Sander v. Alexander Richardson Investments
2003 A.M.C. 1817 (8th Cir. 2003)
The Jessups owned a motor vessel, the A-OK, moored at the Yacht Club of Saint Louis ("Yacht Club"). Ironically, the A-OK wasn't. Mr. Jessup noticed a fuel leak on the vessel. He asked the Yacht Club's repair department to fix the problem. The repair department could not complete the repairs in the timeframe Jessup requested, so the Yacht Club's general manager recommended that Jessup hire Charles Schulte to repair the vessel. Jessup hired Schulte upon the manager's assurance of his competence. Schulte installed a new fuel pump on the A-OK.
After the repairs were completed, Jessup boarded the A-OK and started its engine. After a loud thud, the vessel burst into flames, which spread quickly and destroyed three other boats before it was contained.
The Jessups filed a declaratory relief action in federal court to establish that they were not liable for the incident, or that their liability was limited. The owners of the destroyed boats filed claims against the Jessups and the Yacht Club. The Yacht Club and the Jessups filed cross-actions against each other. The Jessups premised their claim against the Yacht Club on a negligence theory, alleging that the Yacht Club was negligent in recommending Schulte, who was not qualified to perform the repairs the A-OK required. The Yacht Club asserted that the exculpatory clause in the slip agreement with the Jessups exonerated it from liability.
After a bench trial, the District Court found that the Jessups were not negligent but that the Yacht Club was. Further, following the law in the First and Eleventh Circuit Courts of Appeals, the District Court held the exculpatory clause unenforceable because "exculpatory clauses that completely absolve a party from all liability are invalid." The Court further found, in the alternative, that the clause was not sufficiently clear to be enforceable.
The Eighth Circuit reversed. It first held that because the slip agreement is maritime in nature, maritime contract law applied. It next noted that a split exists among the circuit courts of appeals on whether exculpatory clauses that completely exonerate a party from liability are valid and enforceable. Before addressing this split, the Court held that the exculpatory clause—which stated 1) that the Yacht Club would not be liable for "any injuries or property damage resulting, caused by or growing out of the use of the dock or harbor facilities" and 2) that the boat owners released the Yacht Club "from any and all liability for loss, injury (including death), or damages to person or property sustained while in or on the facilities of [the Yacht Club], including fire"—was sufficiently clear to be enforceable.
The Court then addressed the circuit split, adopting the Ninth and Fifth Circuit rule allowing unambiguous exculpatory clauses to completely absolve a party from liability, even due to its own negligence. The Eighth Circuit recognized that the United States Supreme Court held in Bisso v. Inland Waterways Corp., 249 U.S. 85 (1955) that an exculpatory clause in a towage contract that totally absolved the towage company from liability was unenforceable. However, the Eighth Circuit, joining the Ninth Circuit, limited Bisso's holding to towage contracts and similar relationships, such as bailment, employment, or public service relationships. The Court then narrowed its own decision to exculpatory clauses in slip rental agreements, holding that such clauses are enforceable so long as they clearly describe the parties' intent.