The typical vendor-friendly IT service contract will contain a section titled “limitation of liability” with two key provisions: Purchasers will often focus on the first provision but fail to address the second provision, perhaps because it reads like boilerplate language that reasonably confirms that the vendor will not be liable for speculative damage claims. Appx. Silverpop’s failure was a failure to uphold one specific term of the contract (the confidentiality provision), and, based on that, any damages from Silverpop’s lack of security were … More than a news source, the Data Protection Report provides thought leadership on emerging privacy, data protection and cybersecurity issues, and helps its readers proactively address risks and anticipate next steps in this crucial emerging field. Circuit Court of Appeals that affirmed a decision in Silverpop Systems, Inc. v. Leading Market Technologies, Inc., finding that all damages flowing from a vendor’s data breach … This requires both parties to reconsider the standard vendor-friendly term waiving all consequential damages,” the authors write. LEXIS 196 (11th Cir. On July 19, 2012, Silverpop filed this action, seeking a judgment declaring that LMT was not damaged by the data breach or that the damages incurred were consequential damages and, as such, not … If the vendor allows confidential information to be breached, this could harm the value of that data, cause competitive harm and lost profits, and expose the company to claims by third parties with interests in the exposed data, among other things. In Silverpop v. Leading Market Technologies , 2016 U.S. App. An article in Norton Rose Fulbright’s Data Protection Report discusses a recent ruling by the 11th U.S. And anyway, if LMT suffered any damages, they were indirect or consequential and consequential such damages … “In contracting for IT services, it is important for purchasers to thoughtfully consider the risks of harm presented by the services, and then negotiate terms that appropriately allocate those risks between the parties. Ga. App. Matthew Spohn and David Navetta explain that the court’s analysis could apply to almost any breach of data provided to a vendor under an IT service contract, and highlights the need to carefully scrutinize a proposed waiver of consequential damages when confidential or sensitive data is involved in the contract. Silverpop … The court dismissed the case despite the fact that claims for a breach of confidentiality were excused from the contracts separate maximum of total damages that could be incurred and paid out. Leading Marketing counterclaimed, arguing that it was justified in withholding payment since Silverpop had failed to keep the addresses secure. Home > Vendor management and transactions > Recent Case Highlights The Dangers Of Consequential Damage Waivers in IT Contracts. “[T]o the extent that consequential damages are recoverable in breach of contract actions, a clause excluding such damages is valid and binding unless prohibited by statute or public … … To understand the effects of a consequential damages waiver, one must first understand what consequential damages are. This analysis is significant, because it could apply in almost any IT services contract. Appx. A defendant's breach of contract … 2000),  the influential Second Circuit Court of Appeals (which handles appeals from New York’s federal courts, among others) adds the test of whether damages compensate for “the value of the very performance promised,” such that they are direct damages, or whether they compensate for “additional losses (other than the value of the promised performance),” such that they are consequential damages. The contract contained the following exclusion " In no event will Silverpop be liable to the other party for consequential damages ". Only damages foreseeable at the time of contracting are recoverable in the event of a contract breach. Some writers have argued that any damages from the breach of a confidentiality obligation are necessarily consequential, because the specific harm caused by the breach would rarely be apparent on the fact of the contract. Recent Case Highlights Dangers of Consequential Damage Waivers in IT Contracts. Here, LMT's damages are best characterized as consequential. Limitation of Liability is one of the most important clauses you will find in almost any Terms and Conditions agreement. Silverpop / IBM Campaign automation (Watson) is a marketing technology provider that offers a marketing automation solution built on a scalable email marketing platform. An article in Norton Rose Fulbright’s Data Protection Reportdiscusses a recent ruling by the 11th U.S. Id. That position has some support from the recent decision of the Eleventh Circuit Court of Appeals in Silverpop Systems, Inc. v. Leading Market Technologies, Inc., 61 Fed. Silverpop then sued for declaratory judgment that LMT wasn’t entitled to any damages, and LMT filed its negligence and breach-of-contract counterclaims. All Rights Reserved. In the absence of a breach of the confidentiality provision, LMT would not have incurred the loss to the sale value of the LMT List. This confusion is compounded by the fact that courts will often add layers of additional analysis to distinguish direct and consequential damages. Silverpop moved for dismissal of that claim with the argument that those damages were consequential, and were therefore barred by the consequential damages waiver in their agreement. You also learn how to connect a Silverpop connector endpoint to the Silverpop … 849 (11th Cir. It said that the parties’ agreement was not one for … In that case, the Plaintiff Silverpop … Silverpop Systems specializes in planning, executing, and managing permission-based e-mail marketing campaigns. But that is a misconception—the consequential damages waiver has important ramifications, especially in the context of confidentiality breaches. Fine-tune email marketing and lead-generation activities with these four tips for using Silverpop connector activities with IBM WebSphere Cast Iron. And … Silverpop Systems, Inc. v. Leading Market Technologies, Inc. The district court then assessed whether the contract prohibited the damages LMT sought … Recent Case Highlights The Dangers Of Consequential Damage Waivers in IT Contracts, U.S. Court of Appeals for the Eleventh Circuit. Thus, considering the purpose of the parties’ agreement, the damages LMT seeks are not the type that “arise naturally and from the usual course of things.” LMT’s damages are consequential rather than direct. In November of 2010, Silverpop’s web-based system was hacked, potentially affecting the security of the nearly 500,000 e-mail addresses Leading Marketing had uploaded to the system. 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