In City of Oroville v. Superior Court (2019) 2019 Cal.LEXIS 5950, the California Supreme Court held that, to succeed on an inverse condemnation claim, “the damage to private property must be substantially caused by an inherent risk presented by the deliberate design, construction, or maintenance of the public improvement.”
Background
The City of Oroville (City) adopted the Uniform Plumbing Code which requires property owners to install backwater valves on private sewer lateral lines leading from the City’s main sewer line in order to prevent damage from the City’s gravity-driven sewage system. When WGS Dental Complex (WGS) acquired a parcel of property, it completed construction of a building on it, but failed to install a backwater valve. In 2009, plant roots blocked the sewage system resulting in raw sewage discharging from sinks, toilets, and drains in the building. Expert testimony showed that the sewage backup would not have happened if a fully functional backwater valve had been installed. WGS and its insurance carrier sued the City.
The trial court, relying on California State Automobile Assn. v. City of Palo Alto (2006) 138 Cal.App.4th 474 (Palo Alto), held it was constrained to hold the City liable in inverse condemnation because one of the causes of damage was root blockage, described in Palo Alto as an inherent risk of sewer operation. The Third District Court of Appeal affirmed and held that in order for the City to absolve itself of liability, it would need to prove that non-root forces alone produced the injury, which it did not do.
California Supreme Court Holding
The Supreme Court reversed and held in favor of the City. The Court found the lower courts were incorrect to essentially impose strict liability on the City, stating:
Public entities are not strictly or otherwise automatically liable for any conceivable damage bearing some kind of connection, however remote, to a public improvement. To succeed on an inverse condemnation action, a plaintiff must ordinarily show—assuming the public entity made reasonable assumptions about the public improvement in question—that the damage to private property was substantially caused by inherent risks associated with the design, construction, or maintenance of the public improvement.
Instead, an inverse condemnation claim involves a two-part test: (1) did the public improvement, as deliberately designed, constructed, and maintained, substantially cause the damage; and (2) were the inherent risks of the public improvement’s design, construction, or maintenance the cause of the damage?
The Court held “substantial causation” is where the nexus between the risks of the system’s design and the harm caused was “sufficiently robust to create a pronounced likelihood of damage.” The Court stated this nexus test is applicable regardless of if there are several concurrent causes. The Court held that the appeals court failed to address whether the risks of the sewer design were the substantial cause of the damage.
The Court further held “inherent risks” are where the injury to the property arises from the dangers of the public improvement as deliberately designed, constructed, or maintained. The Court reasoned that such a limitation “avoids open-ended liability by protecting public entities from liability for private property damage that is arguably connected to a public improvement but is not the result of the improvement’s inherent risks.” The Court specifically stated that inherent risks include a circumstance where a public entity chooses to use a lower cost plan in creating a public improvement or where a public entity chooses not to routinely maintain a public improvement. The Court reasoned “if the public entity makes a policy choice to benefit from the cost savings … inverse condemnation principles command the corollary obligation to pay for the damages caused when the risks attending these cost saving measures materialize.”
The Court reversed and remanded for further proceedings.
Key Takeaways
This opinion demonstrates that reviewing courts must undergo robust review in inverse condemnation cases rather than imposing strict liability or its equivalent on public entities. When planning infrastructure projects, public agencies should consider whether the design could cause substantial damage in the future to private properties, and ensure regular maintenance of said infrastructure.
Questions
If you have any questions regarding this Legal Alert, please contact the following attorneys from our office, or the attorney with whom you typically consult.
Mona Ebrahimi
mebrahimi@kmtg.com | 916.321.4597
Amara Harrell
aharrell@kmtg.com | 916.321.4598
Olivia Clark
oclark@kmtg.com | 916.321.4290