Case Title: Southern California Gas Leak Co. v. Superior Court of Los Angeles County

Citation: 

Docket Number: S246669

State: california

Court: California Supreme Court

Date: 2019-05-30T00:00:00Z

Document:
IN THE SUPREME COURT OF 
CALIFORNIA 
 
SOUTHERN CALIFORNIA GAS LEAK CASES. 
 
 
SOUTHERN CALIFORNIA GAS COMPANY, 
Petitioner, 
v. 
THE SUPERIOR COURT OF LOS ANGELES COUNTY, 
Respondent; 
 
FIRST AMERICAN WHOLESALE LENDING 
CORPORATION et al., 
Real Parties in Interest. 
 
S246669 
 
Second Appellate District, Division Five 
B283606 
 
Los Angeles County Superior Court 
JCCP No. 4861 
 
 
May 30, 2019 
 
Justice Cuéllar authored the opinion of the court, in which 
Chief Justice Cantil-Sakauye and Justices Chin, Corrigan, Liu, 
Kruger, and Groban concurred. 
 
1 
SOUTHERN CALIFORNIA GAS LEAK CASES 
S246669 
 
Opinion of the Court by Cuéllar, J. 
 
 
This case concerns a massive, months-long leak from a 
natural gas storage facility located just outside Los Angeles.  
According to the allegations before us, the accident severely 
harmed the economy of a nearby suburb.  We must decide if local 
businesses — none of which allege they suffered personal injury 
or property damage — may recover in negligence for income lost 
because of the leak.  Our decision turns on whether the entity 
that allegedly caused the leak had a tort duty to guard against 
what we and other courts have termed “purely economic losses.”   
 
The businesses argue that they deserve compensation for 
such losses, that the entity responsible must bear the full costs 
of its alleged negligence so tort law can play its essential role of 
forcing people and organizations to take sufficient account of the 
risks they generate, and that courts can sensibly apportion 
liability under these circumstances within meaningful limits.  
Tort law indeed lies in the heartland of our common law system.  
It serves society’s interest in allocating risks and costs to those 
who can better prevent them, and it provides aggrieved parties 
with just compensation.  But a proper assessment of competing 
considerations in light of our precedent suggests, and the extent 
of consensus across other jurisdictions confirms, that claims for 
purely economic losses suffered from mere proximity to an 
industrial accident create intractable line-drawing problems for 
courts.  So the claims before us are best not treated as 
compensable in negligence.   
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
2 
We therefore affirm the judgment of the Court of Appeal. 
I. 
Because this case comes to us at the demurrer stage, we 
take as true all properly pleaded material facts — but not 
conclusions of fact or law.  (Centinela Freeman Emergency 
Medical Associates v. Health Net of California, Inc. (2016) 
1 Cal.5th 994, 1010 (Centinela).) 
A. 
Near the northwestern corner of Los Angeles lies Porter 
Ranch, a residential neighborhood home to some 30,000 people.  
Southern California Gas Company (SoCalGas) stores vast 
amounts of natural gas in an underground facility in the hills 
surrounding the community.  Known today as the “Aliso 
Facility,” that subterranean storage site was once an oil 
reservoir.  It was repurposed about 40 years ago for its present 
use.  SoCalGas supplies over 21 million people with natural gas 
from its four storage facilities, but the Aliso Facility is the 
company’s largest.  It holds up to 80 billion cubic feet of natural 
gas, which SoCalGas pumps underground at high pressure into 
more than 100 “injection wells.”  Because natural gas is odorless, 
SoCalGas adds a nausea-causing chemical to the gas so that 
people notice when a leak happens. 
 
In October 2015, a leak happened — and people noticed.  
An uncontrolled flow of natural gas from the Aliso Facility 
coated nearby neighborhoods in an oily mist.  At its peak, the 
leak released some 55 tons of natural gas every hour.  Porter 
Ranch residents reported unpleasant odors, headaches, 
dizziness, and respiratory problems.  In addition to those 
symptoms, students at local schools complained of nosebleeds 
and vomiting. 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
3 
 
That November, the Los Angeles County health 
department directed SoCalGas to establish a relocation program 
available to Porter Ranch residents who lived within a five-mile 
radius of the leak site.  The Department of Conservation’s 
Division of Oil, Gas, and Geothermal Resources required 
SoCalGas to provide real-time data about the leak, as well as a 
timeline for stopping it.  A month later, with the flow of gas 
slowing but still significant, the Los Angeles County Board of 
Education decided to relocate students and staff from two Porter 
Ranch schools for the duration of the academic year.  And a 
month after that, SoCalGas expanded its relocation program, 
citing complaints of poor air quality from people living outside 
the initial five-mile boundary.  About 15,000 people were 
relocated in total, scattering to locations dozens — and in some 
cases hundreds — of miles away. 
 
SoCalGas finally got the leak under control in February 
2016 — four months after detecting it.  All told, about 100,000 
tons of natural gas escaped the Aliso Facility, releasing enough 
greenhouse gases into the atmosphere to erase several years’ 
worth of efforts to combat climate change in California. 
B. 
Plaintiffs are Porter Ranch area businesses seeking to 
represent a class of “[a]ll persons and entities conducting 
business within five miles of the [Aliso] Facility from 
October 23, 2015 to [the] present.”1  They allege that SoCalGas’s 
negligence caused the leak.  The resulting relocation of many 
Porter Ranch residents devastated the local economy:  by 
                                        
1  
We refer to the named plaintiffs in this action collectively 
as “Plaintiffs.” 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
4 
depriving local businesses of customers, the environmental 
disaster cost local businesses considerable earnings.  
 
That harm, Plaintiffs maintain, is ongoing.  Sales at 
businesses of all stripes declined sharply, and in many cases, 
stayed down.  Enrollment at a local martial arts center, Plaintiff 
King Taekwondo, nosedived during the leak and has not 
recovered.  The same was true of a neighborhood day care, 
Plaintiff Polonsky Family Day Care.  Restaurants, gas stations, 
and pharmacies were affected, too.  So were beauty salons, 
doctor’s offices, party suppliers, and a photography store. 
 
With the en masse relocation of Porter Ranch residents 
and the diminution in property values caused by the leak, home 
mortgage lenders and home improvement businesses suffered 
economically as well.  Plaintiff First American Realty saw 
clients get cold feet, loans fall out of escrow, and sales tumble.  
A local contractor’s business dropped by 25 percent, as 
customers moved away or decided against home improvements 
for the time being.  “Since the onset of the gas leak,” in other 
words, business operations throughout Porter Ranch “have 
either halted or slowed substantially” — and Plaintiffs “have not 
yet recovered from the blow to their bottom lines.”  
 
Yet no named plaintiff in this action alleges personal 
injury or property damage.  Accordingly, Plaintiffs acknowledge 
they are suing SoCalGas to recover solely for the income they 
lost because of the leak. 
C. 
SoCalGas demurred, arguing that Plaintiffs’ negligence 
claims failed as a matter of law because Plaintiffs were seeking 
to recover for purely economic losses.  Overruling the demurrer, 
the trial court explained that companies “must face the full cost 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
5 
of accidents” they create, or else “they will underinvest in 
precautions.”  The trial court acknowledged that economic losses 
not flowing from conventional injury to person or property, such 
as physical damage, are ordinarily not recoverable in tort — and 
that the Court of Appeal had so held in Adams v. Southern 
Pacific Transportation Co. (1975) 50 Cal.App.3d 37 (Adams) on 
facts with some similarities to those here.2  But the trial court 
questioned the wisdom of that rule and reasoned that Adams 
was no longer good law after our later decision in J’Aire Corp. v. 
Gregory (1979) 24 Cal.3d 799 (J’Aire). 
 
After SoCalGas petitioned for a writ of mandate, the Court 
of Appeal granted the petition and reversed the trial court.  
(Southern California Gas Leak Cases (2017) 18 Cal.App.5th 581, 
583-584.)  The Court of Appeal explained that, under California 
law, it is “not presumed” that a defendant owes a duty of care to 
guard against economic losses unaccompanied by injury to 
person or property.  (Id. at p. 591.)  And without a “special 
relationship” between the plaintiff and the defendant stemming 
in this context from a “transaction,” the Court of Appeal 
reasoned, California law did not permit recovery for the purely 
economic losses sought by Plaintiffs in this case.  (Id. at p. 591.)  
The Court of Appeal also took the view that our decision in 
J’Aire had not rejected Adams in its entirety but instead 
disapproved Adams only “insofar as [it] held a plaintiff can never 
recover purely economic losses based on a defendant’s negligent 
conduct.”  (Id. at p. 592, italics added.)  Because Plaintiffs 
                                        
2  
The Court of Appeal held in Adams that employees could 
not sue a railroad for lost wages even though, allegedly, the 
railroad’s negligence caused an explosion that destroyed the 
employees’ workplace, a nearby factory.  (See Adams, supra, 50 
Cal.App.3d at pp. 39-41.) 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
6 
disclaimed any desire to further amend their complaint, the 
Court of Appeal directed the trial court to sustain SoCalGas’s 
demurrer without leave to amend.  (Id. at p. 595.) 
II. 
Recovery in a negligence action depends as a threshold 
matter on whether the defendant had “ ‘a duty to use due care 
toward an interest of [the plaintiff’s] that enjoys legal protection 
against unintentional invasion.’ ”  (Centinela, supra, 1 Cal.5th 
at p. 1012, quoting Bily v. Arthur Young & Co. (1992) 3 Cal.4th 
370, 397 (Bily).)  We review de novo whether this “ ‘essential 
prerequisite’ ” to recovery is satisfied.3  (Centinela, at pp. 1010, 
1012.) 
The issue here is whether SoCalGas — separate from 
other legal and practical reasons it had to prevent injury of any 
kind to the public — had a tort duty to guard against negligently 
causing what we and others have called “purely economic 
loss[es].”  (Centinela, supra, 1 Cal.5th at p. 1013; see also 532 
Madison Avenue Gourmet Foods, Inc. v. Finlandia Center, 
Inc. (N.Y. 2001) 750 N.E.2d 1097, 1102 (532 Madison).)  We use 
that term as a shorthand for “pecuniary or commercial loss that 
does not arise from actionable physical, emotional or 
reputational injury to persons or physical injury to property.”  
(Dobbs, An Introduction to Non-Statutory Economic Loss Claims 
(2006) 48 Ariz. L.Rev. 713 (Dobbs).)  And although SoCalGas of 
course had a tort duty to guard against the latter kinds of injury, 
                                        
3  
The “ordinary standards of demurrer review still apply” 
even though this case “arrived at the Court of Appeal by the 
unusual path of a writ petition challenging an order overruling 
a demurrer.”  (City of Stockton v. Superior Court (2007) 42 
Cal.4th 730, 746-747.) 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
7 
we conclude it had no tort duty to guard against purely economic 
losses. 
A. 
In California, the “general rule” is that people owe a duty 
of care to avoid causing harm to others and that they are thus 
usually liable for injuries their negligence inflicts.  (Cabral v. 
Ralphs Grocery Co. (2011) 51 Cal.4th 764, 771 (Cabral).)  Under 
Civil Code section 1714, subdivision (a), “[e]veryone is 
responsible . . . for an injury occasioned to another by his or her 
want of ordinary care or skill in the management of his or her 
property or person, except so far as the latter has, willfully or by 
want of ordinary care, brought the injury upon himself or 
herself.”  So at least in cases involving traditionally 
compensable forms of injury — like physical harm to person or 
property — we presume the defendant owed the plaintiff a duty 
of care and then ask whether the circumstances “justify a 
departure” from that usual presumption.  (Cabral, at p. 771.)  
In Rowland v. Christian (1968) 69 Cal.2d 108 (Rowland), we 
identified several factors that, among others, may bear on that 
question:  (1) “the foreseeability of harm to the plaintiff,” (2) “the 
degree of certainty that the plaintiff suffered injury,” (3) “the 
closeness of the connection between the defendant's conduct and 
the injury suffered,” (4) “the moral blame attached to the 
defendant’s conduct,” (5) “the policy of preventing future harm,” 
(6) “the extent of the burden to the defendant and consequences 
to the community of imposing a duty to exercise care with 
resulting liability for breach,” and (7) “the availability, cost, and 
prevalence of insurance for the risk involved.”  (Id. at p. 113.)  At 
core, though, the inquiry hinges not on mere rote application of 
these separate so-called Rowland factors, but instead on a 
comprehensive look at the “ ‘the sum total’ ” of the policy 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
8 
considerations at play in the context before us.  (Parsons v. 
Crown Disposal Co. (1997) 15 Cal.4th 456, 472 (Parsons), 
quoting Ballard v. Uribe (1986) 41 Cal.3d 564, 572, fn. 6; 
see also 
T.H. 
v. 
Novartis 
Pharmaceuticals 
Corp. (2017) 
4 Cal.5th 145, 164.) 
 
What Civil Code section 1714 does not do is impose a 
presumptive duty of care to guard against any conceivable harm 
that a negligent act might cause.  No one doubts, for example, 
that a child suffers gravely when an accident permanently 
disables her parent.  But in Borer v. American Airlines, 
Inc. (1977) 19 Cal.3d 441 (Borer), we nevertheless treated the 
prospect of a child recovering for loss of consortium in precisely 
that circumstance as “a wholly new cause of action,” rather than 
a presumptively viable one.  (Id. at p. 447.)  And we refused to 
recognize such a novel — though quite sympathetic — claim for 
emotional harm largely because that claim, unlike a loss of 
consortium 
claim 
brought 
by 
a 
spouse, 
threatened 
indeterminate and disproportionate liability.  (Id. at pp. 448-
449, 453; see also Thing v. La Chusa (1989) 48 Cal.3d 644, 666-
668 (Thing) [strictly cabining recovery for negligent infliction of 
emotional distress to ensure meaningful limits on liability].)  
Disabled parents, after all, have parents of their own, along with 
“brothers, sisters, cousins, inlaws, friends, colleagues, and other 
acquaintances who,” in some way, may “be deprived of [their] 
companionship.”  (Borer, at p. 446.)  In declining to impose a tort 
duty to guard against such harms, we noted in Borer the 
“overwhelming approval” our conclusion enjoyed in other 
jurisdictions and rejected the argument that our analysis was 
somehow “inconsistent with the principles of tort law” 
established in our own.  (Id. at pp. 449-450; see also Thing, at 
p. 668, fn. 11.) 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
9 
Plaintiffs do cite several cases where we presumed the 
defendant owed the plaintiff a duty of care and then asked 
whether the circumstances warranted a departure from that 
baseline presumption.  But unlike Borer and Thing, every one of 
those cases involved a traditionally compensable form of harm:  
personal injury.  (See Vasilenko v. Grace Family Church (2017) 
3 Cal.5th 1077, 1082 [plaintiff was struck by a car when crossing 
a public street shortly after leaving defendant’s parking lot]; 
Kesner v. Superior Court (2016) 1 Cal.5th 1132, 1140-1141 
(Kesner) [employee’s household members were exposed to 
asbestos, causing personal injury and death]; Cabral, supra, 51 
Cal.4th at p. 769 [plaintiff’s husband died after colliding with a 
truck owned by defendant]; John B. v. Superior Court (2006) 38 
Cal.4th 1177, 1181-1183 [defendant infected plaintiff with HIV]; 
Parsons, supra, 15 Cal.4th at p. 460 [defendant’s truck startled 
plaintiff’s horse, causing the plaintiff to fall to the ground].)  And 
in Rowland itself, a faulty faucet in the defendant’s home 
mangled tendons and nerves in the plaintiff’s hand.  (Rowland, 
supra, 69 Cal.2d at p. 110.)  So yes, we have frequently begun 
our analysis by presuming a duty of care.  But we have not 
universally done so. 
 
A case in point is liability in negligence for purely 
economic losses, which is “the exception, not the rule” under our 
precedents.  (Quelimane Co. v. Stewart Title Guaranty 
Co. (1998) 19 Cal.4th 26, 58 (Quelimane).)  And that holds true 
even though Civil Code section 1714 does not, by its terms, 
“distinguish among injuries to one’s person, one’s property or 
one’s financial interests.”  (J’Aire, supra, 24 Cal.3d at p. 806; 
see Centinela, supra, 1 Cal.5th at p. 1013; Dobbs, supra, 48 Ariz. 
L.Rev. at p. 713 [explaining that “[n]egligently inflicted 
economic loss that results from some other kind of injury may 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
10 
be recoverable, but recovery for stand-alone economic loss is 
frequently rejected”].)   
 
The primary exception to the general rule of no-recovery 
for negligently inflicted purely economic losses is where the 
plaintiff and the defendant have a “special relationship.”  
(J’Aire, supra, 24 Cal.3d at p. 804.)  What we mean by special 
relationship is that the plaintiff was an intended beneficiary of 
a particular transaction but was harmed by the defendant’s 
negligence in carrying it out.  Take, for example, Biakanja v. 
Irving (1958) 49 Cal.2d 647 (Biakanja).  There, we held that the 
intended beneficiary of a will could recover for assets she would 
have received if the notary had not been negligent in preparing 
the document.  (Id. at pp. 650-651.)  A special relationship 
existed between the intended beneficiary and the notary in 
Biakanja, we emphasized, because “the ‘end and aim’ of the 
transaction” between the nonparty decedent and the notary was 
to ensure that the decedent’s estate passed to the intended 
beneficiary.  (Id. at p. 650.)   
For similar reasons, in J’Aire we held that a special 
relationship existed between a restaurant operator and a 
contractor hired by a third-party property owner to renovate the 
space rented by the restaurant operator.  (J’Aire, supra, 24 
Cal.3d at pp. 804-805.)  So when the contractor negligently 
failed to complete the construction work on time, the restaurant 
operator could recover purely economic losses it suffered as a 
result.4  (J’Aire, at pp. 804-805.) 
                                        
4  
Having concluded in J’Aire that recovery for foreseeable 
purely economic losses “should not be foreclosed simply because 
it is the only injury that occurs,” we disapproved the Court of 
 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
11 
Discerning whether there is a special relationship 
justifying liability of this sort can nonetheless be a subtle 
enterprise.  In both Biakanja and J’Aire we emphasized that our 
duty determination rested not just on (i) “the extent to which the 
transaction was intended to affect the plaintiff,” but also on a 
subset of the Rowland factors relevant to the circumstances 
before us in those cases:  (ii) “the foreseeability of harm to the 
plaintiff,” (iii) “the degree of certainty that the plaintiff suffered 
injury,” (iv) “the closeness of the connection between the 
defendant’s conduct and the injury suffered,” (v) “the moral 
blame attached to the defendant’s conduct,” and (vi) “the policy 
of preventing future harm.”  (J’Aire, supra, 24 Cal.3d at p. 804, 
citing Biakanja, supra, 49 Cal.2d at p. 650.)   
 
Our subsequent decision in Bily, however, underscored for 
negligence cases involving purely economic losses what is true 
of all negligence cases.  Deciding whether to impose a duty of 
care turns on a careful consideration of the “ ‘the sum total’ ” of 
the policy considerations at play, not a mere tallying of some 
finite, one-size-fits-all set of factors.  (Bily, supra, 3 Cal.4th at 
p. 397, quoting Dillon v. Legg (1968) 68 Cal.2d 728, 734 (Dillon).)  
In Bily, investors in a failed company sued the company’s 
auditor for financial losses they allegedly suffered due to the 
auditor’s negligent preparation of a public report on the 
                                        
Appeal’s decision in Adams “[t]o the extent that [it] h[eld] that 
there can be no recovery for negligent interference with 
prospective economic advantage.”  (J’Aire, supra, 24 Cal.3d at 
pp. 806-807 & fn. 3.)  So as the Court of Appeal recognized, 
J’Aire disapproved Adams only to the extent it purported to 
impose an absolute rule that a plaintiff can never recover for 
negligently inflicted purely economic losses. 
 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
12 
company’s financial well-being.  (See Bily at pp. 376-379.)  We 
rejected those claims.  (See id. at p. 376.)  Despite 
acknowledging that financial losses to investors from 
negligently prepared audit reports are “certainly” foreseeable,5 
we held that an auditor “owes no general duty of care regarding 
the conduct of an audit to persons other than the client.”  (Bily, 
at pp. 376, 398.)   
 
In requiring more than mere foreseeability for imposing a 
duty of care in Bily, we appreciated the need to safeguard the 
efficacy of tort law by setting meaningful limits on liability.  
(Bily, supra, 3 Cal.4th at pp. 398-399.)  Citing decisions from our 
court limiting recovery for emotional harms based on similar 
concerns, we explained that although foreseeability “ ‘may set 
tolerable limits for most types of physical harm, it provides 
virtually no limit on liability for nonphysical harm.’ ”  (Id. at 
p. 398, quoting Thing, supra, 48 Cal.3d at p. 663.)  After all, on 
“ ‘clear judicial days’ ” courts “ ‘can foresee forever.’ ”  (Bily, at 
p. 399, quoting Thing, at p. 668.)  So although exposure to 
liability often provides an important incentive for parties to 
internalize the social costs of their actions, we were concerned 
that allowing the countless people who rely on public audit 
reports to recover “pure economic loss suffered” due to a shoddy 
audit would “raise[] the spectre of vast numbers of suits and 
limitless financial exposure.”  (Bily, at p. 400.)  The resulting 
universe of potential claims would not only raise difficult 
line-drawing questions for courts, it might deter socially 
beneficial behavior.  (Id. at pp. 400, 404.)  That result was 
                                        
5  
We of course determine foreseeability not by reference to 
specific parties but instead based on the general sort of conduct 
at issue.  (See Kesner, supra, 1 Cal.5th at p. 1145.) 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
13 
unacceptable.  (Id. at p. 406.)  We therefore limited auditor 
liability to claims for negligent misrepresentation brought by 
plaintiffs who — like the plaintiffs in Biakanja and J’Aire — 
were “specifically intended beneficiaries” of the defendant’s 
conduct.  (Bily, at pp. 406-407.)  
 
To be sure, several additional considerations cut further 
in favor of strictly circumscribing recovery in Bily.  In the audit 
context, “[t]he client typically prepares [the] financial 
statements” on which the auditor relies in preparing a 
report — and that report “is not a simple statement of verifiable 
fact” but instead “a professional opinion based on numerous and 
complex factors.”  (Bily, supra, 3 Cal.4th at pp. 399-400.)  The 
plaintiffs in Bily were also particularly “sophisticated” and had 
“efficient means of self-protection,” such as diversifying their 
investment portfolios or conducting their own due diligence.  (Id. 
at p. 406.)  More fundamentally, purely economic losses flowing 
from a financial transaction gone awry — which were at issue 
in Biakanja, J’Aire, Bily, and our other negligence cases to date 
about purely economic losses6 — “are primarily the domain of 
contract and warranty law or the law of fraud, rather than of 
negligence.”  (Aas v. Superior Court (2000) 24 Cal.4th 627, 636 
(Aas), superseded by statute on other grounds as stated in Rosen 
                                        
6  
(See, e.g., Goonewardene v. ADP, LLC (2019) 6 Cal.5th 
817, 820 [purely economic losses stemming from payroll 
company’s alleged miscalculation of wages]; Centinela, supra, 
1 Cal.5th at p. 1013 [purely economic losses stemming from 
health care plan’s delegation of financial responsibility to pay 
emergency service claims to third parties]; Quelimane, supra, 
19 Cal.4th at pp. 57-60 [purely economic losses stemming from 
defendant’s refusal to issue title insurance policies on real 
property].) 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
14 
v. State Farm General Ins. Co. (2003) 30 Cal.4th 1070, 1079-
1080 (Rosen).)   
 
We nonetheless acknowledged in Bily the “need to limit 
liability for [purely] economic loss[es]” even in the absence of 
those additional considerations.  (Bily, supra, 3 Cal.4th at 
p. 400, fn. 11.)  In doing so, we pointed to a hypothetical scenario 
similar in many ways to the case now before us.  We considered 
a situation where “a defendant negligently causes an automobile 
accident that blocks a major traffic artery such as a bridge or 
tunnel.”  (Ibid.; see also Kinsman Transit Co. (2d Cir. 1968) 388 
F.2d 821, 825, fn. 8 [using a similar illustration]; Rabin, Tort 
Recovery for Economic Loss: A Reassessment (1985) 37 Stan. 
L.Rev. 1513, 1536-38 [same].)  That defendant would of course 
be liable for “personal injuries and property damage suffered in 
such an accident.”  (Bily, at pp. 400-401, fn. 11.)  But would “any 
court,” we continued, “allow recovery by the myriad [other] third 
parties who might claim [purely] economic losses because the 
bridge or tunnel” was blocked?  (Id. at p. 401, fn. 11.)  Based on 
concerns about limitless liability and unending litigation, as 
well as on long-standing legal consensus, we considered that 
prospect “doubtful.”  (Ibid.) 
B. 
What we recognized in Bily fits with numerous decisions 
from other jurisdictions — as well as the Restatement of Torts.  
That consensus cuts sharply against imposing a duty of care to 
avoid causing purely economic losses in negligence cases like 
this one:  where purely economic losses flow not from a financial 
transaction meant to benefit the plaintiff (and which is later 
botched by the defendant), but instead from an industrial 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
15 
accident caused by the defendant (and which happens to occur 
near the plaintiff). 
1. 
 
Concerned about line-drawing problems and potentially 
overwhelming liability, courts across the country have rejected 
recovery for purely economic losses stemming from man-made 
calamity.  Take the New York Court of Appeals’ decision in 
532 Madison.  There, part of a 39-story office tower collapsed, 
shutting down more than a dozen bustling blocks of midtown 
Manhattan for several weeks.  (See 532 Madison, supra, 750 
N.E.2d at p. 1099.)  Among the plaintiffs in 532 Madison were 
local businesses who alleged that would-be customers “were 
unable to gain access to their stores” due to the disaster, forcing 
the plaintiffs to shut down for an extended period of time.  (Id. 
at pp. 1099-1100.)  They sued on behalf of themselves and “all 
other business entities” operating within the affected city 
blocks.  (Ibid.)  
 
The plaintiffs in 532 Madison sought compensation for the 
income they lost from the tower collapse.  The New York Court 
of Appeals responded by declining to hold “that a landowner 
owes a duty to protect an entire urban neighborhood against 
purely economic losses.”  (532 Madison, supra, 750 N.E.2d. at 
pp. 1102.)  It instead “limit[ed] the scope of defendants’ duty to 
those who ha[d], as a result of th[e] [collapse], suffered personal 
injury or property damage.”  (Id. at p. 1103.)  The court 
explained that this limitation provided “a principled basis for 
reasonably apportioning liability” that was necessary to prevent 
potentially crushing liability to “an indeterminate group in the 
affected areas” who could prove “financial losses directly 
traceable to the” collapse.  (Ibid.)  Adopting that rule, the court 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
16 
added, was what “historically courts ha[d] done” with similar 
negligence claims.  (Ibid.)   
Indeed:  the Illinois Supreme Court, for example, reached 
the same result for similar reasons in litigation flowing from a 
flood caused by human error that inundated downtown Chicago 
in 1992.  (See In re Chicago Flood Litigation (Ill. 1997) 680 
N.E.2d 265, 268, 276.)  Consider also the West Virginia Supreme 
Court of Appeals’ decision in Aikens v. Debow (W.Va. 2000) 541 
S.E.2d 576, the Iowa Supreme Court’s decision in Nebraska 
Innkeepers, Inc. v. Pittsburgh-Des Moines Corp. (Iowa 1984) 345 
N.W.2d 124, the Massachusetts Supreme Judicial Court’s 
decision in Stop & Shop Companies, Inc. v. Fisher (Mass. 1983) 
444 N.E.2d 368, and the Seventh Circuit’s decision applying 
Wisconsin law in Leadfree Enterprises, Inc. v. U.S. Steel Corp. 
(7th Cir. 1983) 711 F.2d 805.  Those cases all concerned bridge 
accidents similar to the hypothetical we discussed in Bily — and 
those cases all rejected attempts by affected businesses to 
recover in negligence for purely economic losses resulting from 
those accidents.  (See Aikens, at pp. 579, 589; Nebraska 
Innkeepers, at pp. 125, 128; Stop & Shop, at pp. 371-373; 
Leadfree Enterprises, at pp. 806, 809; see also American 
Petroleum and Transport, Inc. v. City of New York (2d Cir. 2013) 
737 F.3d 185, 187, 196-197 [rejecting under federal maritime 
law recovery for purely economic losses stemming from a 
drawbridge malfunction].)  Among their concerns were the 
endless “ripple effects of a negligence claim based upon pure 
economic loss.”  (Aikens, at p. 591; see also Dundee Cement Co. 
v. Chemical Laboratories, Inc. (7th Cir. 1983) 712 F.2d 1166, 
1172 [opining that allowing recovery in negligence for purely 
economic losses may unleash “multiversant possibilities” for 
litigation that “are staggering to the imagination”].)   
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
17 
 
Similar rationales buttressed the Court of Appeals for the 
District of Columbia’s decision in Aguilar v. RP MRP 
Washington Harbour, LLC (D.C. 2014) 98 A.3d 979 (Aguilar) 
and the Connecticut Supreme Court’s decision in Lawrence v. 
O & G Industries, Inc. (Conn. 2015) 126 A.3d 569.  Like the 
California Court of Appeal’s decision in Adams, those cases 
rejected claims for lost wages brought by employees whose 
workplaces were forced to close by a man-made disaster — a 
flood in Aguilar and an explosion in Lawrence.  (See Aguilar, at 
pp. 981, 983; Lawrence, at pp. 571, 585.)  In fact, more than a 
half century ago we ourselves approved a decision from an 
intermediate appellate court in Ohio that arrived at the same 
conclusion on very similar facts — another explosion causing the 
closure of a nearby workplace.  (See Fifield Manor v. Finston 
(1960) 54 Cal.2d 632, 636, citing Stevenson v. East Ohio Gas Co. 
(Ohio Ct.App. 1946) 73 N.E.2d 200, 201-204.) 
 
Federal courts sitting in admiralty have dealt with 
industrial accidents perhaps most like the one before us:  
maritime spills of oil and other pollutants.  Leaving aside one 
narrow exception not applicable here, they too have refused to 
impose a duty of care to guard against purely economic losses.  
To wit:  in State of Louisiana ex rel. Guste v. M/V Testbank 
(5th Cir. 1985) 752 F.2d 1019 (Testbank), two ships collided in 
the Mississippi River Gulf.  (Id. at p. 1020.)  Some 12 tons of a 
toxic chemical called pentachlorophenol rushed into the water 
and caused the suspension of fishing, shrimping, and other 
maritime activities across four hundred square miles of marsh 
and waterways.  (Ibid.)  Among the plaintiffs were businesses 
like boat rental operators, seafood restaurants, and tackle and 
bait shops.  (Id. at pp. 1020-1021.)  They sued to recover “for 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
18 
economic loss unaccompanied by physical damage” that the spill 
had inflicted.  (Id. at p. 1021.)   
 
The Fifth Circuit rejected those claims.  (See Testbank, 
supra, 752 F.2d at pp. 1028-1029.)  The court echoed concerns 
about “wave upon wave of successive economic consequences” 
and stressed that “[t]hose who would delete the requirement of 
physical damage have no rule or principle to substitute,” save 
perhaps letting the trier of fact determine case-by-case, 
whim-by-whim which claims for purely economic losses warrant 
recovery.  (Id. at p. 1028.)  The Fifth Circuit further explained 
that “to the extent that economic analysis” mattered, it favored 
rejecting recovery for purely economic losses.  (Id. at p. 1029.)  
That 
was 
because 
defendants 
in 
industrial 
accident 
cases — despite their frequently deep pockets — will have more 
difficulty obtaining third-party insurance coverage against 
purely economic losses than will individual plaintiffs seeking 
comparable first-party insurance.  (See ibid.)  Defendants’ 
potential liability for purely economic losses in such cases is 
massive and indeterminate.  (Ibid.)  So insurance companies 
cannot feasibly offer them comprehensive coverage — or even 
fix a sensible premium based on actuarial measurement.  (Ibid.)  
Plaintiffs’ “own potential losses,” by contrast, “are finite and 
readily discernible.”  (Ibid.)  They can therefore obtain insurance 
to cover them — perhaps relatively cheaply.  (Ibid.; see also 
Posner, Common-Law Economic Torts: An Economic and Legal 
Analysis (2006) 48 Ariz. L.Rev. 735, 737-738.) 
 
Faced with an oil spill diverting a container ship at 
substantial cost, the First Circuit in Barber Lines A/S v. M/V 
Donau Maru (1st Cir. 1985) 764 F.2d 50 denied recovery in 
negligence for those purely economic losses.  The First Circuit’s 
analysis in many ways mirrored the Fifth Circuit’s reasoning in 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
19 
Testbank.  (See Barber Lines, at pp. 50-52.)  Through the pen of 
then-Judge Breyer, the First Circuit explained that the “number 
of persons suffering foreseeable financial harm in a typical 
accident” — like a car crash — “is likely to be far greater than 
those who suffer traditional (recoverable) physical harm.”  (Id. 
at p. 54.)  And when it comes to industrial accidents, that 
proliferation of potential liability for purely economic losses is 
even more dramatic.  (See ibid.)  An oil spill, for instance, 
“foreseeably harms” not just those whose property is “covered 
with oil,” but also “blockaded ships, marina merchants, 
suppliers of those firms, the employees of marina businesses and 
suppliers, the suppliers’ suppliers, and so forth.”  (Ibid.)  That 
indeterminate liability, the First Circuit continued, made 
third-party insurance coverage against purely economic losses 
less feasible than first-party insurance.  (Ibid.)  It also risked 
over-deterring socially productive activities.  (Id. at p. 55.)  And 
unable to “distinguish between, say, oil spill accidents and 
tunnel accidents,” the First Circuit rejected the idea of adopting 
different duty rules depending on the particular “industrial 
context” at issue.  (Id. at p. 57.)   
 
The narrow exception mentioned earlier, to which we now 
turn, does not help Plaintiffs.  Applying maritime law and 
California law alike in Union Oil Co. v. Oppen (9th Cir. 1974) 
501 F.2d 558, the Ninth Circuit held that commercial fishermen 
could recover in negligence for the “diminution of aquatic life” 
caused by an oil spill.  (Id. at pp. 563, 570.)  But that was because 
theirs was “a pecuniary loss of a particular and special nature” 
grounded in the time-worn principle that “seamen are the 
favorites of admiralty.”  (Id. at pp. 567, 570; see also Curd v. 
Mosaic Fertilizer, LLC (Fla. 2010) 39 So.3d 1216, 1228.)  
Recovery in Union Oil was therefore tightly circumscribed:  it 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
20 
was “limited to the class of commercial fishermen” whose 
livelihoods depend on the flourishing of aquatic life in the 
commons of the sea and thus did not include, for example, 
recreational fisherman whose “ ‘Sunday piscatorial pleasure’ ” 
depended on angling in the same waters.  (Union Oil, at p. 570, 
quoting Oppen v. Aetna Ins. Co. (9th Cir. 1973) 485 F.2d 252, 
260.)  Indeed, the Ninth Circuit further cautioned that its 
narrow holding based on unique features of the maritime 
context did “not open the door to claims” from others “whose 
economic or personal affairs were discommoded by the oil spill.”  
(Union Oil, at p. 570.)  Not “every decline in the general 
commercial activity of every business” nearby, the court 
reasoned, was “a legally cognizable injury for which the 
defendants may be responsible.”  (Ibid.)  So in Union Oil — as 
in every case discussed so far — recovery in negligence for 
purely economic losses was the exception, not the rule. 
 
Against all these decisions, only the New Jersey Supreme 
Court’s opinion in People Express Airlines, Inc. v. Consolidated 
Rail Corp. (N.J. 1985) 495 A.2d 107 (People Express) cuts 
definitively the other way.  In People Express, a railroad fire 
forced a nearby terminal at Newark International Airport to 
shut down for twelve hours — a terminal housing the plaintiff’s 
business.  (See id. at p. 108.)  The plaintiff brought a negligence 
claim for income lost as a result –– a claim the New Jersey 
Supreme Court permitted to proceed.  (Id. at pp. 108, 116.)  The 
court imposed a tort duty to guard against purely economic 
losses where there is “an identifiable class with respect to whom 
[the] defendant knows or has reason to know are likely to suffer 
such damages from its conduct.”  (Id. at p. 116.)  The court 
stressed “that an identifiable class of plaintiffs is not simply a 
foreseeable class of plaintiffs” — such as happenstance 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
21 
bystanders — but instead a class that is “particularly 
foreseeable in terms of the type of persons or entities comprising 
the class, the certainty or predictability of their presence, the 
approximate numbers of those in the class, as well as the type 
of economic expectations disrupted.”  (Ibid.)   
Yet decades after the demise of the airline that gave the 
case its name, People Express remains “a lonely outpost.”  
(Rabin, Respecting Boundaries and the Economic Loss Rule in 
Tort (2006) 48 Ariz. L.Rev. 857, 858.)  Its relatively ad hoc 
standard, 
embodied 
in 
a 
fact-intensive 
“ ‘particular 
foreseeability’ ” test, has been avoided by other courts with — as 
one scholar put it — “a striking degree of unanimity.”  (Ibid.; 
see also 532 Madison, supra, 750 N.E.2d at p. 1103 [declining to 
follow People Express]; Aguilar, supra, 98 A.3d at p. 984 
[same].)7 
2. 
 
Little wonder the Restatement of Torts takes the 
dominant view.  Although acknowledging that “[d]uties to avoid 
the unintentional infliction of economic loss” exist in certain 
recognized circumstances, the latest Restatement provides that 
there is “no general duty to avoid the unintentional infliction of 
economic loss on another.”  (Rest.3d, Torts, Liability for 
                                        
7  
Although the Alaska Supreme Court discussed People 
Express in a positive light in Mattingly v. Sheldon Jackson 
College (Alaska 1987) 743 P.2d 356, it did so while allowing a 
contractor to recover purely economic losses suffered from the 
collapse of a trench that was dug specifically “so that his 
employees could work in it.”  (Id. at pp. 359-361.)  Mattingly thus 
resembles our special relationship precedents far more so than 
People Express — or this case. 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
22 
Economic Harm (Tent. Draft. No. 1, Apr. 4, 2012) § 1 
(Restatement T.D. 1).)   
In justifying that position, the Restatement echoes 
widespread judicial concern that purely economic losses 
“proliferate more easily than losses of other kinds” and “are not 
self-limiting” in the same way.  (Restatement T.D. 1, § 1, com. c.)  
Those characteristics, the Restatement explains, threaten 
“liabilities that are indeterminate and out of proportion 
to [a defendant’s] culpability,” and with them “exaggerated 
pressure to avoid an activity altogether.”  (Restatement T.D. 1, 
§ 1, com. c.)  For centuries, in fact, similar concerns have 
justified strict limits on private recovery for a public nuisance.  
(See 4 Blackstone, Commentaries 167 [noting that a public 
nuisance is usually not privately actionable because “it would be 
unreasonable to multiply suits by giving every man a separate 
right of action”]; accord Rest.3d Torts, Liability for Economic 
Harm (Tent. Draft. No. 2, Apr. 7, 2014) § 8, com. c. (Restatement 
T.D. 2); Civ. Code, § 3493 [originally enacted in 1872].) 
 
Only when the foregoing considerations are “weak or 
absent” — such as in Biakanja and J’Aire, but not in Bily — does 
a duty to guard against purely economic losses exist under the 
Restatement approach to negligence claims.  (See Restatement 
T.D. 1, supra, § 1, com. d; see also Restatement T.D. 2, supra, 
§ 7, com. a [using 532 Madison’s facts and the court’s holding as 
an illustration of the Restatement view].)  But in this case, as in 
the mine run of man-made disaster cases, those rationales apply 
with full force. 
C. 
The allegations before us underscore the ineluctable 
difficulty associated with imposing a duty to guard against 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
23 
purely economic losses in negligence cases like this one.  It may 
be possible to quantify the profits any one business lost because 
of an industrial accident, but imposing such a duty would 
nevertheless create line-drawing problems across — quite 
literally — space and time.8  So although our duty determination 
must ultimately “occur[] at a higher level of generality” than 
would a jury’s analysis of fact-intensive issues like breach and 
causation (Kesner, supra, 1 Cal.5th at p. 1144), we examine 
some particulars of Plaintiffs’ claims to illustrate those two sets 
of persistent line-drawing problems. 
1. 
We lack clear spatial bounds within which to cabin claims 
like those asserted here.   
This case does not involve a so-called special relationship 
under our precedents.  Plaintiffs concede — as they must — that 
their only relevant ties to SoCalGas are having the misfortune 
of operating near the Aliso Facility.  Accordingly, they propose 
to limit the class they seek to represent based on geographic 
proximity alone.  Putative class members here are businesses 
operating “in the area within five miles” of the leak, a space 
which Plaintiffs characterize as “the precise area from which 
residents were evacuated.” 
 
What is far from clear is why the five-mile line means 
anything.  Others beyond that boundary were also affected.  We 
discern no compelling basis for us to let a business operating 
                                        
8  
We express no view on whether, or to what extent, these 
line-drawing problems persist (or dissipate) in cyberspace.  (See, 
e.g., Dittman v. UPMC (Pa. 2018) 196 A.3d 1036, 1038 
[considering whether to impose a tort duty to guard against 
“purely pecuniary” losses stemming from a data breach].) 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
24 
4.9 miles away recover its lost profits but deny such recovery to 
another business operating 5.1 miles away.  Nor is it clear what 
we should do about a third business operating 6 miles away 
whose balance sheet was hit just as hard by the leak and 
ensuing evacuation — or perhaps a fourth business operating 
10 miles away, whose income depends on supplying Porter 
Ranch businesses or offering services to its residents.  Similar 
questions arise regarding employees of businesses operating 
within the five-mile mark but who live outside it — or even well 
outside it.  (This is Los Angeles we’re talking about.)  They might 
have lost wages during a temporary business slowdown — or 
even lost their jobs if their employers were forced to cut back 
permanently.  Those employees might not be included in 
Plaintiffs’ proposed class, but their losses are foreseeable, too.  
They could come to court next in lawsuits of their own.  And if 
we were to permit recovery for purely economic losses in this 
case, we don’t see how we could justify denying it in that one.   
Most of the foregoing difficulties emerge even when an 
evacuation zone is set in stone.  But here the lines drawn were 
traced in sand.  Plaintiffs’ own complaint acknowledges that, a 
few weeks after the leak was detected, the evacuation zone was 
extended beyond the initial five-mile mark.  Why businesses 
operating outside the original boundary but inside the new one 
should not get to recover their equally real and foreseeable 
financial losses we do not know. 
 
Using the boundary of an evacuation zone as a liability 
line might not just lack predictability.  In certain circumstances, 
it could also inject a dangerous incentive into disaster response 
efforts.  Consider how a company taking after Justice Oliver 
Wendell Holmes’s infamous “bad man” — that is, a company 
that “cares nothing for an ethical rule” and thus cares “only for 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
25 
the material consequences” of its actions — might respond to an 
evacuation zone rule.  (Holmes, The Path of the Law (1897) 10 
Harv. L.Rev. 457, 459, 461; see also Exxon Shipping Co. v. Baker 
(2008) 554 U.S. 471, 501-502 [looking to “Justice Holmes’s ‘bad 
man’ ” in a tort case brought under federal maritime law].)  If 
companies face liability in negligence only for traditionally 
compensable harms, their financial incentive with respect to 
evacuations points in one direction:  caution.  To minimize the 
risk of, and their liability for, harm to people and property, 
companies under that legal regime may indeed seek (or at least 
not try to avoid) large evacuation zones.  But imposing liability 
for purely economic losses — bounded only by the size of the 
evacuation zone — would blunt that otherwise sharp financial 
incentive for caution.  The larger the evacuation zone, the larger 
a company’s potential liability for purely economic losses.  So 
under that rule, a company taking after Justice Holmes’s bad 
man would face a newly vexing cost-benefit analysis:  will an 
evacuation prevent enough physical damage to offset the purely 
economic losses it is sure to cause?  The calculus of a ruthlessly 
self-interested company would tend to prioritize maximizing its 
own economic return, not minimizing the risk of harm to people 
and property.  And where it expects an evacuation to harm its 
bottom line, our proverbial “bad company” might take steps to 
confine or prevent one.   
Such steps might include, most obviously, overt pressure 
on public officials to roll back or eliminate a proposed 
evacuation.  But that’s not the only possibility.  Public officials 
must often rely on company information to know what scale of 
risk the community faces.  Case in point:  during the very 
disaster at issue here, authorities allegedly demanded from 
SoCalGas real-time data about the leak — and a timeline for 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
26 
ending it.  So public officials might simply be kept in the dark.  
That’s bad enough when, as here, the public health concerns are 
things like nausea and nosebleeds.  But it would be much worse 
when, on different facts, the stakes are life and death. 
 
Nor is it always simple to decide what counts as an 
evacuation, or to resolve claims for purely economic losses where 
the disaster in question never triggered an evacuation.  Some 
evacuations are mandatory, others are voluntary.  And 
sometimes public officials issue public safety warnings without 
telling people to leave the area.  An evacuation zone rule would 
require a coherent way to decide which sorts of government 
action count and which ones don’t.  We do not see one.  What is 
more, the utility of an evacuation zone rule depends on there 
being at least some sort of evacuation.  So adopting an 
evacuation zone rule would be of no help in cases where nothing 
remotely approaching an evacuation happens, but the economic 
effects are nevertheless severe.  (Consider, for instance, an oil 
spill at sea that leaves dry land mostly untouched.)  Faced with 
all this potential for negative consequences and doctrinal 
confusion, “we would be acting rashly to adopt a rule treating” 
evacuation zones as talismanic.  (Intel Corp. v. Hamidi (2003) 
30 Cal.4th 1342, 1363 [declining to extend trespass liability into 
cyberspace based on similar doctrinal and practical concerns].) 
 
Without adopting a (not so) bright-line evacuation zone 
rule, the alternative is applying a fact-intensive, case-by-case 
standard à la People Express.  But we have already 
experimented with an analogous approach regarding recovery 
for negligent infliction of emotional distress.  It did not go well.  
In Thing, we lamented the “arbitrary results” and the 
“inconsistent and often conflicting” body of law that approach 
produced.  (Thing, supra, 48 Cal.3d at p. 662.)  Which is why we 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
27 
retreated from an ad hoc standard and imposed instead a 
hard-and-fast rule.  (Id. at pp. 667-668.)   
 
We have not forgotten that experience.  Today, we are 
confronted with hundreds of claims brought by hundreds of 
businesses stemming from one industrial accident — and that’s 
just the artificially limited class Plaintiffs seek to represent, not 
the full universe of potential claimants whose pocketbooks were 
adversely (and foreseeably) affected by the leak.  We see no 
workable way to limit geographically who may recover purely 
economic losses.  Without one, the dangers of indeterminate 
liability, over-deterrence, and endless litigation are at their 
apex. 
2. 
Nor do we see a viable way to limit temporally what purely 
economic losses could be recovered here. 
Plaintiffs allege that they “have been and continue to be 
heavily impacted by the gas leak.”  (Italics added.)  That is 
possible because Plaintiffs complain not of being forced to shut 
down during the disaster — no named plaintiff squarely alleges 
that — but of losing customers due to the exodus of 
neighborhood residents.  And even though the leak is over, they 
allege that, for as long as the Aliso Facility remains in use, 
“business will never return to Porter Ranch as usual.”  (Italics 
added.)  So Plaintiffs are, in effect, seeking pro rata recovery for 
the past, present, and future economic toll the leak allegedly 
had, has, and will have on Porter Ranch.  These are claims 
without end.   
 
True:  we could conceivably cabin recovery for purely 
economic losses to those suffered during the disaster alone.  Or 
we could allow recovery only for such losses suffered during a 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
28 
business closure, not merely for systemic hits to economic 
demand.  Yet upon closer inspection, the alluring simplicity of 
both approaches quickly proves to be a mirage.   
 
The “during the disaster” option would require a way of 
determining precisely what the words “during” and “disaster” 
mean in a given case.  That will not always be easy.  Even 
assuming the beginning and end of most disasters can be easily 
fixed by the closing of a wayward valve or its equivalent, 
distinctions between one disaster (say, a leak of flammable fluid) 
and another (a fire) can be unstable.  Moreover, disasters like 
the gas leak at issue here happen over an extended period of 
time, but other industrial accidents (like tower collapses or 
railroad explosions) happen in an instant.  So for the latter sort 
of disaster, we might have to use the duration of any subsequent 
evacuation (if there is one) to time-bound the ensuing claims for 
purely economic losses.  But doing that would inject into disaster 
response efforts the very same dangerous incentives and other 
problems discussed above.   
 
The “business closure” option, for its part, would likely 
prove self-defeating.  Requiring affected businesses to close as a 
prerequisite for recovery in negligence would lock them into a 
dilemma:  shut down and lose any income you might have 
earned — or stay open and lose any tort claim you might have 
brought.  Difficult though the choice could be for some, many 
businesses might rationally decide they are better off shutting 
down.  Plaintiff Mediterranean Bistro, for example, would 
presumably be reluctant to keep its 80-seat restaurant open to 
serve a handful of customers if doing so meant forfeiting a 
potentially valuable tort claim.  Encouraging businesses to close 
could thus catalyze the very economic stagnation we want to 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
29 
minimize.  Better instead to encourage businesses to continue 
their economic activity where they can. 
D. 
None of this is to say that denying recovery for those who 
did not suffer injury to person or property is a perfect solution 
in negligence cases like this one.  Far from it.  It is only the 
least-worst rule out there.   
Like other courts, we acknowledge that denying recovery 
for purely economic losses under circumstances like these has 
“the vice of creating results in cases at its edge that are . . . 
‘unjust’ or ‘unfair’ ” — or even “seemingly perverse.”  (Testbank, 
supra, 752 F.2d at p. 1029; see also 532 Madison, supra, 750 
N.E.2d at p. 1103 [acknowledging that this rule is “to an extent 
arbitrary because . . . invariably it cuts off liability to persons 
who foreseeably might be plaintiffs”].)  The courthouse doors are 
open for people who experience slight physical injury — yet 
closed to others who suffer devastating purely economic losses.  
That line may appear arbitrary in some sense.  Yet so are the 
alternatives we have considered and rejected — and those 
alternatives, as we’ve explained, have further flaws of their own.   
At any rate, “drawing arbitrary lines is unavoidable if we 
are to limit liability and establish meaningful rules for 
application by litigants and lower courts.”  (Thing, supra, 48 
Cal.3d at p. 666.)  And as we have explained, the ripple effects 
of industrial catastrophe on this scale in an interconnected 
economy defy judicial creation of more finely tuned rules.  Hence 
the admittedly imperfect legal regime that governs in most 
jurisdictions — and that we now confirm governs in ours. 
 
The Legislature, however, may be able to improve that 
regime in ways that would be exceptionally difficult, if not 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
30 
impossible, for us.  To name one example:  after we rebuffed 
homeowners’ efforts to recover for purely economic losses 
stemming from construction defects in Aas, the Legislature 
responded to popular calls for a more forgiving rule in that 
context.  (See Rosen, supra, 30 Cal.4th at p. 1079, citing Aas, 
supra, 24 Cal.4th at p. 646.)  It enacted a detailed statutory 
mechanism specifically designed for homeowners seeking 
redress against negligent builders.  (Rosen, at p. 1079, citing 
Civ. Code, § 895 et seq.)  To name another:  in view of “the 
economic and social disruptions arising out of the Lake Davis 
Northern Pike Eradication Project,” the Legislature set up a 
special process for people to recover for, among other things, 
purely economic losses suffered due to that environmental 
protection effort.  (Gov. Code, §§ 998, 998.2.) 
 
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.  To be sure, purely 
economic losses caused by a natural gas leak may present their 
own set of challenges.  But so too, we can only presume, of those 
caused by an oil spill.  And in that context the Legislature has 
already interceded.  It enacted legislation permitting those “who 
derive[] at least 25 percent” of their income from activities that 
utilize “natural resources” to recover — without regard to 
fault — for “[l]oss of profits or impairment of earning capacity 
due to the injury, destruction, or loss of . . . natural resources” 
from a spill.9  (Gov. Code, § 8670.56.5, subd. (h)(6).)  Perhaps 
there’s a basis for further industry-specific legislative or 
regulatory action.  And through the democratic process, the 
                                        
9  
The United States Congress has passed similar 
legislation.  (See 33 U.S.C. § 2702(b)(2)(E).) 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
31 
Legislature can bring to bear a mix of expertise while 
considering competing concerns to craft a solution in tune with 
public demands.   
 
A partial solution leveraging the insurance market may 
also prove feasible, at least for some businesses.  Although many 
business interruption insurance policies presently available 
might not cover the purely economic losses alleged here (see 
Buxbaum v. Aetna Life & Casualty Co. (2002) 103 Cal.App.4th 
434, 448-449), private insurance companies could conceivably 
see a profit-making opportunity in today’s decision.  Now certain 
that a lawsuit seeking purely economic losses of this sort will 
not succeed, businesses operating near a natural gas storage 
facility — or a dam, shipping lane, oil well, and so forth — may 
be more inclined to buy insurance covering profits they stand to 
lose if disaster strikes.  (See, e.g., Testbank, supra, 752 F.2d at 
p. 1029 [observing that a local business’s “own potential losses” 
in the event of an industrial accident “are finite and readily 
discernible,” which may enable them to obtain insurance “at a 
relatively low cost”].)  If so, private insurance companies might 
expand their policy offerings accordingly. 
 
Finally, we recognize Plaintiffs’ concern that SoCalGas’s 
alleged negligent behavior will go insufficiently deterred if we 
deny recovery here.  But SoCalGas is not getting off scot-free.  
At oral argument, the company represented that some 50,000 
claimants have alleged in other litigation that they suffered 
property damage caused by the leak — several hundred of whom 
are local businesses.  It further informed us, and we have no 
reason to doubt, that the company has spent some $450 million 
on remedial measures and agreed to pay another $120 million 
as part of a settlement with local authorities.  SoCalGas, 
operating in a heavily regulated domain, also remains under 
SOUTHERN CALIFORNIA GAS LEAK CASES 
Opinion of the Court by Cuéllar, J. 
 
32 
investigation –– and may face further consequences in the 
future. 
III. 
Risks from industrial accidents raise grave concerns for 
society, and we have no doubt the accident precipitating this 
case caused significant hardships.  To compensate those harmed 
and to deter those who do the harming, our society assigns tort 
law a pivotal role.  But that does not mean society’s interests are 
best served by extending its scope indefinitely.  Meaningful 
limits on tort liability, along with the incentives they set, are 
crucial to the functioning of our economy and of our courts.  
Where such limits leave gaps in our social fabric, tort does not 
stand alone:  insurance also compensates, regulation also 
deters.  And where gaps persist, the Legislature can act. 
 
The better part of a century has passed since then-Judge 
Cardozo warned that permitting recovery in negligence for 
purely economic losses can threaten indeterminacy-cubed:  
“liability in an indeterminate amount for an indeterminate time 
to an indeterminate class.”  (Ultramares Corp. v. Touche 
(N.Y. 1931) 174 N.E. 441, 444.)  Courts across the country have 
since heeded that warning, by and large denying recovery in 
negligence cases like this one even though purely economic 
losses inflict real pain.  That prevailing rule of no recovery is, 
like society itself, imperfect.  Yet nearly everyone follows a rule 
that few (if any) entirely like.  California does, too.  So we affirm 
the Court of Appeal’s judgment. 
 
 
 
 
 
 
CUÉLLAR, J. 
We Concur: 
CANTIL-SAKAUYE, C. J. 
CHIN, J. 
CORRIGAN, J. 
LIU, J. 
KRUGER, J. 
GROBAN, J.
 
 
See last page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion Southern California Gas Leak Cases 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding 
Review Granted XXX 18 Cal.App.5th 581 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S246669 
Date Filed: May 30, 2019 
__________________________________________________________________________________ 
 
Court: Superior 
County: Los Angeles 
Judge: John Shepard Wiley, Jr. 
 
__________________________________________________________________________________ 
 
Counsel: 
 
Morgan, Lewis & Bockius, James J. Dragna, David L. Schrader, Yardena R. Zwang-Weissman; Quinn 
Emmanuel Urquhart & Sullivan, Kathleen M. Sullivan and Daniel H. Bromberg for Petitioner. 
 
Horvitz & Levy, Jeremy B. Rosen, Eric S. Boorstin and Yen-Shyang Tseng for Chamber of Commerce of 
the United States, California Chamber of Commerce, American Insurance Association and Property 
Casualty Insurers Association of America as Amici Curiae on behalf of Petitioner. 
 
Hueston Hennigan, John C. Hueston, Moez M. Kaba and Douglas J. Dixon for Southern California Edison 
Company, Pacific Gas & Electric Company, Southwest Gas Corporation, Edison Electric Institute and 
American Gas Association as Amici Curiae on behalf of Petitioner. 
 
Munger, Tolles & Olson, Henry Weissmann and Fred A. Rowley, Jr., for Plains All American Pipeline, 
L.P., the Association of Oil Pipe Lines and the Western States Petroleum Association as Amici Curiae on 
behalf of Petitioner. 
 
Mark P. Gergen; Reed Smith and Raymond A. Cardozo for California Tort Law Scholars as Amicus Curiae 
on behalf of Petitioner. 
 
Fred J. Hiestand for The Civil Justice Association of California as Amicus Curiae on behalf of Petitioner. 
 
No appearance for Respondent. 
 
Lieff Cabraser Heimann & Bernstein, Robert J. Nelson, Sarah R. London, Wilson M. Dunlavey; Public 
Justice, Leslie A. Brueckner; Kiesel Law, Paul R. Kiesel, Helen Zukin, Mariana Aroditis; Keller Rohrback, 
Ben Gould, Derek W. Loeser, Amy Williams-Derry; Boucher, Raymond P. Boucher, Shehnaz M. 
Bhujwala, Maria L. Weitz; The Kick Law Firm, Taras Kick; Baron & Budd, Roland Tellis; R. Rex Parris 
Law Firm, R. Rex Parris and Patricia Oliver for Real Parties in Interest. 
 
 
 
 
 
 
 
 
 
Page 2 – S246669 – counsel continued 
 
Counsel: 
 
Sean B. Hecht, Julia E. Stein and Nathaniel Logar for California Tort Professors Richard Abel, Alison 
Anderson, Blake Emerson, Jill Horwitz, Kathleen Kim, Albert Lin, John Nockleby, Alex Wang, Jonathan 
Zasloff and Adam Zimmerman as Amici Curiae on behalf of Real Parties in Interest. 
 
Nelson & Fraenkel, Gretchen M. Nelson and Gabriel S. Barenfeld for Consumer Attorneys of Los Angeles 
as Amicus Curiae on behalf of Real Parties in Interest. 
 
The Arkin Law Firm and Sharon J. Arkin for Consumer Attorneys of California as Amicus Curiae on 
behalf of Real Parties in Interest. 
 
Boies Schiller Flexner, Christopher G. Caldwell, Michael R. Leslie, Andrew Esbenshade, Kelly L. Perigoe 
and David Boies for Toll Brothers, Inc., and Porter Ranch Development Company as Amici Curiae on 
behalf of Real Parties in Interest. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
Kathleen M. Sullivan 
Quinn Emmanuel Urquhart & Sullivan 
555 Twin Dolphin Drive, 5th Floor 
Redwood Shores, CA  94065 
(650) 801-5000 
 
Leslie A. Brueckner 
Public Justice 
475 14th Street, Suite 610 
Oakland, CA  94612 
(510) 622-8150