“Please Release Me, Net Me Dough …”

By Frank L. Murray

 

The Problem

You might be involved in any one of a number of activities in your daily life – maybe you are attending a concert and you notice a lot of cramped tiny writing on the back of your ticket; perhaps laser tag, refinancing your house, going horseback riding, renting bowling shoes, taking out a business loan with bankers for millions of dollars, playing golf, or riding a hot air balloon.

Almost certainly, you will be “asked” to sign a pre-activity waiver, a release, and it is a deal-breaker, a prerequisite to the activity or the business deal that is involved. In Arizona, we have an interesting collection of statutory and case law that is implicated in these situations and is unique to our State.

Releases in Arizona are enforceable, but remains a jury question for the ultimate trier of fact in the case of assumption of the risk and contributory negligence. (See Arizona Constitution Article XVIII, §5.) There are also special statutes for skiing, horseback riding, and motor sport tracks. But in the event that you are not engaged in any of these activities and nevertheless encounter the ubiquitous release, what are the rules governing what you could be signing away?

The Arizona Law

Well, Arizona starts out with the propositions of Darner Motor Sales, Inc. V. Universal Underwriters Insurance Co., 140 Ariz. 383, 682 P. 2d 388 (1984). In Darner, the Arizona Supreme Court held that a standardized form contract could be over-ridden by supplemental terms the parties had agreed upon, that these prolix form contracts are subject to an overriding obligation of good faith and are to be strictly construed against the drafters of the form contract. These releases or waivers may fall before the power of the Courts to refuse to enforce an unconscionable contract or term. Equitable estoppel and reformation are recognized as concepts that can supersede the enforcement of boilerplate terms of, in this case, an insurance contract.

That having been said, it is not surprising that exculpatory waivers or covenants, sometimes called assumption of the risk agreements, are disfavored in Arizona law and the laws of other states. What a remarkable proposition it is that one should escape liability for one’s improper behavior by shoving a wordy and obscure document under someone’s nose shortly before the conduct contemplated, that one can escape responsibility for injuring a party, and that the injured party can never be made whole – because he signed that piece of paper.[1] In a nutshell, the business interest that drafted the release will have to have educated the customer/client in both the risks of the activity/transaction, and the risks of the release, and honestly bargained a bit over its terms. The waiver of liability will be declared void as a matter of law by the courts if these acts are not conducted.

Freedom of Contract v. Public Policy

Benjamin v. Gear Roller Hockey Equipment, 11 P.3^rd 421 (Ariz. App. 1997) is an illustration of how far the facts of a case have to go to enforce an exculpatory release. After tipping its hat to the fact that these releases are not favored, the Court relied upon the fact that the injured man was a lawyer who understood what he was signing, for he had participated in the sport of roller hockey for 15 years and he was keenly aware of the problems of uneven flooring and debris on the skating surface – which had caused the accident. Benjamin is one of those exceptions that proves the rule.

Vastly more prevalent are the results of Maurer v. Cerkvenik-Anderson Travel, 890 P. 2d 69 (Ariz. App. 1972) in which a woman fell to her death changing cars on a train vacation package through Mexico. She signed an ultimately ineffective release that was too general to alert her to the risks she was waiving. Consider also Morganteen v. Cowboy Adventures, Inc. 949 P. 2d552 (Ariz. App 1997) in which Geraldine Morganteen was bucked off her horse during a guided horseback ride after she had signed a grandly titled “Release and Waiver of Liability, Assumption of the Risk, and Indemnity Agreement.” The Court expressed great skepticism toward release documents – and analogized the release in Morganteen to the release in a commercial tort case, specifically the holding of Salt River Project Agric. Improvement & Power Dist. V. Westinghouse Electric Corp., 694 P. 2d 198 (Ariz. 1984). At page 213, the Salt River Court sought to “distill principles” from the case law and apply them to exculpatory waivers: 1. “[t]he law disfavors contractual provisions by which one party seeks to immunize himself from the consequences of his own torts;” 2. in order to effectuate such a provision, there should be no public policy impediment to enforcement; 3. the parties to the waiver agreement should be on an equal footing and should bargain over the provision; and 4. the language of the provision should be strictly enforced against the party relying upon it.

Conclusion

In a bygone day, and perhaps and perhaps in today’s time, a person walked into a restaurant, especially back east or up north, and there was a place to hang your coat, store your scarves and hats against the winter cold. Almost invariably, there was a sign that stated: “Not Responsible for Theft or Damage to Clothing.” It’s fair to say that the sign might well remain as long as there is one customer who believes it and would think it fruitless to protest a loss. However it does not survive the tests found in Arizona case law. The law now treats the meaningless ritual of signing a dense, lengthy release as… a meaningless ritual… as long as it was not bargained for and not explained in some detail and is not publicly harmful – after close scrutiny. So if you released that merchant, to let him love again, the State of Arizona may “have your back”.

 

Frank L. Murray is a commercial litigator at Stoops, Denious, Wilson & Murray who specializes in claims on behalf of the victims of large-scale financial fraud, often against banks and financial institutions. He can be reached at 602-263-8861.

 

[1] “Please Release Me: Exculpatory Covenants in Arizona,” G P Solo Law Trends & News, Volume 1, Number 4, August, 2005.