Nationwide Mut. Fire Ins. Co. v. Interface Sec. Sys.

• Decision Date: 09 February 2023
• Docket Number: Civil Action 2:21-cv-34-KS-MTP
• Parties: NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, as Subrogee of Shirley's of Collins, LLC PLAINTIFF v. INTERFACE SECURITY SYSTEMS, LLC DEFENDANT
• Court: U.S. District Court — Southern District of Mississippi

NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, as Subrogee of Shirley's of Collins, LLC PLAINTIFF v. INTERFACE SECURITY SYSTEMS, LLC DEFENDANT

Civil Action No. 2:21-cv-34-KS-MTP

United States District Court, S.D. Mississippi, Eastern Division

February 9, 2023

MEMORANDUM OPINION AND ORDER

KEITH STARRETT UNITED STATES DISTRICT JUDGE

This cause comes before the Court on Defendant's Motion for Summary Judgment [74]. The motion is fully briefed and is ripe for ruling. Having considered the parties' submissions, the relevant legal authority, and otherwise being duly advised in the premises, the Court finds that, for the reasons set forth below, the motion will be granted in part and denied in part.

I. BACKGROUND

A. Facts

This case is a dispute over liability relating to a burglary and fire loss. On September 4, 2001, Shirley's of Collins (“Shirley's”) and Phillips-Doby Security Systems, Inc. entered into a written alarm services agreement titled “Lease Agreement” (“2001 Agreement”), whereby Phillips-Doby agreed to install, maintain, and monitor a burglar system at Shirley's located at 3450 Highway 49 North, Collins, Mississippi for a fee of $47.95 (excluding tax) per month (recurring monthly revenue or “RMR”). [74-1]. Tammy White, the owner of Shirley's, signed the 2001 Agreement on behalf of Shirley's. [74-2] at 59:12-60:11.

The 2001 Agreement states, “This contract shall be in force and effect for a period of 36 months from the date of this contract and thereafter until cancelled by either party hereto as herein provided.” [74-1] at ¶ 7; [78-3] at 21:23-22:2; [78-2] at 38:2-5. Paragraph 9 of the 2001 Agreement states in full as follows:

It is understood and agreed that contractor is not an insurer, that insurance, if any shall be obtained by Subscriber, that the payments provide for herein are based solely on the value of the services as set forth herein and are unrelated to the value of the Subscriber's property or the property of others located on Subscribers premises; that Contractor makes no guarantee or warranty, including any implied warranty of merchantability or fitness that the equipment or services supplied will avert or prevent occurrences or the consequences there from [sic] which the system or service is designed to detect or avert. Subscriber acknowledges it is impractical and extremely difficult to fix the actual damages, if any, which may proximately result from failure to perform any of the obligations herein, or the failure of the system to properly operate with resulting loss to Subscriber because of, among other things: (a) uncertain amount of value of Subscriber's property or the property of others kept on the premises which may be lost, stolen, destroyed, damaged or otherwise by occurrences which the system or services is designed to detect or avert; (b) The uncertainty of the response time of any police or fire department, should the police or fire department [be] dispatched as a result of a signal being received or an audible device sounding; (c) The inability to ascertain what portion, if any, of the loss would be proximately caused by Contractors failure to perform or by failure of its equipment to operate; (d) The nature of the service to be performed by the Contractor.

Subscriber understands and agrees that if Contractor should be found liable for loss or damage due from a failure of Contractor to perform any of the obligations herein, including but not limited to installation, maintenance, monitoring or service or the failure of the system or equipment in any respect whatsoever, Contractor's liability shall be limited to Two Hundred Fifty ($250.00) Dollars, as liquidated damages and not as a penalty and this liability shall be exclusive and that the provision of this Section shall apply if loss or damage, irrespective of cause or origin, results directly or indirectly to persons or property from performance or nonperformance of the obligations imposed by this contract, or from negligence, active or otherwise, its agents, assigns or employees.

[74-1] at ¶ 9.^[1]From the time of the 2001 Agreement up until the fire, Shirley's paid a service fee every month. [74-2] 136:14-20.

In 2004, Interface executed a Stock Purchase Agreement with Phillips-Doby and acquired all of Phillips-Doby's installation and monitoring agreements, which included the 2001 Agreement executed by Shirley's. [74-3]; [74-4] 28:18-31:5; 33:16-34:13. Once Interface acquired the contract, Shirley's never attempted to cancel the security service. [81-1] 75:5-12. For eighteen years, between the two companies, the service that was provided to Shirley's was never canceled, and service was never disrupted. [81-1] 86:18-20; 117:9-118:21.

In 2008, “open/close reports” were added to the Shirley's account by means of an Interface Addendum RMR (“Addendum”) dated January 14, 2018.^[2][74-2] at 75:15-20; [74-5]. The Addendum provided, “This Addendum to Client Agreement Name/Number Shirley's dated 9-401 . . . .” and “This Agreement renews the original contract dated 9-4-01 for a new term of 12 mos.” [74-5]. The Addendum also states, “Subject to terms and conditions outlined in Client Agreement.” Id.

In March 2016, Ms. White added a fire alarm to the existing system by means of an Interface “Addendum/Customer Change Order” (the “2016 Addendum”). [74-2] at 79:11-24; [746].^[3]Interface installed a combination burglar/fire control panel and added fire-protection equipment, as well as cellular backup monitoring. [74-6]; [78-3] 51:8-52:16; 52:22-53:11; 54:915. The 2016 Addendum states, “This agreement renews the original contract dated 01/04 for the new term of 60 months.” [74-6] at p. 1. It also states, “Subject to terms and conditions outlined in Client Agreement.” Id. Interface's Melanie Regan, who prepared the 2016 Addendum, testified that she erred and transposed numbers in the date and that there is no contract between the parties executed in January 2004.^[4] [81-2] 48:17-24; [74-11] 82:23-83:9. Ms. White does not recall signing any agreement for Shirley's with Interface or Phillips-Doby in January 2004. [81-1] 86:6-22.

On March 10, 2019, Shirley's was burglarized and the building set on fire. [74-7] at ¶ 10. On or about the above date, Shirley's held an insurance policy with Nationwide, which provided building, business personal property, and business interruption coverage. Id. at ¶¶ 1, 12; [74-2] 49:4-6. Nationwide compensated Shirley's under the policy for the losses sustained in the March 10, 2019 incident. [74-7] at ¶ 12; [74-2] at 52:16-22.^[5]

B. Procedural History

On March 3, 2021, Nationwide filed this subrogation action against Interface alleging, not any breach of contract claims, but rather only claims of negligence/gross negligence, breach of implied warranties of merchantability and fitness for a particular purpose, and negligent and intentional misrepresentation. [1] at ¶¶ 14-31. On April 30, 2021 Interface filed a Motion to Dismiss, attaching a document purported to be a contract that controlled this action and required dismissal. [6]. However, the attached contract had no connection to the Shirley's location at issue here, and Interface withdrew its Motion. [12]. Thereafter, on September 15, 2021, Interface filed a Motion for Judgment on the Pleadings [30] based upon other contract documents attached to its Amended Answer, which the Court denied by Order dated October 26, 2021. [44]. The Court found that judgment on the contract was outside the scope of a Rule 12(b)(6) motion because the contract was not referenced in the Complaint, and the Court declined to convert the motion to one for summary judgment. Id. at pp. 3-4.

Because the parties disagreed about the existence and effect of the Phillips-Doby and Interface contracts, the parties filed a Joint Motion to Bifurcate Discovery Issues and Stay PreTrial Deadlines [50], wherein the parties requested that the Court bifurcate discovery into two phases: discovery into the existence of a contract and discovery as to damages, which the Court granted. [55]. The Court ordered a “contract-based discovery” deadline of April 1, 2022 and gave Interface an April 15, 2022 deadline to file a motion for summary judgment “related to any contract.” Id. The Court further ordered that all remaining case deadlines would be reset following the Court's disposition of Defendant's motion for summary judgment. Id.

II. DISCUSSION

Interface seeks summary judgment on the grounds that the limitation of liability provision in the 2001 Agreement applies to limit Nationwide's recovery on its claims in this case. [75] at p. 2. Interface then argues that, despite any such provision, Nationwide's negligence claims fail because it cannot establish that Interface had a duty independent of the contract to support such claims. Next, Interface posits that Nationwide's breach of implied warranty claims are deficient because the transaction between Shirley's and Interface, or its predecessor, was for the provision of services and did not involve a sale of goods. Finally, Interface argues that Nationwide cannot show that any misrepresentations were made or that Shirley's relied upon any misrepresentation.

In response, Nationwide argues that any contractual limitation of liability is either immaterial, ambiguous, or unenforceable as a matter of law. Regardless of the contractual questions, Nationwide argues that it also has valid warranty, gross negligence, and misrepresentation claims against Interface that must remain pending.

A. Legal Standard

“The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “The moving party bears the initial responsibility of...