Jeannie's Jewelers, Inc. v. ADT Security Services, Inc. et al

Filing 14

MEMORANDUM OPINION granting Defendants Motion.. Signed by District Judge James C. Cacheris on 5/22/12. (See Memorandum for further details)(gwal, )

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division

JEANNIE’S JEWELERS, INC.,
Plaintiff,
v.
ADT SECURITY SERVICES, INC.,
et al.,
Defendants.

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1:12cv265 (JCC/IDD)

M E M O R A N D U M

O P I N I O N

This matter is before the Court on Defendants ADT
Security Services, Inc. (“ADT”), Broadview Security, Inc.
(“Broadview”), and Brink’s Home Security, Inc.’s (“Brink’s”)
(collectively “Defendants”) Motion to Dismiss [Dkt. 3] (the
“Motion”).

For the following reasons, the Court will grant

Defendants’ Motion.
I. Background
This case involves allegations of negligence and
breach of contract against a security company in connection with
the burglary of a jewelry store.
A.

Factual Background

Plaintiff Jeannie’s Jewelers, Inc. (“Plaintiff” or
“Jeannie’s”) is the owner of a jewelry store located in Falls
Church, Virginia.

(Compl. [Dkt. 1 Ex. A] ¶ 1.)

1

Thuy “Jeannie”

Nguyen is the president and sole shareholder of Jeannie’s.
(Id.)

On March 26, 2009, Jeannie’s entered into a contract with

Defendant ADT for security services.1

(Compl. ¶ 5.)

Nguyen, on

behalf of Jeannie’s, executed a Protective Service Agreement
(“PSA”) with ADT.

(Id.)

ADT thereafter installed a security

system in Jeannie’s store.

(Compl. ¶ 6.)

The installing

technician represented that the system was operational.

(Id.)

On December 14, 2009, Plaintiff’s store was
burglarized.

(Compl. ¶ 7.)

Jeannie’s alleges that the security

system installed by ADT was not fully operational at the time of
the burglary.

(Compl. ¶ 8.)

Among its defective components

were the line-cut feature (which triggers the alarm in the event
a phone line is cut), indoor motion detectors, and a sensor
affixed to the store’s safe.

(Id.)

The PSA included certain provisions allocating risk
between the parties (the “risk allocation provisions”).
For example, Sections 7(b) and 7(c) emphasize that ADT is not an
insurer and that it is the purchaser’s obligation to obtain
adequate insurance.

(See Defs.’ Mem. Ex. 1 (“PSA”) [Dkt. 4-2]

1

Jeannie’s in fact contracted with Defendant Brink’s. Brink’s subsequently
changed its name to Broadview Security, Inc., and Broadview, in turn, later
merged with ADT. (Compl. ¶ 2.) ADT is successor in interest to Brink’s, and
is bound to the contract at issue in this case. (See Defs.’ Mem. Ex. 1
(“PSA”) [Dkt. 4-2] § 12(c).) The parties agree that ADT is the proper
defendant in this action. (Defs.’ Mem. [Dkt. 4] at 1 n.1; Opp. [Dkt. 8] at 1
n.1.) While all references in the contract are to Brink’s, this Memorandum
Opinion will, for purposes of clarity, refer solely to ADT.

2

§§ 7(b) & (c).)2

In Section 7(d), the PSA states that it is

“impractical and extremely difficult” to fix actual damages
resulting from ADT’s breach of the PSA or the failure of the
protective equipment to operate properly.

(See PSA § 7(d).)

Accordingly, Section 7(e) limits ADT’s liability to “NOT MORE
THAN THE TOTAL AMOUNT OF FEES ACTUALLY PAID TO BRINK’S . . .
DURING THE TWELVE-MONTH PERIOD PRECEDING THE EVENT OR OMISSION”
giving rise to the purchaser’s claim.
(capitalization in original).)

(See PSA § 7(e)

Immediately above the signature

line on the PSA is a statement which reads as follows:

“YOU . .

. ACKNOWLEDGE THAT YOU UNDERSTAND SECTION 7 WHICH LIMITS BRINK’S
LIABILITY AND THAT YOU MAY INCREASE BRINK’S LIMITATION OF
LIABILITY BY PAYING AN ADDITIONAL CHARGE TO BRINK’S.”
(capitalization and bold in original).)

(PSA at 1

Jeannie’s further

agreed on the Installation Work Order that “Brink’s Home
Security is providing the Protective Equipment to you subject to
the terms and conditions of your Protective Service Agreement
(Defs.’ Mem. Ex. 1 at 4.)3

including Sections 6 through 8.”

2

Jeannie’s attaches a copy of the PSA to its Complaint and expressly
incorporates the document by reference. (Compl. ¶ 5.) The Court may
therefore consider the text of the PSA in ruling on Defendants’ Motion to
Dismiss. See Philips v. Pitt Cnty. Mem’l Hosp., 572 F.3d 176, 180 (4th Cir.
2009) (citations omitted). Defendants also include the PSA as an exhibit to
their Motion. The Court cites to Defendants’ exhibit because Jeannie’s does
not challenge its authenticity and Jeannie’s exhibit is illegible. See
Blankenship v. Manchin, 471 F.3d 523, 526 n.1 (4th Cir. 2006) (a court
reviewing a Rule 12(b)(6) motion may consider documents attached to the
motion to dismiss so long as they are integral to the complaint and
authentic).
3
Section 12(a) of the PSA provides that “[t]he entire agreement between you
and Brink’s consists of this Protective Service Agreement and the following
. . . Customer Emergency Information Schedule [and] Installation Work Order.”

3

Jeannie’s asserts claims for negligence and breach of
contract, alleging that it sustained $2.2 million in lost
merchandise as a result of the burglary.

The PSA, however,

limits Jeannie’s recovery on such claims to the amount it paid
for twelve months of service, which at $35.99 per month (see PSA
§ 2(b)) comes to $431.88.
B.

Procedural Background

Plaintiff originally filed suit in Arlington County
Circuit Court on May 27, 2011.

[Dkt. 1 Ex. A.]

Defendants were

not served with a copy of the Complaint until February 17, 2012.
Defendants then removed the case to this Court on March 9, 2012.
[Dkt. 1.]
Dismiss.

On March 16, 2012, Defendants filed a Motion to
[Dkt. 3.]

Plaintiff filed an opposition on March 30,

2012 [Dkt. 8], to which Defendants replied on April 4, 2012
[Dkt. 10].

On May 11, 2012, the Court held oral argument.
Defendants’ Motion is before the Court.
II.

Standard of Review

Rule 12(b)(6) allows a court to dismiss those
allegations which fail “to state a claim upon which relief can

(PSA § 12(a).) Jeannie’s only attached the PSA to its Complaint, while
Defendants include the PSA as well as the Customer Emergency Information
Schedule and Installation Work Order as exhibits to their Motion to Dismiss.
Jeannie’s does not challenge the authenticity of these documents. Because
all three documents constitute the parties’ entire agreement, only a portion
of which Jeannie’s attached to the Complaint, the Court may consider the
Customer Emergency Information Schedule and Installation Work Order in
connection with this Motion. See ScanSource, Inc. v. Thurston Grp., LLC, No.
DKC 11-0380, 2011 WL 1884775, at *1 n.1 (D. Md. May 18, 2011) (considering
the full copy of a contract submitted as an exhibit to defendant’s motion to
dismiss, where plaintiff excerpted only a portion of the contract in its
complaint).

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be granted.”

Fed. R. Civ. P. 12(b)(6).

A Rule 12(b)(6) motion

tests the legal sufficiency of the complaint.
Johnson, 521 F.3d 298, 302 (4th Cir. 2008).

Giarratano v.
A court reviewing a

complaint on a Rule 12(b)(6) motion must accept well-pleaded
allegations as true and must construe factual allegations in
favor of the plaintiff.
518, 522 (4th Cir. 1994).

See Randall v. United States, 30 F.3d
In addition to the complaint,

documents integral to and explicitly relied on in the complaint
may be considered if the plaintiff does not challenge their
authenticity.

Am. Chiropractic Ass’n v. Trigon Healthcare,

Inc., 367 F.3d 212, 234 (4th Cir. 2004).
In deciding a Rule 12(b)(6) motion, a court must be
mindful of the liberal pleading standards under Rule 8, which
require only “a short and plain statement of the claim showing
that the pleader is entitled to relief.”

Fed. R. Civ. P. 8.

While Rule 8 does not require “detailed factual allegations,” a
plaintiff must still provide “more than labels and conclusions”
because “a formulaic recitation of the elements of a cause of
action will not do.”

Bell Atl. Corp. v. Twombly, 550 U.S. 544,

555-56 (2007) (citation omitted).

To survive a motion to

dismiss, “a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible
on its face.’”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Twombly, 550 U.S. at 570).

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“A claim has facial

plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”

Id.

However,

“[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice” to meet
this standard, id., and a plaintiff’s “[f]actual allegations
must be enough to raise a right to relief above the speculative
level . . . .”

Twombly, 550 U.S. at 555.

Moreover, a court “is

not bound to accept as true a legal conclusion couched as a
factual allegation.”

Iqbal, 556 U.S. at 678.
III. Analysis

In their Motion, Defendants argue that Jeannie’s
negligence claim fails for want of a duty independent of ADT’s
contractual obligations.

Defendants also argue that Jeannie’s

breach of contract claim fails to the extent it seeks damages
above the defined amount set forth in the PSA.

The Court first

determines the governing law and then addresses each of
Defendants’ arguments in turn.
A.

Governing Law

Neither party discusses choice of law, but both assume
that Virginia law applies.

Based on the factual allegations in

the Complaint and a review of the PSA, this assumption is
correct.

As a federal court exercising diversity jurisdiction,

the Court must apply the choice of law rules of the forum state,

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i.e., Virginia.

Klaxon Co. v. Stentor Elect. Mfg. Co., 313 U.S.

487, 496-97 (1941).

With respect to Jeannie’s breach of

contract claim, Virginia law favors contractual choice of law
provisions, giving them full effect except in unusual
circumstances, see Tate v. Hain, 181 Va. 402, 410 (Va. 1943),
none of which are present here.

Here, the PSA provides that

“[t]he laws of the state of the installation location govern the
validity, enforceability and interpretation of th[e] Agreement.”
(PSA ¶ 12(d).)

The relevant contractual issue concerns the

validity and effect of the risk allocation provisions in the
PSA.

Therefore, pursuant to the choice of law provision in the

PSA, the law of Virginia, i.e., the installation location,
applies to Plaintiff’s breach of contract claim.

As for

Jeannie’s negligence claim, the Court adheres to the lex loci
delicti, or place of the wrong, standard which is the settled
rule in Virginia for tort claims.

Jones v. R.S. Jones &

Assocs., Inc., 246 Va. 3, 5 (Va. 1993).

Here, it is alleged

that ADT installed a faulty security system at Jeannie’s store
in Falls Church.

Thus the alleged wrong occurred in Virginia

and Virginia law applies to Jeannie’s negligence claim as well.
B.

Negligence

“To establish a cause of action for negligence, the
duty alleged to have been tortiously breached must be a common
law duty, not a duty arising between the parties solely by

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virtue of a contract.”

Holles v. Sunrise Terrace, Inc., 257 Va.

131, 136 (Va. 1999) (citing Foreign Mission Bd. v. Wade, 242 Va.
234, 241 (Va. 1991)).

This rule applies equally to allegations

of ordinary and gross negligence.

See Gedrich v. Fairfax Cnty.

Dep’t of Family Servs., 282 F. Supp. 2d 439, 476 (E.D. Va.
2003).
of law.

Whether a common law duty of care exists is a question
Holles, 257 Va. at 136.
Guided by these principles, this Court previously

dismissed a negligence claim brought in connection with an alarm
services contract.

See Carytown Jewelers, Inc. v. ADT Sec.

Servs., Inc., No. 3:05cv84, 2005 WL 1147800, at *3 (E.D. Va. May
16, 2005).

The Court noted that the negligence claim simply

alleged that the defendant negligently performed the contract
and was a mere “recasting of the breach of contract claim.”

Id.

“Because the duty allegedly performed in a negligent way was
created by contract, there [wa]s no negligence claim available
under Virginia law.”

Id. (citing Richmond Metro. Auth. v.

McDevitt St. Bovis, 256 Va. 553, 559 (Va. 1998)).
In order to avoid the outcome in Carytown, Jeannie’s
must demonstrate that ADT had a duty to provide alarm services
independent of the one imposed by contract.

In this vein,

Jeannie’s contends that because ADT rendered services for the
purposes of protecting its property, a common law duty exists.
In support of its argument, Jeannie’s turns to Section 323 of

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Restatement (Second) of Torts, a provision which has been
applied by Virginia courts.

Section 323 provides that:

One who undertakes, gratuitously or for
consideration, to render services to another
which he should recognize as necessary for
the protection of the other’s person or
things, is subject to liability to the other
for physical harm resulting from his failure
to exercise reasonable care to perform his
undertaking, if
(a)

his failure to exercise such care
increases the risk of such harm, or

(b)

the harm is suffered because of the
other's reliance upon the undertaking.

Restatement (Second) of Torts § 323 (1965).
No Virginia courts appear to have analyzed the
application of Section 323 in the context of an alarm services
contract.

However, other courts have, and concluded that

Section 323 does not give rise to a duty independent of the
parties’ contractual obligations.

See Lala v. ADT Sec. Servs.,

Inc., No. 10-2698, 2010 WL 4923452, at *4 (D.N.J. Nov. 29,
2010).

In Lala, the court determined that Pfenninger v.

Hunterdon Central Regional High School, 167 N.J. 230 (N.J.
2001), a New Jersey case applying Section 323 and cited by the
plaintiff, “did not hold that a plaintiff may convert a breach
of contract into tort claims simply because the contract dealt
with the protection of persons or things.”
4923452, at *4.

Lala, 2010 WL

Rather, the case stood for the “proposition

that a plaintiff may assert tort claims against a defendant with
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whom he had a contract, but only if those claims arose out of
some legal duty other than the one imposed by the contract.”4
Id.

Because the plaintiff simply asserted that the defendant

did not carry out its obligation to provide alarm services
(which arose solely out of contract), the court granted summary
judgment in favor of the defendant on all tort claims.

Id.; see

also C-N-P Nw., Ltd. v. Sonitrol Corp., No. 06-CV-2516, 2008 WL
251816, at *8 (D. Minn. Jan. 29, 2008) (recommending that
summary judgment be granted in favor of defendant on negligence
claim where plaintiffs “failed to cite to any Minnesota case
where a party has been held liable in tort, pursuant to the
Restatement for failing to perform the services it agreed to
perform in a contract”).

4

In reaching this determination, the court in Lala focused on a sentence in
Pfenninger which immediately preceded the New Jersey Supreme Court’s
recitation of Restatement § 323: “[I]f a relation exists which would give
rise to a legal duty without enforcing the contract promise itself, the tort
action will lie, otherwise not.” Lala, 2010 WL 4923452, at *4 (quoting
Pfenninger, 167 N.J. at 241). The Virginia Supreme Court has held the same:
If the cause of complaint be for an act of omission
or non-feasance which, without proof of a contract to
do what was left undone, would not give rise to any
cause of action (because no duty apart from contract
to do what is complained of exists) then the action
is founded upon contract, and not upon tort. If, on
the other hand, the relation of the plaintiff and the
defendants be such that a duty arises from that
relationship, irrespective of the contract, to take
due care, and the defendants are negligent, then the
action is one of tort.
McDevitt, 256 Va. at 558.

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The Virginia cases applying the Restatement which
Jeannie’s cites are distinguishable, as they addressed whether a
legal duty existed between parties in the absence of a contract.
See, e.g., Kellermann v. McDonough, 278 Va. 478, 489 (Va. 2009)
(supervising adults to visiting minor); Didato v. Strehler, 262
Va. 617, 628-29 (Va. 2001) (medical providers to parent of
child); Boland v. Rivanna Partners, LLC, 69 Va. Cir. 308, 2005
WL 3105359, at *3 (Va. Cir. Ct. Nov. 21, 2005) (snow removal
contractor to non-contracting party).

Here, by contrast, ADT’s

obligation to install a security system arose solely by way of
contract.

Contrary to Jeannie’s assertion, there is no common

law duty to provide alarm services.

See Lala, 2010 WL 4923452,

at *4; see also Valenzuela v. ADT Sec. Servs., Inc., Nos. 1056455, 10-56517, 2012 WL 1131535, at *1 (9th Cir. Apr. 5, 2012)
(unpublished) (finding no duty to provide alarm services
independent of parties’ contract); Spengler v. ADT Sec. Servs.,
Inc., 505 F.3d 456, 458 (6th Cir. 2007) (same).

Accordingly,

Jeannie’s negligence claim is dismissed.5
C.

Limitation of Liability

As outlined in Section I.A., supra, the PSA contained
risk allocation provisions, which limited ADT’s liability -including on breach of contract claims -- to a defined amount.
5

Because Jeannie’s tort claim fails, so too does its request for punitive
damages. See Kamlar Corp. v. Haley, 224 Va. 699, 706-07 (Va. 1983) (holding
that proof of an independent, willful tort, beyond the mere breach of a duty
imposed by contract, is required as a predicate for an award of punitive
damages, regardless of the motives underlying the breach).

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The Fourth Circuit and other courts across the nation have found
similar provisions in alarm services contracts permissible.

See

Gill v. Rollins Protective Servs. Co., 722 F.2d 55, 58-59 (4th
Cir. 1983) (upholding limitation of liability provision in alarm
services contract against a negligence claim); see also Leon’s
Bakery, Inc. v. Grinnell Corp., 990 F.2d 44, 48 (2d Cir. 1993)
(“From all that the parties have cited to us and from all that
our own research has unearthed, it appears that all of the
courts that have considered the validity of limitation-ofliability clauses in contracts for the provision of [alarm]
systems have found those clauses to be permissible.”)
(collecting cases).

Indeed, this position has evolved into

basic hornbook law.

See, e.g., Majorie A. Shields, Validity,

Construction, and Application of Exculpatory and Limitation of
Liability Clauses in Burglary, Fire and Other Home and Business
Monitoring Service Contracts, 36 A.L.R. 6th 305 (2008) (“A
company that provides an alarm system may, by contract, limit
its liability to a specific amount or exculpate itself from
liability.”)
Jeannie’s does not argue that the risk allocation
provisions are unenforceable.

Instead, Jeannie’s contends that

the risk allocation provisions, and the entire contract, never
took effect.

Specifically, Jeannie’s points to Section 3(a) of

the PSA, which provides that “[y]ou will take and pay for the

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Service during an initial term of three years6 commencing from
the date Brink’s makes the Protective Equipment operational.”
(PSA § 3(a).)

Jeannie’s argues that because the security system

was not fully operational at the time of the burglary, the
contract never became effective.

This argument is only helpful

to Jeannie’s, however, if there is a common law duty to provide
alarm services which supports its negligence claim.

Because the

Court concludes that there is not, a finding that a contract
never existed would merely serve to foreclose Jeannie’s breach
of contract claim, resulting in dismissal of the Complaint in
its entirety.7
Under Federal Rule of Civil Procedure 8(d)(3), parties
may plead inconsistent facts and inconsistent legal theories.

5

Charles Alan Wright & Arthur R. Miller, Fed. Prac. & Proc. Civ.
§ 1283 (3d ed. 2010).

Thus, Jeannie’s argument that a contract

never existed does not necessarily dictate dismissal of its
breach of contract claim.
that a contract existed.

In fact, Defendants themselves argue
(Reply [Dkt. 10] at 5-6.)

Rather than

seeking dismissal of Jeannie’s breach of contract claim,
Defendants request that damages be limited to the contractually
agreed-upon amount.

(Reply at 7.)

6

Section 3 of the PSA was originally titled: INITIAL THREE-YEAR TERM AND
RENEWAL TERMS. The word “THREE” was crossed out by hand, and the word “five”
written above it. Thus, the initial term was apparently extended to five
years.
7
Jeannie’s also argues that the risk allocation provisions should be
construed strictly so as to exclude claims of gross negligence and willful
and wanton negligence. Of course, this argument is also fruitless given the
dismissal of Jeannie’s negligence claim.

13

Based on the Complaint and the documents properly
considered in connection with this Motion, the Court finds that
a contract plausibly took effect.
a written contract with ADT.

Jeannie’s of course executed

Directly above where Nguyen signed

the Installation Work Order on behalf of Jeannie’s, the document
reads: “You accept the Brink’s Protective Equipment and
acknowledge its placement, installation, demonstration and
testing to your satisfaction.”8

(Defs.’ Mem. Ex. 1 at 4.)

And,

while Jeannie’s alleges that the security system was not fully
operational at the time of the burglary, this does not
necessarily suggest that the security system was never
operational.

For these reasons, Jeannie’s breach of contract

claim survives notwithstanding its alternative theory that a
contract never existed.

That said, Jeannie’s advances no

argument as to why the risk allocation provisions in the PSA
should not limit the damages it may seek for breach of contract.
As such, Jeannie’s potential recovery on its breach of contract
claim is limited as set forth in Section 7(e) of the PSA.

See

Jhaveri v. ADT Sec. Servs., Inc., No. 2:11-cv-4426, 2012 WL
843315, at *7 (C.D. Cal. Mar. 6, 2012) (on a Rule 12 motion,
limiting plaintiffs’ potential recovery on breach of contract

8

When the bare allegations of a complaint conflict with any exhibits or other
documents, whether attached or adopted by reference, the exhibits or
documents prevail. Fare Deals Ltd. v. World Choice Travel.Com, Inc., 180 F.
Supp. 2d 678, 683 (D. Md. 2001) (citing Fayetteville Investors v. Commercial
Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991)).

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claim in accordance with risk allocation provisions set forth in
the parties’ agreement).
IV.

Conclusion

For these reasons, the Court will grant Defendant’s
Motion.
An appropriate Order will issue.

May 22, 2012
Alexandria, Virginia

/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE

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