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


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  • 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.