Christine Gage v. HSM Electronic Protection
Filing
OPINION FILED - THE COURT: ROGER L. WOLLMAN, KERMIT E. BYE and AUDREY G. FLEISSIG. Kermit E. Bye, Authoring Judge (PUBLISHED) [3828491] [10-2545]
United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 10-2545
___________
Christine Gage,
*
*
Appellant,
* Appeal from the United States
* District Court for the
v.
* District of Minnesota.
*
HSM Electronic Protection Services,
*
Inc., doing business as Stanley
*
Convergent Security Solutions, Inc.,
*
*
Appellee.
*
___________
Submitted: February 17, 2011
Filed: September 14, 2011
___________
Before WOLLMAN and BYE, Circuit Judges, and FLEISSIG,1 District Judge.
___________
BYE, Circuit Judge.
Christine Gage purchased a security alarm for her home in 2006 from HSM
Electronic Protection Services, Inc. (“HSM”), which was later purchased by Stanley
Convergent Security Solutions (“Stanley”). In 2008, Stanley received a lowtemperature alarm from Gage’s home but failed to contact Gage or any of the contacts
listed on her account. A few months later, the low temperature caused a pipe to burst
1
The Honorable Audrey G. Fleissig, United States District Judge for the
Eastern District of Missouri, sitting by designation.
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resulting in significant damage to the home. Gage sued Stanley claiming Stanley did
not respond properly to the alarm and therefore is liable for over $250,000 in damages
for willful and wanton negligence, intentional misconduct, fraud, and
misrepresentation. The parties filed cross-motions for summary judgment. The
district court denied Gage’s motion and granted summary judgment in favor of
Stanley. Gage appeals contending the district court applied an incorrect theory of law.
We agree, reversing and remanding for further proceedings.
I
In 2006, Christine Gage contracted with HSM, Inc., for the installation of a
security system and monitoring services. The “Residential Agreement” signed by
Gage includes the following exculpatory clause:
HSM’s Limit of Liability. . . . CUSTOMER AGREES THAT HSM IS
NOT RESPONSIBLE FOR PERSONAL INJURY OR OTHER LOSSES
WHICH ARE ALLEGED TO BE CAUSED BY IMPROPER
OPERATION OR NON-OPERATION OF THE SYSTEM AND/OR
SERVICE, including cases where the system and/or service never
functions whether due to defects in the system and/or service or HSM’s
acts or omissions in receiving and responding to alarm signals.
Customer further agrees that HSM is not an insurer and that insurance,
covering personal injury and other losses, shall be obtained by Customer.
Joint App’x at A25. The agreement also includes an anti-subrogation clause:
No Subrogation. Customer does hereby for himself/herself and other
parties claiming under him/her, release and discharge HSM from and
against all claims arising from hazards covered by Customer’s insurance,
it being expressly agreed and understood that no insurance company or
insurer will have any right of subrogation against HSM. This paragraph
shall be void if contrary to local law or if Customer’s homeowner’s
insurance policy specifically prohibits this type of waiver.
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Id. at A26. Finally, the agreement contained language limiting HSM’s liability: “IF
ANY LIABILITY IS IMPOSED ON HSM, ITS EMPLOYEES, AGENTS OR
REPRESENTATIVES, IT WILL BE LIMITED TO SIX (6) TIMES THE
MONITORING CHARGE PROVIDED ABOVE OR TWO HUNDRED FIFTY
DOLLARS ($250.00), whichever is greater.” Id. at A25. Some time after this
contract was signed, but before the incident disputed in this case occurred, HSM was
purchased by Stanley and as a result, Gage’s service was handled thereinafter by
Stanley.
At 4:30 a.m. on November 21, 2008, Stanley received an alarm indicating the
temperature in Gage’s residence was low. The Stanley operator, Mary Bachman, who
was a contract employee from a temporary agency, acknowledged the warning at 4:31
a.m. and, using an automated feature in the system, initiated a call to Gage’s residence
at 4:33 a.m. One minute later, Bachman inputted the following response to the call:
“answer CUST ADVISED.” The incident was then closed.
Stanley’s policy directs an operator, upon acknowledging an alarm, to first
contact the residence, and if no response is received, to call the persons identified on
a customer call list. Gage had provided an updated call list on two occasions: June 6
and June 12, 2007. The first updated list included three contacts’ names and numbers,
the second adding a fourth contact. However, on November 21, 2008, despite the
operator’s notation indicating she advised the customer of the alarm, she did not. No
one was present in Gage’s home at that time and Gage never received any call or
message informing her of the low temperature alarm. Gage further alleges the number
called by Bachman had actually been disconnected. Additionally, none of Gage’s
listed contacts received a call from Stanley either. Stanley, who has a regular practice
of making audio recordings of all calls to its customers’ premises, could not locate any
recording of the alleged contact made by Bachman and therefore admits it is possible
Bachman did not speak with anyone. Stanley contends it was likely Bachman was
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dealing with multiple incoming calls at one time and may have entered information
for a different customer’s alarm on Gage’s account by mistake.
Because no one was informed of the low temperatures at the residence, and
because no one was residing in the home at the time, the low temperature was not
corrected. Two months after the alarm, on January 16, 2009, the furnace in Gage’s
home failed due to the low temperature and the persistent cold ultimately caused a
pipe to burst. The damage to Gage’s home was estimated at $252,310.79. Gage’s
insurer paid Gage for the damages, but Gage filed this action alleging Stanley’s
actions constituted willful and wanton negligence, intentional misconduct, fraud, and
misrepresentation, subrogating her insurer to the claim.
Both parties thereafter filed motions for summary judgment. Stanley argued it
was entitled to summary judgment because the Agreement exculpates it from liability
for any acts or omissions in responding to alarm signals and further prohibits
subrogation actions. Gage sought summary judgment contending the actions by
Bachman constituted, as a matter of law, willful and wanton negligence, which under
Minnesota law gives rise to a liability that cannot be contracted away as a matter of
public policy. On June 14, 2010, the district court granted Stanley’s motion for
summary judgment, holding Stanley’s actions did not rise to anything more than
ordinary negligence and therefore the claim was barred by the exculpatory clause. In
reaching this conclusion, the district court relied heavily on cases from New York in
which conduct similar to Stanley’s was determined not to amount to gross negligence.
The district court also dismissed Gage’s claims of intentional misconduct, fraud, and
misrepresentation for failing to satisfy the particularity requirement of Federal Rule
of Civil Procedure 9(b). The district court did not address whether the antisubrogation clause in the Agreement barred the subrogation claim. Gage appeals the
grant of summary judgment on her claim of willful and wanton negligence.
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II
We review de novo a district court’s grant of summary judgment. Myers v.
Lutsen Mountains Corp., 587 F.3d 891, 892 (8th Cir. 2009). Summary judgment is
appropriate when the record, viewed in the light most favorable to the non-moving
party, demonstrates there is no genuine issue of material fact and the moving party is
entitled to judgment as a matter of law. Id. at 893; Fed. R. Civ. P. 56(c). Because this
case is before us on diversity jurisdiction, we must “apply the substantive law of the
forum state, Minnesota.” AMCO Ins. Co. v. Inspired Techs., Inc., — F.3d —, 2011
WL 3477188, at *4 (8th Cir. August 10, 2011) (internal quotation marks and citation
omitted). “[T]he law declared by the state’s highest court is binding.” Washington v.
Countrywide Home Loans, Inc., — F.3d —, 2011 WL 3189435, at *3 (8th Cir. July
28, 2011) (citing Erie v. Tompkins, 304 U.S. 64, 78 (1938)). If the Minnesota
Supreme Court has not yet addressed the issue, we may consider “relevant state
precedent, analogous decisions, considered dicta, . . . and any other reliable data,”
including intermediate appellate court decisions if they are the “best evidence” of state
law, to predict how the highest court of the state would resolve the issue. Praetorian
Ins. Co. v. Site Inspection, LLC, 604 F.3d 509, 516 n.13 (8th Cir. 2010); see also
AMCO Ins. Co, 2011 WL 3477188, at *4 (“[I]f the state law is ambiguous, this [c]ourt
predicts how the highest court of that state would resolve the issue.”) (internal
quotation marks and citation omitted). We review the district court’s application of
state law de novo. Id.
The Agreement between Gage and Stanley purports to exculpate Stanley from
liability arising out of any act or omission on the part of the company or its
employees. Under established Minnesota law, such exculpatory clauses are
disfavored and will not be enforced if the clause “purports to release the benefitted
party from liability for intentional, willful or wanton acts.” Schlobohm v. Spa Petite,
Inc., 326 N.W.2d 920, 924 (Minn. 1982). Specifically, the Minnesota Supreme Court
has explained exculpatory clauses do not violate public policy when applied to claims
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of ordinary negligence, but do violate public policy, and are therefore unenforceable,
against claims of “willful and wanton negligence.” Morgan Co. v. Minn. Mining &
Manuf., 246 N.W.2d 443, 448 (Minn. 1976). Thus, Gage survives summary judgment
only if, viewing the facts in the light most favorable to Gage, a reasonable fact finder
could conclude Stanley’s actions, or failure to act, amounted to willful and wanton
negligence. See Pye v. Nu Aire, Inc., 641 F.3d 1011, 1018 (8th Cir. 2011) (“If there
is no dispute of material fact and reasonable fact finders could not find in favor of the
nonmoving party, summary judgment is appropriate.”) (internal quotation marks and
citation omitted).
In finding the facts legally insufficient to establish Gage’s claim for willful and
wanton negligence, the district court concluded Minnesota law is unclear as to what
constitutes willful and wanton negligence because it has intermingled that claim with
a claim of gross negligence. Consequently, the district court determined the
Minnesota courts would require a showing of gross negligence for a plaintiff to avoid
the application of an exculpatory clause and, relying on several cases from New York,
concluded Stanley’s actions “did not evince the recklessness necessary to avoid the
exculpatory clause between Gage and Stanley” because “Stanley’s conduct is akin to
the conduct held to be insufficient to constitute gross negligence as a matter of law [in
the New York cases].” District Court’s Opinion and Order (“Order”) at 8. After a
thorough review of Minnesota law, we cannot agree with the district court as to willful
and wanton negligence being indistinguishable from gross negligence and,
furthermore, we do not view New York law on gross negligence relevant to the case
at hand.
To begin, there are several Minnesota Supreme Court cases defining the claim
of willful and wanton negligence and those cases are binding upon this court when
considering a case based on diversity jurisdiction. See Washington, 2011 WL
3189435 at *3. The claim of willful and wanton negligence is defined as “a failure
to exercise ordinary care after discovering another in a position of peril.” Bryant v.
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N. Pac. Ry. Co., 23 N.W.2d 174, 179 (Minn. 1946). As the Minnesota Supreme Court
acknowledges, this willful and wanton negligence “doctrine” is unique and “peculiar
to Minnesota.” Its name, “willful and wanton negligence,” is essentially a
“‘misnomer,’” id. (quoting Mueller v. Dewey, 198 N.W. 428, 429 (Minn. 1924), and
has been criticized at times because “a negligent act is usually the result of
inadvertence, whereas a willful or wanton act is one done with a consciousness of
probable results but with reckless indifference to them.” Mueller, 198 N.W. at 429.
Nevertheless, the court continues to call the doctrine willful and wanton negligence
because “the expression has become firmly imbedded in the vocabulary of judges and
lawyers as a synonym for willful or wanton injury.” Id. The Minnesota Supreme
Court explained in 1971, this doctrine of willful and wanton negligence, which is also
referred to as the “discovered-peril” doctrine, “does not require a showing of malice,
actual intent to injure the person, or even negligence of a grosser degree than lack of
ordinary care.” Jacoboski v. Prax, 187 N.W.2d 125, 128 (Minn. 1971). Instead, the
doctrine permits a plaintiff to recover when “‘the defendant might, by the exercise of
care, have avoided the consequences of [the peril].’” Id. (quoting Fonda v. St. Paul
City Ry. Co., 74 N.W. 166, 170 (Minn. 1898)). Thus, “a plaintiff may recover
damages for harm caused to him while in a position of peril . . . if the person causing
the harm actually knew that the person harmed was in such a position and had
sufficient time and ability to avert the harm but failed to use due care to do so.” Id.
In other words, if a person fails to exercise ordinary care after (1) the peril was
present, and (2) the peril was known to the person, his ordinary negligence rises to a
higher level of negligence—willful and wanton negligence.
Despite the Minnesota Supreme Court cases recognizing and developing this
“peculiar” doctrine, the district court points to a number of cases which it concludes
“appear to blur the distinction between gross negligence and willful and wanton
negligence.” Order at 6. The district court specifically cites two Minnesota Court of
Appeals cases, Beehner v. Cragun Corp., 636 N.W.2d 821, 829-830 (Minn. Ct. App.
2001) and Hanson v. Bieloh, No. A06-1619, 2007 WL 1893315, *2-3 (Minn. Ct. App.
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July 3, 2007), as well as two federal district court cases, Honeywell, Inc. v. Ruby
Tuesday, Inc., 43 F. Supp. 2d 1074, 1080 (D. Minn. 1999) and American Litho, Inc.
v. Imation Corp., No. 08-CV-5892, 2010 WL 681298, *6-7 (D. Minn. Feb. 23, 2010).
These cases which the district court found to “blur” the distinction between
gross negligence and wilful and wanton negligence should only be relied upon so long
as the issue at hand has not been addressed by the Minnesota Supreme Court and, for
the court of appeals cases, only to the extent they are the “best evidence” of Minnesota
law. Praetorian Ins., 604 F.3d at 516 n.13. We previously detailed the precedent of
the Minnesota Supreme Court defining the claim of willful and wanton negligence and
thus we do not find it necessary to consider either the court of appeals cases or the
federal district court cases. But, even giving thorough consideration to each case, we
cannot agree with the district court’s reliance on any of these cases because the court
of appeals cases do not appear to be the best evidence of Minnesota law and the
federal district court cases do not equate willful and wanton negligence to gross
negligence.
Turning first to the two cases from the federal district court, Honeywell and
American Litho, Inc., we fail to see how these cases imply willful and wanton
negligence is akin to gross negligence. In fact, Honeywell makes no mention of gross
negligence. 43 F.Supp.2d at 1079-80. In addressing whether several clauses limiting
Honeywell’s liability are enforceable, the court recites Minnesota law stating such
clauses “do not foreclose [a victim] from bringing a [claim] based on [another’s]
willful negligence or intentional acts” and then defining willful negligence as “‘the
failure to exercise ordinary care after discovering a person or property in a position
of peril.’” Id. at 1080 (quoting Peterson v. Honeywell, Inc., 1994 WL 34200 *4
(Minn. Ct. App. Feb. 8, 1994 (unpublished)). Similarly, American Litho, Inc. also
does not treat willful and wanton negligence as interchangeable with gross negligence.
Instead, it reinforces the distinctions between the two claims in that it quotes
Honeywell’s definition of willful negligence and then defines gross negligence as
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“very great negligence or absence of even slight care.” 2010 WL 681298, at *6
(internal quotation marks and citation omitted). Although American Litho, Inc.
describes the two claims as “similar,” we fail to see how either American Litho, Inc.
or Honeywell “blur” the line between these two claims.
Considering next the Minnesota Court of Appeals cases relied upon by the
district court, we remain unpersuaded to deviate from the Minnesota Supreme Court
precedent distinguishing willful and wanton negligence from gross negligence. In
Beehner, the court of appeals did lump gross negligence and willful and wanton
negligence together in describing them both as “greater-than-ordinary negligence,”
and further stated “[g]ross negligence is ‘very great negligence or absence of even
slight care, but [it is] not equivalent to wanton and willful’ conduct.” 636 N.W.2d at
829 (quoting Ackerman v. Am. Family Mut. Ins. Co., 435 N.W.2d 835, 840 (Minn.
Ct. App. 1989)) (second alteration in original). Hanson cites the same definitions as
Beehner and then goes further to apparently blur the distinction between gross
negligence and willful and wanton negligence by holding summary judgment was
appropriate in that case because the plaintiff failed to prove “respondents’ conduct
was willful, wanton, or grossly negligent.” 2007 WL 1893315, at *2-3. Debatably,
we could agree with the district court as to each of these cases treating willful and
wanton conduct as either the same or something more severe than gross negligence.
However, to the extent these cases do so, they rely on Ackerman v. American Family
Mutual Ins. Co., another Minnesota Court of Appeals case.
But, if Ackerman is properly scrutinized, it appears to the extent it blurs the line
between willful and wanton negligence and gross negligence, it does so in
contradiction to established Minnesota Supreme Court precedent. The relevant
language in Ackerman states “‘[g]ross negligence is substantially and appreciably
higher in magnitude than ordinary negligence . . . . but it is something less than the
willful, wanton, and reckless conduct.’” Id. at 840 (quoting State v. Bolsinger, 21
N.W.2d 480, 485 (Minn. 1946) (quoting Altman v. Aronson, 121 N.E. 505, 506
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(Mass. 1919))). Notably, this language is quoted from a Minnesota Supreme Court
case, Bolsinger, which in turn is quoting a Massachusetts Supreme Judicial Court
case, Altman. At face value, the language relied on by the court of appeals in
Ackerman infers willful and wanton negligence is a greater form of negligence than
gross negligence. But this reading is incorrect for two significant reasons. First, this
holding is in direct contradiction to Jacoboski, the 1971 Minnesota Supreme Court
case which stated willful and wanton negligence “does not require a showing of
malice actual intent to injure the person, or even negligence of a grosser degree than
lack of ordinary care.” 187 N.W.2d at 128. Second, Ackerman cites to Bolsinger,
which is a Minnesota Supreme Court case from 1946—several years before
Jacoboski—indicating Bolsinger may no longer be the most reliable authority on a
willful and wanton negligence claim. Even more significant, Bolsinger deals
exclusively with criminal negligence in the context of criminal vehicular homicides.
As noted in State v. Engle, 743 N.W.2d 592, 594-95 (Minn. 2008), Bolsinger
interpreted recklessness and gross negligence in the context of a particular statute and
it was not intended to be a definition adopted into other schemes. Thus, the Minnesota
Court of Appeals in Ackerman was possibly incorrect to rely on Bolsinger in the torts
arena. Finally, the relevant part of Bolsinger does not discuss willful and wanton
negligence, only willful and wanton conduct, 21 N.W.2d at 485, providing a perfect
example of the confusion feared by the Minnesota Supreme Court when it expressed
concern about the willful-and-wanton-negligence doctrine being misnamed. See
Mueller, 198 N.W. at 429.
For these reasons, we conclude the district court erred in finding the line
between willful and wanton negligence and gross negligence blurred. The Minnesota
Supreme Court’s case law recognizing and developing willful and wanton negligence
is still valid, provides a precise definition of the claim, and is therefore binding upon
our court. Consequently, we disagree with the district court’s reliance on New York
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case law applying gross negligence as “instructive” despite there being “a principled
distinction between willful and wanton negligence and gross negligence.” Order at
7.
The New York cases are legally distinguishable. In each of those cases, the
court is looking for something more than the failure to exercise ordinary care, such as
“outrageous acts of folly” because each of those cases is premised on a claim of gross
negligence. Hartford Ins. Co. v. Holmes Prot. Grp., 673 N.Y.S.2d 132, 133 (N.Y.
App. Div. 1998) (“Delayed or inadequate response to an alarm signal, without more,
is not gross negligence.” (emphasis added)); see also Consumers Distrib. Co. v. Baker
Prot. Servs., 609 N.Y.S.2d 213, 213 (N.Y. App. Div. 1994) (considering a claim of
gross negligence); Sanif, Inc. v. Iannotti, 500 N.Y.S.2d 798 (N.Y. App. Div. 1986)
(same); Advance Burglar Alarm Sys. v. D’Auria, 488 N.Y.S.2d 416 (N.Y. App. Div.
1985) (same); Dubovsky & Sons v. Honeywell, Inc., 454 N.Y.S.2d 329 (N.Y. App.
Div. 1982) (same). The New York courts define gross negligence as “conduct that
evinces reckless disregard for the rights of others or ‘smacks’ of intentional
wrongdoing.” Hartford Ins., 673 N.Y.S.2d at 132 (internal quotation marks and
citations omitted). The type of conduct the New York courts sought was a higher
threshold than Minnesota’s willful and wanton negligence standard. As clarified in
Jacoboski, willful and wanton negligence does not require an intentional act, but
rather requires one to exercise ordinary care when confronted with a person or
property in known peril. 187 N.W.2d at 128. The New York cases applied a higher
standard—gross negligence—and therefore, despite their factual similarities to the
present case, we do not find these cases instructive.
We therefore hold the district court misapplied Minnesota law. Furthermore,
based on our review of the record, we conclude genuine issues of material fact still
remain as to whether Stanley’s operator was willfully and wantonly negligent in
failing to follow procedure after learning of Gage’s low temperature alarm. The
evidence available at the time of summary judgment does not foreclose a conclusion
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in favor of either party. The Stanley operator failed to properly respond to the alarm
from Gage’s residence, but the question remains as to whether the operator was
willingly ignoring her duty, whether she was distracted by other calls, or whether
there was another explanation for her failure to contact anyone about the alarm. The
evidence on this issue is at best circumstantial, but a reasonable jury could determine
the operator chose to ignore the warning based on facts such as the alarm incident
being closed within one minute of her initiating the call to the residence and the record
establishing this same operator similarly disregarded an alarm on an earlier occasion.
A genuine issue of material fact still exists as to whether the operator, who knew of
the peril present in Gage’s home, exercised reasonable and ordinary care in response.
For that reason, summary judgment was not appropriate and the case should be
remanded for further proceedings.
IV
Accordingly we reverse and remand for further proceedings.2
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2
We decline HSM’s invitation to affirm the entry of summary judgment on the
alternative issue of whether Gage’s insurer’s claim is barred by the contract’s antisubrogation clause. The district court did not rule on that issue in the first instance, but
may consider the defense upon remand. See Cody v. Weber, 256 F.3d 764, 769 n.2
(8th Cir. 2001).
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