Businesses Near Methane Leak Can’t Sue for Lost Profits

LOS ANGELES (CN) – A California appeals court has ruled that SoCalGas had no duty of care to businesses dealt a crushing economic blow when thousands of families fled a Los Angeles suburb after a massive methane gas leak.

The state’s Second Appellate District ruling, issued Friday, reverses a lower court’s finding that the seven businesses should be allowed to make their case to recover damages for the toll on the local economy after the leak at the Aliso Canyon Storage Facility. The environmental disaster began in October 2015, and families within a five-mile radius of the facility relocated.

After Judge John Shepard Wiley’s ruling, SoCalGas filed an objection at the appeals court arguing it owed no duty of care to the businesses under counts of strict liability, negligence and negligent interference with prospective economic advantage.

In Friday’s ruling, Orange County Superior Judge Kim Garlin Dunning, assigned to the appeals panel for this case, found SoCalGas was not liable for economic losses because the businesses had failed to establish a “special” or transactional relationship with the energy company.

The businesses did not claim any loss tied to a person or property, instead suing for negligence for economic loss alone. In such cases, recovery of damages is “limited to situations where a transaction between the defendant and another was intended to directly affect the plaintiff (a third party), whose economic loss was a foreseeable consequence of the defendant’s negligence,” Dunning wrote.

“Without personal injury, property damage or a special relationship, the general rule that precludes business plaintiffs from recovering for pure economic losses under a negligence theory remains viable,” Dunning wrote in the 2 to 1 decision.

Second Appellate District Associate Justice Lamar Baker wrote in a dissent that the businesses might have been able to make their case with a more developed record and that the ruling was premature.

“I think it is quite possible that some – but certainly not all – of the businesses in a five-mile radius from the Aliso Canyon Storage Facility are situated such that Southern California Gas Company owed them a duty of care,” Baker wrote. “In other words, I believe some businesses in the immediate geographic area of the gas leak could have a special dependence on that area such that harm to them would be foreseeable to Southern California Gas Company in a way it would not with respect to many other businesses in the area.”

Acting Presiding Justice Sandy Kriegler joined Dunning’s 21-page opinion.

On Oct. 23, 2015, SoCalGas discovered a ruptured gas well at its Aliso Canyon storage field in the northwest San Fernando Valley which overlooks Porter Ranch.

The leak displaced thousands in the nearby communities of Porter Ranch, Chatsworth, Granada Hills and Northridge. Residents said they suffered from headaches, dizziness, skin conditions, nosebleeds and nausea, aches, pains, and fatigue following the leak.  SoCalGas insisted that the gas from the leak was not harmful. Tens of thousands of people have pending claims against the energy company.

Some 100,000 metric tons of invisible greenhouse gas misted into the air before SoCalGas finally plugged the well 100 days later, nearly the equivalent to carbon dioxide pollution from burning 1 billion gallons of gasoline, according to the California Environmental Protection Agency Air Resources Board.

The ruptured well at Aliso Canyon was built in 1979, and the utility knew the subsurface well was damaged and needed to be repaired, according to court documents. Replacing or repairing the valve would have been a relatively low-cost endeavor but SoCalGas let the well age to the point where it was vulnerable to a catastrophic blowout, authorities found.

 

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