In a ruling that should interest lawyers who write online service terms, last month Judge Jon Tigar of the Northern District of California granted summary judgement to plaintiffs in a class-action breach of contract case brought against the Safeway supermarket chain. In doing so, the court found that a limitation of liability provision in the online terms of the Safeway.com grocery delivery service did not limit Safeway’s liability to the extent Safeway had argued.
In the case, plaintiffs sought breach of contract damages for Safeway’s repeated failure to live up to a promise that prices charged for products delivered by Safeway.com would be no more than those charged in the physical store from which the groceries were delivered.
Safeway argued in a summary judgement motion that under the Safeway.com terms of service each plaintiff agreed that any and all damages owed to that plaintiff, for any number of claims, would be limited to the amount of such plaintiff’s last order on Safeway.com.
The Safeway.com terms of service included the following provision:
“ANY LIABILITY OF SAFEWAY (INCLUDING ITS EMPLOYEES, AFFILIATES, OR AGENTS) TO YOU FOR DAMAGES, INJURIES, LOSSES AND CAUSES OF ACTION, OF ANY KIND OR NATURE, WHETHER IN CONTRACT, TORT, OR OTHERWISE, EITHER JOINTLY OR SEVERALLY, SHALL BE STRICTLY LIMITED TO THE AGGREGATE DOLLAR AMOUNT PAID BY YOU TO SAFEWAY IN YOUR MOST RECENT USE OF THE ONLINE SHOPPING SERVICE IMMEDIATELY PRIOR TO THE CLAIMED INJURY, LOSS, OR DAMAGE.”
In its summary judgement motion, Safeway argued that even though it may have repeatedly breached its price guarantee promise, the amount owed to each particular plaintiff for these multiple breaches must be limited to the amount of that plaintiff’s most recent order on the service. Conversely, plaintiffs argued that the limitation of liability provision limited only the amount a plaintiff may seek for any one of the multiple breaches of contract. In other words, while Safeway argued that the limitation of liability provision created a per-plaintiff liability cap, plaintiffs argued that the provision created only a per-claim liability cap.
On the issue, the court ruled for plaintiffs, finding that the limitation of liability provision allowed each plaintiff up to the total amount of all non-permissible markups in all purchases in which Safeway breached its price guarantee promise.
The court’s construction of the limitation of liability provision hinged upon the last nine words of the paragraph. The court reasoned that those words, “IMMEDIATELY PRIOR TO THE CLAIMED INJURY, LOSS, OR DAMAGE” must not be read as redundant to the preceding words “MOST RECENT USE.” Under canons of construction, no words of a contract ought to be read in a way that makes them surplusage. In order for the words to not be redundant, they must add meaning. And the meaning the court found them to add was that they indicate the limitation of liability to be for “the claimed injury,” not on the plaintiff generally.
Indeed, the court wrote that if the last nine words had not been used in the terms, Safeway would in fact have limited its liability on a per-individual basis to the amount of that individual’s most recent order.
My best guess is that the intent of the lawyer who drafted the Safeway.com limitation of liability provision was to limit liability for any number of claims on an aggregate per-user basis. That certainly is the custom. I won’t comment on whether it would ever be fair or appropriate to actually apply such a limit to direct damages from multiple breaches of contract occurring over time.
The case is a reminder that courts are instinctively loath to enforce limitation of liability provisions to the benefit of large corporations and against individual plaintiffs. Especially when these provisions are found in click-through agreements.