred times, and for each transaction used a standard invoice form containing contractual terms and conditions. Paragraph 8 of that invoice is in bold font and provides, in relevant part:
Limitation of Liability for Loss, etc. (a) the customer agrees that the company shall only be liable for any loss, damage, expense or delay to the goods resulting from the negligence or other fault of the company; such liability shall be limited to an amount equal to the lesser of fifty dollars ($50.00) per entry or shipment or the fee(s) charged for the services provided that in the case of partial loss such amount will be adjusted pro rata;
(b) . . . Customer has the option of paying a special compensation and increasing the limit of Company's liability up to the shipment's actual value; however, such option must be exercised by written agreement, entered into prior to any covered transaction(s), setting forth the limit of the Company's liability and the compensation received.
Paragraph 17 provides:
Loss, Damage or Expense Due to Delay. Unless the services to be performed by the company on behalf of the customer are delayed by reason of the negligence or other fault of the company, the Company shall not be responsible for any loss, damage or expense incurred by the customer because of such delay. In the event the Company is at fault, as aforesaid, its liability is limited in accordance with the provisions of paragraphs 8-9 above.
(Def.'s Rule 56.1 Statement of Undisputed Facts, Ex. A.)
These terms and conditions have been adopted and promulgated by the National Customs Brokers and Freight Forwarders Association of America, of which UTI is a member. Beyond the inclusion of the aforementioned clauses in each invoice, Defendant never informed Plaintiff that its liability would be limited.
As a result of forty-two delayed shipments in September and October 2001, Plaintiff ended its business relationship with the Defendant, claiming that UTI had failed in its duties to promptly and properly move the merchandise through customs, and that UTI caused damages to Plaintiff as a result. Although the Court has not been provided with specific details of the acts constituting the alleged negligent behavior, it appears that the delays arose from various lost documents, missing payments, and late filings in the customs process. (Def.'s Rule 56.1 Statement, Ex. B.) On January 8, 2003, Plaintiff filed a Complaint in the Superior Court of New Jersey, alleging breach of contract, negligence, breach of fiduciary duties, breach of covenant of good faith and fair dealings, failure to properly perform services as an agent, and violation of the New Jersey Consumer Fraud Act. Plaintiff seeks compensatory damages, treble damages, attorney's fees, interest, and cost of suit. The matter was removed to this Court on February 20, 2003 by diversity jurisdiction under 28 U.S.C. § 1441. Defendant has since filed a motion for partial summary judgment asking the Court to determine as a matter of law that its liability in this matter should be limited to $50.00 per shipment pursuant to the contractual terms set forth in the invoice. Plaintiff has filed a motion to strike Defendant's Fourth and Sixth Affirmative Defenses relating to the validity of the exculpatory clause.
Legal Framework
I. Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment may be granted only when the evidence contained in the records shows "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Serbin v. Bora Corp., 96 F.3d 66, 69 n. 2 (3d Cir. 1996). In determining whether there remain any actual issues of factual dispute with regard to the limitation of liability, the court must resolve all reasonable doubts in favor of the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986); Meyer v. Riegel Prods. Corp., 720 F.2d 303, 307 n. 2 (3d Cir. 1983). At the summary judgment stage, "the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). In terms of determining the validity of contractual terms, it is within a court's authority to decide such a question through partial summary judgment. "The construction of a written contract is ordinarily the function of a court, and should not be left to a jury unless the terms are unclear or ambiguous." Marbro, Inc. v. Borough of Tinton Falls, 297 N.J. Super. 411, 421 (Law Div. 1996).
The moving party bears the initial burden of identifying evidence that demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317 (1986). Once that burden has been met, it is incumbent upon the nonmoving party to set forth specific facts showing that there is a genuine issue for trial. Anderson, 477 U.S. at 248. The non-movant must "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., 475 U.S. at 586 (1986). Thus, if the non-movant's evidence on any essential element of the claims asserted is merely "colorable" or is "not significantly probative," the court should enter summary judgment in favor of the moving party. Anderson, 477 U.S. at 249-250. With this legal framework in mind, the Court will now turn to the issues presented in this case.
Discussion
I. Defendant's Motion for Partial Summary Judgment
Whether Defendant's actions were in fact negligent or in breach of contract is not at issue in the present motion. The question before this Court on the partial summary judgment motion is only whether the contractual term limiting liability to $50.00 per shipment will be enforced. As already mentioned, the invoices between the parties contained an exculpatory clause limiting Defendant's liability on any given transaction and precluding the recovery of consequential or special damages. (Def.'s Rule 56.1 Statement, Ex. B, ¶¶ 8, 17.) If this exculpatory clause is deemed enforceable by the Court, it will bind the parties pursuant to its terms.
For some time, federal regulations specifically prevented customs brokers like Defendant from limiting their liability.See 19 C.F.R. § 111.44; Qualimetrics, Inc. v. Lep Profit Intern., Inc., 1996 WL 586330, at *3 (S.D.N.Y. Oct. 11, 1996);General Elec. Co. v. Harper Robinson Co., 818 F.Supp. 31 (E.D.N.Y. 1993). However, those regulations were overturned in 1993, thereby permitting customs brokers to use exculpatory clauses for protection from liability. See Hurco Companies, Inc. v. Kuehne Nagel, Inc., 2001 WL 1386077, at *5 (S.D. Ind. Sept. 28, 2001). No longer barred by federal regulations, the legality of a given exculpatory clause now hinges upon the applicable state law.
At the outset, there is some dispute as to which state's law should presently apply. Plaintiff disputes Defendant's claim that New York law should govern this motion, emphasizing the contractual ambiguity in the choice of law. An ambiguity in a contract exists if the terms of the contract are susceptible to at least two reasonable alternate interpretations. Schor v. FMS Fin. Corp., 357 N.J. Super. 185, 190 (App.Div. 2002). Whether a contractual term is clear or ambiguous is to be determined by the court. Id. Ambiguity in contractual terms must be construed against the draftsman. City of Orange Tp. v. Empire Mortg. Services, Inc., 341 N.J. Super. 216, 227 (App.Div. 2001); In re Estate of Miller, 90 N.J. 210, 221 (1982) (ruling against draftsman, stating that "if he wanted to ensure that his interest in . . . royalties would continue as long as royalties accrued, it would have been simple so to word the documents . . . [his] failure to do so must be construed against him"); Matter of Cmty. Med. Ctr., 623 F.2d 864, 866 (3d Cir. 1980) ("New Jersey follows [the general rule] where there is ambiguity, the words are construed against the drafter."); see also Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62-63 (1995) (ruling against draftsman of contradictory choice-of-law clauses because the party "drafted an ambiguous document, and they cannot now claim the benefit of the doubt. The reason for this rule is to protect the party who did not choose the language from an unintended or unfair result"). This Court agrees with Plaintiff that the invoice contains an ambiguity regarding the relevant choice of law. The only relevant language in the invoice can be found in paragraph 18 which states that "the foregoing terms and conditions shall be construed according to the laws of the State shown on the reverse side thereof." (Def.'s Rule 56.1 Statement of Undisputed Facts, Ex. A). On the reverse side, however, two addresses are printed; the mailing address of Defendant, located in New Jersey, and the address for the Bank of New York, located in New York. No other clarifying language exists in the invoice which would definitively point to the application of either address. Because this contractual ambiguity must be construed against Defendant, and because no public policy is violated by applying New Jersey law, New Jersey law will be applied.
New Jersey courts will enforce choice-of-law provisions in contracts provided the public policies of New Jersey are not offended and the contract bears some relation to the chosen jurisdiction. See, e.g., Pepe v. Rival Co., 85 F.Supp.2d 349, 381 (D.N.J. 1999) (citing to numerous cases so holding).
In any event, it does not appear that the Court's conclusion with respect to the applicability of the exculpatory clause would be considerably different under New York law. Courts in New York have validated nearly identical exculpatory clauses to the present one in similar contexts. See ABN Amro Verzekeringen BV v. Geologistics Americas, Inc., 253 F. Supp. 2d 757, 765 (S.D.N.Y. 2003) ("New York law does not restrict the ability of non-carrier freight forwarders to limit their liability through contract.")
Having determined that New Jersey law applies, the Court begins with the settled principle that courts will generally not interfere with the freedom of the parties to contract as they please. See, e.g., Saxon Const. Mgmt. Corp. v. Masterclean of North Carolina, Inc., 273 N.J. Super. 231, 235 (App.Div. 1994). Despite this underlying premise, courts will examine exculpatory clauses to ensure that their enforcement is just. Any provision limiting liability such as the one in this case must be written in plain and clear language, entered into by equal bargaining partners, and not run contrary to the public interest.Rubin v. AMC Home Inspection Warranty Serv., 175 N.J. Super. 315 (Law Div. 1980). The clause cannot protect a party from its gross negligence, Tessler and Son, Inc. v. Sonitrol Sec. Sys. of N. New Jersey, Inc., 203 N.J. Super. 477, 483 (App.Div. 1985), nor can it be unconscionable, Carter v. Exxon Co. USA, 177 F.3d 197, 207 (3d Cir. 1999). Generally, the courts must ascertain whether the parties "so clearly allocated the risks that each party knew, or should have known, the existence of its contingent liability and was thus placed in a position where it could protect itself against such loss by adequate insurance coverage or otherwise." Chem. Bank of New Jersey Nat'l Ass'n v. Bailey, 296 N.J. Super. 515, 527 (App.Div. 1997) (emphasis added). Based on an application of these considerations to the instant case, this Court finds that the exculpatory clause must be upheld.
The terms of the contract were spelled out in plain and clear language in each of over one hundred transactions between the parties. Simply because the information was listed on the back of an invoice does not undermine its clarity. See e.g., Commodities Recovery Corp. v. Emery Worldwide, 756 F. Supp. 210, 212 (D.N.J. 1991) (ruling that contractual terms "listed on the reverse side of the [invoice] which could only be read by tearing off the cover sheet from attached carbon copies below it" were nonetheless enforceable). Although the small font and light print of the relevant terms may have made them somewhat difficult to read, they do not approach the near illegibility that has been deemed too inconspicuous to be enforceable. Tannock v. New Jersey Bell Telephone Co., 212 N.J.Super. 506, 514 (Law Div. 1986) (finding that where "the print is too small to be read by an average person without the aid of a magnifying glass," an exculpatory clause is not enforceable), rev'd on other grounds, 223 N.J. Super. 1 (App.Div. 1988). In addition, where contractual terms are less clear, repeated opportunities for review of the terms can substitute for such conspicuousness.Commodities Recovery Corp., 756 F. Supp. at 212. A long line of past dealings like those between the present litigants establishes that contractual terms should be understood by all parties. See N.J.S.A. 12A:1-205(3) ("A course of dealing between parties and any usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware give particular meaning to and supplement or qualify terms of an agreement."). The exculpatory clause was included in the contract and Plaintiff cannot escape its dictates by failing to read it, as "one who does not choose to read a contract before signing it is nevertheless bound by its terms." Abel Holding Co., Inc. v. Am. Dist. Tel. Co., 138 N.J. Super. 137, 157 (Law Div. 1975). See also Hoogwegt U.S., Inc. v. Schenker Int'l, Inc., 121 F. Supp. 2d 1228, 1232 (N.D. Ill. 2000) ("Having had numerous opportunities to examine these documents, plaintiff cannot now claim not to have had notice of the [terms] . . . that limited [defendant's] liability. To hold otherwise would be to reward plaintiff for burying its head in the sand and then claiming that it didn't see anything.")
Courts considering situations strikingly similar to the case at bar have found that allegedly unfair and unclear exculpatory clauses can nonetheless limit liability of the parties. In ABN Amro Verzekeringen BV v. Geologistics Americas, Inc., 253 F.Supp.2d 757 (S.D.N.Y. 2003), exculpatory clauses written in a nearly identical manner on the back of a freight forwarder's invoice were found valid based on past dealings and the availability of an option to increase the level of liability.Id. at 765. In that case, the motion for partial summary judgment limiting liability to $50 according to the contract was granted. Id. at 771. In Hurco Companies, Inc., the defendant customs broker also successfully limited its liability to $50.00 per shipment by establishing that the plaintiff had ample opportunity over the course of their many transactions to view and understand the terms of the contract. Id. at *4 ("Although the result may seem harsh, parties are bound by all the terms of their contract, including those implied from course of dealing."). See also Hoogwegt U.S., Inc. 121 F. Supp. 2d 1228 (likewise limiting a freight forwarder's liability to $50.00 per shipment based on identical contractual terms to the case at bar); Gov't of United Kingdom v. Northstar Servs., Ltd., 1 F. Supp. 2d 521 (D. Md. 1998) (same).
Though the Hurco court upheld the exculpatory clause, that determination was not dispositive of the ultimate ruling as the plaintiff had also failed to meet a statute of limitations clause in the contract, which served as sufficient grounds to grant defendant's motion for summary judgment.
Plaintiff advances little evidence to support its claim that the parties were so "unequal" so as to deny the validity of the clause. Invalidating a contract on the basis of inequality generally takes place when one of the parties has no other choice but to accept or reject the terms of the offer as a result of a power imbalance between them. See Vasquez v. Glassboro Service Ass'n, Inc., 83 N.J. 86, 104 (1980). Here there is no such restriction of choice. It is uncontested that Plaintiff failed to object or request changes to the limitation of liability despite an express contractual provision which gave them the opportunity to do so. Although Plaintiff asserts a significant difference in the size of the companies, this is not sufficient to establish that the parties were on unequal footing with respect to the transactions in dispute. Where the smaller of two businesses is nonetheless experienced in the world of making contracts, no inequality has been found. Moreira Const. Co. v. Moretrench Corp., 97 N.J. Super. 391, 395 (App.Div. 1967) ("[T]he instant matter deals with two corporations in a commercial setting. Although Plaintiff . . . is obviously a small corporation, its owner has been engaged in the construction business for 18 years."). See also, Chem. Bank of New Jersey Nat'l Ass'n, 296 N.J. Super. at 528. This court has been provided with no valid reason to believe that these two independent businesses did not negotiate with unmitigated freedom.
This option was available to Plaintiff as stated in "Def.'s 56.1 Statement," Ex. B, § 8(b). Inasmuch as the U.C.C. regulations address exculpatory clauses, such regulations only require a provision, like the one set forth in § 8(b), which allows for increased liability on written request at the time of signing an agreement or within a reasonable time after receipt of the agreement. See N.J.S.A. 12A:7-204.
Numerous courts in this State have upheld a limitation of liability to $50.00 when written in terms nearly identical to those used by Defendant UTI in the instant case. See, e.g., Bogen v. Fanok, 2001 WL 1406898 (N.J.Super. Law Div. 2001). Such contractual limitations on liability have been found valid for transactions related to ski equipment, McBridge v. Ministar, Inc. 283 N.J. Super. 471 (Law Div. 1994), residential construction, Marbro, Inc., 297 N.J. Super. 411, burglar alarm systems, Tessler and Son, Inc., 203 N.J. Super. 477, and real estate mortgages, Chem. Bank of New Jersey Nat'l Ass'n, 296 N.J. Super. 515. Other states have also upheld the validity of contractual limitation of liability where the party has notice of the liability limitation and the opportunity to declare a higher value in exchange for a higher transportation rate. See, e.g., Calvin Klein Ltd. v. Trylon Trucking Corp., 892 F.2d 191, 194 (2d Cir. 1989); Hoogwegt U.S., Inc., 121 F. Supp. 2d 1228; Gov't of United Kingdom, 1 F.Supp.2d 521.
Furthermore, the limitation of liability to $50.00 implicated in this case has repeatedly been deemed consistent with the public interest. See, e.g., Pacific Tall Ships Co. v. Kuehne Nagel, Inc., 94 F. Supp. 2d 928 (N.D.Ill. 2000); Hurco Companies, Inc., 2001 WL 1386077. Although courts have invalidated exculpatory clauses when the public at large is dependent on the goods or services they protect, they have not done so when the clause is part of a simple commercial transaction between two businesses with the freedom to negotiate.Compare Carvalho v. Toll Bros. and Developers, 675 A.2d 209, 215 (N.J. 1996) (finding that the parties' "financial arrangements and understanding do not overcome the public policy that imposes a duty of care and ascribes liability to the engineer in these circumstances") with Abel Holding Co., Inc., 138 N.J. Super. at 157 (Law Div. 1975) (upholding the exculpation of a fire alarm manufacturer when the other party made no attempt to negotiate contractual terms). The instant case does not involve an unreasonable limitation of liability from which the public at large must be protected. Instead, it "was a private contractual arrangement fairly and freely entered into and which the common law would sympathetically carry out in accordance with the contemplation of the parties." Mayfair Fabrics v. Henley, 48 N.J. 483, 488 (1967).
In making its claim that the exculpatory clause at bar is contrary to the public interest, Plaintiff maintains that "the business of importing goods into the United States would come to a standstill without federally licensed and regulated customs brokers . . . it is a violation of public policy to permit a licensed professional to contract away its professional obligations." (Reply Br. in Opp'n to Def.'s Mot. to Limit Damages, 8). Such an assertion runs directly counter to the 1993 decision by Congress to repeal the restriction on the use of exculpatory clauses by customs brokers. This legislative decision was a pronouncement of public policy which the Court sees no reason to invalidate. Moreover, the fact that the contractual provision has been a standard contractual clause approved by the National Customs Brokers and Forwarders Association of America, Inc. and promulgated to its members for some time without manifesting any significant problems provides further evidence that the public at large has not been injured by its use. M.E. Intern., Inc. v. Schenkers Intern. Forwarders, Inc., 1990 WL 83524, at *1 (S.D.N.Y. June 8, 1990). Plaintiff's assertion that the Defendant is attempting to "contract away its professional obligations" exaggerates the circumstances, as the contractual clause as written is merely default contractual language which could have been re-negotiated. (Def.'s 56.1 Statement, Ex. B, § 8(b).)
Plaintiff's reliance on Hy-Grade Oil Co. v. New Jersey Bank with regard to its public interest argument is misplaced. 138 N.J. Super. 112 (App.Div. 1975), cert. denied, 70 N.J. 518 (1976). In that case it was apparent that allowing a bank to exculpate itself from any liability for mistakes in the use of a night deposit box was an instance "where a party to the agreement is under a public duty" and therefore "may not relieve himself of liability for negligence." Id. at 116. However, that decision relied on the judicial recognition that a "bank has been entrusted with an important franchise to serve the public,"Reinhardt v. Passaic-Clifton Nat'l Bank, 16 N.J.Super. 430, 436 (App.Div. 1951), and the legislature's acknowledgment of that special relationship through its adoption of the U.C.C. Id. at 117. With regard to customs brokers, there is no similar mandate or readily apparent important public interest.
The Uniform Commercial Code, Bank Deposits and Collections, N.J.S.A. 12A:4-101 et seq., contains many provisions protecting banks in their daily operations.
Accepting the general enforceability of exculpatory clauses in customs broker contracts, there is still some question as to whether Defendant should be permitted to limit its liability in the instant case. Had the actions of the Defendant amounted to gross negligence or an intentional tort, that single fact would supersede any contractual limitation of liability. Tessler and Son, Inc., 203 N.J. Super. at 484 (finding that "although a promise not to sue for simple negligence may be valid, an attempted exemption from liability for intentional tort or willful act or gross negligence is generally declared to be void"). However, any additional expenses allegedly incurred by Plaintiff due to the actions of the Defendant, in and of themselves, do not indicate breach of good faith or lack of due diligence, and are certainly insufficient for a finding of gross negligence. Although Morgan Home has asserted that the Defendant, in its role as a federally-licensed customs broker and fiduciary agent, had a variety of duties as a contractual party that it failed to meet, it has provided scant and unpersuasive evidence that any such wrong-doing amounts to gross negligence beyond the bounds of valid exculpation. Accordingly, summary judgment cannot be defeated based on this bare allegation. See Anderson, 477 U.S. at 252 ("The mere existence of a scintilla of evidence in support of the [non-movant's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmoving] party.") There is similarly no evidence to support an assertion that this particular limitation of liability is unconscionable and therefore unenforceable. Unconscionability hinges on a finding of an imbalance of power and unreasonable contractual terms. Tannock, 212 N.J. Super. 506; N.J. Stat. Ann. § 12A:2-302. Plaintiff's assertion of an imbalance of power in negotiations has already been considered and dismissed, and the frequency with which identical exculpatory terms are found valid across different industries and between many parties evidences that they are not inherently unreasonable.
Finally, Plaintiff's claim that the maximum liability as provided in the contract "is a mere pittance" with respect to the value of the shipments does not suffice to render the exculpatory clause unenforceable. The size of the liability cap is relevant only in its relation to the size of the expected compensation to the party who is protected by the cap on liability, in this case, the Defendant. The appropriate inquiry in this context is thus "whether the cap is so minimal compared with the expected compensation, that the concern for the consequences of a breach is drastically minimized." Marbro, Inc., 297 N.J. Super. at 418; accord Valhal Corp. v. Sullivan Associates, Inc., 44 F.3d 195, 204 (3d Cir. 1995) (exculpatory clauses remain valid "so long as the limitation which is established is reasonable and not so drastic as to remove the incentive to perform with due care."). See also Blue Sky MLS, Inc. v. RSG Systems, LLC., 2002 WL 1065873, F.Supp.2d at *4 (D.N.J. 2002) (holding that an exculpatory clause limiting Defendant's liability "to a mere 16.7% of its expected contractual gain (i.e. of its . . . fee for the project)" was not enforceable). (emphasis added) The purpose of this inquiry is to ensure that the liability limitations are not set so low as to serve as a disincentive to the party to comply with its end of the contract. The Court has not been provided with any evidence that the expected compensation to Defendant in sending each shipment is so much greater than $50.00 that it would undermine Defendant's desire to adhere to its contractual obligations and "remove the incentive to perform with due care." Marbro, Inc., 297 N.J. Super. at 416 (internal citation omitted)
It is important to distinguish between exculpatory clauses, implicated in this case, and liquidated damages clauses, which are not. Whereas a liquidated damages clause attempts to fairly estimate the parties' likely damages in case of breach, an exculpatory clause "denies liability for all but a nominal amount of damages." Tessler and Son, Inc. v. Sonitrol Security Systems of Northern New Jersey, Inc., 203 N.J. Super. 477, 482 (App. Div. 1985). Although the reasonableness of the estimated contractual amount plays a significant role in determining whether a liquidated damages clause will be upheld, other considerations are paramount when analyzing exculpatory clauses.
Whether the size of the liability cap is disproportionate to the size of Plaintiff's damages (and to Defendant's exposure to liability), as Plaintiff contends, is of little legal import. The liability cap in the invoice was not mandatory and could have been adjusted pursuant to § 8(b). The parties presumably could have also purchased insurance to cover the risk of potential damages. Indeed, courts have enforced exculpatory clauses that limited liability to 0.133% of the total amount of damages,Pacific Tall Ships Co., 94 F. Supp.2d 928, 0.090% of the total amount, Foont-Freedenfeld Corp. v. Electro-Protective Corp., 314 A.2d 69 (N.J.Super.Ct. App. Div. 1973), and even 0.008% of the value of total claimed damages, ABN Amro Verzekeringen BV, 253 F.Supp.2d 757.
For all of the reasons set forth above, the Court finds the exculpatory clause valid as a matter of law. Accordingly, the Court grants partial summary judgment limiting Morgan's claim to the limits set out in the invoice and delivery order. Therefore, Defendant's liability for any loss, damage, expense or delay to the 42 shipments in question resulting from its negligence or other fault is hereby limited to $50 per shipment.
II. Plaintiff's Motion to Strike Defendant's 4th and 6th Defenses
Plaintiff asserts its own motion to strike Defendant's defenses relating to the validity of the aforementioned exculpatory clause. For the same reasons that the summary judgment motion succeeds, the motions to strike must fail. Federal Rule of Civil Procedure 12(f) states that "[u]pon motion made by a party before responding to a pleading . . . the court may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed.R.Civ.P. 12(f). Motions to strike, however, are "not favored and usually will be denied unless the allegations have no possible relation to the controversy and may cause prejudice to one of the parties, or if the allegations confuse the issues." Garlanger v. Verbeke, 223 F. Supp.2d 596, 609 (D.N.J. 2002) (citing Tonka Corp. v. Rose Art Industries, Inc., 836 F. Supp. 200, 217 (D.N.J. 1993)). Rule 12(f) should be construed strictly against striking portions of pleading on grounds of immateriality and if the motion is granted at all, the complaint should be pruned with care. Lipsky v. Commonwealth United Corp., 551 F.2d 887 (2d Cir. 1976). Where no harm will come to Defendant, courts generally are cautious about disturbing the pleadings unless the allegations clearly have no possible bearing upon the subject matter of litigation. Randolph Laboratories v. Specialties Development Corp., 62 F. Supp. 897, 900 (D.N.J. 1945). Furthermore, the remedy will be granted only when the defect is plain, for where there is a semblance of a cause of action or defense set up in the pleading, its sufficiency cannot be determined on motion to strike it out. Fixico v. Ellis, 46 P.2d 519, 520 (Okla. 1935)
In light of the high bar that has been established for striking the defenses of parties, and the fact that not only is this information material to Defendant's liability, but dispositive of it, the Plaintiff's motion to strike is therefore denied. The contractual agreement to limit Defendant's liability through the use of a valid exculpatory clause will be upheld.
Conclusion
For the reasons set forth above, it is on this __ day of February, 2004 hereby:
ORDERED that Defendant's partial summary judgment motion is GRANTED; and it is
FURTHER ORDERED that Plaintiff's motion to strike is DENIED.