Law Updates

Maryland Court of Appeals Upholds Enforceability of Exculpatory Clause in Commercial Retail Center Agreement, Executed by Parent on Behalf of Minor Child

BJ’s Wholesale Club v. Rosen, Court of Appeals of Maryland, Case No. 99 (November 27, 2013) | View pdf

(December 1, 2013) Jhanelle A. Graham, Associate.

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In BJ’s Wholesale Club v. Rosen, the Court of Appeals of Maryland was asked to consider the enforceability of a clause, which contained both an exculpatory provision and indemnification language, in an agreement executed by a parent on behalf of his minor son, permitting his son’s use of a free supervised play area called the “Incredible Kids’ Club” (Kids’ Club) offered by BJ’s Wholesale Club, Inc. (BJ’s), a commercial wholesale retail center at its location in Owings Mills, Maryland. Writing for the appellate court, Judge Lynne A. Battaglia held that exculpatory clauses are unenforceable in “transactions affecting the public interest,” including those transactions that are not readily susceptible to definition. The court further explained that these “transactions affecting the public interest” are determined by evaluating the totality of the circumstances against the backdrop of current societal expectations, which can be derived from relevant statutory and common law.

The Kids’ Club at issue contained a number of different amusement items, including a plastic apparatus called “Harry the Hippo,” which children were permitted to use while their parents shopped. To use the Kids’ Club, BJ’s required parents to sign an agreement, entitled “BJ’s Incredible Kids’ Club Rules,” which mandated usage restrictions. Of particular relevance, BJ’s Incredible Kids’ Club Rules contained an exculpatory clause that provided:

I further acknowledge that I have read, understood and I voluntarily agree to abide by all of the rules appearing above and/or rules as posted in the Play Center and registration area. In consideration for this service, I, individually and on behalf of my child, do hereby waive, release and forever discharge BJ’s Wholesale Club, Inc.; its subsidiaries and affiliates and their respective agents, employees, officers, directors, shareholders, successors and assigns from any and all claims and causes of action of any kind or nature which are in any way related, directly or indirectly, to the use of Play Center which I may have or that hereafter may accrue including any such claims or causes of action caused in whole or in part by the negligence of BJ’s Wholesale Club, Inc., its subsidiaries and affiliates, and their respective agents, employees, officers, directors, successors and assigns. I understand that my child is here at my own risk and expense and agree that neither I nor my child will bring any claim or cause of action of any kind or nature against BJ’s Wholesale Club, Inc., its subsidiaries and affiliates and their respective agents, employees, officers, directors, successors and assigns.

The agreement also contained the following indemnification language, in smaller font than the remaining agreement:

I further agree to indemnify, defend and hold harmless BJ’s Wholesale Club, Inc., its subsidiaries and affiliates and their respective agents, employees, officers, directors, successors and assigns from any claims or causes of action of any kind arising from my or my child’s use of the Play Center. By placing my signature below, I acknowledge and agree that I have read this agreement, understood all of the terms and conditions contained herein, and that this agreement will be in full force and effect during each of my or my child’s visit to the Play Center. This agreement shall remain in full force and effect at all times whether my child is dropped off at the Play Center by me or anyone else.

On July 17, 2005, Russell Rosen executed the “BJ’s Incredible Kids’ Club Rules,” inclusive of both the exculpation and indemnification clauses, on behalf of his three (3) minor children, including his son, Ephraim Rosen. Approximately fifteen (15) months later, Beily Rosen, his wife, went shopping at the BJ’s’ Owings Mills location and dropped off then five-(5)-year old Ephraim at the Kids’ Club where Ephraim was injured, according to the Rosens’ Complaint filed in the Circuit Court for Baltimore County. The Complaint pleaded one (1) count in negligence against BJ for placing The Hippo in an area without sufficient padding. Thereafter, BJ’s filed a motion for summary judgment under Maryland Rule 2-501, alleging that no factual matters were in dispute and that, pursuant to the Court of Appeals’ decision in Wolf v. Ford, 335 Md. 525, 644 A.2d 522 (1994), the exculpatory clause was valid and barred the Rosens’ claims as a matter of law. After holding a hearing, Judge Thomas J. Bollinger, Sr., of the Circuit Court for Baltimore County, granted summary judgment for BJ’s, and the Rosens filed a timely notice of appeal in the Court of Special Appeals. In a reported opinion, the Court of Special Appeals reversed the lower court’s decision, striking down the exculpation and indemnification clauses and acknowledging that, while the appellate court’s decision in Wolf validated exculpatory clauses, “[t]here are circumstances . . . under which the public interest will not permit an exculpatory clause in a contract[.]” Rosen v. BJ’s Wholesale Club, Inc., 206 Md. App. 708, 716, 51 A.3d 100 (2012). BJ’s petitioned the appellate court for a writ of certiorari, which it granted.

First, the appellate court stated that an exculpatory clause is a “contractual provision relieving a party from liability resulting from a negligent or wrongful act.” Black’s Law Dictionary (9th ed. 2009). By entering into an exculpatory agreement, “the parties expressly . . . agree in advance that the defendant is under no obligation of care for the benefit of the plaintiff, and shall not be liable for the consequences of conduct which would otherwise be negligent.” Wolf, 335 Md. at531, 644 A.2d at 525, quoting W. Page Keeton, et al., Prosser and Keeton on the Law of Torts, § 68, at 482 (5th ed. 1984) and citing Restatement (Second) of Contracts § 195 (1981). Moreover, the appellate court opined that exculpatory clauses are to be construed strictly, requiring that the language of any such clause “clearly and specifically indicates the intent to release the defendant from liability for personal injury caused by the defendant’s negligence.” Adloo v. H.T. Brown Real Estate, Inc., 344 Md. 254,266, 686 A.2d 298, 304 (1996).

Second, the appellate court cited Wolf, which articulated various exceptions to the validity of exculpatory clauses: (1) intentional harms or for the more extreme forms of negligence, i.e., reckless, wanton, or gross; (2) a contract that is the product of grossly unequal bargaining power; and (3) a transaction that affects the public interest. According to the Court in Wolf, this last category includes the performance of a public service obligation, e.g., public utilities, common carriers, innkeepers, and public warehousemen, as well as those transactions, not readily susceptible to definition or broad categorization, that are so important to the public good that an exculpatory clause would be “patently offensive,” such that “‘the common sense of the entire community would . . . pronounce it’ invalid.” Md. Nat’l Cap. P. & P. v. Wash. Nat’l Arena, 282 Md. 588, 606, 386 A.2d 1216, 1228 (1978).

After exploring the history of Maryland case law, the appellate court concluded that there are clear societal expectations set forth in the law that parents should make decisions pertaining to their children’s welfare, and that those decisions are generally in the child’s best interest. Additionally, a brief survey of various pieces of legislation revealed to the appellate court that parents are empowered to make significant decisions on behalf of their children. Here, Mr. Rosen made a decision to sign an exculpatory agreement on his behalf and that of his children. According to the appellate court, there is a societal expectation that a parent’s decision-making is not limited; thus, Mr. Rosen’s execution of an exculpatory agreement on behalf of Ephraim to allow him to use the Kids’ Club was not a transaction affecting the public interest within the meaning of Wolf, which otherwise would have impugned the effect of the agreement. The Court of Appeals also rejected the notion that an agreement prospectively waiving a claim for negligence executed by a parent on behalf of a child should be invalidated because a commercial entity may better be able to bear the risk of loss than a non-commercial entity by purchasing insurance. Finally, the appellate court stated that it had never applied the parens patriaedoctrine to invalidate, undermine, or restrict a decision, such as the instant one, made by a parent on behalf of his child in the course of the parenting role. Therefore, the appellate court concluded that the Court of Special Appeals erred by invoking the State’s parens patriae authority to invalidate the exculpatory clause in the Kids’ Club Rules agreement.