Eminent Domain Report

Brad Kuhn was quoted extensively in the Daily Journal article “Century-Old Doctrine  Haunts Fire Litigation.” The article provides an overview of how developments in inverse condemnation that occurred in 2019 pose numerous questions for 2020 in California. 

In the article, Brad commented on inverse condemnation—a legal provision under California state law that holds if a power company’s equipment starts a fire, it is responsible for paying property damages, even if they are not found to have been negligent.

He stated that the “inverse doctrine in and of itself is problematic because it doesn’t involve any concept of foreseeability or fault.” And that “in some respects, you have potentially no boundaries of liability limitations. For example, a tree branch somehow breaks off, flies in the wind and hits an electrical line belonging to a [California  Power Company], and now that [Company] is strictly liable and has to pay for damages by something as small as that? It’s somewhat crazy to me.”

According to Brad, when the doctrine is applied to investor-owned utilities, it gets even more complicated. “It’s a different burden,” he said, and that’s why you see these companies file for bankruptcy. Investor-owned companies are “in difficult positions, and they also fight an uphill battle anytime they attempt to pass through costs. They get push back from consumer advocacy groups.”

To highlight further complications with the doctrine, Brad added that companies have argued in court that if the CPUC won’t allow them to pass wildfire costs to customers “they are essentially preventing the whole concept of inverse condemnation from playing out the way it was supposed to.”  He explained, “The underlying premise of inverse condemnation is to take the costs of a public project or improvement and spread it among everyone.” 

While he doesn’t believe CPUC’s denial of a rate pass-through is an unlawful taking, “it’s just an interpretation of the purpose of inverse condemnation and how you can make the doctrine match with the CPUC’s prudent manager standard,” he said.

“How do those two concepts align? The CPUC has already stated those two don’t work very well, but it’s up to the Legislature to deal with it and fix it.”