LIMITED LIABILITY PROVISION PRECLUDED RECOVERY FOR BREACH OF CONTRACT FOR ANY AMOUNT OVER THE LIMITATION, ALTHOUGH THE LIMITATION OF LIABILITY WAS AN AFFIRMATIVE DEFENSE, IT WAS PROPERLY CONSIDERED ON A MOTION TO DISMISS (FIRST DEPT).
The First Department determined the limitation of liability provision precluded recovery for breach of contract for any amount over the limitation. The contract was an exclusive licensing agreement (ELA) for a securities trading system (ATS). The First Department noted that it was proper to consider the limitation of liability, an affirmative defense, on a motion to dismiss:
It was not error for Supreme Court to rule on the enforceabilty of the liability limitation provision, although it is an affirmative defense, on a motion to dismiss. In the ordinary course of deciding motions, courts consider whether documentary evidence establishes an asserted defense, in this case a defense concerning the limitation of liability provisions in the parties’ contracts … .
New York courts routinely enforce such liability-limitation provisions, especially when negotiated by sophisticated parties. The Court of Appeals has recognized that “[a] limitation on liability provision . . . represents the parties’ Agreement on the allocation of the risk of economic loss in the event that the contemplated transaction is not fully executed, which the courts should honor.* * * [The parties] may later regret their assumption of the risks of non-performance in this manner, but the courts let them lie on the bed they made”… . However, such clauses are unenforceable when, “[i]n contravention of acceptable notions of morality, the misconduct for which it would grant immunity smacks of intentional wrongdoing. This can be explicit, as when it is fraudulent, malicious or prompted by the sinister intention of one acting in bad faith. Or, when, as in gross negligence, it betokens a reckless indifference to the rights of others, it may be implicit” … . Electron Trading, LLC v Morgan Stanley & Co. LLC, 2018 NY Slip Op 00380, First Dept 1-15-18
CONTRACT LAW (LIMITED LIABILITY PROVISION PRECLUDED RECOVERY FOR BREACH OF CONTRACT FOR ANY AMOUNT OVER THE LIMITATION, ALTHOUGH THE LIMITATION OF LIABILITY WAS AN AFFIRMATIVE DEFENSE, IT WAS PROPERLY CONSIDERED ON A MOTION TO DISMISS (FIRST DEPT))/CIVIL PROCEDURE (MOTION TO DISMISS, AFFIRMATIVE DEFENSE, (LIMITED LIABILITY PROVISION PRECLUDED RECOVERY FOR BREACH OF CONTRACT FOR ANY AMOUNT OVER THE LIMITATION, ALTHOUGH THE LIMITATION OF LIABILITY WAS AN AFFIRMATIVE DEFENSE, IT WAS PROPERLY CONSIDERED ON A MOTION TO DISMISS (FIRST DEPT))/AFFIRMATIVE DEFENSE (CIVIL PROCEDURE, MOTION TO DISMISS, LIMITED LIABILITY PROVISION PRECLUDED RECOVERY FOR BREACH OF CONTRACT FOR ANY AMOUNT OVER THE LIMITATION, ALTHOUGH THE LIMITATION OF LIABILITY WAS AN AFFIRMATIVE DEFENSE, IT WAS PROPERLY CONSIDERED ON A MOTION TO DISMISS (FIRST DEPT))