Trial Magazine

In November 2018, two California wildfires caused devastating damage. The Woolsey Fire in southern California destroyed 1,500 structures, damaged another 341, and killed three people.¹ In northern California, the Camp Fire—now the most destructive and deadliest wildfire in the state’s history—destroyed 13,972 homes, 528 commercial buildings, and 4,293 other structures; as of Dec. 3, the fire had killed 85 people.²

Both of these fires are suspected to have been caused by investor-owned utilities, as are a series of fires from 2017.

In October 2017, the North Bay Fires swept through several counties in California, forcing residents to flee. More than 8,400 homes and buildings were destroyed, at least 43 people died, and the fires caused at least $13 billion in property damage.³ 

Two months later, the Thomas Fire covered more than 281,000 acres across Ventura and Santa Barbara counties in southern California.⁴ It caused massive vegetation loss that later led to a devastating mudslide, the Montecito Debris Flow, which killed at least 21 people. It is estimated that the Thomas Fire, which destroyed more than 1,000 structures, caused more than $2 billion in property and economic losses.⁶

Thousands of claims have been filed in California against investor-owned utility companies Pacific Gas & Electric (PG&E) and Southern California Edison (SCE) in two separate Judicial Council Coordination Proceedings (JCCPs).⁷ Injured people, property owners, loved ones of those killed, businesses, farmers, local governments, and insurance companies have legal claims against these companies for creating the unsafe conditions that caused the fires, resulting in personal injuries and property damage. Focusing on this litigation, this article will address claims available under California law, and attorneys handling wildfire cases in other states should check the laws of their different jurisdictions.

Liability Against Investor-Owned Utilities

PG&E and SCE are investor-owned utilities, which are private, for-profit corporations that are publicly traded. The three largest utilities in California—PG&E, SCE, and San Diego Gas & Electric Company (SDG&E)—are investor-owned utilities.⁸ While publicly owned utilities, such as the large Los Angeles Department of Water and Power, still serve some Californians, the overwhelming majority of the state’s residents and businesses are served by the big three investor-owned utilities.⁹ Investor-owned utilities are regulated by the California Public Utilities Commission and have been granted broad quasi-governmental powers, including eminent domain powers.¹⁰

The complaints state that the utilities' equipment caused the fires and that the utilities failed to exercise reasonable care in the ownership, design, operation, and maintenance of their equipment.

The plaintiffs in the two JCCPs collectively allege that PG&E and SCE are liable under theories of inverse condemnation, negligence, nuisance, trespass, and other statutory causes of action. The complaints are replete with detailed allegations of management failures that led to these destructive and deadly wildfires. They state that the utilities’ equipment caused the fires—as a result of poor vegetation management, inadequate wind and recloser policies,¹¹ faulty transformers, poorly designed power lines, dilapidated electrical poles, or other equipment failures—and that the utilities failed to exercise reasonable care in the ownership, design, operation, and maintenance of their equipment.¹² Other allegations include the utilities’ failure to power down certain portions of the electrical grid during predictable high-wind events, despite knowing that certain wind events can cause falling tree limbs and slapping lines.

A history of negligence. PG&E has a history of negligent and even felonious conduct. For example, after the 1994 Trauner Fire (which investigators determined was the result of power lines contacting tree limbs that should have been maintained) the California Public Utilities Commission found that PG&E diverted $77.6 million from its tree trimming budget and underspent its facilities maintenance budget by $495 million.¹³ And with more than 16 million customers in California, PG&E has reaped an annual average net profit of more than $1 billion over the past 10 years.¹⁴ In 2010, PG&E was also convicted of six felonies for disregarding safety standards in the San Bruno explosion, which killed eight people.¹⁵

For over a year after the North Bay Fires, Cal Fire—the California Department of Forestry and Fire Protection, which serves as the state’s wildland fire protection agency and lead cause and origin investigator—has investigated 18 individual ignition points in the North Bay alone. In 2018, Cal Fire released cause and origin conclusions for 17 of the 18 fires, concluding that PG&E’s equipment was the cause and origin of all.¹⁶

Cal Fire referred 11 of those fires to local district attorneys for the utility’s failure to maintain vegetation clearance distances in violation of California Public Resources Code §4293.¹⁷

Inverse condemnation. The California state government has awarded investor-owned utilities broad powers, including eminent domain power. Despite this extensive power, when private property is damaged, responsible utilities may be held liable under theories such as inverse condemnation. Grounded in the eminent domain doctrine, inverse condemnation is a property owner’s right to just compensation when the government damages or destroys private property.¹⁸ The Fifth Amendment to the U.S. Constitution states that, “nor shall private property be taken for public use, without just compensation,” and the California Constitution takes eminent domain protection one step further, stating: “Private property may be taken or damaged for public use only when just compensation, ascertained by a jury unless waived, has first been paid to, or into court for, the owner.”¹⁹ By including the word “damaged,” the California Constitution memorializes inverse condemnation rights. Notably, California’s Constitution also protects the right to put the just compensation question before a jury.

Investor-owned utilities are liable under inverse condemnation when they damage or destroy property while exercising their condemnation and eminent domain powers.²⁰ This is true regardless of whether the conduct is negligent. California courts have repeatedly upheld the application of inverse condemnation against investor-owned utilities, finding that “condemning private property for the transmission of electrical power is a public use.”²¹ California courts have also held that public utilities are more like government entities than private businesses due to the powers granted to them by the state and state direction of the regulatory scheme.²²

Investor-owned utilities have broad powers to design, construct, maintain, and operate their massive electrical grids. When a utility chooses to design the physical structure or operation of a system and when the intended use and design of that system causes a fire, inverse condemnation applies. California courts continually and regularly recognize this important constitutional property right because it ensures a proper balance of power and rights between property owners and the government, as originally contemplated in the U.S. and California Constitutions.

Other claims. Other causes of action available against the utilities and filed by plaintiffs in the JCCPs include nuisance, trespass, negligence, and others under the California Health and Safety and Public Utilities Codes, including Public Utilities Code §2106, which allows exemplary damages.²³

Proving Cause and Origin

Proving that utilities were the cause and origin of wildfires requires evaluating several factors, including the general and specific areas of origin.²⁴ ­Understanding the general cause and origin of a fire requires learning about wind direction and speed, geographic topography, ­available ignition points and fuel, witness accounts, physical evidence, 911 dispatch calls, burn patterns, and weather conditions. When electrical utility equipment is suspected as the cause, understanding the specific cause and origin requires a close inspection of electrical poles, transmission or power lines, transformers, insulators, guy wires, other electrical equipment, and often trees or branches.

A wildfire investigator can be used for the general area of origin, but specialty experts may be needed for the specific cause and origin, such as metallurgists, electrical engineers, arborists, or highly trained wildfire investigators. Hydrology and hydrogeology experts are also required to investigate any post-fire mudslides or “debris flow,” which can occur when later rain events are amplified by loss of vegetation and hydrophobic soils.

The Legislative Fight

In 2018, the investor-owned utilities, led by PG&E, tried to convince the California legislature that imposing inverse condemnation against them after the ­2017 fire season would lead to their bankruptcy. In late July, Gov. Jerry Brown released a proposal that would have effectively eliminated California’s constitutional inverse condemnation protection. But after hearings and testimony, the resulting bill, S.B. 901, which Brown signed into law in September, included no changes to inverse condemnation or the liability standard.²⁵

Rather than fighting to rob wildfire victims of their constitutional property rights, these investor-owned utilities should be investing their guaranteed profits into safety measures. Until they improve safety policies, including vegetation management and other measures, they will not help prevent future ­wildfires.

John Fiske is a shareholder at Baron & Budd in San Diego, Calif., and Scott Summy is a shareholder in Dallas. They can be reached at jfiske@baronbudd.com and ssummy@baronbudd.com.

Notes

1. Cal Fire, Woolsey Fire (Nov. 21, 2018), https://tinyurl.com/y94ekdxv.
2. Emily Sullivan, 88 Dead, 158 Still Unaccounted For After Camp Fire Contained, NPR (Nov. 27, 2018), https://tinyurl.com/ycpkcwpt; Kristin Lam, Death Toll Drops to 85 at Camp Fire; 11 People Remain Missing, USA Today (Dec. 3, 2018), https://tinyurl.com/y8b3sypf. Editor’s Note: When this article went to print, lawsuits had been filed against investor-owned utilities alleging they were responsible for starting the Camp and Woolsey Fires. 
3. Priya Krishnakumar, Joe Fox, Chris Keller, Here’s Where More Than 7,500 Buildings Were Destroyed and Damaged in California’s Wine Country Fires, L.A. Times (Oct. 23, 2017), www.latimes.com/projects/la- me-northern-california-fires-structures/; Alex Dobuzinskis, Death Toll From California Blazes Rises to 43, After Teen Dies, Reuters (Oct. 30, 2017), https://tinyurl.com/yd9k5bt; Artemis, California Wildfire Industry Losses Put at $13.2bn by Aon Benfield (Jan. 25, 2018), https://tinyurl.com/y8o5xa57.
4. Cal Fire, Thomas Fire Incident Information (Mar. 28, 2018), www.fire.ca.gov/current_incidents/incidentdetails/Index/1922.
5. Jack Dolan, Search Teams Find 21st Victim of Montecito Mudslide, L.A. Times (Jan. 21, 2018), www.latimes.com/local/lanow/la-me-montecito-death-toll-20180121-story.html.
6. Thomas Fire Incident, supra note 4; Artemis, supra note 3.
7. California North Bay Fire Cases, Judicial Council Coordination Proceeding No. 4955 (Cal. Super. Ct. San Francisco Cnty. Nov. 20, 2017); Southern California Fire Cases, Judicial Council Coordination Proceeding No. 4965 (Cal. Super. Ct. Los Angeles Cnty. April 16, 2018).
8. See California Public Utilities Commission Approves Single Largest Investment in EV Infrastructure, Sierra Club (May 31, 2018), https://tinyurl.com/ya2zga3x.
9. Of California’s approximately 40 million residents, the big three provide gas and electric service to more than 34 million people. Pac. Gas & Elec., Company Profile (2018), www.pge.com/en_US/about-pge/company-information/profile/profile.page; S. Cal. Edison, Who We Are (2018), www.sce.com/wps/portal/home/about-us/who-we-are; San Diego Gas & Elec., Our Company (2018), www.sdge.com/more-information/our-company.
10. See Cal. Pub. Util. Comm’n, Electric and Natural Gas (2018), www.cpuc.ca.gov/energy/.
11. Reclosers, or automatic circuit reclosers, act as circuit breakers for high voltage electrical distribution networks. Certain recloser policies or protocol can be used to decide if, when, and how electrical distribution and transmission lines are re-energized.
12. See, e.g., Public Entity Master Complaint, California North Bay Fire Cases, JCCP No. 4955 (Mar. 12, 2018).
13. Investigation on the Commission’s Own Motion Into the Operations and Practices of the Pacific Gas and Electric Company in Connection With Public Utilities Code Section 451, General Order 95, and Other Applicable Standards Governing Tree-Line Clearances, No. 99-07-029 (Cal. Pub. Util. Comm’n July 20, 1999), https://tinyurl.com/y7xpkk2h; Kenneth Howe et al., Tree Trimming Pact Lowers PG&E Fine to $29 Million, SF Gate (Apr. 3, 1999), https://tinyurl.com/yaaugfxa.
14. Source available with authors.
15. United States v. Pac. Gas & Elec. Co., 2016 WL 6804575 (N.D. Cal. Nov. 17, 2016); George Avalos, PG&E Gets Maximum Sentence for San Bruno Crimes, Mercury News (Jan. 26, 2017), www.mercurynews.com/2017/01/26/pge-gets-maximum- sentence-for-san-bruno-crimes/.
16. Cal Fire, Cal Fire Investigators Determine the Cause of the Cascade Fire (Oct. 9, 2018),http://calfire.ca.gov/communications/downloads/newsreleases/2018/Cascade% 20Fire%20Cause%20Release.pdf; Cal Fire, Cal Fire Investigators Determine Causes of 12 Wildfires in Mendocino, Humboldt, Butte, Sonoma, Lake, and Napa Counties (June 8, 2018), http://calfire.ca.gov/communications/downloads/news releases/2018/2017_WildfireSiege_Cause.pdf; Cal Fire, Cal Fire Investigators Determine Cause of Four Wildfires in Butte and Nevada Counties (May 25, 2018), https://tinyurl.com/y7cqaj2f.
17. David R. Baker, Fight Over PG&E’s Liability in Wine Country Fires Just Beginning, S.F. Chronicle (June 9, 2018), www.sfchronicle.com/business/article/Fight-over-PG-E-s-liability-in-Wine-Country-12981642.php.
18. Belmont Cnty. Water Dist. v. State of California, 65 Cal. App. 3d 13, 19 fn. 3 (1976) (“An inverse condemnation action is an eminent domain proceeding initiated by the property owner rather than the condemner, and the principles which affect the parties’ rights in an inverse condemnation suit are the same as those in an eminent domain action.”).
19. U.S. Const. amend. V; Cal. Const. art. I, §19.
20. California Public Utilities Code §612 (1975) provides that “[a]n electrical corporation may condemn any property necessary for the construction and maintenance of its electric plant.” “Electric plant” includes electrical transmission facilities such as those at issue in the JCCPs, and “electrical corporation” includes entities “owning, controlling, operating, or managing any electric plant for compensation” within California, with the exception of those on private property not producing electricity for the sale or transmission to anyone other than tenants. Cal. Pub. Util. Code §§217, 218(a).
21. Barham v. S. Cal. Edison Co., 74 Cal. App. 4th 744, 752 (Cal. Ct. App. 1999).
22. Gay Law Students Ass’n v. Pac. Tel. & Tel. Co., 24 Cal. 3d 458, 469 (Cal. 1979). California courts focus on the nature of the service rather than the nature of the entity providing the service. See Barham, 74 Cal. App. 4th at 753; see also Marshall v. Dep’t of Water & Power of the City of Los Angeles, 219 Cal. App. 3d 1124 (Cal. Ct. App. 1990); Aetna Life & Casualty Co. v. City of Los Angeles, 170 Cal. App. 3d 865 (Cal. Ct. App. 1985).
23. Master Complaint, California North Bay Fire Cases, JCCP No. 4955.
24. For more on investigating areas of origin, see Nat’l Wildfire Coordinating Group, Guide to Wildland Fire Origin and Cause Determination (April 2016), www.nwcg.gov/sites/default/files/publications/pms412.pdf.
25. JD Supra, Governor Brown Signs SB 901, Addressing Wildfire Cost Recovery, But Ignoring Inverse Condemnation Liability (Sept. 24, 2018), www.jdsupra.com/legalnews/governor-brown-signs-sb-901-addressing-12208/.