Shakeri et al v. ADT Security Services Inc
Filing
66
MEMORANDUM OPINION AND ORDER denying 62 MOTION to Dismiss Plaintiffs' Fourth Amended Complaint filed by ADT Security Services Inc. (Ordered by Judge Sidney A Fitzwater on 11/4/2016) (Judge Sidney A Fitzwater)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
ABRAHAM SHAKERI, et al.,
Plaintiffs,
VS.
ADT SECURITY SERVICES, INC.
d/b/a ADT,
Defendant.
§
§
§
§ Civil Action No. 3:13-CV-2852-D
§
§
§
§
§
§
MEMORANDUM OPINION
AND ORDER
Defendant Tyco Integrated Security LLC, f/k/a ADT Security Services, Inc. (“ADT”)1
moves to dismiss plaintiffs’ fourth amended complaint on the basis of an exculpatory
provision in a contract to which the Fifth Circuit has held plaintiffs are bound. For the
reasons that follow, the court denies the motion.
I
Because this case is the subject of two prior memorandum opinions of this court and
an opinion of the Fifth Circuit, see Shakeri v. ADT Security Services, Inc., 816 F.3d 283 (5th
Cir. 2016) (“Shakeri III”); Shakeri v. ADT Security Services, Inc., 2014 WL 5780955 (N.D.
Tex. Nov. 6, 2014) (Fitzwater, C.J.) (“Shakeri II”); and Shakeri v. ADT Security Services,
Inc., 2013 WL 6498268 (N.D. Tex. Dec. 11, 2013) (Fitzwater, C.J.) (“Shakeri I”), the court
1
ADT Security Services, Inc. changed its name to Tyco Integrated Security LLC in
June 2012. Because the name change occurred after the events giving rise to this litigation,
the court will refer to the defendant as ADT.
will limit its discussion of the background facts and procedural history to what is pertinent
to this decision.
In 1988 plaintiffs Abraham Shakeri (“Shakeri”) and Kahatereh Taji (“Taji”),
proprietors of a jewelry store called Neimax Jewelry(“Neimax”), entered into a contract with
ADT pursuant to which ADT agreed to install, monitor, and maintain an alarm system with
a backup alarm at Neimax.2 On August 26, 1999 Shakeri, acting as President of Neimax,
executed a second contract with ADT (“1999 Contract”) under which ADT updated and
replaced some of the alarm system’s existing components. The 1999 Contract purports to
limit ADT’s liability, providing, in pertinent part:
ADT SHALL IN NO EVENT BE LIABLE FOR ANY
CONSEQUENTIAL OR INCIDENTAL DAMAGES OF ANY
NATURE, INCLUDING WITHOUT LIMITATION,
DAMAGES FOR PERSONAL INJURY OR DAMAGES TO
PROPERTY AND HOWEVER OCCASIONED, WHETHER
ALLEGED AS RESULTING FROM BREACH OF
WARRANTY OR CONTRACT BY ADT OR NEGLIGENCE
OF ADT OR OTHERWISE.
D. App. 2 (bold font omitted). The contract also provides:
2
In deciding defendant’s Rule 12(b)(6) motion, the court construes plaintiffs’ fourth
amended complaint in the light most favorable to plaintiffs, accepts as true all well-pleaded
factual allegations, and draws all reasonable inferences in plaintiffs’ favor. See, e.g., Lovick
v. Ritemoney Ltd., 378 F.3d 433, 437 (5th Cir. 2004). “The court’s review [of a Rule
12(b)(6) motion] is limited to the complaint, any documents attached to the complaint, and
any documents attached to the motion to dismiss that are central to the claim and referenced
by the complaint.” Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387
(5th Cir. 2010).
-2-
IT IS UNDERSTOOD THAT ADT IS NOT AN INSURER,
THAT INSURANCE, IF ANY, SHALL BE OBTAINED BY
THE CUSTOMER AND THAT THE AMOUNTS PAYABLE
TO ADT HEREUNDER ARE BASED UPON THE VALUE
OF THE SERVICES AND THE SCOPE OF LIABILITY AS
HEREIN SET FORTH AND ARE UNRELATED TO THE
VALUE OF THE CUSTOMER’S PROPERTY OR
PROPERTY OF OTHERS LOCATED IN CUSTOMER’S
PREMISES.
CUSTOMER AGREES TO LOOK
EXCLUSIVELY TO CUSTOMER’S INSURER TO
RECOVER FOR INJURIES OR DAMAGE IN THE EVENT
OF ANY LOSS OR INJURY AND RELEASES AND
WAIVES ALL RIGHT OF RECOVERY AGAINST ADT
ARISING BY WAY OF SUBROGATION. . . . THE
CUSTOMER DOES NOT DESIRE THIS CONTRACT TO
PROVIDE FOR FULL LIABILITY OF ADT AND AGREES
THAT ADT SHALL BE EXEMPT FROM LIABILITY FOR
LOSS, DAMAGE OR INJURY DUE DIRECTLY OR
INDIRECTLY TO OCCURRENCES, OR CONSEQUENCES
THEREFROM, WHICH THE SERVICE OR SYSTEM IS
DESIGNED TO DETECT OR AVERT; THAT IF ADT
SHOULD BE FOUND LIABLE FOR LOSS, DAMAGE OR
INJURY DUE TO A FAILURE OF SERVICE 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 THE AGREED UPON DAMAGES AND NOT
AS A PENALTY, AS THE EXCLUSIVE REMEDY; AND
THAT THE PROVISIONS OF THIS PARAGRAPH SHALL
APPLY IF LOSS, DAMAGE OR INJURY, IRRESPECTIVE
OF CAUSE OR ORIGIN, RESULTS DIRECTLY OR
INDIRECTLY TO PERSON OR PROPERTY FROM
PERFORMANCE OR NONPERFORMANCE OF
OBLIGATIONS IMPOSED BY 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.
-3-
On January 12, 2012 Neimax was robbed. During the robbery, Shakeri pushed the
panic button on his alarm system multiple times, but the alarm did not respond. Shakeri was
severely beaten and tasered. Shakeri alleges that ADT has admitted that, at the time of the
robbery, the alarm system was broken and no monitoring was taking place.
Shakeri and Taji sued ADT in state court alleging claims for breach of contract, fraud,
negligence, and violation of the Texas Deceptive Trade Practices-Consumer Protection Act
(“DTPA”), Tex. Bus. & Com. Code Ann. §§ 17.41-17.63 (West 2016). After removing the
case to this court, ADT moved, inter alia, to dismiss plaintiffs’ negligence claim on the basis
that there is no common law duty to install, monitor, and repair an alarm system, and, to the
extent ADT was contractually obligated to install, monitor, and repair Neimax’s alarm
system and breached this contractual obligation, plaintiffs’ only remedy was to sue for breach
of contract.3 The court granted ADT’s motion to dismiss plaintiffs’ negligence claim,
holding that
plaintiffs have not demonstrated that in Texas there is a common
law duty to provide an operating top of the line commercial
alarm. As the petition is now pleaded, if ADT had such an
obligation, it arose by contract. Accordingly, because plaintiffs
have not plausibly pleaded a “violation of a duty imposed by
law independent of the contract,” the court grants ADT’s motion
to dismiss their negligence claim.
3
ADT also moved to dismiss plaintiffs’ fraud and DTPA claims and to limit its
damages for breach of contract to $1,000. The court granted in part and denied in part
ADT’s motion to dismiss, declined to limit plaintiffs’ contract damages to the sum of $1,000,
and granted plaintiffs leave to file an amended complaint. Shakeri I, 2013 WL 6498268, at
*4.
-4-
Shakeri I, 2013 WL 6498268, at *2 (citations omitted).
As permitted by Shakeri I, plaintiffs filed an amended complaint, which they later
amended a second and third time. In their third amended complaint, plaintiffs alleged claims
for breach of contract, violation of the DTPA, fraudulent inducement, and breach of implied
warranty. ADT moved to dismiss plaintiffs’ claims under Rules 9(b) and 12(b)(6) and again
sought to limit Neimax’s recoverable contract damages to $1,000. The court granted ADT’s
Rule 12(b)(6) motion, held that Neimax’s recoverable damages for breach of contract are
capped at $1,000, and raised, sua sponte that ADT was entitled to dismissal of plaintiffs’
separate claim for breach of the implied warranty of good and workmanlike performance of
services. See Shakeri II, 2014 WL 5780955, at *11. Plaintiffs then moved for an agreed
judgment against ADT in the amount of $1,000 on their remaining breach of contract claim,
and the court granted the motion. Plaintiffs appealed.
On appeal, plaintiffs argued that this court had erred in dismissing their claims for
common law negligence, breach of implied warranty of good and workmanlike performance
under the common law and the DTPA, unconscionable conduct under the DTPA, and
common law fraudulent inducement. See Shakeri III, 816 F.3d at 291. The Fifth Circuit held
at the outset that, despite plaintiffs’ argument to the contrary, they were bound by the terms
of the 1999 Contract. Id. The panel then held that this court had erred for two reasons in
dismissing plaintiffs’ negligence claim. First, the Texas case on which the court in Shakeri
I relied—Chapman Custom Homes, Inc. v. Dallas Plumbing Co., 446 S.W.3d 29 (Tex. App.
2013, pet. granted), rev’d, 445 S.W.3d 716 (Tex. 2014)—was overruled by the Supreme
-5-
Court of Texas after the court decided Shakeri I. The Fifth Circuit held that that decision
made clear that “[p]laintiffs should not be faulted for failing to specifically demonstrate that
a common law duty to provide an operating top of the line commercial alarm exists in Texas
because such duties may be implied by the relationship between the parties.” Shakeri III, 816
F.3d at 293. Second, the Fifth Circuit explained that the economic loss rule did not preclude
plaintiffs’ negligence claim because
[w]hile Plaintiffs assert a duty that sounds similar to the one
covered by the contract, the nature of Plaintiffs’ injury is noneconomic. Plaintiff Shakeri alleged that he suffered severe and
permanent physical injuries when Neimax was robbed on
January 12, 2012. Plaintiff Shakeri’s injury is therefore the kind
of “physical harm” that is not covered by the economic loss rule
and is not defeated by the existence of a contract between the
parties.
Id. The panel reversed this court’s judgment dismissing plaintiffs’ negligence claim and
remanded for further proceedings on this claim.4
On remand, plaintiffs filed a fourth amended complaint in which they assert a single
claim for “all the negligence approved actions by the Fifth Circuit.” 4th Am. Compl. 6.
ADT moves to dismiss on the basis that the 1999 Contract bars plaintiffs’ negligence claim,
or, in the alternative, that it limits plaintiffs’ recoverable damages to the sum of $1,000.
Plaintiffs oppose ADT’s motion.
4
The panel affirmed this court’s orders dismissing plaintiffs’ remaining tort claims.
Shakeri III, 816 F.3d at 296.
-6-
II
A
ADT moves to dismiss plaintiffs’ negligence claim, contending that, under the clear
terms of the 1999 Contract,
Plaintiffs agreed that ADT would not be liable for consequential
or incidental damages of any nature, including damages for
personal injury, that ADT was exempt from liability for
negligence related to the services it provided under the Contract,
that Plaintiffs would look solely to their insurance company to
recover for any injuries or losses and that Plaintiffs’ recoverable
damages for any liability on the part of ADT would be limited
to $1000.
D. Br. 4. It contends that in the alarm services context, Texas courts routinely uphold
limitation of liability provisions identical to the one in the 1999 Contract against claims for
negligence and gross negligence; that outside of the alarm services context, the 1999
Contract’s limitation of liability provision satisfies Texas’s requirements for the enforcement
of contractual pre-injury releases; and, alternatively, plaintiffs’ recoverable damages are
limited by the 1999 Contract’s limitation of damages provision.
Plaintiffs respond that the issues ADT raises in its motion to dismiss “were all
addressed by the Court of Appeals in [its] opinion and [ADT] lost.” P. Br. 1. They argue
that ADT, in its motion, is “trying go to around the Court of Appeals[’] findings and ruling,”
that ADT’s motion is “frivolous,” and that they have “stated their claim with particular facts
supporting each element.” Id. at 2. Plaintiffs do not specifically respond to ADT’s argument
that the 1999 Contract’s limitation of liability provision bars their negligence claim or that
-7-
the 1999 Contract limits their recoverable damages to the sum of $1,000.
B
ADT’s contention that the exculpatory clause in the 1999 Contract relieves it from
liability is an affirmative defense on which ADT will have the burden of proof at trial. See
Rowlett v. McMillan, 574 S.W.2d 625, 627 (Tex. App. 1978, writ ref’d n.r.e.) (holding that
exculpatory clause “is an affirmative defense which under [Tex. R. Civ. P. 94], is required
to be affirmatively pled.”).
“‘Although dismissal under Rule 12(b)(6) is ordinarily
determined by whether the facts alleged in the complaint, if true, give rise to a cause of
action, a claim may also be dismissed if a successful affirmative defense appears clearly on
the face of the pleadings.’” Cochran v. Astrue, 2011 WL 5604024, at *1 (N.D. Tex. Nov.
17, 2011) (Fitzwater, C.J.) (quoting Sivertson v. Clinton, 2011 WL 4100958, at *2 (N.D. Tex.
Sept. 14, 2011) (Fitzwater, C.J.)); see also White v. Padgett, 475 F.2d 79, 82 (5th Cir. 1973)
(holding that claim is “subject to dismissal under Rule 12(b)(6) . . . when [an] affirmative
defense clearly appears on the face of the complaint.”). Stated another way, ADT is not
entitled to dismissal under Rule 12(b)(6) unless plaintiffs “ha[ve] pleaded [themselves] out
of court by admitting to all of the elements of the defense.” Cochran, 2011 WL 5604024,
at *1 (quoting Sivertson, 2011 WL 4100958, at *3).
Under Texas law, “[a]greements exempting a party from future liability for negligence
are generally recognized as valid and effective except where, because of the relationship of
the parties, the exculpatory provision is contrary to public policy or the public interest.”
Crowell v. Hous. Auth. of City of Dall., 495 S.W.2d 887, 889 (Tex. 1973). “If the contract
-8-
is between private persons who bargain from positions of substantially equal strength, the
agreement is ordinarily enforced by the courts.” Id. “The exculpatory agreement will be
declared void, however, where one party is at such disadvantage in bargaining power that he
is practically compelled to submit to the stipulation.” Id. “In determining whether a
limitation of liability clause is unconscionable or against public policy, courts generally
consider the entire atmosphere in which the agreement was made, the bargaining process the
parties went through, and whether there is such a disparity in bargaining power between the
parties that one party is forced to agree to the exculpatory provision.” Mireles v. Tejas
Appraisal & Inspection Co., 2007 WL 1826074, at *1 (Tex. App. 2007, no pet.)
(memorandum opinion) (citing Head v. U.S. Inspect DFW, Inc., 159 S.W.3d 731 (Tex. App.
2005, no pet.); Pony Express Courier Corp. v. Morris, 921 S.W.2d 817, 821 (Tex. App.
1996, no writ)).
C
The court holds that ADT is not entitled to a dismissal at the Rule 12(b)(6) stage of
plaintiffs’ negligence claim based on the affirmative defense that the exculpatory provisions
in the 1999 Contract bar this claim. Although plaintiffs neither plead nor argue that the
exculpatory provisions of the 1999 Contract are unenforceable because they violate public
policy, the court cannot conclude, based only on the allegations of the fourth amended
complaint, that they do not. The only allegations in the fourth amended complaint that refer
to the 1999 Contract are plaintiffs’ assertion that “[t]he alarm system and backup alarm was
contracted and paid for by Neimax since 1987 the opening of the jewelry store,” 4th Am.
-9-
Compl. 1, and plaintiffs’ quotation from Shakeri III, in which the panel stated that “[o]n
August 26, 1999, Shakeri, acting as President of Neimax executed a second contract with
ADT (1999 Contract) under which ADT updated and replaced some of the alarm system’s
existing components,” id. at 3 (quoting Shakeri III, 816 F.3d at 287-88), and cited various
provisions from the 1999 Contract. These allegations do not admit that the 1999 Contract
was enforceable or that there was not a disparity of bargaining power between the parties in
entering into the 1999 Contract. Although the court does not suggest that ADT cannot
prevail on summary judgment or at trial based on the exculpatory provisions in the 1999
Contract, it concludes that plaintiffs’ negligence claim cannot be dismissed at the Rule
12(b)(6) stage. This is because plaintiffs have not pleaded themselves out of court by
admitting all of the elements of this affirmative defense. Accordingly, the court declines to
grant ADT’s motion to dismiss plaintiffs’ negligence claim based on the affirmative defense
that the exculpatory provisions in the 1999 Contract bar plaintiffs’ claim.
To the extent plaintiffs contend that the Fifth Circuit considered and rejected the
arguments ADT is raising in its motion to dismiss, they are mistaken. Although in Shakeri
III the panel stated that “the district court erred when it suggested that, in any event,
Plaintiff’s negligence claim would be covered by the 1999 Contract,” and that “Plaintiff
Shakeri’s injury is therefore the kind of ‘physical harm’ that is not covered by the economic
loss rule and is not defeated by the existence of a contract between the parties,” Shakeri III,
816 F.3d at 293, it made these statements in the context of its discussion of the economic loss
rule. The panel never addressed—because it was not raised before the panel—ADT’s
- 10 -
affirmative defense that plaintiffs’ negligence claim is barred by the limitation of liability
provisions in the 1999 Contract.
III
The court likewise denies ADT’s alternative request to limit plaintiffs’ recoverable
damages to the sum of $1,000. To be sure, “Texas courts have repeatedly upheld liability
limiting clauses in alarm contracts.” Kim v. Stanley Convergent Sec. Solutions, Inc., 2013
WL 1715789, at *2 (N.D. Tex. Apr. 19, 2013) (Lynn, J.) (citing Vallance & Co. v. DeAnda,
595 S.W.2d 587, 589 (Tex. Civ. App. 1980, no writ); Schepps v. Am. Dist. Tel. Co. of Tex.,
286 S.W.2d 684, 690 (Tex. Civ. App. 1955, no writ)). But such clauses are also subject to
the requirement that they not violate public policy. See Arthur’s Garage, Inc. v. RacalChubb Sec. Sys., Inc., 997 S.W.2d 803, 810 (Tex. App. 1999, no pet.) (holding, in context
of summary judgment motion, that agreement to limit liability in alarm service contract was
enforceable where plaintiff “has not asserted any disparity in the bargaining power between
the parties . . . [and] the alarm contract provides [plaintiff] could have obtained greater
protection against losses by paying an additional amount commensurate with the level of
protection desired.”). As with exculpatory clauses, an agreement to limit liability “will not
violate public policy if there is no disparity in bargaining power between the parties.” Fox
Elec. Co. v. Tone Guard Sec., Inc., 861 S.W.2d 79, 83 (Tex. App. 1993, no pet.). As the
court has already explained, plaintiffs have not pleaded facts in their fourth amended
complaint that would enable the court to conclude, from the face of the pleading, that the
limitation-of-liability provision in the 1999 Contract is enforceable (i.e., does not violate
- 11 -
public policy). Accordingly, the court declines to grant ADT’s alternative request that it
limit plaintiffs’ recoverable damages to the sum of $1,000.
The court recognizes that, in Shakeri II, the court held that plaintiffs’ recoverable
contract damages were limited to the sum of $1,000. In reaching this conclusion, the court
followed the approach taken in Kim, in which the court held:
Vallance and Arthur’s Garage unequivocally establish that such
provisions are presumptively valid and supported by public
policy. Plaintiff has pled no facts that might rebut that
presumption, and the Court declines to infer any. See Posey v.
Sw. Bell Yellow Pages, Inc., 878 S.W.2d 275 (Tex. App.—
Corpus Christi 1994, no writ) (“An allegation that a provision in
a contract is void, unenforceable or unconscionable is a matter
of avoidance which must be pled.”).
Kim, 2013 WL 1715789, at *2. But in Shakeri II and Kim, the court was addressing whether
a limitation-of-liability provision in a contract limited the amount of damages that the
plaintiff could recover on a breach of contract claim. Under Texas law, “[a]n allegation that
a provision in a contract is void, unenforceable, or unconscionable is a matter in the nature
of avoidance and must be affirmatively pleaded.” 950 Corbindale, L.P. v. Kotts Cap.
Holdings Ltd. P’ship, 316 S.W.3d 191, 196 (Tex. App. 2010, no pet.). In the context of
plaintiffs’ negligence claim, however, there is no apparent reason for plaintiffs to have
affirmatively pleaded the unenforceability of any provision in the 1999 Contract.
Accordingly, the court cannot conclude at the Rule 12(b)(6) stage, based only on the
allegations of plaintiffs’ fourth amended complaint, as it did in Shakeri II, that the limitationof-liability provision limits plaintiffs’ recoverable damages to the sum of $1,000.
- 12 -
*
*
*
Accordingly, for the reasons explained, the court denies ADT’s motion to dismiss.
SO ORDERED.
November 4, 2016.
_________________________________
SIDNEY A. FITZWATER
UNITED STATES DISTRICT JUDGE
- 13 -
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?