Provision Limiting Claims to Declaratory Judgment Enforceable

On February 24, 2025, Justice Bannon of the New York County Commercial Division issued a decision in Kingsbridge 2005, LLC v. Wells Fargo Bank, N.A., 2025 NY Slip Op. 30648(U), enforcing a provision limiting claims to a proceeding for declaratory judgment, explaining:

The plaintiffs fifth cause of action asserts that the defendants breached the Loan agreement by sending a default notice to the plaintiffs after reneging on an agreement to deposit funds associated with the Alpha Lease and then refusing to fund disbursements as required by the lease. Most notably, this cause of action seeks money damages. The defendants argue that the Borrower’s Remedies provision of parties’ agreement, which precluded money damages, entitles them to summary judgment on this cause of action. The defendants are correct in regard to the money damages sought.

New York courts generally honor such contractual provisions that limit or waive damages. Courts must honor contractual provisions that limit liability or damages because those provisions represent the parties’ agreement on the allocation of the risk of economic loss in. certain eventualities. Indeed, contract terms providing for a sole remedy are sufficiently clear to establish that no other remedy was contemplated by the parties at the time the contract was formed especially when entered into at arm’s length by sophisticated contracting parties’. This is in keeping with the settled law that a contract is to be construed in accordance with the parties’ intent, which is generally discerned from the four corners of the document itself.

The plaintiffs allege that the defendants have engaged in this misconduct for the express purpose of causing harm to the plaintiff and argue that bad faith on the part of the defendants provides an exception to this rule and renders the Borrower’s Remedies provision found in both version of the agreement unenforceable. This argument is unsupported by the proof submitted or decisional authority. Thus, the fifth cause of action is subject to the contractual limitation of remedies provision, precluding money damages.

(Internal quotations and citations omitted).

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