In a recent 5-2 decision, the New Jersey Supreme Court upheld the enforceability of an exculpatory agreement in favor of a health club, holding that the agreement would shield the club against a plaintiff’s claims of ordinary (but not gross) negligence. Stelluti v. Casapenn Enterprises, LLC, __ N.J. __ (2010); 2010 WL 3033884 (N.J. Aug. 5, 2010). A copy of the decision may be obtained by clicking here.
The plaintiff joined a health club in 2004, and signed an exculpatory agreement contained on a pre-printed form routinely used by the Club. In signing the agreement, the plaintiff acknowledged that her use of the Club was at her own risks, and that the club would not be responsible for her injuries. The agreement explicitly noted that it included all injuries that may result from any “sudden and unforeseen malfunctioning of any equipment.”
Shortly after signing the agreement, the plaintiff joined a spinning class, and informed the instructor she had never participated in a spinning class before. The instructor helped her adjust the height of her seat, but did not check to make sure the bike’s handlebars were secured. During the class, the handlebars dislodged, causing the plaintiff to fall forward. She sustained neck and facial injuries, and cracked a tooth. It was later determined that the handlebars had been raised too high for a locking pin to engage, which allowed them to become detached from the bike during the class.
The plaintiff sued the Health Club for negligence, claiming the Club had failed to properly maintain the bike and instruct her how to use it. The trial court granted summary judgment in the Health Club’s favor on the basis of the exculpatory agreement, holding that (1) the agreement was enforceable because the Club was not subject to a requirement to perform by statute; (2) the agreement was not unconscionable, and the plaintiff had read and understood its provisions when she signed it; and (3) the agreement would exculpate the Health Club against claims for gross, as well as ordinary, negligence. The Appellate Division affirmed the trial court’s decision, but limited the scope of the enforceability of the agreement, holding that while the agreement would shield the Club from liability for ordinary negligence, it would not immunize against claims of recklessness or gross negligence. See Stelluti v. Casapenn Enters., 408 N.J.Super. 435 (App. Div. 2009) (available by clicking here). Nevertheless, because there was no evidence in the record of recklessness or gross negligence, the Appellate Division affirmed the trial court’s grant of summary judgment in favor of the Club.
The plaintiff appealed to the New Jersey Supreme Court, arguing three points: (1) the language of the exculpatory agreement was ambiguous; (2) it was an unconscionable contract of adhesion; and (3) enforcing the agreement would be contrary to public policy, because the plaintiff’s instructor’s failure to check the handlebars before she allowed the plaintiff to mount the bike amounted to gross negligence. The New Jersey Supreme Court granted certification, and heard oral argument on March 9, 2010.
Under New Jersey law, an exculpatory agreement is subject to a four-part test, first laid out by the Appellate Division in Gershon v. Regency Diving Ctr., Inc., 368 N.J.Super. 237, 248 (App. Div. 2004). Such an agreement is enforceable only if: (1) it does not adversely affect the public interest; (2) the exculpated party is not under a legal duty to perform; (3) it does not involve a public utility or a common carrier; or (4) the agreement is not a product of unequal bargaining power or is otherwise unconscionable.
As a threshold matter, the Supreme Court held that the agreement unequivocally and unambiguously exculpated the Club’s negligence, and that the plaintiff understood the agreement. The Court also held that although the agreement was a contract of adhesion, it was not procedurally unconscionable. The Court noted that the plaintiff could have joined another club, taken some time to think about signing the agreement, sought advice about using the Club’s equipment, or even found a completely different means of exercising than joining a private club. Further, although the agreement was never explained to her, she did not sign it under duress, nor did the Club’s employees misrepresent its terms.
Having decided that the exculpatory agreement in question was not unconscionable, and noting that the Club was not a public utility or a common carrier, the Supreme Court noted that the remaining analysis as to whether the agreement would be enforceable rested on only two of the Gershon factors: (1) whether enforcing the agreement would implicate a matter of public interest; and (2) whether the Club was already under a legal duty to perform. The Court noted that these two inquiries essentially overlapped, in that whether the public policy interests weighed in favor of protecting a health club from liability partially depended on the extent of the common-law duty of care to which a health club would be subject.
The Court noted the well-settled public policy interests in favor of protecting businesses that pose inherent risks to the participant (such as health clubs), namely, the promotion of vigorous participation in athletic activities, and the avoidance of a flood of litigation. The Court also noted that health clubs (as opposed to other types of businesses in New Jersey, such as roller skating rinks, ski resorts, and equine activity providers) were not under held to a specific, statutorily-defined standard of care. Accordingly, the Supreme Court held that it would not be contrary to public policy, or to any common-law duty owed, to enforce the Club’s exculpatory agreement to shield it from the plaintiff’s claims of negligence. The Court held, however, that the agreement would not exculpate the Club from reckless behavior or gross negligence, such as if the Club’s employees had been on notice of defective exercise equipment, or if it had improperly maintained the equipment. There had been no evidence on the trial court level, however, and thus the Supreme Court affirmed the Appellate Division’s order of summary judgment in the Health Club’s favor.
Two justices dissented from the majority, stating that “for the first time in its modern history, the Court upholds a contract of adhesion with an exculpatory clause that will allow a commercial, profit-making company to operate negligently—injuring, maiming, and perhaps killing one of its consumer-patrons—without consequence. Under the Court’s ruling, a health club will have no obligation to maintain its equipment in a reasonably safe manner or to require its employees to act with due care toward its patrons.” The dissent also stated that the majority’s decision was “not in the public interest, not consistent with this Court’s long-standing, progressive common-law jurisprudence protecting vulnerable consumers, and not in step with the enlightened approaches taken by courts of other jurisdictions that have barred the very type of exculpatory clause to which this Court gives its imprimatur.”