Bagley v. Mt. Bachelor, Inc., 356 Or 543 (December 18, 2014)

The Oregon Supreme Court has ruled that Mt. Bachelor’s liability release is unconscionable and therefore unenforceable. The result is that Mt. Bachelor, and every other recreational operator in Oregon, must go to trial if an injured customer claims negligence. Because skiing and snowboarding are inherently risky activities in which injuries are not uncommon, the ruling is likely to significantly increase the number of lawsuits against Oregon recreational organizations. A liability release can no longer be relied upon to keep a recreational operator out of court.

The Facts

Bagley, the plaintiff, suffered serious permanent injuries while snowboarding at Mt. Bachelor’s terrain park. Bagley filed suit alleging that Mt. Bachelor was negligent in the design, construction, maintenance, and inspection of a jump in the terrain park.

In purchasing a season pass, Bagley accepted a written “Release and Indemnity Agreement” that provided, in part:

“In consideration of the use of a Mt. Bachelor pass and/or Mt. Bachelor’s premises, I/we agree to release and indemnify Mt. Bachelor, Inc., its officers and directors, owners, agents, landowners, affiliated companies, and employees (hereinafter ‘Mt. Bachelor, Inc.’) from any and all claims for property damage, injury, or death which I/we may suffer or for which I/we may be liable to others, in any way connected with skiing, snowboarding, or snowriding. This release and indemnity agreement shall apply to any claim even if caused by negligence. The only claims not released are those based upon intentional misconduct.”

In addition, Mt. Bachelor posted signs at each of its ski lift terminals about the release. The release was conspicuous and unambiguous. Bagley admitted he understood he had entered into a release agreement. Bagley’s acceptance of the release was not at issue, only its enforceability. If the release was found to be unconscionable, it would be unenforceable as a matter of law. Because the Supreme Court concluded that enforcement of the release was unconscionable, it sent the case back to the lower court for trial. The case doesn’t decide if Mt. Bachelor is liable to Bagley, but only that Mt. Bachelor can’t rely on the release to avoid trial on the issue of negligence and liability.

Unconscionability

Unconscionability is a legal doctrine that applies when contract terms are so unjust or overwhelmingly one-sided that they are contrary to good conscience and public policy. An unconscionable contract is unenforceable.

In Bagley, the court considered unconscionability in two ways:  procedural unconscionability and substantive unconscionability. Procedural unconscionability refers to the conditions of contract formation and focuses on two factors:  oppression and surprise. Oppression exists if the parties have unequal bargaining power and the weaker party has no real opportunity to negotiate the terms of the contract. Surprise occurs if terms were hidden or obscured.

Substantive unconscionability refers to the terms of the contract rather than the circumstances of formation. Substantive unconscionability focuses on whether the substantive terms contravene the public interest or public policy. In considering the release for substantive unconscionability, the court considered three factors:

1. Would enforcement of the release cause a harsh or inequitable result?
2. Does the defendant’s recreational business operation serve an important public business or function?
3. Does the release attempt to disclaim liability for more serious misconduct than ordinary negligence?

Procedure Unconscionability

Surprise:  Bagley did not contend that the release was inconspicuous or ambiguous. He did not contend that he was surprised by its terms. Advantage:  Mt. Bachelor.

Oppression:  Bagley asserted that the release was not an agreement between equals, and Mt. Bachelor had superior bargaining strength by requiring its patrons to sign the release on a take-it-or-leave-it basis. Bagley argued he had no opportunity to negotiate for different terms or pay an additional fee to avoid the release. The court held that Bagley had “no meaningful alternative to defendant’s take-it-or-leave-it terms if he wanted to participate in downhill snowboarding.” Advantage:  Bagley.

Substantive Unconscionability

Harsh and Inequitable:  For this pretrial motion, the court assumed without deciding that Bagley’s allegations of negligence are true. The court held that enforcing the release to prevent Bagley from recovery for injuries because of negligence “would be inequitable because defendant, not its patrons, has the expertise and opportunity to foresee and control hazards of its own creation on its premises, and to guard against the negligence of its employees. Moreover, defendant alone can effectively spread the cost of guarding and insuring against such risks among its many patrons”. Advantage:  Bagley.

Important Public Interest or Function:  The court is less likely to uphold a release when an important public interest is involved. Mt. Bachelor argued that ski resorts do not provide an essential public service and, therefore, there is no public interest in interfering with the private contract reached between the parties. The court agreed that Mt. Bachelor does not provide an essential public purpose, but because the facility was an open public accommodation and open to the general public virtually without restriction, the court found a legitimate public interest concerning its operation. The court rejected Mt. Bachelor’s argument that the finding of skiing and snowboarding as “non-essential” would compel enforcement of the release. Instead, the court concluded that “defendant’s business operation is sufficiently tied to the public interest as to require the performance of its private duties to its patrons.” Advantage:  Bagley.

Ordinary Negligence:  The court had held in other cases that a release violated public policy “where it purports to immunize the releasee from liability for gross negligence, recklessness, or intentional conduct…”  The release here dealt only with liability for ordinary negligence. The release explicitly excludes intentional misconduct. Bagley’s claim is based on negligence. Although the court concluded this part of the analysis in favor of Mt. Bachelor, it also concluded that this issue “carries less weight than the other substantive factors we have considered.” Advantage:  Mt. Bachelor.

Ruling

The court concluded that permitting Mt. Bachelor to avoid liability from its own negligence would be unconscionable:

“…important procedural factors supporting that conclusion include the substantial disparity in the parties’ bargaining power in the particular circumstances of this consumer transaction, and the fact that the release was offered to plaintiff and defendant’s other customers on a take-it-or-leave-it basis.

There also are indications that the release is substantively unfair and oppressive. First, a harsh and inequitable result would follow if defendant were immunized from negligence liability, in light of (1) defendant’s superior ability to guard against the risk of harm to its patrons arising from its own negligence in designing, creating, and maintaining its runs, slopes, jumps, and other facilities; and (2) defendant’s superior ability to absorb and spread the costs associated with insuring against those risks. Second, because defendant’s business premises are open to the general public virtually without restriction, large numbers of skiers and snowboarders regularly avail themselves of its facilities, and those patrons are subject to risks of harm from conditions on the premises of defendant’s creation, the safety of those patrons is a matter of broad societal concern. The public interest, therefore, is affected by the performance of defendant’s private duties toward them under business premises liability law.”

In a footnote at the end of the opinion, the court asserts that it does not mean to suggest that an anticipatory release or limitation of negligence liability will never be enforced. In light of the court’s ruling, it’s impossible to imagine a recreational liability release for personal injury that might survive scrutiny. The footnote is merely a fig leaf on the court’s ruling:  liability releases are now unenforceable in Oregon.