California State Lands Commission, et al., v. Plains Pipeline, L.P., et al

Case Number

18CV02504

Case Type

Hearing Date / Time

Fri, 08/23/2024 - 09:00

Nature of Proceedings

Motion of Defendants for Summary Adjudication

Tentative Ruling

California State Lands Commission, et al., v. Plains Pipeline, L.P., et al. 

Case No. 18CV02504           

Hearing Date: August 23, 2024                                                          

HEARING:              Motion of Defendants for Summary Adjudication                      

ATTORNEYS:        For Plaintiff California State Lands Commission: Rob Bonta, Brian D. Wesley, Michael Zarro, Matthew C. Heyn, Office of the California Attorney General

                             For Plaintiff Aspen American Insurance Company: David C. Veis, Laura P. Nash, Clyde & Co. LLP

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

                                   

                                   

TENTATIVE RULING:

The motion of defendants Plains Pipeline, L.P., Plains All American Pipeline, L.P., Plains GP Holdings, L.P., Plains APP, L.P., Plains All American GP LLP, and PA GP LLC for summary adjudication of plaintiff California State Lands Commission’s claim for punitive damages is denied.

Background:

As summarized by the Court of Appeal, plaintiffs State Lands Commission (the Commission) and Aspen American Insurance Company (Aspen) allege (then in their first amended complaint [FAC], now in their second amended complaint [SAC]) against defendants Plains Pipeline, L.P., Plains All American Pipeline, L.P., Plains GP Holdings, L.P., Plains APP, L.P., Plains All American GP LLP, and PA GP LLC (collectively, Plains):

“The Commission administers public lands owned by the state, including submerged lands. [Citation.] The Commission leased offshore lands to Venoco, Inc., to operate Platform Holly [(the Leased Lands)]. Oil and gas produced on the platform were pumped to an onshore facility and pipeline operated by Venoco. Several miles later, the oil and gas reached a pump station where, together with oil and gas from three ExxonMobil platforms, they were pumped into the pipeline at issue here, Line 901. Line 901 was owned and operated by Plains. It ran up the coast where it connected to other pipelines.

“Plains operated Line 901 pursuant to a Federal Energy Regulatory Commission (FERC) tariff that applied to ‘[a]ny Shipper desiring to tender crude petroleum for transportation.’ The tariff set rates and permitted Plains to refuse oil that did not meet specified standards. If all the oil submitted for distribution exceeded Plains’ capacity, the total capacity was required to be prorated among the shippers.

“Plains failed to reasonably monitor, maintain, and repair Line 901. Pipeline walls were corroded to as little as 1/16-inch thick. On May 19, 2015, Line 901 ruptured at Refugio State Beach, spilling 140,000 gallons of crude oil onto the beach and into the ocean. Line 901 was shut down and remains closed.

“Because the shutdown eliminated the only feasible method to transport oil and gas from Venoco’s onshore facility to refineries, Venoco stopped production, thus ending its obligation to pay royalties to the Commission. Venoco quitclaimed its lease back to the state. The shutdown of Line 901 caused property damage to the land and its facilities that the Commission was obligated to remediate and repair, including capping wells to prevent future leaks.

“Plains and Venoco had a connection agreement for Line 901, but neither the Commission nor Aspen were parties to the agreement. Aspen paid the Commission $22 million to meet a portion of Venoco’s bonded obligations to maintain the lands safely and to decommission the wells and other structures. Aspen was subrogated to the rights of the Commission against Plains.” (State Lands Commission v. Plains Pipeline, L.P. (2020) 57 Cal.App.5th 582, 584–585 (State Lands Commission).)

(1)       Facts Asserted in Motion and Opposition

(Note: This recitation of facts is intended to provide background but is not intended to be comprehensive of the facts and evidence presented by the parties.)

On May 19, 2015, Line 901 failed and oil was released from the pipeline. (Plaintiff’s Response Separate Statement [PSS], fact 1 [undisputed on this point].) According to Plains, the failure was of an area of external corrosion on Line 901. (Defendants’ Separate Statement [DSS], fact 1; SAC, ¶¶ 56-59.)

Lines 901 and 903 are underground insulated pipes. (Defendants’ Reply Separate Statement [DRSS], undisputed additional fact 24.) They were coated with a protective coal tar urethane. (Ibid.) On the outside of this protective coating was a layer of rigid polyurethane foam, surrounded by a Polyken polyethylene tape. (Ibid.) The foam insulated the pipeline to maintain the temperature of the heated oil that flowed through Line 901; the tape was supposed to protect the pipeline and the foam from moisture intrusion. (Ibid.)

Insulated pipelines carry the risk of corrosion under insulation, i.e., pipe rust from water trapped under its insulation. (DRSS, undisputed additional fact 25 [subject to evidentiary objection].) The mechanism for corrosion under insulation, wet-dry cycling, is different than other corrosion and can result in highly accelerated corrosion. (DRSS, undisputed additional fact 26 [subject to objection].) Corrosion under insulation is a unique corrosion mechanism that necessitates its own integrity risk assessment. (DRSS, undisputed additional facts 26, 28.) The failure site on Line 901 was caused by corrosion under insulation. (DRSS, undisputed additional fact 27.)

Cathodic protection is a technique used to inhibit the corrosion of a metal surface by making it the cathode of an electrochemical cell. (DRSS, undisputed additional fact 34 [subject to objection].) Buried or submerged pipelines are required by federal regulations to have cathodic protection. (49 C.F.R. § 195.563 (2024).)

According to plaintiffs, Plains did not take measures sufficient to identify the threat of corrosion under insulation and prevent it from leading to a leak. (PSS, additional fact 29 & evidence cited.)

According to Plains, Plains “maintained” a pipeline integrity management program intended to mitigate the risk of external corrosion. (DSS, fact 2.) Plaintiffs admit that Plains published a document called its “Integrity Management Plan” (IMP), but, as discussed below, dispute that Plains adhered to this plan.

Plains had 50 to 80 integrity management employees. (PSS, fact 3 [undisputed on this point].) Plains inspected 3,000 to 5,000 miles of pipeline annually. (PSS, fact 4 [undisputed on this point].) Plains spent $39 million to $107 million each year on the inspection, testing, and correction of identified anomalies. (PSS, fact 5 [undisputed on this point].) Plains spent $135 million to $491 million annually on pipeline maintenance and integrity combined. (PSS, fact 6 [undisputed on this point].)

Plains’ IMP consisted of, among other measures, regular in-line inspections (ILI) of its pipelines conducted by Rosen contractors, a highly regarded ILI company. (PSS, fact 7 [undisputed on this point].) Rosen performed inspections on Line 901 in 2007, 2012, and 2015. (PSS, undisputed fact 8.) Plains made repairs to the pipeline following the 2007 and 2012 inspections prior to 2015. (PSS, fact 9 [undisputed on this point].) The 2015 inspection happened two weeks before the spill and new issues identified in this inspection could not have been repaired in two weeks. (PSS, fact 10 [undisputed on this point].)

Plains’ IMP and federal regulations require Plains to conduct periodic preventative and mitigative sessions regarding facilities such as Line 901 and complete a Form F11-2 report that must be available to PHMSA during audits. (DRSS, additional undisputed fact 32.) John Shelton, the overall manager of Plains corrosion group, was part of the October 8, 2009, preventative and mitigative meeting for Line 901, which meeting was to identify specific threats to Line 901’s integrity. (Ibid.) During that session there was no discussion of corrosion under insulation. (PSS, additional fact 33 & evidence cited.)

The 2012 inspection reported that the point that eventually failed had lost 45 percent of its wall depth. (PSS, undisputed fact 11.) According to Plains, none of the inspections of Line 901 detected the failure anomaly at a depth that would have required Plains to dig or repair the failure anomaly. (DSS, fact 12 & evidence cited.) According to plaintiffs, PHMSA regulations and the IMP required Plains to evaluate what risks, threats, and failure mechanisms may exist and to mitigate those risks accordingly. (PSS, response to fact 12 & evidence cited.) Contractors hired by Plains completed a set of repairs near the failure location, but the contractors reported that the condition of the pipe coating was “good,” other areas were “fair,” and that the anomalies repaired included both an undercall and an overcall. (DSS, fact 13 & evidence cited.) Plaintiffs do not dispute that a set of repairs were completed near the failure location, but dispute that the anomaly that ultimately failed, which was six feet away, was inspected. (PSS, response to fact 13 & evidence cited.) Had the 2012 ILI accurately reported the anomaly’s depth, Plains would have repaired it. (PSS, fact 14 [disputed only as vague and speculative].)

According to plaintiffs, Plains’ 2012 ILI run on Lines 901 and 903 revealed problems with the pipelines and the accuracy of the ILI run. (PSS, additional fact 40 & evidence cited.) Nine large anomalies, ranging in size between 11 and 42 inches, that were known to exist based on 2007 field digs did not show up at all in the 2012 data. (Ibid.) The 2012 ILI run misidentified the size of many other anomalies from 2007, including one identified as 2 inches in 2012 that was measured as 43 inches during the 2007 field dig and one identified as 4 inches that was 27 inches. (Ibid.) According to defendants, this fact is disputed but not material. (DRSS, response to additional fact 40.) Plains’ IMP requires that where there are “[l]arge discrepancies between pig calls and actual size of dents, metal loss or crack like anomalies,” the “Integrity Specialist initiates ILI tool vendor regrading of raw tool data.” (DRSS, additional fact 41 [not disputed on this point].) Plains did not discuss the undercalls from its 2012 ILI run with Rosen. (PSS additional fact 42 & evidence cited.) Plains did not provide the results of its digs for the 2012 ILI to Rosen until after the 2015 spill. (DRSS, response to additional fact 43.)

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’ IMP or the events before the spill that suggested Plains intentionally ignored or consciously disregarded the risk of corrosion on Line 901. (DSS, fact 15 & evidence cited.) According to plaintiffs, the investigator, Dr. Buckingham, is not independent and that Buckingham also concluded that the mitigative actions taken by Plains on Line 901 did not adequately address the elevated integrity threat of corrosion under insulation. (PSS, response to fact 15 & evidence cited.)

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 IMP to Line 901. (PSS, undisputed fact 16.) During the 2013 audit, PHMSA reviewed Plains’ documents relating to its integrity management of Line 901. (PSS, fact 17 [undisputed on this point].) According to plaintiffs, Plains presented at least one document it knew inaccurately states that there was nothing to interfere with the cathodic protection on Line 901 and failed to report several instances of water intrusion and coating failure during the repairs of Line 901. (PSS, response to fact 17 & evidence cited.)

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 18.) According to plaintiffs, PHMSA identified deficiencies with respect to inspections and maintenance of Line 901, including the lack of documentation to demonstrate the consideration and decision-making process of potential P&M measures. (PSS, response to fact 18 & evidence cited.)

Prior to the spill, Plains maintained control room and leak monitoring procedures. (PSS, undisputed fact 19.) The employee responsible for monitoring the line, referred to as the “controller,” received real-time information on the flow rate, pressure, and other conditions in the pipeline from an industry-standard electronic monitoring system. (PSS, undisputed fact 20.) The controller would receive alarms if those conditions fell outside parameters set by Plains and would respond to such notices by either continuing to monitor or stopping flow of oil into the line, in line with Plains’ control room procedures. (PSS, undisputed fact 21.) James Vaughn, the controller on the day of the spill, was not an officer, director, or managing agent for Plains. (PSS, undisputed fact 22.)

John Shelton was the overall manager of Plains corrosion group from 2005 to 2016. (DRSS, additional undisputed fact 30.) He was a manager responsible for overseeing the cathodic protections system addressing the effects of corrosion on Line 901 and the execution and performance of Plains’ IMP. (Ibid.) Shelton was aware corrosion under insulation posed the most serious threat to Line 901. (DRSS, additional undisputed fact 31.) Shelton was part of the October 8, 2009, preventative and mitigative meeting for Line 901, which meeting was to identify specific threats to its integrity. (DRSS, additional undisputed fact 32.) According to plaintiffs, there was no discussion of corrosion under insulation; according to defendants, the supporting testimony for this assertion was much narrower in scope. (DRSS, additional fact 33 & response thereto.)

According to plaintiffs, Plains knew for at least 10 years prior to the 2015 rupture that cathodic protections systems are ineffective at preventing corrosion on insulated, underground pipelines. (PSS, additional fact 35 & evidence cited.) According to defendants, the evidence does not support this assertion and that cathodic protection on insulated pipelines where there is a gap or “holiday” in the shielding. (DRSS, response to additional fact 35.)

Shelton was aware of a 1992 NACE paper, Effectiveness of Cathodic Protection on Thermally Insulated Underground Metallic Structures (revised in 2006), which reported that cathodic protection was not effective in addressing the effects of corrosion under insulated pipes such as Lines 901 and 903. (DRSS, additional fact 36 & response thereto.) According to defendants, Plains implemented all of the industry recommended steps for addressing those limitations. (Ibid.)

Plains was criminally convicted after a jury found “Plains knew or should have known that its maintenance, integrity management and operations policies and practice would cause a discharge of crude oil into the Pacific Ocean.” (DRSS, undisputed additional fact 23.)

(2)       Procedural History

On May 18, 2018, plaintiffs filed their original complaint against Plains asserting six causes of action: (1) & (2) negligence; (3) & (4) willful misconduct; (5) interference with prospective economic advantage; and (6) Lempert-Keene-Seastrand Oil Spill Prevention and Response Act Liability (Gov. Code, § 8670.56.5) (OSPRA). On July 27, 2018, plaintiffs filed their FAC asserting the same six causes of action.

Plains demurred to the FAC. Before the demurrer was heard, plaintiff voluntarily dismissed the sixth cause of action based upon liability under OSPRA. On January 8, 2019, the court issued its order after hearing sustaining the demurrer to all remaining causes of action of the FAC without leave to amend.

On appeal of the judgment following the sustaining of the demurrer, the Court of Appeal reversed in State Lands Commission. (State Lands Commission, supra, 57 Cal.App.5th at p. 584.) The remittitur from the Court of Appeal was filed in this court on March 17, 2021.

On March 22, 2021, Plains filed its original answer to the FAC generally denying the allegations of the FAC and asserting 24 affirmative defenses. On May 7, 2021, Plains filed its first amended answer (FAA), which also generally denies the allegations of the FAC and asserts 24 affirmative defenses.

On July 13, 2022, plaintiffs filed their motion for summary adjudication as to the tenth (assumption of the risk), twentieth (barred by direct benefit), and twenty-first affirmative defenses (barred by agreement).

On December 14, 2022, Plains filed its first motion for summary judgment or alternatively for summary adjudication. Plains asserted five grounds for its motion: (1) the Commission’s claims are subject to the shut-in rights and limitation on liability provisions in the Connection Agreement, which bar the Commission’s claims; (2) Plains owes no duty to the Commission for losses stemming from Plains’ decision not to restart its pipeline; (3) Plains owes no duty to the Commission for pure economic losses that do not flow from physical injury to property; (4) the Commission’s losses were not proximately caused by Plains’ conduct; and (5) the Commission is not the real party in interest because its claims are derivative of

Venoco’s.

The motions for summary judgment and summary adjudication were heard on April 10, 2023. By order after hearing filed on April 13, 2023, the court denied both motions in their entirety.

On November 6, 2023, the court entered its order on the stipulation of the parties granting plaintiffs leave to file a second amended complaint (SAC). On November 13, 2023, plaintiffs filed their SAC asserting five causes of action: (1) & (2) negligence; (3) & (4) willful misconduct; and (5) negligent interference with prospective economic advantage. The Commission seeks an award of punitive damages against defendants with respect to the third cause of action. Pursuant to the stipulation, the previously filed answer is deemed Plains’ response to the SAC.

On April 18, 2024, Plains filed their motion for leave to file this summary adjudication motion as to the Commission’s claim for punitive damages. On May 10, the court granted that motion. On May 16, 2024, Plains filed this motion for summary adjudication. The motion is opposed by the Commission.

Analysis:

“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).)

“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.)

Here, summary adjudication is of the Commission’s claim for punitive damages. “If the plaintiff is going to prevail on a punitive damages claim, he or she can only do so by establishing malice, oppression or fraud by clear and convincing evidence. Thus, any evidence submitted in response to a motion for summary adjudication must necessarily meet that standard.” (Basich v. Allstate Ins. Co. (2001) 87 Cal.App.4th 1112, 1121; see also Civ. Code, § 3294, subd. (a).)

(1)       Davis v. Plains Pipeline, L.P.

The reason for the motion for leave to file this motion for summary adjudication notwithstanding the court’s scheduling orders is the court’s decision in Davis v. Plains Pipeline, L.P., Santa Barbara County Superior Court case No. 16C01319, a case that is related to the instant case, in which the court granted defendants’ motion for summary adjudication of the Davis plaintiff’s claim for punitive damages. Because the cases are related and involve the same underlying oil spill, there is necessarily a certain amount of overlap in the arguments and corresponding analysis. Notwithstanding, the determination in Davis was based upon the evidence and arguments made in that case. The court evaluates this motion on its own merits, considering the evidence and arguments presented by the parties in this motion separate from the court’s determination in Davis.

(2)       Evidentiary Matters

In reply, Plains makes various objections to the evidence presented by the Commission in opposition.

Objections to exhibits as irrelevant and more prejudicial than probative are overruled. The respective exhibits are not wholly irrelevant and, in the context of this motion for summary adjudication, there is no issue of prejudice in considering the evidence to the extent it is relevant. Objections 1 and 2 are overruled.

With respect to expert evidence: “In these circumstances, the expert’s declaration is to be liberally construed. [Citation.] We must resolve ‘any doubts as to the propriety of granting the motion in favor of the plaintiff. [Citation.]’ [Citation.] The requisite of a detailed, reasoned explanation for expert opinions applies to ‘expert declarations in support of summary judgment,’ not to expert declarations in opposition to summary judgment. [Citation.] This is because a defendant moving for summary judgment bears the heavy ‘ “burden of persuasion that there is no genuine issue of material fact and that he is entitled to judgment as a matter of law.” [Citation.]’ [Citation.] On the other hand, a plaintiff opposing a motion for summary judgment need only raise a triable issue of fact.” (Jennifer C. v. Los Angeles Unified School District (2008) 168 Cal.App.4th 1320, 1332-1333.)

“As a general rule, the opinion of an expert is admissible when it is ‘[r]elated to a subject that is sufficiently beyond common experience that the opinion of an expert would assist the trier of fact....’ (Evid. Code, § 801, subd. (a).) Additionally, in California: ‘Testimony in the form of an opinion that is otherwise admissible is not objectionable because it embraces the ultimate issue to be decided by the trier of fact.’ (Evid. Code, § 805.) However, the admissibility of opinion evidence that embraces an ultimate issue in a case does not bestow upon an expert carte blanche to express any opinion he or she wishes. [Citation.] There are limits to expert testimony, not the least of which is the prohibition against admission of an expert’s opinion on a question of law.” (Summers v. A.L. Gilbert Co. (1999) 69 Cal.App.4th 1155, 1178.)

Objections 3 through 14 are overruled.

(3)       Butte Fire Cases and Romo I

Plains seeks summary adjudication of the Commission’s claim for punitive damages principally on the basis of the decision in 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 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 support of its 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, the Commission compares the facts here to those in 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.)

(4)       Punitive Damages

It is undisputed 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.) However, 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 finding malice for purposes of punitive damages is met.

As discussed in this motion, the principal difference between the parties is in their characterization of the evidence. Following the analysis of the Butte Fire Cases, Plains characterizes the evidence as showing that the spill was the result of an “honest error” whereby Plains’ risk management program was ineffective in identifying and preventing the oil spill here at issue. (Motion, at p. 7.) The Commission characterizes the evidence as Plains consciously compromising 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. (Opposition, at p. 16.) Because the summary adjudication standard turns on whether clear and convincing evidence, as evaluated by a reasonable trier of fact, shows “a willful and conscious disregard” by Plains, the issue in this motion is whether such willful and conscious disregard may be appropriately inferred from the evidence presented.

This problem of the appropriateness of inferences in this type of motion for summary adjudication is a nuanced problem of line drawing. The mere fact that the oil spill occurred is plainly insufficient. In its reply, Plains tends to focus on how individual failures in the risk management program, under the Butte Fire Cases analysis, are similarly insufficient. Plains’ arguments, however, ignore the impact of the inferences that may be made both from a combination of failures and from failures that are specific to the risks in play that led to the oil spill here. The Butte Fire Cases explains:

“We have no quarrel with the notion that an inference of corporate malice can be based on the existence of a company policy that willfully, consciously, and despicably disregards the rights and safety of others. [Citations.] We likewise accept the premise that corporate malice can be shown, in the case of a large corporation, ‘by piecing together knowledge and acts of the corporation’s multitude of managing agents.’ [Citation.] But plaintiffs would have us go one step further and hold that a company policy that fails to protect against a known risk of harm necessarily raises an inference of corporate malice, since the existence of the policy establishes the company’s state of mind with respect to the risk. Put another way, plaintiffs would have us conclude that an unsuccessful risk management policy necessarily reflects a conscious and willful company decision to ignore or disregard the risk. This we decline to do.” (Butte Fire Cases , supra, 24 Cal.App.5th at p. 1173.)

The Commission presents evidence focusing not just upon what happened (or did not happen) at Plains but also upon Plains’ knowledge of the risk that it was undertaking by its actions and inactions. The Commission presents evidence that the overall manager responsible for overseeing the cathodic protections system addressing the effects of corrosion on Line 901 and the execution and performance of Plains’ IMP was aware that corrosion under insulation posed the most serious external corrosion threat to Line 901. (DRSS, additional undisputed facts 30, 31.) At the same time, evidence is presented that buried insulated pipelines have unique problems and issues. (E.g., Katchmar depo., at pp. 103-104.) Notwithstanding a knowledge of these unique problems and risks and a legal obligation to identify them, these risks were not identified in the IMP as a risk. (Ibid.; see also DRSS, additional fact 29 & response thereto.) When these known serious risks are coupled with the evidence that large known anomalies did not show up in the 2012 data and Plains did not follow up to determine whether significant additional risks were being unidentified, there is a reasonable factual basis, within the standards for summary adjudication of this issue, to infer that the serious risks were being intentionally and consciously ignored.

In Butte Fire Cases, the court emphasized the record in that case did not support an inference of malice based upon general safety failures. (Butte Fire Cases, supra, 24 Cal.App.5th at pp. 1171 [“plaintiffs maintain that the problems with PG&E’s risk management controls and fire mitigation measures were symptoms of a larger problem: a corporate culture that prioritizes profits over safety”], 1175 [“nothing in the record supports an inference that PG&E willfully or consciously disregarded the need for contractors to use properly trained employees”], 1176 [“there is no evidence that PG&E acted maliciously in setting policies designed to minimize the risk of wildfire or engaging contractors to assist in the company’s fire mitigation efforts”].) The evidence presented by the Commission of Plains’ knowledge and failures are specific to the unique, substantial risks that led to the oil spill here at issue. If credited by the trier of fact and all reasonable inferences are drawn in favor of plaintiffs, the evidence constitutes clear and convincing evidence in support of a finding of malice and an award of punitive damages against Plains.

Under the standards for summary adjudication applicable to this motion, the court therefore finds that the Commission has met its burden to demonstrate one or more triable issues of fact. Plains’ motion for summary adjudication will therefore be denied.