Fitness Formula Club’s Contractual Release Defeats Member’s Personal Training Mishap (The ‘The Beach is That-A-Way’ Post)

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This one’s just in time for the annual blizzard of new gym memberships and personal training sign-ups each January seems to bring.  Cox v. US Fitness, LLC d/b/a Fitness Formula Club, 2013 IL App (1st) 122442, examines whether a gym (FFC) membership agreement’s liability release is enforceable against a gym patron who sued after she broke her wrist while attempting an exercise during a personal training session.  The answer: “yes.”

Facts

Plaintiff signed an FFC membership agreement which contained a broad release which immunized the gym from any personal injury claims by a member associated with any equipment, exercises, classes, advisory services or the facility generally.  The plaintiff signed the release but didn’t read it or ask questions about it.  Plaintiff also signed a second personal training contract  but couldn’t locate or produce that contract in discovery.  Plaintiff fell and broke her wrist during a personal training session and sued FFC’s corporate parent and the personal trainer for negligence.  She alleged the defendants improperly instructed plaintiff, neglected to implement safety measures, and failed to adequately monitor or supervise plaintiff’s exercises.  The trial court granted defendants’ summary  judgment motion based on the expansive language of the release.

 Held: Affirmed

 Why?

Affirming the trial court (and finding for defendants), the Court applied a slew of black-letter contractual release rules and summary judgment burden-shifting principles.  Cox’s key rules:

–  Illinois allows parties to contract away their liability for negligence;

–  While exculpatory clauses which insulate someone from his own negligence aren’t favored, they are still enforceable if specific and conspicuous;

–  The precise occurrence doesn’t have to be contemplated by the parties at the time of contracting for the release language to be upheld;

–  The injury must fall within the scope of possible dangers which ordinarily accompany a given activity (like fitness training, e.g.) to be considered in the parties’ reasonable contemplation;

–  The key inquiry is whether plaintiff knew or should have known the accident was a risk encompassed by the release; not whether plaintiff foresaw the exact act of negligence alleged;

–  Where a defendant supports its summary judgment motion with admissible evidence, the burden shifts to the plaintiff to present a factual basis arguably entitling her to judgment (the burden shifting rule);

–  Where a summary judgment movant bases his motion on affirmative matter – like a release – and attaches that release to its motion, the burden shifts back to the respondent/plaintiff to show that the release is void or inapplicable;

–  Procedural unconscionability applies where a weaker party is deprived of a meaningful choice in entering a contract with a stronger party such as where the release language is hidden or where the weaker party is prevented from reading it or can’t comprehend it;

– A contract won’t be voided on public policy grounds unless it is clearly contrary to statutes or court decisions which pronounce the State’s public policy.

Cox, ¶¶. 14, 26-27, 32, 36.

The Court held that the FFC release was broad enough to encompass plaintiff’s personal training session injury.  By its plain text, the release applied to equipment and fitness advisory services which clearly included personal training session injuries.  This broad language made it (or should have made it) plainly foreseeable that the plaintiff could get injured while training. Cox, ¶ 17.  In fact, that’s the whole purpose for having personal trainee’s sign releases before engaging in strenuous athletic activity.

The court also discarded plaintiff’s argument that the later personal training contract – which plaintiff couldn’t locate – modified the membership agreement and created a question of fact to survive summary judgment.  The Court held that it was plaintiff’s summary judgment burden to produce a specimen copy of the second contract.  Since plaintiff failed to do so, it couldn’t create a fact question on whether the missing personal training contract modified the FFC contract’s release.

Rejecting plaintiff’s procedural unconscionability (plaintiff claimed she didn’t see the release language) argument, the Court noted that the release was easily located and in large bold-face letters.  The Court held that plaintiff adduced no evidence that the release language was obscure or that  defendants hid the language from the plaintiff.  In fact, the evidence showed that defendant’s membership agent specifically asked plaintiff to read the liability release before signing the contract.  Cox, ¶¶ 32-33.

The Cox Court also shot down plaintiff’s argument premised on the Physical Fitness Services Act (815 ILCS 645/10) which, among other things, voids false advertising in fitness contracts.  The Court noted there was no evidence of fraudulent conduct by the defendants and that as a result, FFC’s release didn’t violate the statute.  Cox, ¶ 35.   The plaintiff also lost on her public policy argument: that enforcing the release against her violated public policy.  The Court ruled that no Illinois statute or case provides that a gym membership agreement’s release violates Illinois public policy.  Cox, ¶¶ 35-36.

Afterword: Release language in a gym contract will be enforced as written so long as there’s equal bargaining power between gym and member and the release language is clear and conspicuous.  A release will be construed broadly if its language permits it and the release doesn’t have to spell out every possible injury to be valid.  Its’ enough that the claimed injury has some connection to and falls within the scope of the claims being released.  Cox also illustrates that a summary judgment respondent can’t use a missing document to create a fact question where it’s in that person’s power to obtain the missing document.

 

Illinois Wage Payment Act Applies to Ohio Resident -IL 2d Dist.

Elsener v. Brown, 2013 IL App (2d) 120209 (Sept. 2013) examines when personal liability will attach to a corporate officer under Section 13 of the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq. (the “Wage Act”) where that corporate officer lives out-of-state.

Facts: After plaintiff sold the business journal he founded to an Ohio corporation, plaintiff signed a three-year employment contract the Ohio company’s Illinois subsidiary to stay on as the journal’s publisher.  The contract paid plaintiff an annual salary of $85,000 and provided that if he was terminated without cause, he was entitled to a severance payment equal to the amounts owed through the contract’s expiration.  Defendant signed the employment contract as president of the Illinois subsidiary that became plaintiff’s employer.

After plaintiff was fired just 14 months into the three-year term, he sued the Illinois entity and the company president under the Wage Act.  At trial, plaintiff was awarded over $200,000 against the corporate officer who then appealed.

Held: Affirmed

 Rules/Reasoning:

 The Court found that defendant, an Ohio resident, was subject to Illinois’ long-arm jurisdiction since he was a corporate officer of an Illinois business entity.  See 735 ILCS 5/2-209(12).  The court rejected defendant’s “fiduciary shield” doctrine, which immunizes an out-of-state defendant for taking actions in a state that are required by his employer.  The court found that the defendant purposely availed himself of Illinois courts by voluntarily agreeing to serve as corporate president of the Illinois publishing subsidiary.  ¶¶ 41-47.

Substantively, the Second District noted that Section 5 of the Wage Act requires an employer to pay final compensation to a separated employee no later than the next regularly scheduled payday.  820 ILCS 115/5,  ¶ 49-50.  Here, the plaintiff was fired in August 2009 and the next payday was in September 2009.  Under Section 5 of the Wage Act, plaintiff became entitled to the full amount of his salary through the contract expiration date (about 22 months worth of payments) on the next payday.  ¶ 70.

The Court also affirmed the defendant knowingly permitted a Wage Act violation and was personally liable under Wage Act Section 13.  Under Wage Act Section 13, personal liability attaches only if the corporate employer has the ability to pay.  So, if an employer goes out of business, the employee normally can’t sue the corporate officer under the Wage Act since there’s no willful violation by the corporate officer.  ¶¶ 66-67.

Here, though, the chronology was that plaintiff was fired in August, 2009 and the corporate employer didn’t file bankruptcy until several months later in March 2010.  At the next payday – September 2009 – the corporate employer had the ability to pay plaintiff’s contractual severance based on evidence submitted in the employer’s bankruptcy case.  Defendant’s intentional conduct was also established by the multiple emails from plaintiff to defendant requesting his severance payment and defendant’s refusal to pay.  ¶ 77.

Take-aways:  Elsener’s glaring unanswered question is whether a corporate officer can be liable where there is no underlying finding that the corporate employer violated the Wage Act.  Elsener, ¶ 54.  Here, plaintiff only went to trial against the individual officer and so there was no judgment entered against the corporate employer (due to its bankruptcy).  But since the defendant failed to raise this argument at trial, the Court held that the argument was waived.  The answer would seem to be “no” – an officer cannot be liable without a parallel liability finding against the corporate employer.

Other key holdings from the case include (1) a corporate employer’s agent can still be considered “in this state” under the Wage Act even if he lacks a physical presence in Illinois; (2) a corporate officer’s knowledge of a separated employee’s wage claim can be shown by plaintiff’s unanswered written requests for payment.

Illinois Consumer Fraud Act Applies To ‘Biz to Biz’ Insurance Dispute Says Fed. Court

In GoHealth, LLC v. Zoom Health, Inc., 2013 WL 6183024, the Northern District provides a detailed summary of the necessary Illinois pleading elements of some signature business torts in a diversity contract dispute involving the sale of insurance products.

Plaintiff and defendants entered into a written agreement where plaintiff would sell insurance product leads to defendants for a fee.  The defendants would in turn use the leads in peddling insurance products to its own customers.  The relationship soured and each side filed claims against each other.  Defendant’s counterclaims sounded in consumer fraud and common law fraud. Each side moved to dismiss.

The Court struck defendants’ fraud and negligent misrepresentation claims and upheld its consumer fraud and trade secrets counts.

Fraud Claim and Negligent Misrepresentation Claims

The Court dismissed the defendants’ common law fraud  and negligent misrepresentation claims.  An Illinois fraud plaintiff must allege a (i) knowingly false statement, (ii) intended to induce reliance in the plaintiff, (iii) reliance by the plaintiff and (iv) damages resulting from the reliance.

Negligent misrepresentation has the same elements as fraud except the plaintiff must allege a negligent or reckless (instead of intentional) false statement.  Federal specificity-in-pleading rules under Rule 9(b) don’t apply to a negligent misrepresentation claim. *9-10.

Defendants’ fraud count asserted that plaintiff falsely inflated defendants commission and renewal rates and misstated some sales projections.

The Court found that these two statements non-actionable as they involved future events (e.g. future sales and commissions projections).  Statements of future intent, opinions or of financial projections don’t equal fraud under the law.

The Court also rejected defendants’ argument that plaintiff was in business of providing information for the guidance of others in their business dealings – a key exception to the economic loss rule (this rule posits that you can’t recover in tort where a contract governs the parties’ relationship.)

The Court held that plaintiff was contractually obligated to provide sales leads and nothing else.  It wasn’t hired to provide sales projections or renewal forecasts – the bases for defendants’ fraud and negligent misrepresentation claims.  Any information provided by plaintiff in connection with the leads was peripheral to the contract’s core purpose.  *11.

Consumer Fraud Claims – Allowed

The court sustained defendants’ consumer fraud counterclaim. 815 ILCS 505/1 (the “Act”).  The consumer fraud count was based on plaintiff furnishing over 40,000 bogus and recycled sales leads to defendant instead of fresh leads.

Allowing the claim, the Court broadly construed the Act to encompass business-to-business relationships: “the protections of the Act are not limited to consumers”, but applies broadly to “persons”, including businesses. *12.

The court found the defendant was a “consumer” of plaintiff’s sales leads which constituted intangible property under the Act. (The Act applies to intangible property.)

The defendants’ claim that plaintiff supplied a high volume of duplicate leads also stated a deceptive act under the Act.   *12.

Afterword:

This case is post-worthy for its application of the consumer fraud statute to a purely business-to-business setting and its discussion of what constitutes “information” in the context of a negligent misrepresentation claim that will beat an economic loss rule challenge.