Filed 11/20/20 (unmodified opn. attached)

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

CALIFORNIA STATE LANDS 

COMMISSION et al.,

 Plaintiffs and Appellants,

v.

PLAINS PIPELINE, L.P. et al.,

 Defendants and 

Respondents.

2d Civil No. B295632

(Super. Ct. No. 18CV02504)

(Santa Barbara County)

ORDERING MODIFYING 

OPINION

[NO CHANGE IN 

JUDGMENT]

THE COURT:

It is ordered that the opinion filed herein on November 19, 

2020, be modified as follows 

The first line of the first paragraph in the opinion is 

changed to read:

Because of a company’s negligence, its pipeline 

carrying oil burst. 

There is no change in the judgment.

GILBERT, P.J. YEGAN, J. TANGEMAN, J.
Filed 11/19/20 (unmodified opinion)

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

STATE LANDS COMMISSION 

et al.,

 Plaintiffs and Appellants,

v.

PLAINS PIPELINE, L.P., et al.,

 Defendants and Respondents.

2d Civil No. B295632

(Super. Ct. No. 18CV02504)

(Santa Barbara County)

Because of an oil production company’s negligence, its 

pipeline carrying oil burst. The company was unable to transport 

oil from land it leased from the state, depriving the state of

royalty income and damaging its property.

The pipeline company has been designated a public utility. 

Under the circumstances here, we conclude the pipeline company 

is not exempt from liability for the interruption in service.

Appellants California State Lands Commission (the

Commission) and Aspen American Insurance Company (Aspen) 
2

filed a lawsuit against Plains Pipeline, L.P., and its affiliates1

(collectively “Plains”), claiming that when Plains’s negligent

maintenance of a pipeline resulted in disrupting the flow of oil, it

also disrupted the payment of royalty income to the Commission,

and caused damage to improvements on the Commission’s land. 

The Commission and Aspen appeal from a judgment in favor of 

Plains resulting from the dismissal of their first amended

complaint after a demurrer was sustained without leave to

amend. We reverse.

FACTUAL AND PROCEDURAL HISTORY

The Commission administers public lands owned by the

state, including submerged lands. (Pub. Resources Code, § 6216.) 

The Commission leased offshore lands to Venoco, Inc., to operate

Platform Holly. Oil and gas produced on the platform were

pumped to an onshore facility and pipeline operated by Venoco. 

Several miles later, the oil and gas reached a pump station

where, together with oil and gas from three ExxonMobil

platforms, they were pumped into the pipeline at issue here, Line

901. Line 901 was owned and operated by Plains. It ran up the

coast where it connected to other pipelines.

Plains operated Line 901 pursuant to a Federal Energy 

Regulatory Commission (FERC) tariff that applied to “[a]ny 

Shipper desiring to tender crude petroleum for transportation.” 

The tariff set rates and permitted Plains to refuse oil that did not 

meet specified standards. If all the oil submitted for distribution 

exceeded Plains’s capacity, the total capacity was required to be 

prorated among the shippers.

1 The affiliates are Plains All American Pipeline, L.P.,

Plains GP Holdings, L.P., Plains AAP, L.P., Plains All American

GP LLC, and PAA GP LLC.
3

Plains failed to reasonably monitor, maintain, and repair 

Line 901. Pipeline walls were corroded to as little as 1/16-inch 

thick. On May 19, 2015, Line 901 ruptured at Refugio State 

Beach, spilling 140,000 gallons of crude oil onto the beach and 

into the ocean. Line 901 was shut down and remains closed.

Because the shutdown eliminated the only feasible method 

to transport oil and gas from Venoco’s onshore facility to 

refineries, Venoco stopped production, thus ending its obligation 

to pay royalties to the Commission. Venoco quitclaimed its lease 

back to the state. The shutdown of Line 901 caused property 

damage to the land and its facilities that the Commission was 

obligated to remediate and repair, including capping wells to 

prevent future leaks.

Plains and Venoco had a connection agreement for Line 901, 

but neither the Commission nor Aspen were parties to the 

agreement. Aspen paid the Commission $22 million to meet a 

portion of Venoco’s bonded obligations to maintain the lands 

safely and to decommission the wells and other structures. Aspen 

was subrogated to the rights of the Commission against Plains.

The first amended complaint against Plains alleges 

negligence causing economic and property damage, willful 

misconduct, and negligent interference with prospective economic 

advantage.2 The trial court took judicial notice that a jury found 

Plains guilty of knowingly discharging oil, or reasonably should 

have known that its actions would cause the discharge of oil, into 

the waters of the state, a felony (Gov. Code, § 8670.64, subd. 

(a)(3)) among other crimes. 

2 An additional cause of action for violation of the LempertKeene-Seastrand Oil Spill Prevention and Response Act (Gov. 

Code, § 8670.56.5) was dismissed on motion of appellants.
4

DISCUSSION

I

Standard of Review

We review de novo the order sustaining the demurrer. 

(McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) 

“ ‘ “We treat the demurrer as admitting all material facts properly 

pleaded, but not contentions, deductions or conclusions of fact or 

law.” ’ ” (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 

1126.) “ ‘[W]e determine whether the complaint states facts 

sufficient to constitute a cause of action.’ ” (Ibid.)

II

Public Utility Exemption

The Commission contends the trial court erred in 

determining that Plains is exempt from liability as a public 

utility.

In general, “[e]veryone is responsible, not only for the result 

of his or her willful acts, but also 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.” (Civ. Code, § 1714, 

subd. (a).)

Plains does not contest that the complaint adequately 

alleges negligence. It argues, however, that as a public utility it is 

exempt from liability. The Commission claims that Plains does 

not qualify as a public utility under California law. We need not 

decide whether Plains qualifies as a public utility. Assuming it 

does, it is not exempt from liability.

The seminal case regarding public utility immunity is 

Niehaus Bros. Co. v. Contra Costa Water Co. (1911) 159 Cal. 305. 

In Niehaus, plaintiff’s mill was destroyed when the water utility’s

company’s service failed and plaintiff was unable to put out a fire. 
5

In holding the water utility not liable, our Supreme Court pointed 

out the water utility is discharging a public duty that would 

otherwise devolve upon the city itself. (Id. at pp. 318-319.) The 

compensation the utility receives is fixed by the city. The court 

stated that given the “meager remuneration” provided by the 

municipality’s rates, the water company could not be deemed to 

have “undertake[n] to make good the loss which would result from 

the destruction of a modern city by fire.” (Id. at p. 318; see also 

Ukiah v. Ukiah Water and Imp. Co. (1904) 142 Cal. 173, 178 

[water company not liable for failure to provide sufficient water to 

extinguish fire].) 

Cases following Neihaus have held, in the absence of a 

contract between the utility and the consumer expressly providing 

for the furnishing of a service for a specific purpose, a public 

utility owes no duty to a person injured as a result of an 

interruption of service or a failure to provide service. (White v. 

Southern Cal. Edison Co. (1994) 25 Cal.App.4th 442, 448.) In 

White, plaintiff was injured in a motor vehicle accident that 

occurred in an intersection near inoperative street lights owned 

and maintained by an electric utility.

In Lowenschuss v. Southern Cal. Gas Co. (1992) 11 

Cal.App.4th 496, we determined that a gas utility was not liable 

for its refusal to purge gas from pipes in the path of a rapidly 

expanding fire.

Plains argues that the reason for the exemption from 

liability for public utilities is that their rates are controlled by 

governmental entities, and the rates do not take into account 

liability for damages for failure of service. Plains points out that 

its rates are set by FERC.
6

But the analysis is not that simple. Niehaus points out that 

the water utility provides a public service that would otherwise 

devolve on the municipality. In each of the cases in which the 

exemption is applied, the utility directly serves members of the 

general public in ways similar to the public utility in Niehaus. 

The rates for utilities that provide essential services to the public, 

such as water (Neihaus), electricity (White), and gas 

(Lowenschuss), must be kept low to allow even the most 

economically disadvantaged members of the public to obtain 

essential services. One way to keep rates low is to limit liability. 

In contrast, Plains does not deliver essential municipal 

services to members of the general public. Its task is to transport 

oil to a private entity for commercial purposes. Although it is 

called a public utility, it is a private business, entitled to no more 

immunity from liability than any ordinary private business. Its 

rates are set by FERC and do not include compensation for 

liability. That does not require an exemption. Plains may not be 

compensated for damages caused by its negligence.

Plains reliance on Venoco, LLC v. Plains Pipeline, L.P. (9th 

Cir. 2020) 814 Fed.Appx. 318 is misplaced. There, in a 

memorandum opinion, the court concluded that under California 

law all public utilities are exempt from liability. The court 

reached that conclusion without analyzing the facts or reasoning 

of the cases that provide for immunity. Our analysis of the facts 

and reasoning of those cases lead to a different conclusion. We 

decline to follow Venoco. 

The dissent cites our case Unocal California Pipeline Co. v. 

Conway (1994) 23 Cal.App.4th 331, also cited by Venoco. The 

dissent is puzzled by what it considers an anomaly that here we 

did not reaffirm our holding in Unocal. It is self-evident that 
7

Unocal is far removed from the instant case. Yes, Unocal was a 

public utility that served only one customer. We agree that 

serving only one or two customers does not disqualify Plains as a 

public utility. But it does disqualify Plains from claiming 

immunity from liability. To have immunity from liability, Plains 

must provide an essential service to the general public.

Unocal involved an eminent domain action in which the 

Coastal Commission ordered the movement of Unocal’s pipeline 

under the ground of a private landowner. The landowner sued 

for loss of goodwill. Unocal does not involve a public utility’s 

claim of immunity. The dissent’s grant of blanket immunity to 

all public utilities fails to take into account the policy 

considerations our Supreme Court considered in granting 

immunity to public utilities that provide essential services. In 

the absence of such policy considerations, the grant of immunity 

does not serve the public good. 

No statute grants immunity to public utilities. Whether 

immunity applies is a question of judicial policy.

II

Damages

Plains contends the Commission’s damages are barred by 

the economic-loss rule.

Plaintiff cannot recover economic damages resulting from 

negligence without a physical injury to a person or property. (City 

of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 

292, 318.) Plains argues that at the time the pipeline failed, the 

Commission owned only the land; Venoco owned the property that 

was damaged. Thus, Plains claims the Commission has suffered 

only economic loss.
8

(a) Physical Damage

The Commission’s complaint alleges:

“Since Venoco’s second entry into Chapter 11 protection 

and quitclaim of the Leased Lands, the Commission has been and 

continues to pay roughly $1,000,000 per month to Venoco or the 

Commission’s other contractors to remediate and repair property 

damage to the oil and gas production facilities and to maintain 

the facilities in a safe condition to avoid further property damage. 

The Commission will be required to expend additional and 

substantial sums of money to remediate and repair the abovedescribed property damage and maintain, decommission, and 

remove said oil and gas production facilities on the Leased Lands 

to avoid further property damage.”

The Commission alleges that it has succeeded to Venoco’s 

property, the damage continues, and it is required to spend 

substantial amounts for repairs and maintenance to keep the 

facility in a safe condition. That is a sufficient allegation of 

continuing damage to the property the Commission now owns. 

Plains cites no authority that relieves it from liability for 

continuing damage to property held by a successor in interest. 

The complaint alleges property damage, not purely economic loss.

Plains’s reliance on Texas Eastern Transmission Corp. v. 

McMoran Offshore Exploration Co. (5th Cir. 1989) 877 F.2d 1214 

is misplaced. In Texas Eastern, an undersea pipeline ruptured 

during relocation of a drilling rig platform. The court held that a 

plaintiff had no cause of action for damages resulting from loss of 

production absent a proprietary interest in the pipeline. (Id. at 

pp. 1223-1224.)

First, unlike this case, plaintiff here did not allege physical 

damage to its property. Second, Texas Eastern is not based on 
9

California law. Third, to the extent Texas Eastern can be read to 

conflict with this case, we decline to follow it.

(b) Special Relationship

The economic loss rule does not apply where there is a 

special relationship between the parties.

In J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799, a 

restaurant leased space at a county airport. The lease required 

the county to provide heat and air conditioning. The county 

entered into a contract with defendant to provide the heating and 

air conditioning systems to the restaurant. The restaurant sued 

defendant, alleging that an unreasonable delay in performing the 

contract caused it to lose business. The trial court sustained the 

defendant’s demurrer without leave to amend. Our Supreme 

Court reversed. The court held that where a special relationship 

exists between the parties, recovery for purely economic loss is not 

foreclosed. (Id. at p. 804.) The court gave six factors to consider: 

“(1) the extent to which the transaction was intended to affect the 

plaintiff, (2) the foreseeability of harm to the plaintiff, (3) the 

degree of certainty that the plaintiff suffered injury, (4) the 

closeness of the connection between the defendant's conduct and 

the injury suffered, (5) the moral blame attached to the 

defendant's conduct and (6) the policy of preventing future harm.” 

(Ibid.)

(1) Intended to Affect Plaintiff

Plains relies on Southern California Gas Leak Cases (2019) 

7 Cal.5th 391, 400, where our Supreme Court cited J’Aire with 

approval and stated, “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.” There the defendant owned a gas storage facility 
10

that suffered a massive leak causing an evacuation of residents 

who lived within a five-mile radius. Businesses within the 

evacuation area brought a class action alleging purely economic 

losses. The businesses conceded the only relevant ties to the 

defendant were having the misfortune of operating near the 

defendant’s gas storage facility. (Id. at p. 408.) Our Supreme 

Court determined that there was no special relationship between 

the businesses and the defendant.

Here the relevant tie between the Commission and Plains 

is more than that the Commission happened to own a business in 

the vicinity of an oil spill. The purpose of Plains’s pipeline was to 

transport oil taken from the Commission’s land so that the 

Commission, among others, could make a profit. The 

Commission is intended to be a direct beneficiary of the pipeline 

transaction.

(2) Foreseeability of Harm

It was entirely foreseeable that if the pipeline failed, the 

Commission would lose royalties from its land and would be 

required to take over and maintain Venoco’s facilities in order to 

prevent further harm.

(3) Degree of Certainty Plaintiff Suffered Injury

The Commission alleged that it lost royalty payments and 

was required to spend money to repair and maintain Venoco’s 

facilities. There is a high degree of certainty that the 

Commission suffered injury.

(4) Closeness of Connection Defendant’s Conduct and Injury

There is an immediate and direct connection between 

Plains’s conduct and the Commission’s injury.
11

(5) Moral Blame

Plains’s conduct was not only grossly negligent, it was 

criminal.

(6) Policy of Preventing Future Harm

The immense environmental damage caused by an oil spill 

of the quantity involved here is well known. The damage could 

have easily been avoided if Plains had bothered to conduct an 

adequate inspection of its pipeline. Damages awarded to the 

Commission will encourage Plains and other pipeline operators to 

avoid such future harm.

The complaint alleges sufficient facts to show a special 

relationship between the parties that allows the Commission to 

recover purely economic damages.

IV

Inverse Condemnation

For the first time on appeal, the Commission contends it 

should be allowed to amend its complaint to allege that if Plains 

is a public utility, it is liable for property damage in inverse 

condemnation. 

We need not decide the matter. The allegations of the 

Commission’s complaint without amendment are sufficient to 

require an unqualified reversal. The effect of an unqualified 

reversal is to leave the case “at large” as if no judgment had ever 

been rendered. (9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, 

§ 869, p. 928.) Thus, the proper procedure is to make any motion 

to amend in the trial court in the first instance. We express no 

opinion on how the trial court should rule.
12

The judgment is reversed. Costs are awarded to 

appellants.

CERTIFIED FOR PUBLICATION.

GILBERT, P. J.

I concur: YEGAN, J.
TANGEMAN, J., Dissenting:

I respectfully dissent. The majority couches its 

holding that Plains Pipeline, L.P. (“Plains”) is not entitled to 

immunity from liability for an interruption in service because 

“[a]lthough it is called a public utility, it is a private business, 

entitled to no more immunity from liability than any ordinary 

private business.” (Maj. opn., ante, p. 6.)

This holding is inconsistent with both statutory and 

case authorities in existence for more than a century. (Niehaus 

Bros. Co. v. Contra Costa Water Co. (1911) 159 Cal. 305; Ukiah v. 

Ukiah Water & Imp. Co. (1904) 142 Cal. 173.) In reaching this 

result, the majority grafts onto existing law the additional 

requirements that in order to benefit from the exemption from 

liability, the public utility must do more than “qualify as a public 

utility” (maj. opn. ante, at p. 4). These additional requirements 

lack any grounding in existing law and will give rise to 

uncertainty in the law and increased litigation. 

The majority decline to decide whether a pipeline 

company that serves only a few commercial users is a public 

utility. Venoco, LLC v. Plains Pipeline, L.P. (9th Cir. 2020) 814 

Fed.Appx. 318 (Venoco), which the majority “decline[s] to follow” 

(maj. opn. ante, at p. 6), answered that question in the 

affirmative. In support of that answer, Venoco cited Unocal 

California Pipeline Co. v. Conway (1994) 23 Cal.App.4th 331 

(Unocal), for the proposition that a public utility “‘may serve only 

one or a few customers.’” Unocal was decided by a panel of this 

same court, including both members of the majority here. We 

held in Unocal that a pipeline whose only customer was its own 

parent corporation was a public utility. The same result should 

follow here. Nor does the majority distinguish Public Utilities 
2

Code section 216, subdivision (a)(1), which states that a “‘public 

utility’” includes every common carrier [and] pipeline corporation 

. . . where the service is performed for, or the commodity is 

delivered to, the public or any portion thereof.”

This opinion gives rise to more questions than it 

answers. The majority’s new requirement that the public utility 

must “deliver essential municipal services to members of the 

general public” (maj. opn. ante, p. 6) has never existed before 

today. Which services are “essential” and which are merely 

convenient? Which services come within the umbrella of 

“municipal” services? And what segment of the population 

constitutes the “general public”? Does this opinion purport to 

strike the words “or any portion thereof” from Public Utilities 

Code section 216, subdivision (a)(1)? 

With this decision, the majority casts doubt on more 

than a century of cases holding public utilities exempt from 

liability for interruptions in service. Moreover, this opinion 

creates the anomalous result that the state and its insurer can 

sue Plains for indirect damages here, even though their losses are 

derivative of the direct loss to Venoco. Meanwhile, the direct 

victim, Venoco, is barred from recovery. (Venoco, supra, 814 

Fed.Appx. 318.) 

Because I discern no legal basis for the anomalous 

results reached here, I dissent. I would affirm the trial court’s 

thoughtful and reasoned decision.

CERTIFIED FOR PUBLICATION.

TANGEMAN, J.
Colleen K. Sterne, Judge

Superior Court County of Santa Barbara

______________________________

Xavier Becerra, Attorney General, Diane S. Shaw, 

Assistant Attorney General, Brian D. Wesley and Matthew C. 

Heyn, Deputy Attorneys General, for Plaintiff and Appellant 

California State Lands Commission.

Robins Kaplan, David C. Veis, Jason R. Fair and Glenn A. 

Danas for Plaintiff and Appellant Aspen American Insurance 

Company.

Baker Marquart, Jaime W. Marquart, Brian E. Klein and 

Shane Pennington for Venoco as Amici Curiae on behalf of 

Plaintiffs and Appellants.

Fell, Marking, Abkin, Montgomery, Granet & Raney, Craig 

S. Granet; Munger, Tolles & Olson, Henry Weissmann, Fred A. 

Rowley, Jr., Daniel B. Levin and Aaron D. Pennekamp for 

Defendants and Respondents.