By Kelly J. Woy
The enforceability of exculpatory clauses in New Jersey in the context of participation in a recreational activity is addressed in the Supreme Court’s decision in Stelluti v. Casapenn Enters., LLC, 203 N.J. 286, 1 A.3d 678 (2010). In Stelluti, the Court held that it is not contrary to the public interest, or to a legal duty owed, to enforce a recreational facility’s agreement limiting its liability for injuries sustained as a matter of negligence that result from a patron’s voluntary use of equipment and participation in an activity.
In Stelluti, the plaintiff entered into an agreement with the defendant gym for membership at its facility, and in accordance with the gym’s requirement, signed and dated a Waiver and Release of liability form (“Waiver”). The Waiver provided that the signing member acknowledges the risks of participation in activities at the gym, is voluntarily participating in those activities, and assumes all such risks, including injuries which may occur as a result of the members use of amenities and equipment, participation in activities, sudden and unforeseen malfunctioning of equipment, and instruction or training. Id. at 682. The Waiver explicitly provided that the signor was releasing the defendant gym for its own negligence. Id. at 683. After signing the Waiver, the plaintiff participated in a spinning class; she set up her bike with the assistance of an instructor, and as she stood up on the pedals during the class as instructed, the handlebars fell off, and she was injured. Id.
The plaintiff sued the gym (among other defendants), setting forth negligence claims. The gym defendant filed a motion for summary judgment, which the Law Division granted, and the Appellate Division affirmed. The New Jersey Supreme Court granted the plaintiff’s petition for certification. Id. at 687.
Initially, the Supreme Court acknowledged that the Waiver at issue was a contract of adhesion, in that it was a standardized printed form presented to the plaintiff on a “take-it-or-leave-it” basis, without the opportunity for the “adhering” party to negotiate. Id. at 687-88. However, the Court recognized that contracts of adhesion can be enforced where they are not unconscionable. The Court did not consider the plaintiff in this context to be in a classic “position of unequal bargaining power” such that the contract must be voided based on unconscionability, because the plaintiff “could have taken her business to another fitness club, could have found another means of exercise aside from joining a private gym, or could have thought about it and even sought advice before signing up and using the facility’s equipment. No time limit was imposed on her ability to review and consider whether to sign the agreement.” Id. at 688.
The Court explained that despite the general disfavor for exculpatory clauses and the need for careful scrutiny, such provisions are enforced unless they are adverse to the public interest. Id. at 689. Contracting-away of a statutorily imposed duty and agreements containing a pre-injury release from liability for intentional or reckless conduct are both against public interest. Id. at 688-89. Beyond those categories, there are four factors used to determine whether an exculpatory agreement is against public policy and therefore unenforceable:
- Whether it adversely affects the public interest;
- Whether the exculpated party is under a legal duty to perform;
- Whether it involves a public utility or common carrier; and
- Whether the contract grows out of unequal bargaining power or is otherwise unconscionable.
Id. at 689 (citing Gershon, Adm’x Ad Prosequndum for Estate of Pietroluongo v. Regency Diving Ctr., 368 N.J. Super. 237, 248, 845 A.2d 720 (App. Div. 2004)).
The Court explained that “[a]s a threshold matter, to be enforceable an exculpatory agreement must ‘reflect the unequivocal expression of the party giving up his or her legal rights that this decision was made voluntarily, intelligently and with the full knowledge of its legal consequences.'” Id. at 689 (quoting Gershon, 368 N.J. Super.at 247). In this case, the exculpatory agreement explicitly set forth what was covered (including negligence on behalf of the gym), and the terms limiting the gym’s liability were prominent. Id. at 690. Further, the plaintiff did not claim that she signed the Waiver as the result of fraud, deceit or misrepresentation. Id. Therefore, the Court found that it could be presumed that the plaintiff understood the agreement.
Regarding the exculpatory clause’s implications on public interest, the Court explained that while business owners must maintain safe premises for their business invites, the law recognizes that where certain activities posing inherent risks to participants are conducted by operation of some types of business, the business will not be held liable for injuries sustained as long as it acted in accordance with the “‘ordinary duty owed to business invitees, including exercise of care commensurate with the nature of the risk, foreseeability of injury, and fairness in the circumstances.’ When it comes to physical activities in the nature of sports–physical exertion associated with physical training, exercise, and the like–injuries are not an unexpected, unforeseeable result of such strenuous activity.” Id. at 691 (internal citation omitted).
The Stelluti Court pointed out the New Jersey Legislature’s recognition of the need for risk-sharing for certain inherently risky activities through certain activity-specific statutes:
Assumption of risk associated with physical-exertion-involving discretionary activities is sensible and has been applied in many other settings, including by the Legislature with reference to certain types of recreational activities. Recognizing that some activities involve a risk of injury and thus require risk sharing between participants and operators, the Legislature has enacted statutes that delineate the allocation of risks and responsibilities of the parties who control and those who participate in some of those activities. See N.J.S.A. 5:13-1 to -11 (Ski Act); N.J.S.A. 5:14-1 to -7 (Roller Skating Rink Safety and Fair Liability Act); N.J.S.A. 5:15-1 to -12 (Equine Act). Although no such action has been taken by the Legislature in respect of private fitness centers, that does not place the common sense of a risk-sharing approach beyond the reach of commercial entities involved in the business of providing fitness equipment for patrons’ use. The sense behind that approach does not make it unreasonable to employ exculpatory agreements, within limits, in private contractual arrangements between fitness centers and their patrons.
Id. at 692.
The Court found that while there is public interest in holding a health club to its general common law duty to business invitees, “it need not ensure the safety of its patrons who voluntarily assume some risk by engaging in strenuous physical activities that have a potential to result in injuries”, as that “could chill the establishment of health clubs”. Id. at 693. It recognized that there is “positive social value” in allowing gyms to limit their liability, and “it is not unreasonable to encourage patrons of a fitness center to take proper steps to prepare, such as identifying their own physical limitations and learning about the activity, before engaging in a foreign activity for the first time.” Id. Further, the Court found no evidence of grossly negligent and/or reckless conduct on behalf of the defendant gym. Accordingly, the Court affirmed.
Kelly Woy is a Ricci Tyrrell Associate.
