Large developer sues over Porter Ranch leak

A luxury home builder is suing Southern California Gas Company over the 2015 Aliso Canyon gas leak, claiming the local real estate market dried up as a result of the energy company's negligence.

The Los Angeles County Superior Court lawsuit filed by high-end construction company Toll Brothers Inc. claims SoCalGas knew about the risks of its outdated infrastructure prior to the well leak.

In a different case that may have a bearing on the new lawsuit, a 2nd District Court of Appeal ruling in December said the utility company was not liable for economic damages sustained by businesses as a result of the leak. Southern California Gas Company v. Superior Court of Los Angeles, 2017 DJDAR 11914.

In the lawsuit Toll Brothers said it purchased property in Porter Ranch for $1.6 billion after acquiring Shapell Industries Inc. in 2014. The goal was to develop the largest master-planned community in the county, consisting of about 6,000 home sites, but the October 2015 gas leak put a halt to business, according to the lawsuit. Of about 1,500 homes under development at the time of the incident, 1,400 are yet be built, the lawsuit states. Southern California Gas Cases, JCCP4861 (L.A. Super. Ct., filed Feb. 8, 2016).

About a third of pending sales were canceled, dozens were delayed, and financial concessions were made by the company, the lawsuit states. In the six months following the blowout, the construction company had a net sale of minus 1, making 18 sales and losing 19, according to the lawsuit.

"By comparison, during the same six-month period the prior year, plaintiffs had net sales of 74 homes in Porter Ranch. The impact of the blowout on plaintiffs' sales continues today, and the development of Porter Ranch is still years away from a full recovery," the lawsuit states.

The lawsuit claims strict liability, nuisance, and various negligence causes of action. Toll Brothers is represented by David Boies of Boies Schiller Flexner LLP, who did not respond to a request for comment. SoCalGas did not respond to a request for comment.

According to the lawsuit, SoCalGas knowingly ignored taking a proactive approach to updating its aging infrastructure at Aliso Canyon.

"Rather than designing, implementing, and operating a repair and maintenance protocol that would minimize the possibility of a well blowout, defendants designed a so-called maintenance and repair plan that was reactive instead of proactive," the lawsuit states.

When it argued for reopening the wells, the plaintiff said, SoCalGas acknowledged to the California Public Utilities Commission, its main governing arm, that it had made extensive physical, technological, and safety enhancements at the Aliso Canyon facility since the blowout.

A decision by a Los Angeles County Superior Court Judge John Shepard Wiley regarding whether he has jurisdiction over the commission in a lawsuit related to reopening the site is pending.

The appellate panel was reversing Wiley in December when it said SoCalGas did not have a duty to protect economic interests based on negligent conduct. Seven businesses within a five-mile radius filed a putative class action for negligence, strict liability and violations of the Unfair Competition Law.

"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," wrote Judge Kim Dunning, of the Orange County Superior Court, sitting on assignment. Justice Sandy Kriegler concurred, while Justice Lamar Baker dissented.

Over 100 metric tons of methane spewed from the well, cloaking the neighboring Porter Ranch community in an oily mist. Evacuations and reports of health problems resulted in more than 200 pending lawsuits.