On November 14, 2012, the California Supreme Court denied review in the Pac Bell case which was the subject of the column the Daily Journal published in September, “Private Utility, Public Doctrine” regarding eminent domain issues. 

Here the authors, Managing Partners Craig Simon and Mark Grotefeld, give an update to the case, and discuss recent trial court rulings on the same issues.

Certiorari denied in privately-owned public utility inverse condemnation case

By Craig S. Simon & Mark S. Grotefeld

On Nov. 14 the state Supreme Court denied review to Southern California Edison, which sought reversal of Pacific Bell Telephone Company v. Southern California Edison Co., 208 Cal. App. 4th 1400 (Aug. 30, 2012). This new Court of Appeal decision upholds and explains Barham v. Southern California Edison Co.], 74 Cal. App. 4th 744 (1999), which concluded that any public utility can be liable for an unconstitutional taking, even if the utility is privately owned. Many privately owned public utilities were hoping the Supreme Court would grant review and hold that inverse condemnation law did not apply to them. Their hopes were dashed the appeal failed to persuade even one justice to vote to hear the case.

Many trial judges are grappling with the issues raised in these inverse condemnation cases. Judge Steven L. Dylina, Department 7 of the San Mateo County Superior Court, is presiding over the San Bruno Explosion cases (JCCP 4648 A). On Oct. 29 Judge Dylina ruled that Pacific Gas & Electric was liable to the victims of the San Bruno gas explosion under the law of inverse condemnation. Pacific Gas & Electric (unsuccessfully) argued, “Traditional tort principals apply to PG&E, unlike the state or a public entity. Because PG&E stipulated that the use of the pipe with the defective weld was negligent, tort liability will provide compensation for the resulting harm.” The court ruled that negligence and inverse condemnation are “distinct claims with different remedies, and PG&E offers no authority for why Plaintiffs cannot proceed under both theories.”

PG&E also (unsuccessfully) argued that the plaintiff motion for a legal determination of inverse condemnation liability “should be denied for the simple reason that PG&E is a private corporation and not a public entity.” Judge Dylina ruled that “Barham remains good authority for the court to follow in finding that PG&E is a ‘state actor’ for the purposes of inverse condemnation liability.” On Nov. 14 Judge Dylina issued a minute order in the San Bruno litigation stating that “the California Supreme Court DENIED REVIEW in the Pacific Bell Telephone Co. case” and that “the Court confirms that Plaintiffs’ motion for a legal determination of inverse condemnation liability is GRANTED.”

Judge John S. Wiley of the Los Angeles Superior Court ruled similarly when faced with the same issue. Southern California Gas Company is facing suits arising from the Sesnon Fire of October 14, 2008. On September 5, 2012 Judge Wiley denied a motion for summary judgment filed by SoCalGas seeking a determination that since it had not used eminent domain to acquire the property where the fire started, and since it was a private company, inverse liability could not attach as a matter of law. Judge Wiley ruled that Barham governed, and even though it is a private company, SoCalGas could be liable for inverse condemnation.

As noted in a previous article, the authors think it is fair that when private companies want to step into the shoes of public utilities, to make a profit for the shareholders, they should be subject to the same California constitutional requirements that apply to public entities that provide the same utility service. Holding private companies who provide mainly a public service to the same standard as public entities makes sense. Now that the California Supreme Court has denied review in Pacific Bell , the issue of whether a privately owned utility can be liable for inverse condemnation should be put to rest.

Craig S. Simon is the managing partner of Berger Kahn ALC. Berger Kahn is often involved in cases involving mass tort and inverse condemnation.

 Mark S. Grotefeld is managing partner of Grotefeld, Hoffmann, Schleiter, Gordon & Ochoa LLP. Grotefeld is often involved in cases involving mass tort and inverse condemnation