HI Tech. Corp. v. Quality & Inv. Prop. Suwanee

894 S.E.2d 666

HI TECHNOLOGY CORP.

v.QUALITY & INVESTMENT PROPERTIES SUWANEE, LLC; and vice versa.

A23A0808, A23A0809

Court of Appeals of Georgia.

November 3, 2023

Keith Robert Blackwell, James Charles Grant, Jonathan David Parente, Atlanta, Caroline Marie Rawls, Anderson Speir Brook Kemp, for Appellant in A23A0808.

David Balser, Robert Douglas Griest, Billie Barker Pritchard, Charles Gowen Spalding Jr., Atlanta, for Appellee in A23A0808.

David Balser, Robert Douglas Griest, Billie Barker Pritchard, Charles Gowen Spalding Jr., Atlanta, for Appellant in A23A0809.

Keith Robert Blackwell, James Charles Grant, Jonathan David Parente, Atlanta, Caroline Marie Rawls, Anderson Speir Brook Kemp, for Appellee in A23A0809.

Watkins, Judge.

In these cross-appeals from a case involving claims for beach of contract and defamation, the parties appeal the trial court’s rulings on their competing motions for summary judgment. The trial court concluded that although the remedies and limitation of liability clauses in the parties’ agreement did not completely bar the plaintiff’s breach of contract claims, the defendant’s liability was capped at $1 million. The trial court also concluded that the defendant’s counterclaim for defamation can proceed. We reverse in part, as we conclude that summary judgment should have been granted as to one of the bases for the defamation counterclaim, and otherwise affirm the trial court’s rulings.

Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law[.]" OCGA § 9-11-56 (c). "We review a grant or denial of summary judgment de novo and construe the evidence in the light most favorable to the nonmovant. Because this opinion addresses cross-motions for summary judgment, we will construe the facts in favor of the nonmoving party as appropriate."¹

So viewed, the record shows that HI Technology Corporation, formerly known as InComm Holdings, Inc. ("InComm"), is a global financial services company that facilitates over $50 billion in annual transactions, primarily by selling and activating gift cards for companies such as American Express, Target, Best Buy, and Walmart. Quality Investment Properties Suwanee, LLC ("QTS"), is a provider of data center services, including data center space, power, and connectivity. On December 20, 2019, InComm’s suite at the QTS data center lost power, disrupting InComm’s ability to sell and activate gift cards on one of the busiest shopping days of the year.

InComm and QTS entered into their master space agreement in September 2013, under which QTS agreed to provide InComm with physical space and services in QTS’s professional data center. The agreement provided that because InComm selected the "redundant power supply" option, QTS would guarantee that power would be available in InComm’s suite 99.999 percent of the time. The agreement further identified the remedy InComm would receive if QTS failed to provide the specified level of service, relevantly providing that if power was unavailable for more than 86 minutes in a given month, InComm would receive a "service level credit" of 10.6 percent of its total monthly recurring charge. The agreement also contained a consequential damages waiver providing that the parties would have no liability for damages to each other except, as relevant to this appeal, in cases of gross negligence or intentional misconduct, and in such circumstances their liability would be capped at $1 million. The parties subsequently renewed their agreement through March 31, 2020.

On December 20, 2019, the data center experienced a power outage, and a portion of InComm’s suite was without power for approximately two hours. InComm received a service credit of $17,269.48 on its monthly invoice.

Six months later, InComm filed suit against QTS, raising claims for breach of contract, declaratory judgment (as to the enforceability of the provisions of the agreement waiving or limiting QTS’s liability for damages) and attorney fees.² InComm alleged that it lost tens of millions of dollars due to the outage and contended that QTS was "grossly negligent and intentional" in how it installed and operated the power configuration to InComm’s suite. QTS filed a counterclaim for defamation, alleging that InComm employees made false statements to QTS customers about the power outage. The parties filed cross-motions for summary judgment, and the trial court concluded that QTS was potentially liable for breach of contract but that its liability was limited to, at most, $1 million. Thus, the trial court granted QTS’s motion for summary judgment with respect to alleged damages in excess of $1 million and denied the motion as to all other claims. The trial court also denied InComm’s motion for summary judgment to the extent it sought damages over $1 million. In a separate order, the trial court denied InComm’s motion for summary judgment as to QTS’s counterclaim for defamation. The parties then filed these appeals.

1. QTS contends that pursuant to the parties’ agreement, particularly Section 5 of the addendum, contractually-established credits are InComm’s sole and exclusive remedy for the breaches alleged in this case. It is undisputed that, after the power outage, QTS paid InComm $17,269.48 in such "Service Level Credits." QTS maintains that InComm is not entitled to any additional recovery.

The addendum to the parties’ master space agreement provides:

5.2 Power Guarantee. Except in the event of Facilities Maintenance, Customer Maintenance and Force Majeure conditions, QTS shall have the contracted power available for the Customer as follows: 99.999% of the time during the Term of this Addendum when configured with redundant power, or if the Customer does not choose the redundant power option on the Customer order form, 99.99% of the time during this Addendum ("Power Guarantee").

Power Remedy. In the event QTS fails to provide the level of service provided in the Power Guarantee, Customer shall receive the applicable remedy ("Service Level Credit") described below.

[The agreement then includes a chart indicating the service level credit to be awarded for each scenario.]

The addendum also provides:

5.7

Remedies.

a) If, during the term of this Addendum, QTS fails to meet [the] Power Guarantee, … Customer shall be entitled to receive, as its sole and exclusive remedy, the applicable Service Level Credits described in Section[ ] 5.2 … of this Addendum.

QTS asserts that because all of the damages InComm alleges in this case arose from the loss of power in its suite, Service Level Credits, which QTS already paid, were InComm’s "sole and exclusive remedy" pursuant to Section 5.7. QTS acknowledges that InComm has argued that QTS breached the parties’ agreement in several ways — including by failing to maintain and provide backup power in accordance with industry standards, as required by Section 1.2 (c) of the addendum, and by failing to configure InComm’s suite with redundant power — but argues that those alleged breaches are "irrelevant" because all of InComm’s purported damages were the result of the loss of power.

[1–3] "The cardinal rule of contract construction is to ascertain the intention of the parties…. When the terms of a contract are clear and unambiguous, the reviewing court looks only to the contract itself to determine the parties’ intent."³ By its terms, the Section 5.7 Remedies provision applies in the event QTS fails to meet a service level guarantee. Nothing in that provision addresses what remedies are available in the event QTS breaches other portions of the parties’ agreement. Consequently, we reject QTS’s argument on this issue and conclude, as did the trial court, that service level credits are not the sole and exclusive remedy available to InComm for the breaches alleged in this case.⁴

2. The parties raise competing challenges to the trial court’s interpretation of their consequential damages waiver, which provides:

6.3 Consequential Damages Waiver. IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY TYPE OF INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOST REVENUE, LOST PROFITS, REPLACEMENT GOODS, LOSS OF TECHNOLOGY, RIGHTS OR SERVICES, LOSS OF DATA, OR INTERRUPTION OR LOSS OF USE OF SERVICE OR EQUIPMENT, EVEN IF SUCH PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND WHETHER ARISING UNDER THEORY OF CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE. THE FOREGOING LIMITATION OF LIABILITY DAMAGES SHALL NOT APPLY TO: (I) A BREACH BY EITHER PARTY OF THE CONFIDENTIALITY OBLIGATIONS IN SECTION 7[;] (II) A BREACH BY CUSTOMER OF THE AUP[;] OR (III) AS A RESULT OF LIABILITY ARISING FROM A PARTY’S

GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT, PROVIDED, HOWEVER, ANY DAMAGES ALLOWED PURSUANT TO THIS SECTION 6.[3] (III) SHALL NOT EXCEED ONE MILLION DOLLARS ($1,000,000).⁵

[4, 5] As we consider the parties’ arguments, we bear in mind that under Georgia law, "the freedom of contract is sacrosanct" and "should not be limited absent some important public policy reason."⁶ Thus, "[a]bsent a public policy interest, contracting parties are free to contract to waive numerous and substantial rights, including the right to seek recourse in the event of breach by the other party."⁷ We have routinely concluded that "[e]xculpatory clauses in Georgia are valid and binding, and are not void as against public policy when a business relieves itself from its own negligence."⁸ But, as discussed in more detail later in this opinion, we have also stated, in cases involving tort claims, that "exculpatory clauses do not relieve a party from liability for acts of gross negligence or wilful or wanton conduct."⁹

(a) QTS argues that the trial court erred by failing to rule that InComm’s breach of...