Schmidt v. U.S.

• Decision Date: 27 February 1996
• Docket Number: No. 85545,85545
• Citation: 912 P.2d 871,1996 OK 29
• Parties: Elizabeth M. SCHMIDT, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: Oklahoma Supreme Court

Page 871

912 P.2d 871

1996 OK 29

Elizabeth M. SCHMIDT, Plaintiff, v. UNITED STATES of America, Defendant.

No. 85545.

Supreme Court of Oklahoma.

Feb. 27, 1996.

Certified Questions from a United States Court

Alan D. Rosenbaum, Lawton, Reggie N. Whitten, Douglas A. Terry, Mills & Whitten, Oklahoma City, for Plaintiff.

Patrick M. Ryan, United States Attorney, Ronny D. Pyle, Assistant United States Attorney, Western District of Oklahoma, for Defendant.

OPALA, Justice.

The United States District Court for the Western District of Oklahoma [certifying court] certified the following questions pursuant to the Uniform Certification of Questions of Law Act, 20 O.S.1991 §§ 1601 et seq.:

"1. Whether, under Oklahoma law, a contractual exculpatory clause for personal injury is valid and enforceable?

2. Whether, under Oklahoma law, the exculpatory provisions contained in the Rental Riding Agreement are valid and enforceable and operate to bar the plaintiff's negligence and negligent entrustment claims?"

We respond to the first question in the affirmative. We answer the second with a qualifying affirmative by noting that it applies if the certifying court finds that three preconditions to the clause's enforcement are met: (1) the exculpatory clause's language clearly, definitely and unambiguously displays an intent to insulate the United States from the type of liability the plaintiff seeks to impose; (2) no disparity of bargaining power existed between the two parties to the agreement containing the clause at the time it was executed; and (3) its effect would not violate public policy. We note that exculpatory clauses cannot relieve one from liability for fraud, willful injury, gross negligence or violation of the law. ¹

I ANATOMY OF THE FEDERAL LITIGATION ²

Elizabeth M. Schmidt [plaintiff or Schmidt] went to the Artillery Hunt Riding Stables [Stables] at Fort Sill, Oklahoma ³ to engage in recreational horseback riding. Before participating in this activity she executed a Rental Riding Agreement [contract]. The contract contained the following clause [exculpatory clause or clause]:

"In consideration for being allowed to participate in Horse Rental, I hereby release the Artillery Hunt Center and its employees and/or ride leaders ... and the United States Government from any liabilities or claims arising from my participation. I agree that I will never prosecute or in any way aid in prosecuting any demand, claim or suit against the United States Government for any loss, damage or injury to my person or property that may occur from any cause whatsoever as a result of taking part in this activity." [Emphasis supplied.]

Schmidt claims that, during the ride, a "ride leader" employed by the Stables negligently rode up behind her, frightened her horse and caused it to throw her to the ground, then fall on and injure her.

Schmidt brought a negligent tort complaint against the United States ⁴ alleging that the latter (1) is liable vicariously for the ride leader's negligence and (2) is culpable for its own negligence in selecting and keeping an unfit ride leader. ⁵ By its summary judgment motion the United States interposed the exculpatory clause, by which it sought to defeat Schmidt's claim.

II

THE NATURE OF THIS COURT'S FUNCTION WHEN ANSWERING QUESTIONS

FROM A FEDERAL COURT

While the actionability of state-law claims identified in the submitted questions may be tested when answering the queries posed, it is not this court's province to intrude (by the responses to be given) upon the federal court's decision-making process. Because this case is not before us for decision, we refrain, as we must, from applying the declared state-law responses to the facts elicited or to be determined in the federal-court litigation (whether made by evidence adduced at trial or by acceptable probative substitutes, called "evidentiary materials", for use in the summary adjudication process). ⁶ The task of analyzing the impact of today's answers must be and hence is deferred to the certifying court.

III THE PARAMETERS OF THE CLAUSE'S ENFORCEABILITY

By entering into an exculpatory agreement of the type dealt with here ⁷ the promisor assumes the risks that are waived. ⁸

                While these exculpatory promise-based obligations are generally enforceable, 9 they are distasteful to the law. 10  For a validity test the exculpatory clause must pass a gauntlet of judicially-crafted hurdles:  (1) their language must evidence a clear and unambiguous intent to exonerate the would-be defendant 11 from liability for the sought-to-be-recovered damages; 12  (2) at the time the contract (containing the clause) was executed there must have been no vast difference in bargaining power between the parties; 13  and (3) enforcement of these clauses must never (a) be injurious to public health, public morals or confidence in administration of the law or (b) so undermine the security of individual rights vis-a-vis personal safety or private property as to violate public policy. 14
                

The clause will never avail to relieve a party from liability for intentional, willful or fraudulent acts or gross, wanton negligence. ¹⁵

A. Clear and Unambiguous Description of Parties and Damages

A contractual provision which one party claims excuses it from liability for in futuro tortious acts or omissions must clearly and cogently (1) demonstrate an intent to relieve that person from fault and (2) describe the nature and extent of damages from which that party seeks to be relieved. This is so not only when one assesses a party's direct liability for negligence, but also when assaying whether the agreement's terms embrace acts of an agent or servant of that party. In short, both the identity of the tortfeasor to be released and the nature of the wrongful act--for which liability is sought to be imposed--must have been foreseen by, and fall fairly within the contemplation of, the parties. ¹⁶ The clause must also identify the type and extent of damages covered--including those to occur in futuro. ¹⁷

B. Bargaining Power's Parity Level

Courts consider two factors when called upon to ascertain the equality of the parties' bargaining power, vis-a-vis each other, in the setting of a promissory risk assumption: (1) the importance of the subject matter to the physical or economic well-being of the party agreeing to the release and (2) the amount of free choice that party could have exercised when seeking alternate services. ¹⁸

C. The Element Whose Presence Makes the Exculpation Not Violative of Public Policy ¹⁹

While courts may declare void those portions of private contracts which contradict public policy, ²⁰ they must do so only with great caution. ²¹ Two classes of exculpating agreements may be said to violate public policy: (1) those which--if enforced--patently would tend to injure public morals, public health or confidence in the administration of the law and (2) those which would destroy the security of individuals' rights to personal safety or private property. ²²

IV SUMMARY

National jurisprudence teaches that parties may contractually allocate the risk of future harm. The exercise of this power is conditional; any agreement having as its purpose the unequivocal exoneration of one party from negligent tort liability of another must identify both the putative tortfeasor and the category of recovery from which that actor would be relieved. The parties must have bargained for their exchange on a level playing field--the level to be measured by the seriousness of the contract's subject matter and the options available to the person giving up the right to sue. If the clause is to pass the test's muster, the assumed obligation cannot be deemed to have brought about a result perceived as harmful to the principles of "public policy". ²³

The validity of the Schmidt/Stables exculpatory clause in suit depends on the outcome of the fact-finding investigation to be conducted in the certifying court. ²⁴ If--under the test we announce today--that court should determine that any single requirement for the clause's enforceability has not been met, its decision could not uphold the contract and exonerate the United States.

CERTIFIED QUESTIONS ANSWERED.

KAUGER, V.C.J., and HODGES, LAVENDER, SIMMS, HARGRAVE, SUMMERS and WATT, JJ., concur.

ALMA WILSON, C.J., concurs in part and dissents in part.

1 See infra notes 8 and 15.

2 The material accompanying the certified questions consists of the parties' pleadings and motions filed in the certifying court. The factual recitals in the anatomy of the federal litigation were gleaned from this material and from the briefs submitted to this court.

3 The Stables are admittedly an instrumentality of the U.S. Army.

4 Schmidt's action invokes the Federal Tort Claims Act [FTCA], 28 U.S.C. §§ 2671 et seq. By the FTCA's terms the United States' liability is measured according to the law of the state in which the wrongful act occurred. 28 U.S.C. § 2674.

5 Schmidt charges the United States with actual notice of the employee's unfitness to lead the ride.

6 Brown v. Ford, Okl., 905 P.2d 223, 226 n. 3 (1995); Bonner v. Oklahoma Rock Corp., Okl., 863 P.2d 1176, 1178 n. 3 (1993); Shebester v. Triple Crown Insurers, Okl., 826 P.2d 603, 606 n. 4 (1992).

7 For a discussion of the difference between a contract clause totally exempting one from culpability and one which merely limits the financial extent of that liability, see Elsken v. Network Multi-Family Sec. Corp., Okl., 838 P.2d 1007, 1008 (1992); Fretwell v. Protection Alarm Co., Okl., 764 P.2d 149, 151 (1988). In both of those cases a burglar alarm company sought to limit its liability for loss due to theft of customers' property via a liquidated damages provision. The propriety of similar liability-limiting contract clauses is subject to an analysis grounded in contract law that lies outside the realm of tort jurisprudence. See MacNeil, Power of Contract and Agreed Remedies, 47 CORNELL L. Q. 495 (1962).

8 Express assumption of...