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Asch Webhosting, Inc. v. Adelphia Bus. Solutions Investment, LLC, 2007 WL 2122044 (D.N.J July 23, 2007).
Factual Background Edit
Asch entered intoa three-year agreement with Adelphia in December 2003. Under the agreement, Adelphia would supply Asch with internet services for a monthly fee. Asch began using the services in February 2004. On April 28, 2004, Adelphia informed Asch that it was terminating the agreement due to violations of the agreement’s "Acceptable Use Policy," effective noon on April 30, 2004. After speaking with Asch's counsel, Adelphia agreed to provide Asch with internet service for another month, so that Asch could procure another service provider. Asch claimed that the parties did not limit the extension of service to only thirty days.
Trial Court Proceedings Edit
Asch brought suit against Adelphia for breach of contract for terminating the internet services without proper notice or adequate justification. Asch sought $1.4 million in consequential damages due to the loss in business as a result of the termination. Adelphia moved for summary judgment on the ground that Asch’s claim for consequential damages was barred by the express terms of the contract.
The issue before the court was whether the exculpatory clause precluded Asch’s claim for consequential damages. Adelphia argued that the exculpatory clause in the warranty paragraph "prevents Asch from recovering any of the alleged damages it seeks in this action including, specifically, loss of business and loss of revenue." Asch argued that Adelphia’s "willful and predatory breach of contract invalidates the exculpatory clauses in the contract."
The court found that, even viewing the facts most favorable to Asch, the exculpatory clause was reasonable and Asch had demonstrated no conduct by Adelphia sufficient to overcome the limitations expressed in the exculpatory clause. The exculpatory language was found to be conspicuous and the language limiting Asch’s liability was in bold and capital block letters.
The court based its decision to enforce the exculpatory clause on the fact that the agreement was a product of a legitimate, arms-length business transaction entered into between two private commercial entities. Additionally, the agreement did not implicate any public policy or public interest concerns. Awarding Asch consequential damages in this case would circumvent the parties intent at the time of the contract, and render the exculpatory clause "superfluous."
The court found that the actions of Adelphia in terminating the agreement did not render the exculpatory clause void. Evidence showed that Adelphia terminated the agreement because Asch was "spamming" other customers of Adelphia in violation of the agreement’s "Acceptable Use Policy." Adelphia was entitled to rely on the complaints from its customers when deciding to terminate the agreement with Asch, as long as it relied on those complaints in good faith. Asch did not show that Adelphia relied on the complaints in bad faith. Asch's allegations against Adelphia, even if true, did not amount to "willful and wanton misconduct," "gross negligence," or a violation of Adelphia’s duty of good faith and fair dealing. The court also finds no merit in Asch’s sparse allegations of inequality or power imbalance between the parties.
Asch's argument about lack of notice and the resulting damages was undermined by the fact that Asch was offered services by another internet service provider for approximately $1,000 more than what Asch paid for Adelphia's services. The court further assumed that Asch could have purchased insurance to cover the risk of potential damages arising out of a loss of internet services.
The terms of the exculpatory clause were found to be clear on their face and the court refused to engage in judicial revision of the parties’ agreement in order to award Asch consequential damages. As a result, the court granted Adelphia's motion for summary judgment.