Decision of Interest --
Published in the New York Law Journal 7/1/2010
Lall v. Slomin's Inc., 21510/09
Decided: June 24, 2010
Justice Jeffrey D. Lebowitz
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Both Defendant, SLOMIN'S INC., and Defendant, VERIZON NEW YORK, INC., by notice of motion, move for a dismissal of plaintiff's complaint pursuant to CPLR §3211(a) (failing to state a cause of action) and CPLR §3211(a)(1) (documentary evidence establishes that the Defendants cannot be deemed liable as a matter of law).
In this action, Plaintiffs allege that their telephone service stopped working on the night of May 30, 2009, causing the failure of their alarm system to sound when their house was burglarized the next morning. For the reasons stated herein, Defendants' motions are granted.
A motion to dismiss pursuant to CPLR §3211(a) (7) shall be granted if, giving the plaintiff the "benefit of every possible favorable inference," the plaintiff fails to state a cause of action. Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 633 (1976). In evaluating a motion to dismiss, the court must accept the plaintiff's allegations as true. 219 Broadway Corp. v. Alexander's, Inc., 46 N.Y.2d 506, 509 (1979). The court may consider affidavits, as modern pleading rules focus on whether the plaintiff "has a cause of action rather than on whether he has properly stated one." Rovello, 40 N.Y.2d at 636. A dismissal pursuant to CPLR §3211 (a) (1) shall be granted if documentary evidence "conclusively establishes a defense to the asserted claims as a matter of law." Roth v. Goldman, 254 A.D.2d 405, 406 (N.Y. App. Div. 1998). In applying these standards it is clear that Plaintiffs have failed to state a cause of action against Defendants Slomin's and Verizon, for gross negligence, breach of contract, fraud and breach of warranty.
Gross Negligence andBreach of Contract
The initial issue is whether Plaintiffs' negligence and breach of contract claims can survive the exculpatory and limitation on liability clauses provided in the contract between Plaintiffs and Slomin's. These clauses are enforceable as long as the defendant's actions constitute negligence, but not to the extent that these actions constitute gross negligence. See Colnaghi U.S.A., Ltd. V. Jewelers Prot. Serv., Ltd., 81 N.Y.2d 821, 823 (1993); Aphrodite Jewelry, Inc. v. D & W Central Alarm Co., 256 A.D.2d 288 (N.Y. App. Div. 2nd Dep't 1998). See also Sommer v. Fed. Signal Corp., 79 N.Y.2d 540 (1992) (noting that neither exculpatory clauses nor clauses limiting liability to a nominal sum can be enforced in regards to gross negligence). Gross negligence in the context of alarm systems is defined as conduct that "smacks" of intentional wrongdoing and indicates a "reckless indifference to the rights of others." Sommer, 79 N.Y.2d at 553.
New York courts have consistently held that the failure of an alarm company to respond to a burglary or fire does not rise to the level of recklessness, in upholding exculpatory and limitation on liability clauses. In David Gutter Furs v. Jewelers Protection Services, Ltd., 79 N.Y.2d 1027 (1992), the Court of Appeals held that a burglar alarm system's failure to sound, resulting in a loss of furs valued at three hundred thousand dollars, constituted ordinary negligence, although an expert testified that there should have been two motion detectors instead of one and that a shock sensor should have been installed. The court reasoned that this constituted ordinary negligence, for the alarm company did not exhibit a "reckless indifference to plaintiff's rights." In Colagni, the Court of Appeals held that a burglar alarm company's failure to wire a skylight, resulting in the theft of twenty paintings, failed to invalidate an exculpatory clause, for the alarm company did not exhibit the "recklessness necessary" that rose to the level of gross negligence. See also Sue & Sam Mfg. Co. v. United Protective Alarm Sys., Inc., 119 A.D.2d 664 (N.Y. App. Div. 2nd Dep't 1986) (holding that the failure of a burglar alarm company to install two motion detectors pursuant to their contract, constituted ordinary negligence); World Trade Knitting Mills, Inc. v. Lido Knitting Mills, Inc., 154 A.D.2d 99 (N.Y. App. Div. 2nd Dep't 1990) (holding a fire alarm company's failure to receive a signal at their monitoring office during a fire constituted ordinary negligence); Light's Jewelers, Inc. v. N.Y. Tel. Co., 182 A.D.2d 965 (N.Y. App. Div. 3rd Dep't 1992) (holding an alarm company was not liable for the alarm's failure to sound due to the failure of the telephone service).
Here, the exculpatory clause in the contract between Plaintiffs and Slomin's states that:
Slomin's is not assuming liability and therefore shall not be liable to Subscriber for any loss or damages sustained by Subscriber as a result of the burglary, theft, hold-up, fire smoke or any other cause whatsoever regardless of whether such loss, or damage was caused by or contributed to by Slomin's' negligent performance, failure to perform any obligation or strict products liability."
The contract goes on to state that even if Slomin's is found to be liable, the amount of damages is limited to $250.00.
Plaintiffs assert that these clauses are unenforceable because Slomin's' actions rose to the level of gross negligence in that they failed to inform Plaintiffs about the system's limitations, and that they failed to ensure that proper service would be provided to Plaintiffs' residence. However, like the cases cited supra, Slomin's' actions do not evince the necessary recklessness to invalidate an exculpatory or limitation on liability clause, especially in light of the fact that the failure of the telephone system was not within Defendant Slomin's' control. Furthermore, the contract between Plaintiffs and Slomin's expressly discloses the fact that the alarm system runs on the telephone lines. The contract provision provides that:
[S]ubscriber acknowledges that signals which are transmitted over telephone lines, wire, airwaves, internet, radio, cellular or other modes of communication pass through communication networks wholly beyond the control of Slomin's and are not maintained by Slomin's and therefore, Slomin's shall not be responsible for any failure which prevents transmission signals from reaching the central office monitoring center or damages arising therefrom."
Therefore, the exculpatory and limitation on liability clauses are enforceable and bar Plaintiff's recovery for breach of contract and negligence.
Verizon claims that Plaintiffs' negligence and breach of contract claims cannot survive the exculpatory clause provided to Verizon by the Public Service Commission. A telephone company may file tariffs with the Public Service Commission which provide that the company will not incur liability for acts of ordinary negligence, but rather exclusively for acts of gross negligence or willful misconduct. Hamilton Employment Serv., Inc. v. N.Y. Tel. Co., 253 N.Y. 468, 471 (1930). In the context of telephone services, the standard for gross negligence is "wanton and reckless conduct," a lack of "even scant care" or an "intentional failure to perform a duty." Long Island Cent. Station, Inc. v. N.Y. Tel. Co., 54 A.D.2d 893, 893 (N.Y. App. Div. 2nd Dep't 1976).
A telephone company's actions do not rise to the level of gross negligence where faulty telephone service impedes the functioning of an alarm system, even if it results in the burglary of a jewelry store. Light's Jewelers, 182 A.D.2d at 967. Furthermore, a telephone company's actions do not rise to the level of gross negligence where the company provides "less than satisfactory" service over a period of nineteen months, even if the telephone lines are linked to a burglar alarm. Long Island Cent., 54 A.D.2d at 893. See also L & S Motors, Inc. v. Broadview Networks, Inc., 25 A.D.3d 767 (N.Y. App. Div. 2nd Dep't 2006) (holding that a telephone company's actions do not constitute gross negligence where the company provided faulty telephone service for forty-two days, even though the service resulted in a significant loss of profits).
Here, Verizon has filed the appropriate tariffs with the Public Service Commission. The limitation of liability clause provided by these tariffs states that:
"No liability shall attach to the telephone company for damages arising from errors, mistakes, omissions, interruptions, or delays of the telephone company, its agents, servants, or employees, in the course of establishing, furnishing, rearranging, moving, terminating or changing the service or facilities…. in the absence of gross negligence or willful misconduct."
Pursuant to this clause, Verizon will be liable to Plaintiffs only if their actions rise to the level of gross negligence. Plaintiffs' claim of gross negligence is predicated on Verizon's failure to provide "proper service" to Plaintiffs on the night of the burglary, and similar service problems prior to the incident in question. As in L & S Motors, faulty telephone service for a significant period of time does not constitute gross negligence. Moreover, as in Light's Jewelers, a telephone company will not be liable even if poor telephone service impedes the functioning of a burglar alarm system and results in a burglary. Therefore, Verizon's actions do not rise to the level of gross negligence, and the exculpatory clause provided by the Public Service Commission precludes Plaintiff's recovery on the breach of contract and negligence claims.
The Court next turns to whether Plaintiffs have stated a cause of action for fraud against Slomin's. To sustain a cause of action for fraud, the defendant must have knowingly, and with the intent to deceive, made a false representation of a material fact, and the plaintiff must have suffered an injury as a result of this representation. Channel Master Corp. v. Aluminum Ltd. Sales, 4 N.Y.2d 403, 406-7 (1958). Stated more simply, the elements of fraud are the "representation of a material existing fact, falsity, scienter, deception and injury." Id. at 407. An essential element of fraud is that the representation must have been false when it was made. Lovett v. Allstate Ins. Co., 86 A.D.2d 545, 546 (N.Y. App. Div. 1st Dep't 1982). A court will not find that a representation is false if this assertion is based upon a plaintiff's speculation. Kahmi v. Tay, 244 A.D.2d 266, 266 (N.Y. App. Div. 1st Dep't 1997). In Kahmi, the court held that listing physicians' names on a clinic brochure as part of an advisory board did not indicate that the physicians were directly involved in the treatment of patients, and therefore, that the listing did not constitute a false representation. See also Manti's Transp., Inc. v. C.T. Lines, Inc., 68 A.D.3d 937 (N.Y. App. Div. 2nd Dep't 2009) (holding that the defendant's offer and acceptance of the plaintiff's payment did not imply that the defendants would obtain title in the plaintiff's name, and that therefore, the offer and acceptance did not constitute a false representation); Serbalik v. Gen. Motors, Corp., 246 A.D.2d 724 (N.Y. App. Div. 3rd Dep't 1998) (holding that a car dealer is not liable for fraud where the salesperson's statement that a car was "practically maintenance free" was deemed to be an opinion and not an actionable expression of a fact).
Here, Slomin's employee told Plaintiffs that their alarm system would work in "almost any circumstance." This statement does not meet the element of falsity, for the use of the word "almost" implies that there are some circumstances in which the alarm system would not work. In fact, as in Kahmi, to imply that functioning in "almost any circumstance" includes functioning when the telephone lines are not serviceable amounts to mere speculation, which is not actionable for fraud. Furthermore, as in Serbalik, there is no recovery for fraud where the word "practically" is used.
Even if the salesperson's statements did constitute a false representation, if a signed contract contains terms different from those orally represented, a person "is presumed to have read the writing and may not claim that he or she relied on the representations." See Lewin Chevrolet-Geo-Oldsmobile, Inc. v. Bender, 225 A.D.2d 916, 918 (N.Y. App. Div. 3rd Dep't 1996) (holding that a customer cannot state a cause of action for fraud where the car dealer orally quoted one price and then the customer signed a contract stating a different price).
As discussed supra, the contract between Plaintiffs and Slomin's adequately disclosed that the alarm system ran on the telephone lines. As in Lewin, Plaintiffs are presumed to have read this writing, and cannot claim that they were not informed of this information. Therefore, Plaintiffs cannot state a cause of action for fraud against Slomin's.
Verizon contends that Plaintiffs have not stated a cause of action for fraud against them. Statements of opinion or puffery cannot form the basis for fraud. See Serbalik, 246 A.D.2d at 725 (holding that a salesperson's statements that a car has "great traction" and "excellent service" are determined to be puffery and are non-actionable for fraud); Scaringe v. Holstein, 103 A.D.2d 880 (N.Y. App. Div. 3rd Dep't 1984) (holding that an advertisement that a car is in "excellent condition" is puffery); DH Cattle Holdings Co. v. Smith, 195 A.D.2d 202 (N.Y. App. Div. 1st Dep't 1994) (holding that an agent's representation that an investment is "safe" constitutes puffery).
Here, Verizon told Plaintiffs that they would be provided with "reliable telephone service." Just representations of "excellent service" and a "safe investment" constitute puffery, Verizon's representation is puffery and cannot constitute the basis for fraud.
Furthermore, pursuant to CPLR §3016 (b), when pleading fraud, the plaintiff must state with specificity the circumstances constituting the fraud. Sforza v. Health Ins. Plan of Greater N.Y., Inc., 210 A.D.2d 214, 214 (N.Y. App. Div. 2nd Dep't 1994). Bare allegations, or conclusory statements are insufficient to sustain a cause of action for fraud. Id. A pleading for fraud that fails to allege the time or place of the representation, and specifically which employee made the representations is insufficient to survive a motion to dismiss. Eastman Kodak Co. v. Roopak Enters., Ltd., 202 A.D.2d 220, 222 (N.Y. App. Div. 1st Dep't 1994). Furthermore, a complaint that fails to allege any specific facts to support the allegation that defendant knowingly made the misrepresentation is insufficient to state a cause of action for fraud. Elsky v. KM Ins. Brokers, 139 A.D.2d 691, 691 (N.Y. App. Div. 2nd Dep't 1988).
Here, Plaintiff's fraud allegations are based upon Verizon's statements that Plaintiffs would be provided with "reliable telephone service" when they were "contacted to install Verizon Fios service from the traditional land line service," although Verizon knew "it would be unable to reliably provide such service." As in Eastman Kodak, there is no indication of specifically who made these statements, on which date the statements were made, to which Plaintiff the statements were made, nor the location of the person making these statements. Furthermore, as in Elsky, Plaintiffs do not allege any specific facts to show that these statements were made knowingly. Therefore, Plaintiffs fail to state a cause of action for fraud.
Breach of Warranty
The issue here is whether Plaintiffs can sustain a cause of action for breach of warranty against Slomin's. The Plaintiffs at this time has failed to identify any express warranties. In determining whether an implied warranty has arisen in a hybrid service-sales transaction, it is first necessary to determine whether the service or the sales part of the transaction predominates. Milau Assoc., Inc. v. N. Ave. Dev. Corp., 42 N.Y.2d 482, 485 (1977). If the sales part of the transaction predominates, warranty law applies to the transaction. Id. However, if the service part of the transaction predominates, negligence law will apply. Id.
A fire-alarm system is service-dominated and therefore governed by negligence law, for its "predominant purpose" is to "provide monitoring services." Onebeacon America Ins. Co. v. Comsec Ventures Int'l, Inc., No. 8:07-cv-900 (GLS*RFT), 2010 WL 114819 at *6 (N.D.N.Y Jan. 7, 2010) (applying New York law). See also Rassa v. Rollins Prot. Serv. Co., 30 F.Supp.2d 538 (D. Md. 1998) (holding that the "predominant purpose" of a contract for a fire-alarm system is the installation, programming and monitoring of the alarm system); Fox v. Mountain W. Elec., Inc., 52 P.3d 848 (Idaho 2002) (holding that a fire alarm system was service-dominated). Furthermore, as discussed supra, Plaintiff's are barred from stating a cause of action for negligence.
Even if an alarm system is sales-dominated, Plaintiffs still cannot sustain a cause of action for breach of this warranty. Pursuant to UCC 3-313 (2), a seller's "opinion" or "commendation" cannot form the basis of a warranty. See Nigro v. Lee, 63 A.D.3d 1490, 1491 (N.Y. App. Div. 3rd Dep't 2009) (holding that an advertisement's description of a car as "gorgeous" amounted to the seller's opinion and was non-actionable for breach of warranty); Sparks v. Stich, 135 A.D.2d 989 (N.Y. App. Div. 3rd Dep't 1987) (holding that a representation that farm equipment was in "good working order" did not warrant against "all imperfections in the equipment" and was therefore non-actionable for breach of warranty).
Plaintiffs allege that Slomin's breached a warranty that the alarm system would be in "good working order" and that Slomin's failed to provide "adequate protection in the event of a theft." As in Sparks, the phrase "good working order" is merely a seller's opinion, and cannot constitute the basis for a breach of warranty. Furthermore, there is no indication that the alarm system was not in "good working order," as Plaintiffs do not allege that there is any defect with the alarm system itself. Furthermore, as discussed supra, the contract between Plaintiffs and Slomin's adequately discloses that the alarm system would not run in the event of faulty telephone service. Therefore, Plaintiffs cannot sustain a cause of action for breach of warranty against Slomin's.
Lastly, the Court determines that Plaintiffs cannot sustain a cause of action for breach of warranty against Verizon. As discussed supra, a seller's opinion cannot constitute the basis for a breach of warranty claim. Nigro, 63 A.D.3d at 1491. Furthermore, a seller's representation that equipment is in "good working order" is an opinion and is non-actionable for breach of warranty. Sparks, 135 A.D.2d at 990.
Here, Plaintiff alleges that Defendant Verizon breached a warranty that the telephone service would be in "good working order." As in Sparks, "good working order" is a seller's opinion and cannot form the basis for a breach of warranty claim. Therefore, Plaintiff cannot sustain a cause of action for breach of warranty.
For the foregoing reasons, Defendant Slomin's and Defendant Verizon's motions to dismiss pursuant to CPLR §3211 (a) (7) and CPLR §3211 (a) (1) are granted, and the plaintiff's complaint is dismissed in its entirety.
A copy of this decision with notice of entry shall be served on all parties within 30 days of the date of entry.
This constitutes the decision and order of the Court.