Court Opinion

ID: 4229473
Source: CourtListenerOpinion
Date Created: 2017-12-15 23:01:57.108788+00
Date Added: 2024-06-11T14:43:10.187066
License: Public Domain

Filed 12/15/17
                 CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                 SECOND APPELLATE DISTRICT

                           DIVISION FIVE

SOUTHERN CALIFORNIA GAS LEAK               B283606
CASES
______________________________________     (JCCP No. 4861)

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.

     ORIGINAL PROCEEDINGS; petition for writ of mandate.
John Shepard Wiley, Jr., Judge. Petition granted.
     Morgan, Lewis & Bockius, James J. Dragna, David L.
Schrader, Yarden A. Zwang-Weissman, for Petitioner.
     No appearance for Respondent.
     Baron & Budd and Roland Tellis; Boucher and Raymond P.
Boucher; Lieff Cabraser Heimann & Bernstein and Robert J.
Nelson, for Real Parties in Interest.
                      _____________________

       Seven businesses (business plaintiffs) filed suit to recover
damages for purely economic loss resulting from a massive
natural gas leak at a Southern California Gas Company
(SoCalGas) facility; they did not claim any injury to person or
property. Although our Supreme Court long ago recognized
plaintiffs may sue in negligence for economic loss alone (Biakanja
v. Irving (1958) 49 Cal.2d 647 (Biakanja), such recovery has been
limited to situations where a transaction between the defendant
and another was intended to directly affect the plaintiff (a third
party), whose economic loss was a foreseeable consequence of the
defendant’s negligence. As business plaintiffs’ complaint lacked
allegations of personal injury, property damage, or the requisite
transaction, SoCalGas filed a demurrer to the causes of action
based on negligence.1
       Concluding there is some uncertainty in the law,
respondent court held SoCalGas should “bear all costs its
accident caused” and there is no bar to recovery for purely
economic loss under negligence theories when the precipitating
event is a mass tort. The demurrer was overruled and SoCalGas

1     SoCalGas did not challenge the sufficiency of business
plaintiffs’ cause of action for violations of California’s Unfair
Competition Law. (Bus. & Prof. Code, § 17200 et seq. (UCL).)

                                  2
petitioned for extraordinary relief. We conclude as a matter of
law SoCalGas did not owe a duty to prevent business plaintiffs’
economic loss based on negligent conduct. Accordingly, we grant
the petition for a peremptory writ of mandate.

         FACTUAL AND PROCEDURAL BACKGROUND2
       On October 23, 2015, SoCalGas discovered a natural gas
leak at its Aliso Canyon Storage Facility (facility), located above
Porter Ranch in Los Angeles. The gas leak spread an oily mist
over nearby neighborhoods, damaging real and personal
property. Residents and individuals who worked in the vicinity
of the facility complained about odors and acute respiratory and
central nervous system symptoms.
       On November 19, 2015, in response to the complaints, the
Los Angeles County Department of Public Health (Department)
directed SoCalGas to offer temporary relocation to anyone living
within a five-mile radius of the facility. The following month, the
Los Angeles County Board of Education relocated students and
staff at two Porter Ranch schools for the duration of the 2015-
2016 school year.
       On February 18, 2016, state officials confirmed SoCalGas
permanently sealed the leak. On May 13, 2016, the Department
issued a directive to SoCalGas to implement immediately a
comprehensive remediation protocol for residences within a five-
mile radius of the facility. Since October 2015, homeowners and

2     We rely on the operative pleading—the second amended
consolidated master class action business complaint—for our
recitation of the facts. At this stage, we accept as true all
properly pleaded facts. (Lin v. Coronado (2014) 232 Cal.App.4th
696, 700-701 (Lin).)

                                 3
realtors have been obligated to disclose to potential homebuyers
and lessees the events related to the gas leak.
      The gas leak and the resulting relocation of approximately
15,000 Porter Ranch residents took an enormous toll on the local
economy. On behalf of businesses located within a five-mile
radius of the leak, seven named plaintiffs3 initiated a putative
class action against SoCalGas for (1) strict liability for
ultrahazardous activity, (2) negligence, (3) negligent interference
with prospective economic advantage, and (4) violations of the
UCL.4 Business plaintiffs claimed no injury to person or
property. Instead, they alleged the gas leak and subsequent
relocation of Porter Ranch residents caused crushing economic
loss to their businesses.
       SoCalGas filed a demurrer, asserting it owed no duty of
care to business plaintiffs under any of the alleged negligence
theories—strict liability, negligence, and negligent interference
with prospective economic advantage. Relying on J’Aire Corp. v.
Gregory (1979) 24 Cal.3d 799, 804 (J’Aire), SoCalGas’s principal
argument was the pleading fell short because it did not include
allegations of a transaction, as required by Supreme Court
authority, to establish a special relationship sufficient to impose

3     Named plaintiffs are First American Wholesale Lending
Corporation dba First American Realty; GKM Enterprises, Inc.
dba Hooper Camera and Imaging Centers; Genuine Oil Company
dba Arco; SoCal Hoops Basketball Academy Corporation; King
Taekwondo, Inc.; Polonsky Family Day Care aka Granada
Childcare; and Babak Kosari, DPM, Inc.

4      The action was coordinated with other lawsuits arising out
of the gas leak in Judicial Council Coordinated Proceeding
(JCCP) No. 4861. (Code Civ. Proc., § 404 et seq.)

                                 4
a duty on SoCalGas. Business plaintiffs opposed the demurrer,
asserting J’Aire did not apply or, to the extent that authority did
apply, they sufficiently pleaded the existence of a J’Aire “special
relationship.”
       Respondent court advised the parties its tentative decision
was to overrule the demurrer. In a comprehensive discussion,
the court concluded SoCalGas owed a duty to business plaintiffs
and they could proceed with their action: “The economic loss rule
thus does not apply in a context like this one: a classic mass tort
action where high transactions costs precluded transactions,
where the risk of harm was foreseeable and was closely connected
with [SoCalGas’s] conduct, where damages were not wholly
speculative, and where the injury was not part of the plaintiff’s
ordinary business risk. (J’Aire . . . , supra, 24 Cal.3d [at p.] 808.)”
After the hearing, respondent court adopted the tentative ruling
as its decision.
       Respondent court certified the ruling for appellate review.
(Code Civ. Proc., § 166.1.) SoCalGas petitioned for a writ of
mandate in this court and business plaintiffs filed a preliminary
opposition. We issued an alternative writ directing respondent
court to vacate its order overruling the demurrer or to show cause
before this court why the relief sought in the petition should not
be granted. The respondent court elected not to comply with the
alternative writ. Business plaintiffs subsequently filed a return
and SoCalGas filed a reply.

                        DISCUSSION
I.  Review by Extraordinary Writ
    Despite respondent court’s certification of its ruling for
immediate appellate review and business plaintiffs’ decision not

                                  5
to seek leave to further amend their pleading, the dissent urges
this court to follow the general rule and deny writ relief on the
basis SoCalGas has an adequate remedy by way of appeal should
it fail to succeed on the merits. (See, e.g., San Diego Gas &
Electric Co. v. Superior Court (1996) 13 Cal.4th 893, 913 (San
Diego Gas.) However, San Diego Gas articulated three
exceptions to the general rule: (1) “when the demurrer raises an
important question of subject-matter jurisdiction”; (2) when
granting writ relief “will prevent ‘needless and expensive trial
and reversal’”; and (3) “when the issue presented is ‘of
widespread interest.’” (Ibid.; id at p. 913, fn. 17; see also City of
Stockton v. Superior Court (2007) 42 Cal.4th 730, 747 (City of
Stockton) [extraordinary writ relief where “[a] significant legal
issue is presented, and the benefits of [a] defense would be
effectively lost if defendants were forced to go to trial”].)
        This case falls within the latter two recognized San Diego
Gas exceptions. The legal issue here—the existence of a duty of
care—is significant and of widespread interest. Resolution of the
duty issue as to business plaintiffs at this stage also will prevent
expensive and time-consuming litigation. Although the demurrer
did not attack the UCL cause of action, it was directed to all
causes of action where business plaintiffs would have the right to
a jury trial and damages would be the primary remedy. In this
regard, the conclusion by business plaintiffs that there is “a
question of pleading that requires further factual development
before it can be properly reviewed” rings hollow. Business
plaintiffs failed to suggest any facts that need to—or even could—
be further developed.

                                 6
II.    Standard of Review
       Extraordinary writ review of an order overruling a
demurrer is governed by “the ordinary standards of demurrer
review . . . .” (City of Stockton, supra, 42 Cal.4th at p. 747.) We
independently review the complaint and all matters we are
entitled to judicially notice to determine “whether, as a matter of
law, the complaint states facts sufficient to state a cause of
action. [Citations.] We view a demurrer as admitting all
material facts properly pleaded but not contentions, deductions,
or conclusions of fact or law.” (Lin, supra, 232 Cal.App.4th at pp.
700-701.) If the complaint is insufficient, but there “is a
reasonable possibility that the defect can be cured by
amendment,” plaintiff is entitled to have the opportunity to
amend. (Centinela Freeman Emergency Medical Associates v.
Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010
(Centinela), internal quotation marks omitted.)

III.  Duty to Protect Third Parties From Purely Economic
      Loss in a Negligence Action
      A.     Applicable Law
      The existence of a duty to use due care is “[t]he threshold
element of a cause of action for negligence.” (Bily v. Arthur
Young & Co. (1992) 3 Cal.4th 370, 397 (Bily); see also Centinela,
supra, 1 Cal.5th at p. 1012.) Generally, a defendant owes no duty
to prevent purely economic loss to third parties under any
negligence theory. (Quelimane Co. v. Stewart Title Guaranty Co.
(1998) 19 Cal.4th 26, 58 (Quelimane) [“Recognition of a duty to
manage business affairs so as to prevent purely economic loss to
third parties in their financial transactions is the exception, not
the rule, in negligence law. Privity of contract is no longer

                                 7
necessary . . . [but] public policy may dictate the existence of a
duty to third parties”].) As the Supreme Court reaffirmed in
Centinela, “[t]he test for determining the existence of such an
exceptional duty to third parties is set forth in the seminal case of
Biakanja, supra, 49 Cal.2d at page 650, as follows: ‘The
determination whether in a specific case the defendant will be
held liable to a third person not in privity is a matter of policy
and involves the balancing of various factors, among which are
[1] the extent to which the transaction was intended to affect the
plaintiff, [2] the foreseeability of harm to him, [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.’” (Centinela, supra,
1 Cal.5th at pp. 1013-1014.)
       The duty analysis in cases where a defendant’s alleged
negligence has resulted in economic loss in conjunction with
personal injury or property damage involves many of the
Biakanja factors. (Cabral v. Ralphs Grocery Co. (2011) 51
Cal.4th 764, 771 (Cabral); Rowland v. Christian (1968) 69 Cal.2d
108, 113 (Rowland).)5 As is readily apparent, the duty analysis

5     The Supreme Court decided Rowland 10 years after
Biakanja. The Rowland duty factors are “the foreseeability of
harm to the plaintiff, the degree of certainty that the plaintiff
suffered injury, the closeness of the connection between the
defendant’s conduct and the injury suffered, the moral blame
attached to the defendant’s conduct, the policy of preventing
future harm, 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 the availability, cost,

                                  8
under Rowland does not include the first Biakanja factor, “the
extent to which the transaction was intended to affect the
plaintiff.” Aside from that distinction, it bears emphasis at this
point that the analytical perspectives are also different. Where
alleged negligence has caused personal injury or property
damage and economic loss, the existence of a duty of care is the
rule, not the exception. (Civ. Code, § 1714; Elam v. College Park
Hospital (1982) 132 Cal.App.3d 332, 339 [“‘Duty’ is thus
presumed . . .”].) And under these circumstances, where a duty of
care is presumed, courts consider the Cabral/Rowland factors to
determine whether “an exception to the general duty rule in Civil
Code section 1714” should be found. (Lichtman v. Siemans
Industry Inc. (2017) 16 Cal.App.5th 914, 921.)
       Where the alleged negligence has caused economic loss, but
no personal injury or property damage, duty is not presumed.
Rather, courts examine the Biakanja factors to determine
whether to impose on the defendant “an exceptional duty to third
parties.” (Centinela, supra, 1 Cal.5th at p. 1013.)
       Biakanja was the first in a consistent line of Supreme
Court decisions discussing this “exceptional duty.” In Biakanja, a
notary public’s negligent failure to properly attest a will deprived
the intended beneficiary of the bulk of the decedent’s estate.
Although there was no privity between the intended beneficiary
and the notary, the Supreme Court recognized the economic
damage to the plaintiff was foreseeable and concluded the notary
owed the beneficiary a duty of care. (Biakanja, supra, 49 Cal.2d
at p. 651.)

and prevalence of insurance for the risk involved.” (Rowland,
supra, 69 Cal.2d at p. 113.)

                                 9
       The result was similar in J’Aire, where foreseeability of
harm to the plaintiff as a result of the defendant’s conduct again
figured prominently in the analysis. The landlord in J’Aire hired
a contractor to renovate commercial space, requiring the tenant
to close its business during construction. The contractor’s alleged
negligence delayed completion of the project, thereby delaying the
tenant’s reopening. The Supreme Court permitted the tenant to
sue the contractor on a negligence theory for the tenant’s purely
economic losses. The defendant could not perform the contract
without interrupting the tenant’s business. Therefore, it was
foreseeable the contractor’s performance would directly affect the
tenant. (J’Aire, supra, 24 Cal.3d at pp. 804-805.)
       In J’Aire, our Supreme Court explained that damages for
lost earnings or profits have long been a staple of recovery in
negligence actions where the plaintiff also suffers personal
injuries or property damage. (J’Aire, supra, 24 Cal.3d at p. 804.)
J’Aire also made it clear an award of damages for injury to
prospective economic advantage without personal injury or
property damage is “not foreclosed[:] Where a special
relationship exists between the parties, a plaintiff may recover
for loss of expected economic advantage through the negligent
performance of a contract although the parties were not in
contractual privity.” (Ibid.)
       When a plaintiff seeks to recover for injury to prospective
economic advantage without personal injury or property damage,
J’Aire explained courts resolve the duty issue “by applying the
criteria set forth in” Biakanja. (J’Aire, supra, 24 Cal.3d at p.
804.) Significantly, the J’Aire court did not presume the
existence of a duty under Civil Code section 1714 or analyze the

                                10
duty question with reference to Rowland. (J’Aire, supra, 24
Cal.3d at pp. 804-805.)
       J’Aire did cite Civil Code section 1714, but in the context of
acknowledging that its duty conclusion was “consistent with . . .
the basic principle of tort liability, embodied in Civil Code section
1714 . . . .” (J’Aire, supra, 24 Cal.3d at p. 806.) In the footnote
appended to this statement, the Court added that Civil Code
section 1714 “does not distinguish among injuries to one’s person,
one’s property or one’s financial interests. Damages for loss of
profits or earnings are recoverable where they result from an
injury to one’s person or property caused by another’s negligence.
Recovery for injury to one’s economic interests, where it is the
foreseeable result of another’s want of ordinary care, should not
be foreclosed simply because it is the only injury that occurs.”
(Id. at p. 806, fn. 3.)
       In sum, J’Aire recognized and preserved the distinction
between presuming duty under Civil Code section 1714 and
Rowland and not foreclosing duty for purely economic loss under
Biakanja.
        The plaintiffs in Bily lost their investments in a company.
They sued the company’s auditors for purely economic losses.
The Bily majority never mentioned Rowland. It noted the
absence of privity was not an analytical impediment and
immediately recited the Biakanja factors.6 (Bily, supra, 3 Cal.4th
at p. 397.) The majority examined only the foreseeability

6     The Bily dissent, on the other hand, did not mention
Biakanja. The dissenting justices instead relied on the general
duty rule in Rowland and concluded there was no justification to
exempt the Bily auditors from it. (Bily, supra, 3 Cal.4th at pp.
419-420 (dis. opn. of Kennard, J.).)

                                 11
element, however, and concluded the mere presence of a
foreseeable risk of injury to third persons, was not “sufficient,
standing alone, to impose liability for negligent conduct.” (Id. at
p. 399.) In arriving at this conclusion, the five-justice majority
held: “Even when foreseeability was present, we have on several
recent occasions declined to allow recovery on a negligence theory
when damage awards threatened to impose liability out of
proportion to fault or to promote virtually unlimited
responsibility for intangible injury.” (Id. at p. 398.) The majority
then observed, “An award of damages for pure economic loss
suffered by third parties raises the spectre of vast numbers of
suits and limitless financial exposure” (id. at p. 400)7 and
provided the following example: “One frequently used
illustration of the need to limit liability for economic loss assumes
a defendant negligently causes an automobile accident that
blocks a major traffic artery such as a bridge or tunnel. Although
defendant would be liable for personal injuries and property

7      Contrary to business plaintiffs’ argument, application of
the economic loss doctrine is not limited to the product liability
arena: “‘Judicial hostility to the use of tort theory to recover
purely economic losses predates the twentieth-century battle over
product liability. This hostility was motivated primarily by the
fear of mass litigation and the concern that traditional tort
concepts were not capable of providing clear limitations on
potentially limitless liability. Defining the scope of tort duty to
include only physical harm created “built-in” limits on liability,
since any given chain of events in the physical world has finite
consequences. Permitting plaintiffs to recover for purely
economic losses would result in open-ended liability, since it is
virtually impossible to predict the economic consequences of a
given act.’” (North American Chemical Co. v. Superior Court
(1997) 59 Cal.App.4th 764, 777, fn. omitted.)

                                 12
damage suffered in such an accident, it is doubtful any court
would allow recovery by the myriad of third parties who might
claim economic losses because the bridge or tunnel was
impassible.” (Bily, supra, at p. 400, fn. 11.)
      The trend continued in Quelimane and Centinela. In
discussing negligence theories, neither opinion mentioned Civil
Code section 1714 or Rowland. (Compare, Cabral, supra, 51
Cal.4th 764.) Neither Quelimane nor Centinela presumed the
existence of a duty or asked whether an exception to the general
rule of duty was justified. In Quelimane, the Supreme Court
applied the Biakanja factors and “decline[d] to recognize a duty”
in negligence. (Quelimane, supra, 19 Cal.4th at p. 58.) In
Centinela, the Supreme Court examined the Biakanja factors and
concluded they “support[ed] imposing this continuing common
law duty of care” under a negligence theory. (Centinela, supra, 1
Cal.5th at p. 1020.)

      B.    Analysis
      The negligence allegations in this lawsuit typically invoke
the Biakanja/J’Aire analysis, where we begin with the first
Biakanja factor, “the extent to which the transaction was
intended to affect the plaintiff.” (Biakanja, supra, 49 Cal.2d at p.
650.) No appellate authority addressing negligent liability for
purely economic loss to third parties has found the existence of a
duty of care in the absence of the first factor. (See, e.g.,
Centinela, supra, 1 Cal.5th at p. 1015; Quelimane, supra, 19
Cal.4th at p. 58; Bily, supra, 3 Cal.4th at pp. 397-398; J’Aire,
supra, 24 Cal.3d at p. 804; Biakanja, supra, 49 Cal.2d at p. 651.)
      In the relatively brief time this extraordinary writ petition
has been pending, however, business plaintiffs abandoned their

                                13
earlier allegations that SoCalGas was a party to a contract
intended to affect them and now assert their “loss did not arise
out of any contract. . . . [There is no contract] relevant to the gas
blowout or [their] ensuing losses.” Business plaintiffs add,
“Indeed, whatever contractual relationships SoCalGas had with
other persons are irrelevant to the claims that [business
plaintiffs] assert here.”
       At oral argument, counsel for business plaintiffs relied on
Civil Code section 1714’s presumption of duty and argued no
public policy considerations justify an exception. But Supreme
Court authority from Biakanja to Centinela makes it clear that
while duty under circumstances like those in this case may be
imposed, it is not presumed.
       Business plaintiffs also conflate the “economic loss rule”
with the concept of recovery in tort for purely economic loss. As
they note, the phrase “economic loss rule” appears in numerous
appellate opinions involving contracts, warranties, and products
liability; in those decisions, the “economic loss rule” operates as a
bar to recovery in the absence of personal injury or property
damage. But the Supreme Court did not use that phrase in
Biakanja, J’Aire, Bily, Quelimane, or Centinela. Instead, the
analyses in those decisions focus on the existence of a transaction
and foreseeability of economic harm to determine whether to
impose a duty of care on the defendant vis-à-vis the plaintiff.
       Contrary to the assertions by business plaintiffs, a third
party’s purely economic loss arising from a transaction is a
prerequisite for recovery in tort, absent injury to person or
property. The failure to establish this foundation precludes a
finding of the “special relationship” required by J’Aire and
subsequent Supreme Court decisions.

                                 14
IV.   The Respondent Court’s New Rule for Recovery of
      Purely Economic Loss in a Mass Tort Action
      Presaging—or perhaps serving as a catalyst for—the
decision by business plaintiffs to recast the underpinning of their
negligence theories, respondent court opined, “the economic loss
doctrine . . . currently exists in a state of some uncertainty” as a
result of the Supreme Court’s treatment in J’Aire, supra, 24
Cal.3d at page 807 of an earlier Court of Appeal decision, Adams
v. Southern Pac. Transportation Co. (1975) 50 Cal.App.3d 37
(Adams). In overruling the demurrer, respondent court
necessarily found SoCalGas owed a duty as a matter of law to
business plaintiffs based on its responsibility to “bear all costs its
accident caused.”8 Respondent court did not engage in a J’Aire or
Biakanja analysis, but came to this conclusion by focusing on
Adams rather than on more recent Supreme Court precedent.
      Adams predated J’Aire by four years. The Adams plaintiffs
sued a railroad for negligent interference with prospective
economic advantage after a cargo of bombs exploded and
destroyed the plant where they worked. In affirming the
judgment after the defendant’s demurrer was sustained, the
Court of Appeal determined stare decisis required adherence to

8     The complete context for the court’s statement was as
follows: “In sum, standard tort theory mandates that [SoCalGas]
bear all costs its accident caused. This total should include
tangible and conventionally measurable economic losses to
neighboring businesses. In this way [SoCalGas] (and everyone
else) will face the correct incentive to minimize the social cost of
future accidents.”

                                  15
the rule in Fifield Manor v. Finston (1960) 54 Cal.2d 632
(Fifield).9 (Adams, supra, 50 Cal.App.3d at p. 40.)
       Adams described the “Fifield rule” as “an expression of a
general doctrine prevailing in American courts which bars
recovery for negligent interference with profitable economic
relations.” (Adams, supra, 50 Cal.App.3d at p. 40, fn. omitted.)
Accordingly, the Adams court held Supreme Court precedent
required it to reject the tort of negligent interference with
prospective economic advantage.10 This is precisely the holding

9      In Fifield, an individual with a “life care” contract was
struck by a car. The plaintiff, the nonprofit entity responsible for
his care under the contract, sued the allegedly negligent driver
for subrogation and interference with contractual relations to
recover the injured individual’s medical expenses. (Fifield, supra,
54 Cal.2d at p. 634.) J’Aire explained it was foreseeable the
negligent driver would injure the victim, but “less foreseeable
that it would injure the retirement home’s economic interest.”
(J’Aire, supra, 24 Cal.3d at p. 807.)
       Fifield has not endured as a significant decision in the tort
arena. It is cited more frequently for its subrogation analysis.

10     Two of the Adams justices then engaged in a philosophical
discussion designed to “illustrate the tangible consequences of the
‘new’ analysis in probing the outer regions of negligence liability.”
(Adams, supra, 50 Cal.App.3d at p. 45.) Despite the far-ranging
discussion, the majority in Adams “rigorously eschew[ed]” the
“balancing of important and complex policy factors . . . . Although
[the] plaintiffs’ loss was a foreseeable result of [the railroad’s]
provisionally admitted negligence, [they] neither debate[d] nor
decide[d] whether the railroad owed these plaintiffs a duty of
care.” (Id. at p. 47.)
       By declining to determine whether a duty existed based on
the facts before it, Adams cannot be relied upon to establish

                                 16
J’Aire disapproved: “Fifield [unlike Adams] does not entirely
foreclose recovery for negligent interference with prospective
economic advantage.” (J’Aire, supra, 24 Cal.3d at p. 807.) “To
the extent that Adams holds that there can be no recovery for
negligent interference with prospective economic advantage, it is
disapproved.” (Ibid.)
       In other words, J’Aire disapproved Adams insofar as
Adams held a plaintiff can never recover purely economic losses
based on a defendant’s negligent conduct. J’Aire cited Fifield as
an example where a plaintiff could not prevail on negligence
theories based on the absence of a special relationship with the
defendant and the remoteness of the foreseeability factor: “[The
d]efendant had not entered into any relationship or undertaken
any activity where negligence on his part was reasonably likely to
affect [the] plaintiff adversely. Thus, the nexus between the
defendant’s conduct and the risk of the injury that occurred to the
plaintiff was too tenuous to support the imposition of a duty
owing to the retirement home.” (J’Aire, supra, 24 Cal.3d at p.
807.)
       Although the Adams justices determined Supreme Court
precedent compelled them to reject the negligence theory of the
plaintiffs’ case and did not engage in a foreseeability or duty
analysis, they were all intrigued by the plaintiffs’ contention
“that Fifield and its companion decisions are not [on] point.
[They claim the] lawsuit . . . is not cast in terms of interference
with employment contracts but alleges physical destruction of the
property which enabled them to earn a livelihood. Indeed the

defendant’s duty of care in this mass tort action involving only
economic loss to third parties, i.e., business plaintiffs.

                                17
argument has substance.” (Adams, supra, 50 Cal.App.3d at p.
40.) With the benefit of hindsight, we agree.
       This argument carried the day in George A. Hormel & Co.
v. Maez (1979) 92 Cal.App.3d 963 (Maez). Maez was decided after
Adams and only four months before J’Aire.
       The defendant in Maez was a negligent driver who toppled
a power pole, damaging the transformer. In a Palsgrafian11
chain of events, the downed transformer cut off electricity in the
vicinity, which caused a power surge. The power surge burned
out a motor for critical machinery in the plaintiff’s nearby
facility. Without the machinery, the plaintiff’s employees could
not work. The plaintiff successfully sued for the cost of replacing
the motor and the wages it paid idled employees until the motor
was replaced. (Maez, supra, 92 Cal.App.3d at p. 966.) The Court
of Appeal affirmed, concluding the plaintiff’s damages were
reasonably foreseeable and, for that reason, the defendant owed a
duty of care. (Id. at p. 971.)
       Factually, Maez is similar to Adams: Both cases involved
businesses forced to shut down as a result of property damage to
their premises. It is without consequence that the plaintiffs in
Adams were idled and apparently unpaid employees, while the
Maez plaintiff was the employer that continued to pay the idled
employees. The ultimate difference between the results in the
two cases appears to be Adams’s interpretation of Fifield.
       This brings us to the Ninth Circuit’s opinion in Union Oil
Co. v. Oppen (9th Cir. 1974) 501 F.2d 558 (Union Oil). Union Oil
is particularly apt. There, commercial fishermen sought damages
from an oil company for releasing vast quantities of raw crude off

11    Palsgraf v. Long Island R.R. Co. (1928) 248 N.Y. 339.

                                18
the coast of Santa Barbara. (Id. at p. 559.) Sea life perished, i.e.,
the “property” commercial fishermen depended on for their
livelihoods was destroyed. Commercial fishermen sued for profits
lost as the commercial fishing potential was decimated. The
court acknowledged California law generally precluded
negligence actions for pure economic losses unless there was
“some special relation between the parties.” (Id. at pp. 565-566
[“approach adopted by the California Supreme Court in Biakanja
is particularly instructive”].) The court also highlighted “the
familiar principle that seamen are the favorites of admiralty and
their economic interests entitled to the fullest possible legal
protection.” (Id. at p. 567.) Ultimately, the court held the
plaintiffs’ loss of profits was foreseeable and the oil company
owed a duty to the commercial fishermen. (Id. at p. 568.)
        In permitting the lawsuit to proceed as to the commercial
fishermen, the Union Oil court warned “it must be understood
that our holding in this case does not open the door to claims that
may be asserted by those, other than commercial fishermen,
whose economic or personal affairs were discommoded by the oil
spill . . . . The [rule we adopt] has a legitimate sphere within
which to operate. Nothing in this opinion is intended to suggest,
for example, that every decline in the general commercial activity
of every business in the Santa Barbara area following the [oil
spill] constitutes a legally cognizable injury for which the [oil
company] may be responsible.” (Union Oil, supra, 501 F.2d at p.
570.)
        The common element in Adams, Maez, and Union Oil is the
“physical destruction of the property which enabled [the
plaintiffs] to earn a livelihood.” (Adams, supra, 50 Cal.App.3d at
p. 40.) That element is missing here. Business plaintiffs suffered

                                 19
a decline in commercial activity as a result of neighborhood
residents temporarily relocating after the gas leak. However, in
Union Oil’s words, their economic losses are beyond the
“sphere . . . of a legally cognizable injury for which [SoCalGas]
may be responsible.” (Union Oil, supra, 501 F.2d at p. 570.)
      Traditional analyses hold in this case. California has never
recognized an unlimited duty of care. (Bily, supra, 3 Cal.4th at p.
398.) In the absence of personal injury or property damage, the
special relationship requirement serves as a foreseeability gauge.
Without a special relationship, foreseeability is typically too
tenuous to support the imposition of a duty of care to a third
party. Foreseeability is always “the key component necessary to
establish liability.” (J’Aire, supra, 24 Cal.3d at p. 806.)
Moreover, as discussed above, Bily tempered J’Aire by
recognizing that foreseeability alone may not be enough to permit
recovery on a negligence theory if the imposition of liability would
be “out of proportion to fault or [would] promote virtually
unlimited responsibility for intangible injury.” (Bily, supra, 3
Cal.4th at p. 398.)
      Overruling the demurrer to hold SoCalGas accountable to
business plaintiffs for “all the costs its accident caused” would
“promote virtually unlimited responsibility.” (Bily, supra, 3
Cal.4th at p. 398.) Without personal injury, property damage or
a special relationship, the general rule that precludes business
plaintiffs from recovering for pure economic losses under a
negligence theory remains viable.
      Counsel for business plaintiffs confirmed at oral argument
they do not seek leave to further amend their pleading.
(Centinela, supra, 1 Cal.5th at p. 1010.) This position tacitly
acknowledges the complaint does not suffer from a deficiency that

                                20
can be cured by amendment, but is, instead, ripe for writ review:
“Where, as here, the pleadings and matters subject to judicial
notice establish the defendant owed the plaintiff no duty, a case
may properly be disposed of on demurrer, without further waste
of judicial resources.” (Avila v. Citrus Community College Dist.
(2006) 38 Cal.4th 148, 165, fn. 12.)

                         DISPOSITION
       Let a peremptory writ of mandate issue directing the
respondent court to vacate its order overruling the demurrer and
issue a new order sustaining the demurrer without leave to
amend. The temporary stay is vacated. Costs are awarded to
petitioner SoCalGas.

                                           DUNNING, J.

I concur:

            KRIEGLER, Acting P. J.

       Judge of the Orange Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.

                                21
In Re Southern California Gas Leak Cases
B283606

BAKER, J., Dissenting

       Although I dissent from today’s decision, it is not because I
believe the trial court’s rationale for overruling Southern
California Gas Company’s demurrer is correct—I agree it is not.
But it was a mistake for us to have intervened at this early stage
of the case, and that mistake may well have significant
consequences on the merits.
       In another case involving a utility company, our Supreme
Court endorsed the rule that an appeal from a final judgment is
“normally presumed to be an adequate remedy at law” for a party
who believes it is aggrieved by an erroneous ruling overruling a
demurrer. (San Diego Gas & Electric Co. v. Superior Court
(1996) 13 Cal.4th 893, 912-913 (San Diego Gas).) That normally
adequate remedy “thus bar[s] immediate review by extraordinary
writ.” (Ibid. [explaining an exception to the bar applies in
circumstances not present here, namely, when the demurrer
raises an important question of subject-matter jurisdiction].)
       Despite this rule, this court issued an alternative writ to
review the trial court’s demurrer ruling, tentatively concluding
the trial court erred in determining “the general prohibition
against liability for pure economic loss does not apply in a mass
tort action.”1 Today’s decision finalizes that tentative conclusion

1
       To be fair, the writ issued at the express invitation of the
trial court judge, who certified his demurrer ruling under Code of
and holds the trial court’s rationale was indeed erroneous. But
there is wisdom in the San Diego Gas rule, which generally
permits erroneous demurrer rulings to stand until final
judgment.
      Had we declined to intervene now, we would have a more
developed record on which to base our decision when confronted
with a later appeal or writ petition. And the existence of a more
developed record, to my mind, is important to arrive at an
appropriate disposition of this case. I think it is quite possible
that some—but certainly not all—of the businesses in a five-mile
radius from the Aliso Canyon Storage Facility are situated such
that Southern California Gas Company owed them a duty of care.
In other words, I believe some businesses in the immediate
geographic area of the gas leak could have a special dependence
on that area such that harm to them would be foreseeable to
Southern California Gas Company in a way it would not with
respect to many other businesses in the area.2 (See, e.g., Union
Oil Co. v. Oppen (9th Cir. 1974) 501 F.2d 558, 568, 570
[determining—on appeal from partial summary judgment—that

Civil Procedure section 166.1. But such invitations are not
binding, nor are they quite uncommon. (Bank of America Corp. v.
Superior Court (2011) 198 Cal.App.4th 862, 869, fn. 6 [Code of
Civil Procedure section 166.1 permits a trial judge to encourage
an appellate court to hear and decide a question but does not
change existing writ procedures]; see also, e.g., Farmers
Insurance Exchange v. Superior Court (2013) 218 Cal.App.4th 96,
104-105 [trial judge certifying question]; Moore v. Kaufman
(2010) 189 Cal.App.4th 604, 613 [same].)
2
      One potential example that comes to mind are food delivery
businesses (e.g., Domino’s Pizza) unlikely to deliver beyond a
limited geographical area.

                                2
companies responsible for an oil spill in the Santa Barbara
Channel area owed a duty to commercial fishermen in the area
“whose economic or personal affairs were discommoded by the oil
spill,” but not other businesses].) Indeed, there is reason to
believe plaintiff and Real Party in Interest Polonsky Family Day
Care is such a business because it would be unusually dependent
                                                                3
on customers who work or live in the vicinity of the gas leak.
Because the majority’s opinion resolves the business plaintiffs’
litigation on the demurrer record, however, it has no ability to
approach the question of duty with a scalpel, and unfortunately
resolves it instead with a meat axe. (Compare Kesner v. Superior
Court (2016) 1 Cal.5th 1132, 1140 [reversing Court of Appeal
holding that employer owed no duty of care to avoid take-home
asbestos exposure and concluding duty does extend to household
members of an employee exposed to asbestos—but not to others
who do not live in the employee’s household].)
       I would discharge this court’s alternative writ as
improvidently granted.

                             BAKER, J.

3
       Insofar as the record at this early stage does not firmly
establish this is the case, it is either (a) a problem that could be
cured by amending the complaint, or (b) an example of a duty
question that should not be fully answered until after resolution
of factual issues. (See Alcaraz v. Vece (1997) 14 Cal.4th 1149,
1162, fn. 4 [existence and scope of a defendant’s duty of care is a
legal question for a court, but trier of fact must resolve factual
issues that are logically prior to the question of duty].)

                                  3