Note: This is a common negligence suit in which the defendant claims protection from a waiver of liability. Seldom do courts describe state waiver law so clearly.
Kimberly Ramirez , while a member of 24 Hour Fitness USA, Inc, slipped and fell when she stepped into a puddle of water on the floor (Ramirez v. 24 Hour Fitness USA, Inc., 2013 U.S. Dist. LEXIS 69451). She sued the club alleging negligence and the club claimed that it was not liable because Ramirez had signed a waiver releasing them. The following waiver appeared on the first page of the membership agreement under the heading RELEASE OF LIABILITY – ASSUMPTION OF RISK – BUYER’S RIGHT TO CANCEL:
Using the 24 Hour Fitness USA, Inc. (24 Hour) facilities involves the risk of injury to you or your guest, whether you or someone else causes it. Specific risks vary from one activity to another and the risks range from minor injuries to major injuries, such as catastrophic injuries including death. In consideration of your participation in the activities offered by 24 Hour, you understand and voluntarily accept this risk and agree that 24 Hour . . . will not be liable for any injury, including, without limitation, personal, bodily, or mental injury, economic loss or any damage to you . . . resulting from the negligence of 24 Hour or anyone on 24 Hour’s behalf or anyone using the facilities whether related to exercise or not.
Ramirez contended that the waiver was not enforceable because it was ambiguous, misleading, and inconspicuous. She also claimed the waiver was unconscionable and constituted a contract of adhesion.
Texas Waiver Law
Texas waiver law is very explicit.
- A release of liability “operates to extinguish the claim or cause of action as effectively as would a prior judgment between the parties and is an absolute bar to any right of action on the released matter.”
- The Supreme Court of Texas has defined a release as a contract in which “‘one party assumes the liability inherent in a situation and agrees to hold the other without responsibility for damage or other liability arising out of the transaction involved.'”
- To be enforceable a release must comply with two fair notice requirements: the express negligence doctrine and the conspicuousness requirement.
- The express negligence doctrine requires that the intent of the parties “be specifically stated in the four corners of the contract.”
- The conspicuousness requirement says “something must appear on the face of the contract to attract the attention of a reasonable person when he looks at it. Language may satisfy the conspicuousness requirement by appearing in larger type, contrasting colors, or otherwise calling attention to itself.”
- A contractual release is unenforceable if “the clause involved is so one-sided that it is unconscionable under the circumstances existing when the parties made the contract.”
- In determining unconscionability the court considers both the procedural and substantive aspects of the agreement.
- Procedural unconscionability concerns the facts surrounding the bargaining process — the circumstances surrounding the negotiations must be “shocking.”
- Substantive unconscionability focuses on the fairness of the agreement itself and whether there existed legitimate commercial reasons to include the terms in question.
- A party asserting unconscionability of a contract must prove both procedural and substantive unconscionability.
- A contract of adhesion is “a standardized contract form for consumer goods and services that are offered on a ‘take it or leave it’ basis without affording the consumer a realistic opportunity to bargain and under such conditions that consumer cannot obtain the desired product or services except by acquiescing.
- Contracts of adhesion “are not automatically unconscionable.”
- A disparity in bargaining power may render an agreement unconscionable “when one party has no real choice in accepting the terms of the agreement” however no such unconscionability exists “where a claimant has freedom of choice in entering into the agreement.”
- “If the written agreement is signed . . . and if there is no circumstance that would deprive him of a freedom of choice . . . we see no satisfactory cause for avoiding the terms of the contract.”
Analysis of the Court
Fitness USA had the burden to show that the release of liability clause satisfies the two fair notice requirements.
Express Negligence Doctrine. Fitness USA argued that the release complies with the express negligence doctrine because it listed “negligence” as a claim relinquished by Ramirez. Ramirez argued that the language “involves the risk of injury to you or your guest, whether you or someone else causes it” (specifically the term “someone else”) was “ambiguous and misleading” because it does not specify Fitness USA. The court concluded that the intent of the parties to bar actions such as those brought by Ramirez is “specifically stated in the four corners of the contract,” thus, Fitness USA met its burden to show that the express negligence doctrine is satisfied.
Conspicuousness Requirement. Fitness USA argues that the release is “conspicuous” under Texas law for the following reasons:
- the provision is on the front page of the contract;
- the heading (“RELEASE OF LIABILITY”) is clear and unambiguous, and it is formatted in bold, capitalized typeface larger than the text around it;
- the heading is also positioned in a box with a contrasting background which serves to highlight the heading;
- the release of liability clause is located immediately above where Ramirez signed the waiver; and
- pertinent portions of the release are formatted to be bold, underlined, or bold and underlined.
Ramirez, on the other hand, argued that the font size of the release is too small to be conspicuous. Ramirez asserts that the release is written in 8-point font and 9-point font and is below the standard specified by Texas statute Tex. Bus. & Comm. Code § 601.052. Ramirez also argues that Fitness USA “de-emphasized” the most important terms of the release, a “tactic [that] renders the express ‘negligence’ language inconspicuous.”
The court stated that several factors help to make the clause conspicuous:
- the heading appears in capital letters in a box with a contrasting background; 2) it is written in plain language (“RELEASE OF LIABILITY”);
- the language of the release itself is in a font size no smaller than that of the other substantive provisions on the page;
- regardless of the specific point value, however, the release is of sufficient size to satisfy the conspicuousness requirement (the 10-point minimum standard provided in Tex. Bus. & Comm. Code § 601.052 governs notices of a consumer’s right to cancel a consumer transaction, not releases of liability); and
- the most important terms of the release are bolded, underlined, or both.
In sum, the court concluded that Fitness USA has sustained its burden to show the waiver met both fair notice requirements.
Unconscionability and Adhesion. Under Texas law, the plaintiff bears the burden of proof regarding unconscionability – having to show both procedural and substantive unconscionability. Ramirez argued that the agreement is procedurally unconscionable because the negotiation process it involved an uneducated individual against a corporation. Fitness USA claimed that unequal sophistication of the parties is insufficient on its own to render an agreement unconscionable. The court agreed, and said nothing about the process was “shocking.” The court stated that the fact that Ramirez did not graduate from high school and that the agreement was non-negotiable does not render the agreement unconscionable. In addition, Ramirez admitted that she read and understood the agreement. The court further stated that while the waiver may be a contract of adhesion, there was no evidence that she was deprived of the freedom of choice in deciding whether to enter into the contract. Though she had limited workout options available, Ramirez was confronted with “no real choice in accepting the terms of the agreement.”
Ramirez contended substantive unconscionability claiming that “there surely is a public policy in favor of seeing to it that folks have reasonable access to a safe and clean facility and to retain the right to hold the facility accountable for failing to provide . . . a safe and clean workout facility.” The court, however, seeing no oppression or unfair surprise, stated that a release of liability for negligence does not make the contract so grossly one-sided as to be unconscionable. The court concluded as a matter of law that the release is not unconscionable.
The court ruled that the waiver was enforceable under Texas law and granted Fitness USA’s Motion for Summary Judgment.
Photo Credit: Thanks to Calsidyrose at http://www.flickr.com/photos/calsidyrose/3834549523/sizes/z/in/photolist-6QR4YP-e7Aj4Q-btdEpi-9H3VYn-bDkPgP-cu15wY-cu18as-9GzTpu-aqV2kM-eu6H8S-6FPPKK-aGyDXF-88XkhA-9tmX5j-dmWaqb-bZfzAb-6v7NeT-6v7NaK-bZfCNU-4HtWEE-4KciC7-55nF1r-fgaCj5-bzCWKh-9bF9Bb-4ifaM1-6Gy5yh-8Eww7E-9H3VUK-fFNAU-eiTTJc-5WhCHb-5WhCFU-chuEMG-bvMxJq-hnaRC-dgjee-6VUwLd-8dJNc9-3iS4ye-6VND5R-9GfZip-6vbYd3-4rndPk-9GzTjA-9Gh9wp-7UTcT3-fA15s-856uzj-PyWKi-PyWs6/