Liability Releases Held Unenforceable – Once Again, by Jerry Bloch

After Jason Lhotka died while on a Mt. Kilimanjaro hiking expedition, his heirs sued the San Francisco-based company that arranged the trip, Geographic Expeditions (GE). GE thought it had a “bullet-proof” release form limiting its liability to the cost of the trip and requiring participants to arbitrate claims in San Francisco. When Lhotka’s legal representative filed suit in court, GE moved to compel arbitration.

On January 29, 2010, the California Court of Appeal decided in Lhotka v. Geographic Expeditions, Inc. (2010 DJDAR 1689) that the arbitration provision was unenforceable because the entire contract was too one-sided (“unconscionable”). The decision gave the plaintiffs the right to bring their claims in court and have a jury determine liability and damages. It also means that the liability limit will not be enforced, greatly exposing GE to a potentially large damage award.

The factors that led to the finding of unconcionability were; (i) the limited amount plaintiffs could recover under the contract (the cost of the expedition was $16,831), (ii) the arbitration was to be held in San Francisco regardless of the location of the plaintiffs, who lived in Colorado, (iii) the only choice Lhotka had was to sign the release or not go on the trip (GE’s President wrote a letter stating that the release was mandatory), and (iv) the contract required the plaintiffs to indemnify GE for any lawsuit raising claims waived or released under the contract.

Clients who provide products or services to consumers often seek highly restrictive contracts. It is not uncommon for a business owner to adapt a competitor’s contract form to his own use, believing it is a solid, well drafted document. Given the lesson of this case, that could be a big mistake.

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