Check out this story by JD Morris ("PG&E renews push to avoid strict liability for 2017, 2018 fires") in the San Francisco Chronicle, about the recent (and ongoing) California wildfires, and the issue of what has been called the "unusual," "unique," and "so-called" doctrine of inverse condemnation in that state's courts.
Recall that the theory is that when private property is damaged by a wildfire and a utility's equipment is a substantial cause (or in the words of a recent California Supreme Court opinion, there's a "robust nexus" between the damage and some public purpose improvement), that is a taking or damaging under the California Constitution. Like all takings and damagings resulting in the obligation to provide just compensation, traditional tort notions of fault and negligence don't play a role. As the U.S. Supreme Court noted in Armstrong v. United States, 364 U.S. 40 (1960), the point of takings liability is to ensure that the costs of public goods are not placed on a single property owner, but are absorbed by the benefited public:
The Fifth Amendment's guarantee that private property shall not be taken for a public use without just compensation was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.
Id. at 49.
In cases where the inverse condemnor is a government entity with the taxation power, the condemnor may distribute the judgment's costs automatically. But what about where the taker or damager does not have the power to do so automatically? In the Pacific Gas & Electric bankruptcy case, the court has been asked in this brief to conclude that the utility cannot be subject to California's brand of inverse condemnation liability because without the ability to spread the cost of any such judgments over the ratepayer base automatically, holding it liable is itself a taking.
Get that? California's takings doctrine is a taking. If this sounds familiar to you, you are correct: the very same argument was raised by another California utility in a (denied) cert petition. Here's what we thought of the argument:
PG&E believes that subjecting it to inverse condemnation is a violation of its rights under the takings and due process clauses of the U.S. Constitution’s Fifth and Fourteenth amendments.
If PG&E wins, other California judges who receive utility-related inverse condemnation claims in the future could refer to Montali’s reasoning, but “they would be free to ignore it,” said Jared Ellias, a law professor at UC Hastings College of the Law who has been following the case.
“It would be like a random lightning strike had just hit this particular group” of fire victims, he said. “For any subsequent fires that occur after the Chapter 11 case ends, those fire victims would be able to sue on an inverse condemnation theory, and Judge Montali’s ruling here wouldn’t forestall those lawsuits.”
But PG&E is “unlikely to prevail,” said Robert Thomas, a lawyer and inverse condemnation expert who reviewed the company’s Bankruptcy Court filing.
“This is a pretty momentous claim: They’re saying that California’s inverse liability scheme has to allow automatic repayment,” said Thomas, who writes on a website called Inversecondemnation.com. “This is bankruptcy right now. I really don’t think a court is going to be all too eager to resolve that one just yet.”
Ellias agreed. He said it is “deeply unlikely” that Montali would choose to disadvantage one particular group of plaintiffs.
Notably missing in the argument is any discussion of the utility's delegated power of eminent domain. Apparently, it is still willing to exercise the power. And with great power -- eminent domain -- comes great responsibility -- being also liable for inverse condemnation. Give that up, and then let's talk. And, we can also think of government agencies which are also subject to inverse condemnation liability that do not have the automatic power to tap into taxes. We don't think that holding them liable for inverse condemnation is a taking simply because they need to ask another to spread the cost of an inverse judgment.
Stay tuned. The hearing on PG&E's request is set for November 19, 2019.
Joint Brief of Debtors and Official Comm. of Unsecured Creditors re Inverse Condemnation, In re PG&E Corp.,...
