Judge won’t immediately throw out inverse liability against SoCal Edison in Woolsey Fire

Southern California Edison Co. lost, for now, its bid to knock out strict liability for its alleged role in a 96,000-acre fire that ripped through Ventura County two years ago.

After a showdown between lawyers for Edison and the Woolsey fire plaintiffs Thursday, Los Angeles County Judge William F. Highberger put off ruling on Edison's challenge to inverse condemnation until more facts are discovered, likely through a bench trial or in further summary judgment proceedings.

Inverse condemnation is a strict liability doctrine which holds that just compensation be provided when a private property is taken or damaged for public use. It's a no-fault theory of liability, which has been long pursued against utilities facing wildfire claims that have been on the rise in California. The doctrine's purpose is to also pass on losses among the community that benefits from an entity's services.

At Thursday's hearing, Highberger said he would grant Edison's motion for judgment on the pleadings to the extent of requiring a first group of plaintiffs to re-plead for inverse condemnation consistent with guidelines laid down by the California Supreme Court. City of Oroville v. Superior Court of Butte County 2019DJDAR7729, published Aug. 16, 2019.

In Oroville, the high court said a group of dentists couldn't hold liable the city of Oroville for inverse condemnation because there could have been multiple causes for a sewage backup that damaged their offices.

That first group of Woolsey plaintiffs has 30 days to re-plead, specifically to focus on the elements of public use and substantial causation as required in Oroville.

Edison first challenged the inverse claim in a demurrer last summer with a narrow strategy. Edison maintained that because of its status as a private utility, it doesn't have a guarantee or an ability to raise rates and should be exempt from the inverse doctrine. After the Oroville decision, Edison in its pleadings adopted a new strategy that included attacks on public use, maintenance and causation.

On Thursday, Highberger told plaintiffs to provide clearer articulation of their claims that match the standards laid out in Oroville. Those standards require parties to look at all facts as a whole when determining whether there is inverse condemnation liability. Even so, the judge warned Edison not to bring another demurrer or judgment motion as a "knee-jerk reaction."

The contentious hearing was a heated face-off between Edison's defender and heavy-hitter John C. Hueston of Hueston Hennigan LLP, and Berger Kahn's managing partner Craig S. Simon, who has years of experience litigating wildfire cases and represents insurers. Woolsey Fire cases, JCCP 5000.

The judge peppered both lawyers with questions over issues of public use, investor-owned utilities and causation. It has proven tough for Edison to snuff out inverse liability on a motion for judgment on the pleadings. An unredacted causation report compiled by the Ventura County Fire Protection District and the California Department of Forestry and Fire Protection is still in the hands of the state attorney general, who won't release it until April. Xavier Becerra has opened a criminal probe into the fire.

At Thursday's hearing, Hueston's biggest weapon was Oroville. The opinion relies on three concepts that left the plaintiff-dentists in that case empty-handed: loss spreading, deliberate actions of a public entity, and whether damages are sufficiently linked with public use, as required by the Constitution.

The state Supreme Court noted the dentist-plaintiffs' own acts or omissions could be considered in the causation of sewage backup, and the disaster wasn't the result of a risk posed by the city's sewage system.

Hueston argued fire plaintiffs have other means to pursue liability without inverse condemnation, but Edison, which is subject to rate-setting rules by the California Public Utilities Commission, can't spread losses as a matter of right.

Plaintiffs also must show Edison had concrete maintenance plans that were deficient in light of known, inherent risks in the public improvement, and the Woolsey fire damages were the probable consequence of the utility's adoption of the plan, Hueston argued.

It's not enough to say a maintenance plan was poorly executed, he said. Distributing electricity to the public isn't enough to qualify for inverse condemnation. There must be a public use in the actual fire that occurred, or proof that Edison intentionally wanted to burn properties, he added.

Simon said, "Mr. Hueston keeps banking on some sort of deliberate plan for maintenance." Plaintiffs don't have to find something in Edison's plans that proved the company executed a 'wait-until-it-breaks' approach in its infrastructure policies, he said.

The direct result of Edison's own installation, maintenance of its equipment for public use ignited the fire, Simon added, thus the damages were a proximate and substantial cause due to public use.

Simon questioned why Edison chose a specific design for the "down guy" wires that were placed so close to jumper cables on one of the main poles that the plaintiffs say could have ignited the fire.

"Why wasn't this protected by fiberglass?" he asked. Other rules set forth by the utilities commission require equipment be designed to withstand risks posed by known microclimate weather conditions, Simon argued.

As to Hueston's argument about Edison's inability to spread losses, wildfire risks have been included in return on equity, and there's no showing that the utility commission would disallow inverse losses to be socialized in the Woolsey fire, Simon said.

"I almost cried when Mr. Hueston talked about how Edison is such a victim. But this is a business," Simon said in response to Hueston's argument. "He didn't even talk to you about Assembly Bill 1054."

The bill passed in July established a $21.5 billion wildfire insurance fund contributed by utilities and ratepayers. While Edison can't enjoy the benefits of 1054 as it only funds fires that occur after 2019, Hueston failed to mention that society has historically provided utilities risk-spreading opportunities, and kicked in insurance money, Simon argued.

Craig M. Collins, a plaintiffs' lawyer at Blum Collins LLP, told the judge the Oroville ruling protects property owners, that Edison deliberately chose not to put lines underground, and instead hung them over dry vegetation to save money.

While commending Simon and Hueston for their strong advocacy, Highberger said he wouldn't re-invent "things here in the trial court." Inverse application law has been established in two appellate decisions: Pacific Bell v. SoCal Edison 2012DJDAR12351 and Barham v. SoCal Edison 1999DJDAR9119.

"It takes quite a bit of sailing against a headwind to make the ruling that I am asked to make by Edison, and I will," the judge said. The issues can be dealt with later in further motion practice or a court trial, he added.

A status conference was scheduled for Tuesday. Highberger will also decide later whether to grant Hueston's request to certify the pending issues by interlocutory appeal.