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Exculpatory clause / limitation of liability and gross negligence
March 11, 2021
Exculpatory clause / limitation of liability and gross negligence
          A recent decision in federal court sitting in Louisiana interpreted Louisiana law regarding the enforcement of a contractual exculpatory clause and nominal limitation of liability clause.  The law in Louisiana is fairly consistent with the law in most other states, the principle difference being that Louisiana has codified the law, which reads:
          “Clause that excludes or limits liability:
           Any clause is null that, in advance, excludes or limits the liability of one party for intentional or gross fault that causes damage to the other party.
          Any clause is null that, in advance, excludes or limits the liability of one party for causing physical injury to the other party.” “Louisiana Civil Code article 2004
          The lawsuit Lizabeth Fry Franklin, Et al Civil No. 5:16-1152 (Lead) Civil No. 5:17-1047 (Member) Versus Judge Terry A. Doughty Regions Bank, decided by United States District Court Western District Of Louisiana Shreveport Division, involved plaintiffs suing a bank, alleging the bank was negligent in managing and supervision certain mineral rights contracts.  The bank moved for summary judgment to dismiss the case based on what it called an exculpatory clause.  That provision read as follows:
          ““The Bank shall never be individually liable or responsible to Owner for any loss, damage or injury sustained by reason or account of any mistake in judgment of the Bank occurring in connection with the exercise of these powers of attorney or that may be granted by any other power of attorney or delegation of authority to act; and Owner, to induce Bank to accept this appointment, hereby releases and forever discharges the Bank from any and all liability and responsibility for any and all such loss, damage or injury.”
          The Judge denied the motion, essentially holding that in Louisiana the plaintiff did not have to specifically plead gross negligence and that they court could look to the allegations, and that the issue of gross negligence could not, in this case, be determined as a matter of law – but needed to be tried and determined by the trier of facts [judge or jury if there is one].  But there is a good discussion of gross negligence, and that’s what I think is important for alarm companies to understand.
          “The specific language of La. CC article 2004 nullifies any clause that, in advance, excludes the liability of one party for “intentional or gross fault”. There are no allegations by Franklin or Peironnet of intentional fault by Regions, so the issue becomes whether the allegations of fault on the part of Regions could be classified as “gross fault” under Louisiana law.
          Gross Fault:  Plaintiffs’ Complaint alleges that on August 22, 2007, Regions’ employees, on behalf of Plaintiffs, executed an Extension of Primary Term in favor of Matador, which modified the primary term from 3 years to 4 years, 6 months, as to all of the Plaintiffs’ interest in the 1,805.35 acre tract. (p.13). Plaintiffs further alleged that Regions, through “inexcusable error”, did not exclude property not intended to be extended. (p. 14).
          The actions of Regions are referred to as “inexcusable error” (p.24), “failure to properly limit the extension”, (p. 26), extension not properly drafted. (p. 25).
          A reading of Plaintiffs’ Complaint does not specifically allege “gross fault” or “gross negligence”, but Louisiana is a “fact pleading” state that requires no technical forms of pleading. La. C.C.P. article 854. Additionally, a party may be granted any relief to which he is entitled as long as the facts pled gave the opposing party adequate notice of the existence of potential causes of action. Cox v. W.M. Heroman and Co., 298 So.2d 848 (La. 1974). In Cameron v. Bruce, 981 So.2d 204 (2nd Cir. 2008), the Court specifically held that the trial Court was wrong in failing to consider whether allegations constituted “gross negligence” under La. C.C. article 2004 where “gross negligence” was not specifically pled.
          This Court finds that Plaintiffs’ allegations do not have to specifically plead “gross negligence” or “gross fault”. The facts alleged are sufficient.
          In addressing the term “gross negligence” under Louisiana law, the Supreme Court of Louisiana in Ambrose v. New Orleans Police Dept. Ambulance Service, 639 So.2d 216, (La. 1994) stated: “Louisiana courts have frequently addressed the concept of gross negligence. Gross negligence has been defined as the “want of even slight care and diligence” and the “want of that diligence which even careless men are accustomed to exercise.” State v. Vinzant, 200 La. 301, 7 So.2d 917 (La. 1942). Gross Case 5:16-cv-01152-TAD-KDM Document 146 Filed 03/01/21 Page 6 of 8 PageID #: 2852 7 negligence has also been termed the “entire absence of care” and the “utter disregard of the dictates of prudence, amounting to complete neglect of the rights of others.” Hendry Corp. v. Aircraft Rescue Vessels, 113 F.Supp. 198 (E.D. La. 1953) (applying Louisiana law).
          Additionally, gross negligence has been described as an “extreme departure from ordinary care or the want of even scant care.” W. Page Keeton, et al., Prosser & Keeton on the Law of Torts, § 34, at 211 (5th ed. 1984); 65 C.J.S. Negligence §8(4)(a), at 539-40 (1966 & Supp. 1993). “There is often no clear distinction between such [willful, wanton, or reckless] conduct and ‘gross’ negligence, and the two have tended to merge and take on the same meaning.” Falkowski v. Maurus, 637 So.2d 522 (La. App. 1st Cir.), writ denied, 629 So.2d 1176 (La. 1993) (quoting Prosser & Keeton, supra, at 214)).
          Gross negligence, therefore, has a well-defined legal meaning distinctly separate, and different, from ordinary negligence.” 639 So.2d 216 at 219-220. Additionally, the Court in Houston Exploration Co. v. Halliburton, 269 F.3d 528 (5th Cir. 2001), in examining “gross negligence” under Louisiana law stated: “Under Louisiana law, gross negligence is willful, wanton and reckless conduct that falls between intent to do wrong and ordinary negligence. We stated in Orthopedic & Sports Injury Clinic v. Wang Laboratories, Inc. that “[g]ross negligence is substantially and appreciable higher in magnitude than ordinary negligence.” Other courts have defined gross negligence as the “entire absence of care”, the “want of even slight care and diligence,” and the “utter disregard of the dictates of prudence, amounting to complete neglect of the rights of others.” At least one Louisiana court stated that one is grossly negligent when he “has intentionally done an act of unreasonable character in reckless disregard of the risk known to him, or so obvious that he must be taken to have been aware of it, and so great as to make it highly probable that harm would follow.” Mere inadvertence or honest mistake does not amount to gross negligence.” 268 F. 3d 528, at 531-32     Regions cannot contract in advance to exclude grossly negligent conduct.
          Gross negligence is a fact intensive question that cannot be resolved pursuant to summary judgment. The question of whether Regions’ conduct constitutes gross negligence is a material issue of fact that must be resolved by the trier of fact. CONCLUSION: For the reasons set forth herein, Regions’ Motion for Summary Judgment is DENIED."

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301