New Jersey does not allow a parent to sign away a minor’s right to sue so a binding arbitration agreement is a good idea, if it is written correctly.
Posted: April 15, 2019 Filed under: Contract, Indoor Recreation Center, New Jersey | Tags: Arbitration, bind, Binding Arbitration, defendants', Minor, New Jersey, parent, Right to Sue, Skyzone, Trampoline, Trampoline facility, Trampoline Park, waiving Leave a commentThe arbitration agreement in this case did not state how long the agreement was valid for, so the court held it was only valid for the day it was signed.
Citation: Weed v. Sky NJ, LLC., 2018 N.J. Super. Unpub. LEXIS 410, 2018 WL 1004206
State: New Jersey: Superior Court of New Jersey, Appellate Division
Plaintiff: Lorianne Weed and Scott Trefero as parents and natural guardians of A.M., a minor,
Defendant: Sky NJ, LLC a/k/a and/or d/b/a Skyzone Moorestown and/or a/k/a and/or d/b/a Skyzone and David R. Agger
Plaintiff Claims: Contract failed to compel arbitration
Defendant Defenses: Arbitration
Holding: For the Plaintiff
Year: 2018
Summary
When a parent cannot sign a release for a minor, because the states don’t enforce them, one option may be a binding arbitration agreement. Arbitration usually does not allow massive damages, is cheaper and quicker than going to trial.
However, your arbitration agreement, like a release, must be written in a way to make sure it is effective. This one was not, and the plaintiff can proceed to trial.
Facts
Plaintiff visited the trampoline facility in July 2016. Entrance to the park is conditioned on all participants signing a “Conditional Access Agreement, Pre-Injury Waiver of Liability, and Agreement to Indemnity, Waiver of Trial, and Agreement to Arbitrate” (the Agreement). Weed executed the agreement on behalf of her son in July 2016.
Plaintiff returned to the facility with a friend in November 2016, and was injured while using the trampolines during a “Glow” event, which plaintiff submits used different and less lighting than was present at his earlier visit. Plaintiff entered the facility in November with an agreement signed by his friend’s mother on behalf of both her daughter and A.M.[2] In an affidavit submitted by Weed in opposition to the motion, she stated that she was unaware that her son was going to the facility at the time of the November visit.
After Weed filed suit on behalf of her son, defendants moved to compel arbitration pursuant to the agreement. Defendants argued that the agreements contained “straightforward, clear, and unequivocal” language that a participant was waiving their right to present claims before a jury in exchange for conditional access to the facility. They asserted that the first agreement signed by Weed remained in effect at the time of plaintiff’s subsequent visit in November as there was no indication that it was only valid for the one day of entry in July. Finally, defendants contended that any dispute as to a term of the agreement should be resolved in arbitration.
Plaintiff opposed the motion, asserting that nothing in the first agreement alerted Weed that it would remain in effect for either a certain or an indefinite period of time. To the contrary, defendants’ policy of requiring a new agreement to be signed each time a participant entered the park belied its argument that a prior agreement remained valid for a period of time.
On May 19, 2017, Judge Joseph L. Marczyk conducted oral argument and denied the motion in an oral decision issued the same day. The judge determined that the first agreement did not apply to the November visit because it did not contain any language that it would remain valid and applicable to all future visits. Therefore, there was no notice to the signor of the agreement that it would be in effect beyond that specific day of entry, and no “meeting of the minds” that the waiver and agreement to arbitrate pertained to all claims for any future injury.
As for the second agreement, the judge found that there was no precedent to support defendants’ contention that an unrelated person could bind plaintiff to an arbitration clause. This appeal followed.
Analysis: making sense of the law based on these facts.
In a state where there are no defenses except assumption of the risk for claims by minor’s arbitration can be a good way to speed up the process and limit damages. Each state has laws that encourage arbitration and, in most cases, create limits on what an arbitration panel (the people hearing the case) can award in damages. In man states, arbitration judges cannot award punitive damages.
You need to check your state laws on what if any benefits arbitration provides.
However, if you can use a release, the release is the best way to go because it cuts off all damages. Many times, in arbitration damages are awarded, they are just less.
To determine which states do not allow a parent to sign away a minor’s right to sue see States that allow a parent to sign away a minor’s right to sue.
The best way of dealing with minor claims is the defense of assumption of the risk. However, this takes more time on the front end in making sure the minor participants understand the risk before embarking on the activity.
There were two issues before the appellate court: Whether the first agreement signed by the mother of the injured plaintiff extended beyond the day it was signed. The second issue was whether a second agreement signed by a friend, not a parent, legal guardian or someone acting under a power of attorney had any legal validity.
The first agreement was silent as to how long it was valid. There was no termination date, (which is a good thing) and nothing to indicate the agreement was good for a day or a lifetime. Because the contract was blank as to when the agreement was valid, the court ruled against the creator of the contract.
There is no evidence in the record before us to support defendants’ argument as the agreements are silent as to any period of validity. Defendants drafted these agreements and required a signature from all participants waiving certain claims and requiring submission to arbitration prior to permitting access to the facility. Any ambiguity in the contract must be construed against defendants.
When a contract is written any issues are held against the writer of the agreement. Here because the contract had no end date or did not say it was good forever, there was a gap in the agreement that was held against the defendant as the writer of the agreement.
So, the court ruled the agreement signed by the mother was only valid on the day it was signed and was not valid the second time when the minor came in and was injured.
The second argument made by the defendant was the friend who signed for the minor on the second visit signed an agreement that should be enforced and compel arbitration.
The court laughed that one out the door.
We further find that defendants’ argument regarding the November agreement lacks merit. The signor of that agreement was neither a parent, a legal guardian, nor the holder of a power of attorney needed to bind the minor plaintiff to the arbitration agreement. Defendants’ reliance on Hojnowski v. Vans Skate Park, is misplaced. While the Court found that a parent had the authority to waive their own child’s rights under an arbitration agreement in Hojnowski, there is no suggestion that such authority would extend to a non-legal guardian. Not only would such a holding bind the minor to an arbitration agreement, it would also serve to bind the minor’s parents, waiving their rights to bring a claim on behalf of their child. We decline to so hold.
So Now What?
New Jersey law is quite clear. A parent cannot sign away a minor’s right to sue, Hojnowski v. Vans Skate Park. Consequently, arbitration was probably the way to go. In this case, one little slip up made the arbitration agreement worthless.
The one flaw in using an arbitration agreement is you could use a release to stop the claims for a parent. So, you should write a release that stops the claims of the parents/legal guardians and compels arbitration of the minor’s claims. Those get tricky.
And as far as another adult signing for a minor who is not their child, that is always a problem. A parent can sign for a minor, to some extent, and a spouse can sign for another spouse in certain situations. An officer of a corporation or a manager of a limited liability company can sign for the corporation or company. The trustee can sign for a trust, and any partner can sign for a partnership. But only you can sign for you.
The issue that outdoor businesses see all day long is a volunteer youth leader take groups of kids to parks, amusement rides and climbing walls, etc. Neighbors take the neighborhood kids to the zoo, and friends grab their kids’ friends to take on vacation. Unless the adult has a power of attorney saying they have the right to enter agreements on behalf of the minor child, their signature only has value if they are a celebrity or sports personality.
What do you think? Leave a comment.
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Weed v. Sky NJ, LLC., 2018 N.J. Super. Unpub. LEXIS 410, 2018 WL 1004206
Posted: April 2, 2019 Filed under: Contract, Indoor Recreation Center, Legal Case, Minors, Youth, Children, New Jersey | Tags: Arbitration, bind, Binding Arbitration, defendants', Minor, New Jersey, parent, Right to Sue, Skyzone, Trampoline, Trampoline facility, Trampoline Park, waiving Leave a commentWeed v. Sky NJ, LLC., 2018 N.J. Super. Unpub. LEXIS 410, 2018 WL 1004206
Lorianne Weed and Scott Trefero as parents and natural guardians of A.M., a minor, Plaintiffs-Respondents, v. Sky NJ, LLC a/k/a and/or d/b/a Skyzone Moorestown and/or a/k/a and/or d/b/a Skyzone and David R. Agger, Defendants-Appellants.
No. A-4589-16T1
Superior Court of New Jersey, Appellate Division
February 22, 2018
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 18, 2018
On appeal from Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-2790-16.
Marco P. DiFlorio argued the cause for appellants (Salmon, Ricchezza, Singer & Turchi LLP, attorneys; Joseph A. Ricchezza and Marco P. DiFlorio, on the briefs).
Iddo Harel argued the cause for respondents (Ross Feller Casey, LLP, attorneys; Joel J. Feller and Iddo Harel, on the brief).
Before Judges Currier and Geiger.
PER CURIAM
Defendants Sky NJ, LLC a/k/a/ Sky Zone Moorestown and David Agger (defendants) appeal from the May 19, 2017 order denying their motion to compel arbitration in this personal injury suit brought by plaintiffs after A.M.[1] suffered severe injuries while jumping on a trampoline at defendants’ facility. After a review of the presented arguments in light of the record before us and applicable principles of law, we affirm.
Plaintiff visited the trampoline facility in July 2016. Entrance to the park is conditioned on all participants signing a “Conditional Access Agreement, Pre-Injury Waiver of Liability, and Agreement to Indemnity, Waiver of Trial, and Agreement to Arbitrate” (the Agreement). Weed executed the agreement on behalf of her son in July 2016.
Plaintiff returned to the facility with a friend in November 2016, and was injured while using the trampolines during a “Glow” event, which plaintiff submits used different and less lighting than was present at his earlier visit. Plaintiff entered the facility in November with an agreement signed by his friend’s mother on behalf of both her daughter and A.M.[2] In an affidavit submitted by Weed in opposition to the motion, she stated that she was unaware that her son was going to the facility at the time of the November visit.
Both agreements required the submission of all claims to binding arbitration and contained the following pertinent language:
I understand that this Agreement waives certain rights that I have in exchange for permission to gain access to the [l]ocation. I agree and acknowledge that the rights I am waiving in exchange for permission to gain access to the [l]ocation include but may not be limited to the following:
a. the right to sue [defendants] in a court of law;
b. the right to a trial by judge or jury;
c. the right to claim money from [defendants] for accidents causing injury within the scope of the risk assumed by myself;
d. the right to claim money from [defendants] for accidents causing injury unless [defendants] committed acts of gross negligence or willful and wanton misconduct; and
e. the right to file a claim against [defendants] if I wait more than one year from . . . the date of this Agreement.
Waiver of Trial, and Agreement to Arbitrate
IF I AM INJURED AND WANT TO MAKE A CLAIM AND/OR IF THERE ARE ANY DISPUTES REGARDING THIS AGREEMENT, I HEREBY WAIVE ANY RIGHT I HAVE TO A TRIAL IN A COURT OF LAW BEFORE A JUDGE AND JURY. I AGREE THAT SUCH DISPUTE SHALL BE BROUGHT WITHIN ONE YEAR OF THE DATE OF THIS AGREEMENT AND WILL BE DETERMINED BY BINDING ARBITRATION BEFORE ONE ARBITRATOR TO BE ADMINISTERED BY JAMS[3] PURSUANT TO ITS COMPREHENSIVE ARBITRATIONRULES AND PROCEDURES.I further agree that the arbitration will take place solely in the state of New Jersey and that the substantive law of New Jersey shall apply. I acknowledge that if I want to make a claim against [defendants], I must file a demand before JAMS. … To the extent that any claim I have against [defendants] has not been released or waived by this Agreement, I acknowledge that I have agreed that my sole remedy is to arbitrat[e] such claim, and that such claim may only be brought against [defendants] in accordance with the above Waiver of Trial and Agreement to Arbitrate.
After Weed filed suit on behalf of her son, defendants moved to compel arbitration pursuant to the agreement. Defendants argued that the agreements contained “straightforward, clear, and unequivocal” language that a participant was waiving their right to present claims before a jury in exchange for conditional access to the facility. They asserted that the first agreement signed by Weed remained in effect at the time of plaintiff’s subsequent visit in November as there was no indication that it was only valid for the one day of entry in July. Finally, defendants contended that any dispute as to a term of the agreement should be resolved in arbitration.
Plaintiff opposed the motion, asserting that nothing in the first agreement alerted Weed that it would remain in effect for either a certain or an indefinite period of time. To the contrary, defendants’ policy of requiring a new agreement to be signed each time a participant entered the park belied its argument that a prior agreement remained valid for a period of time.
On May 19, 2017, Judge Joseph L. Marczyk conducted oral argument and denied the motion in an oral decision issued the same day. The judge determined that the first agreement did not apply to the November visit because it did not contain any language that it would remain valid and applicable to all future visits. Therefore, there was no notice to the signor of the agreement that it would be in effect beyond that specific day of entry, and no “meeting of the minds” that the waiver and agreement to arbitrate pertained to all claims for any future injury.
As for the second agreement, the judge found that there was no precedent to support defendants’ contention that an unrelated person could bind plaintiff to an arbitration clause. This appeal followed.
“[O]rders compelling or denying arbitration are deemed final and appealable as of right as of the date entered.” GMAC v. Pittella, 205 N.J. 572, 587 (2011). We review the judge’s decision to compel arbitration de novo. Frumer v. Nat’1 Home Ins. Co., 420 N.J.Super. 7, 13 (App. Div. 2011). The question of whether an arbitration clause is enforceable is an issue of law, which we also review de novo. Atalese v. U.S. Legal Servs. Group, L.P., 219 N.J. 430, 445-46 (2014). We owe no deference to the trial court’s “interpretation of the law and the legal consequences that flow from established facts.” Manalapan Realty v. Twp. Comm., 140 N.J. 366, 378 (1995).
Defendants argue that the trial court erred when it determined that the first arbitration agreement signed by Weed four months before plaintiff’s injury was no longer binding on the parties at the time of plaintiff’s injury. We disagree.
While we are mindful that arbitration is a favored means of dispute resolution in New Jersey, the threshold issue before us is whether Weed’s signature on the July agreement would be binding on plaintiff for all subsequent visits. We apply well-established contract principles, and ascertain the parties’ intent from a consideration of all of the surrounding circumstances. James Talcott, Inc. v. H. Corenzwit & Co., 76 N.J. 305, 312 (1978). “An agreement must be construed in the context of the circumstances under which it was entered into and it must be accorded a rational meaning in keeping with the express general purpose.” Tessmar v. Grosner, 23 N.J. 193, 201 (1957).
It is undisputed that neither agreement contains any reference to a term of validity. The parties submitted conflicting affidavits in support of their respective positions. Weed stated there was nothing in the agreement she signed to apprise a participant that the agreement was in effect for longer than the day of entry. Defendants contend that plaintiff did not need a second agreement signed for the November visit as the initial agreement remained in effect.
There is no evidence in the record before us to support defendants’ argument as the agreements are silent as to any period of validity. Defendants drafted these agreements and required a signature from all participants waiving certain claims and requiring submission to arbitration prior to permitting access to the facility. Any ambiguity in the contract must be construed against defendants. See Moscowitz v. Middlesex Borough Bldq. & Luan Ass’n, 14 N.J.Super. 515, 522 (App. Div. 1951) (holding that where a contract is ambiguous, it will be construed against the drafting party). We are satisfied that Judge Marczyk’s ruling declining enforcement of the July agreement was supported by the credible evidence in the record.
We further find that defendants’ argument regarding the November agreement lacks merit. The signor of that agreement was neither a parent, a legal guardian, nor the holder of a power of attorney needed to bind the minor plaintiff to the arbitration agreement. Defendants’ reliance on Hojnowski v. Vans Skate Park, 187 N.J. 323, 346 (2006) is misplaced. While the Court found that a parent had the authority to waive their own child’s rights under an arbitration agreement in Hojnowski, there is no suggestion that such authority would extend to a non-legal guardian. Not only would such a holding bind the minor to an arbitration agreement, it would also serve to bind the minor’s parents, waiving their rights to bring a claim on behalf of their child. We decline to so hold. See Moore v. Woman to Woman Obstetrics & Gynecology, LLC, 416 N.J.Super. 30, 45 (App. Div. 2010) (holding there is no legal theory that would permit one spouse to bind another to an agreement waiving the right to trial without securing consent to the agreement).
As we have concluded the threshold issue that neither the July nor the November agreement is enforceable as to the minor plaintiff, we do not reach the issue of whether the arbitration provision contained within the agreement accords with our legal standards and case law. Judge Marczyk’s denial of defendants’ motion to compel arbitration was supported by the evidence in the record.
Affirmed.
Notes:
[1] Lorianne Weed is A.M.’s mother. Because A.M. is a minor, we use initials in respect of his privacy and we refer to him hereafter as plaintiff.
[2] The agreement required the adult to “certify that [she was] the parent or legal guardian of the child(ren) listed [on the agreement] or that [she had] been granted power of attorney to sign [the] Agreement on behalf of the parent or legal guardian of the child(ren) listed.” There were no proofs presented that the adult met any of these requirements.
[3] JAMS is an organization that provides alternative dispute resolution services, including mediation and arbitration.
Each state had its landmines on how releases are to be written
Posted: January 28, 2019 Filed under: New York, Racing, Release (pre-injury contract not to sue) | Tags: amusement, Arbitration, compel arbitration, Consumer, cross-motion, establishment, font, negligence liability, personal knowledge, Recreation, Release, Tough Mudder, urban mudder, Void, Waiver Leave a commentIn 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
Plaintiff: Isha
Defendant: Tough Mudder Incorporated d/b/a/ Urban Mudder
Plaintiff Claims: Negligence
Defendant Defenses: Contract
Holding: For the Plaintiff
Year: 2018
Facts
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.
What do you think? Leave a comment.
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Isha v. Tough Mudder Incorporated d/b/a/ Urban Mudder, 2018 N.Y. Misc. LEXIS 4883; 2018 NY Slip Op 32743(U)
Posted: January 21, 2019 Filed under: Legal Case, New York, Racing | Tags: amusement, Arbitration, compel arbitration, Consumer, cross-motion, establishment, font, negligence liability, NY General Obligations Law, personal knowledge, Recreation, Release, Tough Mudder, urban mudder, Void Leave a commentIsha v. Tough Mudder Incorporated d/b/a/ Urban Mudder, 2018 N.Y. Misc. LEXIS 4883; 2018 NY Slip Op 32743(U)
[**1] Isha, Plaintiff, against Tough Mudder Incorporated d/b/a/ Urban Mudder, Defendant. Index Number 512947/2016
512947/2016
SUPREME COURT OF NEW YORK, KINGS COUNTY
2018 N.Y. Misc. LEXIS 4883; 2018 NY Slip Op 32743(U)
September 21, 2018, Decided
NOTICE: THIS OPINION IS UNCORRECTED AND WILL NOT BE PUBLISHED IN THE PRINTED OFFICIAL REPORTS.
JUDGES: [*1] DEVIN P. COHEN, Acting Justice, Supreme Court.
OPINION BY: DEVIN P. COHEN
OPINION
DECISION/ORDER
Upon the foregoing papers, defendant’s motion to compel arbitration and plaintiff’s cross-motion for an order denying defendant’s motion and invalidating the Waiver Agreement between the parties, is decided as follows:
Plaintiff brings this action against defendant seeking damages for injuries she sustained when she participated in defendant’s “Urban Mudder” event. Defendant contends that this dispute should be arbitrated pursuant to the contract between the parties. Typically, arbitration clauses in contracts are regularly enforced and encouraged as a matter of public policy (159 MP Corp. v Redbridge Bedford, LLC, 160 AD3d 176, 205, 71 N.Y.S.3d 87 [2d Dept 2018]). Defendant provides a copy of the contract, which states that all disputes between the parties shall be submitted to binding arbitration with the American Arbitration Association.
Plaintiff argues the arbitration contract is invalid pursuant to GBL § 399-c, which prohibits mandatory arbitration in consumer contracts. Defendant contends that the Federal Arbitration Act preempts GBL § 399-c because defendant’s business is involved in interstate commerce (Marino v Salzman, 51 Misc 3d 131[A], 36 N.Y.S.3d 48, 2016 NY Slip Op 50410[U], *1 [App Term, 2d Dept 2016] [**2] ; Ayzenberg v Bronx House Emanuel Campus, Inc. (93 AD3d 607, 608, 941 N.Y.S.2d 106 [1st Dept 2012]). However, defendant provides no evidence from someone with personal knowledge [*2] of this factual claim (cf Marino, 51 Misc 3d 131[A], 36 N.Y.S.3d 48, 2016 NY Slip Op 50410[U], *1 [holding that the FAA preempted GBL § 399-c in that case because an employee of defendant submitted an affidavit wherein he stated that defendant was a multi-state company with business in several states]). Accordingly, defendant has not established that the FAA applies and, as a result, whether the arbitration provision is enforceable here.
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.
In opposition, defendant submits the affidavit of Johnny Little, the Director of Course and Construction with defendant, who states [*3] that the font used in the contract was 8-point, Times New Roman. Mr. Rosen further states that defendant forwarded a draft of the contract, in Microsoft Word format, to be professionally printed for the event, without any reduction in font size. Accordingly, there is a triable issue of fact as to whether the document is 8-point font.
Finally, plaintiff argues that the waiver of liability clause in her contract with defendant is void because violates N.Y. Gen. Oblig. Law § 5-326, which prohibits contracts between the “owner or operator of [**3] any pool, gymnasium, place of amusement or recreation, or similar establishment and the user of such facilities” from exempting such 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”. Plaintiff does not object to the substance of any other portion of the contract.
Defendant contends that the Urban Mudder event is not a place of amusement or recreation. While the statute does not define these terms, courts have applied them to a range of activities, such as rock climbing (Lee v Brooklyn Boulders, LLC, 156 AD3d 689, 690, 67 N.Y.S.3d 67 [2d Dept 2017]), motocross (Sisino v Is. Motocross of New York, Inc., 41 AD3d 462, 463, 841 N.Y.S.2d 308 [2d Dept 2007]), automobile racing (Knight v Holland, 148 AD3d 1726, 1727, 51 N.Y.S.3d 749 [4th Dept 2017]), sky diving (Nutley v SkyDive the Ranch, 65 AD3d 443, 444, 883 N.Y.S.2d 530 [1st Dept 2009]), spa activities (Debell v Wellbridge Club Mgt., Inc., 40 AD3d 248, 250, 835 N.Y.S.2d 170 [1st Dept 2007]), and horseback riding (Filson v Cold Riv. Trail Rides Inc., 242 AD2d 775, 776, 661 N.Y.S.2d 841 [3d Dept 1997]).
Defendant’s attempt [*4] to distinguish the Urban Mudder event from these activities is unavailing. As an initial matter, defendant counsel’s description of the event holds no evidentiary value, as counsel does not establish his personal knowledge of these events. Secondly, even if this court were to accept counsel’s description, the event’s “rigorous” and “athletic” nature is no different than the other activities listed above. Furthermore, counsel’s assertion that these other applicable activities did not require “physical preparation” is simply baseless. Accordingly, this court finds that the contract’s waiver of negligence liability violates N.Y. Gen. Oblig. Law § 5-326.
[**4] For the foregoing reasons, defendant’s motion to compel arbitration is denied and plaintiff’s cross-motion is granted to the extent that the contract’s waiver of negligence liability is deemed void.
This constitutes the decision and order of the court.
September 21, 2018
DATE
/s/ Devin P. Cohen
DEVIN P. COHEN
Acting Justice, Supreme Court
Littlejohn v. Timberquest Park at Magic, LLC, et. al., 2015 U.S. Dist. LEXIS 96443
Posted: October 22, 2015 Filed under: Assumption of the Risk, Legal Case, Risk Management, Vermont, Zip Line | Tags: Arbitration, Release, Vermont, zip line Leave a commentLittlejohn v. Timberquest Park at Magic, LLC, et. al., 2015 U.S. Dist. LEXIS 96443
Joseph P. Littlejohn, Plaintiff, v. Timberquest Park at Magic, LLC, and Corporate Challenge, Inc., d/b/a Adventure Más, Defendants.
Case No. 5:14-cv-200
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF VERMONT
July 20, 2015, Decided
July 21, 2015, Filed
SUBSEQUENT HISTORY: Amended by Littlejohn v. Timberquest Park at Magic, LLC, 2015 U.S. Dist. LEXIS 94592 (D. Vt., July 21, 2015)
CORE TERMS: arbitration, customer, ticket, adventure, arbitration clause, motorcycle, mutuality, summary judgment, exculpatory, zip-line, participating, wire, zip, guy, ski area–, arbitration provision, public policy, general public, ski, website, unconscionability, enforceability, unconscionable, recreational, arbitrate, sport, void, cable, enforceable, adhesion
COUNSEL: [*1] For Joseph P. Littlejohn, Plaintiff: Daniel L. Burchard, Esq., Thomas E. McCormick, McCormick, Fitzpatrick, Kasper & Burchard, P.C., Burlington, VT.
For Timberquest Park at Magic, LLC, Defendant: Andrew A. Beerworth, Esq., Robert G. Cain, Paul Frank Collins PC, Burlington, VT.
For Corporate Challenge, Inc., doing business as Adventure Mas, Defendant: Heather Z. Cooper, Rodney Edward McPhee, Kenlan, Schwiebert, Facey & Goss, P.C., Rutland, VT.
For ENE Evaluator, ENE Evaluator: Michael J. Marks, Esq., MarksPowers LLP, Middlebury, VT.
For Timberquest Park at Magic, LLC, Cross Claimant: Robert G. Cain, Paul Frank Collins PC, Burlington, VT.
For Corporate Challenge, Inc., Cross Defendant: Rodney Edward McPhee, Kenlan, Schwiebert, Facey & Goss, P.C., Rutland, VT.
JUDGES: Geoffrey W. Crawford, United States District Judge.
OPINION BY: Geoffrey W. Crawford
OPINION
OPINION AND ORDER RE: DEFENDANT’S AND PLAINTIFF’S MOTIONS FOR SUMMARY JUDGMENT (Docs. 44, 46 & 52)
Plaintiff Joseph Littlejohn was severely injured while participating in an adventure zip-line course at Magic Mountain Ski Area in Londondeffy, Vermont on October 5, 2013. He claims that defendants negligently designed, constructed, and operated the course, leading to the [*2] accident which caused his injuries. Both Littlejohn and defendant TimberQuest Park at Magic, LLC (TimberQuest) have filed motions for summary judgment, seeking a determination regarding the enforceability of a liability waiver and arbitration provision signed by Littlejohn prior to participating in the course.
I. Facts
The following facts are undisputed for the purposes of summary judgment, except where otherwise noted. On October 5, 2013, Littlejohn was injured while traversing a self-guided aerial adventure course at Magic Mountain. At the time of his injury, Littlejohn was seventy-six years old. He had never participated in an adventure course before. Defendant TimberQuest operated the adventure course at the time of the incident. Defendant Corporate Challenge, Inc. d/b/a Adventure Mas designed and constructed the course.
The adventure course consists of a series of rope bridges, ladders, cargo nets and zip lines placed between elevated platforms constructed around trees and poles. Participants gradually gain elevation by climbing and traversing a series of uphill course elements and then return to the bottom of the course by sliding down a series of zip lines. Participants wear a [*3] climbing harness equipped with a “smart belay” system that is meant to keep them attached at all times to both a safety cable and a zip line cable. The “smart belay” system is intended to ensure that the participant is always attached to at least one of the cables.
The trees and poles which support the course platforms are stabilized by guy wires. These guy wires are anchored at one end to the tree or pole where a course platform is located and at the other end to another nearby tree or the ground.
On the day he visited, Littlejohn was equipped with a climbing harness and was instructed how to use the smart belay system’s dual carabiners. According to Littlejohn, he was not warned that there were guy wires on the course in addition to safety cables and zip line cables or that he should avoid clipping onto the guy wires.
Littlejohn climbed through the uphill course elements and began to descend on the zip lines. As he was preparing to descend one of the sections of the course, he mistook a guy wire for the zip line cable. He attached his smart belay to the guy wire and slid down the guy wire. At the bottom he ran into the tree which anchored the other end of the guy wire. He suffered severe [*4] injuries.
Littlejohn’s friend Miki Conn had purchased their tickets for the adventure course through TimberQuest’s website on September 12, 2013.
According to Littlejohn, TimberQuest’s website does not alert customers that they will be required to sign a liability waiver prior to participating in the adventure course. Littlejohn alleges that neither Conn nor he was aware that they would have to sign a liability waiver until they arrived at TimberQuest three weeks later. At oral argument, counsel for both sides cleared up some confusion on this point: there is a notice on the website concerning the liability waiver, but it appears only at the point of purchase by the customer. A company other than TimberQuest provides the ticketing, reservation and credit card services. That company’s website includes a warning to customers that they will be required to sign a liability waiver before they enter the course. Since Littlejohn’s counsel did not actually buy a ticket, he did not encounter this information in preparing his motion for summary judgment.
When they arrived at TimberQuest on October 5, Littlejohn and Conn were each presented with a document entitled “Release of Liability, Waiver [*5] of Claims, Indemnification, and Arbitration Agreement.” The agreement was presented to them in digital format on an electronic device and they were instructed to read and sign it electronically.
The agreement stated that the participant agreed to “waive all claims” and “assume all risks” arising from participating in programs at the adventure course, including claims arising from negligent acts or conduct of TimberQuest, and further agreed to release and indemnify TimberQuest from liability for any injury suffered by the participant while using the course. (Doc. 44-3 at 2.) Under the heading “Arbitration,” the agreement stated that:
The Participant … hereby agrees to submit any dispute arising from participation in the Programs, for which Participant intends to seek damages in excess of $75,000.00, to binding arbitration. . . . In the event that Participant . . . files a lawsuit in any court relating to, and/or arising from, Participant’s participation in the Programs, Participant . . . by signing this document, stipulate[s] to a cap on Participant’s damages of $75,000.00, exclusive of interest and costs. As a threshold matter, the Panel, or the Court (if a lawsuit is filed), shall confirm whether [*6] the Waiver and Release contained in this Agreement are enforceable under applicable law. (Id.)
The agreement contains a severability clause stating that if any provision is invalidated, the remainder of the agreement will continue to be binding. Littlejohn signed the agreement prior to participating in the course.
II. Analysis
On March 27, 2015, TimberQuest filed a motion for partial summary judgment seeking a declaration that the $75,000 damages cap contained in the arbitration clause is enforceable against Littlejohn. (Doc. 44.) Littlejohn opposed the motion on the grounds that the damages cap violates public policy and is procedurally and substantively unconscionable. (Doc. 45.) Littlejohn filed a cross-motion for summary judgment seeking to have the waiver, assumption of risk, release and indemnity provisions of the agreement declared void and unenforceable as well. (Doc. 46.) In response, TimberQuest filed a cross-motion for summary judgment arguing that the agreement is enforceable and all of Littlejohn’s claims should be dismissed because he released TimberQuest from liability for negligence by signing the agreement. (Doc. 52.)
A. Standard of Review
Summary judgment is appropriate [*7] where “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). In considering a motion for summary judgment, “[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).
B. Enforceability of Provisions Regarding Waiver of Claims, Release, Assumption of Risks from Negligence, and Indemnity
The enforceability of a contract provision providing for the waiver of a customer’s claims for negligence arising out of recreational activities is a matter of Vermont law. It is governed by four Vermont Supreme Court cases which seek to define the circumstances under which a business may contract out of liability for its own negligent conduct.
The leading case remains Dalury v. S-K-I, Ltd., 164 Vt. 329, 670 A.2d 795 (Vt. 1995), in which the Vermont Supreme Court rejected the exculpatory language in ski tickets issued by the Killington ski resort to its customers. The court reviewed the criteria announced by the California Supreme Court in Tunkl v. Regents of University of California, 60 Cal. 2d 92, 32 Cal. Rptr. 33, 383 P.2d 441 (Cal. 1963),1 and identified the longstanding rule that business owners are responsible for the safety of their premises as the basis on which to strike the exculpatory provisions in the ticket. Dalury, 670 A.2d at 799. The decision [*8] recognized that the ski area–and not the skiers–had the expertise and opportunity to foresee and control hazards and to reduce negligent conduct by its employees.
1 The Tunkl decision identified the following list of characteristics which may violate the public interest:
It concerns a business of a type generally thought suitable for public regulation. The party seeking exculpation is engaged in performing a service of great importance to the public, which is often a matter of practical necessity for some members of the public. The party holds himself out as willing to perform this service for any member of the public who seeks it, or at least for any member coming within certain established standards. As a result of the essential nature of the service, in the economic setting of the transaction, the party invoking exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks his services. In exercising a superior bargaining power the party confronts the public with a standardized adhesion contract of exculpation, and makes no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence. Finally, [*9] as a result of the transaction, the person or property of the purchaser is placed under the control of the seller, subject to the risk of carelessness by the seller or his agents.
Tunkl, 383 P.2d at 445-46.
The Dalury decision did not depend upon a determination that skiing was an essential industry or service. “Whether or not [the ski resort] provide[s] an essential public service does not resolve the public policy question in the recreational sports context.” Id. Skiing is not like taking a cab or visiting the hospital–services for which there may be no substitute and which are necessary to everyday life. Rather, the decision rests upon two related principles: the business is open to the general public without regard to special training or ability and the premises owner is in the best position to assure the safety of visitors. These principles have remained unchanged in the cases which have followed Dalury.
The first was Spencer v. Killington, Ltd., 167 Vt. 137, 702 A.2d 35, 37 (Vt. 1997), in which the exculpatory language used as a condition for entering an amateur ski race was not enforced for the same reasons the court had expressed two years before in Dalury. The dissent identified the fault line in the doctrine:
There is a significant difference between the expectations of the general [*10] public, which has a right to assume reasonable care on the part of the ski area operator, and a ski racer who consciously undertakes risks that he or she knows may strain or exceed the tolerance of any safety system.
Id. at 38 (Allen, C.J., dissenting). Over time this distinction between members of the general public and people engaging in high-risk sports would become more marked.
In Thompson v. Hi Tech Motor Sports, Inc., 183 Vt. 218, 945 A.2d 368, 372 (Vt. 2008), the Vermont Supreme Court upheld the enforceability of a liability waiver on public policy grounds.2 The case concerned a customer at a motorcycle dealership who was injured on her test ride. The court distinguished the policy concerns at issue in Dalury, explaining that “whereas public policy places the burden of maintaining safe premises on a landowner, public policy concerning motorcycle safety places the burden of safe driving on the operator of the motorcycle.” Id. The court also determined that motorcycle dealerships do not provide a necessary service. Id. at 373. In this respect, the case followed Dalury. In contrast to skiers, however, the customer operated the motorcycle on the public road. There were no business premises relevant to the case. The decision also compared motorcyclists to customers of skydive [*11] companies, underwater diving schools, and mountain guiding services–high-risk sports for people with special skills. Id. Further, unlike the ski area in Dalury, the motorcycle dealership only allowed licensed motorcycle drivers with sufficient experience and training to take its motorcycles out for a ride. Id.
2 Although the waiver provision was held not to be void on public policy grounds, the court concluded that the provision failed release the defendant from liability for negligence because the language was ambiguous. Id. at 375.
Finally, in Provoncha v. Vermont Motorcross Association, 185 Vt. 473, 974 A.2d 1261, 1267 (Vt. 2009), the exculpatory language for an off-road motorcycle racing club was enforced because the activities were “neither of great importance to the public nor open to the public at large.” The majority distinguished the case from Dalury because the premises where the accident occurred was a private racetrack open only to members of a small club of 300 members. Id. The general public was not permitted to ride. The decision also drew a parallel to the enforcement of similar provisions in cases involving parachute jumping, stock car racing, scuba diving, and mountaineering–all sports which were said not to be matters of legitimate public interest. Id.
All four [*12] cases call for a flexible case-specific analysis of the factors originally identified in the Dalury decision. Of these, the least significant is whether a recreational activity is necessary to society. Few of them are. Not surprisingly, skiing and motorcycle riding–the two activities which generated the four decisions–were both found to be inessential to daily life. The factors which were most consistently applied were whether the defendant was in control of the location where the injury occurred and whether these premises were open to the general public. When these factors are present–as in Dalury and Spencer–the exculpatory clauses are not enforced. When these factors are absent–as in Thompson and Provoncha–the exculpatory clauses are likely to be enforced.
The court is not persuaded by TimberQuest’s argument that the Dalury case is on its last legs and will not survive much longer. Although the result was different in Thompson and Provoncha, neither case suggested that any member of the Vermont Supreme Court sought to discard the rule announced in Dalury. Instead, the debate from both sides concerned the differences between activities open to the general public and the more risky [*13] pursuits of riding motorcycles, skydiving, scuba diving and mountaineering, all of which generally take place in settings that are not under the control of the business operators.
The remaining factors set out in Tunkl had no particular application in Dalury and the subsequent cases and have little in this case either. These include whether the activity is suitable for public regulation, whether the business enjoys unequal bargaining strength as a result of its essential nature, and whether the contract is one of adhesion. Tunkl, 383 P.2d at 445-46. Although ski lifts are regulated, see 31 V.S.A. §§ 701-12, the downhill experience is not. Neither are rope courses or motorcycle races. Although a person who sought to negotiate the terms of his ski ticket or his adventure course ticket might not be admitted, in the absence of any necessity the customer can always walk away, which gives him or her some degree of economic strength. And all of the contracts involved in these cases–whether enforced or not–were preprinted contracts of adhesion which appeared on tickets and entrance forms.
Before leaving the Dalury factors, the court must consider one final factor which is heavily relied upon by the defendants. This factor arises from [*14] the language in Dalury that thousands of skiers visit Killington every day, 670 A.2d at 799, while only a few come to TimberQuest’s zip-line course. In the course of discovery, TimberQuest’s owner estimated that he has 1000 visitors a season–the number he put down on his worker’s compensation insurance application. (Doc. 52-6 at 3.) He does not actually have a real count. Assuming a 100-day season, this amounts to ten visitors each day or one or two visitors per hour. (The estimate may not be very reliable, but it is the only number in the record.) The defense argues that a small business which is open to the public should receive treatment which is different from a large business. Although the court has reviewed the language in the Dalury decision about the thousands of daily visitors, the court is not convinced that the size of the business alone plays a significant role in whether the exculpatory clause in the ticket should be enforced.
As this discussion indicates, the court is satisfied that attending a zip-line program is more like visiting a ski area than like taking part in a specialized high-risk sport which requires skill and experience. Like the ski area, the zip-line sells tickets to all [*15] comers (subject to age and weight restrictions not relevant here.) It requires no prior training. As an excerpt from the website furnished by defendant indicates, this is a recreational activity open to all without restriction:
TimberQuest is an exhilarating treetop adventure course for the entire family. We have over 20 zip lines and 75 challenges of varying difficulty. Challenges include rope bridges, ladders, cargo nets, and even a course for younger children. Customers are always clipped into a safety guide wire and friendly trained staff provide[] assistance from the ground. (Doc. 52-4 at 5.)
The course is designed and controlled by defendants. There is no indication in the record that anyone needs to learn to use the course beyond an initial training class offered at the park. (Doc. 52-4 at 14.) It is even more open to the public than skiing, which typically involves beginner’s lessons and some degree of acquired skill. The zip-line course requires no such training or skill.
This court’s decision to invalidate the exculpatory clause on public policy grounds falls within the principles laid down by the Vermont Supreme Court in Dalury and the later cases. It recognizes the longstanding [*16] rule that business owners are responsible for the safety of their premises. It also recognizes the expectation that a recreational activity which is open to the general public will be reasonably safe for use by all users. In other words, the business cannot contract out of liability for negligence in the design, maintenance and operation of its business premises.
For these reasons, the court will not enforce the exculpatory language on the public policy grounds first identified in Dalury.
C. Assumption of Risk and Indemnity
Littlejohn seeks to invalidate the assumption-of-risk provision in the agreement. The court has already concluded that the first sentence of this provision, which states that by signing the agreement the participant agrees to assume all risks of participating in the adventure course including those caused by TimberQuest’s negligence, is invalid.
However, Littlejohn’s argument does not specifically address the second sentence of this provision, which states that “[t]he Participant … understand[s] that there are inherent risks of participating in the Programs and using the Equipment, which may be both foreseen and unforeseen and include serious physical injury and death.” (Doc. 44-3 [*17] at 2.) Under Vermont law, “a person who takes part in any sport accepts as a matter of law the dangers that inhere therein insofar as they are obvious and necessary.” 12 V.S.A. § 1037. This defense remains viable even if the defendant’s exculpatory agreement is found to be void as contrary to public policy. Spencer, 702 A.2d at 38. This provision of the agreement remains valid and TimberQuest is free to assert assumption of risk as a defense.
There is no third-party claim against TimberQuest for indemnity. The court does not address this issue.
D. Enforceability of Arbitration Clause
After disposing of the exculpatory clause, the court considers the enforceability of the arbitration clause.
As drafted, the clause works in the following way: a claimant seeking damages in excess of $75,000 is required to proceed to binding arbitration. Claims of $75,000 or less are not subject to arbitration. The arbitration panel is composed of three members. Each side chooses one member. The two members then select the third, who must be “an officer or director of any entity that operates an aerial adventure park with zip lines in the United States.” (Doc. 52-4 at 31.) If the first two panel members cannot agree on a third, a judge within the District of Vermont shall appoint [*18] the third member “utilizing the selection criteria for the neutral as set forth above.” (Id.)
Littlejohn challenges this provision on the following grounds. First, he argues that the provision is procedurally unconscionable because it is contained in small print in a contract of adhesion that was presented to him well after he paid for his tickets. Second, he maintains that the arbitration clause is substantively unconscionable because the third arbitrator is required to be an officer or director of another company that operates a zip-line course, thus tilting the arbitration panel in favor of TimberQuest. Finally, he argues that the arbitration clause lacks mutuality because it has no application to a claim by TimberQuest against a customer.
The first issue is what law governs this dispute. Both the Federal Arbitration Act, 9 U.S.C. §§ 1-16, and the Vermont Arbitration Act, 12 V.S.A. §§ 5651-5681, apply to this arbitration agreement which was formed in Vermont and which the defendant seeks to enforce in Vermont. When the two statutes differ, the federal provision preempts state law. See David L. Threlkeld & Co., Inc. v. Metallgesellschaft Ltd. (London), 923 F.2d 245, 249-50 (2d Cir. 1991) (holding that FAA preempts VAA); Little v. Allstate Ins. Co., 167 Vt. 171, 705 A.2d 538, 540 (Vt. 1997) (same). The claims of unconscionability raised by Littlejohn, however, are matters arising under state [*19] substantive law and are enforced in the same way under either the federal or state arbitration acts. See 9 U.S.C. § 2 (stating agreements to arbitrate “shall be valid, in-evocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract”); AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1746, 179 L. Ed. 2d 742 (2011) (explaining that final phrase of § 2 provides that agreements to arbitrate may be invalidated by generally applicable state-law contract defenses such as fraud, duress, or unconscionability). In considering issues of both procedural unconscionability relating to the form of the contract to arbitrate and substantive unconscionability relating to its content, the court is guided by Vermont decisional law where it is available.
Littlejohn’s claim of procedural unconscionability is unconvincing. Unlike the provisions at issue in Glassford v. BrickKicker, 191 Vt. 1, 35 A.3d 1044, 1053 (Vt. 2011), the arbitration provision is on the middle of the page, directly under the waiver provisions and is prefaced with a conspicuous header stating “Arbitration.” The print is normal-sized. The customer’s signature line is on the second page, giving him an opportunity to read the text before signing. Although the agreement was presented to Littlejohn as a preprinted contract with no real opportunity [*20] to negotiate the terms, he could have declined to participate in the course and requested his money back if he objected to the arbitration provision. This was not a contract for a necessary service such as home inspection where the weaker party was “at the mercy” of the drafter. See id. at 1052. As the Vermont Supreme Court has repeatedly pointed out, “unequal bargaining power alone will not nullify a contract.” Maglin v. Tschannerl, 174 Vt. 39, 800 A.2d 486, 490 (Vt. 2002).
Littlejohn also argues that the arbitration agreement was procedurally unconscionable because he was presented with it upon arrival at TimberQuest, more than three weeks after his companion paid for the tickets, and was not warned in advance that he would have to sign it. This argument was based on his attorney’s mistaken belief that the TimberQuest website did not warn customers prior to payment that they would be required to sign the agreement. However, at oral argument the parties agreed that on the payment page, under Terms and Conditions/Liability Waiver, the website displayed the following message: “All participants MUST sign a release and waiver of claims/indemnification agreement at check-in.” Customers were required to check a box stating “I agree” in order to purchase their [*21] tickets. This provided sufficient constructive warning to Littlejohn through his friend who actually bought the tickets that he would have to sign the agreement prior to participating in the course. Further, this was not the first time that Littlejohn had encountered a recreational liability agreement. As he testified at his deposition, “[w]e did sign a release, but that’s standard to me” since he was often required to sign similar forms at ski areas. (Doc. 44-4 at 4.)
Turning to Littlejohn’s argument of substantive unconscionability, it is obvious that the requirement that the “neutral arbitrator” be drawn from the ranks of the zip-line industry is unfair. It is no more than a requirement that the arbitration be conducted among friends–or at least people who share the same concerns about defending against claims by injured customers. Courts have long refused to enforce arbitration clauses which call for the appointment of panel members who are likely to harbor a bias in favor of one side or another. See Halligan v. Piper Jaffray, Inc., 148 F.3d 197, 202 (2d. Cir. 1998) (discussing possibility of institutional bias due to industry influence over selection of arbitration panel); Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 995 F. Supp. 190, 209 (D. Mass. 1998) (listing cases). TimberQuest’s suggestion that a member of the same industry [*22] will be biased against TimberQuest because he or she will be a competitor willing to do harm to a rival company demonstrates only that the arbitration clause requires the choice of someone likely to hold some form of bias or self-interest–maybe for TimberQuest and maybe against.
The contract between the parties includes a severability clause: “To the extent that any portion of this Agreement is deemed to be invalid under the law of the applicable jurisdiction, the remaining portions of the Agreement shall remain binding and available for use by the Host and its counsel in any proceeding.” (Doc. 52-4 at 32.) Setting aside for a moment the one-sided nature of this clause–“available for use by the Host and its counsel”–the severability clause authorizes the court to reform the arbitration provision by striking the requirement that the neutral be drawn from the zip-line industry and providing for the more conventional selection of a genuinely neutral arbitrator by the other two panel members with provision for selection of a third by the court in the event of a deadlock.
The court will enforce the severability clause to strike the provision requiring the choice of a “neutral” arbitrator [*23] who is likely to hold a bias in favor of the zip-line industry. The remaining question is the issue of mutuality.
Some courts have found arbitration clauses in contracts of adhesion that required one party to go to arbitration but imposed no similar obligation on the other party to be unconscionable. See, e.g., Iberia Credit Bureau, Inc. v. Cingular Wireless LLC, 379 F.3d 159, 170-71 (5th Cir. 2004) (holding arbitration clause in cellular telephone customer service agreement was unconscionable under Louisiana law because it required customer but not provider to arbitrate all claims); Abramson v. Juniper Networks, Inc., 115 Cal. App. 4th 638, 9 Cal. Rptr. 3d 422, 437 (Cal. Ct. App. 2004) (“When only the weaker party’s claims are subject to arbitration, and there is no reasonable justification for that lack of symmetry, the agreement lacks the requisite degree of mutuality.”).
However, this appears to be a minority position. The Second Circuit has rejected the argument that an arbitration clause is void for lack of mutuality where it only requires one party to submit all claims to arbitration. In Doctor’s Associates, Inc. v. Distajo, 66 F.3d 438 (2d Cir. 1995), the court held that an arbitration clause in a franchise agreement was not void for lack of mutuality under Connecticut law, even though the clause required the franchisees to submit all controversies to arbitration while reserving to the franchisor the right to seek summary eviction [*24] against the franchisees. The court explained that mutuality was “not an issue.” Id. at 451. Under modern contract law, the doctrine of “mutuality of obligation,” which requires that a contract be based on reciprocal promises, is no longer required so long as the agreement as a whole is supported by consideration. Id. (citing Restatement (Second) of Contracts § 79 (1979)). The court rejected the idea that the arbitration clause must be considered as a separate contract within a contract, supported by its own consideration. Id. at 452. Likewise, the court held that the doctrine of “mutuality of remedy,” which provides that a “plaintiff shall not get specific enforcement unless the defendant could also have obtained it,” is also defunct and did not support the franchisees’ argument. Id. at 453 (citing Restatement (Second) of Contracts § 363 cmt. c. (1979)). Because the agreement to arbitrate was part of a larger contract which was supported by consideration, it did not fail for lack of mutuality.
Other circuits have reached similar conclusions. See Soto v. State Indus. Prods., Inc., 642 F.3d 67, 77 (1st Cir. 2011) (applying Puerto Rico law); Harris v. Green Tree Fin. Corp., 183 F.3d 173, 181 (3d Cir. 1999) (applying Pennsylvania law); Barker v. Golf U.S.A., Inc., 154 F.3d 788, 791 (8th Cir. 1998) (applying Oklahoma law); see also Circuit City Stores, Inc. v. Najd, 294 F.3d 1104, 1108 (9th Cir. 2002) (applying California law and holding that employer’s promise to be bound by arbitration process was sufficient consideration for employee’s agreement [*25] to arbitrate); Michalski v. Circuit City Stores, Inc., 177 F.3d 634, 636 (7th Cir. 1999) (applying Wisconsin law and reaching same conclusion as Najd).
Vermont courts have not specifically addressed whether an arbitration clause may be void for lack of mutuality. Vermont contract law does not otherwise require parties to an agreement to have equivalent obligations for the agreement to be valid. See H.P. Hood & Sons v. Heins, 124 Vt. 331, 205 A.2d 561, 566 (Vt. 1964) (“[T]here is no requirement that the option of one promisor must be coextensive with the privilege of termination extended to the counter-promisor.”). “Even if one party has options not provided to the other party … the contract is not per se unsupported by consideration. Rather, a contract is incomplete only if one party’s obligations are so attenuated as to render consideration merely illusory.” Petition of Dep’t of Pub. Serv., 157 Vt. 120, 596 A.2d 1303, 1309 (Vt. 1991) (Morse, J., dissenting); Restatement (Second) of Contracts§ 79 (1981) (“If the requirement of consideration is met, there is no additional requirement of … ‘mutuality of obligation.'”). The FAA would preempt Vermont from imposing such a requirement only in the case of arbitration provisions. See AT&T Mobility LLC, 131 S. Ct. at 1741. Given that Vermont law strongly favors arbitration, Union Sch. Dist. No. 45 v. Wright & Morrissey, Inc., 183 Vt. 555, 945 A.2d 348, 354 (Vt. 2007), the court concludes that mutuality is not required in order for the arbitration provision to be enforceable.
Littlejohn argues that the agreement was unsupported [*26] by consideration because he was forced to sign it weeks after he had paid for the tickets. This argument is without merit. “[A]ny performance which is bargained for is consideration.” Restatement (Second) of Contracts § 72 (1981). TimberQuest’s performance in this case was allowing Littlejohn to use its adventure zip-line course. In exchange, Littlejohn’s friend paid for their tickets. Upon arrival at the park, he promised that he would submit his claims to arbitration or agree to limit his recovery in court to $75,000. As noted above, the payment page required Littlejohn to agree to sign the agreement prior to participating in the course. “In other words, defendant’s offer of services did not extend to anyone who did not sign the Agreement.” Mero v. City Segway Tours of Washington DC, LLC, 962 F. Supp. 2d 92, 103 (D.D.C. 2013) (holding that liability waiver signed by plaintiff who paid for Segway tour in advance was supported by consideration in form of defendant’s provision of Segway and guided tour where confirmation email warned that he would have to sign liability waiver prior to tour). Thus, Littlejohn’s promise was supported by consideration.
As reformed by the court, the arbitration provision is valid. Under the agreement, there is no cap on damages if the participant chooses to go to arbitration. If [*27] the participant chooses to go to court, he or she agrees to seek $75,000 or less in damages. This court only has jurisdiction over a diversity case if the amount in controversy “exceeds the sum or value of $75,000.” 28 U.S.C. § 1332(a). This provision is strictly construed, and does not extend jurisdiction to a claim for an even $75,000. Salis v. Am. Export Lines, 331 Fed. Appx. 811, 814 (2d Cir. 2009); Matherson v. Long Island State Park Comm’n, 442 F.2d 566, 568 (2d Cir. 1971). Thus, Littlejohn may not bring suit in this court. The court accordingly dismisses plaintiff’s negligence claims for lack of subject matter jurisdiction and without prejudice to plaintiff’s right to demand arbitration.
III. Conclusion
For the reasons stated above, defendant TimberQuest’s motion for partial summary judgment (Doc. 44) is GRANTED. TimberQuest’s cross-motion for summary judgment dismissing all claims (Doc. 52) is DENIED. Plaintiff’s cross-motion for summary judgment (Doc. 46) is GRANTED in part and DENIED in part. The case is dismissed for lack of subject matter jurisdiction without prejudice to plaintiff’s right to demand arbitration.
Dated at Rutland, in the District of Vermont, this 20th day of July, 2015.
/s/ Geoffrey W. Crawford
Geoffrey W. Crawford, Judge
United States District Court
Arbitration clause in a release is upheld in Mississippi, but only because it was “fair”
Posted: September 29, 2014 Filed under: Contract, Mississippi | Tags: Arbitration, Arbitration clause, Education Corporation of America, Enrollment, Enrollment Agreement, MISSISSIPPI, Release, Tuition, Tuition Agreement, Virginia College L.L.C., Willis-Stein and Partners 2 CommentsLarger issue is should you use arbitration and if you should, when?
Daniels v. Virginia College at Jackson; 478 Fed. Appx. 892; 2012 U.S. App. LEXIS 13037
State:
Plaintiff: Mississippi, United States Court of Appeals for the Fifth Circuit
Defendant: Virginia College L.L.C.; Education Corporation of America; Willis-Stein and Partners
Plaintiff Claims: negligence, conversion, embezzlement, and unjust enrichment
Defendant Defenses: Mandatory arbitration as found in the release which was part of the enrolment agreement
Holding: for the defendant
Year: 2012
The facts of this case are unknown. What is known is the plaintiff enrolled in the defendant college. To enroll she had to sign an Enrollment and Tuition Agreement. The Enrollment and Tuition Agreement (Enrollment form) had a mandatory arbitration clause.
Arbitration is a cross between mediation and a trial. Arbitration is usually done by a member of the American Arbitration Association or by a neutral party picked by both sides. Arbitration is a lot cheaper and faster than going to trial. In many states, an arbitrator cannot award all the types of damages that a jury or judge could. Arbitrators rarely award as much money in damages as a jury does.
Arbitration is supported by state law, which limits damages, compels arbitration and encourages and forces parties to an arbitration clause to arbitrate.
In this case, the plaintiff objected the required arbitration required in the contract. That arbitration was required by the trial court, and the plaintiff appealed to the United States Court of Appeals for the Fifth Circuit. The Fifth circuit court upheld the mandatory arbitration.
Summary of the case
The discussion in this case is fairly simple. The plaintiff was unhappy about how the defendant school had retained portions of the federal financial aid she had received. She sued claiming the arbitration clause was void because it was unconscionable.
Under Mississippi law unconscionability:
…is proven by oppressive contract terms such that there is a one-sided agreement whereby one party is deprived of all the benefits of the agreement or left without a remedy for another party’s nonperformance or breach.
The plaintiff argued that the enrollment agreement was unconscionable because it limited damages, had a jurisdiction and venue clause and awarded the defendant attorney fees if it won its case. To overcome some of the issues, the defendant in its written argument to the appellate court considered the attorney fee’s clause stating the clause allowed any winning party to recover its attorney fees.
Consequently, the arbitration clause was not found to be unconscionable in this situation applying Mississippi law.
So Now What?
The real issue to look at in this case is, should you use arbitration if you run an outdoor recreation business or program and if so when.
Probably, if you are an outdoor recreation activity in a state that supports the use of a release, and you have a well-written release, then no, do not require arbitration. The reason is simple; arbitration does not allow motions for summary judgment, which is a quick and final ending to the litigation.
Arbitration will allow the parties to go to arbitration and allow the plaintiff to have their day in court. Usually, a motion for summary judgment is faster, simpler and cheaper.
The only places I would consider arbitration in an outdoor recreation business setting would be those states that do not allow the use of a release, if those states support mandatory arbitration. At the time of the writing of this article, those states are: Louisiana, Montana, and Virginia (although Virginia attorneys continuously tell me lower courts uphold releases?).
Possibly Alaska, Hawaii, New York, Arizona, New Mexico, and West Virginia for some activities were the state legislature or the courts have held that releases are not valid for those activities. However, in all of those states, you must investigate the statute and make sure arbitration works the way you need as well as limits the damages that can be awarded by an arbitrator.
See States that do not Support the Use of a Release
Arbitration is not a cover up for having a bad release. If your release is bad, an arbitration clause is not going to provide any greater protection. Besides if you have a bad release, you probably have a bad arbitration clause also.
Of note, is the court looked at the over-all fairness of the agreement and the arbitration clause. Without a finding of fundamental fairness, the court might have voided the arbitration clause. In
For an article on failed arbitration see: Complicated serious of cases created to defend against a mountaineering death.
What do you think? Leave a comment.
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By Recreation Law Rec-law@recreation-law.com James H. Moss #Authorrank
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