Unpublished Disposition, 843 F.2d 502 (9th Cir. 1986)

No. 87-1646.

United States Court of Appeals, Ninth Circuit.

Before GOODWIN and NELSON, Circuit Judges, and RUDI M. BREWSTER, District Judge^** .

MEMORANDUM^* 

James Joseph Tuscano appeals from the district court's grant of summary judgment for defendant Malibu Grand Prix Corporation and denial of partial summary judgment for plaintiff in this negligence and product liability action. Tuscano received personal injuries when the race car he was driving at Malibu Grand Prix's race track went out of control and rolled over. The district court held that the exculpatory agreement Tuscano signed prior to using the car was enforceable under Arizona law, and that there was no genuine issue of material fact as to plaintiff's knowledge of the agreement since the agreement was conspicuous as a matter of law. Thus, the district court granted appellee's motion for summary judgment and denied appellant's cross-motion for summary judgment. We affirm in part and reverse and remand in part.

On April 25, 1986, appellant received injuries to his neck and right arm when the go-kart-type "race car" he was driving at appellant's race track rolled over. Appellee operates a recreational race track facility which offers the public an opportunity, for a fee, to operate a go-kart-type "race car" around a timed race course. Prior to operating the race car, prospective participants must sign an exculpatory agreement releasing Malibu from any and all claims arising out of the use of its race cars.

The release involved announced in large bold type the following caption: EXPRESS ASSUMPTION OF RISK, COMPLETE RELEASE AND AGREEMENT NOT TO SUE, AND INDEMNITY AGREEMENT--READ THIS CAREFULLY--IT AFFECTS YOUR LEGAL RIGHTS! Subsection one of the release provides that in exchange for the use of appellee's facilities, the releasor agrees to "ASSUME ANY AND ALL RISKS INVOLVED IN OR ARISING FROM DRIVER'S USE OR PRESENCE UPON THE FACILITIES."

Tuscano was driving at appellee's establishment for the first time. Before driving the race car, Tuscano signed appellee's standard exculpatory contract. Tuscano does not recollect whether or not he read the release. However, he does recall that prior to his signing of the release, appellee's attendant at the facility made certain representations regarding the substantive content of the document. The attendant allegedly represented that the release barred any claims that Tuscano might have arising from his own negligence.¹  Consequently, Tuscano claimed that he thought the release covered only injuries arising from his negligence rather than the injuries resulting from the negligence of Malibu or its defective race car or related facilities.

On May 22, 1986, appellant filed this suit against Malibu in the Superior Court of Maricopa County, State of Arizona. On June 9, 1986, the action was removed to the District Court for the District of Arizona on diversity jurisdiction grounds.

Appellee moved for summary judgment arguing that the exculpatory contract, releasing Malibu from tortious liability arising from appellant's use of the facilities, was an enforceable liability waiver under Arizona law. The appellant responded that the form, content, and manner of execution of the exculpatory contract did not satisfy the requirements for an enforceable liability waiver under Arizona law.

The district court held that there was no public policy impediment to enforcing appellee's exculpatory contract. The court also held that the provisions of the exculpatory agreement were sufficiently conspicuous as a matter of law that the plaintiff should have been aware of them regardless of whether he actually read the agreement, and accordingly, entered the summary judgment from which the appeal is taken.

This Court reviews an appeal from an order granting summary judgment de novo. Yazzie v. Olney, Levy, Kaplan & Tenner, 593 F.2d 100, 102 (9th Cir. 1979). Under Fed. R. Civ. P. 56(c), summary judgment is proper only where there is no genuine issue of any material fact or where, viewing the evidence and the inferences which may be drawn therefrom in the light most favorable to the non-moving party, the movant is clearly entitled to prevail as a matter of law. Id. at 102. We must determine whether there is any genuine issue of material fact underlying the adjudication and, if not, whether Arizona's substantive law was correctly applied. Id. at 102. Moreover, although the propriety of summary judgment is governed by Federal law, because this is a diversity action, Arizona law governs the substantive issues. Id. at 102; Milgard Tempering, Inc. v. Selas Corp. of America, 761 F.2d 553, 554 (9th Cir. 1985).

Appellant requests we certify this matter to the Arizona Supreme Court to resolve any uncertainties as to the application of Arizona law under these circumstances. We find it unnecessary to certify any questions to the Arizona Supreme Court because there is sufficient case law already addressing the applicable issues.

We agree with the district court that the exculpatory agreement in this action is not in violation of public policy. Generally, public policy considerations militate against the right of one party to contract himself out of tortious responsibility. Valley National Bank v. National Association for Stock Car Auto Racing Inc., 153 Ariz. 374, 736 P.2d 1186, 1189 (Ariz.Ct.App.), petition for reh'g denied (Ariz.Ct.App.1987); Central Alarm of Tucson v. Ganem, 116 Ariz. 74, 567 P.2d 1203 (Ariz.Ct.App.1977). However, in certain circumstances, one party can expressly agree to shoulder the risk of loss or injury that the law would otherwise have placed upon the other party. Valley National Bank, 736 P.2d at 1189.

The type of transaction in which exculpatory provisions have been held valid involve a party seeking to enforce an exculpatory provision who provides a non-essential, recreational service for public amusement. See Valley National Bank, 736 P.2d at 1189. Such transactions do not offend public policy notions. The release agreement in the instant case involves such a transaction; Malibu provides a non-essential, recreational service for public amusement rather than public necessity; therefore, the exculpatory agreement is not in violation of public policy.

The district court erred in its determination that there were no issues of material fact regarding the enforceability of the release under Arizona law. The district court held that where the exculpatory provisions in the release are conspicuous as a matter of law, it is irrelevant whether the plaintiff was actually aware of the provisions. Appellee argues that Tuscano's subjective understanding or failure to read and understand the terms of the agreement are immaterial because the release is conspicuous as a matter of law. Therefore, appellee concludes that Tuscano was bound by the terms of the document regardless of whether he read or understood the exculpatory clauses.

The two cases which appellee primarily relies upon, Salt River Project v. Westinghouse, 143 Ariz. 368, 694 P.2d 198 (1984), and Valley National Bank, provide guidance in analyzing the validity of a release agreement. An analysis of the court of appeals' holdings in Salt River and Valley National Bank reveals that the parties, before assenting to the release, must clearly intend to relinquish responsibility for tort liability that the law otherwise imposes upon the releasee. Salt River, 694 P.2d at 213 (quoting from this Circuit, M/V American Queen v. San Diego Marine Construction Corp., 708 F.2d 1483, 1488 (9th Cir. 1983)); Valley National Bank, 736 P.2d at 1189. Generally, it is immaterial whether or not the parties actually read the terms of the agreement, assuming the agreement is otherwise enforceable under Arizona law. See Darner Motor Sales Inc. v. Universal Underwriters Insurance Co., 140 Ariz. 383, 682 P.2d 388 (1984). In Valley National Bank, the court of appeals noted, in dictum, that "one who signs an instrument may not avoid the impact of its terms on the ground that he failed to read the instrument before signing it." 694 P.2d at 1190. n. 2. See Apolito v. Johnson, 3 Ariz.App. 232, 413 P.2d 291 (Ariz.Ct.App.), modified, 3 Ariz.App. 358, 414 P.2d 442 (Ariz.Ct.App.1966).

Although relinquishment of a right as a result of inadvertence does not void an otherwise valid waiver, relinquishment of a right due to the misrepresentations of the other party can affect the enforceability of a waiver. Where one of the parties to an agreement shows that he was induced to execute the agreement due to the misrepresentations of the other party, the agreement can be set aside. Bradley v. Industrial Commission, 51 Ariz. 291, 76 P.2d 745, 749 (1938).

Appellee cites Bradley in support of his argument that failure to read does not form the basis for voiding an otherwise enforceable agreement under Arizona law. Yet, in Bradley, the court stated as follows:

When a person ... has carelessly signed ... [a writing] without reading it, the mere fact that he believed it to be something else than what it was, when such belief was not brought about by the misconduct of the other party, furnishes no ground for the admission of the parol evidence that he did not mean to execute it, for courts are not under the duty of relieving parties of the consequences of their own gross negligence.

51 Ariz. 291, 76 P.2d 745, 748 (1938). (emphasis added). Generally, therefore, failure to read a document will not affect the enforceability of its terms unless one party was induced to execute the document by some legal fraud or misrepresentation by the other party. Id. at 746.

In the present case, there is a genuine issue of material fact regarding the propriety of Toscano's execution of the exculpatory agreement. Unlike the situation in Salt River and Valley National Bank where no extraneous misrepresentations regarding the content of the releases were made, in the instant case, the Malibu attendant allegedly made certain comments prior to Tuscano's signing of the release. Tuscano was a first time user of Malibu's race care facility. He testified that the attendant told him substantially that the "release" document meant that Tuscano was responsible for injury or damage caused by his own negligent driving. Tuscano allegedly did not read the waiver before he signed the document. He testified that he interpreted the assumption of risk phrase to mean that he would only be responsible for his own unsafe driving.

Given the type of agreement at issue in this case, the court must carefully scrutinize any alleged misconduct surrounding its execution which might render it unenforceable. In Salt River and Valley National Bank, the courts stressed that the parties must clearly intend to relinquish tort liability that the law otherwise imposes. In the present case, there is evidence that representations which might constitute misconduct were made by the Malibu attendant and were relied upon by Tuscano. Such evidence presents the possibility of a genuine question of material fact to be resolved. We, therefore, conclude that the district court erred in granting defendant's summary judgment. We also conclude that the district court properly denied plaintiff's partial summary judgment.

AFFIRMED IN PART, AND REVERSED AND REMANDED IN PART.