Louisiana does not allow the use or releases. A trampoline park tried to use an assumption of risk agreement with an arbitration clause and liquidated damage’s clause which the LA Supreme Court found to be a contract of Adhesion.Posted: March 26, 2018
If you are going to have check boxes, then every paragraph has to have check boxes.
State: Louisiana, Supreme Court of Louisiana
Plaintiff: James Duhon
Defendant: Activelaf, LLC, D/B/A Skyzone Lafayette and Underwriters at Lloyds, London
Plaintiff Claims: Negligence
Defendant Defenses: Mandatory Arbitration
Holding: for the Plaintiff
Louisiana does not allow the use of a release so amusement and recreation businesses always scramble to find ways to protect themselves. However, you can go too far.
This trampoline park had an arbitration clause hidden in a paragraph. The Louisiana Supreme Court determined that made the agreement and adhesion contract and voided the agreement.
The plaintiff sued. The defendant filed a motion to require mandatory arbitration as required under the agreement. The trial court denied the motion, and the defendant appealed. The defendant appealed the trial court decision to the appellate court which upheld the mandatory arbitration clause. The plaintiff appealed, and the Supreme Court of Louisiana reversed the appellate court and held the arbitration clause was not enforceable.
The contract, as explained by the court, has terms that become important in this decision’s analysis. The contract included a video and photography release, allowed the defendant to email the signors, waives the signor’s right to sue, mandatory arbitration clause and a liquidated damage’s clause requiring the signor to pay the defendant $5,000 if the plaintiff sued.
Three paragraphs then had boxes next to them had that to be checked. The rest of the paragraphs did not.
The total issues of the agreement, the fact the important clauses were not identified, and only three paragraphs required check boxes were of issue before the court.
Analysis: making sense of the law based on these facts.
The court found that signing the agreement electronically did not mean anything.
As an initial matter, we note the electronic nature of the Agreement in this case is of no legal consequence and does not fundamentally change the principles of contract. Louisiana law gives legal effect to both electronic contracts and signatures. We interpret and analyze the terms of the Agreement using the same rules that we would apply to oral and written contracts.
Louisiana law, like federal law, favor arbitration clauses. Arbitration does not require on the court system, allows hiring of an agreeable arbiter by the parties, is much cheaper and much quicker than a trial.
The plaintiff argued the agreement in this case was adhesive. If a contract is found to be an adhesion contract, the contract is void. The court defined an adhesion contract as:
Broadly defined, a contract of adhesion is a standard contract, usually in printed form, prepared by a party of superior bargaining power for adherence or rejection of the weaker party. Often in small print, these contracts sometimes raise a question as to whether or not the weaker party actually consented to the terms.
The court stated that just because a contract was a standard form contract does not immediately mean it was an adhesion contract. “Therefore, we are not willing to declare all standard form contracts adhesionary; rather, we find standard form serves merely as a possible indicator of adhesion.”
The court then looked at other cases and came up with the following test to determine if the arbitration clause in a contract was adhesionary. The court must look at:
(1) the physical characteristics of the arbitration clause, (2) the distinguishing features of the arbitration clause, (3) the mutuality of the arbitration clause, and (4) the relative bargaining strength of the parties.
The test is not a definitive test, but one that the court must use and apply to all arbitration clauses and evaluate each clause.
Using those four requirements the court looked at the clause in this agreement.
The first problem the court found was the arbitration clause was hidden in the agreement. There was no check box for the paragraph which contained the clause, no heading, no bold type, nothing to indicate there was an important clause in the paragraph.
However, the lack of distinguishing features and the specific placement of the arbitration clause serve to conceal the arbitration language from Sky Zone patrons. The Agreement is structured with check boxes next to the first three paragraphs, followed by five additional paragraphs without corresponding check boxes.
Additionally, the paragraph containing the arbitration clause contained several different legal points. Consequently, the court thought the arbitration clause was hidden in the agreement and difficult to find.
Thus, looking at the Agreement as a whole, the arbitration language appears to be the only specific provision not relegated to a separate paragraph or set apart in some explicit way. Here, the two-sentence provision mandating arbitration is camouflaged within the confines of an eleven-sentence paragraph, nine of which do not discuss arbitration. The effect of the placement of the arbitration language is to cloak it within a blanket of boilerplate language regarding rules and risks of participating in the Sky Zone activities.
Consequently, the court held the plaintiff did not consent to the arbitration clause.
The court then went on to find more issues with the agreement. The court found there was no mutuality in the arbitration clause. Meaning the plaintiff was bound to arbitrate and the defendants were not.
The court was also disturbed when it found a punitive provision which required an injured patron, if they sued, to pay the defendant $5,000.00 within sixty days of filing a lawsuit. The $5,000 would earn interest at 12% per year.
Even more troublesome in this case is the punitive provision compelling patrons to pay Sky Zone liquidated damages of $5,000 within sixty days should the patron file suit, with legal interest added at 12% per year. Sky Zone has no mutual obligation in the Agreement.
The court found the arbitration clause was adhesionary and unenforceable.
Considering the lack of mutuality together with the obscure placement of the arbitration language in the Agreement, and in comparison to the contract in Aguillard, we are compelled to find the arbitration clause in the Sky Zone Agreement is adhesionary and unenforceable.
The case could proceed to trial.
The decision had two short concurring decisions and one dissenting decision.
So Now What?
Here three items doomed the defendant. The first was the check boxes. Electronically, the check boxes do not provide the same problems as with a paper agreement. However, having three check boxes next to relatively unimportant clauses and no check boxes next to the clause at issue disturbed the court and found it an attempt to hide the arbitration clause from signors.
The second was the fact a major clause in a contract was hidden. It was mixed in a paragraph with other legal clauses and not pointed out as an important clause.
The third was the clause requiring the plaintiff to pay the defendant if they filed suit. Honestly, this one caught me off guard. There was no legal basis for it. Nothing was required by a party to do or not to do such as sue and lose. Filing a lawsuit was going to cost the plaintiff $5,000.
Arbitration clauses are good in those states that do not recognize a release. See States that do not Support the Use of a Release. You do not want to use an arbitration clause if you are in a state where releases are valid. Arbitration does not allow motions; you just go to a hearing. When you have the opportunity to win by using the release, the arbitration clause may set you up for a longer fight. Also, arbitrators are more than likely to split decisions, providing some benefit to both sides of the arbitration.
Many state laws encouraging arbitration clauses also limit the types of damages an arbitrator can award. Many do not allow an arbitrator to award punitive damages. If you are in a recreation industry where damages may be excessive, arbitration may provide a benefit.
A release allows you to win without having to pay the plaintiff anything. If you have a state that supports a release, use a release.
Arbitration clauses require more work than simply requiring arbitration. You need to define what type of arbitration, where and how the rules will be applied. You just can’t require it without knowing what you are getting yourself into.
For other cases looking at Louisiana law on releases and recreation see:
Articles looking at arbitration clauses in outdoor recreation.
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Louisiana Supreme Court set forth how a court decides if there should be a duty or to create a duty.
Plaintiff: Herman Carrier, Individually and in His Capacity as the Administrator of the Estate of his Minor Child, Herman Blake Carrier, and his Wife, Wendy Wallace Carrier
Defendant: City of Amite, Bell Sports, Inc., and Sears Roebuck and Co.
Plaintiff Claims: negligence failure to properly fit the helmet and instruct on the use of the helmet
Defendant Defenses: no duty
Holding: For the defendant (retailer) Sears Roebuck and Co.
The plaintiff’s in this case are a mother, father and six-year-old child. The parents went into a Sears store and purchased a bicycle helmet for the child. They did not ask for or receive any assistance in purchasing the helmet.
The boy was riding on the municipal tennis court when he had an accident. The plaintiffs sued the city that owned the tennis court, the helmet manufacturer and Sears Roebuck where they purchased the helmet.
Sears filed a motion for summary judgment arguing they had no duty to fit or instruct on the use of the helmet. The trial court granted the motion. The Appellate court reversed finding the trial court committed error in dismissing the case. Sears filed this appeal to the Louisiana Supreme Court.
Summary of the case
In this case, it was the responsibility of the plaintiff to prove negligence. The first step in that would be to prove that the defendant owed the plaintiff a duty to provide a point of sale fitting instruction for bicycle helmets.
“In the instant case, plaintiffs do not identify any Louisiana statutory or jurisprudential authority which establishes a specific duty on the part of a retailer to fit bicycle helmets at the point of sale.” The only thing the plaintiff could point to was the opinion of its expert that the defendant owed a duty. However the expert could not point to any authorities, research or other retailers that supported his statement. “Courts have held that experts may not rely on their own conclusions as authority in the absence of any objective support.”
The court stated the considerations that need to be covered before a duty can be created.
…it is necessary for the court to determine whether the rule is intended to protect him from the particular harm alleged, an inquiry which involves both the duty and causation elements of the negligence formulation. The court must make a policy determination in light of the unique facts of the case. Thus, the duty-risk analysis requires the court to take into account the conduct of each party as well as the particular circumstances of the case. In determining whether to impose a duty in a particular situation, the court may consider various moral, social, and economic factors, including whether the imposition of a duty would result in an unmanageable flow of litigation; the ease of association between the plaintiff’s harm and the defendant’s conduct; the economic impact on society as well as the economic impact on similarly situated parties; the nature of the defendant’s activity; moral considerations, particularly victim fault; and precedent as well as the direction in which society and its institutions are evolving.
Applying the above requirements to this case, the court found no reason to create a duty upon the part of a retailer to provide a point of sale fitting instructions for bicycle helmets. “Under these circumstances, we find the responsibility to determine whether the helmet was properly fitted should rest with plaintiffs, not Sears.”
So Now What?
There are two important things that come from this decision. The first is no duty exists unless your industry, your community, or you create one. Unless you advertise you are going to do something, market yourself or write your requirements down, it is difficult for the plaintiff to prove you owe them anything, a duty or money.
The second is the list of requirements the court set forth to determine if a duty has been created. It is not as easy to review as a list; however, it provides some factors that you can review to make sure you are not creating liability that does not exist.
· Make sure you know the issues you must do when dealing with your business, program or job.
· Don’t create liability if you don’t have too.
What do you think? Leave a comment.
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