Court Opinion

ID: 9748187
Source: CourtListenerOpinion
Date Created: 2023-08-27 15:54:25.882822+00
Date Added: 2024-06-11T07:25:32.535571
License: Public Domain

Annabelle Clinton Imber, Justice, dissenting. Over the course of the last one hundred years, this court has crafted a consistent doctrine of disfavor for exculpatory clauses.1 In the most recent cases, the court has carved out limited exceptions to this general disfavor where the overall negative impact on public policy is mitigated. The majority opinion, while purportedly espousing the language in our long fine of cases that emphasizes the harmful nature of exculpatory contracts, effectively overrules those cases. The opinion takes a position that has far-reaching negative consequences for public policy, does not correctly apply our precedent, and is founded on a misinterpretation of the challenged exculpatory clause and a misapplication of the law. I must dissent. For over sixty years, this court has analyzed exculpatory contracts in light of their effects on public policy. In 1942, in the case of Arkansas Power & Light Co. v. Kerr, 204 Ark 238, 161 S.W.2d 403 (1942), we refused to enforce an exculpatory clause and stated, “A consciousness that failure to exercise due care will require compensation for injury to person or property is productive of caution and forethought by those in whose control rest the agencies that may cause damage.” Id. at 241, 161 S.W.2d at 404. Our concern for the public policy implications of exculpatory clauses has continued through our present-day decisions. In Plant v. Wilbur, 345 Ark. 487, 47 S.W.3d 889 (2001), we reiterated that “this court has long stated a strong disfavor for exculpatory contracts that exempt a party from liability, because of the public-policy concern encouraging the exercise of care.” Id. at 493, 47 S.W.3d 893. Furthermore, in deciding the validity of exculpatory clauses our court has required a thorough consideration of “the facts and circumstances surrounding the execution of the release.” Finagin v. Arkansas Dev. Fin. Auth., 335 Ark. 440, 455, 139 S.W.3d 797, 806 (2003). Under some limited circumstances, the court has been willing to enforce exculpatory clauses after a determination that the circumstances are such that the exculpatory clause does not discourage the use of ordinary care. In Finagin, the exculpatory clause was executed by a guarantor in favor of a lender. We observed that there was no evidence that the guarantors were unsophisticated businessmen, or that the agreements were entered into unfairly, and thus, enforcement of the exculpatory clause was allowed. Id. at 458, 139 S.W.3d 808. Moreover, the exculpatory clause only released the lender from liability for any “setoff, counterclaim, reduction, diminution of an obligation, or any defense of any kind or nature . . . .” Id. at 455, 139 S.W.3d 806. Notably, this release was not a release from all liability, only liability arising in the form of a setoff counterclaim or defense. Likewise, we upheld a limited waiver of liability in Edgin v. Entergy Operations, Inc., 331 Ark. 162, 961 S.W.2d 724 (1998), where we concluded that, because the waiver of liability was not a complete waiver of liability for work-related injuries and instead only a limited waiver of liability for additional remedies after workers’ compensation, the agreement did not violate public policy by discouraging the employer or its clients from exercising reasonable care. Id. at 168, 961 S.W.2d 727. Similarly, in the case of Miller v. Pro-Transportation, 78 Ark. App. 52, 77 S.W.3d 551 (2002), the Arkansas Court of Appeals upheld a clause releasing the trucking company from liability for negligence where the signor was the wife of the driver who sought to ride along with her husband. When the truck was involved in an accident, the wife sued the trucking company for damages she received as a result of the negligence of its employee (her husband) and argued that the exculpatory clause was invalid as against public policy. In analyzing the public policy question in connection with the release, the appellate court concluded that the circumstances of the case mitigated the public policy concerns: Finally, we think that the public policy of encouraging careful behavior that underlies the disfavor for such exculpatory clauses has little application in the present case, where the allegedly negligent party, appellant’s husband, was the driver of the vehicle and, therefore had far more compelling reasons to drive carefully than the avoidance of possible tort liability. Id. at 55, 77 S.W.3d 554. In its analysis, the Miller court additionally examined the circumstances surrounding the lease, including that the appellant had previously ridden with her husband and knew the dangers involved in the trucking operation, and that the parties knew that injury could result from these activities, and as a result, the company required additional passenger insurance to cover the appellant’s injuries. This court reviewed similar factors in upholding the exculpatory clause in the case of Plant v. Wilbur, supra. In Plant, the appellant, Robert Plant, was injured by flying debris while watching an auto race from the pit area of the track. Before entering the pit, Plant signed an exculpatory agreement that released the track from all liability “whether caused by the negligence of the releasees or otherwise while the undersigned is in or upon the restricted area, and/or competing, officiating in, observing, working for, or for any purpose participating in the event.” Id. at 490, 47 S.W.3d 891. When Mr. Plant brought suit against the track, the track moved for summary judgment, arguing that the release excused it from liability. The trial court granted summary judgment, and we affirmed its decision. In upholding the grant of summary judgment, this court focused on the specific circumstances surrounding the release, including the dangerous recreational nature of the activity and the number of people affected by the clause. First, we placed significant emphasis on the fact that the release was executed “in the context of a dangerous, recreational activity.” Id. at 493, 47 S.W.3d at 893. The court noted, More importantly, as a participant, Plant was certainly familiar with the dangers inherent in the sport of auto racing. In fact, he admitted to having witnessed numerous wrecks that occurred during racing events. With this knowledge, Plant continued to voluntarily participate in this activity. Id. at 495, 47 S.W.3d at 894. We also noted that the reach of these clauses was fairly limited in scope, as “they involve a very narrow segment of the public, rather than situations involving a public utility, a common carrier, or a similar entity connected with the public interest.” Id. at 494, 47 S.W.3d 893. The rationale adopted in Plant is easily distinguishable from the case at hand. Unlike the auto-racing activity, which is purely recreational, the type of activity at issue here is an integral part of Mr. Jordan’s livelihood; that is, it involves his means of making a living. We approved the trial court’s finding that recognized this distinction in Plant: I don’t find that this is the type of enterprise in which the courts have acknowledged that it is improper to let them, — in other words, an enterprise that people have to rely upon like public transportation or other types of enterprises where people of necessity have to go just to get through life and conduct regular business activities, making a living. ... his is recreation. Id. at 495, 47 S.W.3d 894 (emphasis added). Additionally, while in Plant the affected segment of the public was small, the members of the public who could be affected by exculpatory clauses in contracts for the leasing of equipment is virtually limitless. If exculpatory clauses are less harmful in the context of recreational auto racing (because the participants are limited in number and are not compelled to participate, much less be in the restricted pit area), these clauses become progressively more threatening when they involve the daily activities of the general population. Enforcement of the exculpatory clause in the present case would have sweeping consequences for every future rental agreement in all areas of daily life. Moreover, unlike in the cases of Edgin and Miller, the lessors of machinery have only a minimal motivation outside of the threat of liability to exercise ordinary care. The employers in Edgin still faced potential liability for their negligence pursuant to the workers’ compensation statutes and were only relieved from the imposition of additional liability; as such, their motivation to act with due care and avoid liability would still be significant. In Miller, the wife signing the release could be fairly well-assured that her husband, who, as a representative of the company, was being released from liability, had her best interests in mind. Thus, he would continue to exercise reasonable care where she was concerned to keep her from harm, even without the threat of liability. In the present case, once Diamond is released from liability for harm to its customers, it has no significant motivation to maintain its machinery and business in a way that reduces the risk of harm to others. Instead, Diamond can operate without regard to who is put at risk by its negligence, and without fear of any legal repercussion. In my view, encouraging such a lack of due care is unacceptable and should not be allowed. The majority’s treatment of the case at bar radically deviates from our court’s traditional course of caution and disfavor of exculpatory clauses. While still echoing the notions of strict construction and general disfavor, the majority has created a test that is all too easy to overcome. The present situation does not involve any of the previous factors found to mitigate the general disfavor of exculpatory clauses; nor does it present any new indicia suggesting that the enforcement of similar clauses will not negatively impact public policy. In fact, the potential application of this case has sweeping negative effects on virtually every citizen of this state. The enforcement of broad and vague exculpatory clauses like the one at issue here erodes the very idea of ordinary care and provides an easy escape for entities who seek to avoid liability for their negligence. Jordan rightfully suggests that enforcement of the exculpatory clause in this case will effectively overrule our past cases such as Dessert Seed Co. v. Drew Farmers Supply, Inc., 248 Ark. 858, 454 S.W.2d 307 (1970), Arkansas Power & Light, supra, and Farmers Bank v. Perry, 301 Ark. 547, 787 S.W.2d 645 (1990). For example, in Dessert Seed Co., a seed distributor sent the wrong seeds to the grower but then attempted to claim immunity from suit based on an exculpatory clause contained on the seed tag. We refused to uphold the agreement, noting that “the law should encourage ‘caution and forethought’ on the part of the [distributor]. To uphold the negligence clause in the contract would be more likely to produce the opposite result.” Id. at 865, 454 S.W.2d 311. Similarly, in the case at bar, enforcement of the exculpatory clause would have the effect of discouraging lessors of machinery from exercising the use of ordinary care. In Farmers Bank, this court acknowledged the relationship of Farmers Bank as a provider of rental services to the renter of the lockbox, its customer, and held that the exculpatory agreement was insufficient to absolve the bank of liability for its negligence when the bank owed a duty of care towards its customer. Here, too, Diamond owes a similar duty of care to Jordan, its customer. Instead of addressing Jordan’s arguments and distinguishing these cases, the majority merely reaffirms the traditional notion that to avoid liability for negligence, “the contract must at least clearly set out what negligent liability is to be avoided.” However, a careful examination of the majority opinion shows that the Diamond exculpatory clause does not meet the requisite burden of clarity. The majority states, “we must ask whether Diamond clearly sets out what negligent liability is to be avoided,” but then fails to provide any persuasive analysis explaining the precise scope of the clause. The majority simply continues to quote the vague and inconclusive language of the clause, as if its meaning will become clear with repetition. It does not. Further, as support for the conclusion that the scope of the exculpatory clause is clear, the majority states: As an experienced, full-time landscaping contractor, Jordan admitted in his deposition that he intended to rent a piece of equipment to enable him to complete his job, and that in his discussions with Diamond personnel, they instructed him how to operate the Bobcat loader. This statement by the majority is a red herring. Jordan’s subjective level of knowledge about the equipment he was renting provides absolutely no information on the scope of the exculpatory clause. The scope of the clause determines who is released and from what liability; assuming the same exculpatory clause is used in each contract, the scope will be the same. The issue of whether the scope of the clause is clear is an objective inquiry into the actual language of the clause. See Farmers Bank, supra. Thus, instead of analyzing the central questions of who is released from what liability, the majority delves into the merits of the underlying action, the negligent failure to instruct, as support for upholding the clause. But whether Jordan should ultimately succeed on his claim is not our concern; we are only to decide whether the exculpatory clause is enforceable so as to bar completely any cause of action for negligence against Diamond. Here, we arrive back at the question originally posed but never answered by the majority: whether Diamond clearly sets out what negligent liability is to be avoided. In light of the majority’s complete failure to provide any explanation as to the scope of the ambiguous exculpatory clause, the answer must be no. This clause in no way meets that test and should not be enforced. Plant v. Wilbur, supra; Farmers Bank v. Perry, supra. The majority further holds, albeit erroneously, that no question of fact exists on the issue of whether Jordan had knowledge of the potential liability he released in the contract with Diamond. In support of this conclusion, the majority notes that Jordan initialed the “yes” line stating, “I hereby accept the damage waiver.” What the majority fails to mention, however, is that the “limited damage waiver” clause actually states, If customer has agreed to purchase limited damage waiver, and takes all reasonable precautions to safeguard rented items and uses them in a safe and responsible manner, Diamond Equipment assumes the risk of direct physical loss or damage due to accidental damage to rental equipment except in the following circumstances: 1. Loss, damage or failure of tires and tubes under any circumstances. 2. If equipment is overloaded, operated above the rated capacity, rolled over, or if operating and safety instructions are not followed. 3. If customer fails to contact Diamond Equipment regarding maintenance and servicing of equipment, including but without limitation, lubrication, change of filters when required, and maintenance of adequate air, oil, water, or fuel pressures or levels. 4. If damage results from improper or unsafe operation or care whether caused by negligence, lack of training incompetence, or infidelity of the customer’s employee or other person to whom rented items are entrusted. * * * * Damage waiver does not cover theft of equipment while in renter’s possession. Clearly, the “limited damage waiver” clause applies only to the issue of who is responsible for damage to the rented equipment and not whether Diamond is responsible for the injuries to Jordan. Hence, the fact that Jordan initialed acceptance of this clause is utterly irrelevant to our analysis of the exculpatory “Warranties and Liabilities” clause. The only other “proof’ cited by the majority that Jordan knew he was releasing Diamond of all liability is the fact that Jordan signed the rental contract. First, I must disagree fundamentally with the idea that a mere signature, without more, is enough to show the party had knowledge of the potential liability he thereby released. Indeed, as the great majority of exculpatory contracts are signed documents, the Finagin requirement of “knowledge of the liability released” would become a virtual nullity if a signature was all that was required to show knowledge. Instead, the analysis should include “whether [the signor] was given a reasonable opportunity to read and comprehend that he was signing a complete waiver of liability.” Plant, 345 Ark. at 499, 47 S.W.3d at 897 (Glaze, J., dissenting). In the instant case, Diamond has not presented evidence at this stage of the proceeding, outside the signing of the rental agreement, to establish that Jordan read and comprehended that he was signing a complete waiver of liability. Moreover, the majority incorrectly states that Jordan did not offer proof that he was unaware of the liability he released by signing the contract. To the contrary, during his deposition, Jordan was unable to say for certain that he remembered the exculpatory clause on his agreement. He stated, “There is something that has a lot of small writing on the back of the contract that I signed, but I cannot specifically say [the exculpatory clause] would have been on the back.” Where, as here, the only evidence offered by Diamond in support of the exculpatory clause is the fact that Jordan signed the rental agreement, I believe the foregoing statement by Jordan is enough to raise a genuine issue of material fact as to whether Jordan was, in fact, “knowledgeable of the potential liability that is released.” Finagin v. Arkansas Dev. Fin. Auth., 355 Ark. at 458, 139 S.W.3d at 808. For that reason, if for no other, the circuit court erred in granting summary judgment in favor of Diamond. In short, the majority opinion provides no clarity on the issue of the enforcement of exculpatory clauses. The majority wholly fails to determine the scope of the Diamond exculpatory clause, and then attempts to avoid this failure by making a public-policy-style argument that in fact goes to the merits of the case. In any event, this approach rejects our tradition of analyzing separately the questions of clarity of scope and public policy. Because the majority uses broad, sweeping language instead of analyzing the clause at issue here, this case will have far-reaching and disastrous consequences. Henceforth, exculpatory clauses will no longer be strongly disfavored or strictly construed against the parties relying on them. Instead, the only relevant inquiry will be whether or not the agreement has been signed. Under such a system, exculpatory clauses will become favored and broadly construed, and few, if any, will ever be declared unenforceable. For all of the above-stated reasons, I respectfully dissent. Hannah, C.J., and Glaze, J., join.   See Gulf Compress Co. v. Harrington, 90 Ark. 256, 119 S.W. 249 (1909).