Shareholders’ Porter Ranch gas leak lawsuits dismissed without prejudice

A pair of derivate shareholder actions filed against Sempra Energy's board of directors over the 2015 Porter Ranch gas leak have been dismissed due to lack of specific allegations of wrongdoing, but plaintiffs have two months to file an amended complaint.

The blowout occurred at Aliso Canyon's underground storage facility on Oct. 23, 2015 after well SS-25 was reported to have spilled a leak. The facility is owned by Southern California Gas Company, a subsidiary of the Sempra Energy corporation. The utility faces thousands of claims from plaintiffs who say they were affected by the leak in a consolidated action presided over by Los Angeles County Superior Court Judge Carolyn B. Kuhl. Southern California Gas leak cases, JCCP 4861.

In 2016, a group of shareholders sued Sempra's board of directors for breach of fiduciary duty and aiding and abetting the breach. Rhoda Kanter v. Debra Reed, et al BC611319 (L.A. Super. Ct., filed Feb. 23, 2016).

Statutes allow for shareholders who suspect wrongdoing by the board after an incident to ask a company's board to bring a case against themselves and investigate.

Shareholder Rhoda Kanter's lawsuit accused directors of failing to ensure the facility was operating safely and argued making a demand on the board while challenging its decisions would've been useless because the majority of Sempra's directors couldn't conduct an objective, independent investigation of any alleged wrongdoing.

Kuhl's Nov. 4 ruling said shareholders must first make a pre-suit demand to Sempra's board, meaning they had to provide notice to the board to ask them to investigate the alleged misconduct before taking legal action.

A second lawsuit, filed by shareholder Charles Fazio, accused the board of not taking any action in a timely fashion when he demanded it remedy the situation. Charles Fazio v. Debra Reed, et al 37-2017-00007459-CU-SL-CTL (S.D. Super. Ct., filed Mar. 1, 2017).

Sempra board members, represented by Jack DiCanio, partner at Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates, argued in their demurrer personnel were simply waiting for a root cause analysis report to be released before making any changes. With respect to Kanter, defense argued the shareholders didn't sufficiently demonstrate a potential liability as to any of the board members, to which Kuhl agreed.

In her ruling, Kuhl sustained Sempra's demurrer and dismissed both lawsuits without prejudice, due to a lack of particularized allegations specifying that the board intentionally sought to undermine the safety of the Aliso Canyon facility.

As to Fazio, Kuhl found the board clearly didn't reject his demand but simply deferred it until the root cause analysis report conducted by the California Public Utilities Commission and the state's Division of Oil, Gas and Geothermal Resources was complete.

Shareholders have been given 60 days to file an amended complaint or be barred from bringing any further claims.

In a statement Friday, Jeff S. Westerman of Westerman Law Group, who represents Kanter, said he plans to file an amended complaint but did not comment further.

Fazio's counsel, Daniel Germain of Rosman & Germain LLP and James M. Ficaro of The Weiser Law Firm PC of Philadelphia, could not be reached for comment Friday.