In every contract parties try to limit their liability. As a result, drafters put in very broad limitations of liability, which, up to a point, are fine and should be used. However, the problems arise when an entity tries to draft a limitation of liability that is so broad that it goes against public policy and state statutes. This is what recently happened in the case of Rossi v. Photoglou (Court of Appeals of California, Fourth District Division Three [9/29/2014]).
The case dealt with a cast member from “The Real Housewives of Orange County,” Gretchen Rossi, and her claim that her former friend Jay Photoglou was harassing and stalking her. At the trial level, Rossi was successful and recovered more than $500,000 in compensatory and punitive damages. The court dismissed the counterclaim by Photoglou against Rossi for libel, slander and invasion of privacy. It based the dismissal on the release signed by Photoglou which shielded not only the producers of the program, but also other cast members from liability. However, the Court of Appeals did not agree and reversed that finding because it held that all three of his claims involved intentional torts, and courts have often held that one cannot waive liability for intentional torts.
In California, there is a specific statute (California Civil Code Section 1668) which is on point. It states:
“All contracts which have their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful injury to the person or property of another or violation of law, whether willful or negligent, are against the policy of the law.”
The release that Photoglou signed stated that he was releasing the producers, their employees, officers and agents from,
“…any and all claims, demands, controversies, causes of action, damages, rights, liabilities, and obligations whatsoever (including without limitation, any defamation claim and/or claim that such use invades any right of privacy and/or publicity).”
The court found that since libel, slander and invasion of privacy are intentional torts, this release could not, as a matter of law, stand as to those claims. But one other very interesting point that the claim brings up is that the California statute precludes one from limiting liability from their “own” acts. However, in a case like this, where there might be actions by a third party which are intentional torts for which liability might flow back to the principal, Section 1668 might not, in fact, prevent one from insulating oneself from the intentional torts of third parties.
When drafting a proper waiver, one should draft it as broadly as possible, but should not exclude limitations based on the principal’s own fraud or willful injury to persons or property of another. But, under California or similar laws, you can include the broad waiver language for vicarious liability even if it is based on the intentional commission of a tort or violation of law by the third party. A properly drafted release can specifically limit the liability so that a potential plaintiff’s sole remedy would be to sue the person who actually committed the intentional tort and not someone who might normally be vicariously libel. Further, this should be matched by a mirror component in the indemnification clause and representations made by anyone who would cause vicarious liability to a third party. In a case such as Rossi, this would of course be any of the cast members or crew or anyone involved in the productions of the commercial, television program, film or the like.
In those situations, the producer should insist that everyone represent, warrant and covenant that they will not commit any intentional torts, violate the law or cause any action that would be deemed outside the scope of their employment or relationship and, as such, would not be deemed to be covered under the liability or the actions of the principle (e.g. the producer of the advertisement, television program or film). They would further agree to provide the standard indemnifications of the production company, its employees, officers, etc.
Anyone producing videos, commercials, programming, infomercials, television programs or just generally involved in a situation where they might incur vicarious liability based on the actions of a third party can limit their liability. But they need to be careful not to overdo their limitations of liability, to keep them within the parameters of the law so that they are enforceable. The take- away is that too much of a good thing is not a good thing.