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Exculpatory
Clauses: Uncertain Shields Against Liability Exculpatory
clauses garner mixed reviews from courts, juries, and consumers but
can be useful tools in the armory of companies that provide services
involving significant risk. Litigators and transactional attorneys
alike will benefit from knowing the strengths and limitations of these
devices. By
Troy F. Tatting In
practice, however, an exculpatory clause does not necessarily abrogate
litigation. Minnesota courts disfavor exculpatory clauses and juries
may loathe them even more. Minnesota case law has not explicitly approved
of certain “magic words” that would make an exculpatory
clause airtight. Under these circumstances, the course of litigating
a matter involving an exculpatory clause may change dramatically depending
upon a court’s interpretation of the clause in a ruling on a
motion to dismiss or for summary judgment. So how should plaintiff, defense, and transactional
attorneys best serve their respective clients
when confronted with an exculpatory clause? Exculpatory Basics Minnesota case law on exculpatory clauses is
still developing, but courts have adopted some basic rules. The rules
are conflicted, providing hope for both plaintiff and defense attorneys.
On one hand, an exculpatory clause is valid as long as (1) it is not
ambiguous in scope; and (2) it does not exonerate the benefited party
from liability for intentional, willful or wanton acts.2 On the other
hand, exculpatory clauses are disfavored and strictly construed against
the benefited party.3 They are also void if they violate public policy
considerations.4 Tactics
for Plaintiffs Plaintiffs’ attorneys should be wary but willing
in taking on an exculpatory clause. An exculpatory clause does not
necessarily terminate your client’s claims. It may intimidate you
because it adds increased risk and litigation costs, even if successful.
To reduce monetary risk, consider charging a flat fee to contest the
validity of the clause and, if successful, a contingent fee thereafter.
Tip the scales in your favor. Remember, defendants
and their attorneys see an exculpatory provision as a complete bar
to liability and convenient tool to avoid protracted litigation. Your
case’s value should inflate significantly if you survive a motion
to dismiss or summary judgment. That is why it is essential to have
a good handle on the facts before you place your case in suit. You
need to be able to create a record for negligence, ambiguity, overly
broad contractual language, and an offense to public policy. First, tell the court about the strengths of
the underlying case. You represent an injured party, who needs compensation.
You have a good argument that the defendant was, at the very least,
negligent. The defendant should have cleaned up that wet floor, fixed
its treadmill, tightened that saddle, etc. Show the court that your
client would win if not for the exculpatory provision. Then, attack the contract. Focus on any ambiguity,
however small or questionable it may be. This is a disfavored contract
and it should be avoided for even the smallest of ambiguities. Look into the exculpatory language itself to
see if it is overly broad. Minnesota courts are unclear about whether
an attempt to exculpate intentional misconduct results in the voiding
of an entire exculpatory clause or the voiding of only the portion
of the clause attempting to exculpate intentional misconduct.5 Nevertheless,
the contract may ask for too much, and you may hope to convince the
court that your client should be relieved from its oppressive terminology
because of it. Tactics for the Defense Keep the case about the contract. Plaintiff
signed it voluntarily, gave consideration, and could have contracted
with other companies if she so desired. Focus on the contractual language
that unambiguously blankets the factual scenario which brought about
plaintiff’s alleged injury. If a clause is unambiguous, construction
by the court is unnecessary and summary judgment is appropriate.6
Plaintiff’s alleged injury can be said to be contemplated by the express
terms of the contract if it states, for example, that the defendant
shall not be held liable for the negligence of its employees or injuries
resulting from use of its facilities. If the language suggests that
the contract might apply to exonerate willful acts, argue that it
does not do so in the underlying case. Remind the court that exculpatory clauses are
routinely upheld and why that is so. Although Minnesota courts disfavor
exculpatory clauses, historically they have upheld such clauses in
the business and commercial context.7 Where these clauses have been
upheld, the cases rely on principles of freedom of contract and provide
that parties may protect themselves against liability resulting from
their own negligence so long as the agreement does not contravene
public policy or public welfare.8 You may also want to argue that exculpatory
clauses allocate risk between contracting parties. Without exculpatory
clauses, your client’s membership fees will increase, its inspection
costs will skyrocket, or its recreational activities will be unaffordable.
In other words, your client will suffer hardship that will be passed
on to its clients and consumers. It’s not over until it’s over. Remind plaintiff’s
attorney that you will appeal an unfavorable judgment relating to
the validity of the exculpatory clause. Even if the court denies your
motion to dismiss or for summary judgment, any recovery at trial might
still be completely wiped out with a post-trial reversal. Drafting Exculpatory Clauses In drafting exculpatory clauses, adopt language
from already scrutinized contracts. While the courts may not have
explicitly approved of certain magic words that would make an exculpatory
clause fool-proof, they have upheld contracts containing specific
exculpatory language. Find a case, such as Breehner
v. Cragun Corp., 636 N.W.2d 821, 825-26 (Minn. App. 2001), where
a clause has been upheld and set forth in the opinion. Adapt it to
apply to your clients’ businesses and make a generic annotated copy
for your records so you can later explain why you selected certain
words and phrases. Advise your clients about the public policy
test. The test examines (1) whether, at the time of contracting, there
was a disparity of bargaining power between the parties, and (2) if
the type of service being offered is a public or essential service.9
A disparity of bargaining power exists where an adhesion contract
is drafted by a business and forced on an unwilling or unknowing public
“for services that cannot readily be obtained elsewhere.”10 To establish
a disparity in bargaining power, a party must show that there was
no opportunity for negotiation and that the services could not be obtained elsewhere.11 If your client is one that provides a public
or essential service, such as a common carrier, hospital, public utility
or innkeeper, among others, courts will not enforce its exculpatory
clause.12 A public or essential service includes a service generally
thought suitable for public regulation.13 Recreational activities
generally do not fall into the categories of public or essential services.14 Update your work. A good exculpatory clause
today may be an overly broad clause tomorrow. Compare new case law
with your annotated copy and adjust it accordingly. Each adjustment
gives you a great reason to keep in contact your clients. Be an Expert A thorough understanding of how exculpatory
clauses are enforced, avoided, and drafted should provide you with
an excellent opportunity to market to current clients, generate new
business, and impress your partners and associates. Your expertise
in this area should make you the go-to-attorney when your firm is
dealing with exculpatory clauses. s Notes 2
Yang v. Voyagaire Houseboats, Inc., 701
N.W.2d 783, 789 (Minn. 2005). 3
Schlobohm v. Spa Petite, Inc., 326 N.W.2d
920, 923 (Minn. 1982). 4
Id. See
also Zerby v. Warren, 210 N.W.2d 58, 64 (Minn. 1973). 5
Schlobohm, 326 N.W.2d at 923 (providing
that an exculpatory clause is unenforceable if it “purports” to release
intentional conduct but citing to cases from other jurisdictions suggesting
that an overbroad clause including a release of intentional conduct
would be narrowed to a negligence release); Nimis
v. St. Paul Turners, 521 N.W.2d 54, 57 (Minn. App. 1994) (court
voided entire clause where it released all claims caused by negligence
“or otherwise”); Ball v. Waldoch
Sports, Inc., 2003 WL 22039946, at *3 (Minn. App. 2003) (an attempt
to release intentional misconduct would result in voiding only that
portion of the clause) (unpublished opinion). 6
See Schlobohm, 326 N.W.2d at 923. 7
See Solidification, Inc. v. Minter, 305
N.W.2d 871, 873 (Minn. 1981); Great
Northern Oil Co. v. St. Paul Fire & Marine Ins. Co., 189 N.W.2d
404, 407 (Minn. 1971). 8 Arrowhead
Elec. Co-op. Inc. v. LTV Steel Mining Co., 568 N.W.2d 875, 878
(Minn. App. 1997). 9
Schlobohm, 326 N.W.2d at 923. 10
Id. at 924. 11 Id.
at 924-25; see also Malecha
v. St. Croix Valley Skydiving Club, Inc., 392 N.W.2d 727, 730
(Minn. App. 1986) (fact that party had no opportunity to negotiate
terms of exculpatory agreement by itself not enough to show a disparity
in bargaining power). 12 Schlobohm,
326 N.W.2d at 923. 13 Id.
at 925. 14
Id. at 925-26. TROY F. TATTING is an associate at Larson • King and represents plaintiffs and defendants in business, class action, and mass tort litigation with a focus on employment law. He graduated magna cum laude from Quinnipiac University School of Law in Hamden, Connecticut where he was a member of the Quinnipiac Law Review. |
