Southern California Gas Company v. Superior Court of Los Angeles County
Public Justice’s Leslie Brueckner is co-lead counsel in this California Supreme Court appeal that concerned an issue of enormous importance to consumers and tort victims throughout the State: whether the “economic-loss rule” precludes recovery of purely economic damages arising out one of the most serious environmental disasters in California (if not U.S.) history.
The appeal arose out of a massive gas leak from a methane storage facility operated by Southern California Gas Company (SoCalGas). The leak lasted for over four months despite numerous “kill” attempts by SoCalGas, causing catastrophic environmental damage and ruining the local economy. We represented a class of over 400 small businesses who suffered serious economic losses due to the 6-months-long evacuation of a five-mile area surrounding the leak.
SoCalGas is argued that our clients are not entitled to any recovery for their losses, simply because many of them didn’t also suffer property damage. We think this is wrong and makes no sense. We argued that the economic-loss rule is simply inapplicable to tort cases, like this one, where there is no contractual relationship between the parties.
The gas leak that caused our clients’ injuries was the worst methane gas leak in United States history. (Methane gas is the number one contributor to global warming.) The well blew out in September 2015. Over the course of the next four months, it released thousands of tons of methane and other chemicals into the air. Overall, 220 times more methane escaped via the leak that the total amount of oil emitted by the 2010 Deepwater Horizon disaster. The blowout went on for months despite SoCalGas’s eight separate “kill” attempts, causing Governor Jerry Brown to declare a State of Emergency and resulting in 15,000 area residents evacuating their homes over the course of six months. The situation was so severe that the Federal Aviation Administration restricted flights over the area out of a fear that planes could ignite fumes from the leak.
Our clients allege that SoCalGas’s negligence resulted in the catastrophic gas leak, causing them to suffer crippling economic losses after thousands of the state’s residents evacuated their homes for months. The Court of Appeal dismissed the businesses’ claims on the ground that the economic losses they suffered—rather than property damage or personal injury—did not arise from any contractual relationship with SoCalGas, and they are therefore barred from recovery under the economic loss rule.
The California Supreme Court granted review to decide whether “a gas company that negligently caused the largest methane gas leak in United States history, and which forced residents in the surrounding community to evacuate their homes for several months, owes a duty of care to the community’s businesses for the economic losses caused by the gas company’s misconduct?”
Unfortunately, in a decision that seemed to drip with regret, the Court held that the economic-loss rule barred the claims. But the Court invited the California legislature to take action to protect the plaintiffs, stating that “[t]he Legislature … may be able to improve [the economic-loss] regime in ways that would be exceptionally difficult, if not impossible, for us.” See also 7 Cal.5th at 413 (“With the economic consequences in this case allegedly so severe, and the number of people affected allegedly so large, the Legislature could be spurred yet again to act.”).
Public Justice’s Leslie Brueckner and Robert Nelson of Lieff, Cabraser, Heimann & Bernstein are co-lead appellate counsel on the case. For more details, please see Leslie’s blog post about the case.