Louisiana Record

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Arbitration expert predicts Supreme Court review in Sky Zone decision

By Mike Helenthal | Nov 3, 2016

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NEW ORLEANS — A Louisiana Supreme Court decision declining to enforce a waiver contract that a trampoline park required its customers to sign before jumping could still face the test of a U.S. Supreme Court review.

Liz Kramer, a partner with Minneapolis-based Sinston Leonard Street and an expert on arbitration law, said the October decision by the state’s highest court is ripe for a higher court review.

“They didn’t cite a case (in their decision), outside of an arbitration context, where they’ve done the same thing,” Kramer told the Louisiana Record. “They’re leaving themselves open to a challenge.”

At issue is a case filed against Sky Zone, which has an international franchise of trampoline parks that allow participants to bounce off specially designed floors and walls. According to the suit, Sky Zone required anyone participating in the bouncing activity to sign a waiver that required complaints about injuries to be settled in an arbitration process, not in open court. The waiver also imposed $5,000 of liquidated damages for any customer who filed a lawsuit.

But the court ruled that those two items – the arbitration requirement and the damages clause – constituted “adhesion,” making the contract unenforceable. Kramer said an “adhesionary” document is “a form document that a party with greater power offers on a permanent basis,and that can’t be revised.” In the case of the Sky Zone waiver, “your only choice (in signing) is if you go to Sky Zone or not,” she said.

The rules of contract language vary by state, she said, but most have some language to gauge the level of “unconscionability” in recognizing a contract’s enforcement. If the requirements in the waiver seem outlandish, there’s a good chance the court won’t recognize it. In the Sky Zone case, the court said the arbitration clause in the contract was “the only specific provision not relegated to a separate paragraph or set apart in some explicit way.”

“The fine was also the basis of one of the arguments (the court) used to say it was unenforceable,” Kramer said. “The court feels like, if doesn’t smell right at this stage, it should say in the public light and stay in court.”

She said there are certain other “sensitive” legal situations where courts avoid enforcing arbitration agreements, among them, nursing home admission and payday lending contracts.

“You can have people waive away liability, but you can’t force them into private court,” she said.

Kramer said companies try to maximize the power of waiver language to keep lawsuits low-key and out of the public eye in an effort to protect their reputation and brand value. Requiring arbitration would be one way to keep news of a lawsuit silent.

Kramer said Sky Zone case could represent the latest skirmish in a long-standing battle between the U.S. Supreme Court and state courts over the use of arbitration to settle disputes. She said the Supreme Court has positioned itself as “pro-arbitration” over the last decade, while the states have “rebelled” from that stance.

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