HILLSBOROUGH RARE COINS, LLC v. ADT SECURITY SERVICES, LLC et al
Filing
72
OPINION filed. Signed by Judge Freda L. Wolfson on 7/2/2018. (km)
*NOT FOR PUBLICATION*
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
___________________________________
:
VICTOR FABRICATORE, d/b/a
:
Civil Action No. 16-916 (FLW) (DEA)
HILLSBOROUGH RARE COINS,
:
:
Plaintiff,
:
OPINION
:
v.
:
:
ADT LLC, et al.,
:
:
Defendants.
:
___________________________________ :
WOLFSON, United States District Judge:
In this matter, Plaintiff Victor Fabricatore (“Plaintiff”), the uninsured owner of a store
that specializes in the collection and sale of rare coins, seeks to obtain recovery from Defendant
ADT LLC (“Defendant” or “ADT”), a company that monitored a security alarm system for
Plaintiff’s store, for inventory stolen during a burglary of the store. Defendant moves for
summary judgment, pursuant to Federal Rule of Civil Procedure 56, arguing that Plaintiff’s sole
remaining claim for breach of contract is foreclosed by an exculpatory provision in the parties’
contract, or, alternatively, that Plaintiff’s damages are limited by a limitation of liability
provision in the contract. For the reasons that follow, Defendant’s Motion is granted in part and
denied in part.
I.
BACKGROUND1
A.
The Parties
For the purposes of the instant Motion, the Court draws the relevant facts from the parties’
Local Rule 56.1 statements. These facts are undisputed, except where noted, and are construed
in the light most favorable to Plaintiff, the non-moving party on this Motion.
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Mr. Fabricatore is the sole owner and operator of Hillsborough Rare Coins (“HRC”), a
business engaged in the collection and sale of rare coins. Statement of Material Facts in Support
of Defendant ADT LLC’s Motion for Summary Judgment (“Def.’s Statement”), ¶¶ 1-2, 30;
Plaintiff’s Responsive Statement of Material Facts (“Pl.’s Resp.”), ¶¶ 1-2, 30. ADT is a limited
liability company that provides a broad range of alarm monitoring services for commercial and
residential properties.
B.
The Alarm Services Contract
In 2006, Plaintiff purchased an alarm system from ADT for the HRC store located in
Green Brook, New Jersey (the “Store”). Plaintiff’s Supplemental Statement of Material Facts
(“Pl.’s Statement”), ¶ 1; ADT LLC’s Response to Plaintiff’s Supplemental Statement of Material
Facts (“Def.’s Resp.”), ¶ 1.2 On September 26, 2014, HRC and ADT entered into a subsequent
contract (the “Contract”) to upgrade and convert the alarm system to ADT’s “Pulse” system.
Def.’s Statement at ¶ 8; Pl.’s Resp. at ¶ 8. The Contract states that, in exchange for a monthly
fee of $63.00, ADT agreed to provide, inter alia, the following “Signal Receiving and
Notification Service”:
B. SERVICES. ADT agrees to provide the services indicated on page two (2), which
include any of the following (“Services”):
...
2. Signal Receiving and Notification Service. Signal Receiving and Notification
Service shall be provided by ADT if this Contract includes a charge for Service. If an
alarm signal registers at ADT’s [Customer Monitoring Center (“CMC”)], ADT shall
endeavor to notify the appropriate Police or Fire Department and the designated
representative of the Customer. If a burglar alarm signal or fire signal registers at ADT’s
CMC, ADT at it sole discretion may endeavor to contact Customer’s premises by
According to Plaintiff, ADT forged Plaintiff’s signature on the 2006 contract (the “2006
Contract”) pertaining to the original installation of the alarm system for the Store. See Pl.’s
Statement at ¶¶ 4-10.
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telephone (or, in the case of a burglar alarm system only, by Two-Way Voice if such
monitoring service has been elected by Customer) to verify that the alarm is not false.
Failing to contact Customer promptly or questioning the nature of the response received
upon such contact, ADT shall endeavor to notify the appropriate Police Department or
Fire Department. Customer agrees that ADT shall have no liability pertaining to any
Two-Way Voice communication or its publication. If a supervisory signal or trouble
signal registers at ADT’s CMC, ADT shall endeavor to notify the designated
representative of the Customer.
Small Business Contract (“Contract”), Def.’s Mot. for Summ. J., Ex. D at 4, ¶ B (italics added).
Although Plaintiff signed the Contract on behalf of HRC, Plaintiff testified he may or
may not have actually read the Contract before signing it. Deposition Transcript of Victor
Fabricatore (“Fabricatore Dep.”), at 47:12-48:5; see Def.’s Statement at ¶¶ 10, 12; Pl.’s Resp. at
¶¶ 10, 12. Above the signature line, the Contract provides, in relevant part: “I acknowledge
and agree to each of the following: (A) this Contract consists of six (6) pages. Before
signing this Contract, I have read, understand and agree to each and every term of this
Contract, including but not limited to Paragraphs C and E of the important terms and
conditions.” Contract at 1 (emphasis in original). The Contract also includes an integration
clause, which states that “[t]his Contract constitutes the entire agreement between Customer and
ADT.” Id. at 6, ¶ L.
Paragraph E of the Contract, entitled, “LIMITATIONS ON LIABILITY,” contains
several provisions that are relevant to the instant dispute. Id. at ¶ E (emphasis in original). The
first of those provisions (the “Exculpatory Provision”) explains that although ADT agrees to
provide alarm services, it is not an insurer, and thus, that the amounts charged to Plaintiff are
based on the services provided by ADT, rather than the value of Plaintiff’s property. See id. at ¶
E(1)-(2). The Exculpatory Provision further provides that ADT cannot be held liable as an
insurer for losses related to an event that ADT’s alarm system is designed to detect or avert. See
id. Specifically, the Exculpatory Provision states:
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1. ADT IS NOT AN INSURER. THE AMOUNTS ADT CHARGES CUSTOMER
ARE NOT INSURANCE PREMIUMS. SUCH CHARGES ARE BASED UPON
THE VALUE OF THE SERVICES, SYSTEM AND EQUIPMENT ADT
PROVIDES AND ARE UNRELATED TO THE VALUE OF CUSTOMER’S
PROPERTY, ANY PROPERTY OF OTHERS LOCATED IN CUSTOMER’S
PREMISES, OR ANY RISK OF LOSS ON CUSTOMER’S PREMISES.
2. ADT’S SERVICES, SYSTEMS AND EQUIPMENT DO NOT CAUSE AND
CANNOT ELIMINATE OCCURRENCES OF THE EVENTS THEY ARE
INTENDED TO DETECT OR AVERT. ADT MAKES NO GUARANTY OR
WARRANTY . . . THAT THE SERVICES, SYSTEM OR EQUIPMENT
SUPPLIED WILL DETECT OR AVERT SUCH EVENTS OR THE
CONSEQUENCES THEREFROM. ACCORDINGLY, ADT DOES NOT
UNDERTAKE ANY RISK THAT CUSTOMER’S PERSON OR PROPERTY, OR
THE PERSON OR PROPERTY OF OTHERS, MAY BE SUBJECT TO INJURY
OR LOSS IF SUCH EVENT OCCURS. THE ALLOCATION OF SUCH RISK
REMAINS WITH THE CUSTOMER, NOT ADT. INSURANCE, IF ANY,
COVERING SUCH RISK SHALL BE OBTAINED BY THE CUSTOMER. ADT
SHALL HAVE NO LIABILITY FOR LOSS, DAMAGE OR INJURY DUE
DIRECTLY OR INDIRECTLY TO EVENTS, OR THE CONSEQUENCES
THEREFROM, WHICH THE SYSTEMS OR SERVICES ARE INTENDED TO
DETECT OR AVERT. CUSTOMER SHALL LOOK EXCLUSIVELY TO ITS
INSURER AND NOT ADT TO PAY THE CUSTOMER IN THE EVENT OF ANY
SUCH LOSS, DAMAGE OR INJURY. CUSTOMER RELEASES AND WAIVES
FOR ITSELF AND ITS INSURER ALL SUBROGATION AND OTHER RIGHTS
TO RECOVER FROM ADT ARISING AS A RESULT OF PAYING ANY CLAIM
FOR LOSS, DAMAGE OR INJURY OF CUSTOMER OR ANOTHER PERSON.
Id. (emphasis in original).
The Contract also includes a provision (the “Limitation of Liability Provision”) that
limits ADT’s liability in the event that it fails to perform its contractual obligations. See id. at ¶
E(3). Specifically, the Limitation of Liability Provision states:
3. IF NOTWITHSTANDING THE PROVISIONS OF THIS PARAGRAPH E,
ADT IS FOUND LIABLE FOR LOSS, DAMAGE OR INJURY UNDER ANY
LEGAL THEORY DUE TO A FAILURE OF THE SERVICES, SYSTEM OR
EQUIPMENT IN ANY RESPECT, ITS LIABILITY SHALL BE LIMITED TO A
SUM EQUAL TO 10% OF THE ANNUAL SERVICE CHARGE OR $1,000,
WHICHEVER IS GREATER, AS AGREED UPON DAMAGES AND NOT AS A
PENALTY, AS CUSTOMER’S SOLE REMEDY. THIS WILL BE THE SOLE
REMEDY BECAUSE IT IS IMPRACTICAL AND EXTREMELY DIFFICULT
TO DETERMINE THE ACTUAL DAMAGES, IF ANY, WHICH MAY RESULT
FROM ADT’S FAILURE TO PERFORM ANY OF ITS OBLIGATIONS UNDER
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THIS CONTRACT. IF CUSTOMER REQUESTS, ADT MAY ASSUME
GREATER LIABILITY BY ATTACHING A RIDER TO THIS CONTRACT
STATING THE EXTENT OF ADT’S ADDITIONAL LIABILITY AND THE
ADDITIONAL CHARGES CUSTOMER WILL PAY FOR ADT’S ASSUMPTION
OF SUCH GREATER LIABILITY. HOWEVER, SUCH ADDITIONAL
CHARGES ARE NOT INSURANCE PREMIUMS, AND ADT IS NOT AN
INSURER EVEN IF IT ENTERS INTO SUCH A RIDER.
Id. (emphasis in original).
Finally, Paragraph E provides that:
4. THE PROVISIONS OF THIS PARAGRAPH E SHALL APPLY NO MATTER
HOW THE LOSS, DAMAGE OR INJURY OR OTHER CONSEQUENCE
OCCURS, EVEN IF DUE TO ADT’S PERFORMANCE OR
NONPERFORMANCE OF ITS OBLIGATIONS UNDER THIS CONTRACT OR
FROM NEGLIGENCE (ACTIVE OR OTHERWISE), STRICT LIABILITY,
VIOLATION OF ANY APPLICABLE CONSUMER PROTECTION LAW OR
ANY OTHER ALLEGED FAULT ON THE PART OF ADT, ITS AGENTS OR
EMPLOYEES.
Id. at ¶ E(4) (emphasis in original).
C.
The Burglary
At approximately 10:30 p.m. on June 1, 2015, a group of burglars broke into the Store by
cutting through the wall of an adjoining business and disarming the Store’s alarm system. See
Def.’s Statement at ¶ 20; Pl.’s Resp. at ¶ 20. The circumstances concerning the triggering of
ADT’s alarm system and ADT’s response to the alarm are not entirely clear from the record. To
begin, it is undisputed that, when the burglars first entered the Store, the ADT alarm system was
triggered. See Def.’s Statement at ¶ 22; Pl.’s Resp. at ¶ 22. It is further undisputed that ADT’s
Pulse team sent Plaintiff an email (the “Notification Email”) notifying him that a silent panic
alarm had been triggered at 10:36 p.m. at the Store. See Def.’s Statement at ¶ 23; Pl.’s Resp. at ¶
23; Pl.’s Statement at ¶ 38; Def.’s Resp. at ¶ 38. Although the time stamp on the Notification
Email shows that it was received by Plaintiff at 11:06 p.m., Plaintiff asserts that he did not see
the Notification Email until the burglary was over, because it went directly into his “spam”
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folder. See Pl.’s Statement at ¶ 40; Certification of Victor Fabricatore in Opposition to Motion
for Summary Judgment (“Fabricatore Cert.”), Ex. C.
The parties dispute whether an alarm signal ever registered at ADT’s CMC. See Pl.’s
Statement at ¶ 39; Def.’s Resp. at ¶ 39. According to Plaintiff, although ADT was aware that the
silent alarm had been triggered, ADT breached its contractual obligations by failing to call
Plaintiff and to contact the police. Pl.’s Statement at ¶ 39. Conversely, despite acknowledging
that it sent Plaintiff the Notification Email regarding the silent panic alarm, Defendant denies
that an alarm signal ever registered at ADT’s CMC. Def.’s Resp. at ¶ 39.
In any event, at approximately 11:20 p.m. on the night of the burglary, an ADT
representative (the “ADT Representative”) called Plaintiff to inform him that a “trouble signal”
was received from the ADT alarm system, indicating that there had been a power loss to the
system. Pl.’s Statement at ¶¶ 41-53; Def.’s Resp. at ¶¶ 41-43. The ADT Representative assured
Plaintiff that the system was still functioning on battery backup and explained that Plaintiff
would receive a call in the event that battery backup failed. See Pl.’s Statement at ¶¶ 45-46;
Def.’s Resp. at ¶¶ 45-46. It is undisputed that the ADT Representative never informed Plaintiff
that, in addition to the power loss signal, there was also an alarm signal indicating an entry into
the Store.3 Pl.’s Statement at ¶ 47; Def.’s Resp. at ¶ 47. According to Plaintiff, the burglars
remained in the Store for approximately three hours. See Pl.’s Statement at ¶ 36. Ultimately, the
thieves escaped with valuable rare coins and other merchandise, representing somewhere
between 25-50% of HRC’s inventory. See Def.’s Statement at ¶¶ 21, 25; Pl.’s Resp. at ¶¶ 21, 25.
Once again, Defendant attributes the ADT Representative’s failure to inform Plaintiff of the
alarm signal regarding the entry into the Store to the fact that an alarm signal never registered at
ADT’s CMC. See Def.’s Resp. at ¶ 47.
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Following the burglary, Lieutenant William Cowan from the Green Brook Police
Department spoke with an operator for ADT’s Pulse team (the “Operator”) regarding the
burglary. Pl.’s Statement at ¶ 49; Def.’s Resp. at ¶ 49; see Transcript of December 13, 2017
Conversation (“Operator Tr.”), Pl.’s Opp. to Def.’s Mot. for Summ. J., Ex. A. The Operator
explained that, in her experience, ADT’s Pulse team always dispatches the police upon receipt of
a silent panic alarm signal at the CMC. Operator Tr. at 48:1-8. Thus, when questioned as to
why ADT would have sent out the Notification Email without dispatching the police, the
Operator stated her belief that the alarm must have been disabled, such that the CMC did not
receive “the signal on the monitoring side.” Id. at 48:21-49:23. Yet, when Lieutenant Cowan
noted that the alarm was not ripped off the wall until approximately one hour after the break-in,
the Operator was unable to explain why the CMC did not receive the panic alarm signal properly
or why the police would not have been dispatched in this case. Id. at 50:2-51:17.
D.
The Store’s Inventory was Uninsured
It is undisputed that, at the time of the burglary, Plaintiff did not have insurance for either
the Store or its inventory. Fabricatore Dep. at 71:4-22; Pl.’s Statement at ¶ 26; Def.’s Resp. at ¶
26. Plaintiff testified that although he had previously received quotes for obtaining insurance,
see Fabricatore Dep. at 71:23-72:5 (“Q: Ever get quotes for insurance for your inventory? A:
Yes. Q: Do you remember how much the premium was? A: $8,500. Q: Per year? A: Per year per
$250,000.”), he chose not to get insurance because of “[t]he cost and exclusions.” Id. at 72:6-8.
According to Plaintiff, insurance for the inventory held by the Store – “small coins that
can be hidden easily and where inventory changes daily” – is “difficult to obtain and, where it is
available, is cost-prohibitive.” Fabricatore Cert. ¶ 25. In that regard, Plaintiff explained that
when he “looked into obtaining insurance, [he] discovered that the policies offered contained so
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many exclusions (while being so costly) that it made no business sense to obtain it for the type of
coins [he] was dealing in.” Id. at ¶ 26. Indeed, Plaintiff submits that, based on the exclusions
that are typically contained in such policies, “a significant portion of the coins stolen during the
robbery would have been excluded from coverage.” Id. at ¶ 28. Thus, “in [Plaintiff’s]
experience, affordable insurance covering all of the coins in [his] store was simply not available,
as a practical matter.” Id. at ¶ 27. Defendant disputes that insurance covering the Store’s
inventory was not available, asserting that Plaintiff was able to obtain quotes for insurance and
simply made a business decision not to insure the Store’s inventory. Def.’s Resp. at ¶¶ 27-30
E.
Procedural History
On December 2, 2015, HRC filed suit against ADT in the Superior Court of New Jersey,
Somerset County, Law Division. ECF No. 1. On February 1, 2016, Defendant removed the
action to this Court, pursuant to 28 U.S.C. § 1441, on the basis of diversity jurisdiction. Id. On
October 4, 2016, HRC filed a First Amended Complaint, asserting claims for: (i) breach of
contract; (ii) promissory estoppel; (iii) equitable estoppel; (iv) breach of the implied covenant of
good faith and fair dealing; (v) breach of warranty; (vi) violation of the New Jersey Consumer
Fraud Act (“NJCFA”), N.J.S.A. § 56:8-1, et seq.; (vii) violation of the New Jersey Products
Liability Act (“NJPLA”), N.J.S.A. § 2A:58C-1, et seq.; and (viii) theft or civil conspiracy to
commit theft. ECF No. 30.
On May 2, 2007, the Honorable Mary L. Cooper, U.S.D.J., granted Defendant’s Motion
to Dismiss all of the claims asserted in the First Amended Complaint, with the exception of
HRC’s breach of contract claim. ECF Nos. 39-40. Significantly, Judge Cooper found that HRC
stated a plausible claim for breach of contract that was not subject to the Exculpatory Provision
contained in Paragraph E of the Contract, because: (i) HRC alleged that ADT breached its
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contractual obligation to immediately call Mr. Fabricatore and the police if an alarm was
triggered; and (ii) “HRC is not seeking coverage from ADT for the store’s losses.” ECF No. 39
at 9-10. Additionally, Judge Cooper found that it was premature to address ADT’s argument that
HRC’s damages should be limited to $1,000 under the Limitation of Liability Provision. See id.
at 10.
This matter was reassigned to me on July 10, 2017. ECF No. 45. HRC filed a Motion
for Leave to File a Second Amended Complaint on September 15, 2017. ECF No. 48. On
January 12, 2018, the Magistrate Judge denied HRC’s Motion for Leave to File a Second
Amended Complaint, insofar as HRC sought to amend its NJCFA claim,4 and granted the
Motion, insofar as HRC sought to designate Mr. Fabricatore, doing business as HRC, as the
proper Plaintiff in this case. ECF Nos. 57-58. Accordingly, on January 1, 2018, Plaintiff filed
the Second Amended Complaint, which is identical to the First Amended Complaint, except for
the fact that Mr. Fabricatore is named as the Plaintiff. ECF No. 59. Defendant filed the instant
Motion for Summary Judgment on December 20, 2017. ECF Nos. 52-55. Defendant’s Motion
has been fully briefed. ECF Nos. 60-62, 66-67.
II.
LEGAL STANDARD
Summary judgment is appropriate where the Court is satisfied that “there is no genuine
issue as to any material fact and that the movant is entitled to a judgment as a matter of law.”
FED. R. CIV. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Orson, Inc. v.
Miramax Film Corp., 79 F.3d 1358, 1366 (3d Cir. 1996). A factual dispute is genuine only if
there is “a sufficient evidentiary basis on which a reasonable jury could find for the non-moving
Plaintiff has moved for reconsideration of the Magistrate Judge’s Order denying Plaintiff’s
Motion for Leave to amend the NJCFA claim. See ECF No. 64.
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party,” and it is material only if it has the ability to “affect the outcome of the suit under
governing law.” Kaucher v. County of Bucks, 455 F.3d 418, 423 (3d Cir. 2006); see also
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Disputes over irrelevant or
unnecessary facts will not preclude a grant of summary judgment. Anderson, 477 U.S. at 248.
“In considering a motion for summary judgment, a district court may not make credibility
determinations or engage in any weighing of the evidence; instead, the non-moving party’s
evidence ‘is to be believed and all justifiable inferences are to be drawn in his favor.’” Marino v.
Indus. Crating Co., 358 F.3d 241, 247 (3d Cir. 2004) (citation omitted).
The moving party bears the initial burden of demonstrating the absence of a genuine issue
of material fact. Celotex, 477 U.S. at 322. If the movant satisfies its initial burden, the
nonmoving party cannot rest upon mere allegations in the pleadings to withstand summary
judgment; rather, the nonmoving party “must counter with specific facts which demonstrate that
there exists a genuine issue for trial.” Orson, 79 F.3d at 1366. Specifically, the nonmoving party
“must make a showing sufficient to establish the existence of each element of his case on which
he will bear the burden of proof at trial.” Huang v. BP Amoco Corp, 271 F.3d 560, 564 (3d Cir.
2001); see Orsatti v. New Jersey State Police, 71 F.3d 480, 484 (3d Cir. 1995) (“[A] plaintiff
cannot resist a properly supported motion for summary judgment merely by restating the
allegations of his complaint, but must point to concrete evidence in the record that supports each
and every essential element of his case.”). Thus, “a mere ‘scintilla of evidence’ in the
nonmovant’s favor” is insufficient to create a genuine issue of fact.” Ramara, Inc. v. Westfield
Ins. Co., 814 F.3d 660, 666 (3d Cir. 2016) (citation omitted); see Lackey v. Heart of Lancaster
Reg'l Med. Ctr., 704 F. App'x 41, 45 (3d Cir. 2017) (“There is a genuine dispute of material fact
if the evidence is sufficient for a reasonable factfinder to return a verdict for the nonmoving
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party.”). Ultimately, it is not the Court’s role to make findings of fact, but to analyze the facts
presented and determine if a reasonable jury could return a verdict for the nonmoving party. See
Brooks v. Kyler, 204 F.3d 102, 105 n. 5 (3d Cir. 2000).
III.
DISCUSSION
Defendant moves for summary judgment, arguing that the Exculpatory Provision
operates as a complete defense to Plaintiff’s breach of contract claim. Alternatively, Defendant
maintains that, pursuant to the Limitation of Liability Provision, this Court should limit
Plaintiff’s recoverable damages to $1,000. Because the parties’ arguments with respect to each
of those provisions overlap, the Court will address the enforceability of the Exculpatory
Provision and the Limitation of Liability Provision (collectively, the “Exculpatory Provisions”)
in tandem.
A.
The Exculpatory Provisions are Enforceable
As a preliminary matter, this Court’s determination of whether the Exculpatory
Provisions are enforceable is complicated by Plaintiff’s failure to plead with specificity the
precise nature of the damages that he seeks to recover on his breach of contract claim. To that
end, in the Second Amended Complaint, Plaintiff merely states that he seeks “damages” from
Defendant in connection with the breach of contract claim. Second Am. Compl. at 9. Moreover,
in rejecting the exact same arguments regarding the Exculpatory Provision that Defendant
rehashes on this Motion, Judge Cooper found as follows:
[The court] find[s] that HRC has stated a plausible claim of breach of contract that would
not be subject to the insurer provision. HRC has stated that under the contract, ADT had
an obligation to immediately call Fabricatore and the police if the alarm was triggered.
HRC is not seeking coverage from ADT for the store’s losses. Rather, according to HRC,
the alarm was triggered but no phone call followed. Therefore, ADT broke their
contractual obligation.
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See ECF No. 39 at 9-10. Stated differently, Judge Cooper found that she did not need to address
the enforceability of the Exculpatory Provision, because Plaintiff is not seeking to recover the
Store’s losses as a result of the burglary in connection with the breach of contract claim. See id.
However, in his Opposition brief, Plaintiff indicates that he “has brought the within action
against [Defendant] for losses arising from a burglary occurring at HRC’s store . . . .” Pl.’s Br. at
2.
In any event, this Court can only discern two categories of damages that Plaintiff may
seek to recover in connection with his breach of contract claim: (i) losses arising from the
burglary, i.e., the stolen goods and property damage; and (ii) compensatory damages for the cost
of ADT’s services, including past premiums. The first category of those damages clearly falls
within the ambit of the Exculpatory Provision, which provides that “ADT SHALL HAVE NO
LIABILITY FOR LOSS, DAMAGE OR INJURY DUE DIRECTLY OR INDIRECTLY
TO EVENTS, OR THE CONSEQUENCES THEREFROM, WHICH THE SYSTEMS OR
SERVICES ARE INTENDED TO DETECT OR AVERT.” Contract at 6 ¶ E(2) (emphasis in
original). Additionally, the Limitation of Liability Provision, which sets forth a limitation on
damages in the event that Defendant is held liable for failing to perform its contractual
obligations, covers the second category of potential damages in this case.5 Accordingly, because
the Exculpatory Provisions are facially applicable to any damages that Plaintiff may seek in this
action, the Court must examine the enforceability of those Provisions.
5
Indeed, while Plaintiff contends that the Limitation of Liability Provision is unenforceable,
Plaintiff does not argue that his breach of contract claim seeks damages that fall outside the
scope of that Provision.
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New Jersey law6 regarding exculpatory clauses7 is well-settled. Although exculpatory
clauses “have historically been disfavored in law and thus have been subjected to close judicial
scrutiny,” New Jersey courts “enforce contracts that contain exculpatory clauses unless such
provision proves adverse to the public interest.” Stelluti v. Casapenn Enterprises, LLC, 203 N.J.
286, 303 (2010); see Mayfair Fabrics v. Henley, 48 N.J. 483, 487 (1967) (“Where they do not
adversely affect the public interest, exculpatory clauses in private agreements are generally
sustained.”). In determining whether the enforcement of an exculpatory provision would be
contrary to public policy, the Supreme Court of New Jersey has directed courts to look to the
four factors identified in Gershon, Adm'x Ad Prosequendum for Estate of Pietroluongo v.
Regency Diving Ctr., Inc., 368 N.J. Super. 237, 248 (App. Div. 2004). See Stelluti, 203 N.J. at
304 (“The Gershon test . . . captures the essential features to be explored when considering
whether enforcement of an exculpatory agreement would be contrary to public policy.”). To wit,
Gershon provides:
In New Jersey, an exculpatory release will be enforced if (1) it does not adversely affect
the public interest; (2) the exculpated party is not under a legal duty to perform; (3) it
does not involve a public utility or common carrier; or (4) the contract does not grow out
of unequal bargaining power or is otherwise unconscionable.
368 N.J. Super. at 248.
6
The parties do not dispute that New Jersey law governs this case.
As the Court explains, supra, New Jersey regards limitation of liability provisions in alarm
service contracts – including provisions that are nearly identical to the Limitation of Liability
Provision – as exculpatory provisions, and thus, courts determine their enforceability under the
test pertaining to exculpatory provisions. See Tessler & Son, Inc. v. Sonitrol Sec. Sys. of N. New
Jersey, Inc., 203 N.J. Super. 477, 482 (App. Div. 1985); see, e.g., Jacobsen Diamond Ctr., LLC
v. ADT Sec. Servs., Inc., No. A-1578-14T1, 2016 WL 3766236, at *7 (N.J. Super. Ct. App. Div.
July 15, 2016) (finding that a $1,000 limitation of liability provision in a contract for the sale of a
burglary alarm system was an enforceable exculpatory provision). Thus, this Court will examine
whether the Limitation of Liability Provision is enforceable in accordance with New Jersey law
governing exculpatory provisions.
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Here, Plaintiff argues that the Exculpatory Provisions are unenforceable, because they are
both adverse to the public interest and otherwise unconscionable. Specifically, Plaintiff argues
that the Provisions are adverse to New Jersey public policy, because they insulate Defendant
from liability even where Defendant materially breaches its contractual obligations and “offer[]
no countervailing or redeeming societal value.” Pl.’s Br. at 19. Additionally, Plaintiff argues
that the Provisions are procedurally unconscionable, because they are drafted in tiny print and
are too inconspicuous to be enforceable. See id. at 24-25. Plaintiff’s arguments are without
merit.
Significantly, New Jersey law does not restrict the ability of alarm service providers to
limit their liability through risk allocation provisions, and thus, New Jersey courts have routinely
upheld exculpatory provisions in contracts for alarm services, including provisions similar to the
ones contained in the Contract. See, e.g., Synnex Corp. v. ADT Sec. Servs., Inc., 394 N.J. Super.
577, 591-92 (App. Div. 2007) (enforcing an exculpatory clause in a contract for a burglar alarm
system, which stated that ADT was not an insurer and was exempt from liability for losses
caused by events that the system was designed to detect or prevent); Tessler & Son, Inc. v.
Sonitrol Sec. Sys. of N. New Jersey, Inc., 203 N.J. Super. 477, 481-86 (App. Div. 1985)
(enforcing a $250 limitation of liability provision in an alarm services contract); FoontFreedenfeld Corp. v. Electro-Protective Corp., 126 N.J. Super. 254, 257-58 (App. Div. 1973),
aff'd, 64 N.J. 197 (1974) (affirming trial court’s partial summary judgment order enforcing a
limitation of liability clause in a burglary alarm services contract); Jacobsen Diamond Ctr., LLC
v. ADT Sec. Servs., Inc., No. A-1578-14T1, 2016 WL 3766236, at *7 (N.J. Super. Ct. App. Div.
July 15, 2016) (enforcing a $1,000 limitation of liability clause in a contract for the sale of a
burglary alarm system); St. Paul Fire & Marine Ins. Co. v. Wells Fargo Alarm Servs., No. 95-
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712, 1995 WL 306642, at *5 (D.N.J. May 9, 1995) (granting partial summary judgment on the
enforceability of a limitation of liability provision in the parties’ alarm services contract).
The rationale in these cases is that exculpatory provisions and limitations of liability are
“reasonable measure[s] within this particular industry to contain an alarm system supplier’s
exposure from the losses caused by thefts or other criminal acts.” Jacobsen, 2016 WL 3766236
at *7. In that regard, as the Synnex court aptly explained, sound policy reasons support the
enforcement of these provisions in the context of alarm service contracts:
[W]here the subject matter of a contract containing a limitation of liability or exculpatory
clause is an alarm contract, the buyer is in the best position to know the value of its
property and to insure against any loss from fire or theft, regardless of whether the alarm
company's negligence was a contributing cause of the occurrence. As the contract
between ADT and Synnex illustrates, the purchase price of an alarm system is generally
only a small fraction of the value of the property it is designed to protect. If an alarm
company were subject to liability for loss of that property, it would be hesitant to sell an
alarm system to a buyer with valuable property or would insist upon payment of a
premium to offset its exposure to a claim. The requirement of payment of such a
premium would place the alarm company in the position of selling not only an alarm
system but also a form of insurance. Thus, to determine the price for an alarm system, the
company would have to determine the value of the buyer’s property and its contents as
well as other pertinent risk factors, such as its location, which would be similar to an
insurance company’s determination of the premium for a casualty insurance policy.
Furthermore, insurance coverage for loss from fire or theft is readily available and is in
fact maintained by most property owners including Synnex. Therefore, unlike a home
buyer who contracts for a home inspection, the purchaser of an alarm system does not
have to rely upon the availability of a tort claim against the seller of the system to obtain
protection from loss of its property.
394 N.J. Super. at 592-93.
In Synnex, for example, the Appellate Division considered the enforceability of an
exculpatory provision contained in an alarm services contract with ADT. There, Synnex, a
distributer of computers and computer-related equipment, sued ADT following a burglary at
Synnex’s warehouse. See id. at 583. Specifically, Synnex asserted claims for, inter alia,
negligence and breach of express and implied warranties, based on the design of the alarm
15
system and ADT’s alleged insufficient communication with Synnex on the night of the burglary.
See id. In the proceedings before the trial court, ADT moved for summary judgment, arguing
that an exculpatory clause in the parties’ alarm services contract – which required the customer
to rely on its own insurance for loss from any theft – precluded Synnex’s claims. See id. The
trial court held that ADT could not rely on the exculpatory provision, based, in part, on its
finding that the provision was contrary to public policy. See id. at 584.
The Appellate Division reversed, holding that the exculpatory provision was enforceable
and did not violate public policy. See id. at 580-81. As an initial matter, the court noted that
New Jersey courts had previously upheld similar exculpatory provisions in contracts for the sale
of fire and burglary alarm systems, and that “such clauses may insulate an alarm company from
liability even for ‘very negligent or grossly negligent performance.’” Id. at 588 (quoting Tessler,
203 N.J. Super. at 485). Next, the court found that the exculpatory provision was not contrary to
public policy, because it “simply allocate[d] responsibility to the buyer of an alarm system to
maintain insurance coverage, and the buyer [was] in the best position to know the value of its
property and to insure against any loss.” Synnex, 394 N.J. Super. at 580-81.
More recently, in Jacobsen, the Appellate Division affirmed the trial court’s summary
judgment ruling that a limitation of liability provision in a contract between ADT and an
uninsured store owner was enforceable. See 2016 WL 3766236 at *7-8. There, the store owner
brought suit against ADT and various other defendants, seeking to recover over $5 million in
goods stolen from the store. See id. at *2. The trial court granted ADT’s motion for summary
judgment, which sought to enforce a $1,000 limitation of liability clause in ADT’s form contract
with the owner. Id. at *3. Relying on Synnex, the Appellate Division affirmed the enforceability
of the limitation of liability provision, finding that the limitation was a “reasonable measure” for
16
containing an alarm service provider’s exposure from losses caused by thefts, because it merely
allocated the responsibility of maintaining insurance coverage to the alarm purchaser, who was
in the best position to know the value of its property and insure against losses. Id. at *7. With
respect to the owner’s public policy arguments, the court noted that, although the “responsibility
of maintaining insurance coverage was expressly allocated to plaintiff[,] . . . plaintiff opted not to
procure any such insurance.” Id. at *8. Thus, finding that there was “no compelling policy
reason to place the responsibility for customer losses due to theft or burglary upon ADT simply
because its customer failed to take other measures within its control to manage a known risk,”
the Appellate Division affirmed the enforceability of the limitation of liability provision. Id.
As the Synnex and Jacobsen decisions illustrate, New Jersey views exculpatory
provisions and limitation of liability clauses in alarm service contracts as reasonable measures
for providers to limit their exposure for theft-related losses. Here, Plaintiff has failed to establish
that enforcement of the Exculpatory Provisions would implicate any public policy concerns that
were not present in those cases. To that end, while Plaintiff raises several arguments regarding
the practicality of obtaining insurance for the Store’s inventory, Plaintiff testified that he did, in
fact, receive insurance quotes for the Store, and made a business decision that procuring
insurance was too costly. See Fabricatore Dep. at 71:23-72:8; Fabricatore Cert. ¶ 26 (“When I
looked into obtaining insurance, I discovered that the policies offered contained so many
exclusions (while being so costly) that it made no business sense to obtain it for the type of coins
I was dealing in.”). Moreover, although the Contract provided Plaintiff with the right to increase
ADT’s liability in exchange for higher fees,8 Plaintiff opted not to do so. See Greenspan v. ADT
Specifically, the Limitation on Liability Provision states: “IF CUSTOMER REQUESTS,
ADT MAY ASSUME GREATER LIABILITY BY ATTACHING A RIDER TO THIS
CONTRACT STATING THE EXTENT OF ADT’S ADDITIONAL LIABILITY AND
8
17
Sec. Servs. Inc., 444 F. App'x 566, 570 (3d Cir. 2011) (enforcing a $500 limitation of liability
provision, where the plaintiffs had the right to obtain insurance and to increase ADT’s limit on
its liability, but opted not to do so). Accordingly, I find that enforcement of the Contract’s
Exculpatory Provisions does not violate public policy.
Additionally, contrary to Plaintiff’s argument, the Exculpatory Provisions are enforceable
even if Defendant breached its contractual obligations. In that regard, Plaintiff fails to cite any
authority for the proposition that exculpatory provisions are unenforceable where one party
allegedly breached its contractual obligations. To the contrary, where an exculpatory provision
is otherwise enforceable, courts routinely enforce such provisions despite any alleged contractual
breach. See, e.g., Tessler, 203 N.J. Super. at 481, 483-86 (affirming the trial court’s decision to
enforce a limitation of liability provision, despite the jury’s finding that the defendant failed to
perform its contractual obligations); Sys. v. ADT Sec. Servs., Inc., No. 07-3579, 2008 WL
682232, at *3 (D.N.J. Mar. 7, 2008) (enforcing exculpatory provision in alarm services contract,
despite the plaintiff’s allegation that ADT breached its contractual obligations by failing to
provide adequate monitoring services). Indeed, Plaintiff is effectively arguing that this Court
should enforce Defendant’s performance obligations under the Contract on one hand, but excuse
Plaintiff from the Contract’s risk allocation provisions on the other. However, because Plaintiff
has failed to demonstrate that the public interest would be adversely affected by enforcing the
Exculpatory Provisions, Plaintiff “has shown no persuasive reason to leave the [C]ontract
THE ADDITIONAL CHARGES CUSTOMER WILL PAY FOR ADT’S ASSUMPTION
OF SUCH GREATER LIABILITY.” Contract at 6, ¶ E(3) (emphasis in original).
18
generally intact but then excise only the limitation of liability clause.” 9 Jacobsen, 2016 WL
3766236 at *8.
Moreover, Plaintiff’s argument that the Exculpatory Provisions are unenforceable
because they are inconspicuous and set forth in tiny print is unavailing. Significantly, courts
considering the enforceability of exculpatory provisions phrased in nearly identical language
have found that such provisions were written with sufficient clarity to be enforceable. See, e.g.,
Tessler, 203 N.J. Super. at 481-86; Foont-Freedenfeld, 126 N.J. Super. at 257-58; Jacobsen,
2016 WL 3766236 at *7; Greenspan, 444 F. App'x at 570; St. Paul Fire, 1995 WL 306642 at *5.
Additionally, the font size of the Exculpatory Provisions is not so small as to render those
Provisions unenforceable, particularly since they are set forth in bold, all-capitals font. See
Prescription Counter v. AmerisourceBergen Corp., No. 04-5802, 2007 WL 3511301, at *12
9
I note that under New Jersey law, parties may not exculpate themselves from willful or wanton
misconduct. Tessler, 203 N.J. Super. at 484; see Kane v. U-Haul Int'l Inc., 218 F. App'x 163,
167 (3d Cir. 2007) (observing that, under New Jersey law, willful and wanton “conduct cannot
be exculpated.”). The Supreme Court of New Jersey has defined willful and wanton misconduct
as follows:
It must appear that the defendant with knowledge of existing conditions, and conscious
from such knowledge that injury will likely or probably result from his conduct, and with
reckless indifference to the consequences, consciously and intentionally does some
wrongful act or omits to discharge some duty which produces the injurious result.
McLaughlin v. Rova Farms, Inc., 56 N.J. 288, 305 (1970). Significantly, however, this exception
applies only to willful and wanton conduct, and thus, parties may exculpate themselves from
even gross negligence. See Tessler, 203 N.J. Super. at 485 (holding that an exculpatory
provision may insulate an alarm company even for “very negligent or grossly negligent
performance.”). Here, as previously noted, Plaintiff has not argued that Defendant’s conduct in
this case falls outside the scope of the Exculpatory Provisions, or more specifically, that
Defendant’s conduct in failing to call Plaintiff or dispatch the police rose to the level of being
willful or wanton. In any event, even viewing the facts in the light most favorable to Plaintiff,
the record is bereft of any evidence suggesting that Defendant’s conduct was willful or wanton.
Accordingly, because no reasonable factfinder could conclude that Defendant’s conduct was
willful or wanton, the Court’s decision on the applicability of the Exculpatory Provisions need
not await a jury finding on the degree of Defendant’s liability.
19
(D.N.J. Nov. 14, 2007) (finding that a limitation of liability provision was enforceable, even
though it was written in small font, where “the paragraph that addresse[d] the limitation of
liability [was] titled in all capital letters.”); Morgan Home Fashions, Inc. v. UTI, U.S., Inc., No.
03-0772, 2004 WL 1950370, at *4 (D.N.J. Feb. 9, 2004) (“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.”). Indeed, the
Provisions are set forth in the same font and print size as the remainder of the terms and
conditions in the Contract, including those outlining the performance obligations that Plaintiff
seeks to enforce.
Finally, Plaintiff’s argument that the Limitation of Liability Provision is a reverse
liquidated damages provision that is unenforceable under New Jersey law ignores the Appellate
Division’s decision in Tessler. In Tessler, the plaintiff brought suit against an alarm services
provider, alleging that the defendant breached its contractual obligation to monitor the plaintiff’s
shop. See 203 N.J. Super. at 480-82. The trial court enforced a limitation of liability provision
in the parties’ contract, which provided:
If [the defendant] should be found liable for loss or damage due to the failure of its
services in any respect, even if due to [the defendant’s] negligence, its liability shall be
limited to a sum equal to ten percent of the annual monitoring charge for the premises or
$250 whichever is greater, as liquidated damages and not as a penalty . . . .
Id at 481. Significantly, in affirming the enforceability of the limitation of liability provision, the
Tessler court explained that while the provision “purports to be a liquidated damage clause . . .
[i]n real effect, however, it is an exculpatory clause, because it denies liability for all but a
nominal amount of damages.” Id. at 482. In that regard, the court explained that while
liquidated damages clauses attempt to estimate the reasonable forecast of damages caused by a
breach, “[t]he limit of $250 is obviously not the result of an effort to fairly estimate plaintiff's
20
likely damages from a break-in.” Id. at 482; see Morgan, 2004 WL 1950370 at *7 n. 6
(“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.’”) (citation omitted). Following Tessler, courts applying New Jersey law have
interpreted limitation of liability provisions contained in alarm services contracts as exculpatory
provisions, rather liquidated damages clauses. See, e.g., Jacobsen, 2016 WL 3766236 at *7; St.
Paul Fire, 1995 WL 306642 at *2. As in Tessler, here, it is clear that the Limitation of Liability
Provision, which limits Plaintiff’s recoverable damages to $1,000 or 10% of the annual service
charge, is not an attempt to forecast Plaintiff’s damages in the event of a burglary. Accordingly,
because the Limitation of Liability Provision is an exculpatory provision, rather than a reverse
liquidated damages provision, Plaintiff’s arguments to that effect are unavailing.10
In sum, the Court finds that, because the Exculpatory Provision is enforceable, Plaintiff
cannot recover any damages for losses arising from the burglary of the Store on his breach of
contract claim. Additionally, the Limitation of Liability Provision is enforceable, and thus, to the
10
I note that Plaintiff also argues that the Exculpatory Provisions should not be enforced, based
on Plaintiff’s representations regarding the impact of the alleged forgery of the 2006 Contract on
the 2014 Contract. Specifically, in his Certification, Plaintiff asserts that “had the 2006 Contract
not been forged, I would have (prior to signing) reviewed the Terms and Conditions on the
Contract,” including the Exculpatory Provisions. Fabricatore Cert. ¶ 9-11. However, as Judge
Cooper has already recognized, the 2014 Contract is the operative agreement in this case, not the
2006 Contract, and thus, Plaintiff’s arguments regarding the forgery provide no basis for this
Court to hold that the Exculpatory Provisions are unenforceable. See ECF No. 39 at 23.
Moreover, Plaintiff’s argument, distilled to its essence, is that his failure to read the 2014
Contract is attributable to the alleged forgery of the 2006 Contract, and thus, that he should be
excused from having to comply with the Exculpatory Provisions. However, it is axiomatic that
“one who does not choose to read a contract before signing it cannot later relieve himself of its
burdens.” Abel Holding Co. v. Am. Dist. Tel. Co., 138 N.J. Super. 137, 157 (Law. Div. 1975),
aff'd, 147 N.J. Super. 263 (App. Div. 1977). Accordingly, because the 2006 Contract is not the
operative agreement in this case, and because Plaintiff’s failure to read the 2014 Contract
provides no basis for relieving him of its obligations, I reject Plaintiff’s argument that the
Exculpatory Provisions are unenforceable based on the alleged forgery.
21
extent that Plaintiff seeks to recover compensatory damages outside of the Store’s losses for
Defendant’s alleged failure to perform its contractual obligation to call Plaintiff or dispatch the
Police, Plaintiff’s recoverable damages on his breach of contract claim are limited to $1,000.
B.
Remand is Warranted for Lack of Subject Matter Jurisdiction
Having found that Plaintiff’s recoverable damages on his breach of contract claim are
limited to $1,000, the Court must review its subject matter jurisdiction over this case. In that
regard, pursuant to 28 U.S.C. § 1447(c), removed cases, such as the case at bar, may be
remanded at any time before final judgment, if the district court determines that it lacks subject
matter jurisdiction over the case. 28 U.S.C. § 1447(c); see DeJoseph v. Cont'l Airlines, Inc., 18
F. Supp. 3d 595, 597 (D.N.J. 2014) (“Removal is not appropriate if the case does not fall within
the district court's original federal question jurisdiction and the parties are not diverse.”).
Here, the jurisdiction of this Court was based solely on the existence of diversity
jurisdiction under 28 U.S.C. § 1332. For diversity jurisdiction to exist under § 1332, each party
must be of diverse citizenship from each other and the amount in controversy must exceed
$75,000. 28 U.S.C. § 1332(a); see Grand Union Superm. of the Virgin Isl., Inc., v. H.E. Lockhart
Mgmt., Inc., 316 F.3d 408, 410 (3d Cir. 2003). The parties are of diverse citizenship, and, at the
time this case was removed, Plaintiff asserted eight causes of action, exceeding the threshold
jurisdictional amount. Nonetheless, Plaintiff’s sole remaining cause of action in this case is his
claim for breach of contract, and, because I have determined that $1,000 Limitation of Liability
Provision is enforceable, Plaintiff’s maximum recovery in this case is less than the required
jurisdictional amount. Accordingly, because the minimum amount in controversy for diversity
jurisdiction is no longer satisfied, this Court is without subject matter jurisdiction and remand is
appropriate. See Valhal Corp. v. Sullivan Assocs., Inc., 44 F.3d 195, 209 (3d Cir. 1995)
22
(“Because we have concluded that the limitation of liability clause is an enforceable part of the
contract which is the basis of this diversity action, [the plaintiff’s] maximum possible recovery is
$50,000. . . . Accordingly, we will vacate the order of the district court and remand with
directions to dismiss for lack of subject matter jurisdiction.”).
That said, Plaintiff has moved for reconsideration of the Magistrate Judge’s Order
denying Plaintiff’s request for leave to amend his NJCFA claim. If Plaintiff were able to assert
such a claim, the jurisdictional amount may exceed $75,000. Accordingly, this Court will delay
a determination on remand pending a decision on the Motion for Reconsideration.
IV.
CONCLUSION
For the foregoing reasons, Defendant’s Motion for Summary Judgment is granted in part
and denied in part, as follows: (i) Defendant’s Motion is granted, insofar as Defendant seeks an
order that the Exclusionary Provision bars Plaintiff from recovering damages for the Store’s
losses; (ii) Defendant’s Motion is denied, insofar as Defendant seeks an order that the
Exclusionary Provision bars Plaintiff from recovering any damages on his breach of contract
claim; and (iii) Defendant’s Motion is granted, insofar as Defendant seeks an order that any
damages that Plaintiff can recover on his breach of contract claim are limited to $1,000 under the
Limitation of Liability Provision.
Dated: July 2, 2018
/s/ Freda L. Wolfson
Hon. Freda L. Wolfson
United States District Judge
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