Blaisdell v. Dentrix Dental Sys., Inc.

• Decision Date: 26 June 2012
• Docket Number: No. 20100392.,20100392.
• Citation: Blaisdell v. Dentrix Dental Sys., Inc., 284 P.3d 616, 711 Utah Adv. Rep. 15, 2012 UT 37 (Utah 2012)
• Parties: Mark H. BLAISDELL, an individual, and Mark H. Blaisdell, D.D.S., P.C., a Utah professional corporation, Plaintiffs and Appellants, v. DENTRIX DENTAL SYSTEMS, INC., a Utah corporation, Defendant and Appellee.
• Court: Utah Supreme Court

284 P.3d 616

711 Utah Adv. Rep. 15

2012 UT 37

Mark H. BLAISDELL, an individual, and Mark H. Blaisdell, D.D.S., P.C., a Utah professional corporation, Plaintiffs and Appellants,

v.DENTRIX DENTAL SYSTEMS, INC., a Utah corporation, Defendant and Appellee.

No. 20100392.

Supreme Court of Utah.

June 26, 2012.

Barry N. Johnson, David M. Kono, Joshua L. Lee, Salt Lake City, for appellants

Gregory M. Hess, Terry E. Welch, Salt Lake City, for appellee.

Associate Chief Justice NEHRING, opinion of the Court:

INTRODUCTION

¶ 1This case concerns the loss of data during the installation of software at a dentist's office.We hold that provisions in the software contract allocating the risk of such a loss to the consumer are enforceable.

BACKGROUND

¶ 2Mark H. Blaisdell is a dentist.Dr. Blaisdell performs professional dental services through his professional corporation.Like dentists everywhere, Dr. Blaisdell preserved information about his patients on computers.To aid his patient data requirement, Dr. Blaisdell agreed to purchase dental practice management software from Dentrix Dental Systems, Inc.Under the terms of Dr. Blaisdell's purchase contract with Dentrix, the parties agreed that:

7.LIMITATION OF LIABILITIES.In no event will Dentrix be liable to you for any indirect, incidental, consequential, special, or exemplary damages arising out of or in connection with your use or inability to use the Product, the breach of any express or implied warranty, or otherwise in connection with the Product, its Software, the Documentation and/or the license even if Dentrix has been advised of the possibility of such damages.In no event shall Dentrix be held liable to you whenever registry files are examined and/or edited.Because some states do not allow the exclusion or limitation of liability for consequential or incidental damages, the above limitation may not apply to you.

In no event shall Dentrix's total liability for any damages, direct or indirect, in connection with the Product, its Software, the Documentation and/or this License exceed the license fees paid for your right to use this Product whether such liability arises from any claim based upon contract, warrants, tort or otherwise.

¶ 3 As promised, Dentrix sent software upgrades to Dr. Blaisdell.In 2006, Dentrix sent Dr. Blaisdell the G2 Software Upgrade.One of Dr. Blaisdell's employees installed the G2 Upgrade while on the phone with a Dentrix technical support employee.Following an unsuccessful attempt to install the G2 Upgrade on a computer workstation, the G2 Upgrade erased Dr. Blaisdell's electronic patient files, appointment book, treatment plans, and insurance information.Dentrix has acknowledged that, after Dr. Blaisdell's data loss, it discovered the G2 Upgrade could overwrite the Dentrix Data files on a computer system after an unsuccessful G2 Upgrade installation.

¶ 4 Everyone agrees that Dentrix had unambiguously warned Dr. Blaisdell to back up his patient data, but Dr. Blaisdell's backup system was not working properly.After his patient data was lost, Dr. Blaisdell's staff had to collect and reenter data manually while managing the office without patient records.

¶ 5 Dr. Blaisdell sued Dentrix under numerous theories including negligence in tort, strict products liability, and negligent misrepresentation.Dr. Blaisdell also sued for breach of contract, breach of implied warranty, breach of express warranty, breach of implied warranty of merchantability, fraudulent nondisclosure, and punitive damages.Dentrix resisted the claims and, in time, moved for summary judgment.The district court granted Dentrix's motion for summary judgment on Dr. Blaisdell's contract claims and his fraudulent nondisclosure claim.The court also granted summary judgment on the tort claims, which it determined were barred by the economic loss rule.Dr. Blaisdell appeals only the order granting summary judgment on his tort claims.Because neither the district court nor the parties addressed the limitation of liabilities clause quoted above on appeal, we ordered supplemental briefing on that issue.¹We have jurisdiction pursuant to Utah Code section 78A–3–102(3)(j).

STANDARD OF REVIEW

¶ 6“We review the district court's grant of a motion for summary judgment for correctness.Summary judgment is appropriate when ... ‘there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.’ ”²

ANALYSIS

¶ 7 The contract between Dr. Blaisdell and Dentrix limited Dr. Blaisdell's remedies for damages in tort caused by defects in the Dentrix software.Dr. Blaisdell's supplemental brief provides three grounds for invalidating the limitation of liabilities clause: (1) the clause is unenforceable under the Utah Products Liability Act,³(2) the clause is unenforceable as to Dr. Blaisdell's strict products liability claim, and (3) the clause is unenforceable as to Dr. Blaisdell's gross negligence claim.We conclude that the limitation of liabilities clause is enforceable and affirm the district court's grant of summary judgment.We do so without reaching the centerpiece of the parties' briefing and argument, the economic loss rule.⁴

I.THE UTAH PRODUCTS LIABILITY ACT DOES NOT RENDER THE LIMITATION OF LIABILITIES CLAUSE UNENFORCEABLE

¶ 8 Dr. Blaisdell argues that the legislature, by enacting the Utah Products Liability Act, explicitly rendered unenforceable the limitation of liabilities clause at issue here.The relevant section of the Act is titled “Indemnification provisions void and unenforceable.”It states,

Any clause in a sales contract or collateral document that requires a purchaser or end user of a product to indemnify, hold harmless, or defend a manufacturer of a product is contrary to public policy and void and unenforceable if a defect in the design or manufacturing of the product causes an injury or death.⁵

As read by Dr. Blaisdell, this provision renders the limitation of liabilities clause in his contract with Dentrix unenforceable because it requires Dr. Blaisdell “to hold Dentrix—‘the manufacturer of a product’—harmless for ‘any indirect, incidental, consequential, special, or exemplary damages.’ ”

¶ 9 The statutory language—“indemnify, hold harmless, or defend”—however, refers to situations where one party agrees to assume the tort liability of another.⁶In Meadow Valley Contractors, Inc. v. Transcontinental Insurance Co.,the court of appeals interpreted Utah Code section 13–8–1, which voids indemnification provisions in construction contracts.⁷In that statute, the legislature defined “indemnification provision” as an agreement “requiring the promisor to insure, hold harmless, indemnify, or defend the promisee or others against liability” for damages “resulting from the fault of the promisee, indemnitee, others, or their agents or employees.”⁸The court of appeals determined that “the plain meaning of the statute voids only agreements requiring one party in a construction contract to personally insure against liability stemming from the other [contracting]party's negligence.”⁹Additionally, in American Rural Cellular, Inc. v. Systems Communication Corp.,the court of appeals determined that, in a contract requiring one party to “ ‘indemnify and hold [the other party] harmless from and against, any and all damages [and] liabilities,’ ”¹⁰“the hold-harmless provision does not apply to disputes between [the contracting parties], but instead to disputes between [one of the contracting parties] and third parties.”¹¹

¶ 10We note that the term “hold harmless” can release one of the contracting parties from liability when that is the clear intent of the parties.¹²The language of Utah Code section 78B–6–707, like section 13–8–1, however, indicates the legislature's intent to void indemnification provisions.This interpretation is buttressed by the title of the statute: “Indemnification provisions void and unenforceable.”“The title of a statute is not part of the text of a statute, and absent ambiguity, it is generally not used to determine a statute's intent.However, it is persuasive and can aid in ascertaining [the statute's] correct interpretation and application.”¹³Indemnity, where “one party agrees to answer for any specified or unspecified liability or harm that the other party might incur,”¹⁴ is inapplicable to a circumstance where, as here, the contracting parties agreed to assign the risk of loss between themselves and limit the damages available.The disputed language in the contract at issue is not an indemnification provision.In fact, the limitation of liabilities clause does not use words of indemnification: rather, it limits Dentrix's liability to Dr. Blaisdell in tort to the license fees Dr. Blaisdell paid for the product.Utah Code section 78B–6–707 is inapplicable.¹⁵

II.THE LIMITATION OF LIABILITIES CLAUSE IS ENFORCEABLE AND PROPERLY LIMITS DR. BLAISDELL'S STRICT PRODUCTS LIABILITY CLAIM

¶ 11 Utah law and precedent permit contracts limiting strict products liability in some situations.Dr. Blaisdell argues that, as a matter of law, a strict products liability claim “is not affected by any disclaimer or other agreement” under section 402A of the Restatement (Second) of Torts.¹⁶Schaerrer v. Stewart's Plaza Pharmacy, Inc.¹⁷ recognized this court's adoption of “the doctrine of strict products liability set forth in section 402A of the Restatement (Second) of Torts,”¹⁸ but this court has never expressly addressed the language Dr. Blaisdell quotes, which appears in a comment to the Restatement (Second) of Torts.

¶ 12 The Uniform Commercial Code permits an agreement that “limit[s] or alter [s] the measure of damages recoverable ... as by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement of nonconforming goods or parts.”¹⁹This court has similarly stated, “On grounds of public policy, parties to a contract may not generally exempt...