New York court shreds Tough Mudder online release and arbitration clause because the reader could assent to the release without reading the release.

The clauses in the release were not clearly identified and could be avoided by plaintiff. Release was found to be void because if violated New York General Obligations Law § 5-326

Scotti v Tough Mudder Inc., 63 Misc. 3d 843, 97 N.Y.S.3d 825, 2019 N.Y. Misc. LEXIS 1525, 2019 NY Slip Op 29098, 2019 WL 1511142

State: New York, Supreme Court of New York, Kings County

Plaintiff: Richard E. Scotti et al. (Richard E. Scotti and Joseph Russo)

Defendant: Tough Mudder Incorporated et al. (Tough Mudder Incorporated and Tough Mudder Event Production Incorporated)

Plaintiff Claims: Negligence

Defendant Defenses: Arbitration Clause & Release

Holding: for the Plaintiffs

Year: 2019

Summary

Tough Mudder has been having a tough time in court. This was another court that found several ways to void the release. Tough Mudder was attempting to compel arbitration; however, the arbitration clause in the release did not meet the legal requirements of New York Law. The release itself failed because if violated New York General Obligations Law § 5-326 which voids releases for recreation.

Facts

This personal injury action stems from an accident which occurred on July 23, 2016, when the plaintiffs Richard E. Scotti and Joseph Russo participated in the “Tough Mudder,” a physically challenging obstacle course event (hereinafter the TM event), which took place at 1303 Round Swamp Road, Old Bethpage, New York. Defendants Tough Mudder Incorporated and Tough Mudder Event Production Incorporated (collectively, Tough Mudder) are the business entities that organized the TM event. Plaintiffs commenced the within action on or about November 17, 2017, against Tough Mudder alleging that they each sustained injuries as a result of defendants’ negligent operation of an activity at the event, referred to as the “salmon ladder.” Tough Mudder joined issue on or about December 20, 2017, with the service of a verified answer. In their answer, Tough Mudder denied all material allegations and asserted various affirmative defenses, including that the plaintiffs’ action is barred by the participation/registration agreement, which included an arbitration clause.

Tough Mudder now moves, pursuant to CPLR 7501 and 7503, to compel arbitration, arguing that the plaintiffs are barred from pursuing the instant action in this court because they each waived the right to sue by virtue of agreeing to arbitrate any “disputes, controversies, or claims” arising out of their participation in the TM event. Tough Mudder claims that the plaintiffs each entered into an agreement to arbitrate all claims related to their participation in the TM event when they completed an online Internet registration form. In support of this contention, Tough Mudder has submitted the sworn affidavit of Jenna Best, the manager of customer relations for Tough Mudder Incorporated. Best avers that she is fully familiar with the TM event online registration process as it existed in 2016 when the plaintiffs registered for the TM event at issue. Tough Mudder has submitted copies of the online registration forms that the plaintiffs allegedly completed for the TM event (Cash affirmation, exhibit D). Best states that, during the online registration process, the plaintiffs were required to scroll down to a section containing the “Participant Waiver and Course Rules” (hereinafter PWCR), a document version of which has been submitted herein She contends that the full text of the PWCR was contained in a box on the screen, which could be read by scrolling down in the text box. Best contends that the initial visible content of the scrollable box, which preceded the full PWCR document, which could be read in its entirety by scrolling down…

Below the box containing the scrollable PWCR was another box next to the statement: “I agree to the above waiver.” Best avers that it was necessary for the plaintiffs, or any other registrant, to click on the box to indicate his or her consent to the PWCR in order for the registrant to complete his or her registration for the TM event. According to Best, the Internet registration form cannot proceed to the payment page, and registration cannot be completed, until the registrant checks the box indicating his or her consent to the PWCR She further avers that both plaintiffs did in fact click on the box indicating their consent to the PWCR, as otherwise they would not have been able to participate in the TM event. Based upon the foregoing, Tough Mudder contends that the plaintiffs agreed to the terms of the online waiver, which included the arbitration clause, and, therefore, are barred from pursuing the instant action.

Analysis: making sense of the law based on these facts.

The court looked at the plaintiff’s arguments first.

In opposition, plaintiffs argue that the arbitration provision at issue is unenforceable because Tough Mudder has failed to establish that they actually agreed to it. In this regard, plaintiffs point out that the webpage where the PWCR was located contained a text box that did not show the entire document. In order to read the full PWCR, including the arbitration provision, plaintiffs contend it would have been necessary to scroll down through many screens of text using the arrows on the right-hand side of the text box. The PWCR fills seven single-spaced pages of text.

On top of that, the court stated the evidence presented by the defendant Tough Mudder was not sufficient to prove that either plaintiff checked the box or agreed to the terms of the contract.

Plaintiffs further argue that Tough Mudder has failed to proffer any evidence that either plaintiff actually signed/checked the consent box, or any evidence identifying the computers or electronic devices from which their respective registrations were completed.

The burden was on Tough Mudder to prove the plaintiffs signed the agreement which contained the arbitration clause.

It is well settled that “[a] party to an agreement may not be compelled to arbitrate its dispute with another unless the evidence establishes the parties’ clear, explicit and unequivocal agreement to arbitrate” When one party seeks to compel the other to arbitrate any disputes between them, the court must first determine whether the parties made a valid arbitration agreement. The party seeking arbitration bears the burden of establishing that an agreement to arbitrate exists

To prove the existence of the contract and the agreement to the arbitration clause the courts look for evidence that the website user had actual or constructive knowledge of clauses in the contract.

The question of whether there is agreement to accept the terms of an online contract turns on the particular facts and circumstances. Courts generally look for evidence that a website user had actual or constructive notice of the terms by using the website. Where the person’s alleged consent is solely online, courts seek to determine whether a reasonably prudent person would be put on notice of the provision in the contract, and whether the terms of the agreement were reasonably communicated to the user. In Specht v Netscape Communications Corp, the court emphasized that “[r]easonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent to those terms by consumers are essential if electronic bargaining is to have integrity and credibility”

The seven-page agreement had no headings, no italics, no bold print, nothing to indicate the agreement covered more issues than were identified in the heading. The heading stated:

“ASSUMPTION OF RISK, WAIVER OF LIABILITY, AND INDEMNITY AGREEMENT “PARTICIPANTS: READ THIS DOCUMENT CAREFULLY BEFORE ACCEPTING. THIS DOCUMENT HAS LEGAL CONSEQUENCES AND WILL AFFECT YOUR LEGAL RIGHTS AND WILL ELIMINATE YOUR ABILITY TO BRING FUTURE LEGAL ACTIONS.”

No where in the heading was a mention of a mandatory arbitration clause. (Ambush by small print was eliminated by the courts in the 70’s, this lawsuit was in 2019; someone should have realized that by now.)

The court the defined the agreement as one of four types of agreements found online “the four “general types of online consumer contracts [are identified as] (a) browsewrap; (b) clickwrap; (c) scrollwrap; and (d) sign-in-wrap.”

Based on the evidence presented by the defendants the court found the agreement was a “clickwrap” agreement.

Here, the PWCR at issue appears to be a click-wrap agreement as identified in Berkson in that the clickable box is located directly below the scrollable text box that allegedly contained the full text of the agreement. Only by scrolling down in the text box would the user see all of the terms of the PWCR, including the arbitration clause at issue.

The court then held that you could agree to the agreement without scrolling through the agreement; therefore, you could sign the agreement without knowing what was in the agreement.

However, the user could proceed to complete the registration process without necessarily scrolling down through the text box to view the full document, thereby rendering it a click-wrap agreement.

The plaintiff could be bound by a clickwrap agreement, but only if they were given sufficient opportunity to read the agreement and agree to it. There must also be a way to decline a click-wrap agreement.

A party may be bound to a click-wrap agreement by clicking a button declaring assent, so long as the party is given a “sufficient opportunity to read the . . . agreement, and assents thereto after being provided with an unambiguous method of accepting or declining the offer.”

Then the court closed the door on the defendants attempt to compel arbitration.

…[a] court cannot presume that a person who clicks on a box that appears on a . . . screen has notice of all contents not only of that page but of other content that requires further action (scrolling, following a link, etc.). The presentation of the online agreement matters: Whether there was notice of the existence of additional contract terms presented on a webpage depends heavily on whether the design and content of that webpage rendered the existence of terms reasonably conspicuous. Clarity and conspicuousness of arbitration terms are important in securing informed assent.” (Internal quotation marks and citations omitted.)

Understand, the court did not say the contract was invalid; the court was only looking at the issue of the arbitration clause. Under New York law for the arbitration clause to be valid, the plaintiff had to “had actual or constructive notice of the terms….” Since there was no notice of arbitration in the heading, and you could agree to the agreement without reading it, the agreement failed the heightened requirements to prove an arbitration clause existed between the parties.

Thus, on a motion to compel arbitration, a valid agreement to arbitrate exists where the notice of the arbitration provision was reasonably conspicuous, and manifestation of assent is unambiguous as a matter of law. Therefore, the issue herein is whether Tough Mudder’s website registration screen put a reasonably prudent user on inquiry notice of the relevant terms of the PWCR, particularly the arbitration clause at issue.

Then the court jumped on the issue that the evidence in front of the court did not prove their argument. Black-and-white copies were provided to the court rather than color copies. The font size was small and barely legible.

In addition, the court notes that the purported copies of the plaintiffs’ respective online registration forms (screenshots) submitted by Tough Mudder are black and white copies of poor quality, the text of which is in an extremely small font size and is barely legible. Tough Mudder has not proffered any color copies of any screenshots depicting its online registration process. In addition, the full text of the PWCR, as provided by Tough Mudder, is not a screenshot but a black and white document, consisting of seven pages of single-spaced language, all in the same font and size, with no underlined, hyperlinked or bolded terms.

The court then attacked how the document would have been presented online from the evidence in front of it.

In order to view the “Mediation and Arbitration” clause, the plaintiffs, by using the arrows inside the text box, needed to scroll down significantly beyond what is initially visible, to page four of the seven-page single-spaced PWCR document. The court additionally notes that, as with the entire document, the arbitration provision is neither underlined, bolded nor hyperlinked. Further, since this court has only been provided with a black and white document, not screenshots, it is unable to discern how the subject arbitration clause actually appeared to the user. Indeed, “[i]n the context of web-based contracts, [courts] look to the design and content of the relevant interface to determine if the contract terms were presented to the offeree in a way that would put her [or him] on inquiry notice of such terms

It is laughable that in 2019 you read a case where the court complains about the type being too small to read.

The court found that based on the evidence in front of it, there was not an arbitration clause between the parties.

The court then looked at the release.

New York General Obligations Law § 5-32 voids releases for recreation activities where a fee is paid.

That statute protects consumers from the effect of form releases printed on membership applications and similar documents when such releases are offered in connection with the use of a “place of amusement or recreation” for which a fee is paid

The court found New York General Obligations Law § 5-32 voided the release.

The terms of this statute apply to the plaintiffs herein, who paid a fee to use Tough Mudder’s obstacle course, which, contrary to Tough Mudder’s assertion, is a place of recreation. Indeed, the nature of the TM event as described by Tough Mudder—a rigorous, athletic competition requiring proper training—is comparable to the other activities, such as horseback riding, auto racing, cycling and skiing, which have been held to be covered by General Obligations Law § 5-326.

The final issue was the agreement had a severability clause. This is a clause that states if a portion of the contract is found unenforceable or void by the court it does not void the entire document. Only the portions the court finds void, are severed from the document, and the document without those clauses can be used as evidence in court.

However, as Tough Mudder correctly argues, the unenforceable provisions of the PWCR do not nullify the entire agreement. Where an agreement consists partially of an unlawful objective, the “court may sever the illegal aspects . . . and enforce the legal ones, so long as the illegal aspects are incidental to the legal aspects and are not the main objective of the agreement.

Which is exactly what the court did.

Here, the waiver of liability provision in the PWCR releasing Tough Mudder from liability, as well as the arbitration clause, are severable from the remainder of the PWCR agreement on the ground that the unenforceable provisions are incidental to the legal aspects and not the main objective of the agreement. Further, the severability provision in the PWCR reflects the intent of the parties that the legal provisions of the agreement be severed from any provisions determined to be void and unenforceable.

So, hopefully the seven-page document had language that could be used to prove assumption of the risk by the defendants.

So Now What?

On paper, this release might have survived. However, there are more issues with online releases. This is the second case where the court found the proof offered by the defense to prove the release was signed was found to be lacking because of poor copies of the website. That is just stupid. With color printers now days, computers and monitors that can be brought into court or linked to in a document you should be able to have anyone see what the document actually looked and how the software performed.

When you have several different issues in a contract, it is common to identify the new issues with a heading or bold type. In this case not only where there are new issues in the release besides release language there was an arbitration agreement. New York, as most states, have specific language in how an arbitration agreement should be written. This release failed that test.

The arbitration agreement was an attempt to lose the value of the entire release because releases for recreation where a person pays money to recreation are void. New York General Obligations Law § 5-32

§ 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 big issue the court seemed to be pushing was the game of hide and seek that Tough Mudder plays both with its courses and with the release. Contestants never know what they will encounter when competing in a Tough Mudder event. Consequently, you eliminate a lot of the defense of assumption of the risk. You can’t assume a risk you don’t know about.

Tough Mudder then tried that game with its release (or did not have an attorney write its release) and tried to slide the arbitration clause past the participants. It failed because the court held it must meet New York law and be written and visible in a way that the signor understands they are signing an arbitration agreement. That is a bigger burden then just signing a release.

What do you think? Leave a comment.

Copyright 2020 Recreation Law (720) 334 8529

If you like this let your friends know or post it on FB, Twitter or LinkedIn

If you are interested in having me write your release, fill out this Information Form and Contract and send it to me.

Author: Outdoor Recreation Insurance, Risk Management and Law

To Purchase Go Here:

Facebook Page: Outdoor Recreation & Adventure Travel Law

Email: Jim@Rec-Law.US

By Recreation Law    Rec-law@recreation-law.com    James H. Moss

#AdventureTourism, #AdventureTravelLaw, #AdventureTravelLawyer, #AttorneyatLaw, #Backpacking, #BicyclingLaw, #Camps, #ChallengeCourse, #ChallengeCourseLaw, #ChallengeCourseLawyer, #CyclingLaw, #FitnessLaw, #FitnessLawyer, #Hiking, #HumanPowered, #HumanPoweredRecreation, #IceClimbing, #JamesHMoss, #JimMoss, #Law, #Mountaineering, #Negligence, #OutdoorLaw, #OutdoorRecreationLaw, #OutsideLaw, #OutsideLawyer, #RecLaw, #Rec-Law, #RecLawBlog, #Rec-LawBlog, #RecLawyer, #RecreationalLawyer, #RecreationLaw, #RecreationLawBlog, #RecreationLawcom, #Recreation-Lawcom, #Recreation-Law.com, #RiskManagement, #RockClimbing, #RockClimbingLawyer, #RopesCourse, #RopesCourseLawyer, #SkiAreas, #Skiing, #SkiLaw, #Snowboarding, #SummerCamp, #Tourism, #TravelLaw, #YouthCamps, #ZipLineLawyer, #RecreationLaw, #OutdoorLaw, #OutdoorRecreationLaw, #SkiLaw,

arbitration, notice, box, registration, online, user, assent, scrolling, click, unenforceable, website, screen, recreation, Mediation, webpage, conspicuous, click-wrap, registered, hyperlink, void, screenshots, scrollable, consumer, obstacle, prudent, Venue


Paperwork, the death of trees and in this case the only defense the defendant had at this stage of the trial because the paperwork was not taken care of properly.

The youth camp failed to keep a good copy of the registration paperwork. What was presented to the court as a forum selection clause was illegible so the court held it was not valid.

Epps, et al., v. 1.I.L., INC., d/b/a Independent Lake Camp, 2007 U.S. Dist. LEXIS 93335, 2007 WL 4463588

State: Pennsylvania, United States District Court, Eastern District of Pennsylvania

Plaintiff: Ben Epps, et al.

Defendant: 1.I.L., INC., d/b/a Independent Lake Camp

Plaintiff Claims: Negligence

Defendant Defenses: Motion to Dismiss because of improper venue

Holding: For the Plaintiff

Year: 2007

Summary

Lawsuits are not games; they are not invitations to parties, there is a lot of money riding on the outcome in most cases. Documents needed for the case must be given to the attorneys defending the case in the condition in which they are maintained. In this case, a document was faxed to the defense attorneys and in such a bad way the court could not read the document. Since the court could not read the document, the court assumed the original was the same, and therefore, the document was not valid.

At the same time, if you are collecting and keeping documents that may end up in court, you need to create a system that preserves these documents in perfect condition so if they do get to court the judge can read them.

Finally, you must get the documents from the people you need a signature from in a condition the court will accept.

Facts

Plaintiffs allege that on June 24, 2005, their son, Axel, fell from a bike and was seriously injured while attending Defendant’s Independent Lake Camp located in Orson, Wayne County, Pennsylvania. Plaintiffs allege that Axel’s accident was caused by Defendant’s negligence while Defendant was acting in loco parentis. Specifically, Plaintiffs allege that Defendant: 1) failed to provide proper supervision and safeguards; 2) gave Axel a bike, helmet, and other equipment without properly training him to use them; 3) allowed Axel to use a bike track, which was inappropriate for his age and experience; and 4) failed to obtain parental consent for its actions.

Plaintiffs further allege that Axel suffered serious and permanent physical injuries, including permanent cognitive and psychological damage, several fractures, lacerations resulting in scarring, cervical and lumbar sprain, and a shock to his nervous system. Plaintiffs also claim that Axel’s injuries include severe financial losses in the form of future costs of treatment and therapy, loss of earnings, and loss of earning capacity.

Defendant brought its motion to dismiss for improper venue alleging that the Registration Agreement, which Plaintiffs had to sign for Axel to attend camp, contained a forum selection clause. Defendant attached a blank, unsigned version of the Independent Lake Camp Registration 2005 (“Registration Agreement”) to its motion to dismiss. Defendant alleges that under the Registration Agreement, the proper forum would be a court in Wayne County, which is located in the Middle District of Pennsylvania.

In Plaintiffs’ response to Defendant’s motion to dismiss, Plaintiffs argued that the blank Registration Agreement was unsigned and thus that Defendant failed to show that Plaintiffs had agreed to the terms in the document, including the forum selection clause. Plaintiffs averred by affidavit that they did not agree and would not have agreed to such a forum selection clause.

Defendant then provided a signed copy of the Registration Agreement, in which the information requested had been filled in and which was signed by Plaintiff Ben Epps. Defendant submitted an affidavit by Daniel Gould, the president of Defendant and Director of Independent Lake Camp. Mr. Gould avers that, after an exhaustive and diligent search, Defendant could only locate a photocopy of the signed Registration Agreement and was unable to locate the original. He avers that the original agreement is presumed lost and/or destroyed through no bad faith or improper act on the part of Defendant. The photocopy of the agreement provided to the court also appears to be a faxed copy, as evident from a fax header across the top margin.

In the copy of the signed Registration Agreement submitted by Defendant, the small print containing the terms of the agreement is blurry and barely legible. As Defendant concedes, the right-side margin, toward the bottom, is cut off, truncating the forum selection clause.

Analysis: making sense of the law based on these facts.

The defendants filed a motion to dismiss because the plaintiffs had filed the case in the wrong court according to the agreement, the registration form signed by the parents of the injured youth. The forum selection clause as defined by the courts or agreement to hold the trial at a specific court, allegedly stated the trial was to be held in Wayne County Court, Pennsylvania. The plaintiffs filed the case in the federal district our in Pennsylvania. The defendants filed a motion to dismiss from federal court and force the case to the state court.

The jurisdiction in the case was going to be Pennsylvania law no matter what; however, the trial would not be held in the back yard of the defendant, which is normally a good thing for the defendant.

When in the federal district court system, if a forum selection clause is upheld the case is simply transferred to the proper court. However, in this case because the selection clause stated a state court the case could not be transferred. The case would be dismissed at the federal court. The case could be refiled in the state court at that time if the statute of limitations had not run.

However, here, the document that was presented to the court that was the alleged agreement by the parents to only sue in state court was not legible.

The court agrees that the small print of the forum selection clause in the photocopied and faxed signed Registration Agreement is blurry and illegible, and does not provide reasonable notice of its terms. The court cannot assume that Mr. Epps signed a clear version of the agreement that became blurry and illegible upon subsequently being photocopied and faxed, because such evidence is not before the court. There is no evidence that Plaintiff Ben Epps signed any version of the Registration Agreement other than the document provided to the court.

Further, even if the forum selection clause were legible, it’s essential term, that any cause of action be brought in Wayne County, Pennsylvania, is cut off so as to be incomprehensible. Even if legible, the term “V– County Pennsylvania” in the forum selection clause gives no reasonable notice of the location of any agreed-upon forum.

The court concludes that the forum selection clause is inconspicuous and does not give notice of its terms to a reasonable person in violation of strong Pennsylvania public policy. The forum selection clause therefore is unreasonable, invalid, and unenforceable. Because the court finds that the forum selection clause is unreasonable and invalid, it does not address the private and public factors as transfer considerations under § 1404(a).

The agreement was a copy that had been faxed, was illegible and could not be read by the court.

Since the court could not read the document, the legal wording was incomplete and the entire document had sections missing the court could not find there was an agreement. The motion to change venue was dismissed.

So Now What?

I would guess the camp had received the faxed copy from the parents. There would be no need to fax the documents around the camp. The camp probably had sent the documents to the parents for their signature, and they had faxed them back. This was mistake one, because the camp accepted a badly faxed copy of the document.

  1. When you receive an email, fax, or original where you cannot make out what is going on, signature seems off, the document is unreadable, you must get a good copy. Tell the signor to do it again and make the copy legible.
  2. Set up a system to check documents when they come in.
  3. Set the system up with enough time so that is time to correct problems. Don’t place yourself in a position where you are balancing the money coming in versus proper paperwork you need.

Second, the camp seemed to not locate the original fax, but only had a copy of the faxed document.

  1. Develop a system to store and maintain the documents. Now day’s scanners are so efficient all the documents can be scanned and maintained in seconds. The original paper documents can be preserved and kept for the statue of limitations for the state, and a good electronic copy is also available.

Don’t allow a kid or adult to come to camp, attend the program, participate in the activity unless you have all the paperwork you need, signed and in a good legible condition. Then and only then cash the check and open the gates.

What do you think? Leave a comment.

Copyright 2018 Recreation Law (720) 334 8529

If you like this let your friends know or post it on FB, Twitter or LinkedIn

If you are interested in having me write your release, fill out this Information Form and Contract and send it to me.

Author: Outdoor Recreation Insurance, Risk Management and Law

To Purchase Go Here:

Facebook Page: Outdoor Recreation & Adventure Travel Law

Email: Jim@Rec-Law.US

By Recreation Law    Rec-law@recreation-law.com    James H. Moss

#AdventureTourism, #AdventureTravelLaw, #AdventureTravelLawyer, #AttorneyatLaw, #Backpacking, #BicyclingLaw, #Camps, #ChallengeCourse, #ChallengeCourseLaw, #ChallengeCourseLawyer, #CyclingLaw, #FitnessLaw, #FitnessLawyer, #Hiking, #HumanPowered, #HumanPoweredRecreation, #IceClimbing, #JamesHMoss, #JimMoss, #Law, #Mountaineering, #Negligence, #OutdoorLaw, #OutdoorRecreationLaw, #OutsideLaw, #OutsideLawyer, #RecLaw, #Rec-Law, #RecLawBlog, #Rec-LawBlog, #RecLawyer, #RecreationalLawyer, #RecreationLaw, #RecreationLawBlog, #RecreationLawcom, #Recreation-Lawcom, #Recreation-Law.com, #RiskManagement, #RockClimbing, #RockClimbingLawyer, #RopesCourse, #RopesCourseLawyer, #SkiAreas, #Skiing, #SkiLaw, #Snowboarding, #SummerCamp, #Tourism, #TravelLaw, #YouthCamps, #ZipLineLawyer, #RecreationLaw, #OutdoorLaw, #OutdoorRecreationLaw, #SkiLaw,

forum selection clause, venue, parties, improper venue, enforceability, terms, legible, notice, motion to dismiss, conspicuous, applies, factors, invalid, print, 1.I.L., INC., Independent Lake Camp, forum selection clause,


Epps, et al., v. 1.I.L., INC., d/b/a Independent Lake Camp, 2007 U.S. Dist. LEXIS 93335, 2007 WL 4463588

Epps, et al., v. 1.I.L., INC., d/b/a Independent Lake Camp, 2007 U.S. Dist. LEXIS 93335, 2007 WL 4463588

Ben Epps, et al., Plaintiffs, v. 1.I.L., INC., d/b/a Independent Lake Camp, Defendant.

Civil Action No. 07-02314

United States District Court, Eastern District of Pennsylvania

December 19, 2007

ORDER

MEMORANDUM

James T. Giles J.

I. Introduction

Before the court is Defendant 1.I.L., Inc.’s Motion to Dismiss for Improper Venue pursuant to Federal Rule of Civil Procedure 12(b)(3). Plaintiffs, Bens Epps and Amy Monroe, as parents and natural guardians of Axel Epps and in their own right, bring suit based in diversity jurisdiction, 28 U.S.C. § 1332, against Defendant 1.I.L. Inc. for personal injuries allegedly sustained by their son, Axel, while attending Defendant’s camp.

The primary issue raised by Defendant’s motion and determined by the court is whether the forum selection clause in the Registration Agreement at issue is valid and enforceable. The court finds that the forum selection clause contained in the signed Registration Agreement is not enforceable because it does not provide reasonable notice of its terms. The court concludes that Plaintiffs have brought suit in a proper venue and denies Defendant’s motion to dismiss for the reasons that follow.

II. Factual Background

Plaintiffs allege that on June 24, 2005, their son, Axel, fell from a bike and was seriously injured while attending Defendant’s Independant Lake Camp located in Orson, Wayne County, Pennsylvania. (Pls.’ Compl. ¶ 6.) Plaintiffs allege that Axel’s accident was caused by Defendant’s negligence while Defendant was acting in loco parentis. (Pls.’ Compl. ¶ 7.) Specifically, Plaintiffs allege that Defendant: 1) failed to provide proper supervision and safeguards; 2) gave Axel a bike, helmet, and other equipment without properly training him to use them; 3) allowed Axel to use a bike track, which was inappropriate for his age and experience; and 4) failed to obtain parental consent for its actions. (Pls.’ Compl. ¶ 8.)

Plaintiffs further allege that Axel suffered serious and permanent physical injuries, including permanent cognitive and psychological damage, several fractures, lacerations resulting in scarring, cervical and lumbar sprain, and a shock to his nervous system. (Pls.’ Compl. ¶ 9.) Plaintiffs also claim that Axel’s injuries include severe financial losses in the form of future costs of treatment and therapy, loss of earnings, and loss of earning capacity.

Plaintiffs, citizens of New York, brought suit in the Eastern District of Pennsylvania because Defendant is a citizen of Pennsylvania with offices in both Montgomery County and Wayne County. (Pls.’ Compl. ¶ 1-4; Pls.’ Br. in Supp. of Ans. to Mot. of Def. to Dismiss for Improper Venue (“Pls.’ Supp. Ans.”) 1; Def.’s Br. in Supp. of Mot. to Dismiss for Improper Venue (“Def.’s Supp.”) 1, 5.) Plaintiffs demand damages in excess of $150,000 for each of the two counts in the complaint as well as interest and costs of the suit.

III. Procedural History

Plaintiffs filed their Complaint on June 7, 2007. Defendant brought its motion to dismiss for improper venue alleging that the Registration Agreement, which Plaintiffs had to sign for Axel to attend camp, contained a forum selection clause. (Def.’s Mot. to Dismiss 2.) Defendant attached a blank, unsigned version of the Independent Lake Camp Registration 2005 (“Registration Agreement”) to its motion to dismiss. (Def.’s Mot. to Dismiss, Ex. A.) Defendant alleges that under the Registration Agreement, the proper forum would be a court in Wayne County, which is located in the Middle District of Pennsylvania. (Def.’s Mot. to Dismiss, Ex. A.) The blank Registration Agreement, in which the print is small but clear and legible, provides in part:

It is agreed that any dispute or cause of action arising between the parties, whether out of this agreement or other wise [sic], can only be brought in a court of competent jurisdiction located in Wayne County Pennsylvania [sic] and shall be construed in accordance with the laws of Pennsylvania.

(Def.’s Mot. to Dismiss, Ex. A.)

In Plaintiffs’ response to Defendant’s motion to dismiss, Plaintiffs argued that the blank Registration Agreement was unsigned and thus that Defendant failed to show that Plaintiffs had agreed to the terms in the document, including the forum selection clause. Plaintiffs averred by affidavit that they did not agree and would not have agreed to such a forum selection clause. (Pls.’ Supp. Ans. 2, Ex. B ¶¶ 2-3 (Ben Epps Aff.), Ex. C ¶¶ 2-3 (Amy Monroe Aff.).)

Defendant then provided a signed copy of the Registration Agreement, in which the information requested had been filled in and which was signed by Plaintiff Ben Epps. Defendant submitted an affidavit by Daniel Gould, the president of Defendant and Director of Independent Lake Camp. Mr. Gould avers that, after an exhaustive and diligent search, Defendant could only locate a photocopy of the signed Registration Agreement and was unable to locate the original. (Gould Aff. ¶¶ 5, 7-10.) He avers that the original agreement is presumed lost and/or destroyed through no bad faith or improper act on the part of Defendant. (Gould Aff. ¶ 10.) The photocopy of the agreement provided to the court also appears to be a faxed copy, as evident from a fax header across the top margin. (Gould Aff. Ex. A (Signed Registration Agreement).)

In the copy of the signed Registration Agreement submitted by Defendant, the small print containing the terms of the agreement is blurry and barely legible. As Defendant concedes, the right-side margin, toward the bottom, is cut off, truncating the forum selection clause. (Gould Aff. ¶ 6, Ex. A.) Consequently, if the print were clearly legible, when compared with the clear, blank version of the agreement, the forum selection clause would read:

It is agree [sic] any dispute or cause of action arising between the parties, whether out of this agreement or other wise [sic], can only be brought in a court of competent jurisdiction located in V [or three-quarters of a W] County Pennsylvania [sic] and shall be construed in accordance with the laws of Pennsylvania.

(Gould Aff. Ex. A.) Thus, if legible, most or all of the letters in the word “Wayne,” as in “Wayne County Pennsylvania,” are missing. (Gould Aff. ¶ 6, Ex. A.)

In Plaintiffs’ reply to Defendant’s affidavit, Plaintiffs do not dispute that Plaintiff Ben Epps’ signature appears on the copy of the Registration Agreement. Nor do Plaintiffs argue that the entire agreement itself is invalid. (Compare Pls.’ Supp. Ans. 2-3 (arguing, before Defendant’s production of a signed agreement, that the Registration Agreement was not enforceable because there was no objective manifestation of the parties’ intention to be contractually bound), with Pls.’ Reply to Def.’s Aff. 1 (arguing, after Defendant’s production of a signed Registration Agreement, that there was no meeting of the minds as to the forum selection clause because the wording of the clause was truncated and indiscernible).) Thus, the issue determined by the court is the enforceability of the forum selection clause.

III. Discussion

Federal law applies in the determination of the effect given to a forum selection clause in diversity cases. Jumara v. State Farm Ins. Co., 55 F.3d 873, 877 (3d Cir. 1995) (quoting Jones v. Weibrecht, 901 F.2d 17, 19 (2d Cir. 1990)). To evaluate the enforceability of the forum selection clause here, the court determines if the standard for dismissal or transfer is proper.[1] See id. at 877-78. If the standard for transfer applies, the court then determines if the forum selection clause is reasonable. See id. at 880 (citing M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12-13 (1972)).

A. Dismissal or Transfer under 28 U.S.C. § 1404(a) or 1406.

Although dismissal is a “permissible means of enforcing a forum selection clause that allows suit to be filed in another federal forum,” the Third Circuit cautions that “as a general matter, it makes better sense, when venue is proper but the parties have agreed upon a not- unreasonable forum selection clause that points to another federal venue, to transfer rather than dismiss.” Salovaara v. Jackson Nat’l Life Ins. Co., 246 F.3d 289, 298-99 (3d Cir. 2001); see Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 28-29, 32 (1988) (holding that a federal court sitting in diversity jurisdiction should treat a request to enforce a forum selection clause in a contract as a motion to transfer venue under applicable federal law, 28 U.S.C. § 1404(a)); 15 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3803.1 (2d ed. 1986 & Supp. 2006).

Transfer, however, is not available when a forum selection clause specifies a non-federal forum. Salovaara, 246 F.3d at 298. The forum selection clause in the Registration Agreement, if valid and untruncated, would provide that “any dispute . . . can only be brought in a court of competent jurisdiction located in Wayne County Pennsylvania” and does not limit jurisdiction to state court. The provision’s plain language is construed to permit the action in any court of the county, including the federal court in the federal judicial district encompassing Wayne County, Pennsylvania, regardless of whether the federal court is physically located in the county. See Jumara, 55 F.3d at 881 (construing an arbitration provision requiring the action to transpire within a particular county to mean that the action would be permitted in any court, state or federal, with jurisdiction encompassing that county). Transfer is an available remedy because the forum selection clause, if valid and untruncated, includes a federal forum. See id. at 881-83 (applying the § 1404(a) analysis for transfer where a forum selection clause permitted any state or federal forum within a particular county).

Because transfer is the appropriate remedy, the court must then consider whether 28 U.S.C. § 1404(a) or § 1406 applies. “Section 1404(a) provides for the transfer of a case where both the original venue and the requested venue are proper. Section 1406, on the other hand, applies where the original venue is improper and provides for either transfer or dismissal of the case.” Id. at 878. Whether venue is proper in this district is governed by the federal venue statute, 28 U.S.C. § 1391. Id.

Without considering the forum selection clause, venue is proper in the Eastern District of Pennsylvania. Neither party disputes that Defendant is subject to personal jurisdiction in this district because Defendant transacts business here. See 28 U.S.C. § 1391(c); Jumara, 55 F.3d at 878-79; Stewart, 487 U.S. at 29 n.8 (“The parties do not dispute that the District Court properly denied the motion to dismiss the case for improper venue under 28 U.S.C. § 1406(a) because respondent apparently does business [there].”); see also (Pls.’ Supp. Ans. 1; Def.’s Supp. 3). This court therefore concludes that the appropriate analysis is whether the case should be transferred under § 1404(a). See Salovaara, 246 F.3d at 298-99.

B. Transfer under 1404(a) Is Improper Because the Forum Selection Clause Is Unreasonable and Unenforceable.

Section 1404(a) controls the inquiry of whether to give effect to a forum selection clause and to transfer a case.[2] Stewart, 487 U.S. at 29, 32. Before considering the factors under Section 1404(a), the court first examines the validity or reasonableness of the forum selection clause through application of the test in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12-13 (1972). “Where the forum selection clause is valid, which requires that there have been no ‘fraud, influence, or overweening bargaining power,’ the plaintiffs bear the burden of demonstrating why they should not be bound by their contractual choice of forum.” Jumara, 55 F.3d at 879-80 (quoting Bremen, 407 U.S. at 12-13).

A forum selection clause is unreasonable and invalid if the objecting party demonstrates that (1) the forum selection clause is the result of fraud or overreaching, (2) its enforcement would violate a strong public policy of the forum, or (3) its enforcement would result in litigation so seriously inconvenient and unreasonable that it would deprive a litigant of his or her day in court. Bremen, 407 U.S. at 15-17; In re Diaz Contracting, Inc., 817 F.2d 1047, 1051-52 (3d Cir. 1987).

To dispose of this issue, the court need only address whether the enforcement of the forum selection clause violates a strong public policy of the forum. Under Pennsylvania law, a clause in a contract must be conspicuous, so as to provide notice of its terms to a reasonable person. See, e.g., 13 Pa.C.S. § 2316 (requiring that limitation of warranties terms be conspicuous); 13 Pa.C.S. § 1201 (defining “conspicuous”); Beck-Hummel v. Ski Shawnee, Inc., 2006 Pa. Super 159, P23-24 & n.12-13 (Pa. Super. Ct. 2006) (relying on the requirement for conspicuous terms in the sale of goods context in a case involving the sale of services, and finding that disclaimer language on a ski ticket was not sufficiently conspicuous to put a purchaser on notice of its contents). Plaintiffs argue that the forum selection clause contained in the signed Registration Agreement is invalid because the wording of the clause is “truncated and indiscernible.” (Pls.’ Reply 1.)

The court agrees that the small print of the forum selection clause in the photocopied and faxed signed Registration Agreement is blurry and illegible, and does not provide reasonable notice of its terms. The court cannot assume that Mr. Epps signed a clear version of the agreement that became blurry and illegible upon subsequently being photocopied and faxed, because such evidence is not before the court. There is no evidence that Plaintiff Ben Epps signed any version of the Registration Agreement other than the document provided to the court.

Further, even if the forum selection clause were legible, its essential term, that any cause of action be brought in Wayne County, Pennsylvania, is cut off so as to be incomprehensible. Even if legible, the term “V– County Pennsylvania” in the forum selection clause gives no reasonable notice of the location of any agreed-upon forum.

The court concludes that the forum selection clause is inconspicuous and does not give notice of its terms to a reasonable person in violation of strong Pennsylvania public policy. The forum selection clause therefore is unreasonable, invalid, and unenforceable. Because the court finds that the forum selection clause is unreasonable and invalid, it does not address the private and public factors as transfer considerations under § 1404(a).

V. Conclusion

For the foregoing reasons, Defendant’s Motion to Dismiss for Improper Venue is denied. An appropriate order follows.

ORDER

AND NOW, this 19th day of December, 2007, upon consideration of Defendant 1.I.L., Inc.’s Motion to Dismiss for Improper Venue (Doc. No. 4), Plaintiffs’ Response in opposition thereto, Defendant’s Affidavit of Daniel Gould and Exhibits (Doc. Nos. 8 & 9), and Plaintiffs’ Reply, it is hereby ORDERED that said motion is DENIED for the reasons set forth in the attached memorandum.

Notes:

[1] Prior to Defendant’s production of a signed Registration Agreement, Plaintiffs argued that the forum selection clause should not be enforced because it did not meet the standard of reasonable communicativeness, as set forth in Marek v. Marpan Two, Inc., 817 F.2d 242, 245 (3d Cir. 1987), due to the agreement’s small print. Marek applies primarily in cases involving maritime law. See, e.g., Gibbs v. Carnival Cruise Lines, 314 F.3d 125, 130 (3d Cir. 2002); Hodes v. S. N.C. Achille Lauro ed Altri-Gestione, 858 F.2d 905, 906, 909-12 (3d Cir. 1988). As discussed below, the court follows more recent Third Circuit precedent on the enforceability of forum selection clauses.

[2] Section 1404(a) provides that “a district court may transfer any civil action to any other district or division where it might have been brought” for “the convenience of parties and witnesses” and “in the interest of justice.” 28 U.S.C. § 1404(a); see Stewart, 487 U.S. at 29. Courts must adjudicate motions to transfer based on an “individualized, case-by-case consideration of convenience and fairness,” weighing a number of factors. Id. (quoting Van Dusen v. Barrack, 376 U.S. 612, 622 (1964)). A court’s review is not limited to the three enumerated factors in § 1404(a) – convenience of the parties, convenience of witnesses, or interests of justice – and courts may consider various private and public interests. Jumara, 55 F.3d at 879-80.

The parties’ agreement as to the proper forum, although not dispositive, receives “substantial consideration” in the weighing of relevant factors. Id. at 880; see Stewart, 487 U.S. at 29-30 (“The presence of a forum selection clause . . . will be a significant factor that figures centrally in the district court’s calculus. . . . The flexible and individualized analysis Congress prescribed in § 1404(a) thus encompasses consideration of the parties’ private expression of their venue preferences.”). The deference generally given to a plaintiff’s choice of forum is “inappropriate where the plaintiff has already freely chosen an appropriate venue.” Jumara, 55 F.3d at 880.