What, you want another example of a court mishandling its analysis of potential ambiguity? My SuperGuide post (here) wasn’t enough for you? OK, if you insist …
Reader Zach Courson alerted me to a recent opinion of the North Carolina Business Court, Medfusion, Inc. v. Allscripts Healthcare Solutions, Inc., No. 14 CVS 5192, 2015 WL 1455680 (N.C. Super. Mar. 31, 2015) (PDF copy here).
Medfusion (the plaintiff) and Allscripts (the defendant) had an agreement to create and market an online patient portal for healthcare providers. Medfusion sued Allscripts, claiming breach of contract, among other claims. Allscripts filed a motion to dismiss Medfusion’s complaint.
The complaint included damages for lost revenue arising from breach of contract. Allscripts argued that the contract’s limitation-of-liability provision precluded Medfusion from recovering damages for lost revenue. Here’s the relevant language, in sentence case to spare you from being driven mad by the all-caps:
In no event shall either party be liable for any loss or damage to revenues, profits, or goodwill or other special, incidental, indirect, or consequential damages of any kind, resulting from its performance or failure to perform under this agreement …
Here’s what the court had to say:
The parties’ disagreement over the meaning of the LOL Provision centers primarily around the impact of a single comma before the phrase “or goodwill or other special, incidental, indirect, or consequential damages of any kind ….” Defendant contends that the comma before “or goodwill” is an Oxford, or serial, comma that sets apart three independent categories of damages barred by the agreement. First, under this interpretation, lost revenues are barred. Second, the agreement bars lost profits. Third, the agreement bars goodwill or other special, incidental, indirect, or consequential damages of any kind. Under this analysis, the phrase “or other … consequential damages” only modifies “goodwill” and not lost revenue or lost profits. Accordingly, Defendant argues, lost revenue and lost profits, the damages Plaintiff is seeking here, are excluded by the LOL Provision even if they are not considered special or consequential damages.
Plaintiff, on the other hand, argues that the “or other … consequential damages” language modifies “revenues, profits, or goodwill” to make clear that these categories of damages are only excluded to the extent that they are considered consequential. Under this interpretation, Plaintiff would only be excluded from recovering lost profits that are consequential damages. To the extent lost profits constitute direct damages, they are not barred by the LOL Provision under Plaintiff’s interpretation of that clause.
Ultimately, at this stage in the litigation, the Court finds that the LOL Provision is reasonably susceptible to either interpretation, and is, therefore, ambiguous. While Defendant’s argument as to the use of the Oxford comma within the LOL Provision appears logical, the use of such a comma is not at all consistent within the broader language of the Agreement. Indeed, the section that immediately precedes the LOL Provision does not use the Oxford comma, nor does the section immediately following the LOL Provision use the Oxford comma, even in a numbered list. Accordingly, the Court simply cannot conclude, as it must to grant the Motion to Dismiss, that Defendant’s interpretation of the LOL Provision is the only reasonable interpretation of that provision as a matter of law.
Well, to the court and Allscripts I say, You cannot be serious!
Yes, presence or absence of a serial comma can create ambiguity, but only regarding the relationship between the items in a list that includes, or omits, a serial comma. See this 2010 post and this 2013 post. So presence of a serial comma does not affect the relationship between “revenues, profits, or goodwill” and the following noun phrase.
One you get rid of that red herring, the most natural reading is that the antecedent of “other special, incidental, indirect, or consequential damages of any kind” is the preceding noun phrase featuring the word “damage,” namely “any loss or damage to revenues, profits, or goodwill”. In other words, the most natural reading is that sought by Medfusion; there’s no ambiguity. I arrive at that conclusion through two steps.
First, the antecedent isn’t just “any loss or damage to revenues”. That’s because “any loss or damage” could only modify all of “revenues, profits, or goodwill”—it makes sense to say “will be liable for any loss or damages to … profits” but it doesn’t make sense to say “will be liable for … profits”.
And it follows that it doesn’t make sense to suggest that the antecedent is just the word “goodwill,” as goodwill doesn’t constitute damages.
The court refers to one part of the provision as modifying another part. But that’s a concept that applies to syntactic ambiguity. Here, we’re dealing with something different, anaphor and antecedent; see chapter 17 of The Cambridge Grammar of the English Language. Using grammar terminology loosely is a sign of a court that’s out of its depth. No one would mistake me for a linguist, but I’ve learned to tread carefully.
What’s the fix? Once more, with feeling: Allow expert testimony on potential ambiguity. (For more about that, go to the bottom of this post.)
7 thoughts on “The North Carolina Business Court and the Serial Comma: It’s Not Pretty”
What would you have done as a drafting fix? (I have my own ideas, of course.)
I’m not inspired to offer an alternative version of this language. Apart from the whole “consequential damages” thing, in its current form I might have written it myself, so it’s not as if anyone could have know this was going to get them into trouble.
I was a math major; I reflexively look for opportunities to use parentheses and the like to delineate concepts.
I’d be inclined to rewrite the clause as follows, recognizing that substantively it might not be what the parties intended. (It’s such a broad disclaimer that one or both parties might well object to it.)
In no event shall either party be liable for any of the following when resulting from the party’s performance or failure to perform under this agreement: (i) loss or damage to revenues, profits, or goodwill, or (ii) other special, incidental, indirect, or consequential damages of any kind.
I came to the same conclusion but possibly by a different road. I can’t be sure because I’ve been hit in the head with the Cambridge Dictionary of English Grammar and socked in the jaw with anaphor.
Plaintiff Medfusion’s interpretation, which minimizes the damage exclusions, parses this way (numbers inserted for ease of analysis):
‘In no event shall either party be liable for  any loss or damage to revenues, profits, or goodwill or  *other* special, incidental, indirect, or consequential damages of any kind’.
The ‘other’ operates to make the four adjectives in category (2) apply back to category (1), as when I say ‘Barabbas and *another* prisoner’, that implies that Barabbas is a prisoner.
Defendant Allscripts’ competing interpretation, which maximizes the damage exclusions, parses this way:
‘In no event shall either party be liable for any loss or damage to  revenues,  profits, or  goodwill or *other* special, incidental, indirect, or consequential damages of any kind’.
I agree that the insertion of a comma after “goodwill” would be nonsense and wouldn’t make either interpretation likelier, so yes, the Oxford comma’s a red herring.
The disputed language is a bit like this: ‘I see Bernice, Veronica, and Barabbas and *another* prisoner’. That muddies up how many of the four are prisoners.
But the defendant’s proffered interpretation doesn’t match up with the Barabbas example. Allscripts is forced press this bit of infelicity: ‘In no event shall either party be liable for any loss or damage to … damages of any kind’. Can’t swallow it. Makes the defendant’s interpretation unreasonable. Medfusion, despite its ugly name, carries the day.
How could the drafter have avoided the dispute? Depends on the desired outcome. Here’s a pro-plaintiff (Medfusion) version:
‘In no event shall either party be liable to the other for excluded damages resulting from performance or failure to perform under this agreement. Excluded damages are (1) damages to revenue, profits, or goodwill, if such damages are special, incidental, indirect, or consequential, and (2) any other special, incidental, indirect, or consequential damages’.
Here’s a pro-defendant (Allscripts) version.
‘In no event shall either party be liable to the other for excluded damages resulting from performance or failure to perform under this agreement. Excluded damages are (1) any loss or damage to revenues, profits, or goodwill and (2) special, incidental, indirect, or consequential damages of any kind’.
Still not persuaded of the merits of allowing expert testimony on the meaning of contract language. What next, experts on legislative drafting?
+2, because the comment censor doesn’t like a second +1.