Plaintiffs-appellants, E.H. Ashley & Co., Inc. and Willow Associates (jointly, “Ashley”), have appealed from an order of the United States District Court for the District of Rhode Island on February 6, 1990, granting summary judgment in favor of defendant-appellee, Wells Fargo Alarm Services, a Division of Baker Protective Services, Inc. (“Wells Fargo”).
In June 1985, Ashley contracted with Wells Fargo Servicеs to obtain a burglar alarm system. The contract contained a limitation of liability clause. The clause stated that Wells Fargo was not an insurer and that it would not be liable for any of Ashley’s “losses or damages ..., irrespective of origin, whether directly or indirectly caused by performance or nonperformance of оbligations imposed by this contract or by negligent acts or omissions of Wells Fargo, its agents or employees.” Under the clause, Ashley waived and released any rights of recovery against Wells Fargo and agreed that if Wells Fargo Alarm should be found liable for any losses or damages attributable to a failure of its systems or services in any respect, its liability would be limited to the annual charge paid by Ashley ($985) or $10,000, whichever is less.
In May 1988, a theft occurred at Ashley’s place of business resulting in a claimed loss of $120,112, which claim was paid in full, less the $1,000 deductible, by Aetna Casualty and Surety Company (“Aetna”). Under the terms of the policy, Aetna was subro-gated “to all rights of recovery fоr ... loss or expense against the persons, firms, corporations or estates which ... caused or contributed to” the loss — to the extent of Aetna’s coverage of the loss. Aetna thereafter brought suit in the name of Ashley against Wells Fargo in Rhode Island Superior Court to recover the amount of its payment to Ashley. Aetna claimed that Ashley’s loss was directly attributable to a defect in or negligent maintenance of the burglar alarm system installed by Wells Fargo and brought claims sounding in negligence and breach of contract.
Aetna claimed also that, as subrogee, it was not bound by the limitation of liability clause in its insured’s contract with Wells Fargo. Alternatively, it argued that the limitation of liability clause was unconscionable and should, therefore, not be enforced against it.
In response to Wells Fargo’s motion to dismiss for failure to state a claim upon which relief may be granted, the district court rejected Aetna’s argument that its right of subrogation was not subject to the limitation of liability. It granted discovery, however, on the issue of unconscionability. Wells Fargo then moved for summary judgment; and the court ruled that, even viewing the facts in the light most favorable to Ashley, the contract was not unconscionable. It granted partial summary judgment to Wells Fargo, upholding the contract term limiting liability to $985. Wells Fargo then offered to pay Aetnа that amount rather than litigate the issue whether it was liable at all under the contract. Accordingly, the judge issued an order conditioning its entry of partial summary judgment for Wells Fargo on Wells Fargo’s payment of $985 to Aetna. Wells Fargo tendered the payment but Aetna refused to accept it.
Aetna then brought this appeal, asserting that the district court erred in granting Wells Fargo’s motion for partial summary judgment for the reason that material *1277 questions of fact remain with respect to (1) whether the limitation of liability clause in the contract for burglar alarm services is void and unenforceable as to Aetna, Ashley’s subrogee, and (2) whether the contract is void as an unсonscionable contract of adhesion.
Because we find that the grant of partial summary judgment against Aetna was proper, we affirm the decision of the district court.
DISCUSSION
Summary judgment is permissible when “there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). Our review of dispositions by summary judgment is plenary.
Garside v. Osco Drug, Inc.,
The movant for summary judgment must first aver an absence of evidence to support the opposing party’s case. The burden then shifts to the nonmovant to establish the existence of at least one fact issue which is both “genuine” (i.e., can properly be resolved only by a finder of fact because it may reasonably be resolved in favor of either party) and “material” (i.e., affects the outcome of the suit). On issues where the nonmovant bears the burden оf proof, he must reliably demonstrate that specific facts sufficient to create an authentic dispute exist.
Garside,
Aetna alleges first of all that disputed issues of material fact remain with regard to the enforceability against the insurer (who has been subrogated to the rights of its insured) of a limitation of liability clause in a contract entered into by its insured. Aetna points, however, to no disputed issues of fact that bear on this question. Aetna’s arguments instead- challenge the legal conclusion of the district court that the limitation of liability clause in the contract between Ashley and Wells Fargo is enforceable against Aetna, the subrogee of Ashley’s rights against Wells Fargo. ■ The facts surrounding the formation of the contract are not in dispute. Accordingly, we treat this issue as an allegation that the district court erred in its legal ruling that the rights of a subrogee are limited by the rights of the subrogor.
The contention that Aetna, as subrogee of Ashley’s rights under the contract, is not bound by the terms of the contract is frivolous. The law of Rhode Island governs the interpretation of the сontract in question; and it is well settled in Rhode Island, as elsewhere, that an insurer, by a right of subrogation, steps into the shoes of the insured and can recover only if the insured could have recovered. The subrogee has no greater rights against a third party by virtue of its status as the insurer.
Silva v. Home Indemnity Co.,
Aetna’s second claim, that there are genuine issues of material fact as to
*1278
whether the burglar alarm service contract is void as an unconscionable contract of adhesion — rendering erroneous the district court’s grant of summary judgment — likewise cannot be sustained. In order to establish unconscionability, a party must prove that (1) there is an absence of “meaningful choice” on the part of one of the parties; and (2) the challenged contract terms are “unreasonably favorable” to the other party.
Williams v. Walker-Thomas Furniture Co.,
On appeal, Aetna argues that it meets the first prong of the Walker-Thomas test for unconscionability — lack of meaningful choice — because Ashley was required by its insurer to enter into the contract or face either cancellation of its policy or skyrocketing ratеs, and because even if it had tried to purchase the same type of burglar alarm services from another vendor, it could not have avoided the limitation of liability clause because virtually all major vendors of burglar alarm systems include a similar clause in their form contracts. Aetna fails, however, to articulate how it mеets the second prong of the Walker-Thomas test — that the limitation of liability clause is “unreasonably favorable” to Wells Fargo because it limits the liability of Wells Fargo for losses to purchasers of the burglar alarm system, even if such losses have been caused by Wells Fargo’s negligence. Without deciding whether Aetna has met the first prong, we hold thаt, as a matter of law, Aetna has failed to allege facts in support of its position that the clause was “unreasonably favorable” to Wells Fargo. Accordingly, the contract was not unconscionable.
Courts, including the Supreme Court of Rhode Island, have repeatedly upheld limitation of liability clauses in burglar alarm service contracts against allegations that they are violative of public policy or unconscionable.
See, e.g., Ostalkiewicz v. Guardian Alarm,
Ostalkiewicz
followed two other cases that presented facts essentially identical to those of the case before it as well as to those of the instant case. The court quoted first from
Fireman’s Fund American Ins. Cos. v. Burns Electronic Security Services, Inc.,
“The terms of this contract belie uneon-scionability. The chance of a burglary and the potential loss depended not only on the quality of the alarm but on many factors peculiar to [the store owner] and within [his] knowledge and control. For example, the type and quantity of merchandise in the store, perhaps the prime motivation for a [break-in], was for [the owner] to determine and not Burns [the burglar alarm service company]. It was not unreasonable for Burns to feel that the jeweler was better able than itself to buy any desired amount of insurance at *1279 appropriate rates. Burns could propеrly insist on the exculpation clause to make certain that the risk of a burglary lay on the jeweler, not on Burns.”
“Allocating the risk to [the jeweler] wás thus not a bargain ‘which no man in his senses, not under delusion, would make ... and which no fair and honest man would accept’.... It does not suggest unfair surprise or oppression.... On the contrary, the [limitation оf liability] clause was a commercially sensible arrangement, and the plaintiff is bound by it.”
Ostalkiewicz,
The court in
Ostalkiewicz
also discussed
St. Paul Fire & Marine Insurance Co. v. Guardian Alarm Co.,
The Rhode Island Supreme Court cited numerous other cases in which courts had reached similar results, id. at 566 — including courts in Arizona, California, Washington, D.C., Massachusetts, New Hampshire, and Pennsylvania — and concluded that since the two parties to the burglar alarm service contract in the case before it had dealt at arm’s length and it was obvious under the terms of the contract that the burglar alarm service company was not an insurer, the limitation of liability clause was not violative of public policy, nor was it unconscionable.
The factors referred to by the Rhode . Island Supreme Court 'in Ostalkiewicz are equally present in the case at bar. The two parties to the contract dealt at arms length in contraсting for burglar alarm services. The contract specifically stated that the burglar alarm service company was not an insurer and that it would not be liable for loss through theft. Indeed, Ashley was separately insured against the theft of its merchandise. There is no indication of “unfair surprise or oppression” or that the contract was anything other than a “commercially sensible arrangement.” Indeed, no fact alleged by Aetna would chállenge any of these conclusions. The mere fact that Wells Fargo’s liability under the contract was limited to the amount of Ashley’s annual fee, and that it declined to insure against theft without the payment of additional fees, does not necessarily mean that it was “unreasonably favorable” to Wells Fargo. Aetna itself noted that all providers of comparable burglar alarm services have similar limitation of liability clauses in their contracts, a fact that would tend to demonstrate the commercially reasonable nature of the contraсt.
Aetna has failed entirely to point to any facts that would indicate unconscionability or a contract of adhesion. The limitation of liability clause was set forth in the most conspicuous print on the first page of the contract. The contract was written in plain English; there was no complex legalistic language at аll. There was no disparity in sophistication or bargaining power between the parties. The Vice-President of Ashley who signed the contract admitted in his deposition that he was aware of and understood the limitation of liability clause when he signed the contract, that he did not attempt to negotiate a higher limitation of liability in еxchange for higher annual fees — as the contract indicated was possible — and that he did not even attempt to contact competitors of Wells Fargo to learn whether he could obtain comparable services under a contract which imposed no such limit. He merely signed the contract without question.
*1280 In the face of the overwhelming weight of authority, we conclude that summary judgment for Wells Fargo was in order.
MOTION FOR DOUBLE COSTS AND ATTORNEY’S FEES FOR AETNA’S PURSUIT OF THIS APPEAL
Wells Fargo has requested that we assess Aetna costs and attorney’s fees pursuant to Fed.R.App.P. 38 and 39 as a sanction for bringing this essentially merit-less appeal. The purpose of such penalties is to discourage litigants from wasting the time and monetary resources of both their opponents and the nation’s judicial system with legal arguments that do not merit consideration.
Johnson v. Allyn & Bacon, Inc.,
Aetna’s appeal in this case was wholly without merit because the result was obvious. The оverwhelming weight of precedent militates against Aetna’s position. There is no support in the case law for Aetna’s theory that the limitation of liability clause in Ashley’s contract should not be applied against Ashley’s insurer. Furthermore, Aetna has set forth no facts whatsoever to support its theory that the contract between Wells Fargo and Ashley was “unreasonably favorable” to Wells Fargo to the point of rendering it unconscionable. The mere allegation that the other party declined to provide certain additional services in the absence of payment of an additional fee is hardly sufficient to demonstrate that the arrangеment was “unreasonably favorable” to the other party. We have been able to discover no cases holding that a limitation of liability clause in a burglar alarm service contract is unconscionable; and numerous cases have held to the contrary. Likewise, Aetna has alleged no facts that would justify an excеption to this universal rule. As a federal court sitting in diversity we are, of course, bound by the applicable state law. Unlike the high court of a state, we have no leeway to change that law even if we wished to do so.
Because Aetna had no legitimate ground for pursuing this appeal, Aetna and its attorney shall be required to pay double costs and all reasonable attorney’s fees expended by Wells Fargo in defending this appeal up to a maximum of $4,000 in attorney’s fees.
Affirmed.