## Facts

- Nirvana International, Inc. operated a jewelry store and contracted with ADT Security Services, Inc. for installation and monitoring of an alarm system.
- ADT presented a multi-page written agreement in which the signature page warned that additional terms and conditions were included on accompanying pages.
- The accompanying terms included a “LIMITATIONS ON LIABILITY” provision stating ADT was not an insurer and capping ADT’s liability at $1,000, with an option to purchase additional coverage.
- Nirvana’s owner signed and initialed the front pages describing services and pricing, permitted installation to proceed, and paid monthly monitoring fees.
- After installation, the store was burglarized; the alarm allegedly did not activate, and Nirvana claimed about $2.4 million in losses.
- Nirvana sued for breach of contract, negligence/gross negligence, and forgery/fraud, alleging ADT produced a page bearing a forged signature on the terms-and-conditions page containing the liability limitation.
- ADT moved to dismiss under Rule 12(b)(6), relying on the contractual liability cap.

## Issues

1. Whether the contract’s limitation-of-liability clause was part of the parties’ agreement and enforceable despite the allegation that the owner did not sign (and did not agree to) the page containing the clause.
2. Whether negligence and gross-negligence claims could proceed to avoid the contractual liability limitation, including whether ADT owed a duty independent of the contract.
3. Whether allegations of a forged signature stated a viable fraud/forgery claim, including whether Nirvana adequately pleaded reliance and damages caused by the alleged misrepresentation.

## Decision

- The court granted ADT’s motion to dismiss all claims.
- The court held the limitation-of-liability clause was incorporated into the contract and enforceable, capping recovery at $1,000.
- The court dismissed negligence and gross-negligence claims because the alleged wrongdoing arose from contractual duties and did not constitute gross negligence sufficient to defeat the contractual limitation.
- The court dismissed the fraud/forgery claim for failure to plead reliance and fraud damages tied to the alleged forgery.

## Legal Principles

- A party who signs a contract is generally bound by its terms and by clearly referenced accompanying terms; acceptance may be shown by conduct, including permitting performance and paying for services without timely objection.
- Limitation-of-liability clauses in commercial alarm/security contracts are enforceable where the contract allocates risk and disclaims insurer status, and the customer is on notice of the limitation.
- Under New York law, a plaintiff cannot avoid a contractual risk allocation by recasting a contract dispute as negligence absent a duty independent of the contract.
- A contractual limitation of liability may be overcome only by sufficiently egregious misconduct; allegations amounting to ordinary negligent performance of contractual duties do not establish gross negligence.
- Fraud requires, among other elements, justifiable reliance and damages caused by the misrepresentation; an alleged post-performance forgery that did not induce action or forbearance does not satisfy reliance.

## Conclusion

The court enforced the contract’s $1,000 limitation-of-liability provision against a jewelry store’s burglary-loss claims, rejecting efforts to bypass the cap through tort and fraud theories because the alleged failures were contractual in nature, did not amount to gross negligence, and did not plausibly allege reliance on any forged document.


Nirvana Int'l, Inc. v. ADT Sec. Servs., Inc., 881 F. Supp. 2d 556 (S.D.N.Y. 2012)