High court justices (regretfully) nix suits by businesses over gas leak

With a hint of regret, the state Supreme Court on Thursday closed the courthouse door to business owner plaintiffs seeking to recover revenue lost when a massive 2015 natural gas leak at a Southern California Gas Co. facility forced residents to evacuate a swath of Los Angeles County's Porter Ranch neighborhood.

The business owners are a discrete subset of plaintiffs suing the utility, whose claimed harm was solely financial and not tied to any physical injury or property damage caused by the gas leak.

In an unanimous opinion written by Justice Mariano-Florentino Cuéllar, the court concluded that "competing considerations" and "intractable line-drawing problems" recommend against allowing recovery for such plaintiffs, with "purely economic losses."

"None of this is to say that denying recovery for those who did not suffer injury to person or property is a perfect solution in negligence cases like this one," wrote Cuellar. "Far from it; it is only the least-worst rule out there."

The gas leak released some 55 tons of natural gas every hour from underground storage containers, affecting the health of nearby residents and prompting the Los Angeles County health department to direct SoCalGas to relocate those who lived within five miles of the leak site. Thanks to the evacuation, the plaintiffs claimed, their businesses suffered direct and definte economic losses.

During oral argument, multiple justices seemed sympathetic, seemingly searching for a way to craft a legal remedy that would allow the plaintiffs' suit to proceed. Both Cuellar and Joshua P. Groban noted the denial of recovery for purely economic loss seemed arbitrary.

Cuellar revisited that point in the opinion, but acknowledged it's often an unavoidable part of jurisprudence, and noted that most jurisdictions follow the rule.

"Drawing arbitrary lines is unavoidable if we are to limit liability and establish meaningful rules for application by litigants and lower courts," Cuellar wrote. "The ripple effects of industrial catastrophe on this scale in an interconnected economy defy judicial creation of more finely tuned rules."

"Hence the admittedly imperfect legal regime that governs in most jurisdictions -- that we now confirm governs in ours," he added.

Mark Gergen, an associate dean at UC Berkeley School of Law, who filed an amicus brief in support of SoCalGas, said courts can't always provide legal remedies, even when they might want to do so.

"There are some wrongs, some harms that the legal system simply cannot redress in a way that's acceptable," Gergen said, who said the economic loss rule, if harsh, is at least workable. "If you can't draw a principled line, fall back on the default rule: No recovery for solely economic harm."

Leslie Brueckner, a senior counsel with Public Justice in Oakland, who represented the plaintiffs at oral argument, contended a definable, sensible line could be drawn that would allow recovery for her plaintiffs.

"As we argued, there are all sorts of ways to limit liability in economic loss under existing tort rules," Brueckner said. "The court was apparantly worried there would be too many claims unleashed."

Brueckner said the unanimous ruling surprised her, after the justices had seemed inclined to figure out a remedy for the plaintiffs. That, she thought, likely explained the hesistancy with which the court reached its conclusion.

"It seemed the court was really holding its nose, saying over and over that it recognizes this is the least bad of the rules it could come up with," Brueckner said. "The court went out of its way to recognize how unfair the result is; it felt its hands were tied."

Another concern raised at oral argument by both Justice Carol Corrigan and Chief Justice Tani Cantil-Sakauye was regarding deterrence, and whether cutting off potential liability in this case leaves insufficient pressure on state utilities to avoid similar accidents.

Kathleen Sullivan, a partner with Quinn Emanuel Urquhart & Sullivan LLP, insisted SoCalGas was effectively deterred by statutes and regulatory oversight, plus the threat of traditional tort suits.

The justices appeared to agree, insisting that "SoCalGas is not getting off scot-free," as tens of thousands of plaintiffs claiming property damage remain in litigation against the utility, which, the court added, claims to have spent nearly half a billion dollars toward remedial measures.