Opinion ID: 387302
Heading Depth: 2
Heading Rank: 2

Heading: Violation of California's Public Policy

Text: 32 Varig's second argument urges an addition to the California choice-of-law rules outlined in section II, supra. Varig contends that if a contract provision is contrary to the public policy of California, a California court will refuse to enforce it, regardless of whether the generally appropriate governing law is California's or another state's. In light of this assertion, Varig contends that: (1) summary judgment is always inappropriate where there is a question concerning violation of California public policy, (2) summary judgment was improperly granted because Boeing attempted to exempt itself from liability for violations of law, contrary to the public policy of California, and (3) summary judgment was improperly granted because Boeing attempted to exempt itself from liability for fraud, contrary to the public policy of California. 33 Because we conclude that the public policy of California does not control the outcome of this appeal, we do not reach the first contention.
34 In opposition to the summary judgment, plaintiff relies upon the California rule that a choice-of-law provision will be ignored to the extent necessary to preserve California's public policy. See part II, supra. From California's willingness to ignore choice-of-law agreements, plaintiff attempts to derive the broader rule that the state will disregard the foreign law designated under its governmental interest analysis when application of that law would violate California's public policy. 35 Plaintiff has not cited a single case which supports this broader rule. We are obligated to follow California's choice-of-law rules. Sarlot-Kantarjian v. First Pennsylvania Mortgage Trust, supra, 599 F.2d at 917. When we confront a situation not yet met by the California Supreme Court, we must fashion the rule we believe that court would follow were it confronted with a similar situation. Takahashi v. Loomis Armored Car Service, 625 F.2d 314, 316 (9th Cir. 1980). 36 Application of plaintiff's suggested rule to the present case would have the effect of imposing California's public policy on litigants and events having no substantial contact with the state. Adoption of the principle would mean that no party to a contract in any of the 50 states could be certain that his bargain would be enforceable. If minimum contact with California existed, a party could be made to answer a complaint filed in California. Under the rule argued for, every allocation of risk between the contracting parties would have to withstand scrutiny under the public policy dictates of California. In reviewing the claim that summary judgment was improper because the contract exculpated Boeing from liability due to violations of law and fraud, we adhere to the California choice-of-law rules outlined in part II of this opinion.
37 Plaintiff alleges that a proximate cause of the accident aircraft's crash was Boeing's failure to comply with a Federal Aviation Administration regulation. 4 Citing California law, plaintiff maintains that Boeing cannot exculpate itself from liability incurred due to a violation of federal regulations. It cites three Court of Appeal cases which support the proposition that pursuant to California Civil Code § 1668 (West 1973), 5 California courts will refuse to enforce an exculpatory provision that would insulate a party from the consequences of his violation of law. Of these cases, only Hanna v. Lederman, 223 Cal.App.2d 786, 36 Cal.Rptr. 150 (1963), deals with an exculpatory clause in a contract between two commercial entities. 38 In Hanna, a commercial tenant entered into a lease excusing the landlord from all damage to goods and merchandise from any cause. Citing Civil Code § 1668, the court held that the tenant's negligence action could not be barred if damage occurred as a proximate result of the landlord's violation of a municipal ordinance requiring sounding devices on sprinkler systems. Hanna might support the argument that, under California law, if plaintiff could prove that Boeing's alleged violation of law was a proximate cause of the crash, the exculpatory clause would be ignored. But see Delta Air Lines, Inc. v. McDonnell Douglas Corp., 503 F.2d 239, 244 (5th Cir. 1974), cert. denied, 421 U.S. 965, 95 S.Ct. 1953, 44 L.Ed.2d 451 (1975). Like the instant case, Hanna involved commercial entities, a contract which explicitly stated that the waiver was part of the consideration for the contract, and property damage, not personal injury. Id. at 788-789, 36 Cal.Rptr. 150. 39 Judge McGovern, sitting in Washington, found that under that state's law the general rule permitting exculpation for negligence, Hewitt v. Miller, 11 Wash.App. 72, 521 P.2d 244 (1974), would not be abrogated in the event that a negligent act also constituted a violation of law. Interpretations of local law by a district court sitting in the locality are entitled to great weight. They will not be disturbed unless clearly wrong. Leslie Salt Co. v. St. Paul Mercury Ins. Co., 637 F.2d 657, 659 (9th Cir. 1980). Though the Washington courts have not directly addressed this subject, closely related decisions support the conclusion reached by Judge McGovern. See, e. g., Ritter v. Shotwell, 63 Wash.2d 601, 388 P.2d 527, 530 (1964); Stegall v. Kynaston, 26 Wash.App. 731, 613 P.2d 1214, 1216 (1980). 40 Because, arguably, the laws of the two relevant jurisdictions differ, we must determine whether one state has a significant interest in having its law applied. See part II, supra. The policy underlying the California rule appears to be the protection of its citizens. Here, that policy is not impaired if Washington law controls. The victim in this instance, Varig Airlines, is not a citizen of California. Nor did it originally attempt to invoke the protection of California law. Further, despite Boeing's immunity from suit by Varig, nothing inhibits the operation of the regulation in question through suits brought by the estates of the deceased or sanctions imposed by the Federal Aviation Administration. See Delta Air Lines v. McDonnell Douglas Corp., 503 F.2d 239, 243-44 (5th Cir. 1974), cert. denied, 421 U.S. 965, 95 S.Ct. 1953, 44 L.Ed.2d 451 (1975); Delta Air Lines v. Douglas Aircraft Co., 238 Cal.App.2d 95, 47 Cal.Rptr. 518, 524 (1965). 41 Washington, by contrast, does have an interest in having its law observed. Boeing is a Washington-based corporation. In accordance with the policy of that state, it consciously allocated the risk associated with its contract with Seaboard and, through Seaboard, with Varig. The state of Washington has an interest in seeing that the legitimate expectations of the parties to the contract are not frustrated. 42 Because we find Washington law controlling, we find no error in the granting of summary judgment.
43 In the district court, Varig argued that the aircraft's alleged failure to conform to FAA regulations, when Boeing represented in its contract with Seaboard that the aircraft would conform, and Boeing's failure to warn Varig of the fire hazard once Boeing allegedly had knowledge of it, amounted to fraud. It maintained that California law controlled and that, under Civil Code § 1668, a California court will not enforce any contract provision that attempts to exculpate an actor from liability for fraud. 44 We find no merit in the argument that a subsequent failure to warn amounts to fraud under § 1668. Neither the case law nor the face of the statute supports this construction. 45 Plaintiff also argues that negligent misrepresentation falls within the strictures of California Civil Code § 1668. See Palmquist v. Mercer, 43 Cal.2d 92, 272 P.2d 26 (1974). Assuming, arguendo, that plaintiff is correct, the outcome of the case is unaffected because Washington, not California, law would apply in that case. 46 Judge McGovern found Washington law controlling and concluded that Washington treats negligent misrepresentation as mere negligence, not as fraud vitiating an exculpatory provision. See Brown v. Underwriters at Lloyd's, 53 Wash.2d 142, 332 P.2d 228, 233 (1958). Plaintiff has suggested no reason to question this conclusion. The competing interests of Washington and California with respect to this issue parallel those discussed in section 2, supra. For the reasons expressed there, we conclude that Judge McGovern was justified in applying Washington law. We therefore further conclude that plaintiff's claim under California Civil Code § 1668 raised no unresolved issue of fact. Thus, the granting of summary judgment was proper. See Lurie v. State of California, 633 F.2d 786, 788 (9th Cir. 1980).