Dunlap v. Fortress Corp. and Covenant Health ( 2000 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
October 2, 2000 Session
MARTHA DUNLAP v. FORTRESS CORPORATION and COVENANT
HEALTH
Direct Appeal from the Circuit Court for Knox County
No. 2-48-98 Hon. Harold Wimberly, Circuit Judge
FILED OCTOBER 27, 2000
No. E2000-00103-COA-R3-CV
Plaintiff’s action for personal injuries sustained at defendant’s fitness center was dismissed by the
Trial Court because plaintiff’s agreement with the center contained an exculpatory clause. We
vacate the Judgment.
Tenn. R. App. P.3 Appeal as of Right; Judgment of the Circuit Court vacated.
HERSCHEL PICKENS FRANKS , J., delivered the opinion of the court, in which HOUSTON M. GODDARD ,
P.J., and D. MICHAEL SWINEY, J., joined.
Wayne A. Ritchie, II and Debra C. Poplin, Knoxville, Tennessee, for Plaintiff-Appellant.
F. Michael Fitzpatrick, Knoxville, Tennessee, for Defendant-Appellee.
OPINION
In this action, plaintiff alleged that on January 29, 1997, she was using the exercise
facilities at the defendant’s fitness Center and was tripped by a piece of rubber matting on the floor
near the walking track, causing her multiple injuries. She further alleged that the matting constituted
an unreasonably dangerous condition of the premises, and that defendant’s employees were negligent
in leaving the matting on the floor which was the proximate cause of her injuries. Among the
defenses raised by defendant in response to plaintiff’s complaint, was the assertion that plaintiff
expressly assumed the risk based upon her written contract with defendant. The contract contains
an exculpatory clause which reads as follows:
MEMBER RELEASES AND DISCHARGE S CENTER, ITS SHAREHOLD ERS, DIRECTORS,
OFFICERS, EMPLOYEES, AND AGENTS FROM ANY AND ALL DAMAGES OR CAUSES OF
ACTION FOR PERSONAL INJURY TO MEMBER OR MEMBER’S CHILD OR CHILDREN
RESULTING FROM OR ARISING OUT OF USE OF OR PARTICIPATION IN ANY OF
CENTER’S FACILITIES OR PROGRAM S.
Defendant then filed a Motion for Summary Judgment which the Trial Court granted.
When reviewing a grant of summary judgment, this Court must take the strongest
legitimate view of the evidence in favor of the nonmoving party, allow all reasonable inferences in
favor of that party, and discard all countervailing evidence. Byrd v. Hall, 847 S.W.2d 208 (Tenn.
1993). Summary judgment is only proper where there are no genuine issues of material fact and the
moving party is entitled to judgment as a matter of law. Shadrick v. Coker, 963 S.W.2d 726 (Tenn.
1998). Where a question of law is involved, no presumption of correctness attaches to the Trial
Court’s judgment. Union Carbide Corp., v. Huddleston, 854 S.W.2d 87 (Tenn. 1993).
Defendant asserts that the exculpatory clause is valid, and relies upon the cases of
Empress Health and Beauty Spa, Inc., v. Turner, 503 S.W.2d 188 (Tenn. 1973), and Petry v.
Cosmopolitan Spa International, Inc., 641 S.W.2d 202 (Tenn. Ct. App. 1982). In these cases, the
plaintiffs had been injured while using exercise equipment and had signed exculpatory clauses
similar to the one now before the Court. In these cases the Court said the exculpatory clauses were
valid and enforced them against the plaintiffs.
On appeal, plaintiff argues that the exculpatory clause in this case is invalid on the
authority of Olson v. Molzen, 558 S.W.2d 429 (Tenn. 1977).
We pretermit the issue based on Molzen and conclude that the dispositive issue in this
case is whether Tenn. Code Ann.§47-18-301 et seq. renders the exculpatory clause in this case
unenforceable.
Subsequent to Empress Health and Beauty Spa, Inc., and Petry, the Tennessee
Legislature passed legislation regarding health clubs as a part of the Consumer Protection Act, Tenn.
Code Ann. §47-18-301 et seq. Tenn. Code Ann. §47-18-303 states that a health club agreement
which fails to conform to the requirements of the statute “shall be unenforceable against the buyer”.
The statute’s definition section, Tenn. Code Ann. §47-18-301 defines a “health club”
as “any enterprise organized for profit, however styled, which offers on a regular, full time basis
services or facilities for the development or preservation of physical fitness through exercise, weight
control, or athletics.” The record demonstrates that this is precisely the type of facility that defendant
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was operating, and defendant is a for-profit corporation. However, Tenn. Code Ann. §47-18-
301(3)(B), excludes from the definition of “health club” any health club which is tax exempt under
the provisions of Tenn. Code Ann. §67-6-330(a)(19). But there is nothing in the record to indicate
that defendant falls within this exception.
Tenn. Code Ann. §47-18-305 states:
47-18-305. Requirements for valid agreements. - (a) All health club agreements
shall:
(1) Be in writing;
(2) Be signed by the buyer;
(3) Designate the date on which the buyer actually signed the agreement;
and
(4) Contain in boldface type of at least ten (10) points, in immediate
proximity to the space reserved for the signature of the buyer, the following
statement:
BUYER’S RIGHT TO CANCEL
YOU (THE BUYER) MAY CANCEL THIS AGREEMENT BY SENDING
NOTICE OF YOUR WISH TO CANCEL TO THE HEALTH CLUB BEFORE
MIDNIGHT OF THE THIRD DAY (EXCLUDING SATURDAYS, SUNDAYS,
AND LEGAL HOLIDAYS) AFTER THE DAY YOU SIGNED THE
AGREEMENT. THIS NOTICE MUST BE SENT BY REGISTERED MAIL
TO THE FOLLOWING ADDRESS:
_________________
_________________
_________________
WITHIN THIRTY (30) DAYS AFTER RECEIPT OF THE NOTICE OF
CANCELLATION, THE HEALTH CLUB WILL RETURN ANY PAYMENTS
MADE AND ANY NOTE EXECUTED BY YOU IN CONNECTION WITH
THE AGREEMENT.
(5)(A) Contain in boldface type of at least ten (10) points, the following
statement:
SHOULD YOU (THE BUYER) CHOOSE TO PAY THIS AGREEMENT
IN FULL, BE AWARE THAT YOU ARE PAYING FOR FUTURE
SERVICES AND MAY BE RISKING LOSS OF YOUR MONEY IN THE
EVENT THIS HEALTH CLUB CEASES TO CONDUCT BUSINESS.
(B) Contain in boldface type, the following statements in separated
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paragraphs:
(I) IN ADDITION TO ANY OTHER REMEDIES PROVIDED BY
LAW, IN THE EVENT THIS HEALTH CLUB CEASES OPERATION
AND FAILS TO OFFER YOU (THE BUYER) AN ALTERNATE
LOCATION WITHIN FIFTEEN (15) MILES, WITH NO ADDITIONAL
COST TO YOU, THEN NO FURTHER PAYMENTS SHALL BE DUE TO
ANYONE, INCLUDING ANY PURCHASER OF ANY NOTE
ASSOCIATED WITH OR CONTAINED IN THIS CONTRACT.
(ii) STATE LAW REQUIRES THAT HEALTH CLUB
AGREEMENTS BE PAYABLE ONLY IN THE FOLLOWING MANNER,
AND ANY HEALTH CLUB WITH ENTERS INTO HEALTH CLUB
AGREEMENTS SHALL OFFER BOTH PAYMENT OPTIONS AT THE
SAME PRICE, EXCLUDING INTEREST OR FINANCE CHARGES OR
OTHER EQUIVALENT CHARGES WHICH SHALL NOT EXCEED
EIGHTEEN PERCENT (18%) OF THE TOTAL CONTRACT PRICE:
(a) Full payment within ninety (90) days after entering into the
health club agreement; or
(b) Equal monthly installments with any down payment (unless
exempt as provided by law) limited to thirty percent (30%) of the total cost
of the agreement. Prepayment is allowed at any time with full refund of
unearned finance charges.
(iii) THIS CONTRACT DOES NOT CONTAIN ANY PAYMENTS
OF ANY KIND, INCLUDING, BUT NOT LIMITED TO, ENROLLMENT
FEES, MEMBERSHIP FEES, OR ANY OTHER DIRECT PAYMENTS
TO THE HEALTH CLUB, OTHER THAN FULL PAYMENT FOR THE
HEALTH CLUB AGREEMENT OR MONTHLY INSTALLMENT
PAYMENTS WITH ANY DOWN PAYMENT (UNLESS EXEMPT AS
PROVIDED BY LAW) LIMITED TO THIRTY PERCENT (30%) OF THE
TOTAL COST OF THE AGREEMENT.
(iv) THERE ARE NO AUTOMATIC OR LIFETIME RENEWALS
OF THE TERM INCIDENT TO THE TERM OF THIS CONTRACT. IF
THE HEALTH CLUB PROVIDES FOR A RENEWAL OPTION, SUCH
OPTION MUST BE AFFIRMATIVELY AGREED TO IN WRITING BY
THE BUYER AT THE BEGINNING OF THE RENEWAL PERIOD.
THE ANNUAL COST OF SUCH RENEWAL SHALL NOT BE LESS
THAN THIRTY PERCENT (30%) OF THE ANNUALIZED COST OF
THE BASE MEMBERSHIP CONTRACT OR SEVENTY-FIVE
DOLLARS ($75.00), WHICHEVER IS GREATER, PAYMENT OF ANY
RENEWAL SHALL BE MADE AS REQUIRED BY TENNESSEE CODE
ANNOTATED, § 47-18-305(a)(5)(B)(ii).
(b) A health club shall not enter or offer to enter into a health club agreement
unless the health club is fully operational and available for use. The division may,
upon application, certify that a health club is fully operational if substantially all of
the promised equipment and services are available for use, and the health club has
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made a diligent effort to provide the remaining equipment and services.
The provisions underlined in the foregoing statute are not contained in the contract
plaintiff signed with defendant.
In an unreported case of Floyd v. Club Systems of Tennessee, Inc., 1999 WL 820610(Tenn. Ct. App. July 20, 1999). This Court considered whether the contract before it was
unenforceable, pursuant to Tenn. Code Ann. §47-18-303, which renders such contracts
unenforceable unless they conform with the provisions of Tenn. Code Ann. §47-18-301 et seq. The
Court in Floyd said “We find that the substance in the statutory requirements is embodied in this
contract, and that any minor distinction does not materially alter the meaning of the phrases to a
reasonable reader. We therefore hold that this agreement does not ‘fail to conform’ to the provisions
of the Code as contemplated by §47-18-303.” Unlike the contract before the Court in Floyd, the
contract in this case does not substantially comply with the regulatory requirements. Accordingly,
we find the contract to be unenforceable, and vacate the judgment of the Trial Court and remand for
further proceedings consistent with this opinion.
The cost of the appeal is assessed to defendant, Fortress Corporation.
_________________________
HERSCHEL PICKENS FRANKS , J.
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