Opinion
Civ. No. 04-2922 (RHK/JSM).
September 30, 2004
Joseph W. Anthony, Norman J. Baer, and Court J. Anderson, Anthony Ostlund Baer, PA, Minneapolis, Minnesota, for Plaintiff.
Laurence S. Shtasel and Brian S. Paszamant, Blank Rome LLP, Philadelphia, Pennsylvania, and Joanne H. Turner, Denis E. Grande, and Erin A. Shields, Mackall Crounse Moore, PLC, Minneapolis, Minnesota, for Defendant.
MEMORANDUM OPINION AND ORDER
Introduction
Plaintiff Piper Jaffray Co. ("Piper Jaffray") and Defendant SunGard Systems International, Inc. ("SunGard") entered into an agreement whereby SunGard would provide computer software and services to Piper Jaffray. Because the desired software never performed as expected, Piper Jaffray has sued SunGard for breach of contract and seeks, among other things, (1) consequential and incidental damages and (2) total damages in excess of $5 million. SunGard has moved to dismiss these claims on the grounds that by the terms of the agreement between the parties (1) Piper Jaffray waived consequential and incidental damages and (2) SunGard's total liability is "capped" at an amount less than $5 million. For the reasons set forth below, the Court will grant SunGard's Motion regarding consequential and incidental damages, but will decline to address the contractual cap issue.
Background
Piper Jaffray, a Delaware corporation with its principal place of business in Minneapolis, Minnesota, provides financial products and services, including brokerage services for the trading of fixed income securities. (Am. Compl. ¶ 1.) Its Fixed Income business, which handles approximately 1,500 trades per day with an aggregate value of $1 billion, is dependent upon computers and computer software. (Id. ¶ 5.) SunGard, a Pennsylvania corporation with its principal place of business in New York, New York, provides computer software products and services. (Id. ¶ 2.)
In 2000, Piper Jaffray desired to upgrade its existing computer software systems used to trade securities in its Fixed Income business. (Id. ¶ 6.) During the course of selecting new software, Piper Jaffray had communications with SunGard in which it described the needs of its Fixed Income business. (Id. ¶ 8.) As a result, SunGard sought to license two products to Piper Jaffray: Global Trader ("a front office trading system") and MINT ("a `middleware' application"). (Id.) In November 2000, the parties signed a letter of intent providing that SunGard would consult with Piper Jaffray regarding the purchase and installation of Global Trader and MINT and that the parties would negotiate a license agreement. (Id. ¶ 9.) Under the terms of the letter of intent, Piper Jaffray paid SunGard a $500,000 retainer and SunGard conducted an in-depth study of Piper Jaffray's business. (Id.)
In March 2001, the parties executed a Software License Agreement ("Agreement"). (Id. ¶ 10, Ex. A.) Under the Agreement, Piper Jaffray was licensed to use SunGard's Global Trader and MINT computer software. (Id. ¶ 11, Ex. A (Agreement § 1.1).) In exchange for the use of the software, Piper Jaffray agreed to pay SunGard a license fee as well as maintenance and service fees. (Id. ¶ 11, Ex. A (Agreement §§ 5.1, 5.2, 5.3, Part A page 2).) For its part, SunGard agreed to install the software and provide ongoing support. (Id. ¶ 11, Ex. A (Agreement §§ 2, 3, Part D).) SunGard expressly warranted that the software "will perform as described in the Documentation in all material respects." (Id. Ex. A (Agreement § 6.1).) Its "only obligation under this warranty [was] to comply with the provisions of Section 3.1 with respect to any material failure to perform as described in the Documentation." (Id.) Section 3.1, entitled "Ongoing Support Obligations," provides that SunGard will utilize "all commercially reasonable efforts in solving" any software errors reported by Piper Jaffray. (Id. Ex. A (Agreement § 3.1(b)).)
In addition, should the Agreement be breached, both parties' liability was capped at the amount of license fees paid (with certain exceptions not at issue):
6.10 Limitations. . . . WITH RESPECT TO EACH SOFTWARE SCHEDULE NEITHER PARTY'S TOTAL LIABILITY UNDER THIS AGREEMENT SHALL UNDER ANY CIRCUMSTANCES EXCEED THE INITIAL LICENSE FEES ACTUALLY PAID BY CUSTOMER TO SUNGARD UNDER THIS AGREEMENT WITH RESPECT TO SUCH SOFTWARE SCHEDULE.
(Id. Ex. A (Agreement § 6.10).) The Agreement also excludes consequential and incidental damages (with certain exceptions not at issue):
6.11 Consequential Damage Exclusion. . . . UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER OR ANY OTHER PERSON FOR ANY INCIDENTAL, INDIRECT, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES OF ANY KIND OR NATURE, INCLUDING, SUCH DAMAGES ARISING FROM ANY BREACH OF THIS AGREEMENT OR ANY TERMINATION OF THIS AGREEMENT, WHETHER SUCH LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT, TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY), OR OTHERWISE, WHETHER OR NOT FORESEEABLE, EVEN IF THE PARTY HAS BEEN ADVISED OR WAS AWARE OF THE POSSIBILITY OF SUCH LOSS OR DAMAGES.
(Id. Ex. A (Agreement § 6.11).)
The parties also agreed that SunGard would install Global Trader and MINT, with agreed-upon specifications, by September 6, 2001. (Id. ¶¶ 13, 14.) It soon became apparent that SunGard would miss that deadline because Global Trader did not perform as promised. (Id. ¶¶ 15-17.) As a result, the parties extended the deadline to October 2001. (Id. ¶ 16.) By late 2001, however, Global Trader had not met Piper Jaffray's needs. (Id. ¶ 19.) In February 2002, Piper Jaffray gave notice of termination of the Agreement and commenced a lawsuit against SunGard in Minnesota state court. (Id. ¶ 20.) During subsequent negotiations, SunGard insisted that it could fulfill Piper Jaffray's needs and requested another opportunity to perform. (Id. ¶ 21.)
On September 10, 2002, the parties exercised an Addendum to the Agreement whereby Piper Jaffray would dismiss the pending state court lawsuit without prejudice and SunGard would provide a "Production Ready Version of Global Trader" by January 2003. (Id. ¶¶ 22, 23, Ex. B (Addendum §§ 1, 12).) The parties defined the "Production Ready Version" of Global Trader to be capable of, among other things, "process[ing] 10,000 trades per day in the Piper Jaffray environment as mutually agreed upon by the parties." (Id. Ex. B (Addendum § 1C).) Other than the express modifications contained in the Addendum, the Agreement remained in full force and effect. (Id. Ex. B (Addendum § 13).)
By January 2003, SunGard had not delivered a Production Ready Version of Global Trader. (Id. ¶ 25.) In June or July 2003, SunGard's project manager conceded that SunGard would not be able to provide software that met Piper Jaffray's specifications unless the software architecture was changed to an Internet-based approach. (Id. ¶ 26.) In the following months, SunGard concentrated its development efforts on the Internet verison of Global Trader called "eGT." (Id. ¶ 27.) In fall 2003, Piper Jaffray tested eGT and declared it a failure. (Id.) In October 2003, the eGT software was installed, but it still did not contain the agreed-upon functionality Piper Jaffray required. (Id. ¶ 30.) Despite its efforts, SunGard has been unable to cure the defects. (Id. ¶¶ 30-34.)
For example, while the Addendum required that Global Trader be able to process 10,000 trades per day, the software could only process less than 2,000 trades per day. (Am. Compl. ¶ 31.)
In May 2004, Piper Jaffray commenced this action in Minnesota state court, which SunGard removed to this Court. Piper Jaffray asserts three claims: (1) breach of the Addendum (Count One); (2) breach of the Agreement (Count Two); and (3) conversion (Count Three). (Am. Compl. ¶¶ 42-66.) In its breach of contract claims, Piper Jaffray seeks, among other things, "all of its direct, consequential and incidental damages" (id. at p. 16 (A B)), and estimates its damages "to be in excess of $5 million" (id. ¶¶ 52, 60). SunGard's Motion to Dismiss followed.
Standard of Review
Under Federal Rule of Civil Procedure 12(b)(6), all factual allegations must be accepted as true and every reasonable inference must be made in favor of the complainant. See Midwestern Mach., Inc. v. Northwest Airlines, Inc., 167 F.3d 439, 441 (8th Cir. 1999); Carney v. Houston, 33 F.3d 893, 894 (8th Cir. 1994). "[D]ismissal under Rule 12(b)(6) serves to eliminate actions which are fatally flawed in their legal premises and [destined] to fail, thereby sparing litigants the burden of unnecessary pretrial and trial activity." Young v. City of St. Charles, Mo., 244 F.3d 623, 627 (8th Cir. 2001) (citation omitted). A cause of action "should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff cannot prove any set of facts in support of his claim that would entitle him to relief." Schaller Tel. Co. v. Golden Sky Sys., Inc., 298 F.3d 736, 740 (8th Cir. 2002) (citations omitted). Said another way, "dismissal under Rule 12(b)(6) is likely to be granted only in the unusual case in which a plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief." Gebhardt v. ConAgra Foods, Inc., 335 F.3d 824, 829 (8th Cir. 2003) (citation and internal quotations omitted).
Analysis
SunGard contends that Piper Jaffray's claims for consequential and incidental damages for breach of the Agreement and the Addendum must be dismissed because Piper Jaffray waived its right to recover such damages. Section 6.11 of the Agreement provides, in pertinent part:
UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER . . . FOR ANY INCIDENTAL, INDIRECT, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES OF ANY KIND OR NATURE, INCLUDING, SUCH DAMAGES ARISING FROM ANY BREACH OF THIS AGREEMENT. . . .
Piper Jaffray's argument as to why it should be permitted to recover consequential and incidental damages despite having expressly waived such a right in the Agreement proceeds in several steps. The first step is that Pennsylvania's Uniform Commercial Code ("UCC") — specifically, 13 Pa. Cons. Stat. Ann. § 2719 — governs this case. (Pl.'s Mem. in Opp'n at 6-9.) Although SunGard disputes the applicability of the UCC (Def.'s Mem. in Supp. at 13; Def.'s Reply Mem. in Supp. at 2-8), for the purposes of this Motion, the Court will assume that the UCC applies. Section 2719 of Pennsylvania's UCC provides, in pertinent part:
Both parties agree that Pennsylvania law applies. (Pl.'s Mem. in Opp'n at 1 n. 1; Def.'s Mem. in Supp. at 9; Am. Compl. Ex. A (Agreement § 10.6).)
(a) General rule. — Subject to the provisions of subsections (b) and (c) . . .
(1) The agreement may provide for remedies in addition to or in substitution for those provided in this division and may limit or alter the measure of damages recoverable under this division, as by limiting the remedies of the buyer to return of the goods and repayment of the price or to repair and replacement of nonconforming goods or parts.
(2) Resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.
(b) Exclusive remedy failing in purpose. — Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this title.
(c) Limitation of consequential damages. — Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.13 Pa. Cons. Stat. Ann. § 2719.
The second step in Piper Jaffray's argument is that the Agreement contains an exclusive or limited remedy of repair and replacement of Global Tracker in the event SunGard breaches its warranty. (See Pl.'s Mem. in Supp. at 9-10.) Under § 2719(a)(1), parties "may limit or alter the measure of damages recoverable . . . to repair and replacement of nonconforming goods or parts." 13 Pa. Cons. Stat. Ann. § 2719(a)(1). Section 6.1 of the Agreement provides, in pertinent part:
SunGard warrants . . . that the Software . . . will perform as described in the Documentation in all material respects. SunGard's only obligation under this warranty is to comply with the provisions of Section 3.1 with respect to any material failure to perform as described in the Documentation.
Section 3.1 provides that "SunGard shall provide . . . all commercially reasonable efforts in solving" errors in Global Trader. (Am. Compl. Ex. A (Agreement § 3.1(b)).) Although SunGard disputes that these provisions provide an exclusive remedy (see Def.'s Reply Mem. in Supp. at 9-11), for the purposes of this Motion, the Court will view it as an exclusive or limited remedy.
The third step in Piper Jaffray's argument is that the exclusive or limited remedy has "failed of its essential purpose" because SunGard has not cured the errors plaguing Global Tracker. (Pl.'s Mem. in Opp'n at 9, 10.) Under § 2719(b), if "an exclusive or limited remedy . . . fail[s] of its essential purpose, remedy may be had as provided in this title." 13 Pa. Cons. Stat. Ann. § 2719(b). Comment 1 to this provision explains that "where an apparently fair and reasonable clause because of circumstances fails in its purpose or operates to deprive either party of the substantial value of the bargain, it must give way to the general remedy provisions of this Article." Id. § 2719, cmt. 1. A finding that the essential purpose of a remedy has failed typically arises "when the exclusive remedy involves replacement or repair of defective parts, and the seller because of his negligence in repair or because the goods are beyond repair, is unable to put the goods in warranted condition." New York State Elec. Gas Corp. v. Westinghouse Elec. Corp., 564 A.2d 919, 929 (Pa.Super.Ct. 1989) (quoting James J. White Robert S. Summers, Uniform Commercial Code at 469 (2d ed. 1980)). Again, the Court will assume that the exclusive or limited remedy has failed of its essential purpose under the circumstances presented in this case.
The final, and crucial, step in Piper Jaffray's argument is that when an exclusive or limited remedy fails of its essential purpose, a "remedy may be had as provided in this title" — including consequential and incidental damages. (Pl.'s Mem. in Opp'n at 10-13.) Under Piper Jaffray's theory, consequential and incidental damages are recoverable upon the failure of an exclusive or limited remedy even though § 2719(c) permits a waiver of consequential damages unless such waiver is unconscionable. (See id.) In other words, Piper Jaffray views subsections (b) and (c) as interdependent: if an exclusive or limited remedy fails of its essential purpose, then the recovery of consequential and incidental damages is permitted regardless of the waiver of such recovery. It relies upon Caudill Seed Warehouse Co. v. Prophet 21, Inc., 123 F. Supp. 2d 826 (E.D. Pa. 2000).
"Incidental damages resulting from the breach of the seller include . . . any commercially reasonable charges, expenses or commissions in connection with effecting cover; and . . . any other reasonable expense incident to the delay or other breach." 13 Pa. Cons. Stat. Ann. § 2715(a). "Consequential damages resulting from the breach of the seller include . . . any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and . . . injury to person or property proximately resulting from any breach of warranty." Id. § 2715(b).
Disputing Piper Jaffray's final premise, SunGard contends that the majority of cases enforce consequential damages exclusions even when an exclusive or limited remedy fails of its essential purpose and that Caudill represents a minority position. (Def.'s Reply Mem. in Supp. at 11-14.) In contrast to Piper Jaffray's position, SunGard views subsections (b) and (c) as independent and, in so doing, relies upon Northeastern Power Co. v. Balcke-Durr, Inc., No. 97-CV-4836, 1999 WL 674332 (E.D. Pa. Aug. 23, 1999), decided before Caudill, and a Third Circuit decision applying New Jersey's UCC, Chatlos Sys., Inc. v. Nat'l Cash Register Corp., 635 F.2d 1081 (3d Cir. 1980).
New Jersey's version of the UCC on this matter is identical to Pennsylvania's. Compare 13 Pa. Cons. Stat. Ann. § 2719,with N.J. Stat. Ann. § 12A:2-719; see Factory Market, Inc. v. Schuller Int'l, Inc., 987 F. Supp. 387, 399 n. 10 (E.D. Pa. 1997).
Neither the Supreme Court of Pennsylvania nor the Superior Court of Pennsylvania has addressed whether subsections (b) and (c) are interdependent or independent. See Caudill, 123 F. Supp. 2d at 830. Accordingly, this Court must predict how the Supreme Court of Pennsylvania would rule if presented with the question at issue here. See Robertson v. Allied Signal, Inc., 914 F.2d 360, 378 (3d Cir. 1990).
After considering the text of § 2719, the official comments thereto, and the current trend of the case law, this Court concludes that under Pennsylvania law subsections (b) and (c) are independent and freestanding provisions. As a result, even assuming that the UCC applies, an exclusive or limited remedy exists, and that the exclusive or limited remedy failed of its essential purpose, Piper Jaffray's waiver of its right to recover consequential and incidental damages is valid and enforceable.
First, a textual reading of subsections (b) and (c) reveals their independence. For example, these subsections are governed by different standards — the exclusive or limited remedy survives unless it fails of its essential purpose, while the consequential damages exclusion is valid unless it is unconscionable. Compare 13 Pa. Cons. Stat. Ann. § 2719(b), with § 2719(c); see Chatlos, 635 F.2d at 1086. Moreover, these subsections are distinct as to who applies the standards they set out. Whether a limited remedy fails of its essential purpose is an issue of fact for a jury. See Rheem Mfg. Co. v. Phelps Heating Air Conditioning, Inc., 746 N.E.2d 941, 948 (Ind. 2001); 4B Lary Lawrence, Lawrence's Anderson on the Uniform Commercial Code § 2-719:49 (3d ed. 2001); 67A Am. Jur. 2d Sales § 848 (citing cases). Conversely, whether an exclusion of consequential damages is unconscionable is a question of law for the court. See Borden, Inc. v. Advent Ink Co., 701 A.2d 255, 264 (Pa.Super.Ct. 1997) (citing cases); 13 Pa. Cons. Stat. Ann. § 2302. These facial distinctions between the subsections suggest a legislative intent that the provisions should function independently of one another.
The independent view is also consistent with the long-held principle of statutory interpretation that courts "will not construe a statute so as to render any word or provision meaningless or surplusage, unless no other construction is possible." Tax Review Bd. v. Smith, Kline and French Laboratories, 262 A.2d 135, 141 (Pa. 1970); see 1 Pa. Cons. Stat. Ann. § 1921(a) ("Every statute shall be construed, if possible, to give effect to all its provisions."). The interdependent view that Piper Jaffray propounds would render § 2719(c) inoperative by deleting a contractual exclusion of consequential damages without any analysis of its unconscionability. See Rheem, 746 N.E.2d at 949; Schurtz v. BMW of N. Am., Inc., 814 P.2d 1108, 1112 (Utah 1991). In contrast, the independent view allows both provisions to operate — subsection (b) will invalidate a failed exclusive or limited remedy, allowing the buyer to claim some damages, but not consequential damages unless the waiver is found unconscionable under subsection (c).See Rheem, 746 N.E.2d at 949; Schurtz, 814 P.2d at 1112.
Second, support for the independent reading is found in the official comments. Comment 1 provides, "Under this section parties are left free to shape their remedies to their particular requirements and reasonable agreements limiting or modifying remedies are to be given effect." 13 Pa. Cons. Stat. Ann. § 2719, cmt. 1. Consistent with this sentiment, Comment 3 provides:
Subsection (3) recognizes the validity of clauses limiting or excluding consequential damages but makes it clear that they may not operate in an unconscionable manner. Actually such terms are merely an allocation of unknown or undeterminable risks.Id. § 2719, cmt. 3. The Comments acknowledge that business entities may want to allocate certain risks between them, and, under the philosophy of the UCC, should be free to do so provided that the allocation is not unconscionable. See Eastman Chem. Co. v. Niro, Inc., 80 F. Supp. 2d 712, 721 (S.D. Tex. 2000) (applying Tennessee law); see also Valhal Corp. v. Sullivan Assocs., Inc., 44 F.3d 195, 204 (3d Cir. 1995) (noting that under Pennsylvania law "[l]imitation of liability clauses are a way of allocating unknown or undeterminable risks and are a fact of everyday business and commercial life" (citation and internal quotations omitted)). It would undermine the liberty of business entities to allocate unknown or indeterminate risks to make the validity of a freely negotiated consequential and incidental damages waiver under subsection (c) dependent on the success of a distinct contractual provision concerning exclusive or limited remedies under subsection (b). See Eastman, 80 F. Supp. at 721.
Finally, viewing subsections (b) and (c) as independent is consistent with the current trend in the case law. See id. at 721-22 (citing cases); see also Rheem, 746 N.E.2d at 947 ("We hold that [§ 2719(b)] does not categorically invalidate an exclusion of consequential damages when a limited remedy fails of its essential purpose." (applying Indiana law)); Schurtz, 814 P.2d at 1112-13 ("The statute's terms [§ 2719] lead us to conclude that subparts [(b) and (c)] should be read independently." (applying Idaho law)); Canal Elec. Co. v. Westinghouse Elec. Corp., 548 N.E.2d 182, 186 (Mass. 1990) ("[W]e conclude that the disclaimer of consequential damages is enforceable even though the limited repair or replacement remedy has failed of its essential purpose." (applying Massachusetts law)); Kearney Trecker Corp. v. Master Engraving Co., 527 A.2d 429, 437 (N.J. 1987) ("We are also persuaded that many routine business transactions would be dislocated by a rule requiring the invalidation of a consequential damage exclusion whenever the prescribed contractual remedy fails to operate as intended." (applying New Jersey law)); McNally Wellman Co. v. New York State Elec. Gas Corp., 63 F.3d 1188, 1197 (2d Cir. 1995) ("[A] limitation on incidental or consequential damages remains valid even if an exclusive remedy fails.") (applying New York law)); Riegel Power Corp. v. Voith Hydro, 888 F.2d 1043, 1047 (4th Cir. 1989) ("[T]he more recent cases indicate that the two provisions are independent and are to be applied as such." (citations omitted) (applying Delaware law)); Chatlos, 635 F.3d at 1086 ("It appears to us that the better reasoned approach is to treat the consequential damage disclaimer as an independent provision, valid unless unconscionable." (applying New Jersey law)); Northeastern Power, 1999 WL 674332, at *17 ("[W]e find the authority favoring an independent reading of sections 2-719(b) and 2-719(c) to be more persuasive." (applying Pennsylvania law)). Even Caudill, the case upon which Piper Jaffray relies, conceded that "District Courts within the Third Circuit generally favored the [independent] approach." 123 F. Supp. 2d at 831. Commentators also share this view:
At oral argument, Piper Jaffray asserted that this Court could not follow Northeastern Power "without deciding that [Piper Jaffray has] an adequate remedy." (Hr'g Tr. at 22.) While the court in Northeastern Power found that the plaintiff had adequate remedies available, its finding was dicta and was not essential to its holding that subsections (b) and (c) operate independently. See 1999 WL 674332, at *17-18. Moreover, as can be plainly seen, this Court is not relying solely uponNortheastern Power.
In general, we favor the [independent] line of cases. Those cases are most true to the Code's general notion that the parties should be free to contract as they please. The text of the Code disfavors judges' and juries' rewriting contracts that allocate risks between the parties. . . . In our view the parties, better than the state, can allocate the loss to the one who can avoid it at the least cost. The state's agents should respect that allocation. This is particularly true when a knowledgeable buyer is using an expensive machine or consuming a commodity in a business setting. . . . Believing the parties to know their own interests best, we favor their allocations.
James J. White Robert S. Summers, Uniform Commercial Code § 12-10 (4th ed. 1995).
The Court acknowledges contrary authority. See, e.g, Ragen Corp. v. Kearney Trecker Corp., 912 F.2d 619, 625 (3d Cir. 1990) (applying Wisconsin law); R.W. Murray, Co. v. Shatterproof Glass Corp., 758 F.2d 266, 272-73 (8th Cir. 1985) (applying Missouri law); John Deere Co. v. Hand, 319 N.W.2d 434, 437 (Neb. 1982) (applying Nebraska law).
Piper Jaffray's waiver of consequential and incidental damages is valid under § 2719 unless it is unconscionable. See 13 Pa. Cons. Stat. Ann. § 2719(c) ("Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable."). Piper Jaffray does not argue that the exclusion is unconscionable and such an argument would not be successful. As noted above, whether a contractual provision is unconscionable is a question of law. Borden, 701 A.2d at 264. "A contractual provision is unconscionable if: 1) one of the parties had no meaningful choice with respect to the provision, and 2) the provision unreasonably favors the other party." Id. (citing cases). Here, Piper Jaffray cannot meet its burden on either point. First, § 10.12 of the Agreement reveals that it had a "meaningful choice" in waving consequential damages: " Negotiated Terms. The parties agree that the terms and conditions of this Agreement are the result of negotiations between the parties." (Am. Compl. Ex. A (Agreement § 10.12).) Second, the waiver does not "unreasonably favor" SunGard because SunGard also waived consequential and incidental damages. Moreover, "[u]nder Pennsylvania law, clauses limiting damages in commercial settings are generally enforced" and "[i]n commercial settings, a limitation of damages clause will rarely be found unconscionable." Borden, 701 A.2d at 262, 264; see 4B Lary Lawrence, Lawrence's Anderson on the Uniform Commercial Code § 2-719:66 (3d ed. 2001) ("[W]here the contract is between two sophisticated commercial entities, an exclusion of consequential damages will seldom be unconscionable."). Accordingly, because Piper Jaffray's waiver is conscionable, its claims for consequential and incidental damages will be dismissed.
"Although [§ 2719(c)] speaks only of consequential damages, courts uniformly apply that subsection to both incidental and consequential damages." 4B Lary Lawrence, Lawrence's Anderson on the Uniform Commercial Code § 2-719:70 (3d ed. 2001); see McNally, 63 F.3d at 1198 n. 8.
SunGard has also moved to dismiss Piper Jaffray's claims for damages in excess of the initial license fee on the ground that it exceeds the contractual cap. (Def.'s Mem. in Supp. at 7, 8; see Am. Compl. Ex. A (Agreement § 6.10).) Neither side, however, provides any substantive argument as to whether this issue is mooted by the above determination. Considering that this case is not ended by this decision, the contractual cap issue will be left for another day. The Court has some reservations, however, as to whether Piper Jaffray can recover damages in excess of the cap.