Another look at the state Supreme Court’s inverse condemnation ruling in City of Oroville

The California Supreme Court, for the first time in more than two decades, recently waded into the murky inverse condemnation waters. The utility industry defense bar has hailed that decision, City of Oroville v. Superior Court, 7 Cal. 5th 1091 (2019), as the North Star for providing guidance on the current state of inverse condemnation law. In fact, even a cursory reading of that case suggests otherwise.

The City of Oroville holding can be boiled down to the following: Inverse condemnation applies if the inherent risk in the design, construction or maintenance of a public use is the substantial (not nominal) cause of a loss. Hence, in City of Oroville plaintiff was denied recovery when his failure to comply with code-mandated installation of a backflow device defeated the design of the city's sewage system. The balance of the City of Oroville opinion is nothing more than dicta attempting to harmonize the numerous inverse decisions.

A simplistic analysis of inverse law divides the myriad decisions into three separate and distinct boxes:

BOX 1: FLOOD CASES

A number of so-called "flood cases" (Bunch v. Coachella Valley Water Dist., 15 Cal. 4th 432, 439 (1997); Belair v. Riverside County Flood Control Dist., 47 Cal. 3d 550 (1988); Locklin v. City of Lafayette, 7 Cal. 4th 327, 362 (1994); Paterno v. State of California, 113 Cal. App. 4th 998 (2003), etc.) have been decided. The courts have uniformly held those cases are sui generis and applied the "rule of reasonableness" test-essentially a negligence standard. The rationale for those cases is that dikes and levees are specifically designed to prevent flooding-hence when they fail strict liability should not apply. The genesis of those decisions is the "common enemy" rule, which has its underpinnings in real property law.

BOX 2: WATER/SEWAGE CASES

A plethora of cases involving broken water mains and sewage backups (McMahan's of Santa Monica v. City of Santa Monica, 146 Cal. App. 3d 684 (1983); CSAA v. City of Palo Alto, 138 Cal. App. 4th 474 (2006); Pacific Bell v. City of San Diego, 81 Cal. App. 4th 596 (2000)) have been the subject of inverse condemnation. A strict liability standard has uniformly been applied in those cases.

BOX 3: WILDFIRE CASES

Numerous wildfire cases (Aetna Life & Casualty Co. v. City of Los Angeles, 170 Cal. App. 3d 865 (1985); Marshall v. Department of Water and Power, 219 Cal. App. 3d 1124 (1990); Barham v. Southern Cal. Edison Co., 74 Cal. App. 4th 744 (1999), etc.) have been the subject of inverse condemnation. The courts in those cases have consistently applied the strict liability standard on the basis that supplying electricity to the public is properly the subject of inverse condemnation. Further, those cases draw no artificial distinction between city-owned and investor-owned utilities.

CONCLUSION

The City of Oroville decision provides no panacea to the utility industry for inverse condemnation liability in wildfire cases. Contrary to any tortured Rorschach reading by the defense bar, the City of Oroville decision is an outlier which does not represent a departure from settled California inverse condemnation law. The strict liability/no-fault standard consistently employed in wildfire cases will continue to be applied so long as they are substantially caused by an inherent risk in the design, construction or maintenance of their electrical facilities. 