Court upholds limitation of liability clause in Internet services agreement

Asch Webhosting, Inc. v. Adelphia Business Solutions Inv., LLC, No. 04-2593, 2007 WL 2122044 (D.N.J. July 23, 2007).

Plaintiff Asch Webhosting entered into a three year contract with Adelphia Business Solutions for “internet services.” About two months after the agreement was finalized, Adelphia sent Asch a letter informing it that the services would be terminated because of alleged violations by Asch of the service’s acceptable use policy. The parties worked out an agreement whereby Asch had thirty days to find another provider. After those thirty days were over, Adelphia pulled the plug.

Asch filed suit alleging breach of contract, claiming $1.4 million in consequential damages due to the loss of business stemming from the termination of the agreement. Adelphia moved for summary judgment, citing to an “exculpatory clause” in the agreement which limited the amount of recovery for consequential damages to the amount paid by Asch for the services.

The court granted Adelphia’s motion for summary judgment. It held that the exculpatory clause was reasonable and that Asch demonstrated no conduct by Adelphia sufficient to overcome the expressed limitations on liability. The transaction at issue was made at arms length and was between two private commercial entities. Moreover, there were no public policy concerns implicated by the agreement. Given this scenario, the court refused to “engage in judicial revision of the parties’ [a]greement.”

Adelphia’s conduct in terminating the agreement, according to the court, did not render the exculpatory clause void. Adelphia had received complaints that Asch was using the service to spam other customers. Regardless of the “ultimate accuracy or veracity” of those complaints, the court found that Adelphia was entitled to rely on them so long as it did so in good faith.