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Great Northern Insurance Co. v. ADT Security Services

September 30, 2009

GREAT NORTHERN INSURANCE CO., AS SUBROGEE OF CROATIAN FRATERNAL UNION OF AMERICA, PLAINTIFF,
v.
ADT SECURITY SERVICES, INC., DEFENDANT.



The opinion of the court was delivered by: Judge Terrence F. McVerry

Magistrate Judge Lisa Pupo Lenihan

Doc. No. 46

MEMORANDUM OPINION

In this subrogation action, Plaintiff, Great Northern Insurance Company ("Great Northern"), seeks to recover monies it paid its insured, the Croatian Fraternal Union of America ("CFU"), under a property insurance policy for damages sustained to CFU's building containing its office and museum, when a broken pipe in its sprinkler system went undetected for a period of time. Great Northern has brought claims of negligence and breach of implied warranty against Defendant, ADT Security Services, Inc. ("ADT"), with regard to its conduct in servicing and/or arranging for the repair of a component part of the panel box that monitors CFU's fire protection and alarm system.

Currently before the Court is ADT's second motion for summary judgment (Doc. No. 46) submitted post-discovery. Prior to the commencement of discovery, Defendant ADT previously filed a summary judgment motion (Doc. No. 13) on three issues: (1) whether CFU and ADT intended, either by their words or conduct, to include in their agreement for service and repair of CFU's alarm system, the terms and conditions, including a limitation of liability provision, contained on the reverse side of a service ticket, issued by ADT for proposed repair to a component part of CFU's alarm system and signed by an employee of CFU; and, if so, (2) whether a limitation of liability provision, limiting damages to $1,000.00 contained on the reverse side of the service ticket, is valid and enforceable; and (3) whether the language in the limitation of liability provision is broad enough to apply to losses resulting from gross negligence. On September 17, 2007, the District Court issued its Opinion (Doc. 32) and Order (Doc. 33) finding that issues of fact existed as to the first issue, but granting summary judgment in ADT's favor on the second and third issues.

Discovery is now closed, and ADT has filed its second motion for summary judgment asking the Court to find that: (1) there is no genuine issue of material fact that CFU's employee, Robert Keber, had express and/or apparent authority to sign the November 18, 2004 Service Ticket and/or agree to the terms and conditions contained in the service ticket, and ADT reasonably believed that CFU's employee had apparent authority to agree to the terms and conditions in the November 18, 2004 Service Ticket, and therefore, as a matter of law, any recovery by Great Northern is limited to $1,000.00; and (2) CFU is liable for spoliation of evidence and that summary judgment is an appropriate sanction. For the reasons that follow, the Court will grant ADT's summary judgment motion as to the first issue, but will deny the motion as to the second issue.

I. RELEVANT FACTS

The factual background and procedural history were previously set forth in the Court's Opinion dated September 17, 2007 (Doc. No. 32) and will not be repeated here. The following facts, stated in the light most favorable to Great Northern, are relevant to the pending motion and are not disputed.

Plaintiff, Great Northern Insurance Company ("Great Northern"), provided property insurance coverage to Croatian Fraternal Union of America ("CFU") on its premises and business located at 100 Delaney Drive in Pittsburgh, Pennsylvania ("CFU's facility"), pursuant to Policy No. 35832562. In January of 1989, CFU contracted with Rollins Protective Service ("Rollins") for the purchase and installation of a security detection system to monitor the fire detection and security at CFU's premises.*fn1 John P. Plesh, who was then the Secretary/Treasurer and a member of the Executive Board of CFU, signed the Security Agreement on behalf of CFU. In April of 1992, Rollins and CFU executed a Commercial Security Purchase and Service Agreement, extending the monitoring service for five years. Plesh also signed the Commercial Security Purchase and Service Agreement on behalf of CFU in his capacity as Secretary/Treasurer.

Beginning on or around August 10, 2001, ADT notified CFU through a letter that announced, in part, that ADT had acquired SecurityLink, CFU's prior monitoring service provider, and that: "Your new ADT protection is in place. . . . The changeover does not require any action on your part. The only change you will notice is that your monitoring invoices will now come from ADT." (Ex. A, Def.'s App. (Doc. 48-2).)*fn2 CFU and ADT did not enter into a written agreement for system monitoring or maintenance; instead, ADT provided monitoring services for charge, on a month- to-month basis, and maintenance service as requested by CFU and for an appropriate fee and/or charge. Specifically, ADT provided monitoring services to CFU for its facility at Delaney Drive and when contacted by CFU, ADT appeared to maintain or service the monitoring system, a Radionics Panel D8112G2 ("Radionics Panel"), and the burglar alarm located at CFU's facility. From 2001 until January 2005, ADT submitted monthly invoices for its alarm monitoring services, and sent those invoices directly to CFU's executive offices for payments. (Ex. C in Def.'s App.) When CFU representatives contacted ADT and requested maintenance, service or repair to the Radionics Panel and/or the burglar alarm, ADT charged CFU for labor and materials. At all relevant times, ADT did not design, install, maintain, repair or service the CFU fire protection system, including the deluge sprinkler system located at CFU's facility, nor did ADT design or install the CFU monitoring or burglar alarm system.

On those occasions when ADT service technicians appeared at the request of CFU and performed maintenance, service or repair to the Radionics Panel and/or the burglar alarm at CFU's facility, the ADT service technician prepared a document identified as a "Service Ticket" (ADT Security Form 524-07), "ADT Service Documentation" (ADT Security Form 524-08), and/or an "ADT Service Authorization" (ADT Security Form 524-09) (collectively "Service Tickets"). For example, ADT service technicians appeared at CFU's facility on the following six dates to perform maintenance, repair or service to the Radionics Panel or the burglar alarm pursuant to a request received from CFU: January 30, 2003, June 14, 2004, November 18, 2004 (Service Tickets); June 22, 2005 (ADT Service Documentation); and February 8, 2006 and March 2, 2006 (ADT Service Authorizations). On each of these six occasions, either Robert D. Keber, the CFU facilities manager,*fn3 or Mark Hile, also employed by CFU, signed the Service Tickets, Service Documentation, and Service Authorizations.*fn4 Mr. Keber was the primary contact person at CFU who interacted with the ADT service technicians on maintenance and repair of CFU's security systems. (Keber Dep. at 121-22, 138-41; Pazo Dep. at 88.)*fn5

Each ADT Service Ticket, Service Documentation, and Service Authorization, respectively, includes, among other things, preprinted information such as "Limitation of Liability" and "Limited Warranty" provisions, as well as a "General" notice that notifies the customer that ADT Security does not assume any liability for delays associated with the installation of equipment, and an "Equipment Disconnections" notice that notifies the customer that its system is temporarily or permanently disconnected and cannot transmit notice to ADT Security. (Ex. B in Def.'s App.)

On November 18, 2004, in response to a notice of a "service com failure"*fn6 at CFU's facility, ADT directed one of its commercial service technicians, Kevin Ferri, to appear at CFU's facility.*fn7

On November 18, 2004, Mr. Ferri appeared at CFU's facility and confirmed that the Radionics Panel could not communicate with the ADT Security monitoring center because of a problem with a component part called a "dialer." (Ferri Aff. ¶¶ 7-12; Ferri Dep. at 43-46; Keber Dep. at 153-60.) Mr. Ferri informed Mr. Keber that CFU had the option of removing the Radionics Panel, sending it to Bosch in California for service and/or repair, or installing a new monitoring system. (Ferri Aff., ¶ 12; Ferri Dep. at 47-50; Keber Dep. at 153-60.)

Given the inoperable condition of the Radionics Panel on November 18, 2004 due to the broken dialer, the Radionics Panel was unable to send signals from the burglar alarm system and fire protections system, including the deluge sprinkler system, to ADT's monitoring system. Thus, the effect was essentially the same after the removal of the Radionics Panel as it was before, in that in either event, CFU's burglar alarm and fire protections systems were unable to communicate with ADT's monitoring system. (Ferri Dep. at 66-67; Keber Dep. at 153-160.)*fn8

On November 18, 2004, during ADT's actual service call, and prior to removal of the Radionics Panel by Ferri and Mr. Keber's signing of the Service Ticket, Mr. Keber contacted Ed Pazo, CFU Secretary/Treasurer, to advise him of the status of the repair, to discuss the available repair options, and to notify him of the fact that service would not be provided during the time that the Radionics Panel would be removed. (Keber Dep. at 155-57; Pazo Dep. (Ex. I in Def.'s App.) at 202-204.) After being advised of the above, Mr. Pazo gave express authority to Mr. Keber to direct ADT to perform the removal of the Radionics Panel and to have the panel repaired. (Keber Dep. at 248-49; Pazo Dep. at 198-204.)*fn9

On November 18, 2004, Mr. Keber was the only person from CFU who spoke with Ferri, the ADT service technician. (Pazo Dep. at 204, 206-07.) In addition, the only time Ferri and Keber discussed the extent of Keber's authority was on November 18, 2004 regarding the removal of the Radionics panel and with regard to his authority to sign the Service Ticket. (Ferri Dep. at 97.)

Thereafter, Mr. Ferri produced an ADT Service Ticket,*fn10 upon which he inserted the following handwritten information about the service call on the front side above the signature of Mr. Keber: "*Customer understands that Security/Fire protection at site will be out of service." (Ex. B in Def.'s App.) Mr. Ferri then presented the Service Ticket to Mr. Keber for review and approval. Mr. Keber testified that before he signed the Service Ticket, he specifically discussed with Mr. Ferri the handwritten notation on the Service Ticket and that Mr. Ferri verbally communicated this handwritten notation and showed him where it was located on the Service Ticket. (Keber Dep. at 153.)

Before Mr. Keber signed the Service Ticket on November 18, 2004, Mr. Ferri testified that he told Mr. Keber there was information on the reverse side of the ticket that he should review, and he gave Mr. Keber an opportunity to read the reverse side, but Ferri never told Mr. Keber what information was contained on the reverse side of the Service Ticket, nor did he read any of that information to Keber. (Ferri Dep. at 85-86, 89, 92.) In addition, Mr. Ferri did not ask Mr. Keber whether he read and understood what was on the reverse side of the ticket, and Mr. Keber did not ask any questions about it. (Ferri Dep. at 95.) Ferri never discussed with Keber whether he had authority to agree to the terms and conditions on the reverse side of the Service Ticket, or whether Keber had authority to enter into contracts on behalf of CFU. (Ferri Dep. at 96-100, 103-04.) In fact, November 18, 2004 was the first time Mr. Ferri informed Mr. Keber about the language on the reverse side of the ADT Service Tickets. (Ferri Dep. at 91.) Ferri explained that he did so on November 18, 2004 because of the importance of the effect of removing the Radionics panel. (Ferri Dep. at 90.) Mr. Ferri observed Mr. Keber sign the Service Ticket and just glance at the information on the reverse side. (Ferri Dep. at 88.)

Although Ferri had "glanced over some of the bold print," he was unaware of what information was being conveyed by the "legal language" contained on the reverse side of the Service Ticket, including the limitation of liability provision. (Ferri Dep. at 92-93, 95.) ADT never explained to Mr. Ferri what was contained on the reverse side, never told him to explain the terms on the reverse side of the service ticket to the customer, never trained Mr. Ferri in the significance of the language or told him that the language would bind the customer, and never provided Mr. Ferri with any instructions in conveying information to a customer presented with a service ticket. (Doc. 58, ¶ 63 (citing Ferri Dep. at 93-94); Doc. 63, ¶ 63.)

The reverse side of the November 18, 2004 Service Ticket contains the following "LIMITATION OF LIABILITY"provision:

IT IS UNDERSTOOD THAT ADT IS NOT AN INSURER, THAT INSURANCE, IF ANY, SHALL BE OBTAINED BY THE CUSTOMER AND THAT THE AMOUNTS PAYABLE TO ADT HEREUNDER ARE BASED ON THE VALUE OF SERVICES AND THE SCOPE OF LIABILITY AS HEREIN SET FORTH AND ARE UNRELATED TO THE VALUE OF THE CUSTOMER'S PROPERTY OR PROPERTY OF OTHERS LOCATED IN CUSTOMER'S PREMISES. CUSTOMER AGREES TO LOOK EXCLUSIVELY TO CUSTOMER'S INSURER TO RECOVER FOR INJURY OR DAMAGE IN THE EVENT OF ANY LOSS OR INJURY AND RELEASES AND WAIVES ALL RIGHT OF RECOVERY AGAINST ADT ARISING BY WAY OF SUBROGATION. ADT MAKES NO GUARANTY OR WARRANTY, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS THAT THE SYSTEM OR SERVICES SUPPLIED, WILL AVERT OR PREVENT OCCURRENCES OR THE CONSEQUENCES THEREFROM, WHICH THE SYSTEM OR SERVICE IS DESIGNED TO DETECT. IT IS IMPRACTICAL AND EXTREMELY DIFFICULT TO FIX THE ACTUAL DAMAGES, IF ANY, WHICH MAY PROXIMATELY RESULT FROM FAILURE ON THE PART OF ADT TO PERFORM ANY OF ITS OBLIGATIONS HEREUNDER. THE CUSTOMER DOES NOT DESIRE THIS CONTRACT TO PROVIDE FOR FULL LIABILITY OF ADT AND AGREES THAT ADT SHALL BE EXEMPT FROM LIABILITY FOR LOSS, DAMAGE OR INJURY DUE DIRECTLY OR INDIRECTLY TO OCCURRENCES, OR CONSEQUENCES THEREFROM, WHICH THE SERVICE OR SYSTEM IS DESIGNED TO DETECT OR AVERT; THAT IF ADT SHOULD BE FOUND LIABLE FOR LOSS, DAMAGE OR INJURY DUE TO A FAILURE OF SERVICE OR EQUIPMENT IN ANY RESPECT, ITS LIABILITY SHALL BE LIMITED TO A SUM EQUAL TO 10% OF THE AGGREGATE PRICE REFLECTED ON THE FRONT HEREOF OR $1,000, WHICHEVER IS GREATER, AS THE AGREED UPON DAMAGES AND NOT AS A PENALTY, AS THE EXCLUSIVE REMEDY; AND THAT THE PROVISIONS OF THIS PARAGRAPH SHALL APPLY IF LOSS, DAMAGE, OR INJURY IRRESPECTIVE OF CAUSE OR ORIGIN, RESULTS DIRECTLY OR INDIRECTLY TO PERSON OR PROPERTY FROM PERFORMANCE OR NONPERFORMANCE OF OBLIGATIONS IMPOSED BY THIS CONTRACT OR FROM NEGLIGENCE, ACTIVE OR OTHERWISE, STRICT LIABILITY, VIOLATION OF ANY APPLICABLE CONSUMER PROTECTION LAW OR ANY OTHER ALLEGED FAULT ON THE PART OF ADT, ITS AGENTS OR EMPLOYEES. . . . IF THE CUSTOMER DESIRES ADT TO ASSUME A GREATER LIABILITY, ADT SHALL AMEND THIS AGREEMENT BY ATTACHING A RIDER SETTING FORTH THE AMOUNT OF ADDITIONAL LIABILITY AND THE ADDITIONAL AMOUNT PAYABLE BY THE CUSTOMER FOR THE ASSUMPTION BY ADT OF SUCH GREATER LIABILITY PROVIDED, HOWEVER, THAT SUCH RIDER AND ADDITIONAL OBLIGATION SHALL IN NO WAY BE INTERPRETED TO HOLD ADT AS AN INSURER, IN THE EVENT ANY PERSON, NOT A PARTY TO THIS AGREEMENT, SHALL MAKE ANY CLAIM OR FILE ANY LAWSUIT AGAINST ADT IN ANY WAY RELATING TO THE EQUIPMENT OR SERVICES THAT ARE THE SUBJECTS OF THIS AGREEMENT, INCLUDING FOR FAILURE OF ITS EQUIPMENT OR SERVICE IN ANY RESPECT; . . .

See Ex. B in Def.'s App. In addition, the Service Ticket contains the following "GENERAL" Term and Condition:

ADT ASSUMES NO LIABILITY FOR DELAYS IN INSTALLATION OF THE EQUIPMENT, OR FOR INTERRUPTIONS OF SERVICE DUE TO STRIKES, RIOTS, FLOODS, FIRES, ACTS OF GOD OR ANY CAUSES BEYOND THE CONTROL OF ADT AND WILL NOT BE REQUIRED TO SUPPLY SERVICE TO THE CUSTOMER WHILE INTERRUPTION OF SERVICE DUE TO ANY SUCH CAUSE SHALL CONTINUE.

Id. With regard to "EQUIPMENT DISCONNECTIONS," the Service Ticket states: "This represents ADT's notice to you that the system(s)/device(s) listed on the face of this Service Ticket as temporarily or permanently disconnected are no longer in service and, thus, cannot detect and/or report occurrences or transmit signals." Id.

The ADT Security Service Tickets, Service Documentation, and Service Authorizations between ADT and CFU dated January 30, 2003, June 14, 2004, June 22, 2005, February 8, 2006, and March 2, 2006, contain the same or similar Limitation of Liability, Equipment Disconnections, and General provisions as the November 18, 2004 Service Ticket. (Ex. B to Def.'s App.)

After Mr. Keber signed the service tickets and/or other service documentation approving repairs or maintenance, he forwarded those documents, including the November 18, 2004 Service Ticket, to Mr. Pazo's secretary, who in turn would present it to Mr. Pazo for review. (Keber Dep. at 98, 160; Pazo Dep. at 212.) Pazo does not recall looking at the November 18, 2004 Service Ticket or any other service ticket; however, if such documents were presented to him, he would have reviewed them, but it would only have been for the purpose of approving payment for services. (Pazo Dep. at 87.) Pazo also reviewed monthly invoices from ADT and approved same for payment. (Pazo Dep. at 87, 97-100.) Mr. Pazo is the point person for the CFU executive board. (Pazo Dep. at 161.)

As of January 23, 2005, the Radionics Panel had not been replaced and the monitoring system located at CFU's facility could not contact the ADT Security monitoring center. On January 23, 2005, a pipe in the sprinkler system broke at CFU's premises, causing the premises' deluge system to activate, which went undetected for a substantial period of time, resulting in damage to CFU's building and its contents. Pursuant to Policy No. 35832562 issued by Great Northern to CFU, Great Northern made payments to CFU for the damage to its building and contents.

Great Northern became subrogated to the rights of CFU as a result of such payment and subsequently instituted the present action on February 2, 2006, asserting that ADT was negligent and breached an implied warranty by failing to properly inspect, maintain, service and repair the alarm system, including the Radionics Panel, and that such failure allowed the deluge system to flow undetected for a substantial period of time in violation of the applicable building and fire codes.

II. STANDARD OF REVIEW

Summary judgment is appropriate if, drawing all inferences in favor of the nonmoving party, "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56 (c). Summary judgment may be granted against a party who fails to adduce facts sufficient to establish the existence of any element essential to that party's case, and for which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

More specifically, the moving party bears the initial burden of identifying evidence which demonstrates the absence of a genuine issue of material fact. Once that burden has been met, the nonmoving party must set forth "specific facts showing that there is a genuine issue for trial" or the factual record will be taken as presented by the moving party and judgment will be entered as a matter of law. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting Fed.R.Civ.P. 56(e)) (emphasis added by Matsushita Court). An issue is genuine only "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

III. LAW OF THE CASE

Preliminarily, ADT argues that because this Court previously decided several issues as a matter of law in its Opinion and Order dated September 17, 2007, those rulings have become the law of the case in this action. In particular, ADT contends the following rulings are binding by the law of the case doctrine: (1) that if Mr. Keber had authority to bind CFU, the Terms and Conditions on the Service Ticket, including the Limitation of Liability provision, are a part of the parties' bargain (Doc. No. 32 at 24, 28-29); (2) that the Limitation of Liability provision is enforceable (Id. at 36); and, (3) that the Limitation of Liability provision applies to acts of gross negligence (Id. at 42). Moreover, the Court also concluded that material issues of fact existed precluding summary judgment on the issue of whether CFU's employees had actual or apparent authority to agree to the terms and conditions contained in the November 18, 2004 Service Ticket, including the Limitation of Liability provision. (Doc. No. 32 at 33.) ADT submits that after substantial discovery which has produced admissions and other undisputed facts establishing that Mr. Keber had authority to sign the Service Ticket and bind CFU to its terms, reconsideration of this issue is permitted by the law of the case doctrine because the Court is being asked to reconsider an issue of fact, and not a question of law. In support, ADT cites Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 816 (1988), and Public Interest Research Group of New Jersey, Inc. v. Magnesium Elektron, Inc., 123 F.3d 111, 116 (3d Cir. 1997). Great Northern does not appear to dispute ADT's argument as it does not address this argument in its responsive brief.

The law of the case doctrine "'posits that when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case.'" Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 816 (1988) (quoting Arizona v. California, 460 U.S. 605, 618 (1983)). The doctrine promotes finality and judicial economy, as it prevents courts from entertaining endless challenges to settled issues. Id. (citations omitted); see also Public Interest Research Group of N.J., Inc. v. Magnesium Elektron, Inc., 123 F.3d 111, 116 (3d Cir. 1997). Moreover, "'[l]aw of the case rules have developed to maintain consistency and avoid reconsideration of matters once decided during the course of a single continuing lawsuit.'"

Public Interest Research Group, 123 F.3d at 116 (quoting 18 Charles A. Wright, Arthur R. Miller, Edward Cooper, FEDERAL PRACTICE & PROCEDURE § 4478 at 788 (1981)). The court of appeals went on to explain that the law of the case doctrine does not limit the power of a federal court, but instead, directs the court to exercise its discretion. Id. (citing Arizona v. California, 460 U.S. at 619; Messinger v. Anderson, 225 U.S. 436, 444 (1912)). The scope and nature of this discretion has been expounded upon by the Supreme Court:

"A court has the power to revisit prior decision of its own or of a coordinate court in any circumstance, although as a rule courts should be loathe to do so in the absence of extraordinary circumstances such as where the initial decision was 'clearly erroneous and would work a manifest injustice.'"

Id. (quoting Christianson, 486 U.S. at 817)). The court of appeals has identified three extraordinary circumstances that would justify reconsideration of an issue previously decided during the course of litigation: "(1) new evidence is available; (2) a supervening new law has been announced; or (3) the earlier decision was clearly erroneous and would create manifest injustice." Id. at 116-17 (citations omitted).

In the present case, the Court sees no reason to revisit the three legal rulings identified above by ADT that were previously decided in its September 17, 2007 Opinion and Order. With regard to the issue of Keber's authority to bind CFU to the terms and conditions on the Service Ticket, the Court finds that it is not precluded from revisiting this issue as it involves a question of fact and discovery has yielded new evidence not previously available to inform the ...


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