Appellate court: SoCalGas doesn’t have to pay Porter Ranch businesses affected by leak

Southern California Gas Company is not responsible for reimbursing economic damage suffered by area businesses related to the 2015 gas leak at Aliso Canyon, according to a published opinion from the 2nd District Court of Appeal.

In a 2-1 ruling, a court panel said that the utility did not have a duty to protect the businesses’ economic interests based on negligent conduct. The majority opinion zeroed in on the existence of a transaction and foreseeable economic harm.

Seven businesses within a five-mile radius of the leak filed a putative class action for strict liability for ultra-hazardous activity, negligence, negligent interference with prospective economic advantage, and violations of the Unfair Competition Law.

Because the business plaintiffs did not allege any injury to persons or property, only economic loss, SoCalGas has no duty to pay, the court ruled. Further, there was no indication of a transaction, as required by the Supreme Court to establish a relationship, the court ruled last week.

“Without personal injury, property damage or a special relationship, the general rule that precludes business plaintiffs from recovering for pure economic losses under a negligence theory remains viable,” wrote Judge Kim Garlin Dunning, an Orange County Superior Court judge sitting on assignment.

With Justice Sandy Kriegler concurring, the appellate panel ordered the trial court to sustain the gas company’s demurrer.

“Although our Supreme Court long ago recognized plaintiffs may sue in negligence for economic loss alone Biakanja v. Irving (1958) 49 Cal.2d 647 (Biakanja), such recovery has been limited to situations where a transaction between the defendant and another was intended to directly affect the plaintiff (a third party), whose economic loss was a foreseeable consequence of the defendant’s negligence,” Dunning wrote.

Los Angeles County Superior Court Judge John Shepard Wiley ruled that losses could be sought in part because the damage was foreseeable and a duty was present. “The economic loss rule thus does not apply in a context like this one: a classic mass tort action where high transactions costs precluded transactions, where the risk of harm was foreseeable and was closely connected with [SoCalGas’] conduct, where damages were not wholly speculative, and where the injury was not part of the plaintiff’s ordinary business risk. (J’Aire . . . , supra, 24 Cal.3d [at p.] 808.”

In a dissenting opinion, Justice Lamar Baker said the ruling was premature and lacked a more complete record.

“I think it is quite possible that some — but certainly not all — of the businesses in a five-mile radius from the Aliso Canyon Storage Facility are situated such that Southern California Gas Company owed them a duty of care,” Baker wrote.

“In other words, I believe some businesses in the immediate geographic area of the gas leak could have a special dependence on that area such that harm to them would be foreseeable to Southern California Gas Company in a way it would not with respect to many other businesses in the area,” he added.

SoCalGas was represented by James Dragna and David Schrader of Morgan, Lewis & Bockius LLP, who declined to comment about the case. Plaintiffs’ attorney Raymond Boucher of Boucher LLP, did not respond to a request for comment. The businesses are also represented by R. Rex Parris of the R. Rex Parris Law Firm, Baron & Budd PC, the Kick Law Firm, and Lieff Cabraser Heimann & Bernstein LLP.

More than 200 negligence lawsuits were spawned as a result of 100,000 metric tons of methane that spewed from the gas facility. Residents of Porter Ranch reported developing fevers, coughs and rashes as a result of a mysterious odor.