KEN KIRSCHENBAUM, ESQ
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Exculpatory clause not to be confused with Limitation of liability clause
February 24, 2021
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Exculpatory clause not to be confused with Limitation of liability clause
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            A federal court recently commented on the exculpatory clause and limitation of liability clause, interpreting Georgia law as it applied to those provisions.  As you can see by the opinion below there remain some confusion, though I am not sure why.  Equating an exculpatory clause with a nominal limitation of liability clause or a covenant not to sue clause should be easily distinguishable.  I think the problem is that too often contracts combine these provisions.  The Standard Form Agreements separate these provisions and it's quite easy to see the difference.  While they may all end up insulating you from liability they are usually treated differently by judges when it comes time to enforce the contract.  These provisions do share one common issue, they will not be enforced to shield against gross negligence and willful misconduct.
            The case below deals primarily with arbitration issues, such as arbitrator powers and the court's function to review and possibly overturn an arbitration award.  Below excerpt deals with the protective provisions.
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            "OADS argues that Georgia’s public policy prohibits contractual damages limitations for intentional torts, and that the MOA’s covenant not to sue for consequential or special damages violated that public policy with respect to OADS’ claims for the intentional torts of conversion and tortious interference.”
            In Georgia, “it is well settled that contracts will not be avoided by the courts on the grounds that they violate public policy, except where the case is free from doubt and where an injury to the public interest clearly appears." Monitronics Int’l, Inc. v. Veasley, 746 S.E.2d 793, 802—03 (Ga. Ct. App. 2013).
            Additionally, “[i]t is also well settled that exculpatory clauses in which a business seeks to relieve itself from its own negligence are valid and binding in [Georgia], and are not void as against public policy unless they purport to relieve liability for acts of gross negligence or wilful [sic] or wanton conduct." Q Based on that holding, the Panel cited Monitronics for the proposition that “Georgia case law has firmly established the validity of contractual waivers of consequential damages even where a party seeks to relieve itself of claims for its own negligence." OADS Exh. 44 [Dirt No. 36-43]1| 102.
            OADS argues that Georgia public policy prohibits enforcement of the MOA’s covenant not to sue for consequential damages with regard to its conversion and tortious interference claims, and that the Panel was directly confronted with and then disregarded the Monitronics case. Gulfstream counters that the MOA’s covenant was not an “exculpatory clause[]," as it only limited the availability of certain types of damages instead of barring the parties from recovering '4
            Because Georgia specifically allows parties to waive “all recourse in the event of breach by the other,” the MOA’s damage limitation clause would not be void as to OADS’ breach of contract claims. Imgging Sys. Int’l, 490 S.E.2d at 127 (1997). 31 Case 1:20-cv-01033-LMB-MSN Document 45 Filed 02/05/21 Page 32 of 37 PageID# 3125 Case 1:20-cv-01033-LMB-MSN Document 45 Filed 02/05/21 Page 32 of 37 Page|D# 3125 at all. EQ Gulfstrearn argues that the caselaw presented by OADS to the Panel dealt with whether public policy allows parties to contractually foreclose liability (for example, whether a party could limit liability for negligence to a nominal level, which was at issue in Monitronics); whereas, as the Panel recognized, here “[d]irect damages would still have been available if Gulfstream had breached.” [Dkt. No. 1-2] 1i 103. OADS responds that the language in Monitronics describing “exculpatory clauses” being against public policy was followed by a footnote in which the Georgia Court of Appeals explained: “We take a moment here to note that although the section of the contract at issue is more accurately characterized as a limitation-of liability clause rather than an exculpatory clause . . . Georgia case law does not appear to treat such clauses differently for purposes ofreview.”mm, 746 S.E.2d at 802, n. 20 (internal citations omitted) (emphasis added). At best, the footnote cited by OADS may suggest that Georgia courts do not differentiate between exculpatory clauses and limitation-of—liability clauses; however, the footnote’s use ofthe word “appear” shows that this is not a “clearly defined" principle without “reasonable debate.” Long John Silver’s Rests, 514 F.3d at 349-50."
IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Alexandria Division GULFSTREAM AEROSPACE CORR, Plaintiff, v. 1:20-cv~1033 (LMB/MSN) OPTICAL AIR DATA SYSTEMS, LLC, Defendant  Filed 02/05/21
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
ken@kirschenbaumesq.com
www.KirschenbaumEsq.com