Rosen v. BJ's Wholesale Club, Inc.

KRAUSER, C.J. BJ’s Wholesale Club, Inc., appellee, is a self-described “membership warehouse club.” Among other things, it purports to offer its members “brand-name” products at relatively low prices. 1 To be a member, an interested party must pay an annual membership fee. BJ’s Wholesale provides a play center for the children of its members while its members shop. But, before a member’s child may have access to the play center, the member must execute a release agreement. The agreement, in addition to setting forth rules for the use of the club, ostensibly releases BJ’s Wholesale from “any and all claims and causes of action” arising from the use of the play center by a member’s child and requires a member to “indemnify, defend and hold harmless” BJ’s Wholesale from any such claims or causes of action.

As a member of BJ’s Wholesale, Russell Rosen executed one of BJ’s release agreements in July 2005. A little more than fifteen months later, on October 22, 2006, Mr. Rosen’s wife, Beily Rosen, entrusted the Rosens’ five-year-old son, Ephraim, to the play center, upon entering BJ’s to shop. While playing there, Ephraim fell head first from “an elevated plastic play apparatus,” suffering a serious brain injury. The Rosens thereafter brought a negligence action, on behalf of Ephraim and themselves, in the Circuit Court for Baltimore County, against BJ’s Wholesale.

In turn, BJ’s filed ⁷¹³ a counterclaim against the Rosens, alleging breach of the release agreement Mr. Rosen had signed, and later a motion for summary judgment invoking the same agreement. The circuit court granted summary judgment in favor of BJ’s Wholesale, concluding that the release agreement was valid and enforceable. Claiming that it is neither, the Rosens noted this appeal. Because we hold that a parent may not waive by agreement a minor child’s future claim in negligence against what we shall refer to as a “commercial enterprise”—that is, a for-profit, commercial entity that principally serves private interests 2 —we reverse the judgment below.

We further hold that the release’s indemnification clause is also unenforceable, because implementation of that clause under the circumstances of this case would obviate the very public policy considerations that underlie our conclusion that the exculpatory clause of the release agreement is both invalid and unenforceable. Background BJ’s Wholesale, a Fortune 500 corporation, operates a chain of “membership-only” warehouse stores in the eastern United States. Russell and Beily Rosen were members and shopped at the BJ’s store in Owings Mills, Maryland. As a courtesy to its members, BJ’s offers, at its stores, a free, supervised children’s play center, which BJ’s calls the “Incredible Kid’s Club.” But a member’s children may not use the play center, unless the member signs a release, containing exculpatory and indemnification clauses, as well as rules that must be followed to use the play center.

The rules speak to address such things as the minimum and maximum ages of a child using the center, the maximum length of time a child may remain at the play center on a single visit, the responsibility of parents to pick up their children and to answer the store’s paging promptly, a prohibition against sick children using the play center, and so on. ⁷¹⁴ At the bottom of the single-page document, in bold print, but what appears to be eight-point type, are exculpatory and indemnification provisions which are the subject of this appeal. 3 There, the document states: I hereby acknowledge that the participation in BJ’s Incredible Kid’s Club (the “Play Center”) is a benefit offered to me ás a part of my BJ’s Wholesale Club membership. I further acknowledge that I have read, understood and I voluntarily agree to abide by all of the rules appearing above and/or rules as posted in the Play Center and registration area. In consideration for this service, I, individually and on behalf of my child, do hereby waive, release and forever discharge BJ’s Wholesale Club, Inc., its subsidiaries and affiliates and their respective agents, employees, officers, directors, shareholders, successors and assigns from any and all claims and causes of action of any kind or nature which are in any way related, directly or indirectly, to the use of Play Center which I may have or that hereafter may accrue including any such claims or causes of action caused in whole or in part by the negligence of BJ’s Wholesale Club, Inc., its subsidiaries and affiliates, and their respective agents, employees, officers, directors, successors and assigns. I understand that my child is here at my own risk and expense and agree that neither I nor my child will bring any claim or cause of action of any kind or nature against BJ’s Wholesale Club, Inc., its subsidiaries and affiliates and their respective agents, employees, officers, directors, successors and assigns.

I further agree to indemnify, defend and hold harmless BJ’s Wholesale Club, Inc., its subsidiaries and affiliates and their respective agents, employees, officers, directors, successors and assigns from any claims or causes of action of any kind arising from my or my child’s use of the Play Center. By placing my signature below, I ⁷¹⁵ acknowledge and agree that I have read this agreement, understood all of the terms and conditions contained herein, and that this agreement will be in full force and effect during each of my or my child’s visit [sic] to the Play Center. This agreement shall remain in full force and effect at all times whether my child is dropped off at the Play Center by me or any one else. On July 17, 2005, Russell Rosen signed this agreement.

About fifteen months later, Beily Rosen took her five-year-old son Ephraim to the BJ’s Wholesale store in Owings Mills, Maryland. Upon entering the store, she dropped Ephraim off at the play center. While Mrs. Rosen was shopping in BJ’s, Ephraim climbed onto “an elevated plastic play apparatus known as Harry the Hippo” at the play center and then fell approximately thirty-eight inches before striking his head on the floor below. Although “most of” the concrete floor of the play center was covered with thick foam padding, Ephraim landed on a section of floor, which was covered by only a thin layer of carpet.

Landing head first, he sustained life threatening injuries. Ephraim was promptly transported to Sinai Hospital in Baltimore, where a CT 4 scan revealed that he had suffered a large, acute epidural hematoma in the right temporal lobe of his brain. He was then transported to Johns Hopkins Hospital, where he underwent a craniectomy 5 to relieve the fluid buildup in his brain. Ultimately, Russell and Beily Rosen, individually and as parents and next friends of Ephraim, brought a negligence action in the Baltimore County circuit court against BJ’s Wholesale, prompting BJ’s Wholesale to file in response a ⁷¹⁶ counterclaim, alleging breach of the release agreement signed by Mr. Rosen.

When BJ’s later moved for summary judgment, invoking that agreement, the circuit court granted the motion. In so doing, it observed that, under Maryland law, exculpatory agreements executed by adults on their own behalf are enforceable and that there has been no articulation of public policy enforcement of such an agreement executed by a parent of a minor child. From that judgment, the Rosens noted this appeal. Discussion This appeal presents a legal question of first impression in Maryland, that is, whether a release of liability, presented by a “commercial enterprise,” as previously defined, and executed by a parent, on behalf of a minor child and before the child has sustained any injury, is enforceable.

The Rosens contend that it is not, as a matter of public policy. The same is true, they maintain, as to the indemnification clause of the release agreement, since to rule otherwise would, according to the Rosens, obviate the very public policy that renders the exculpatory clause of the same agreement unenforceable. The Rosens’ starting point is the settled proposition that, although “[i]n the absence of legislation to the contrary, exculpatory clauses are generally valid,” “[tjhere are circumstances ... under which the public interest will not permit an exculpatory clause in a contraet[.]” Wolf v. Ford, 335 Md. 525, 531 , 644 A.2d 522 (1994). The Wolf Court enumerated three public policy exceptions to the general rule favoring enforceability of exculpatory agreements: (1) “a party will not be permitted to excuse its liability for intentional harms or for the more extreme forms of negligence, i.e., reckless, wanton, or gross”; (2) “the contract cannot be the product of grossly unequal bargaining power”; and (3) “public policy will not permit exculpatory agreements in transactions affecting the public interest.” Id. at 531-32 , 644 A.2d 522 .

The “ultimate determination of what constitutes the public interest,” the Court of Appeals has said, “must be made ⁷¹⁷ considering the totality of the circumstances of any given case against the backdrop of current societal expectations.” Id. at 585 , 644 A.2d 522 . Such a backdrop may be found, the Rosens claim, in the Maryland Code 6 and in Maryland common law, 7 ⁷¹⁸ which, they point out, reflect a substantial public interest in protecting children and their rights to seek redress for negligence, when that negligence results in injury to them. We agree and add that the public interest in favor of protecting the claims of children carries additional weight where the tortfeasor is a “commercial enterprise,” for the reasons outlined in the discussion that follows. BJ’s release agreement contains, as noted earlier, both an exculpatory and an indemnification clause.

An exculpatory clause “absolve[s] [a party] from liability for its future negligence,” Adloo v. H.T. Brown Real Estate, Inc., 344 Md. 254, 257 , 686 A.2d 298 (1996), by “denying] an injured party the right to recover damages from the person negligently causing the injury,” Scott v. Pacific West Mountain Resort, 119 Wash.2d 484, 491 , 834 P.2d 6 (1992), while an indemnification clause “attempts to shift responsibility for the payment of damages to someone other than the negligent party, usually back to the injured party,” thereby “producing the same result as an exculpatory clause.” Id. We begin with the exculpatory clause. I. The central issue in this case is whether a parent may waive any and all future tort claims his or her child may have against a “commercial enterprise.” As to this question, Maryland case law provides little guidance. Neither this Court nor the Court of Appeals has addressed whether a release signed by a parent waiving any and all future claims that his or her child may have against such an entity is enforceable.

That, of course, is not the case where an adult signs an agreement, releasing others from any future claims he or she may have against them. Wolf v. Ford, supra, 335 Md. 525 , ⁷¹⁹ 644 A.2d 522 (clause in contract signed by eighteen-year-old, which waived any future claims against securities investment firm for trading losses resulting from the firm’s negligence, held valid and enforceable); Seigneur v. Nat’l Fitness Inst. Inc., 132 Md.App. 271 , 752 A.2d 631 (2000) (pre-injury release signed by adult injured in health and fitness club held valid and enforceable); Boucher v. Riner, 68 Md.App. 539 , 514 A.2d 485 (1986) (pre-injury release signed by Naval Academy midshipman injured while skydiving held valid and enforceable); Winterstein v. Wilcom, 16 Md.App. 130 , 293 A.2d 821 (1972) (pre-injury release signed by adult injured while drag racing on private property held valid and enforceable). In our quest to find case law that does address this issue, we turn to the appellate courts of other states.

When we do, we find that a substantial majority of the state courts that have squarely considered whether a release agreement may bar future negligence claims of a child have held that such agreements are invalid and unenforceable on public policy grounds (the “majority view”). Galloway v. State, 790 N.W.2d 252 (Iowa 2010) (holding that parentally executed release, in favor of the state of Iowa, waiving minor child’s personal injury claims as a condition of child’s participation in educational field trip, violates public policy and is unenforceable); Kirton v. Fields, 997 So.2d 349, 350 (Fla.2008) (holding that parent lacks authority to execute, on behalf of minor child, pre-injury release in favor of owners and operators of commercial motor sports park, “when the release involves participation in a commercial activity”); Hojnowski v. Vans Skate Park, 187 N.J. 323, 338 , 901 A.2d 381 (2006) (holding that “parent’s execution of a pre-injury release,” in favor of operator of commercial skate park, “of a minor’s future tort claims arising out of the use of a commercial recreational facility is unenforceable”); Cooper v. Aspen Skiing Co., 48 P.3d 1229, 1231 (Colo.2002) (holding that pre-injury release and indemnification agreement, signed by both a mother and her seventeen-year-old son, in favor of for-profit skiing club and related entities, “violate[d] Colorado’s public policy to protect mi ⁷²⁰ nors”), superseded by statute, Colo.Rev.Stat. § 13-22-107(3) 8 ; Hawkins v. Peart, 37 P.3d 1062 (Utah 2001) (holding that parentally executed release, on behalf of minor child, in favor of provider of for-profit trail guide service, containing both waiver of liability and indemnification provision, violates public policy and is unenforceable); Scott v. Pacific West Mountain Resort, supra, 119 Wash.2d 484, 492 , 834 P.2d 6 (holding that “parent does not have legal authority to waive,” in favor of commercial ski school, “a child’s own future cause of action for personal injuries resulting from a third party’s negligence”); Meyer v. Naperville Manner, Inc., 262 Ill.App.3d 141, 146-47 , 199 Ill.Dec. 572 , 634 N.E.2d 411 (1994) (holding that, in the absence of statutory or judicial authorization, parent cannot waive, compromise, or release minor child’s cause of action, in favor of commercial horse riding stable, “merely because of the parental relationship,” although parent could waive his own cause of action arising from his child’s injury); Munoz v. II Jaz, Inc., 863 S.W.2d 207, 209-10 (Tex.App.1993) (holding that statute which “grants to the parents of a minor child the power to make decisions of substantial legal significance concerning the child” does not give parents power to waive, in favor of operator of amusement park, child’s cause of action for personal injuries because such an interpretation “would be against the public policy to protect minor children”). See also Woodman v. Kera LLC, 486 Mich. 228 , 785 N.W.2d 1 (2010) (holding that pre-injury waiver of liability, signed by parent on behalf of his or her minor child, in favor of operator of commercial children’s play facility, is unenforceable under “longstanding” Michigan common law); Doyle v. Bowdoin College, 403 A.2d 1206 , 1208 n. 3 (Me.1979) (observing that parent or guardian cannot release “child’s, or ward’s, cause of action” in favor of private college and directors of summer hockey clinic held at that college); Childress v. Madison ⁷²¹ County, 777 S.W.2d 1 (Tenn.Ct.App.1989) (holding that mother had no authority to release, exculpate or indemnify local government and board of education against liability, on behalf of her twenty-year-old severely retarded son). Although some state courts, a minority to be sure, have upheld the enforceability of agreements executed by a parent on behalf of a minor child, releasing a potential tortfeasor from future claims of the child (the “minority view”), they have generally done so not where a “commercial enterprise” was the subject of the release, but where the release was of a claim against either a government agency or non-profit organization, or its agents. 9 Sharon v. City of Newton, 437 Mass. 99 , 769 N.E.2d 738 (2002) (holding that release and indemnification agreement in favor of a municipality, signed by both a father and his sixteen-year-old daughter, as a condition of permitting her to participate in extra-curricular sports, was enforceable); Zivich v. Mentor Soccer Club, Inc., 82 Ohio St.3d 367, 374 , 696 N.E.2d 201 (1998) (holding that “parents have the authority to bind their minor children to exculpatory agreements in favor of volunteers and sponsors of nonprofit sport activities where the cause of action sounds in negligence” and that such agreements “may not be disaffirmed by the child on whose behalf they were executed”); Hohe v. San Diego Unified School District, 224 Cal.App.3d 1559, 1563 , 274 Cal.Rptr. 647 (1990) (holding that releases in favor of a local school district and a parent, teacher, and student association, signed by a father and his fifteen-year-old daughter, as a condition of permitting her to participate in a hypnotism show sponsored by the association, were not “contrary to public policy”). 10 ⁷²² A. Preliminarily, we observe that, while in most of the majority-view decisions noted above, the defendants were commercial entities, there are at least two decisions that have invalidated, on public policy grounds, pre-injury releases, executed by a parent, on behalf of minor children or other legally incompetent persons, where the defendants were governmental agencies: Galloway v. State, 790 N.W.2d 252 (release executed by mother, on behalf of minor child, in favor of State of Iowa); Childress v. Madison County, 111 S.W.2d 1 (release executed by mother, on behalf of severely retarded adult child, in favor of county and local school board). 11 The question of whether a different rule should apply to government agencies, non-profit organizations, and their agents, on the one hand, and commercial enterprises, on the other, must await a case involving such an entity, or action by the General Assembly. 12 For our purposes, it is enough to recognize that, in the instant case, BJ’s Wholesale is unquestionably a commercial enterprise, and, thus, we need not and do not address whether we would apply the same rule, invalidating a parentally executed pre-injury release on behalf of a minor child, that waives any future claims that child may have, against a governmental entity (or, generally, a non-profit organization), as we apply here to a commercial enterprise. ⁷²³ B. The extraterritorial, majority-view decisions 13 that have invalidated, on public policy grounds, pre-injury agreements, executed by a parent on behalf of a minor child, purporting to release a “commercial enterprise,” share a number of common features.

In each case, a parent had executed, on his or her minor child’s behalf, a release agreement (with or without an indemnification clause) in favor of a private commercial enterprise, 14 usually as a pre-condition for allowing the child’s access to and participation in some recreational activity. While participating in that activity, the child sustained injuries, and suit was thereafter brought on the child’s behalf. In each case, the defendant entity attempted to shield itself from liability by invoking the release agreement, and the trial court granted summary judgment or, as in one case, 15 a motion to dismiss. Thus, all of these cases present the same legal issue and were in essentially the same procedural posture.

Consequently, in lieu of a repetitious recitation of the facts, procedural posture, and holding of each of these cases, seriatim, an exercise which would serve to obscure, rather than clarify, we shall, instead, distill the holdings of all of these decisions and the reasoning underlying them. There are several common threads running through the majority-view decisions, though, admittedly, not all of these threads appear in every one of those decisions. First, the majority-view decisions have generally taken, as a starting point—which, as we shall later explain, we, in Maryland, ⁷²⁴ cannot—statutes or rules which prohibit a parent from releasing, without court approval, a child’s cause of action after an injury has occurred and extended those statutes or rules to the prospective, pre-injury setting. See, e.g., Hojnowski, 187 N.J. at 333-34 , 901 A.2d 381 (reasoning that, under New Jersey law, “after a minor has suffered a tortious injury, a minor’s parent or guardian may not dispose of a minor’s existing cause of action without statutory or judicial approval,” regardless of whether suit has been filed on the minor’s behalf and that, furthermore, “children deserve as much protection from the improvident compromise of their rights before an injury occurs” as afterwards) (citations and quotations omitted); Cooper, 48 P.3d at 1233 (observing that the legislature “has demonstrated an on-going commitment to afford minors significant safeguards from harm by passing numerous statutes designed to protect minor children,” the “[mjost significant” of which “are the protections accorded minors in Colorado in the post-injury claim context”); Hawkins, 37 P.3d at 1066 (observing that there is no source of law “granting parents in Utah a general unilateral right to compromise or release a child’s existing causes of action without court approval or appointment to that effect” and that, as there is “little reason to base the validity of a parent’s contractual release of a minor’s claim on the timing of an injury,” it concluded “that a parent does not have the authority to release a child’s claims before an injury”) (emphasis in original); Scott, 119 Wash.2d at 492-94 , 834 P.2d 6 (same).

But see Kirton, 997 So.2d at 354 (“The absence of a statute governing parental pre-injury releases demonstrates that the Legislature has not precluded the enforcement of such releases on behalf of a minor child.”). Second, in declining to enforce such agreements where minors are involved, a number of the majority-view courts have recognized, as the Supreme Court of Utah observed, that an “exculpatory clause that relieves a party from future liability may remove an important incentive to act with reasonable care,” that such clauses are “routinely imposed in a unilateral manner without any genuine bargaining or opportunity to pay a fee for insurance,” unlike post-injury releases of ⁷²⁵ liability, which “involve actual negotiations concerning ascertained rights and liabilities,” and that, “if anything, the policies relating to restrictions on a parent’s right to compromise