S. Cal. Gas Co. v. Superior Court of L. A. Cnty.(In Re S. Cal. Gas Leak Cases)
247 Cal. Rptr. 3d 632
Cal.2019Background
- Massive natural gas leak at SoCalGas’s Aliso storage facility (Oct 2015–Feb 2016) forced relocation of ~15,000 residents and disrupted Porter Ranch’s economy; no named plaintiff alleges personal injury or property damage.
- Putative class: businesses operating within five miles of the facility seeking recovery solely for lost income caused by the leak and attendant evacuations.
- Trial court denied SoCalGas’s demurrer; Court of Appeal granted writ and reversed, holding plaintiffs cannot recover purely economic losses in negligence absent a special relationship.
- Supreme Court granted review to decide whether tort duty exists to guard against purely economic losses from an industrial accident absent personal/property injury.
- Court framed the question against California precedent limiting recovery for purely economic loss and national consensus favoring bright-line limits to avoid indeterminate liability, over-deterrence, and unmanageable line-drawing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SoCalGas owed a tort duty to businesses to prevent purely economic losses caused by the leak | Plaintiffs: negligence duty exists; tort should allocate costs and deter risky conduct; courts can apportion liability | SoCalGas: no duty for purely economic loss absent personal/property harm or a special relationship; allowing recovery creates indeterminate liability | No duty: purely economic losses unaccompanied by physical injury or property damage are not recoverable in negligence absent a special relationship; demurrer sustained. |
| Whether geographic proximity (five-mile evacuation zone) creates a judicially manageable boundary for recovery | Plaintiffs: limit class spatially to businesses within five miles (evacuation area) | SoCalGas: proximity-based line is arbitrary and creates unworkable spatial limits and incentives | Rejected: five-mile boundary is arbitrary; spatial limits based on evacuation zones create line-drawing and perverse incentives. |
| Whether temporal limits (during disaster or business closure) can reasonably cabin claims for economic loss | Plaintiffs: damages tied to the leak and its ongoing economic effects justify recovery | SoCalGas: permitting recovery across time creates open-ended liability | Rejected: temporal limits are unworkable (disasters vary in duration; post-disaster economic effects continue), producing indeterminate liability. |
| Whether precedent or policy supports recognizing a duty for purely economic losses here | Plaintiffs: cite J’Aire and other cases allowing recovery in some economic-loss contexts | SoCalGas: Bily, Adams and broader authority support limiting recovery absent special relationship | Court: follows precedent (special-relationship rule from Biakanja/J’Aire limited by Bily) and national consensus rejecting recovery in industrial-accident contexts. |
Key Cases Cited
- J’Aire Corp. v. Gregory, 24 Cal.3d 799 (Cal. 1979) (recognized recovery for purely economic loss where a special relationship existed between parties)
- Adams v. Southern Pacific Transp. Co., 50 Cal.App.3d 37 (Cal. Ct. App. 1975) (refused recovery for employees’ lost wages after an explosion destroyed their workplace)
- Bily v. Arthur Young & Co., 3 Cal.4th 370 (Cal. 1992) (limited duty for negligent economic loss in auditor context; emphasized need for meaningful limits on liability)
- Centinela Freeman Emergency Medical Assn. v. Health Net of Cal., 1 Cal.5th 994 (Cal. 2016) (demurrer-review standard and definitions of recoverable economic harms)
- 532 Madison Ave. Gourmet Foods, Inc. v. Finlandia Ctr., Inc., 750 N.E.2d 1097 (N.Y. 2001) (declined to extend duty to cover purely economic losses to an entire urban neighborhood after a tower collapse)
- State of La. ex rel. Guste v. M/V Testbank, 752 F.2d 1019 (5th Cir. 1985) (under admiralty law, rejected recovery for purely economic losses after chemical spill)