Beaver, Dorothy v. Grand Prix Karting , 246 F.3d 905 ( 2001 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-2387
DOROTHY BEAVER and STACY J. BEAVER,
Plaintiffs-Appellants,
v.
GRAND PRIX KARTING ASSOCIATION, INC.,
an Indiana corporation; and NATIONAL KART
NEWS, INC., an Indiana corporation,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Indiana, South Bend Division.
No. 3:96-CV-0140-AS--Allen Sharp, Judge.
Argued January 22, 2001--Decided March 30, 2001
Before BAUER, KANNE, and EVANS, Circuit Judges.
EVANS, Circuit Judge. The death last month of
race car legend Dale Earnhardt at the Daytona 500
was tragic, but not unpredictable. Indeed, the
sport of automobile racing is a hazardous
activity, and drivers on the NASCAR circuit know
very well that they risk life and limb every time
they get into a race. The same can be said,
though to a lesser degree, to be sure, of go kart
racers. As karts have become faster and more
maneuverable, the sport has matured from little
more than child’s play to a rather dangerous
activity. Although the risks of negotiating a
race course at high speeds in a vehicle that
offers little protection seem obvious, organizers
of go kart races have adopted the practice of
requiring participants to sign a release flagging
those risks and waiving claims arising from
injuries sustained during a race. In this case we
confront the question of whether such a release
can be enforced against a racer who likely was
aware of the requirement that she execute it, but
somehow participated in the race without doing
so.
First, a little bit of background. In July of
1994, plaintiff Dorothy Beaver participated in
the annual Elkhart Grand Prix, a series of go
kart races held in Elkhart, Indiana. During the
event in which she drove, a piece of polyurethane
foam padding used as a course barrier was torn
from its base and ended up on the track. One
portion of the padding struck Beaver in the head,
and another portion was thrown into oncoming
traffic, causing a multi-kart collision during
which Beaver sustained severe injuries. In 1996
Beaver and her husband Stacy filed this diversity
action against the race organizers (Grand Prix
Karting Association, Inc., National Kart News,
Inc., and Curt Paluzzi) and the manufacturers of
the foam padding (Foamcraft, Inc. and, by later
amendment, Foamex International, Inc. and Foamex
L.P.) which the Beavers claimed was defective.
The race organizers denied the material
allegations of the complaint--which included
counts alleging willful and wanton conduct,
misrepresentation and concealment, and failure to
warn--and asserted the affirmative defense that
Beaver "executed a valid and proper release and
indemnification agreement."
Much to the race organizers’ chagrin, discovery
revealed that the release upon which they relied
was executed by Beaver prior to the 1993 Elkhart
Grand Prix, a race in which she participated one
year before her accident. A search for a release
executed by Beaver for the 1994 race turned up
nothing. Despite this major setback, the race
organizers pressed on with a motion for summary
judgment, arguing (1) the evidence demonstrated
Beaver had executed a release applicable to the
1994 race (notwithstanding their inability to
find it) and, (2) even if she had not executed
such a release, her actions manifested her
intention to be bound by its terms.
Either of the race organizers’ arguments, if
successful, would substantially relieve them of
liability and obviate further proceedings on the
merits of certain of Beaver’s claims. But both
arguments depended on disputed issues of fact and
thus were inappropriate for resolution at the
summary judgment stage. The district judge
recognized this and, in a commendable effort to
avoid wasting scarce judicial resources,
empaneled a jury to resolve the limited issues of
whether Beaver executed a release applicable to
the 1994 race and, if not, whether her actions,
combined with her knowledge that go kart events
customarily require drivers to execute releases,
indicated a willingness to be bound in any event.
At the trial, Beaver testified that she had
participated in a number of go kart races since
taking up the sport in 1985, that many of these
races required her to execute a release in order
to participate, and that she had never refused to
sign one. Beaver acknowledged her signature on
the release for the 1993 Elkhart Grand Prix but
could not remember executing a fresh copy at
registration for the 1994 race. Although she
participated in the 1994 race, and a photograph
of her taken prior to the race shows her wearing
a wristband she received at race registration,
Beaver remembers nothing about the 1994 race due
to the injuries she sustained.
Paluzzi, the race promoter, testified for the
defense. He stated that all participants in the
1994 race were required to sign a release,
identical to the one used in 1993, as part of the
registration process. Paluzzi confirmed that
Beaver had pre-registered and checked in at the
race site. It was never brought to Paluzzi’s
attention that anyone refused to sign the
release, and if anyone had done so, he or she
would not have been permitted to race. Paluzzi
admitted, however, that he had searched far and
wide for Beaver’s 1994 release before coming up
dry. In addition, Paluzzi admitted that several
race officials who entered a "restricted area"
(i.e., the track, pit, and other potentially
dangerous areas covered by the release) had not
executed releases.
Paluzzi’s testimony was corroborated by several
other race officials who testified that race
policy required a release and that they could
conceive of no way a racer could complete
registration without executing one. At least two
of these individuals admitted that they did not
sign releases themselves, however, despite the
fact that they entered restricted areas. Finally,
the race organizers called a host of witnesses
who testified that in the dozens (or hundreds) of
races in which they had participated, a release
was always required.
Beaver’s mother, father, and brother--all go
kart racers themselves--testified by deposition.
Although her mother could remember no race that
did not require a release, her father and brother
each named certain events that permitted drivers
to race without executing a release. None of
Beaver’s family members had ever refused to sign
a release when asked. In addition, an
acquaintance of Beaver’s named C.J. Van Dorn
testified that he had gone to race-day
registration with Beaver, and that neither she,
her brother, nor Van Dorn had signed a release.
At the conclusion of the evidence, Judge Allen
Sharp submitted two questions to the jury:
[1] Did Dorothy Beaver sign the "Release and
Waiver of Liability and Indemnity Agreement" for
the 1994 Elkhart Grand Prix?
[2] Did Dorothy Beaver, by her actions in
participating in the Elkhart Grand Prix, agree to
the terms of the "Release and Waiver of Liability
and Indemnity Agreement" for the 1994 Elkhart
Grand Prix?
The jury answered "no" to the first question and
"yes" to the second. Based on the jury’s
determination that Beaver had agreed to be bound
by the terms of the release, the district court
entered summary judgment in favor of the race
organizers. Beaver appeals./1
Beaver raises a host of alleged errors
committed by the district court, but her primary
argument is that she may be bound by the release
only if she expressly agreed to its terms. See
Fresh Cut, Inc. v. Fazli, 630 N.E.2d 575, 578
(Ind. Ct. App. 1994) (stating in dicta that
liability may be limited "by an exculpatory
clause or an express agreement . . . to assume
the risk") (emphasis added), vacated in part on
other grounds, 650 N.E.2d 1126 (Ind. 1995). An
express agreement, according to the sixth edition
of Black’s Law Dictionary, is one that is
"[m]anifested by direct and appropriate language,
as distinguished from that which is inferred from
conduct." As the jury found (and the race
organizers do not dispute on appeal), Beaver
never executed a release applicable to the 1994
race. And there is no evidence that she ever
orally indicated her assent to be bound by its
terms. Accordingly, Beaver argues, the district
court had no legal basis to submit the second
interrogatory to the jury, and the jury’s answer
to that interrogatory must be vacated as a matter
of law.
Notwithstanding the dicta in Fresh Cut implying
that an exculpatory agreement is invalid absent
an express agreement to its terms, Indiana courts
repeatedly have held that assent to a contract--
and that, in essence, is what a release is--may
be established by acts which manifest acceptance.
In Herald Telephone v. Fatouros, 431 N.E.2d 171(Ind. Ct. App. 1982), for example, the court held
that the defendant newspaper had formed a
contract to print an advertisement by accepting
a proposed copy of the advertisement along with
payment. Although the newspaper never expressly
promised to print the advertisement, its actions
unequivocally manifested its intent to accept the
advertiser’s offer to contract. Id. at 174-75.
Such a "manifestation or expression of assent
necessary to form a contract may be by work, act,
or conduct which evinces the intention of the
parties to contract." Calumet Motor Sales of
Hammond, Inc. v. M.F. Cooper Builders, Inc., 221
N.E.2d 438, 440 (Ind. Ct. App. 1966) (quoting 17
Am. Jur. 2d Contracts sec. 20).
Release and indemnification agreements are
governed by the same rules as other contracts,
Western Ohio Pizza, Inc. v. Clark Oil & Refining
Corp., 704 N.E.2d 1086, 1091 (Ind. Ct. App. 1999)
(release); Plumlee v. Monroe Guar. Ins. Co., 655
N.E.2d 350, 359 (Ind. Ct. App. 1995)
(indemnification), including the rule that assent
to the terms of a contract may be manifested by
a party’s actions. Indeed, the Indiana Supreme
Court specifically has held on at least two
occasions that "[a]ssent to a limitation of
liability may be assumed where a knowledgeable
party enters into the contract, aware of the
limitation and its legal effect, without
indicating non-acquiescence to those terms."
Martin Rispens & Son v. Hall Farms, Inc., 621
N.E.2d 1078, 1087 (Ind. 1993) (citing Carr v.
Hoosier Photo Supplies, Inc., 441 N.E.2d 450, 455
(Ind. 1982)). In State v. Daily Express, Inc.,
465 N.E.2d 764 (Ind. Ct. App. 1984), a trucking
company applied to the State Highway Commission
for a permit to transport an oversize load on
Indiana’s roads. Because the company made its
application over the telephone, it did not sign
an indemnification agreement that was part of the
written application. Id. at 766-67. Although the
Highway Commission reviewed the truck’s proposed
route (including bridge clearances) in connection
with granting the permit, the top of the truck
struck the underside of a bridge, and third
parties were injured in the accident. The
trucking company settled claims brought against
it by the third parties and then sought
compensation from the state, arguing that it was
not bound by the indemnification agreement
because it was never formally executed. Observing
that "[t]he validity of a contract is not
dependent upon the signature of the parties,
unless such is made a condition of the
agreement," id. at 767, the Indiana Appellate
Court held that the indemnification agreement was
binding. Because the trucking company was aware
of the terms of the agreement through its prior
dealings with the Highway Commission, and
nevertheless chose to use Indiana’s roads without
objection, it could not later be heard to disavow
the indemnification clause. Id. at 769. Based on
this reasoning, we cannot accept the proposition
that the Elkhart Grand Prix release cannot bind
Beaver absent her signature.
The question of whether assent to an
exculpatory clause can be gleaned from a party’s
actions is generally a question of fact. It was
here, and the second jury interrogatory was a
perfectly proper way of resolving the disputed
issue. Based on the evidence presented, the jury
reasonably concluded that it is the custom and
practice of the go kart industry, as well as the
Elkhart Grand Prix, to require race participants
to execute releases. The jury further reasonably
concluded that Beaver was well-aware of this
requirement and chose to participate in the 1994
race anyway. Under Indiana law, these facts
sufficiently establish Beaver’s assent to the
release.
Beaver also contends that the Indiana Statute
of Frauds, Ind. Code sec. 32-2-1-1, bars
enforcement of the release absent her signature.
It is true that certain indemnity agreements are
covered by the statute, and we’ll assume that it
also covers release clauses contained in the same
contract as a covered indemnity provision. But in
Henry C. Beck Co. v. Fort Wayne Structural Steel
Co., 701 F.2d 1221, 1225-26 (7th Cir. 1983), we
held that the statute applies only if the promise
to indemnify is made by the third party directly
to the creditor. For example, if Beaver (the
third party) had promised another driver who was
injured in the race (the creditor) to pay claims
the other driver had against the race organizers
(the debtors), the statute would require that the
promise be written. Here, however, Beaver (the
third party) promised the race organizers (the
debtors) to indemnify them against claims made by
other drivers (the creditors) against the race
organizers. Because Beaver made her promise to
indemnify to the debtors and not the creditors,
the statute of frauds does not apply. See id.Beaver next argues that the release cannot be
enforced against her because it is
unconscionable. A contract may be declared
unconscionable if a great disparity in bargaining
power leads the party with lesser power to enter
a contract unwillingly. Pinnacle Computer Servs.,
Inc. v. Ameritech Publ’g, Inc., 642 N.E.2d 1011,
1017 (Ind. Ct. App. 1994). "In addition, the
contract must be one that no sensible person not
under delusion, duress or in distress would make,
and one that no honest and fair person would
accept." Id. Beaver does not argue that she
lacked sense or suffered from delusion or duress
when she agreed to the release prior to the 1993
Elkhart Grand Prix. Yet that release is identical
to the one she now challenges as unconscionable.
Moreover, nothing in our record suggests that the
release at issue is substantively different from
the myriad other releases executed by Beaver and
other go kart enthusiasts each time they race.
And it certainly does not shock the conscience
that the organizers of a dangerous event would
require an arm’s-length exculpatory agreement
from participants. In fact, it would strike us as
odd indeed for promoters to not want to protect
themselves if participants in a dangerous event
like this suffer a mishap. The release here is
anything but unconscionable.
In a parting shot at the release, Beaver asks
us to find it void because the race organizers
misrepresented and/or concealed information
relevant to the safety of the race course.
Specifically, Beaver alleges that the race
organizers concealed the fact that the foam
padding used on the course was experimental and
that its suitability as padding on a race course
had not adequately been tested.
Misrepresentations or concealments of fact in the
context of an exculpatory contract render the
contract void. See Fultz v. Cox, 574 N.E.2d 956,
959 (Ind. Ct. App. 1991); see also Cadek v. Great
Lakes Dragaway, Inc., 58 F.3d 1209, 1213 (7th
Cir. 1995) (applying Wisconsin law). But there is
no evidence in the record that the race
organizers ever made any representation about the
foam padding or in any way attempted to conceal
any aspect of the course. Not even Beaver’s
briefs on appeal set out any specific alleged
misrepresentation or concealment. Accordingly, we
will not reverse the district court’s or the
jury’s findings with respect to the
enforceability of the release.
The scope of the release--which of Beaver’s
claims it bars--is an entirely different inquiry,
however. Beaver first asserts that even if the
release precludes each of her claims, it cannot
bar recovery by her husband for loss of
consortium because he was not a party to the
release agreement. There is a split of authority
on the question of whether a spouse’s claim for
loss of consortium is viable in the face of a
valid release by the spouse suffering the primary
injury. Compare Hardy v. St. Clair, 739 A.2d 368,
372 (Me. 1999) (release executed by pit crew
member does not bar wife’s claim for loss of
consortium); Bowen v. Kil-Kare, Inc., 585 N.E.2d
384, 392 (Ohio 1992) (release executed by race
car driver does not bar wife’s claim for loss of
consortium); Huber v. Hovey, 501 N.W.2d 53, 57
(Iowa 1993) (release executed by spectator at
race track does not bar wife’s claim for loss of
consortium) with Conradt v. Four Star Promotions,
Inc., 728 P.2d 617, 621-22 (Wash. Ct. App. 1986)
(release executed by race car driver bars wife’s
claim for loss of consortium); Hall v. Gardens
Servs., Inc., 332 S.E.2d 3, 5 (Ga. Ct. App. 1985)
(release executed by woman injured while riding
horse bars husband’s claim for loss of
consortium)./2 "However, the more prevalent view
seems to be that the loss of consortium suit is
not barred as it is a separate and independent
cause of action which is the property of the
spouse and cannot be controlled by the injured
person." Caroll J. Miller, Annotation, Injured
Party’s Release of Tortfeasor as Barring Spouse’s
Action for Loss of Consortium, 29 A.L.R. 4th
1200, 1201 (1984). Indiana sides with the
majority of jurisdictions. See Rosander v. Copco
Steel & Eng’g Co., 429 N.E.2d 990, 991 (Ind. Ct.
App. 1982); see also Board of Comm’rs of Cass
County v. Nevitt, 448 N.E.2d 333, 341 (Ind. Ct.
App. 1983) ("Where . . . an injured husband’s
recovery is prevented by a procedural bar
unrelated to the merits of his claim, his claim
should still be viewed as valid, for the purpose
of supporting his wife’s claim for loss of
consortium."). Although we are not convinced of
the wisdom of this rule, it is our job to apply
Indiana law, not rewrite it. We therefore
reinstate Stacy Beaver’s claims based on loss of
consortium./3
Beaver also asks us to reverse the district
court’s decision as it applies to her willful and
wanton conduct claim. Although the release
purports to free the race organizers from "all
liability," courts have refused on public policy
grounds to enforce exculpatory agreements when
the claim at issue involves willful conduct.
E.g., Downing v. United Auto Racing Ass’n, 570
N.E.2d 828, 836 (Ill. App. Ct. 1991) (refusing on
public policy grounds to enforce release executed
by pit crew member as to willful and wanton
conduct claim against race track), abrogated on
other grounds by Burke v. 12 Rothschild’s Liquor
Mart, Inc., 593 N.E.2d 522 (Ill. 1992). At least
one Indiana court has recognized this rule,
albeit in dicta, see LaFrenz v. Lake County Fair
Board, 360 N.E.2d 605, 608 (Ind. Ct. App. 1977),
and the race organizers point to no contrary
authority. Although we consider it highly
unlikely that Beaver could ever prove the race
organizers acted willfully or wantonly, this
question was not presented to the district court
(or to us), as defendants’ summary judgment
motion focused exclusively on the release.
Finally, Beaver argues that a number of the
judge’s instructions to the jury misstated the
law and that the court erred in refusing to give
several of her proposed instructions. Given how
we have resolved the issues presented, the
complaint about the jury instructions need not be
independently discussed.
In sum, we find a sufficient legal and factual
basis to hold Beaver to the terms of the 1994
release. Because that release cannot bar her
claim for willful and wanton conduct or her
husband’s recovery for loss of consortium, we
reverse that part of the judgment and remand for
further proceedings. In all other respects the
district court’s judgment is affirmed. Each side
shall bear its own costs.
/1 This appeal involves only the claims against the
race organizers. Although the district court’s
judgment for defendants initially included the
foam padding manufacturers, they were removed
from the coverage of the judgment by a subsequent
order of court. The district court’s order
further indicated that its judgment in favor of
the race organizers was final and appealable, and
a later order stated that there was no just
reason for delay. We therefore have jurisdiction
to hear this appeal.
/2 Appellees also cite Groves v. Firebird Raceway,
Inc., 849 F. Supp. 1385, 1391-92 (D. Idaho 1994),
in which the district court held that a release
signed by a race car driver barred his wife’s
derivative claim for loss of consortium.
Appellees did not inform us, however, that the
Ninth Circuit reversed the decision of the
district court in an unpublished order squarely
on the proposition for which they cite it. See
Groves v. Firebird Raceway, Inc., 1995 WL 574619(9th Cir. Sept. 28, 1995). We mention this to
remind counsel that they are obligated to
thoroughly check each citation in their
submissions to this court (and all other courts),
and that a failure to do so can result in
sanctions. See Kawitt v. United States, 842 F.2d
951, 954 (7th Cir. 1988).
/3 Our decision may have little practical effect,
however, because Beaver agreed in the release to
indemnify the race organizers for any liability
they incur due to her participation in the race.
Thus, any recovery by Beaver’s husband will
ultimately be paid by Beaver herself.