*457 Opinion
Appellants TEG Oil & Gas U.S.A., Inc. (TEG), and its parent company Sefton Resources, Inc. (Sefton), appeal the grant of summary judgment on their cross-complaint against respondent CAZA Drilling (California), Inc. (CAZA). TEG hired CAZA pursuant to a written agreement to drill a well on an oil field leased by TEG and Sefton and operated by TEG. CAZA argued, and the trial court agreed, that exculpatory and limitation of liability provisions in the parties’ agreement precluded the recovery of the types of damages sought in the cross-complaint: compensation for economic loss and physical harm to equipment and facilities. The court entered judgment on the cross-complaint, despite appellants’ contention that CAZA was both negligent and in violation of various regulations governing oil drilling operations.
On appeal, appellants take the position that the exculpatory and limitation of liability provisions in the parties’ agreement are invalid under Civil Code section 1668 (section 1668), which prohibits enforcement of contracts that have for their object the exemption of parties from responsibility for fraud, willful injury, or violations of law. We conclude that the contractual provisions represented a valid limitation on liability rather than a complete exemption from responsibility, and that, in any event, appellants have failed in their repeated efforts to identify a specific law or regulation potentially violated by CAZA. We shall affirm the trial court judgment.
FACTUAL AND PROCEDURAL BACKGROUND
Certain background facts are not disputed. In 2002, CAZA was hired by TEG to drill a well at the Tapia oil field, located in Castaic, California. The well was referred to as “Yule 6.” The work was performed under a standardized contract entitled “Daywork Drilling Contract — U.S.” 1 A few days after drilling began, there was a blowout, resulting in the death of a CAZA employee, injury to others, and complete destruction of Yule 6.
It is appellants’ position the blowout was the result of the negligence of CAZA’s crew in pulling the drillstring out of the wellhole too quickly (referred to as “swabbing in”), which caused a fire to ignite. Under appellants’ theory, the crew committed further negligence by failing to close the blowout preventer after the fire began. Nonetheless, TEG felt constrained to engage CAZA to do additional work to help repair the damage. In 2003, the parties signed a second Daywork Drilling Contract and a “Payment Schedule” to deal with outstanding invoices due under the 2002 agreement.
*458 Complaint
In November 2003, CAZA sued TEG for breach of contract, open book account, account stated, quantum meruit, and foreclosure of oil and gas liens. Initially, the complaint was based on the Payment Schedule. CAZA claimed to be owed $33,219.94, plus interest.
Subsequently, CAZA amended the complaint to include claims for breach of the two Daywork Drilling Contracts. The claim for unpaid work was increased to $117,824.73, based on work performed under the 2003 agreement.
Cross-complaint
TEG and Sefton cross-claimed against CAZA for breach of contract, negligence, and negligence per se based on violations of various safety provisions contained in state and federal regulations. The cross-complaint alleged that as a result of CAZA’s actions appellants suffered “damage to the Well and the hole, as well as unexpected and otherwise unnecessary cleanup and remediation damage, and losses to [appellants’] business operations.” Although there is a reference to the related lawsuit by the survivors of the deceased worker (Currington et al., v. TEG Oil & Gas U.S.A. et al. (Super. Ct. L.A. County, 2003, No. PC033424 (Currington)), the cross-complaint does not seek indemnification for damages paid to the plaintiffs in that lawsuit.
Daywork Drilling Contract
The 2002 Daywork Drilling Contract consists of a standardized form agreement with a number of blanks for the name of the operator, the contractor, the location of the well, the commencement date of drilling operations, the rates to be charged for various tasks, and other items. TEG was designated the “Operator” and CAZA was described as the “Contractor.” The contract begins with a statement that “Operator [TEG] engages Contractor [CAZA] as an Independent Contractor to drill the hereinafter designated well or wells in search of oil or gas on a daywork basis” and that “Contractor shall furnish equipment, labor, and perform services as herein provided, for a specified sum per day under the direction, supervision and control of Operator.” “Daywork basis” is defined to mean that “Contractor shall furnish equipment, labor, and perform services as herein provided, for a specified sum per day under the direction, supervision and control of Operator (inclusive of any employee, agent, consultant or subcontractor engaged by Operator to direct drilling operations).” The contract also provides that: “When operating on a daywork basis, Contractor shall be fully paid at the applicable rates of payment and assumes only the obligations and liabilities stated herein. *459 Except for such obligations and liabilities specifically assumed by Contractor, Operator shall be solely responsible and assumes liability for all consequences of operations by both parties while on a daywork basis, including results and all other risks or liabilities incurred in or incident to such operations.”
Paragraph 8, entitled “DRILLING METHODS AND PRACTICES” includes the following pertinent subparagraphs: “8.1 Contractor [CAZA] shall maintain well control equipment in good condition at all times and shall use all reasonable means to prevent and control fires and blowouts and to protect the hole. [¶] . . . [¶] 8.3 Each party hereto agrees to comply with all laws, rules, and regulations of any federal, state or local governmental authority which are now or may become applicable to that party’s operations covered by or arising out of the performance of this Contract.”
Paragraph 14 governs “RESPONSIBILITY FOR LOSS OR DAMAGE, INDEMNITY, RELEASE OF LIABILITY AND ALLOCATION OF RISK.” Under subparagraph 14.1, the contractor (CAZA) “assume[s] liability” for “damage to or destruction of Contractor’s surface equipment,” unless the damage fell under paragraph 10, which requires the operator (TEG) to prepare a “sound location” to support the drilling rig, or subparagraph 14.3, which requires the operator to assume liability for damage to or destruction of the contractor’s equipment “caused by exposure to highly corrosive or otherwise destructive elements, including those introduced into the drilling fluid.” Subparagraph 14.2 requires the operator to assume liability for “damage to or destruction of Contractor’s in-hole equipment.”
Subparagraph 14.4 requires the operator (TEG) to assume liability “for damage to or destruction of Operator’s equipment . . . regardless of when or how such damage or destruction occurs,” and to “release Contractor of any liability for any such loss or damage.” Similarly, under subparagraph 14.5, the operator is to “be solely responsible for . . . damage to or loss of the hole, including the casing therein” and the operator is to “release Contractor [CAZA] of any liability for damage to or loss of the hole” and in addition “protect, defend and indemnify Contractor from and against any and all claims, liability, and expense relating to such damage to or loss of the hole.”
In subparagraph 14.6, the operator releases the contractor from liability for, and agrees to indemnify the contractor from and against claims “on account of injury to, destruction of, or loss or impairment of any property right in or to oil, gas, or other mineral substance or water” unless “reduced to physical possession above the surface of the earth,” and for “any loss or damage to any formation, strata, or reservoir beneath the surface of the earth.”
*460 Subparagraphs 14.8 and 14.9 require the parties to indemnify each other for claims based on injuries to their own employees “without regard to the cause or causes thereof or the negligence of any party or parties.”
Subparagraph 14.10 states that the operator is liable “for the cost of regaining control of any wild well, as well as for cost of removal of any debris.”
The parties focus particular attention on subparagraph 14.11. Entitled “Pollution and Contamination,” it provides:
“Notwithstanding anything to the contrary contained herein, except the provisions of Paragraphs 10 and 12[ 2 ], it is understood and agreed by and between Contractor and Operator that the responsibility for pollution and contamination shall be as follows: [¶] (a) Unless otherwise provided herein, Contractor [CAZA] shall assume all responsibility for, including control and removal of, and shall protect, defend and indemnity Operator from and against all claims, demands and causes of action of every kind and character arising from pollution or contamination, which originates above the surface of the land or water from spills of fuels, lubricants, motor oils, pipe dope, paints, solvents, ballast, bilge and garbage, except unavoidable pollution from reserve pits, wholly in Contractor’s possession and control and directly associated with Contractor’s equipment and facilities.
“(b) Operator [TEG] shall assume all responsibility for, including control and removal of, and shall protect, defend and indemnify Contractor from and against all claims, demands, and causes of action of every kind and character arising directly or indirectly from all other pollution or contamination which may occur during the conduct of operations hereunder, including, but not limited to, that which may result from fire, blowout, cratering, seepage of any other uncontrolled flow of oil, gas, water or other substance, as well as the use or disposition of all drilling fluids, including, but not limited to, oil emulsion, oil base or chemically treated drilling fluids, contaminated cuttings or cavings, lost circulation and fish recovery materials and fluids. Operator shall release Contractor of any liability for the foregoing.”
Subparagraph 14.12 provides that neither party is liable to the other for “special, indirect or consequential damages resulting from or arising out of this Contract, including, without limitation, loss of profit or business interruptions including loss or delay of production, however same may be caused.”
*461 Finally, subparagraph 14.13 entitled “Indemnity Obligation” provides; “Except as otherwise expressly limited herein, it is the intent of parties hereto that all releases, indemnity obligations and/or liabilities assumed by such parties under terms of this Contract, including, without limitation, Subparagraphs 14.1 through 14.12 hereof, be without limit and without regard to the cause or causes thereof (including preexisting conditions), strict liability, regulatory or statutory liability, breach of warranty (express or implied), any theory of tort, breach of contract or the negligence of any party or parties, whether such negligence be sole, joint or concurrent, active or passive.”
There are two nonstandardized provisions. A handwritten term provides for a $10 million umbrella policy, in addition to the statutory workers’ compensation insurance and the comprehensive general and automobile liability insurance policies. The other change is the deletion by interlineation of a provision requiring TEG to pay motel expenses for CAZA employees.
CAZA ’s Motion for Summary Judgment
CAZA moved for summary judgment on the cross-complaint on the ground that the 2002 Daywork Drilling Contract allocates liability for all damages claimed by appellants in the cross-complaint to TEG. The statement of undisputed material facts (SOF) is quite brief. With respect to the 2002 Daywork Drilling Contract, it states that the parties entered into the contract on November 7, 2002, that the contract identified TEG as operator and CAZA as contractor, and that TEG “claims that it is owed money for losses that resulted from the performance of the day work contract.”
Other factual allegations were geared toward establishing that the parties’ agreement contract was not an adhesion contract. In this regard, the SOF states that TEG had discussions with seven other drilling companies before settling on CAZA because CAZA “had the only drilling rig available in the area” at the time, although TEG “could have waited until a rig owned by [three other companies] became available”; that TEG’s agent, Karl F. Arleth, refused to sign the 2002 contract until TEG was named an additional insured under CAZA’s umbrella policy; that “[Arleth] struck out a term of the day work contract that would have required [TEG] to compensate CAZA” for its employees’ hotel expenses; and that “[a]ll terms of the day work contract are negotiable for a price.”
The remaining factual allegations relate to establishing that appellants were not at a disadvantage in negotiating with CAZA and were equally knowledgeable concerning the vagaries of drilling for oil. In this regard, the SOF states that Sefton had a market capitalization between $3 and $4 million; that its chief executive officer, Jim Ellerton, was “well versed in the formation of oil *462 and gas exploration companies”; that Arleth “held various positions in the oil and gas industry” since obtaining his degree; that Arleth worked for 22 years with “the international oil and gas conglomerate Arnaco”; that Arleth’s position with Arnaco included “exploration geologist” and “president of Amaco Polant, Limited”; that “[djrilling a commercial oil well is an extremely costly process that can result in the expenditure of hundreds of thousands of dollars”; and that “Craig Krummerich, the drilling engineer hired by [TEG], was hired for the express purpose of executing the ‘drilling program with the drilling company, CAZA.’ ”
In a separate declaration, Gene Gaz, area manager for CAZA, explained that there are many different contracts covering drilling services. Besides the standard “Daywork Drilling” contract there are standard “Turnkey” contracts and “Footage” contracts, and operators sometimes prepare their own agreements. Under a Turnkey contract, the contractor hires a geologist and formulates a drilling plan, but under a Daywork Drilling contract, “the Operator is in control” and “[t]he Contractor receives all of its direction from the Operator.” Gaz stated that standard provisions are negotiable and that if a company wished to place responsibility for damage caused to the geologic structure on CAZA, “CAZA [would] allow such a change in exchange for a dramatically increased drilling cost to the Operator.” 3
In its memorandum of points and authorities, CAZA relied primarily on the 2002 Daywork Drilling Contract provision that “Operator shall be solely responsible and assumes liability for all consequences of operations by both parties while on a Daywork basis, including results and all other risks or liabilities incurred in or incident to such operations” to establish that it could not be liable to appellants on the cross-complaint. The memorandum also references subparagraph 14.11 governing liability for environmental pollution, subparagraph 14.5 governing liability for damage to the hole, and subparagraph 14.12 prohibiting the recovery of consequential damages.
Appellants’ Opposition
In their opposition SOF, appellants disputed that the provisions of the Daywork Drilling Contract were negotiable. Karl Arleth, TEG’s former president and a director of Sefton who signed the contract on behalf of TEG, stated in a declaration that he was “never informed by CAZA that any of the provisions in the standard, pre-printed form were negotiable,” and that “under the circumstances (the small size of our company and the unavailability of other drilling rigs and CAZA’s awareness of these facts), it was clear to me *463 that they were not negotiable.” He also stated, however, that “we agreed with a hand-written change that CAZA would provide a $10 million umbrella policy and we also agree[d] to eliminate what appeared to be virtually duplicate per diem reimbursements by deleting the motel expense line and leaving the daily subsistence amount.”
With respect to their losses, appellants stated that “Cross-Complainant[ 4 ] claims that it is owed money for damages to its well and other costs and expenses resulting from CAZA’s breach of the contract and from CAZA’s gross negligence and violation of law.” They further stated that “[t]he blowout and fire at the Yule 6 well caused injury and death and completely destroyed the well, forcing [appellants] to expend funds for remediation and clean-up, and for other costs and expenses, leaving TEG without income and resulting in Sefton having to sell its stock at a depressed price to raise capital.”
Appellants disputed that any of their employees was expert in drilling. They asserted that CAZA “had the only drilling rig available for work which would allow TEG to begin drilling work during the latter part of 2002” and that “[f]or financial reasons and because of duties to stockholders, [appellants] could not wait for other companies to have a rig available at a later time.”
The remainder of appellants’ SOF describes in detail the actions or omissions of CAZA’s crew that appellants believe caused the blowout and fire. These assertions were supported by the declaration of expert witness, Gregg S. Perkin. Perkin expressed the opinion that “the CAZA crew swabbed in TEG’s well as the drill stem was being pulled from the well”; that “the swabbing of the Yule 6 wellbore by the actions of the CAZA crew, and not an earlier reduction in the drilling mud’s weight, caused the well to kick” resulting in “the well’s blowing out and catching fire”; and that “[m]ore likely than not ... the drill stem was being pulled out of the hole [in a] negligent manner.” He based this opinion on his review of the report of the Department of Gas and Geothermal Resources, the “DataHub EDR Log,” and CAZA’s “Master Driller Reference Guide.” Perkin stated that in undertaking these actions, CAZA violated “Part 30 of the Code of Federal Regulations, Part 250.410(b), which stated that: [¶] ‘4) Drill pipe and downhole tool running and pulling speeds shall be at controlled rates so as not to induce an influx of formation fluids from the effects of swabbing nor cause a loss of drilling fluid and corresponding hydrostatic pressure decrease from the effects of surging. [¶] 5) When there is an indication of swabbing or influx of *464 formation fluids, the safety devices and measures necessary to control the well shall be employed. The mud shall be circulated and conditioned, on or near the bottom, unless well or mud conditions prevent running the drill pipe back to the bottom.’ ” (Boldface omitted.)
Trial Court Order
The trial court granted the motion for summary judgment on the cross-complaint, stating in its order: “[CAZA] asserts that the cross-complaint is barred by the provisions of the contract between the parties assigning liability ‘for all consequences of operations by both parties’ to [TEG]. Therefore, the issue is one of contract interpretation and is a matter of law for the court to decide. [¶] [TEG] points to clauses in the contract requiring [CAZA] to maintain and control well equipment and follow the law. These provisions, however, do not negate the provisions assigning liability to [TEG] ‘for all consequences of operation.’ [TEG] argues further that the exculpatory provisions of the contract are void as against public policy under Civil Code Section 1668. The court disagrees for the reasons set forth in the moving papers.”
Judgment was entered on the cross-complaint, and both Sefton and TEG purported to appeal, although TEG was a party to the still pending complaint.
DISCUSSION
I
Where a defendant cross-claims against the plaintiff, dismissal of the cross-complaint is not a final judgment for purposes of appeal unless there is a separate and distinct party involved and adjudication of the cross-complaint represents a final adverse adjudication as to that party. (See, e.g.,
Kantor
v.
Housing Authority
(1992)
In a supplemental brief, appellants explain that CAZA raised the issue of Sefton’s standing in a demurrer to the cross-complaint that preceded the summary judgment motion. The trial court overruled the demurrer. Accordingly, appellants had no occasion to amend the cross-complaint. In their supplemental brief, appellants contend that Sefton owned the oil field where the injury occurred and the mineral rights impacted by the drilling accident. Since the order overruling the demurrer is not before us, we express no opinion on whether it was properly decided. But we agree with appellants that, under the circumstances, it would be unfair for this court to assume that appellants could not have amended the cross-complaint to assert direct injury to Sefton had the trial court required that they do so.
We turn to the issue of whether TEG is a proper party to this appeal. Where the issues involved in an appeal are “inextricably intertwined” with claims raised by a party still involved in litigation at the trial court level, “judicial economy” permits that party to join in the appeal.
(Miller v. Silver
(1986)
*466 II
We now turn to the merits. According to the 2002 Daywork Drilling Contract, “[e]xcept for such obligations and liabilities specifically assumed by [CAZA], [TEG] shall be solely responsible and assume liability for all consequences of operations by both parties.” This was the provision chiefly relied upon by CAZA in seeking summary judgment. Preliminarily, appellants contend this general language cannot control over more specific provisions of subparagraphs 8.1, requiring CAZA to use “all reasonable means” to prevent fires and blowouts, and 8.3, requiring that both parties comply with all federal, state, and local laws, rules, and regulations.
Appellants are correct that when general and specific provisions are inconsistent, the latter control. (Code Civ. Proc., § 1859; 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 754, p. 845.) However, as we have seen, the general provision just quoted is not the only provision in the agreement relating to allocation and limitation of liability. Paragraph 14 describes in detail the parties’ respective “RESPONSIBILITY FOR LOSS OR DAMAGE, INDEMNITY, RELEASE OF LIABILITY AND ALLOCATION OF RISK.” Under its terms, each party was to be liable for damage to its own equipment, with certain limited exceptions, and for injury to its own employees. Responsibility for damage to the hole and the underground minerals and for regaining control of a “wild well” was fixed on the operator. Liability for “Pollution and Contamination” was allocated between the parties depending on the cause. Neither party was to be liable for the other’s consequential damages. These provisions are more specific with respect to allocation and limitation of liability than the language cited by appellants.
Beyond that, we do not believe that the allocation and limitation of liability provisions are contradicted by subparagraphs 8.1 and 8.3. The latter describes CAZA’s duties under the contract. To the extent TEG can establish that CAZA failed to perform these duties, it is entitled to raise that breach as a defense to CAZA’s claim for payment under the 2002 Daywork Drilling Contract. 5 The provisions of paragraph 14 are intended to limit contract damages by excluding consequential damages and allocating liability for tort damages for injuries to persons or property in the case of negligence. There is nothing inherently inconsistent in a party to a contract agreeing to do “X,” but stating that if it does not, the other party may not recover consequential damages or stating that if negligence occurs during the performance of “X,” liability will be limited.
The authorities upon which appellants
rely
—Woodall
v. Wayne Steffner Productions
(1962)
Appellants also contend that the provisions of the various subparagraphs of paragraph 14 cannot be read as excluding liability for negligence because negligence was not specifically mentioned in every subparagraph. It is true that “ ‘[f]or an agreement to be construed as precluding liability for “active” or “affirmative” negligence, there must be express and unequivocal language in the agreement which precludes such liability’ ” and that “ ‘[a]n agreement which seeks to limit liability generally without specifically mentioning negligence is construed to shield a party only for passive negligence, not for active negligence.’ ”
(Burnett v. Chimney Sweep
(2004)
Subparagraph 14.13 specifically states that the allocations of liability set forth in subparagraphs 14.1 through 14.12 are “without limit” and “without regard to the cause or causes thereof,” including “regulatory or statutory liability,” “breach of contract or the negligence of any party or parties, whether such negligence be sole, joint or concurrent, active or passive.” Read as a whole, the provisions of paragraph 14 make clear the parties’ intent — to limit “the Operator’s” ability to recover for injury resulting from accidents, even those caused by the negligence of “the Contractor.” As a matter of contractual interpretation, there is nothing to hinder “voluntary transactions in which one party, for a consideration, agrees to shoulder a risk which the law would otherwise have placed upon the other party.”
(Tunkl, supra,
*468 III
Section 1668 provides that “[a]ll contracts which have for their object, directly or indirectly, to exempt any one from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.” As explained in
Tunkl,
early interpretations of this provision expressed the view that section 1668 absolutely prohibited a party from limiting its liability for its own negligence.
(Tunkl, supra,
In Tunkl, the Supreme Court limited the holding in Mills v. Ruppert. The court concluded that exculpatory clauses relieving a party from the consequences of its own negligence cannot be enforced where the public interest was involved, even if the conduct did not involve a violation of law. The court described factors or characteristics which identify a transaction implicating the public interest: (1) the transaction “concerns a business of a type generally thought suitable for public regulation”; (2) “[t]he party seeking exculpation is engaged in performing a service of great importance to the public, which is often a matter of practical necessity for some members of the public”; (3) “[t]he party holds himself out as willing to perform this service for any member of the public who seeks it, or at least for any member coming within certain established standards”; (4) “[a]s a result of the essential nature of the service, in the economic setting of the transaction, the party invoking exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks his services”; (5) “[i]n exercising a superior bargaining power the party confronts the public with a standardized adhesion contract of exculpation, and makes no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence”; and (6) “as a result of the transaction, the person or property of the purchaser is placed under the control of the seller, subject to the risk of carelessness by the seller or his agents.” (Tunkl, supra, 60 Cal.2d at pp. 98-101, fns. omitted.)
Appellants contend these factors are present here. We disagree. Although the Supreme Court did not specifically exclude contracts between *469 relatively equal business entities from its definition of contracts in the public interest, it is difficult to imagine a situation where a contract of that type would meet more than one or two of the requirements discussed in Tunkl. With respect to the second and third factors, for example, CAZA did not hold itself out as performing services for the public, but only for the small number of entities that happened to be oil field operators. While the production of oil is of great importance to the public, the drilling of a particular oil well is generally only important to the party who will profit from it. With respect to the fourth and fifth factors, appellants’ argument that it was forced into an adhesion contract boils down to this: “Although two provisions in the agreement were altered during negotiations, we did not know we could alter any provisions during negotiations.” The fact that TEG found itself backed into a comer in late 2002 as a result of failure to plan ahead and had no choice but to deal with the only company that had a suitable drill rig available at that specific point in time, is not the sort of unequal bargaining power to which the court in Tunkl referred.
Appalachian Ins. Co. v. McDonnell Douglas Corp.
(1989)
The same is true here. CAZA’s services may have been essential to TEG, but the agreement between the parties did not implicate the public interest in the way required to abrogate exculpatory provisions limiting liability for negligence under Tunkl.
IV
If
Tunkl
were the only basis raised by appellants for the applicability of section 1668, we could end our analysis. However, in their cross-complaint and their opposition to the motion for summary judgment, appellants contend that CAZA violated various statutes and regulations in performing drilling activities. They argue that section 1668 invalidates any exculpatory language that would relieve CAZA of liability for performing drilling operations in violation of law “without regard to whether any public interest [was] involved.” They cite for support this court’s recent decision in
Capri
v.
L.A. Fitness International, LLC
(2006)
The plaintiff in
Capri
had joined a health club, signing a membership agreement which contained a release and waiver of liability for injuries caused by the club’s negligence. The plaintiff was using the club’s outdoor swimming pool when he slipped and fell on the pool deck. After the accident, he noticed an accumulation of algae around the drain in the area where the accident occurred. In defense to the plaintiff’s personal injury suit, the club raised the release. However, in his complaint, the plaintiff had alleged that the club violated Health and Safety Code sections 116040 and 116043, which require operators of public swimming pools to maintain them in a sanitary, healthful, and safe manner. Section 116065 of that code made violation of these provisions a crime. In reversing summary judgment in favor of the club, we held that because the plaintiff had alleged that the club violated Health and Safety Code sections 116040 and 116043, and that the violation of these laws was the cause of his slip and fall, the limitation on liability “falls squarely within the explicit prohibition in section 1668 against contractual exculpation for a ‘violation of law’ and is invalid.”
(Capri, supra,
We found support for our conclusion in
Hanna v. Lederman
(1963)
Capri
is significantly different from the present case because it involved personal injury to a consumer. Here, the contract was between two business entities and the damages claimed are entirely economic. In only one recent case has a court applied section 1668 to invalidate provisions in a contract between business entities:
Health Net of California, Inc. v. Department of Health Services
(2003)
The holding in
Health Net
does not apply to this case because, as the court explained, the exculpatory clause at issue in that case “prohibited] ... the recovery of
any damages at all
for DHS’s statutory or regulatory violations” and “exempted] DHS
completely
from responsibility for completed wrongs.”
(Health Net, supra,
113 Cal.App.4th at pp. 240-241, italics added.) The court believed that even in a commercial case, “an exculpation of any liability for
any
damages for
any
statutory violation surely rises to the level of an ‘exemption] from responsibility’ within the meaning of the plain language of section 1668.”
(Id.
at p. 239.) The provisions at issue here do not exempt CAZA from all liability, but merely limit its responsibility with respect to economic damages. The court in
Health Net
expressly declined to decide
*472
whether
“some
contractual limitations over the scope of available remedies” would “necessarily run afoul of section 1668.”
(Ibid.,
italics added; see
Farnham v. Superior Court
(1997)
Although it did not reach the issue, the court in
Health Net
cited
Klein
v.
Asgrow Seed Co.
(1966)
The court in
Health Net
did not point out that the decision in
Klein
represented something of an anomaly. In the majority of commercial situations, courts have upheld contractual limitations on liability, even against claims that the breaching party violated a law or regulation. (See, e.g.,
Nunes Turfgrass, Inc. v. Vaughan-Jacklin Seed Co.
(1988)
Nearly a decade after the Fifth Circuit decision in
Delta Air Lines, Inc. v. McDonnell Douglas Corporation, supra,
Continental Airlines
v.
Goodyear Tire & Rubber Co.
(9th Cir. 1987)
This line of authority was followed in
In re Air Crash Disaster, Detroit Metro. Airport
(E.D.Mich. 1989)
While no reported California case has expressly relied on this federal precedent, a similar issue was addressed in
Delta Air Lines, Inc.
v.
Douglas Aircraft Co.
(1965)
The same public policy issue was addressed more recently in
Philippine Airlines, Inc. v. McDonnell Douglas Corp.
(1987)
Based on these authorities, we conclude that the challenged provisions in the 2002 Daywork Drilling Contract represent a valid limitation on liability rather than an improper attempt to exempt a contracting party from responsibility for violation of law within the meaning of section 1668. CAZA did not seek or obtain complete exemption from culpability on account of its potential negligence or violation of any applicable regulations. It merely sought to limit its liability for economic harm suffered by TEG. The parties foresaw the possibility that a blowout could occur and agreed between themselves concerning where the losses would fall. Significantly, the agreement required CAZA to accept responsibility for damage to its equipment, injury to its employees, and certain pollution and contamination removal and control activities. Thus, the limitation of liability provisions did not adversely affect the public or the workers employed by CAZA. As appellants concede, CAZA accepted liability for the bodily injury that occurred as the result of the blowout, and has defended and indemnified appellants, through its carrier, in the
Currington
litigation. Under these facts, we agree with the federal courts and the court in
Delta Air Lines, Inc.
v.
Douglas Aircraft Co., supra,
*476 V
Finally, appellants made no serious effort to identify a specific law or regulation potentially violated by CAZA so as to trigger application of section 1668. In their cross-complaint, appellants contended that CAZA violated Public Resources Code section 3219, as well as California Code of Regulations, title 14, sections 1722, subdivisions (a) and (c), 1722.2, 1722.5, 1722.6, and 1744, and title 8, sections 3202, 6507, and 6573, subdivision (a). Appellants did not mention any of these provisions in opposing the summary judgment motion. The only reference to a statutory or regulatory violation was in an expert declaration, where Perkin contended that CAZA violated (former) 30 Code of Federal Regulations, part 250.410(b). 6 We asked for clarification in a letter to counsel, and, in one of the sections in their supplemental brief, appellants cited yet another set of statutes: Public Resources Code sections 3714 to 3716, 3724, 3724.1, 3739, 3740, 3754, and 3757.
The statutes cited in the supplemental brief are contained in chapter 4 of division 3 of the Public Resources Code. While division 3 is entitled “Oil and Gas,” chapter 4 deals entirely with “geothermal resources” defined as “the natural heat of the earth, the energy, in whatever form, below the surface of the earth present in, resulting from, or created by, or which may be extracted from, such natural heat, and all minerals in solution or other products obtained from naturally heated fluids, brines, associated gases, and steam, in whatever form, found below the surface of the earth, but excluding oil, hydrocarbon gas or other hydrocarbon substances.” (Pub. Resources Code, § 6903, italics added; see Pub. Resources Code, § 3701.) Since the well involved in this case was not for the production of geothermal resources, the statutory provisions cited in the supplemental brief cannot apply.
The federal regulations quoted in Perkin’s declaration, are contained in a subchapter that regulates “oil, gas, and sulphur exploration, development, and production operations on the outer Continental Shelf.” (30 C.F.R. § 250.101; see § 250.102, italics added.) Obviously, they have no application to this case. 7
At first glance, the statutory and regulatory provisions cited in the cross-complaint seem more relevant. Public Resources Code section 3219 appears in chapter 1 of division 3, which covers “oil and gas” wells. (Pub. Resources Code, § 3008.) Section 3219 provides: “Any person engaged in operating any *477 oil or gas well wherein high pressure gas is known to exist, and any person drilling for oil or gas in any district where the pressure of oil or gas is unknown shall equip the well with casing of sufficient strength, and with such other safety devices as may be necessary, in accordance with methods approved by the supervisor, and shall use every effort and endeavor effectually to prevent blowouts, explosions, and fires.” But, on examination, the flaw in appellants’ attempt to hold CAZA accountable for ensuring compliance with this chapter of the Public Resources Code and the safety regulations promulgated under it becomes apparent.
Section 3219 of the Public Resources Code refers to persons engaged in “operating” oil or gas wells. Section 3009 of the Public Resources Code defines “ ‘[o]perator’ ” as “any person who, by virtue of ownership, or under the authority of a lease or any other agreement, has the right to drill, operate, maintain, or control a well.” It would be stretching the definition of “operator” to include a company performing drilling work by the day. This is confirmed by other statutory provisions found in this chapter of the Public Resources Code, which imposes duties on “the operator” that a drilling company such as CAZA could not reasonably be expected to fulfill. (See Pub. Resources Code, §§ 3203 [operator must file a written notice of intent to commence drilling], 3204 [operator must post an indemnity bond prior to engaging in drilling], 3210-3211 [owner or operator required to keep a log of the history of the drilling of the well showing, among other things, the formations encountered or passed through], 3227 [owner required to file monthly production reports];
Wells Fargo Bank v. Goldzband
(1997) 53 Cal.App,4th 596, 605-606 [
Review of the governing regulations further illustrates the point that “operator” means something more than a daywork contractor. Section 1722.1.1 of title 14 of the California Code of Regulations requires that there be posted at each well location a sign “with the name of the operator.” Section 1722, subdivision (b) of title 14 requires “the operator” to “develop an oil spill contingency plan.” Section 1722, subdivision (c) of title 14 requires “the operator” to submit “a blowout prevention and control plan, including provisions for the duties, training, supervision, and schedules for testing equipment and performing personnel drills.” Other regulations, while not specifically referencing owners or operators, similarly impose duties that a drilling company hired on a daywork basis could not reasonably be *478 expected to undertake. Section 1722.2 of title 14 requires wells to have casings “designed to provide anchorage for blowout prevention equipment” and “to withstand anticipated collapse, burst, and tension forces.” Sections 1722.3 and 1722.4 of title 14 require cement casings of a certain depth and strength.
Appellants draw our attention to California Code of Regulations, title 14, sections 1722.5 and 1722.6, which are specifically designed to prevent blowouts and “uncontrolled flow of fluids from any well.” 8 While neither provision expressly imposes responsibility for compliance on well owners and operators, there is no reason to interpret them as imposing legal responsibility on a contractor like CAZA, when all the other statutes and regulations in this area are clearly directed at the owner or operator.
In short, unlike the plaintiff in Capri, appellants have failed to set forth a specific statute or regulation purportedly violated. Accordingly, no basis has been presented that justifies invalidating the exculpatory provisions of the 2002 Daywork Drilling Contract.
*479 DISPOSITION
The judgment is affirmed.
Notes
The same document also contained the “Drilling Bid Proposal” from CAZA.
As we have seen, paragraph 10 obligates the operator to prepare a sound location. Paragraph 12 provides for termination of the contractor’s liability after restoration of the location.
Under the 2002 Daywork Drilling Contract, CAZA charged approximately $7,780 per day plus approximately $6,000 for mobilization and demobilization costs.
Since appellants’ SOF used the term “Cross-Complainant” in the singular, it is unclear whether TEG or Sefton is being referred to or if it was a typographical error and both parties claim to have suffered such damages.
Of course, the parties’ rights and responsibilities may have been modified by the Payment Schedule and the 2003 Daywork Drilling Contract, neither of which are before us.
The requirements quoted by Perkin now appear at 30 Code of Federal Regulations, part 250.456(d) and (e) (2005).
California Code of Regulations, title 14, section 1744, cited in the cross-complaint, also applies to “wells on offshore sites.”
Section 1722.5 of title 14 of the California Code of Regulations provides: “Blowout prevention and related well control equipment shall be installed, tested, used, and maintained in a manner necessary to prevent an uncontrolled flow of fluid from a well. Division of Oil, Gas, and Geothermal Resources publication No. MO 7, ‘Blowout Prevention in California,’ shall be used by division personnel as a guide in establishing the blowout prevention equipment requirements specified in the division’s approval of proposed operations.”
Section 1722.6 of title 14 of the California Code of Regulations provides: “The operational procedures and the properties, use, and testing of drilling fluid shall be such as are necessary to prevent the uncontrolled flow of fluids from any well. Drilling fluid additives in sufficient quantity to ensure well control shall be kept readily available for immediate use at all times. Fluid which does not exert more hydrostatic pressure than the known pressure of the formations exposed to the well bore shall not be used in a drilling operation without prior approval of the supervisor. [¶] (a) Before removal of the drill pipe or tubing from the hole is begun, the drilling fluid shall be conditioned to provide adequate pressure overbalance to control any potential source of fluid entry. Proper overbalance shall be confirmed by checking the annulus to ensure that there is no fluid flow or loss when there is no fluid movement in the drill pipe or tubing. The drilling fluid weight, the weight and volume of any heavy slug or pill, and the fact that the annulus was checked for fluid movement shall be noted on the driller’s log. During removal of the drill pipe or tubing from the hole, a hole-filling program shall be followed to maintain a satisfactory pressure overbalance condition. [¶] (b) Tests of the drilling fluid to determine viscosity, water loss, weight, and gel strength shall be performed at least once daily while circulating, and the results of such tests shall be recorded on the driller’s log. Equipment for measuring viscosity and fluid weight shall be maintained at the drill site. Exceptions to the test requirements may be granted for special cases, such as shallow development wells in low pressure fields, through the field rule process.”