(Originally featured by Daily Business Review at https://www.law.com/dailybusinessreview/2019/09/11/recent-case-emphasizes-the-limits-of-contracts-in-florida-courts/)
Uncertainty in the law is sometimes unavoidable. But sophisticated parties want predictability, and when the enforceability of commonly used provisions in commercial contracts is uncertain, practitioners need to know. The U.S. Court of Appeals for the Eleventh Circuit recently offered a useful reminder to practitioners that the enforceability of broad exculpatory clauses under Florida law remains an open question, and prodded the Florida Supreme Court for an answer.
In Pier 1 Cruise Experts v. Revelex, 929 F.3d 1334, 1337 (11th Cir. 2019), the Eleventh Circuit certified a question to the Florida Supreme Court seeking guidance on whether an “unusually broad exculpatory clause” could be enforced. The parties in Revelex had negotiated an exculpatory clause releasing liability for “damages regardless of kind or type (whether in contract, tort (including negligence), or otherwise),” and providing that Revelex’s total cumulative liability could not exceed $100. The Eleventh Circuit wants to know whether language that broad is enforceable and, if not, whether the presence of such a broad exculpatory clause renders the entire contract illusory or simply means that some but not all claims are barred. As the court observed, “Florida law arguably supports any of three different answers to the question, but none of the decisions that have been cited to us (or that we have found ourselves) is quite on point.”
The Eleventh Circuit’s opinion is the most recent in a series of decisions suggesting that courts are still trying to define the limits of parties’ freedom of contract under Florida law. A few years ago, for example, the Fifth District Court of Appeal certified to the Florida Supreme Court a series of questions “involving great public importance” regarding the enforceability of nonreliance clauses under Florida law, see Billington v. Ginn-La Pine Island, 192 So. 3d 77, 85 (Fla. 5th DCA 2016). Neither party appealed the certified questions to the Florida Supreme Court, but the Billington court found that Florida courts had “struggled to reconcile and apply” case law on whether fraud claims can be barred by a nonreliance clause. We have argued that Florida courts generally should enforce nonreliance clauses. See Ian Ross, “Reframing the Question: Why Florida Courts Should Enforce Nonreliance Clauses,” 93 Fla. Bar J. 16 (January/February 2019). The Fifth District ultimately held that the nonreliance clause at issue in Billington did in fact negate a claim for fraud in the inducement but, in doing so, observed that its decision was in express conflict with the Fourth District Court of Appeal’s decision in Lower Fees v. Bankrate, 74 So. 3d 517 (Fla. 4th DCA 2011).
More recently, the Third District Court of Appeal refused to enforce a general release in a fraud action that purported to apply to all claims, “whether past or present, known or unknown, filed or unfiled” even though the release stated it was “intended to be as broad and inclusive as Florida law permits,” see Falsetto v. Liss, No. 3D18-794, — So. 3d — (Fla. 3d DCA May 22, 2019). The Falsetto court observed that the willingness of Florida courts “to enforce general releases is not absolute,” quoting Mazzoni Farms v. E.I. DuPont De Nemours & Co., 761 So. 2d 306, 315 (Fla. 2000). The Florida Supreme Court in Mazzoni Farms found enforcement of general releases “is premised upon the assumption that the released claims are those that were contemplated by the agreement.” The Mazzoni court found that the release language in that case was not sufficiently broad to bar fraudulent inducement claims, but declined to rule on whether a more expansive release would have barred fraudulent inducement claims. The court then surveyed Florida cases where the release had specifically released “future” or “unaccrued” claims, concluding that the presence of such language resulted in a broader release that could encompass fraud claims. The court concluded, “because the agreement in this case mutually released the parties from claims ‘past or present, known or unknown’—but did not release future or unaccrued claims—its plain language requires us to hold that” the unaccrued claims had not been released.
These decisions show that, when negotiating general releases or exculpatory language, the details matter. The Billington decision, for example, navigated the different outcomes of Florida cases interpreting nonreliance clauses by relying on the fact that disclaimer in that case was “clear” and “comprehensive.” Falsetto also involved a fraud claim, and the court was careful to note that a fraud claim, in particular, may only accrue when there is knowledge of the fraud, even if this is well after the fraud occurs. But Falsetto did not say that unaccrued claims—such as fraud claims where the party signing the release has not yet learned of the fraud—cannot be disclaimed by a general release. Instead, it offers guidance to parties negotiating such releases, and suggests that a release covering “unaccrued” or “future” claims may be interpreted far more broadly than a release covering “unknown” and “unfiled” claims.
Ian Ross and Erica Perdomo are litigators at Stumphauzer Foslid Sloman Ross & Kolaya. Ross litigates business disputes, complex commercial cases, and class actions on behalf of corporations, directors, and officers. Perdomo focuses her practice on white-collar defense, government enforcement, commercial litigation and internal investigations.