Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Cal. App.: California court could hear UCL claim against public utility, (Jan 23, 2015)

By Dan Selcke, J.D.

A California trial court had jurisdiction to hear an Unfair Competition Law (UCL) claim brought by a homeowner whose house had been burglarized as a result of a public utility’s failure to safeguard the means of access to its on-site electric stations, a California appellate court held, despite the utility’s arguments that doing so would violate a statute forbidding courts from reviewing rules made by the California Public Utilities Commission (PUC). The PUC had adopted a rule allowing the utility to choose how property owners must protect access to its electric stations, but granting relief to the plaintiff would not interfere with the PUC’s exercise of its authority (Guerra v. San Diego Gas & Electric Company, January 20, 2015, McDonald, J.).

San Diego Gas & Electric (SDG&E) is a public utility. Rule 16, which had been adopted by the California PUC, permitted the utility to access customers’ premises for the purpose of furnishing electric services. Under the rule, property owners who located SDG&E facilities behind a locked gate or door had to pay for and install the locking device approved by the utility. In this case, SDG&E selected the Schlage VTQP Quad Key Section system (Keyways) as the device its customers must use and issued keys capable of unlocking the device to its employees.

Guerra, the plaintiff, lived at a condominium complex that used Keyways. The complex was burglarized on several occasions by people who gained access by using Keyways keys. SDG&E did not keep track of who it gave keys to, how many it gave out, and whether any were lost. Thus, it could not help the police track down the burglars.

Guerra brought a putative class action against SDG&E, alleging that it distributed keys without instituting reasonable policies and procedures to track and safeguard them. SDG&E argued that the court did not have jurisdiction to hear the case under Public Utilities Code Section 1759, which prohibited trial courts from reviewing decisions and rules made by the PUC. The court agreed and granted SDG&E’s motion for judgment on the pleadings. Guerra appealed.

Reach of Sec. 1759. Sec. 1759 conflicted with Public Utilities Code Section 2106, which provided a private right of action against utilities for unlawful activities. Courts had read this tension to mean that Sec. 1769’s prohibition on reviewing PUC decisions and rules was not absolute, and the California Supreme Court had developed a three-part test to determine when an action was barred by Sec. 1769. San Diego Gas & Electric Co. v. Superior Court (Covalt), 13 Cal.4th 893 (1996).

There was no question that the situation here met the first part of the Covalt test—the PUC definitely had the authority to adopt a regulatory policy governing service extensions and access to property. The appellate court then considered the other two questions making up the test: whether the PUC had actually adopted a policy governing the allegedly unlawful conduct of which Guerra was accusing SDG&E, and whether a judgment granting Guerra his requested relief would hinder or interfere with the PUC’s exercise of its authority. The answer to both of these questions was no.

It was true that the PUC had exercised its authority by adopting Rule 16, which guaranteed that SDG&E would have access to a property owner’s premises, in part by allowing the utility to designate which type of locking device that owner must install. However, this policy was not the kind of broad and continuing supervisory or regulatory program with which the second part of the Covalt test was concerned. It was a single rule, and granting Guerra the relief he wanted would neither require the PUC to change it nor preclude SDG&E from selecting a locking device. In short, Guerra was not challenging the PUC’s decision to allow SDG&E to select which locking device its customers must install, but only the manner in which SDG&E chose to safeguard the devices after it had made a selection. This was not the kind of action barred by Sec. 1769.

Judicial abstention. SDG&E also argued that the appellate court should abstain from making a decision as to the utility’s ability to choose locking devices for its customers, as doing so would require it to assume the function of the PUC. The court rejected this argument, noting again that Guerra was only challenging the way SDG&E had implemented the PUC’s grant of authority, not that the PUC had that authority.

Superseding causes and conclusion. The utility also argued that the burglaries represented intervening criminal conduct and were the superseding cause of any injury Guerra suffered. SDG&E, therefore, was cut off from liability, the utility asserted. This argument failed, since Guerra alleged that SDG&E’s failure to safeguard the keys increased the risk of criminal activity such as burglary. According to Guerra, SDG&E’s negligence was the direct cause of his injury, and no superseding cause could come between it and liability. Having disposed with all of SDG&E’s arguments, the appellate court held that the trial court had erred in granting its motion for judgment on the pleadings.

The case number is: D065265 (Super. Ct. No. 37-2012-00103728)

Attorneys: Timothy Gordon Blood (Blood, Hurst & O'Reardon LLP), and John William Davis (Law Office John W. Davis) for Marc Guerra. Michael Jesse Perez (Perez & Wilson) for San Diego Gas & Electric Co.

Companies: San Diego Gas & Electric Co.

Cases: StateUnfairTradePractices CaliforniaNews