S. Cal. Gas Co. v. Superior Court of L. A. Cnty. (In re S. Cal. Gas Leak Cases)
227 Cal. Rptr. 3d 117
Cal. Ct. App. 5th2017Background
- In Oct 2015 SoCalGas discovered a massive natural gas leak at Aliso Canyon; residents were relocated and property/health impacts occurred. 7 businesses within a five-mile radius sued for purely economic losses (no personal injury or property-damage claims).
- Business plaintiffs asserted causes of action including strict liability for ultrahazardous activity, negligence (including negligent interference with prospective economic advantage), and UCL claims.
- SoCalGas demurred, arguing California precedent requires a special transaction or relationship (Biakanja/J'Aire line) to impose a duty for purely economic loss to third parties.
- The trial court overruled the demurrer, reasoning that in a mass-tort context SoCalGas should “bear all costs its accident caused” and allowed negligence recovery for purely economic loss.
- SoCalGas petitioned for writ review; the appellate court granted relief, holding as a matter of law no duty existed to business plaintiffs for purely economic loss and directed the demurrer be sustained without leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SoCalGas owed a duty in negligence to third-party businesses for purely economic loss from the gas leak | Mass-tort context makes the economic-loss bar inapplicable; SoCalGas should bear all costs its accident caused | California precedent requires a special relationship/transaction to impose duty for pure economic loss; absent personal injury or property damage, no duty exists | No duty as a matter of law; demurrer sustained without leave to amend |
| Whether J'Aire or Biakanja permits recovery here absent a transaction intended to affect plaintiffs | J'Aire permits recovery for lost economic advantage in mass events; trial court relied on that principle | J'Aire preserves exception but requires a special relationship/transactional nexus—plaintiffs allege none | J'Aire/Biakanja require the transaction/special-relationship factor; plaintiffs failed to allege it, so J'Aire does not support recovery here |
| Whether the trial court correctly relied on Adams and similar cases to allow broad recovery for economic loss | Trial court treated Adams and related authority as supporting broad liability in mass torts | Adams is distinguishable or disapproved by later Supreme Court decisions (J'Aire); Adams cannot justify blanket duty here | Trial court erred to rely on Adams; cases permitting recovery involved physical destruction of plaintiff’s property or a transaction nexus which is absent here |
| Whether writ review was proper at demurrer stage | Plaintiffs argued factual development needed; trial court certified question for immediate review | SoCalGas argued appellate intervention was appropriate to avoid needless expense and decide a widely important legal duty question | Writ review granted: issue significant, of widespread interest, and susceptible to resolution on the pleadings; appeal would not be adequate |
Key Cases Cited
- Biakanja v. Irving, 49 Cal.2d 647 (recognition of exceptional duty to third parties for purely economic loss based on a transaction intended to affect the plaintiff)
- J'Aire Corp. v. Gregory, 24 Cal.3d 799 (special-relationship/transaction requirement for recovery of lost prospective economic advantage absent personal injury or property damage)
- Bily v. Arthur Young & Co., 3 Cal.4th 370 (foreseeability alone insufficient to impose broad negligence liability for pure economic loss)
- Quelimane Co. v. Stewart Title Guaranty Co., 19 Cal.4th 26 (applied Biakanja factors and declined to recognize duty for pure economic loss)
- Centinela Freeman Emergency Medical Assocs. v. Health Net of California, Inc., 1 Cal.5th 994 (applied Biakanja to impose an exceptional duty where factors supported it)
- Adams v. Southern Pac. Transp. Co., 50 Cal.App.3d 37 (earlier Court of Appeal decision limiting negligent-interference recovery; later disapproved to the extent it barred all recovery)
- George A. Hormel & Co. v. Maez, 92 Cal.App.3d 963 (recovery for economic loss where physical damage to property that enabled livelihood caused foreseeable business interruption)
- Union Oil Co. v. Oppen, 501 F.2d 558 (Ninth Circuit allowed duty to commercial fishermen for oil spill damages where plaintiffs’ livelihood depended on destroyed property/resource)
- Fifield Manor v. Finston, 54 Cal.2d 632 (illustrates limits on recovery for interference with economic interests when nexus is too remote)