Eugene Davis et al vs Plains Pipeline LP et al

Case Number

16CV01319

Case Type

Hearing Date / Time

Mon, 02/05/2024 - 10:00

Nature of Proceedings

Motion: Summary Judgment

Tentative Ruling

Eugene Davis etc. v. Plains Pipeline, L.P., et al. 

Case No. 16CV01319          

Hearing Date: February 5, 2024                                                        

HEARING:              Motion of Defendants for Summary Judgment or Alternatively for Summary Adjudication                              

ATTORNEYS:        For Plaintiff Eugene Davis, in his capacity as Liquidating Trustee of the Venoco Liquidating Trust: R. Paul Yetter, Timothy S. McConn, Tracy N. LeRoy, Wynn B. McCloskey, Audrey Hendricks, Luke A. Schamel, Yetter Coleman LLP; Brian E. Klein, Theresa L. Huggins, Emily Steirwalt, Waymaker LLP

                                    For Defendants Plains Pipeline, L.P., Plains All American Pipeline, L.P., Plains GP Holdings, L.P., Plains AAP, L.P., Plains All American GP LLC, and PAA GP LLC: Brad D. Brian, Henry Weissmann, Daniel B. Levin, Robyn K. Bacon, Munger, Tolles & Olson LLP; Craig S. Granet, Rimon PC

                                                           

TENTATIVE RULING:

The motion of defendants Plains Pipeline, L.P., et al., for summary judgment or alternatively for summary adjudication is granted in part and denied in part. The motion is granted to summarily adjudicate in favor of defendants that there is no merit to plaintiff’s claim for punitive damages. In all other respects, the motion is denied.

Background:

(1)       Procedural History

Plaintiff Venoco, LLC, filed its original complaint in this action on April 1, 2016. Venoco, LLC, is the subject of a bankruptcy proceeding in the United States Bankruptcy Court for the District of Delaware (Bankruptcy Court). The Bankruptcy Court approved a stipulation for relief from the automatic bankruptcy stay to permit Venoco, LLC, to prosecute this action (now by plaintiff Eugene Davis in his capacity as Liquidating Trustee of the Venoco Liquidating Trust (plaintiff or Venoco)).

Following removal to, proceedings in, and remand from the United States District Court, on December 14, 2022, the parties stipulated to, and the court entered as its order, leave for Venoco to file a fourth amended complaint. Venoco’s operative pleading, the fourth amended complaint (4AC), was separately filed on January 27, 2023. The 4AC asserts four causes of action: (1) negligence/ gross negligence; (2) willful misconduct; (3) intentional interference with contractual relations; and (4) interference with prospective economic advantage.

On February 28, 2023, defendants filed their answer to the 4AC, generally denying the allegations thereof and asserting 35 affirmative defenses.

On October 31, 2023, defendants filed this motion for summary judgment or, alternatively, for summary adjudication. In its motion, defendants assert that summary judgment is proper as to all causes of action of the 4AC under five separate legal theories and, alternatively, summary adjudication is proper as to plaintiff’s claim for punitive damages. The motion is opposed by plaintiff.

Trial is now set for March 11, 2024.

(2)       Facts Asserted in Motion and Opposition

On October 13, 2011, representatives of Plains Pipeline, L.P., and Ellwood Pipeline, Inc., (Ellwood) executed a contract titled the Pipeline Connection Agreement. (Plaintiff’s Response Separate Statement [PSS], undisputed facts 1, 31, 50.) The Pipeline Connection Agreement was negotiated primarily with Ron Nagatani, a Venoco employee responsible for negotiating Venoco’s sales agreements. (PSS, facts 12, 61 [undisputed on this point].) At times before the Pipeline Connection Agreement was executed, the counterparty to Plains was Venoco, which was replaced with Ellwood. (PSS, facts 13, 62 [undisputed on this point].) The Pipeline Connection Agreement was reviewed by Venoco. (PSS, facts 14, 63 [undisputed on this point].) The Pipeline Connection Agreement was signed by Timothy Marquez who as at the time both the CEO and Chairman of the Board of Directors of Venoco and CEO of Ellwood. (PSS, facts 15, 64 & responses thereto.)

Ellwood Pipeline, Inc., was a wholly-owned subsidiary of Venoco, Inc. (PSS, undisputed facts 30, 71.) Ellwood had no employees. (PSS, undisputed fact 72.) According to Plains, Ellwood was run by Venoco employees. (DSS, fact 73 & evidence cited.) According to Venoco, Venoco employees performed work for Ellwood pursuant to a contract under which Ellwood was charged overhead. (Hendricks decl., exhibit 24.) Ellwood had a separate board of directors where the only overlapping director with Venoco was Tim Marquez. (Schulman depo., at pp. 291-293.) Ellwood and Pipeline had the same mailing address and corporate address. (PSS undisputed fact 74.) Ellwood owned Line 96. (PSS, undisputed fact 75.)

Prior to 2012, oil produced at Platform Holly, an offshore oil platform, was shipped by barge for delivery. (PSS, facts 2, 51 [undisputed on this point].) At that time, no oil was shipped in Line 901, an oil pipeline. (PSS, undisputed facts 3, 52.) By connecting a pipeline to Line 901, oil produced at Platform Holly could be transported through Line 901. (PSS, facts 4, 53 [undisputed on this point].) Prior to the Pipeline Connection Agreement, Ellwood could not connect to Line 901 and oil from Platform Holly could not flow into Line 901. (PSS fact 18 [undisputed on this point].)

The Pipeline Connection Agreement includes the following provisions:

“WHEREAS, Plains owns and operates a pipeline known as the All American Pipeline in Santa Barbara County, California (the ‘Pipeline’);

“WHEREAS, Venoco, Inc. owns and operates the Ellwood Onshore Facility in Santa Barbara County (the ‘Venoco Facility’);

“WHEREAS, [Ellwood Pipeline, Inc. (EPI or Ellwood)] desires to install meters and pumps at the Venoco facility and connect the Venoco Facility to the Pipeline via a six inch (6") connecting pipeline (the ‘EPI Ellwood Pipeline’) to be constructed by EPI, an insulated flange gasket (the ‘Insulating Flange’), valve, and other necessary appurtenances (the valve and appurtenances are referred to collectively as, the ‘Connection’) for the purpose of delivering crude oil to the Pipeline whose specifications must be acceptable to Plains and comply with the applicable Plains tariff;

“WHEREAS, Plains, pursuant to the terms of this Agreement, is willing to permit EPI to connect to the Pipeline ... .” (PSS, undisputed facts 5, 32, 54 [Pipeline Connection Agreement, recitals].)

“Unless otherwise advised by Plains, EPI shall have access to deliver nominated volumes of crude oil to the Pipeline.” (PSS, undisputed facts 20, 66 [Pipeline Connection Agreement, ¶ 3(c)].)

“Shut-In Rights. Each Party shall have the right to shut-in the Connection at any time a Party deems it appropriate in order to protect persons, property, the common stream, or the environment. Each Party will use reasonable efforts to give the other Party at least twenty-four (24) hour advance written notice of a shut-in, except in the case of an emergency when either Party may shut down immediately, whereby the Party will use reasonable efforts to notify the other Party prior to any such shut-in. If [Ellwood] causes Plains to shut-in the Connection, [Ellwood] shall be liable to Plains for any cost or damage incurred as a result of such shut-in. The Connection shall be reactivated as soon as any risks to persons, property, or the environment are remedied.” (PSS, undisputed facts 6, 33, 55 [Pipeline Connection Agreement, ¶ 4].)

“For purposes of this agreement, ‘affiliate’ shall mean, with respect to any relevant person, any other person that directly or indirectly controls, is controlled by, or is under common control with, such relevant person in question. As used herein, the term ‘control’ (including its derivatives and similar terms) means owning, directly or indirectly, 50% or more of the interest or voting control in any such relevant person.” (PSS, undisputed facts 29 [Pipeline Connection Agreement, ¶ 5(F)], capitalization altered.)

“As between the parties hereto, neither party shall be liable under any circumstances to the other party for special, indirect, punitive, incidental, exemplary or consequential damages resulting from or arising out of this agreement, including, without limitation, loss of profit or business interruption, loss of or deferral of crude oil, and/or the interruption of metering, receiving or transporting black oil products or crude oil, however the same may be caused, whether by the sole, joint or concurrent negligence, fault or liability without fault of any party, their contractors or sub-contractors.” (PSS, undisputed facts 8, 35, 57 [Pipeline Connection Agreement, ¶ 5(I)], capitalization altered.)

“Neither Party shall be liable to the other for any loss, damage or delay or nonperformance caused in whole or in part by an Act of God, quarantine, authority of law, strike, riot, fire, flood, storm, earthquake, explosion, sabotage, insurrection, rebellion, war or act of the public enemy, or any order or necessity of the government of the United States, or for any other similar cause not (i) due to the negligence of, or (ii) reasonably within the control of, the Party claiming protection of this Force Majeure provision other than the obligation to make payments then due or becoming due with respect to performance prior to the event.” (PSS, additional fact 28 [Pipeline Connection Agreement, ¶ 8(a)].)

“Succession and Assignment of Rights. Any company which shall succeed by purchase, merger, or consolidation to title to the properties, substantially as an entirety, of EPI, or Plains or their Affiliates, as the case may be, shall be entitled to the rights and shall be subject to the obligations of its predecessor in title under this Agreement. Each of the Parties may also freely assign any of its rights and obligations hereunder to a company or companies with which it is affiliated, but otherwise no assignment of the Agreement or any of the rights or obligations hereunder shall be made unless there first shall have been obtained the consent thereto in writing of the other Party, which consent shall not be unreasonably withheld, delayed or conditioned. Subject only to the foregoing and except as may be specifically provided otherwise by another term or provision of this Agreement, all rights contained, expressed or implied in this Agreement are for the benefit of the Parties to this Agreement. No such rights will inure to the benefit of any third party, including without limitation, any obligee of any indebtedness of either Party to this Agreement.” (PSS, undisputed facts 28 [Pipeline Connection Agreement, ¶ 18].)

Beginning in 2012, Venoco delivered oil produced at Platform Holly to the Ellwood Onshore Facility (EOF). (PSS, facts 16, 39, 65 [undisputed on this point].) Venoco received payment from Phillips 66 for oil it delivered into Line 96, which was transported through the Line 96 connection to Plains Line 901. (PSS, fact 17 [undisputed on this point].) In 2015, Ellwood had authority to deliver oil produced by Venoco at Platform Holly into Line 901. (PSS, fact 41; Pipeline Connection Agreement, ¶ 3(c).) According to Venoco, beginning in 2012, Phillips 66 took title to the oil before it flowed into Line 96 and owned the oil while it was transported on Ellwood’s Line 96 and on Line 901. (PSS, response to facts 17, 41 & evidence cited.)

In 2015, Ellwood delivered oil produced by Venoco at Platform Holly into Line 901 through the connection established by the Pipeline Connection Agreement. (PSS, undisputed fact 42; see also PSS fact 40 & response.)

In 2015, Plains was a common carrier engaged in interstate transportation of oil through Line 901, subject to federal regulation. (PSS, undisputed facts 77, 83.) In 2015, Plains transported oil through Line 901 pursuant to a tariff submitted to the Federal Regulatory Commission (FERC Tariff). (PSS, facts 21, 43, 78, 84 [undisputed on this point].) In order to transport oil through Line 901, prospective shippers were required to submit a nomination each month pursuant to Plains’ FERC Tariff. (PSS, undisputed facts 22, 44, 85.) Plains’ FERC Tariff did not include any terms that would allow a shipper to reserve capacity or arrange for shipments in future months. (PSS, undisputed facts 23, 45, 79, 86.)

According to Plains, Plains did not execute any agreement with any producer or

shipper under which Plains committed to continue transporting oil on its pipeline for any period. (DSS, facts 24, 46, 87; Herbert decl., ¶ 7.) According to Venoco, in 1993, defendants’ predecessor executed a contract with Exxon Company USA (Exxon) wherein Exxon committed to transport all production from its Santa Inez unit through the AAPL and Plains agreed to rates for that transportation. (PSS, response to facts 24, 46; Herbert depo., pp. 173-174 [“Q. … So if I’m understanding correctly, there is a letter agreement between Plains and Exxon; and then your recollection is that the letter agreement, Exxon agreed to commit oil from their Santa Ynez unit to the AAPL; is that correct? [¶] A. Yes, and – [¶] Q. And then Plains for its part would do what in exchange? [¶] A. File tariffs that were inside – file commercial rates that were inside there, inside the letter agreement. The would file those with FERC and those would become the tariff.”) Plains succeeded to this contract and it remained in effect until the 2015 AAPL rupture stopped transportation. (Ibid.; Hendricks decl., exhibit 15.)

Each month, Venoco notified Plains and Phillips 66 of the volume of oil that it desired to deliver to Line 901 in the following month. (PSS, facts 25, 67 [undisputed as to notice].) Phillips 66 submitted monthly nominations to Plains and paid Plains

to transport the oil it purchased from Venoco through Line 901 pursuant to Plains’ FERC Tariff. (PSS, undisputed facts 25, 48, 68.) The last notice that Venoco submitted and the last nomination accepted by Plains from Phillips 66 was for oil to be shipped in May 2015. (PSS, undisputed facts 27, 49, 69.)

On May 19, 2015, an area of external corrosion on Line 901 failed and oil was released from the pipeline. (PSS, undisputed fact 89.) On that day, defendants shut down the Pipeline to prevent further oil spillage from the ruptured Pipeline. (Defendants’ Separate Statement [DSS], fact 7; 4AC, ¶ 19.) No oil from the spill touched Venoco’s property. (PSS, undisputed facts 10, 37, 59, 88.)

According to Plains, prior to May 19, 2015, Plains maintained a pipeline integrity management program intended to mitigate the risk of externa corrosion on its pipeline. (DSS, fact 90 & evidence cited.) According to Venoco, Plains’ pipeline integrity management plan was not intended to mitigate the risk of external corrosion on Line 901. (PSS, response to fact 90 & evidence cited.) Plains had 50 to 80 integrity management employees. (PSS, fact 91 [undisputed on this point].) Plains inspected 3,000 to 5,000 miles of pipeline annually. (PSS, fact 92 [undisputed on this point].) Plains spent $39 to $107 million each year on the inspection, testing, and correction of identified anomalies. (PSS, undisputed fact 93.) Plains spent $135 to $491 million annually on pipeline maintenance and integrity combined. (PSS, fact 94 [undisputed on this point].)

Plains’ integrity management program consisted of, among other measures, regular in-line-inspections (ILI) of its pipelines conducted by Rosen contractors, a highly-regarded ILI company. (PSS, fact 95 [undisputed on this point].) Rosen performed inspections on Line 901 in 2007, 2012, and 2015. (PSS, undisputed fact 96.) The 2012 inspection reported that the point in Line 901 that eventually ruptured had lost 45 percent of its wall depth. (PSS, fact 99 [undisputed on this point].) According to Plains, none of the inspections of Line 901 detected the failure anomaly at a depth that would have required Plains or repair the failure anomaly. (DSS, fact 100 & evidence cited.) According to Venoco, the regulations require an operator to evaluate what risks and threats and failure mechanisms may exist on each of its pipelines and mitigate those risks accordingly. (PSS, response to fact 100 & evidence cited; see 49 C.F.R. § 195.452(h) (2023).) According to Plains, had the 2012 ILI accurately reported the anomaly’s depth, Plains would have repaired it. (PSS, fact 102 & evidence cited [disputed by Venoco only as vague and speculative].)

Plains made certain repairs to the pipeline following the 2007 and 2012 inspections prior to 2015. (PSS, fact 97 [undisputed on this point].) New issues were identified in the 2015 inspection two weeks before the spill and could not have been repaired in two weeks. (PSS, fact 98 [undisputed on this point].) According to Plains, Plains completed a set of repairs near the failure location, but the inspectors reported that the condition of the pipe coating was “good” and that the anomalies repaired included both an undercall and an overcall. (DSS, fact 101 & evidence cited.) According to Venoco, the same location on the pipe just two years later was reported as having “thick, layered deposits” of “corrosion product,” areas of “de-cohesion from the insulation substrate,” cracks and wrinkles in the polyethylene tape, the “insulation was compressed on the bottom of the pipe” and “saturated with

moisture,” and there was “disbondment of the coal tar coating.” (PSS, fact 101 & evidence cited.) Thus, the damage at the failure site seen in 2015 would have dated back to 2007 or 2012. (Ibid.)

According to Plains, the independent investigator who conducted the root cause analysis of the spill testified that she did not see anything in her review of Plains’ integrity management program or the events before the spill that suggested Plains intentionally ignored or consciously disregarded the risk of corrosion on Line 901. (DSS, fact 103 & evidence cited.) According to Venoco, Dr. Buckingham’s employer Det Norske Veritas (DNV) was retained by the law firm representing Plains in 2015 to perform a root cause and metallurgical analysis. (PSS, response to fact 103 & evidence cited.) DNV had done other projects both for that law firm and for Plains. (Ibid.) Dr. Buckingham met with Dan Levin at Munger Tolles the day prior to her deposition. (Ibid.) In her draft report that she signed, Dr. Buckingham concluded that Plains’s IMP was “ineffective” and “[t]he mitigative actions taken by Plains on Line 901 did not adequately address the elevated integrity threat of corrosion under insulation.” (Ibid.)

In 2013, the Pipeline and Hazardous Materials Safety Administration (PHMSA)—the federal agency with oversight of oil pipelines—conducted an integrated audit of Plains’ application of its integrity management program to Line 901. (PSS, undisputed fact 104.) During the 2013 audit, PHMSA reviewed Plains’ documents relating to its integrity management of Line 901, including digs and repairs Plains performed based on the 2012 inspection results, and a graph of corrosion depth reported by the inspection tool versus the corrosion depth data Plains collected from its repairs. (PSS, undisputed fact 105.)

According to Plains, in the Notice of Probable Violation and Final Order PHMSA issued after the spill, they did not identify any deficiencies with respect to the inspections or maintenance of Line 901 in 2007, 2012, or 2015. (DSS, fact 106 & evidence cited.) According to Venoco, the Notice of Probable Violation expressly states that it does not address the May 19, 2015, rupture and related only to

the 2013 audit. (PSS, response to fact 106 & evidence cited.) PHMSA issued an entirely separate 500-page report for the May 19, 2015, rupture, that identifies numerous deficiencies with respect to inspections and maintenance of Line 901. (Ibid.)

Prior to the spill, Plains maintained control room and leak monitoring procedures. (PSS, undisputed fact 107.) James Vaughn, the controller on the day of the spill was not an officer, director, or managing agent for Plains. (PSS, undisputed fact 108.)

On December 31, 2015, Venoco sent Plains a demand letter that included the following: “Tatro Tekosky Sadwick LLP, on behalf of Venoco, Inc. (‘Venoco’ or

‘Claimant’), submits Venoco’s damages claim (the ‘Claim’) and notice of claim (the ‘Notice’) for loss of profits and/or impairment of earning capacity to Plains Pipeline,

L.P (‘Plains’). To the extent Plains believes there are additional entities which also should receive the Claim and/or the Notice, Venoco requests that you notify Venoco without delay by contacting me at the letterhead address above. The Claim is submitted pursuant to the Federal Oil Pollution Act of 1990, 33 U.S.C. §§ 2701 et seq. (‘OPA’) and 33 CFR §§ 136.1 et seq. This Claim also serves as a Notice of

Claim pursuant to paragraph 85 of Plains Pipeline, LP Local Tariff (Issued November 25, 2014; Effective January 1, 2015; F.E.R.C. No. 114.2.0).” (PSS, undisputed fact 81.)

The Local Tariff includes the following provision: “Notice of claims for loss, damage or delay in connection with shipments must be made to the Carrier in writing within nine (9) months after same shall have accrued; or, in case of failure to make

delivery, within nine (9) months after a reasonable time for delivery shall have

elapsed. Such claims, fully amplified, must be filed with the Carrier within nine

(9) months thereafter; and, unless so made and filed, the Carrier shall be wholly released and discharged therefrom and shall not be liable therefore in any court of justice. And no suit at law or in equity shall be maintained upon any claim unless

instituted within two (2) years and one (1) day after the cause of action accrued.” (PSS, undisputed fact 82.)

Plains cancelled its FERC Tariff for Line 901 in February 2016. (PSS, undisputed fact 80.)

Venoco seeks monetary damages in the form of lost value from its assets in the South Ellwood Field and lost profits that it would have made from those assets. (PSS, undisputed facts 9, 36, 58.)

Analysis:

“A party may move for summary judgment in an action or proceeding if it is contended that the action has no merit or that there is no defense to the action or proceeding.” (Code Civ. Proc., § 437c, subd. (a)(1).)

“A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if the party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs. A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Code Civ. Proc., § 437c, subd. (f)(1).)

“The motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. In determining if the papers show that there is no triable issue as to any material fact, the court shall consider all of the evidence set forth in the papers, except the evidence to which objections have been made and sustained by the court, and all inferences reasonably deducible from the evidence, except summary judgment shall not be granted by the court based on inferences reasonably deducible from the evidence if contradicted by other inferences or evidence that raise a triable issue as to any material fact.” (Code Civ. Proc., § 437c, subd. (c).)

“A defendant … has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action. Once the defendant … has met that burden, the burden shifts to the plaintiff … to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto. The plaintiff … shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(2).)

“But other principles guide us as well, including that ‘[w]e accept as true the facts … in the evidence of the party opposing summary judgment and the reasonable inferences that can be drawn from them.’ [Citation.] And we must ‘“view the evidence in the light most favorable to plaintiff[] …’ and “liberally construe plaintiff[’s] evidentiary submissions and strictly scrutinize defendant[’s] own evidence, in order to resolve any evidentiary doubts or ambiguities in plaintiff[’s] favor.” ’ [Citation.]” (Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243, 254.)

Plains moves for summary judgment as to all claims on the basis of five separate legal theories: (1) direct benefits estoppel; (2) limited agency principles; (3) traditional agency principles; (4) federal law preemption; and (5) economic loss rule. Plains also moves alternatively for summary adjudication of the claim for punitive damages on the grounds that Venoco cannot meet the standard for recovery of punitive damages.

(1)       Contract Issues

Plains argues that the Pipeline Connection Agreement bars Venoco’s claims. This argument depends upon Venoco being bound to the contractual limitations of the Pipeline Connection Agreement although it is undisputed that Venoco is not expressly a party to the Pipeline Connection Agreement. (Defendants’ Reply Separate Statement [DRSS], undisputed additional fact 1; see Pipeline Connection Agreement, introductory para. [defining “Parties” as Plains and Ellwood].)

As a prefatory matter, the court notes that the Pipeline Connection Agreement includes a provision that it is to be interpreted under the laws of Texas. (Pipeline Connection Agreement, ¶ 19.) While this issue is briefly touched upon by the parties in their papers, neither party identifies any Texas law different from the corresponding California law, with Plains extensively citing California law but failing to cite to Texas law in it moving papers. “As the forum state, California will apply its own law ‘unless a party litigant timely invokes the law of a foreign state.’ [Citations.]” (Chen v. Los Angeles Truck Centers, LLC (2019) 7 Cal.5th 862, 867.) In any event, under these circumstances, the court assumes that Texas law, to the extent it is applicable, is not materially different from California law as applied to the issues of this motion.

Plains relies upon the contractual limitations contained in paragraph 5(I) of the Pipeline Connection Agreement (capitalization altered): “As between the Parties hereto, neither party shall be liable under any circumstances to the other party for special, indirect, punitive, incidental, exemplary or consequential damages resulting from or arising out of this agreement ….” Paragraph 5(I) is contrasted with paragraphs 5(A) and 5(B), which provide (capitalization altered):

“EPI hereby releases, indemnifies, defends and holds Plains, its parent(s), and its and their Affiliates, and its and their managers, officers, directors, employees, agents, representatives, contractors, and subcontractors (collectively, ‘Plains Indemnified Parties’) harmless from and against each and every suit, demand or cause of action and all liabilities, expenses, liens, losses, claims, damages and/or costs (including court costs and reasonable attorneys’ fees as well as any fees and costs to enforce the provisions of this indemnity) (collectively, ‘Losses’) for or based upon personal injury, bodily injury or death of any managers, officers, directors, employees, agents, representatives, contractors, servants and subcontractors of any EPI Indemnified Party in connection with or in any way arising out of, relating to,

or incident to the activities contemplated under this agreement including without limitation such losses resulting from any negligent acts or omissions of any Plains Indemnified Party, but excluding any losses to the extent caused by the gross negligence or willful misconduct of any Plains Indemnified Party.” (Pipeline Connection Agreement, ¶ 5(A).)

“Plains hereby releases, indemnifies, defends and holds EPI, its Parent(s), and its and their Affiliates, and its and their managers, officers, directors, employees, agents, representatives, contractors and subcontractors (collectively, ‘EPI Indemnified Parties’) harmless from and against all losses for or based upon personal injury, bodily injury or death of any managers, officers, directors, employees, agents, representatives, contractors, servants and subcontractors of any Plains Indemnified Party in connection with or in any way arising out of, relating to, or incident to the activities contemplated under this Agreement including without limitation such losses resulting from any negligent acts or omissions of any EPI Indemnified Party, but excluding any losses to the extent caused by the gross negligence or willful misconduct of any EPI Indemnified Party.” (Pipeline Connection Agreement, ¶ 5(B).)

As noted by Plains, the term “Affiliates” is defined by paragraph 5(F) to include other persons controlling or controlled by that Party. Thus, although Venoco is not itself a party, it is, by virtue of its ownership of Ellwood, an “Affiliate” of Ellwood under this definition. Paragraph 5(I) by its express terms is limited to “the Parties hereto”; paragraphs 5(A) and 5(B) expand the scope of those subject to the release and indemnity to include Affiliates. This contrast provides a textual basis for restricting the limitations of paragraph 5(I) to Parties, i.e., Ellwood and Plains Pipeline, L.P.

Similarly, paragraph 18, quoted above, provides that a successor “by purchase, merger, or consolidation to title to the properties” or by assignment to an Affiliate shall be subject to the obligations of its predecessor or assignor, but not otherwise. The evidence presented in support of the motion does not show purchase, merger, consolidation to title to the properties, or assignment from Ellwood to Venoco. Thus, paragraph 18 also provides a textual basis for restricting the limitations of paragraph 5(I) to the Parties.

Plains seeks to expand the application of paragraph 5(I) by invoking doctrines of direct benefits estoppel and agency.

            (A)       Direct Benefits Estoppel

Direct benefits estoppel derives from the common law proposition that: “A voluntary acceptance of the benefit of a transaction is equivalent to a consent to all the obligations arising from it, so far as the facts are known, or ought to be known, to the person accepting.” (Civ. Code, § 1589.) “The same rule is in effect otherwise stated in section 3521 of the Civil Code to the effect that: [¶] ‘He who takes the benefit must bear the burden.’ [¶] This rule, however, is in itself a rule of equity and as such must be given a reasonable interpretation.” (In re Bruce’s Estate (1938) 27 Cal.App.2d 44, 50.)

The rule is employed most frequently in cases by which a non-signatory is bound to an arbitration clause. (E.g., NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 72; Verge Media Companies, Inc. v. Maccini (C.D.Cal., Oct. 17, 2011, No. CV1105520MMMJCX) 2011 WL 13220726, at p. *16.) These cases turn in large part upon the nature of the benefits accepted. “Estoppel is one of the five theories available to a signatory seeking to compel a non-signatory to arbitrate. [Citation.] The standard is whether the non-signatory has ‘ “knowingly exploit[ed] the agreement containing the arbitration clause despite having never signed the agreement.” ’ [Citations.]” (Verge Media Companies, Inc. v. Maccini, supra, 2011 WL 13220726, at p. *16.) “While the distinction between ‘direct’ and ‘indirect’ benefits is not always clear, one court has offered the following definition: [¶ ‘First, benefits are direct—and therefore will lead to estoppel when knowingly exploited—when arising specifically from the unsigned contract containing the arbitration clause; and benefits are indirect—and therefore will not lead to estoppel even if knowingly exploited—when merely incidental to the contract’s execution.... Second, benefits are direct when specifically contemplated by the relevant parties; and benefits are indirect when the parties to the agreement with the arbitration clause would not have originally contemplated the non-signatory’s eventual benefit.’ [Citation.]” (Ibid.)

This rule is helpfully discussed in Recorded Picture Co. v. Nelson Entertainment, Inc. (1997) 53 Cal.App.4th 350, 356 (Recorded Picture). In Recorded Picture, the “producers of a motion picture entered into a written agreement with a distributor to exploit the picture domestically in the theatrical, television, and home video markets. The agreement contemplated that the distributor would enter into a separate contract with a subdistributor for home video release and obligated the distributor to require that the subdistributor pay 70 percent of the gross receipts directly to the producers. [¶] The distributor entered into a subdistribution contract but did not require the subdistributor to pay anything directly to the producers. Moreover, despite the provision in the producer-distributor agreement requiring that the producers receive 70 percent of the gross receipts, the distributor agreed to a 50/50 split of the net receipts between itself and the subdistributor. The subdistributor approved this arrangement without actual knowledge of the terms of the producer-distributor agreement.” (Recorded Picture, supra, 53 Cal.App.4th at p. 356.) The producers filed an action against the distributor and the subdistributor, seeking to recover 70 percent of the gross receipts from the home video release of the picture. (Ibid.) The producers and the subdistributor filed cross-motions for summary judgment. (Ibid.) The trial court ruled in favor of the producers, concluding that the subdistributor was bound by the 70 percent gross receipts provision in the producer-distributor agreement, not by the 50 percent net receipts provision in its own contract. (Ibid.)

The Recorded Picture court reversed the summary judgment. (Recorded Picture, supra, 53 Cal.App.4th at p. 356.) The Recorded Picture court first found that the general rule that one who accepts the benefit of a contract or transaction is also obligated to accept the burdens had no application to the facts in Recorded Picture. (Id. at pp. 361-362.) The court found that the subdistributor did not accept or receive all of the benefits of the producer-distributor contract and therefore was not burdened by the obligations of the other contract. (Id. at pp. 363-365.) The court further found that although the subdistributor may have had actual knowledge of the existence of the producer-distributor contract, it did not have knowledge of the terms of that agreement, and in particular the 70/30 split of gross receipts. (Id. at p. 365.) In the absence of actual knowledge or the application of another doctrine not present in that case, the subdistributor was not bound to the terms of the producer-distributor contract. (Id. at pp. 373-374.)

There is no issue here concerning knowledge of the existence or of the terms of the Pipeline Connection Agreement. There is, however, at least a triable issue of fact on the issue of whether Venoco accepted the benefits of the Pipeline Connection Agreement. There are two different legal characterizations of this transaction based upon conflicting inferences from the facts. The first, argued by Plains, is that Venoco and Ellwood should be treated essentially as one entity with respect to the Pipeline Connection Agreement because of the status of Venoco as an Affiliate of Ellwood (based upon the ownership and close corporate connection) and because of the activity of Venoco in delivering oil to the pipeline. Under Plains’ construction of this transaction, Venoco receives the direct benefits of the use of the pipeline, which in turn exists only because of the terms and conditions of the Pipeline Connection Agreement. The second characterization of this transaction is to take the Pipeline Connection Agreement on its own terms, as an agreement between Ellwood and Plains Pipeline, L.P., as the only and express parties to the agreement. As noted above, this characterization is supported by the text of the Pipeline Connection Agreement. The conflicting inferences from the facts are sufficient by themselves to demonstrate the existence of a triable issue of fact as to the applicability of the Pipeline Connection Agreement to Venoco.

There is a further issue inherent in this analysis. As noted above and as the presence of the word “estoppel” in the doctrine’s title suggests, this rule is one of equity and therefore subject to equitable considerations. “Broadly speaking, ‘estoppel’ refers less to a doctrine than to a conceptual pattern, first articulated in the courts of equity, which has come to pervade our law. When it is successfully invoked, the court in effect closes its ears to a point—a fact, argument, claim, or defense—on the ground that to permit its assertion would be intolerably unfair. It is commonly said that the party to be estopped, having conducted himself in manner X, will ‘not be heard’ to assert Y. [Citations.]” (City of Hollister v. Monterey Ins. Co. (2008) 165 Cal.App.4th 455, 486.)

The undisputed facts demonstrate that the Pipeline Connection Agreement was a contract between sophisticated business entities. In the course of negotiating this agreement, Venoco was replaced as the counterparty to Plains with Ellwood. It may be reasonably inferred that there was some business reason for this substitution, at least on the part of Venoco and Ellwood, and this substitution was with the consent and ultimate agreement of Plains. When this fact is considered in light of the textual definitions of parties and Affiliates in the Pipeline Connection Agreement and in light of the absence of express limitations applicable to Affiliates under paragraph 5(I), a reasonable inference is that the exclusion of Venoco from the obligations and limitations of the Pipeline Connection Agreement was intended and itself served some business purpose. The Pipeline Connection Agreement can thus be reasonably construed to exclude the extension of obligations and limitations argued by Plains. Under these circumstances, the court would be hard pressed to find that it would be intolerably unfair to hold Plains to its express agreement. Indeed, because Plains has accepted the benefits of the Pipeline Connection Agreement knowing of its negotiated exclusions, it could even be said that Plains accepted the burdens inherent in not extending the limitations to Venoco. For purpose of this motion, it is sufficient to state that conflicting inferences from the facts demonstrate triable issues of fact precluding summary judgment.

            (B)       Agency

Alternatively, Plains argues that three different agency principles apply to make the limitations of the Pipeline Connection Agreement applicable to Venoco: (i) limited agency principles; (ii) general agency principles; and (iii) Venoco’s control of Ellwood.

The limited agency principle argued by Plains is that nonsignatories to a contract for the transportation of goods are subject to limitation-of-liability provisions entered into by other entities involved in the chain of transportation, citing

Norfolk Southern Railway Co. v. Kirby (2004) 543 U.S. 14 [125 S.Ct. 385, 160 L.Ed.2d 283] (Kirby) and Morville v. United Parcel Service (1983) 144 Cal.App.3d 552 (Morville).

In Kirby, the owner of machinery hired an intermediary freight forwarding company to facilitate the transport of his goods from Australia to Alabama. (Kirby, supra, 543 U.S. at pp. 18-19.) The intermediary then hired a shipping company to transport the goods, and the shipping company subcontracted the overland portion of the trip. (Id. at p. 19.) The cargo was damaged while being carried by rail in its final, inland leg of its journey in a train wreck. (Id. at pp. 18-19.) In negotiating with the shipping company, the intermediary had the opportunity to declare the full value of the machinery and to have the shipping company assume liability for that value, but instead accepted a contractual liability limitation below the machinery ‘s true value resulting in lower shipping rates. (Id. at p. 19.) The liability limitation with the shipping company was passed along to the subcontracting railroad. (Id. at pp. 32-33.) The railroad argued that its liability to the machinery owner was capped by a limitation of liability negotiated by the upstream carrier; plaintiff machinery owner maintained that it was not bound by the limitation because it did not agree to those terms. (Ibid.)

The United States Supreme Court in Kirby, applying federal maritime law regarding shipping contracts, found for the intermediary. (Kirby, supra, 543 U.S. at pp. 22-23, 35-36.) “When an intermediary contracts with a carrier to transport goods, the cargo owner’s recovery against the carrier is limited by the liability limitation to which the intermediary and carrier agreed.” (Id. at p. 33.) In reaching this default rule, the Kirby court determined that the intermediary is to be treated as the owner’s agent for the single, limited purpose, namely, when an intermediary contracts with subsequent carriers for limitation on liability. (Id. at p. 34.)

The Kirby court concluded: “We hold that [the railroad] is entitled to the protection of the liability limitations in the two bills of lading. Having undertaken this analysis, we recognize that our decision does no more than provide a legal backdrop against which future bills of lading will be negotiated. It is not, of course, this Court’s task to structure the international shipping industry. Future parties remain free to adapt their contracts to the rules set forth here, only now with the benefit of greater predictability concerning the rules for which their contracts might compensate.” (Kirby, supra, 543 U.S. at p. 36.)

In Morville, the plaintiff was a mail order postage stamp dealer who contracted with a mailing company to convert their mailing list to cards for use with the mailing company’s addressing machines. (Morville, supra, 144 Cal.App.3d at p. 554.) The mailing company delivered the list and cards to defendant United Parcel Service (UPS) for shipment and the package was lost. (Ibid.) The contract between UPS and the mailing company included a $100 limitation of liability unless excess value was declared; no excess value was declared. (Ibid.) The plaintiff did not contest the existence of the contract between the mailing company and UPS, but argued that it did not limit UPS’s liability to plaintiff. (Ibid.) The trial court disagreed and granted UPS’s motion for summary judgment. (Ibid.)

On appeal, the Morville court affirmed. (Morville, supra, 144 Cal.App.3d at p. 554.) “A consignor with authority to deliver goods to a carrier for shipment has the authority to enter into a special contract limiting liability. [Citation.] The rule is the same where actual authority is absent but the facts do not place the shipper on notice the consignor is without authority to limit liability.” (Id. at p. 555.)

In reaching its conclusion, the Morville court distinguished Lux Art Van Service, Inc. v. Pollard (9th Cir. 1965) 344 F.2d 883 (Lux Art): “[The plaintiff] contends [Lux Art] holds the consignee cannot limit its liability by special contract if the owner and consignor have agreed not to ship. Pollard entrusted a race horse to a breeder with an agreement Pollard would personally pick up the horse when in foal. Instead, the breeder shipped the horse through Lux (an experienced horse van service). The bill of lading included a limitation of liability of $150. The horse died in transit crossing the desert. In affirming the $25,000 judgment and striking the $150 limitation, the court held, ‘mere possession carries no indication of any right to engage in transactions of serious consequence to the owner ...’ [Citation.] The court pointed to the dangerous nature of shipping horses through the desert and the special knowledge of the shipper regarding the horse’s value. In essence the shipper, unlike UPS, was on actual notice the consignor had no authority to limit liability.” (Morville, supra, 144 Cal.App.3d at p. 555.)

As stated in its recitals, the Pipeline Connection Agreement expressly contemplates the transaction including Venoco as a separate party from Ellwood. As discussed above, there is at least a triable issue of fact as to whether the Pipeline Connection Agreement intended to exclude Venoco from the liability limitation at issue here. In that respect, Kirby is inapplicable because, as the Supreme Court concluded, Kirby sets forth a default rule (of maritime shipping contracts) that may be contractually varied by the parties. Similarly, in Morville, the existence of actual notice of the lack of authority to limit liability was sufficient to distinguish Lux Art reaching a different conclusion. In construing the Pipeline Connection Agreement as contractually intending to exclude Venoco, the Pipeline Connection Agreement reaches a different allocation of risk of liability and provides actual notice to Plains of the allocation of such risk (to which contractually agreed). Under this construction of the Pipeline Connection Agreement, the court would not imply different terms than as agreed and intended by the parties to that agreement.

The same analysis applies on a broader basis to Plains’ argument regarding general agency principles. Plains argues under these general agency principles Ellwood acted as Venoco’s agent so that Venoco is bound as a principal to the Pipeline Connection Agreement. This characterization of the relations suffers the same difficulty as the argument under limited agency principles because, as before, there is at least a triable issue of fact that the Pipeline Connection Agreement contemplates Venoco as a separate part in the transaction and as an Affiliate of Ellwood, but not as a party to that agreement subject to the limitations of liability. This argument would imply a different relationship between Plains and Venoco than contemplated by the parties in the Pipeline Connection Agreement and in conflict with the intent of that agreement (under this construction of the Pipeline Connection Agreement).

The third agency principle asserted by Plains in its motion is not identified specifically in the notice of motion, which states limited agency principles as issue 2 and traditional agency principles as issue 3. To the extent that this argument falls within the traditional agency principles argument, based upon the above discussion, there are triable issue of fact precluding summary judgment. In any event, this issue raises triable issues of fact as to whether Ellwood is the agent of Venoco on the basis argued (which is more akin to the entirely different, but not raised, doctrine of alter ego). “Persons are not normally bound by an agreement entered into by a corporation in which they have an interest or are employees.” (Suh v. Superior Court (2010) 181 Cal.App.4th 1504, 1513.) The Pipeline Connection Agreement itself, for the reasons discussed above, provides evidence of the parties understanding that Venoco is not the agent of Ellwood for purposes of that agreement and is not subject to the contractual limitation of liability. This at least presents a triable issue of fact as to the existence of such agency.

The court therefore concludes that triable issues of fact preclude summary judgment on the basis of agency.

(3)       FERC Tariff Issues

As a fourth issue for summary judgment, Plains argues that the Interstate Commerce Act (ICA) and, specifically, the Carmack Amendment to the Interstate Commerce Act (49 U.S.C. Appen. § 20(11) (1988)) preempts Venoco’s claims. (Note: There is a complicated history of the ICA. The ICA’s codification was eventually repealed and replaced in part by enactment of the revised title 49 of the United States Code, but certain unrepealed provisions were incorporated in the revised title 49 by reference to law as it existed in 1977. (E.g., 49 U.S.C. § 60503.) The law as it existed in 1977 was reprinted as an appendix to the 1988 United States Code, hence the peculiar citation. (See Frontier Pipeline Co. v. F.E.R.C. (D.C. Cir. 2006) 452 F.3d 774, 776.))

“The general scope of the Carmack Amendment federal preemption of state shipping statutes is as follows: ‘[S]tate statutes are preempted by the Carmack Amendment if they “in any way enlarge the responsibility of the carrier for loss or at all affect the ground of recovery, or the measure of recovery.” [Citation.] [¶] The Carmack Amendment and the set of federal regulations that complement it cover not only the actual transport of goods, but they also govern the claims process.’ [Citation.] In [Rini v. United Van Lines, Inc. (1st Cir. 1997) 104 F.3d 502 (Rini)], the First Circuit further synthesized the scope of Carmack Amendment preemption as follows: ‘A state law “enlarges the responsibility of the carrier for loss or at all affects the ground of recovery, or the measure of recovery,” [citation], where, in the absence of an injury separate and apart from the loss or damage of goods, it increases the liability of the carrier. Preempted state law claims, therefore, include all liability stemming from damage or loss of goods, liability stemming from the claims process, and liability related to the payment of claims.’ [Citation.]” (Dictor v. David & Simon, Inc. (2003) 106 Cal.App.4th 238, 247, italics added.) “On the other hand, liability arising from separate harms—apart from the loss or damage of goods—is not preempted.” (Rini, supra, 104 F.3d at p. 506; accord, Gordon v. United Van Lines, Inc. (7th Cir. 1997) 130 F.3d 282, 289.)

The evidence presented here is consistent with Venoco’s pleadings, namely, that Venoco is not pursuing claims based upon the loss or damage of its oil. Instead, Venoco asserts claims for an injury separate and apart from the loss or damage of goods. As discussed additionally below, these claims are claims based upon Plains’ negligence in maintaining Line 901 irrespective of the loss or damage to oil in the pipeline. Thus, Plains either fails to meet its initial burden on summary judgment to show preemption or alternatively Venoco has met its burden to show the existence of triable issues of fact as to whether there is an injury separate and apart from the loss or damage to goods.

(4)       Economic Loss Rule

Plains’ fifth issue for summary judgment is that the claims are barred by the economic loss rule.

In general, a “[p]laintiff cannot recover economic damages resulting from negligence without a physical injury to a person or property.” (State Lands Commission v. Plains Pipeline, L.P. (2020) 57 Cal.App.5th 582, 588 (State Lands).) “The primary exception to the general rule of no-recovery for negligently inflicted purely economic losses is where the plaintiff and the defendant have a ‘special relationship.’ [Citation.] What we mean by special relationship is that the plaintiff was an intended beneficiary of a particular transaction but was harmed by the defendant’s negligence in carrying it out.” (Southern California Gas Leak Cases (2019) 7 Cal.5th 391, 400.)

Plains argues that there was no injury to property and that there was no “special relationship” within the exception to the economic loss rule. Venoco disputes both contentions.

With respect to the issue of no injury to property, this issue was addressed in State Lands. As the parties both acknowledge, the State Lands decision arose out of the identical oil spill that underlies this action. In State Lands, the plaintiff, the State Lands Commission alleged “that it has succeeded to Venoco’s property, the damage continues, and it is required to spend substantial amounts for repairs and maintenance to keep the facility in a safe condition.” (State Lands, supra, 57 Cal.App.5th at p. 589.) This allegation of damages is an allegation of the same type of damages asserted by Venoco in this action. (4AC, ¶ 31.) “That is a sufficient allegation of continuing damage to the property the Commission now owns. Plains cites no authority that relieves it from liability for continuing damage to property held by a successor in interest. The complaint alleges property damage, not purely economic loss.” (State Lands, at p. 589.)

Plains does not provide any separate statement facts which address this allegation of physical damage. Instead, Plains’ sole asserted fact is that no oil from the spill touched Venoco’s property. (DSS, fact 88.) Venoco does not dispute this fact. (PSS, response to fact 88.) Plains then argues that the type of damage alleged by Venoco is not a type of damage sufficient to constitute “property damage” because there is no physical contact from Plains’ conduct. (Reply, at p. 7.) Plains argues that State Lands held only that the Commission’s pleading was sufficient, not that there was sufficient evidence to support this allegation. (Ibid.) In making this argument, Plains relies upon In re Taira Lynn Marine Ltd. No. 5, LLC (5th Cir. 2006) 444 F.3d 371 (Taira Lynn), distinguishing Venoco’s citation to Consolidated Aluminum Corp. v. C.F. Bean Corp. (5th Cir. 1985) 772 F.2d 1217 (Consolidated Aluminum).

In Consolidated Aluminum, the plaintiff’s plant machinery was damaged by the slowing of gas that was caused by the defendant’s negligent puncture to a pipeline distant from the plaintiff’s facility. (Consolidated Aluminum, supra, 772 F.2d at pp. 1219-1220.) The Consolidated Aluminum court found that the physical damage suffered by the plaintiff was sufficient to bring it outside the economic loss rule. (Id. at p. 1222.) In Taira Lynn, a barge allided with a bridge, which caused the barge to discharge into the air a gaseous mixture of propylene and propane. (In re Taira Lynn, supra, 444 F.3d at pp. 375-376.) Consequently, the Louisiana State Police ordered a mandatory evacuation of all businesses and residences within a certain radius of the bridge. (Id. at 376.) Among the claims asserted were that of a business that lost crab that spoiled in a freezer when law enforcement shut off electricity during the evacuation and that of a business that lost materials when it had to prematurely terminate two manufacturing runs. (Id. at p. 377.) The Taira Lynn court determined that gaseous emissions do not constitute physical damage. (Id. at p. 379.) Distinguishing Consolidated Aluminum, the Taira Lynn court found that there was no physical damage because the allision did not physically cause the disruption in electrical power or physically impact the manufacturer’s facilities. (Id. at p. 380.) The economic loss rule thus barred these claims. (Ibid.)

The discussion of Consolidated Aluminum and Taira Lynn is beside the point in view of State Lands. State Lands addressed allegations of exactly the same type of damages at issue in this action arising from the same transaction and found that the damages were sufficient as a matter of law to fall within the exception to the economic loss rule. While it is true that State Lands was decided on a demurrer and this is a summary judgment motion, that procedural distinction does not matter here for two reasons. First, having determined that this type of damage—damage not requiring physical contact of oil from the oil spill—is a sufficient allegation of damage, it is part of Plains’ initial burden on summary judgment to provide evidence negating that element of Venoco’s claim (or showing that Venoco does not have and cannot obtain such evidence). Plains has failed to address this issue factually and therefore failed to meet its initial burden on summary judgment. Second, Venoco has presented evidence of such damage. (E.g., Huskins depo., pp. 339-341 [Hendricks decl., exhibit 14].) So, even if Plains had met its initial burden, Venoco has met its burden to show the existence of a triable issue of fact. In either case, this is a sufficient basis to deny summary judgment as to this issue.

With respect to the issue of a “special relationship,” this argument is also resolved by the decision in State Lands. Applying the special relationship test of J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799 (J’Aire), the State Lands court found that the Commission’s complaint sufficiently alleged such a special relationship. (State Lands, supra, 57 Cal.App.5th at p. 589.) Each of the J’Aire factors discussed by the State Lands court applies equally to Venoco. However, none of Plains’ separate statement facts for this summary judgment issue factually negates the special relationship. For the same reasons, Plains has failed to meet its initial burden on summary judgment.

Accordingly, summary judgment will be denied as to this issue.

(5)       Punitive Damages

Plains alternatively seeks summary adjudication of Venoco’s claims for punitive damages, citing Butte Fire Cases (2018) 24 Cal.App.5th 1150.

In Butte Fire Cases, a large wildfire started when a pine tree came into contact with a power line of defendant Pacific Gas & Electric Company (PG&E). (Id. at p. 1154.) More than 2,000 plaintiffs brought suit against PG&E in a consolidated and coordinated proceeding. (Ibid.) PG&E brought a motion for summary adjudication as to the plaintiffs’ request for punitive damages. (Id. at p. 1155.) In opposing the motion, the plaintiff argued that the Butte Fire was the result of years of continued, conscious disregard for ensuring the proper functioning of risk management controls. (Ibid.) The trial court tentatively found that plaintiffs’ evidence was insufficient, but at the hearing on the motion plaintiffs made additional arguments. (Id. at p. 1156.) After the hearing, the trial court invited further briefing and changed its tentative and denied the motion. (Ibid.)

On writ review, the Butte Fire Cases court determined that plaintiffs’ evidence was insufficient. (Butte Fire Cases, supra, 24 Cal.App.5th at p. 1176.) “Although plaintiffs dismiss the company’s risk management controls and fire mitigation efforts as a mere ‘façade,’ they fail to produce clear and convincing evidence from which a reasonable jury could find that PG&E consciously disregarded the risk of wildfire or willfully ignored fire safety standards.” (Id. at p. 1174.)

“In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.” (Civ. Code, § 3294, subd. (a).) “ ‘Malice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Civ. Code, § 3294, subd. (c)(1).)

“ ‘Despicable conduct’ is conduct that is ‘ “so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by most ordinary decent people.” ’ [Citation.] Such conduct has been described as having the character of outrage frequently associated with crime. [Citation.] ‘Conscious disregard’ means ‘ “that the defendant was aware of the probable dangerous consequences of his conduct, and that he willfully and deliberately failed to avoid those consequences.” ’ [Citation.] Put another way, the defendant must ‘have actual knowledge of the risk of harm it is creating and, in the face of that knowledge, fail to take steps it knows will reduce or eliminate the risk of harm.’ [Citation.]” (Butte Fire Cases, supra, 24 Cal.App.5th at p. 1159.)

In support of the motion, Plains presents evidence that its conduct leading to the oil spill was not willful or in conscious disregard for the rights or safety of others. Plains presents evidence that it had an extensive risk management program, including regular in-line inspections of its pipelines conducted by a highly regarded ILI company. Plains also provides evidence of the absence of knowledge of the probable dangerous consequences of its conduct and knowing failure to take steps it knew would reduce or eliminate the risk of harm. (See Butte Fire Cases, supra, 24 Cal.App.5th at p. 1159.) Plains has thus met its initial burden on summary adjudication as to this issue.

In opposition, Venoco starts by pointing out that Plains was criminally convicted of “knowingly discharging oil or reasonably should have known that its actions would cause the discharge of oil.” (PSS, additional fact 54; DRSS, response to additional fact 54.) This jury verdict does not establish knowledge because the finding includes the alternative that Plains “reasonably should have known.” While conduct warranting punitive damages overlaps with criminal conduct in many cases, “ ‘[t]he mere carelessness or ignorance of the defendant does not justify the imposition of punitive damages.’ ” (Butte Fire Cases, supra, 24 Cal.App.5th at p. 1170, citations omitted.) The criminal jury’s finding therefore does not assist in determining whether the standard for imposition of punitive damages is met.

Venoco’s evidence in opposition demonstrates that Plains’ risk management program was ineffective in identifying and preventing the oil spill here at issue. However, applying the appropriate summary adjudication standard, this evidence is insufficient to demonstrate a triable issue of fact.

“Punitive damages may be recovered under section 3294 ‘where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice.’ [Citation.]” (Butte Fire Cases, supra, 24 Cal.App.5th at p. 1159.) “Under the clear and convincing standard, the evidence must be ‘ “ ‘ “so clear as to leave no substantial doubt” ’ ” ’ and ‘ “ ‘ “sufficiently strong to command the unhesitating assent of every reasonable mind.” ’ ” ’ [Citation.] Although the clear and convincing evidentiary standard is a stringent one, ‘it does not impose on a plaintiff the obligation to “prove” a case for punitive damages at summary judgment [or summary adjudication].’ [Citations.] Even so, ‘where the plaintiff’s ultimate burden of proof will be by clear and convincing evidence, the higher standard of proof must be taken into account in ruling on a motion for summary judgment or summary adjudication, since if a plaintiff is to prevail on a claim for punitive damages, it will be necessary that the evidence presented meet the higher evidentiary standard.’ [Citation.] … Summary judgment or summary adjudication ‘ “ ‘on the issue of punitive damages is proper’ only ‘when no reasonable jury could find the plaintiff’s evidence to be clear and convincing proof of malice, fraud or oppression.’ ” ’ [Citation.]” (Id. at pp. 1158–1159.)

In Butte Fire Cases, the court held: “Plaintiffs argue that PG&E evinces a cavalier attitude towards public safety, which justifies an award of punitive damages. They point to numerous potential shortcomings in PG&E’s risk management controls and fire mitigation efforts, raising thought-provoking questions about the efficacy of the risk and compliance committee’s reporting structure, the wisdom of the decision to extend the routine patrol cycle in 2013 and loosen hiring standards for seasonal CEMA inspectors, the soundness of the company’s audit methodologies and incentives for reducing patrol workload, and the timeliness of Quantum Spatial’s delivery of LiDAR data. But these criticisms, whatever their merits, do not amount to clear and convincing proof that PG&E acted with malice. At most, plaintiffs’ evidence shows ‘ “ ‘mere carelessness or ignorance,’ ” ’ which is insufficient to establish malice. [Citation.] We therefore conclude, as the trial court did, that no reasonable jury could find plaintiffs’ challenges to PG&E’s risk management controls and fire mitigation efforts to be clear and convincing proof of malice.” (Butte Fire Cases, supra, 24 Cal.App.5th at pp. 1170–1171.)

In opposition, Venoco asserts that this case is more like Romo v. Ford Motor Co. (2002) 99 Cal.App.4th 1115 (Romo I), cert. granted and judgment vacated by Ford Motor Co. v. Romo (2003) 538 U.S. 1028 [123 S.Ct. 2072, 155 L.Ed.2d 1056]. Romo I is summarized in Butte Fire Cases:

“Romo I arose out of a car accident that resulted in the deaths of three members of the Romo family. [Citation.] During the accident, the family car, a 1978 Ford Bronco, rolled over several times. As the car rolled, a steel portion of the roof collapsed, killing the car’s driver. A fiberglass portion of the roof broke loose, striking and killing two passengers. Three remaining passengers survived with injuries. [Citation.]

“The surviving family members sued Ford on products liability and negligence theories, seeking compensatory and punitive damages. [Citation.] Following a four-month trial, the jury returned a verdict of approximately $6 million in compensatory damages and $290 million in punitive damages. [Citation, fn.] The trial court then reduced the compensatory damages to approximately $5 million based on comparative fault and granted a motion for a new trial on the issue of punitive damages. [Citation.] Both sides appealed. [Citation.]

“On appeal, Ford argued that the plaintiffs failed to present sufficient evidence of malicious or despicable conduct. [Citation.] Specifically, Ford argued that the plaintiffs failed to present clear and convincing proof that ‘ “at least one particular Ford employee, officer, director or managing agent had the requisite malicious state of mind in 1978.” ’ [Citation.] The court rejected Ford’s argument, characterizing it as a ‘fundamental misconception of the required proof.’ [Citation.] The court then offered an overview of the ‘managing agent’ requirement found in section 3294, subdivision (b), noting: ‘In most of the cases in which the “managing agent” issue has resulted in reversal of a punitive damage award, initial liability arises from a particular tortious act of an employee of the corporation. [Citations.] Defendant has cited no case, and our own research has failed to disclose any case, in which a series of corporate actions and decisions, such as the design, production, and marketing of an automobile, has been found inadequate to support an award of punitive damages on the basis that the multitude of employees involved in various aspects of the process were not high enough in the corporate chain of command. When the entire organization is involved in the acts that constitute malice, there is no danger a blameless corporation will be punished for bad acts over which it had no control, the primary goal of the “managing agent” requirement. [Citation.]’ [Citation.[

“The court continued, ‘There is no requirement that the evidence establish that a particular committee or officer of the corporation acted on a particular date with “malice.” A corporate defendant cannot shield itself from liability through layers of management committees and the sheer size of the management structure. It is enough if the evidence permits a clear and convincing inference that within the corporate hierarchy authorized persons acted despicably in “willful and conscious disregard of the rights or safety of others.” [Citation.]’ [Citation.]

“The court also rejected Ford’s argument that the plaintiffs failed to ‘ “present evidence of any ‘malicious or despicable’ conduct with respect to the design and production of the 1978 Bronco,” ’ stating: ‘This ignores the fact that the design and production of the vehicle was the despicable conduct: we think it obvious that putting on the market a motor vehicle with a known propensity to roll over and, while giving the vehicle the appearance of sturdiness, consciously deciding not to provide adequate crush protection to properly belted passengers (in the words of a corporate memo introduced in evidence, “penalizing” passengers for wearing a seatbelt) constitutes despicable conduct. Such conduct could kill people. The question is not whether the conduct, if it occurred, was despicable, the question is whether there is sufficient evidence from which a rational trier of fact could find that the knowing conduct occurred.’ [Citation.]

“Applying these standards, the court found that the plaintiffs presented substantial evidence permitting an inference that Ford willfully and consciously ignored the dangers inherent in its Bronco design, resulting in the deaths of three persons. [Citation.] Among other things, the court found that the plaintiffs presented clear and convincing evidence that Ford’s policymakers ignored the company’s own internal safety standards, created a false appearance of the presence of an integral roll-bar, and declined to test the strength of the roof before placing the car in production. [Citation.] On this record, the court found that there was substantial evidence permitting a reasonable trier of fact to conclude that Ford’s decision to put an unreinforced fiberglass roof on the 1978 Bronco was despicable. [Citation.]” (Butte Fire Cases, supra, 24 Cal.App.5th at pp. 1171–1173.)

Butte Fire Cases court distinguished Romo I:

“That PG&E adopted policies that failed to prevent the Butte Fire does not, without more, raise a triable issue as to malice. Although plaintiffs need not produce a ‘smoking gun,’ they must nevertheless present evidence that ‘permits a clear and convincing inference that within the corporate hierarchy authorized persons acted despicably in “willful and conscious disregard of the rights or safety of others.” ’ [Citation.] Plaintiffs have failed to present any such evidence.

“Romo I illustrates the point. There, the plaintiffs offered evidence that Ford’s decision-makers disregarded the determination of the company’s own safety engineers that unreinforced fiberglass should never be used for components comprising the passenger compartment, and no utility vehicle should be produced without a roll bar. [Citation.] The plaintiffs also offered evidence to support an inference that Ford’s decision-makers disregarded safety policies dictating that crush resistance should have been higher, and declined to conduct preproduction testing. [Citation.] Here, by contrast, there was no evidence, let alone clear and convincing evidence, that the company consciously compromised standards that might have prevented harm to plaintiffs or willfully declined to conduct risk assessments that could have revealed weaknesses in the company’s approach to a known risk. [Citation.] Although plaintiffs dismiss the company’s risk management controls and fire mitigation efforts as a mere ‘façade,’ they fail to produce clear and convincing evidence from which a reasonable jury could find that PG&E consciously disregarded the risk of wildfire or willfully ignored fire safety standards.” (Butte Fire Cases, supra, 24 Cal.App.5th at pp. 1173–1174.)

Venoco here has failed to meet its burden in the same way that the plaintiffs failed in Butte Fire Cases by not producing clear and convincing evidence that Plains consciously compromised standards that might have prevented harm or willfully declined to conduct risk assessments that could have revealed weaknesses in the company’s approach to a known risk. Venoco’s showing of fault in Plains’ risk management program is insufficient to show malice by clear and convincing evidence. Indeed, Venoco tacitly recognizes the weakness of its own evidence: “Reasonable minds can differ as to whether Defendants’ conduct was ‘despicable’ and evidenced a ‘conscious disregard of the rights or safety of others.’ ” (Opposition, at p. 19.) Clear and convincing evidence, by definition, requires more persuasive value than evidence where “reasonable minds can differ.” (See In re Angelia P. (1981) 28 Cal.3d 908, 919 [“ ‘Clear and convincing’ evidence requires a finding of high probability. This standard is not new. We described such a test, 80 years ago, as requiring that the evidence be ‘ “so clear as to leave no substantial doubt”; “sufficiently strong to command the unhesitating assent of every reasonable mind.” ’ [Citation.] It retains validity today.”].)

Accordingly, the court will grant Plains’ motion for summary adjudication on the issue of punitive damages.

(6)       Procedural and Evidentiary Matters

The parties have asserted certain evidentiary and other objections. The court overrules Plains’ objection Nos. 7, 8, 9, 10, and 11. The court does not otherwise rule on these evidentiary objections. (See Code Civ. Proc., § 437c, subd. (q).)

The court notes that Plains’ separate statement has consecutively numbered its separate statement facts so that identical separate statement facts as applied to different issues have different separate statement numbers. Venoco has similarly numbered additional facts presented in its response separate statement with numbers within the same numbering system as Plains. The consequence of this numbering scheme is to make it extremely difficult for the court to identify which separate statement facts are duplicative. The court’s preference is that each separate statement fact bear the same number wherever it may appear so that those unique facts can be easily ascertained.