Fear Not Law Articles: CAZA DRILLING (CALIFORNIA), INC., v. TEG OIL & GAS U.S.A., INC PART-I

CAZA DRILLING (CALIFORNIA), INC., v. TEG OIL & GAS U.S.A., INC

Filed 8/29/06

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

CAZA DRILLING (CALIFORNIA), INC.,

Plaintiff, Cross-defendant and Respondent,

TEG OIL & GAS U.S.A., INC.,

Defendant, Cross-complainant and Appellant;

SEFTON RESOURCES, INC.,

Cross-complainant and Appellant.

B182892

(Los Angeles County

Super. Ct. No. PC033872)

APPEAL from a judgment and an order of the Superior Court of Los Angeles County, Barbara M. Scheper, Judge. Affirmed.

Ford, Walker, Haggerty & Behar and K. Michele Williams for Defendant, Cross-complainant and Appellant, TEG Oil & Gas U.S.A., Inc., and Cross-complainant and Appellant, Sefton Resources, Inc.

Clifford & Brown, Grover H. Waldon, and Daniel T. Clifford for Plaintiff, Cross-defendant and Respondent.

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 â€

Description	Court properly rejected oil company's cross-complaint against drilling company stemming from damages caused by blowout, on basis that exculpatory and limitation of liability provisions in parties' contract were valid--rather than improper attempt under Civil Code Section 1668 to exempt a contracting party from responsibility for fraud, willful injury, or violations of law--where drilling company did not seek or obtain complete exemption from culpability on account of its potential negligence or violation of any applicable regulations, but only sought to limit its liability for economic harm suffered by oil company. The parties foresaw possibility that a blowout could occur and agreed between themselves concerning where the losses would fall. The agreement required drilling company responsibility for damage to its equipment, injury to its employees and certain pollution and contamination removal and control activities. Thus not adversely affecting public or drilling company's employees.
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