According to a report by Bloomberg on Wednesday, U.S. Bankruptcy Judge Denis Montali took the side of wildfire victims and said that PG&E is subject to the Inverse Condemnation doctrine. Therefore, California is holding the utility liable for covering the costs of fire damages caused by their faulty equipment.
“The California Constitution provides that private property may be taken or damaged for a public use as long as just compensation is paid to the owner. This section does not mention liable parties, cost recovery, or socialization of costs. In short, the California Constitution imposes strict liability in favor of the owner of property that has been taken or damaged through a public use or purpose and does not concern itself with the rights and liabilities of (who) or what did the damage.” Bankruptcy Judge Denis Montali
What is Inverse Condemnation?
To quote from Dictionary.law.com:
“Inverse Condemnation: n. the taking of property by a government agency which so greatly damages the use of a parcel of real property that it is the equivalent of condemnation of the entire property. Thus the owner claims he/she is entitled to payment for the loss of the property (in whole or in part) under the constitutional right to compensation for condemnation of property under the government’s eminent domain right. Example: the city of Los Angeles widens a boulevard and thereby takes the entire parking lot of Bennison’s Busy Bee Market. The city offers to pay for the lot, but Bennison claims the market has lost all its business since no one can park and wants the value of the entire parcel, including the market building.” – Dictionary.Law.com
In layman terms, Inverse Condemnation refers to the government taking property and failing to pay the compensation required by the 5th Amendment to the Constitution.
What Does Inverse Condemnation Mean for PG&E?
In short, this Inverse Condemnation ruling means that PG&E will not be able to compensate for their losses due to wildfire damage by passing the burden to their users. In other words, PG&E cannot raise rates to compensate for losses due to their negligence. The utility will, most likely, have to cover liability and damage claims out of their own, considerably deep, pocket.
What Does PG&E Have to Say About It?
PG&E stands to lose nearly everything if Inverse Condemnation rulings pass the California Supreme Court. They fervently tried to convince the judge that the doctrine should not apply in this case because shareholders control PG&E and not the government. However, there is precedent from as early as 1894 that shows that Inverse Condemnation applies here.
PG&E seems to think that the Inverse Condemnation ruling shows just how truly “flawed” the legal doctrine is and that it could potentially be bad for their “customers, our economy, and our state.” However, PG&E seemed to back-peddle on their claim with the following quote from their statement on the proceedings:
“While we are disappointed in today’s ruling, we understand and appreciate that there are diverse opinions on this subject. We look forward to being engaged in discussions on these important issues to all Californians.” – PG&E statement
What Do the Victims and Their Representation Have to Say?
Robert Julian, a lawyer for the committee of fire victims in California, says that the decision was “undoubtedly correct.” In fact, he’s quoted as saying the following:
“Once again, we would simply like PG&E to acknowledge the obvious: that it caused the fires and that it’s liable for the damages, instead of trying to throw up every single roadblock it can think of in order to delay this bankruptcy case and delay the victims from recovering the money so that they can rebuild their homes and get their lives back together again.” – Attorney Robert Julian