Decisive Supreme Court Decision on the Validity of Releases in OklahomaPosted: May 27, 2013
Case arose as a certified question from the US District Court from Western Oklahoma.
This is a request by the Federal District Court in Western Oklahoma for clarification on a legal point. When a Federal court has to apply state law and there are no decisions for the Federal court to rely upon, it certifies the question to the state Supreme Court for clarification. That is how this case arose.
The plaintiff went for a trail ride at Artillery Hunt Riding Stables at Fort Sill, Oklahoma. Because the stable was owned by the Army that is the reason for the suit to be brought in Federal Court and why the defendant is the USA.
While on the ride, the “ride leader” allegedly rode up behind the plaintiff and frightened her horse causing the horse to throw her. The plaintiff sued saying that the US “(1) is liable vicariously for the ride leader’s negligence and (2) is culpable for its own negligence in selecting and keeping an unfit ride leader.” Both claims are based in negligence.
The Federal Court could not find case law to rely upon to issue an opinion on the defendant’s defense of release so it sent the case the Oklahoma Supreme Court.
The Oklahoma Supreme Court did not decide the case. The court only used the facts as supplemental information in making its decision concerning releases in Oklahoma.
The Oklahoma looked at the question in two parts:
1. Whether, under Oklahoma law, a contractual exculpatory clause for personal injury is valid and enforceable?
2. Whether, under Oklahoma law, the exculpatory provisions contained in the Rental Riding Agreement are valid and enforceable and operate to bar the plaintiff’s negligence and negligent entrustment claims?
The court responded this way: “
We respond to the first question in the affirmative. We answer the second with a qualifying affirmative by noting that it applies if the certifying court finds that three preconditions to the clause’s enforcement are met: (1) the exculpatory clause’s language clearly, definitely and unambiguously displays an intent to insulate the United States from the type of liability the plaintiff seeks to impose; (2) no disparity of bargaining power existed between the two parties to the agreement containing the clause at the time it was executed; and (3) its effect would not violate public policy.
We note that exculpatory clauses cannot relieve one from liability for fraud, willful injury, gross negligence or violation of the law.
Summary of the case
This decision is a well-written look at how Oklahoma and many other states look at releases. Generally, releases are upheld in Oklahoma. However, although releases are “generally enforceable” releases are distasteful. The test in Oklahoma on whether a release is valid is:
(1) their language must evidence a clear and unambiguous intent to exonerate the would-be defendant from liability for the sought-to-be-recovered damages;
(2) at the time the contract (containing the clause) was executed there must have been no vast difference in bargaining power between the parties; and
(3) enforcement of these clauses must never
(a) be injurious to public health, public morals or confidence in administration of the law or
(b) so undermine the security of individual rights vis-a-vis personal safety or private property as to violate public policy.
The court then described what clear and unambiguous intent was:
A contractual provision which one party claims excuses it from liability for in futuro tortious acts or omissions must clearly and cogently (1) demonstrate an intent to relieve that person from fault and (2) describe the nature and extent of damages from which that party seeks to be relieved. This is so not only when one assesses a party’s direct liability for negligence, but also when assaying whether the agreement’s terms embrace acts of an agent or servant of that party. In short, both the identity of the tortfeasor to be released and the nature of the wrongful act — for which liability is sought to be imposed — must have been foreseen by, and fall fairly within the contemplation of, the parties. The clause must also identify the type and extent of damages covered — including those to occur in futuro.
The court did differentiate between an exculpatory clause (release) which limits suits and clauses, which limit damages under Oklahoma law.
Bargaining power was described by the court in looking at releases as:
Courts consider two factors when called upon to ascertain the equality of the parties’ bargaining power, vis-a-vis each other, in the setting of a promissory risk assumption: (1) the importance of the subject matter to the physical or economic well-being of the party agreeing to the release and (2) the amount of free choice that party could have exercised when seeking alternate services.
The final issue, a release that violates public policy was described as:
While courts may declare void those portions of private contracts which contradict public policy, they must do so only with great caution. Two classes of exculpating agreements may be said to violate public policy: (1) those which — if enforced — patently would tend to injure public morals, public health or confidence in the administration of the law and (2) those which would destroy the security of individuals’ rights to personal safety or private property.
The court summed up its opinion on what a release must have under Oklahoma law as:
“any agreement having as its purpose the unequivocal exoneration of one party from negligent tort liability of another must identify both the putative tortfeasor and the category of recovery from which that actor would be relieved.
However, if any single requirement of the three requirements is not met by a release, then the release must fail.
So Now What?
You never find a decision that says this is what you must do to be legal. This decision from the Oklahoma Supreme Court explains step by step what an attorney must do to write a release.
Plaintiff: Elizabeth M. Schmidt
Defendant: United States of America (Artillery Hunt Riding Stables at Fort Sill, Oklahoma)
Plaintiff Claims: Negligence in the original Federal Action
Defendant Defenses: Release
Holding: Sent to the Federal Court for determination based on the decision here.
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