By Rick Conner
Part 2 of 3
Rick Conner is an attorney with McGuireWoods in Charlotte, N.C. This is an excellent summary of North Carolina waiver law, originally published in 2008. Thanks to Rick for granting permission for this reprinting. Part 3 will appear next week. DC
The Public Interest Exception
The Supreme Court of North Carolina has held that “a party cannot protect himself by contract against liability for negligence in the performance of a duty of public service, or where a public duty is owed, or public interest is involved, or where public interest requires the performance of a private duty.” 13 One federal district court, interpreting this statement, noted that other jurisdictions usually hold exculpatory clauses to be unenforceable “where the party relying on the exculpatory clause (a) is significantly regulated by public authority, (b) holds himself out to the public as willing to perform the sort of services subject to such regulation [and] (c) purports to be capable of performing those services in conformity with the standard of care established in the community …” 14 Another district court held that the public interest exception “applies only to entities or industries that are heavily regulated.” 15
The public interest exception has been applied by state and federal courts in North Carolina to prevent ski area operators16 and motorcycle safety instructors17 from limiting or escaping liability for their own negligence. 18 On the other hand, state and federal courts in North Carolina have held that the public interest exception would not prevent a release or waiver from protecting a company renting jet skis from a claim by an injured renter, 19 a track owner from a claim by an injured participant in a go-kart race, 20 or a race car driver from a claim by an injured NASCAR official. 21 A few of these decisions are discussed in more detail below to illustrate how state and federal courts in North Carolina have interpreted the public interest exception.
Bertotti v. Charlotte Motor Speedway, Inc.
In Bertotti v. Charlotte Motor Speedway, Inc., 22 the United States District Court for the Western District of North Carolina held that a release signed by a go-kart driver prior to a race barred the driver from suing the racetrack owner for negligence after he was injured in a crash. There was no dispute that the driver saw and signed two separate release agreements, though he claimed that he did not read the release agreements before he signed them. 23 The court noted, however, that under North Carolina law, “a party’s failure to actually read a contract before signing it does not make the agreement unenforceable unless there is some evidence of mutual mistake, fraud, or oppression.” 24
The plaintiff argued that the releases should be invalidated under the public inter-est exception, noting that the speedway entered into a joint venture with the State of North Carolina to build an interstate inter-change near the speedway, and that the speedway was designated as a special recreational district by statute so it could obtain special permits for the sale of alcohol. 25 The court rejected the plaintiff’s contention, holding that the public interest exception applies only to “heavily regulated” industries and noting that North Carolina does not regulate the racing industry or the amateur go-kart racing industry. 26
The court recognized that other jurisdictions have similarly held that “exculpatory contracts entered in connection with motor sports do not violate public policy because such contracts do not involve public interests.” 27
The North Carolina Court of Appeals recently endorsed the Bertotti decision in an unpublished opinion, and held that a race car driver was protected from a personal injury claim filed by a NASCAR official because the official had signed releases in his Membership and License Application, a “race night release,” and his “Pit Pass.” 28
Strawbridge v. Sugar Mountain Resort, Inc.
In Strawbridge v. Sugar Mountain Resort, Inc., the Western District of North Carolina held that a ski area operator was not protected from a negligence claim by an injured skier, despite a liability release on the back of the skier’s lift ticket and a release in the equipment rental agreement signed by the skier. 29 With regard to the equipment rental agreement, the court noted that the agreement released the resort from liability “related to” and “resulting from … the use of his equipment.” 30
Strictly construing the liability release, the court found that this language only barred suits arising out of injuries caused by the equipment, and held that the skier’s claim was not barred by this release because he alleged that his injuries were caused by a bare spot on the slopes and not by the equipment he rented. 31
As for the waiver on the back of the skier’s lift ticket, the court said that the writing (which stated that the user agrees to “assume all risk of personal injury as a result of all the inherent risks of skiing,” including “bare spots”) would bar the skier from suing the resort for the injury he suffered, if not for the application of the public interest exception and the impact of a North Carolina statute. 32 The court said that enforcing the exculpatory terms on the back of the lift ticket would violate N.C. Gen. Stat. § 99C-2, which “imposes on ski area operators the duty ‘[n]ot to engage willfully or negligently in any type of conduct that contributes to or causes injury to another person or his properties.'”33 The court also held that the exculpatory clause was voided by the public interest exception, although it noted that “this case presents a very close question.” 34 “[S]kiing presents numerous risks to participants which has led the General Assembly to enact legislation regulating the operation of ski slopes,” the court noted. 35 Although the court recognized that the skiing regulations were not as extensive as those regulating cosmetology, 36 it said that it would not “draw arbitrary lines regarding how much legislation constitutes ‘heavy regulation’ under North Carolina law.” 37
Waggoner v. Nags Head Water Sports, Inc.
In Waggoner v. Nags Head Water Sports, Inc. , 38 the Fourth Circuit held that a woman who was injured while riding a rented jet ski was barred from asserting a negligence claim against the company that rented the jet ski due to a waiver she signed in the rental agreement. The court said that her release of “all claims” and “all liability for damages, losses or injuries that may arise from [her] use of the craft” included her negligence claim. 39
The court also found that the public interest exception did not apply to prevent enforcement of the release, noting that North Carolina’s Boating Safety Act “deal[s] almost exclusively with the operation of water craft and do[es] not address the duties owed by one who rents such craft for recreational use.” 40 “North Carolina courts have not held that recreational boat renting, as opposed to the services of a common carrier, is sufficiently important to justify such an imposition on the freedom of contract.” 41
The Fourth Circuit also rejected the plain-tiff’s argument that the release should not be enforced because it was an adhesion contract and she suffered from an inequality of bargaining power. Although the plaintiff could not negotiate the terms of the contract, and had to either sign the exculpatory clause or decline to rent the jet ski, the court said that the inequality in bargaining power was “more apparent than real,” and was no different from “that which exists in any other case in which a potential seller is the only supplier of the particular article or service desired.” 42 “Only where ‘it is necessary for [the plaintiff ] to enter into the contract to obtain some-thing of importance to him which for all practical purposes is not obtainable else-where’ will ‘unequal bargaining power’ void an exculpatory clause.” 43
13. Hall v. Sinclair Ref. Co. , 242 N.C. 07, 710, 89 S.E.2d 396, 398 (1955).
14. Tatham v. Hoke, 469 F. Supp. 914, 918 (W.D.N.C. 1979).
15. Bertotti v. Charlotte Motor Speedway, Inc., 893 F. Supp. 565, 569 (W.D.N.C. 1995).
16. Strawbridge, 320 F. Supp.2d at 434 (holding that ski area operator was not protected by release and waiver on the back of skier’s lift ticket because it would violate a North Carolina statute imposing duties on ski area operators, and run counter to the public interest).
17. Fortson v. McClellan , 131 N.C. App. 635, 508 S.E.2d 549 (1998) (noting the “extensive regulation of motorcycle use” and the “hazards to the public associated with motorcycle instruction”).
18. See also Alston, 92 N.C. App. at 63-64, 373 S.E.2d at 466-67 (holding that cosmetology industry was sufficiently tied to public interest to prevent cosmetologists from escaping liability for their negligence, since cosmetology practice is extensively regulated by the General Assembly, and may affect the health of the general public); Tatham v. Hoke, 469 F. Supp. at 918 (noting that the public interest in and extensive regulation of doctors and abortion practice “is beyond question”).
19. Waggoner, 1998 WL 163811 at *7 (noting that North Carolina statutes “do not address the duties owed by one who rents such craft for recreational use”).
20. Bertotti, 893 F. Supp. at 569 (noting that “North Carolina does not regulate the racing industry generally, much less the amateur kart racing industry”).
21. Brown v. Robbins , No. COA07-77,
2007 WL 3256866 (N.C. Ct. App. Nov. 6, 2007) (holding that driver that hit NASCAR official with his car during the race was protected by releases and waivers signed by official prior to the race, citing Bertotti for the proposition that racing is not “heavily regulated” and does not involve a public interest). 22. 893 F. Supp. 565 (W.D.N.C. 1995).
23. Id. at 568.
25. Id. at 568-569.
26. Id. at 569.
27. Id. at 566.
28. Brown, 2007 WL 3256866 at *3.
29. 320 F. Supp.2d 425 (W.D.N.C. 2004).
30. Id. at 432.
32. Id. at 432-433.
33. Id. at 433 (citing N.C. Gen. Stat. § 99C-2(c)(7)).
34. Id. at 434.
36. See note 18, supra.
38. No. 97-1394, 1998 WL 163811 (4th Cir. April 6, 1998).
39. Id. at *4.
40. Id. at *7.
41. Id. at *8.
42. Id. at *7 (citing Gas House, Inc. v. Southern Bell Tel. and Tel. Co. , 289 N.C. 175, 221 S.E.2d 499, 505 (1976), overruled on other grounds, State ex rel. Utilities Comm’n v. Southern Bell Tel. and Tel. Co., 307 N.C. 541, 299 S.E.2d 763 (1983)).
43. Id. (quoting Hall v. Sinclair Refining Co., 242 N.C. 707, 710, 89 S.E.2d 396, 398 (1955)).
Photo Credit: Thanks to Taber Andrew Bain on Flickr.