By Doyice Cotten
In Hojnowski v. Vans Skate Park (2006), The New Jersey Supreme Court ruled that parental waivers of liability (those signed by parents on behalf of their minor child) are not enforceable in New Jersey. In that same decision, it also ruled that parental arbitration agreements (those signed by parents on behalf of their minor child) are enforceable. The rationale in these decisions has been that a liability waiver, if enforced, takes away the rights of the minor for compensation for loss; whereas the arbitration agreement merely changed the forum in which the case is to be heard. The minor can still be compensated for loss by the ruling of the arbitrator.
In a 2020 case (Pandya v. Ski Zone Lakewood), Chand Pandya, a minor, was injured in the Sky Zone trampoline park. Plaintiff Chand Pandya, the son of plaintiffs Marilyn and Anoop Pandya, visited defendant’s trampoline park. Before her son could use defendant’s recreational facility, Marilyn Pandya signed and initialed a “Conditional Access Agreement, Pre-Injury Waiver of Liability, and Agreement to Indemnity, Waiver of Trial, and Agreement to Arbitrate” (Agreement). The Agreement contained two sections – an agreement to arbitrate and a waiver of liability and indemnification:
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 PURSUANT TO ITS COMPREHENSIVE ARBITRATION RULES AND PROCEDURES. I further agree that the arbitration will take place solely in the [S]tate of New Jersey and that the substantive law of New Jersey shall apply. I acknowledge that if I want to make a claim against [defendant], I must file a demand before JAMS www.jamsadr.com.
To the extent that any claim I have against [defendant] has not been released or waived by this Agreement, I acknowledge that I have agreed that my sole remedy is to arbitration of such claim, and that such claim may only be brought against [defendant] in accordance with the above Waiver of Trial, and Agreement to Arbitrate.
Pre-Injury Waiver of Liability, and Agreement to Indemnity
The following Waiver of Liability, and Agreement to Indemnity shall apply to any persons eighteen (18) years-old or older. I UNDERSTAND AND AGREE THAT [DEFENDANT] WILL NOT PAY FOR ANY COST OR EXPENSES INCURRED BY ME IF I AM INJURED UNLESS SUCH INJURY WAS CAUSED BY GREATER THAN ORDINARY NEGLIGENCE OF [DEFENDANT]. In consideration and as a condition of [defendant] allowing my participation in or viewing of trampoline games or activities, I agree to hold harmless, release and discharge [defendant] of and from all … legal liability … due to [defendant]’s ordinary negligence; and I further agree that except in the event of [defendant]’s gross negligence or willful and wanton misconduct, I shall not bring any claims … against [defendant][.]
Sky Zone moved for dismissal because of the arbitration agreement called for resolution by arbitration. The motion judge in the 2017 order denied defendant’s motion to compel arbitration in spite of saying the arbitration clause was clear and unambiguous. The motion judge reasoned that the arbitration clause did not apply to claims for gross negligence.
In Pandya v. Sky Zone Lakewood, 2018, the ruling “vacated the judge’s denial of defendant’s motion to compel arbitration and remanded the matter for the judge to advance his findings of fact and conclusions of law.” Then in 2019, the judge instructed determination of whether there was gross negligence, ordering arbitration if the negligence was ordinary negligence and denying arbitration if there was gross negligence.
On this appeal, defendant argued the judge erred in denying its motion to compel arbitration.
Validity of the Liability Waiver
This appellate court ruled that the judge erred in reading the arbitration agreement in conjunction with the waiver of liability. In so doing, the judge concluded that gross negligence by the defendant constituted an exception to arbitration. Consequently, the judge misinterpreted the agreement. The waiver agreement was not applicable because Chand was a minor (the waiver stated that it applied only to parties aged 18 or older). He remained free to pursue claims of both ordinary negligence and gross negligence based on the Hojnowski ruling that a parent could not release a future claim of the minor in relation to the use of a recreational facility.
This court also ruled that the two paragraphs (the arbitration clause and the waiver of liability) were separate and distinct from each other. It held that the arbitration clause did not limit the rights of the plaintiff to pursue a claim against the defendant; it simply “specified arbitration as the proper forum for resolution of those claims.”
Validity of the Arbitration Clause
At this point, the court proceeded to determine if the arbitration clause was valid and enforceable. The court noted that both the Federal and New Jersey Arbitration Acts support the policy favoring arbitration. It added that New Jersey public policy “favors arbitration as a means of settling disputes that otherwise would be litigated in a court.”
The court then stated the requirements of a valid arbitration clause as 1) it must state its purpose clearly and unambiguously; and 2) it must be the product of mutual assent, requiring that the parties understand the terms. It added, in clarification, that a valid arbitration clause in a contract is severable and enforceable on its own, even if the contract contains unconscionable or otherwise unenforceable provisions.
The appellate court agreed with the trial judge that the arbitration clause was sufficiently clear and unambiguous to “pass[ ] legal muster.” It added that “by signing the Agreement and specifically initialing the arbitration provision, plaintiffs expressly “waive[d] any right … to a trial in a court of law before a judge and jury.” Factors leading to this conclusion seemed to include
1) the fact that the plaintiff initialed the arbitration clause;
2) the wording specifying plaintiff’s “sole remedy is to arbitration”;
3) that the clause specified that both any disputes regarding the agreement and any claim against the defendant that has not been released or waived would be resolved by arbitration; and
4) the plain language was understandable to the reasonable consumer.
- The waiver was ruled unenforceable under New Jersey law.
- The arbitration clause was found to be clear and unambiguous and ruled valid and enforceable.
- The court reversed the order denying arbitration and remanded the matter to the trial court for that court to order arbitration.
- Because the Agreement’s arbitration clause is valid and enforceable, all disputes between the parties are to be resolved by the arbitrator.
Worthy of note:
- It should be noted that this is a New Jersey court and this is New Jersey law. Remember that state laws differ, both as to the enforceability of waivers and as to arbitration clauses.
- Drafters of waivers should note the factors that contributed to the enforcement of the arbitration clause. Consideration should be given to implementing most or all of the factors – particularly if you are in New Jersey.
- Arbitration clauses are being included in liability waivers more often than in the past. There are advantages to such clauses, but the reader should know that there are also significant disadvantages to them. These advantages and disadvantages are discussed in detail on Sportwaiver.com at The ABCs Of Arbitration Agreements In Waivers Of Liability For Sport, Recreation, & Fitness Providers by Doyice and Mary Cotten.
Photo Credit: Thanks to Todd Van Hoosear via Flickr.