On April 24, 2025, the California Supreme Court issued a transformative decision in New England Country Foods, LLC v. VanLaw Food Products, Inc. — one that hotel owners and management companies operating in an increasingly technology-driven world can’t afford to ignore.

In New England Country Foods, the court confronted a common situation:

A commercial contract contained a broad limitation of liability clause, but one party alleged that the other had committed willful misconduct, including breach of fiduciary
duties (meaning someone must act for another person’s financial benefit).

The court held that, under California Civil Code § 1668, parties can’t contractually shield themselves from liability for intentional wrongdoing or breaches of independent
legal duties – even in heavily negotiated, sophisticated agreements between business entities. Such limitations are void as they’re
against public policy.

This ruling lands squarely at the intersection of technology, operations and legal risk. As hotel operations become increasingly tech-driven – from property management systems to artificial intelligence (AI) revenue management to cybersecurity compliance – managers' fiduciary obligations now extend deep into technology oversight.

The key impact is that mismanagement– including willful cybersecurity failures, misuse of customer data, self-dealing with technology vendors, or manipulation of AI
tools – could now expose hotel managers to full tort damages (a tort is a civil, not a criminal wrong that results in liability for the responsible party). And this can happen despite limitation of liability clauses in hotel management agreements (HMAs).

When Does a Breach of a Technology Contract Become a Tort?

Not every missed performance standard creates tort liability. The primary distinction is whether the manager’s actions breach an independent duty arising outside the contract. A fiduciary duty, for example, doesn’t result from the contract– it typically arises outside of it and is based on common law because the manager:

• Acts as the owner’s agent,
• Controls the owner’s property and financial operations,
• Is entrusted with discretion over technology and operational decisions critical to the hotel’s success.
  

In California (and most jurisdictions), where an independent duty exists, such as an agency relationship, a manager’s bad faith can become actionable as a tort, not just a contract violation.

When Does Negligence Become a Breach of Fiduciary Duty?

Negligence is the failure to exercise reasonable care and becomes a breach of fiduciary duty when it violates the stricter legal standards imposed by the fiduciary relationship itself. A fiduciary, such as a hotel manager entrusted with operational control over technology and guest data, must exercise: the utmost loyalty, full disclosure, and the highest standard of care. Thus, a simple human error, like a clerical mistake, is likely ordinary negligence.

Negligent cybersecurity oversight, self-interested vendor selection or concealment of technology failures violates fiduciary duties– and can be pursued as a tort, with full tort damages.

California law makes clear that a fiduciary’s negligence –if it breaches their special duty of loyalty, disclosure, or care– is actionable as a breach of
fiduciary duty. (See: City of Atascadero v. Merrill Lynch (1998) 68 Cal.App.4th 445, 483.)

If a manager's negligent act compromises fiduciary respon- sibilities – such as safeguard- ing hotel technology systems, protecting data, or faithfully executing owner instructions– it may cross the line into a fiduciary breach, exposing the manager to full liability.

Examples of Technology Mismanagement

Now Rising to Tort Liability In a modern hotel operation, technology lies at the heart of fiduciary management. Key systems include: property management (PMS), central reservation (CRS), customer relationship management (CRM) platforms, cybersecurity frameworks, revenue management algorithms, guest loyalty and data systems.

Mismanaging these technologies can now create tort exposure where independent duties are breached, and under New England Country Foods, any contractual damages caps are void. For example:

Why Limitation of Liability Clauses May No Longer Protect Management Companies

Standard limitation clauses, commonly included in HMAs and tech procurement contracts, are an attempt to cap damages for loss of profits, business interruption, data loss, system failures and indirect or consequential damages. However, under New England Country Foods and related California law, these clauses are invalid if they try to shield against breaches of fiduciary duty, fraud, gross negligence or willful misconduct. Thus, a contract clause alone can’t protect a management company where its technology mismanagement constitutes a fiduciary breach or intentional tort.

National Trends: Public Policy Against Limiting Liability for Intentional Wrongs

California’s ruling aligns with broader national legal principles:

• New York: Refuses enforcement of contractual waivers for intentional misconduct.
• Colorado: Invalidates liability limits for willful and wanton conduct.
• Georgia and Nebraska: Similarly refuse to shield parties from gross negligence or intentional breaches via contract.

As hotel groups increasingly operate across jurisdictions, managers must anticipate that technology misconduct triggering fiduciary breaches won’t be insulated by contract anywhere in the U.S.

Technology Raises the Stakes

The future of hotel management lies in seamless technology integration, but the legal exposure has never been higher. Mismanaging critical technology systems is no longer just an operational failure – it can become a fiduciary breach and a tort. Under New England Country Foods, owners can pursue full compensatory and even punitive damages, bypassing contractual damage caps. Managers must approach technology stewardship with the same care and loyalty owed to any other vital hotel asset.

In today’s hospitality landscape, technology isn't just a tool – it's a trust. And courts are watching.

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