Each state had its landmines on how releases are to be writtenPosted: January 28, 2019
In several states, New York as in this case, the land mines might be too many and other options should be explored.
A Tough Mudder event used a release in NY that required arbitration. The Release was thrown out by the court, consequently the requirement for arbitration was thrown out.
Arbitration works to reduce damages; however, you should only use an arbitration clause when you can’t win because you don’t have a release. In every other state other than NY, the arbitration clause might have been a worse decision.
State: New York, Supreme Court of New York, Kings County
Defendant: Tough Mudder Incorporated d/b/a/ Urban Mudder
Plaintiff Claims: Negligence
Defendant Defenses: Contract
Holding: For the Plaintiff
The plaintiff was injured in an Urban Mudder event, which appears to be something like a Tough Mudder but in a city? Other than that, there are no facts in the decision.
Analysis: making sense of the law based on these facts.
The defendant motioned to have the dispute arbitrated because the contract, the release, required arbitration.
Defendant contends that this dispute should be arbitrated pursuant to the contract be-tween the parties. Typically, arbitration clauses in contracts are regularly enforced and encouraged as a matter of public policy
The plaintiff argued that arbitration was invalid because a NY statute prohibits arbitration of consumer contracts.
Plaintiff further argues that the contract cannot be admitted into evidence pursuant to CPLR 4544 because it involves a consumer transaction and the text of the contract is less than 8-point font. In support of this argument, plaintiff submits the affidavit of Vadim Shtulboym, a paralegal in plaintiff counsel’s office. Mr. Shtulboym states that, based on his work experience, he has determined, with the aid of a scanner and Abobe Acrobat Reader DC, that the contract between the parties is 7-point font. Mr. Shtulboym explains that he came to this conclusion by typing words in 8-point font and 6-point font, and comparing them to the text of the contract, the size of which appeared to be in between the two fonts.
Plaintiff also argued the contract was void because it violated NY Gen. Oblig Law § 5-326.
§ 5-326. Agreements exempting pools, gymnasiums, places of public amusement or recreation and similar establishments from liability for negligence void and unenforceable
Every covenant, agreement or understanding in or in connection with, or collateral to, any contract, membership application, ticket of admission or similar writing, entered into between the owner or operator of any pool, gymnasium, place of amusement or recreation, or similar establishment and the user of such facilities, pursuant to which such owner or operator receives a fee or other compensation for the use of such facilities, which exempts the said owner or operator from liability for damages caused by or resulting from the negligence of the owner, operator or person in charge of such establishment, or their agents, servants or employees, shall be deemed to be void as against public policy and wholly unenforceable.
The court found contract violated NY Gen. Oblig Law § 5-326 and was thrown out by the court. Once the agreement was thrown out in its entirety, the arbitration clause was also thrown out.
Two different statutes took the only defenses outside of assumption of the risk and through them out the door.
The court found because there was a dispute, a triable issue of fact, the motion to dismiss failed and the parties would proceed to trial on this fact alone. The size of the type font on the agreement was enough to throw the defendant into the courtroom.
So Now What?
When you have a release, in a state where releases are valid, arbitration clauses usually create a better position for the plaintiff. Most arbitrations do not allow the award of punitive damages or any special damages unless specifically allowed in a statute. However, most arbitrations split the middle and award damages to the plaintiff.
A well written release in a state where releases are upheld the plaintiff gets nothing, or less.
However, in a state like New York or the other states that do not support the use of a release, (See States that do not Support the Use of a Release), you must use an assumption of risk clause. Assumption of the risk is a defense in most states, again, for sporting and recreational activities. An assumption of the risk agreement does not run afoul of any statute that I have discovered or been made aware of and also works for minors who can understand the agreement and the risk.
Assumption of risk clauses can also contain arbitration clauses. When faced with a situation where you do not have the option of using a release, an assumption of the risk clause with an arbitration clause is your best defense position.
Typeface? If the judge can’t read it, your typeface is too small. Always use typeface in your release that is at least 10 pt. and may be larger. Small type face has been a joke for decades in dealing with the fine print in contracts. It is not a reality.
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