Tunkl v. Regents of University of California

Citations: 383 P.2d 441; 60 Cal. 2d 92; 32 Cal. Rptr. 33; 6 A.L.R. 3d 693; 1963 Cal. LEXIS 226Docket: L. A. 26984

Court: California Supreme Court; July 9, 1963; California; State Supreme Court

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The case involves Olga Tunkl, acting as executrix for her deceased husband Hugo Tunkl, who sought damages for personal injuries allegedly caused by the negligence of physicians at a nonprofit charitable hospital operated by the Regents of the University of California. Upon admission, Tunkl signed a release of liability for any negligent acts by the hospital's employees, contingent on the hospital's due care in their selection. The trial court allowed a jury to determine the validity of this exculpatory clause, which they upheld, leading to a judgment in favor of the hospital. Tunkl's executrix appealed, challenging the clause's validity under California Civil Code section 1668, which prohibits contracts that exempt individuals from liability for their own negligence or wrongful acts. The court noted a historical inconsistency in the interpretation of this statute, with some cases strictly invalidating negligence liability waivers. The ruling emphasized that the exculpatory provision in the hospital's contract undermines public interest and is therefore unenforceable under section 1668, aligning with precedents that prohibit limiting liability for negligence through contractual agreements.

Union Constr. Co. v. Western Union Tel. Co. established that exculpatory clauses can only be enforced if they do not involve public interest. Mills v. Ruppert later limited "negligent violation of law" to statutory law only. Various cases have clarified that statutes prohibit the exculpation of gross negligence and differentiate between active and passive negligence. In Stephens v. Southern Pac. Co., the court upheld an exculpatory clause, stating that the parties were on equal footing and the public interest was minimal. Conversely, Nichols v. Hitchcock Motor Co. enforced an exculpatory clause as it pertained solely to the private affairs of the parties. In contrast, courts have invalidated such clauses in contracts involving public services, such as telegraph messages and banking transactions, emphasizing the public's interest in accountability. Ultimately, the enforceability of exculpatory clauses depends on their impact on public interest, necessitating the identification of relevant factors.

Social forces influencing the concept of public interest are complex and evolving, making it impossible to define this concept rigidly. Instead of a strict definition, it is more useful to identify situations where public interest is relevant. Courts have outlined characteristics of contracts that exhibit public interest, particularly regarding the invalidation of exculpatory clauses. Such contracts typically involve businesses subject to public regulation and services deemed essential to the public. 

The party seeking exculpation often has significant bargaining power over the public, presenting standardized contracts that do not offer additional protection against negligence. This creates a scenario where the service recipient may be compelled to accept risks without adequate consideration or choice, particularly when the service is vital to them. 

Public policy generally places the risk of negligence on the party providing the service, ensuring that risk is not unfairly shifted to those less able to bear it. The hospital-patient relationship clearly exemplifies a contract affecting public interest, as it meets all the outlined characteristics: it is a public-regulated institution, offers essential services, and while it may be selective in patient acceptance, it retains its public nature.

The hospital selectively accepts cases relevant to its research and training specialties, presenting itself as a public institution offering services to qualifying individuals. In requiring patients to accept a waiver in their admission contract, the hospital wields significant bargaining power, leaving patients unable to negotiate terms or seek alternatives. Consequently, the agreement resembles an adhesion contract, wherein the patient relinquishes control and assumes the risk of the hospital's potential negligence. The hospital's role transcends that of a private party, affecting public interest similarly to that of an innkeeper.

The hospital's defense arguments against the waiver's validity are unconvincing. It argues that public interest may invalidate the waiver for paying patients but not for charitable patients, and that it should be exempt from liability for its employees' negligence. However, the duty of care owed by the hospital does not differ based on the patient's payment status, and the notion of charitable immunity for nonpaying patients is rejected, as it undermines both legal principles and ethical standards. The distinction between the hospital's own negligence and vicarious liability for its employees is also flawed; as a corporate entity, the hospital acts through agents without distinction in liability types.

The court refuses to establish a broad distinction regarding the liability of research hospitals for negligence. It argues that if a patient's right to sue a negligent agent is adequate, the hospital can be subrogated to that right upon paying a judgment. The defendant seeks to modify the previous ruling in Malloy, which abolished charitable immunity, claiming that holding hospitals accountable could divert resources from medical research. However, the court emphasizes that negligence must be proven and that the standards of care will reflect the experimental nature of treatments. Exempting hospitals from any duty of care would effectively grant them immunity through contractual clauses, contradicting the principles established in Malloy. The court asserts that in a mutually dependent society, public interest cannot be narrowly defined, as negligence in any sector, including healthcare, impacts the broader community. Therefore, the court reverses the judgment, reaffirming that hospitals cannot preemptively shield themselves from liability for negligence. Additionally, the plaintiff's argument regarding the invalidity of a release signed under duress was rejected by the jury, which found that the plaintiff understood the release's implications. This appeal focuses solely on the legal standing of that release.

Section 1668 allows for exculpatory clauses in contracts, except for instances involving intentional wrongdoing, which raises concerns about its effect on the term "negligent violation of law." The prevailing legal view in the U.S. holds that exculpatory contracts are valid unless they impact public interest; however, New Hampshire rejects this "public interest" test outright. Notable California cases demonstrate various applications of this doctrine, with courts ruling that exculpatory clauses are not applicable in certain contexts, particularly when public interest is at stake. In contrast, some contracts, deemed ordinary business transactions, have upheld exculpatory clauses. There is a distinction in California law between contracts that modify responsibilities in regulated relationships and those that do not face specific regulation. Historical references to the "public interest" concept indicate its influence on constitutional considerations regarding state price fixing laws, as established in landmark Supreme Court cases.

Restaurants are prohibited from racial discrimination as they serve a public interest, similar to historical roles of innkeepers and common carriers. Legal precedents highlight that businesses classified as places of public accommodation, such as restaurants and retail stores, must provide services to all, reflecting a constitutional standard derived from cases like *Charles Wolff Packing Co. v. Court of Industrial Relations* and *German Alliance Ins. Co. v. Lewis*. Various legal writings and cases further establish the duty of public service, noting that businesses cannot evade liability for negligence if they are bound to serve the public. The relationship between the obligation to serve and the enforcement of exculpatory clauses is crucial, with courts often rejecting such clauses when a duty to serve exists, although this does not necessarily apply to all businesses. Additionally, some rulings have voided exculpatory provisions even when no public service duty was present, indicating a broader judicial approach to ensuring accountability in business practices.

Contracts that exempt a party from liability for negligence are generally deemed invalid when one party holds a significantly superior bargaining position, effectively placing the disadvantaged party at the mercy of the other’s negligence. This principle is supported by numerous case law citations, including Bisso v. Inland Waterways Corp. and others, indicating a consistent judicial stance against such exculpatory clauses. The excerpt references various legal analyses and notes that highlight the significance of comparative bargaining power in contract law. Additionally, the provision of hospital services is affirmed as a valid exercise of police power to promote public health, supported by cases such as Goodall v. Brite and Wilmington General Hospital v. Manlove, which assert the obligation of hospitals to provide emergency services.