From Wartsila Nsd N. Am., Inc. v. Hill Int’l, Inc., 2008 U.S. App. LEXIS 13099, a business litigation opinion just released:
Three exceptions have been identified where the public interest will render an exculpatory clause [in a contract] unenforceable: (1) when the party protected by the clause intentionally causes harm or engages in acts of reckless, wanton, or gross negligence; (2) when the bargaining power of one party to the contract is so grossly unequal so as to put that party at the mercy of the other’s negligence; and (3) when the transaction involves the public interest. Wolf, 644 A.2d at 525-26. None of these exceptions is applicable here.
Although the jury concluded that Hill was negligent, there was no evidence that Hill engaged in willful misconduct, such as "intentional harms" or "the more extreme forms of negligence, i.e., reckless, wanton, or gross." Id. at 525. At trial, Wartsila argued that Hill violated the Agreement by committing fraud. The jury expressly concluded in its verdict, however, that Hill had not committed fraud. This finding eviscerates any argument that the exculpatory clause should be disregarded because of the nature of Hill’s alleged misconduct.
To get around the exculpatory clause, all the plaintiff had to do was prove the defendant’s conduct was reckless, wanton, or grossly negligent. Yet, apparently they only asked the jury if the defendant was negligent or if they committed fraud.
It is thus entirely possible that every single juror thought the defendant was grossly negligent, a factual finding that would have destroyed the exculpatory clause, a yet on the facts presented to the Third Circuit plaintiff’s claim has been "eviscerated."
The District Court erred in failing to exclude evidence of "incidental, special, indirect, or consequential" damages. Further, the Court did not ask the jury to identify which portion of its award was based on Hill’s breach of contract or its alleged negligence. Thus, we cannot tell from the jury’s verdict what portion of its award of damages was based on direct damages and what amount was based on consequential damages. In order to give effect to the exculpatory clause agreed to by these parties, there must be a new trial on the issue of damages.
Again, the jury could have already answered this question, but now the parties have to go back for new trial, and the plaintiff is denied resolution and compensation another day.
Maybe that is in their best interest, since they just had the exculpatory clause enforced as a matter of law, and now they can focus their case on the permissible damages. Somehow I doubt that was their plan all along…
UPDATE: See Philly JD’s comment below — the outcome is even worse than I thought, as the final verdict is now capped at a level that makes re-trial unprofitable for the client and the attorney.