Facts

On July 20, 2004, defendant Manual Lopez was operating a tractor/trailer owned by defendant Cartel Transport, LLC (Cartel) in the course and scope of his employment with Cartel. Due to standing water in the roadway, Lopez lost control of the vehicle and it collided with a power pole located on State Highway 33, 590 feet north of Fahey Road, in Merced County. Plaintiff Ingomar Packing Company, LLC (Ingomar), sued defendants for loses allegedly suffered due to the power outage caused by the accident. Plaintiff St. Paul Guardian Insurance Company was subrogated to Ingomar's rights, as it was Ingomar's insurer and had compensated Ingomar for part of its claimed business losses.

Judicial notice was taken that the plant is over eight miles away from the scene of the subject accident. Plaintiffs filed their first amended complaint for motor vehicle negligence, general negligence, and negligence per se on July 13, 2007. Defendants demurred to the complaint on the ground that no facts were pleaded sufficient to demonstrate a legal duty owed to plaintiff (due to the distance between the accident and the plant), and the demurrer was sustained with leave to amend. Plaintiffs filed their second amended complaint on or about Jan. 15, 2008. Defendants again demurred on the same grounds. On March 28, 2008, the court overruled the second demurrer, on a "close, close, close call." (Transcript, Law & Motion, Dept. 24, 3/28/08 ("Demurrer Hearing") at p. 23:20).

PLAINTIFF'S CONTENTIONS:
Plaintiffs alleged that defendants' negligence, carelessness, and actions/inactions caused a power outage that resulted in plaintiffs to suffer certain business losses at the Ingomar tomato packing facility.

DEFENDANT'S CONTENTIONS:
Defendants contended that there was no duty of care owed to plaintiffs as a matter of law.

Settlement Discussions

Plaintiffs approached defendants while the summary judgment motion was on file to discuss settlement. Defendants declined to do so.

Damages

Plaintiffs claimed $384,058 in lost profits and damages.

Result

After discovery, defendants moved for summary judgment. In its ruling on the motion, the court held that, as a matter of law, defendants did not owe a duty of care to the plaintiffs and that defendants were entitled to summary judgment. The court's rationale included citation of the seminal tort case Palsgraf v. Long Island Railroad Co. (1928) 248 N.Y. 339, which introduced the concept of the "zone of danger." Pursuant to California law, a power consumer in plaintiffs' position would need to be located in the "neighboring vicinity" of an accident in order to recover its claimed damages. The court held that the eight-mile distance in the instant case was outside the "neighboring vicinity" as a matter of law. Plaintiffs agreed to forego any appeal in exchange for defendants' waiver of costs. Summary judgment granted for defendants

Other Information

According to defense counsel: The critical issue in this case was the eight-mile distance. The judge may have been aided by defendants' citation of an Indiana case with unbelievably similar facts. In Hammock v. Red Gold, Inc. (2003) 784 N.E.2d 495, the Indiana court applied the California "neighboring vicinity" standard and determined that an approximately 2.5 mile distance was too far.