Public Entities Win on Inverse Condemnation

Public Entities Win on Inverse Condemnation

Updated on February 21, 2020

Last year the California Supreme Court (the “Court”) heard City of Oroville v. Superior Court of Butte County (“City of Orville”), its first inverse condemnation case in roughly twenty-two years.  To the benefit of public entities, the Court found in favor of the City of Oroville (the “City”).  To do so, the Court reversed the decisions of the trial and appellate level courts.  Thus, the Court ruled against the decisions of the lower courts which were in favor of the property owner.  The Court’s basis for reversing the lower courts’ decisions were significant for many reasons.  Most significant, the Court established a standard more deferential to the government that the lower courts must now apply.  The days of holding the government strictly liable for harm caused by public projects to private property is now in the past.  The following is a summary of the facts and holding from the City of Orville.

Case Facts & Holding

The City of Orville case was about a sewage backup from the City’s sewage maintenance system that damaged a dental office.  Specifically, the dentists complained that the system failed when it “allowed sewage to back up into their building instead of [having] siphon[ed] the waste away from their private property.”  (City of Oroville v. Superior Court of Butte County (2019) 7 Cal.5th 1091, 1098.)  The sewage system’s failure was not in dispute.  Instead, in dispute was the City’s contention that the dentists themselves were to blame because the dentists had failed to install a legally-required backwater valve that would have prevented the damage.  (Id.)  The Court agreed.

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In agreeing with the City, the Court focused on the core question of whether the sewer system, “as deliberately designed, constructed, or maintained,” was the substantial cause for damage suffered by the dentist’s office.  (Id.)  In answering the question, the Court held that because the dentists failed to install the legally required valve, which expert testimony revealed would have prevented the damage, the sewage system was not the substantial cause.  (Id.)

In reaching its decision, the Court had to overturn any prior notion that public entities are strictly liable or otherwise automatically liable for “any conceivable damage bearing some kind of connection, however remote, to a public improvement.”  (Id. at 1098.)  The court balanced this strict liability against the public policy concerns that “compensation allowed too liberally will seriously impede, if not stop, beneficial public improvements because of the greatly increased cost.” (Id. at 1103.)

Thus, to restrict public entities from liability for public projects, the Court created a new standard whereby liability will only be imposed against the government when “the damage to private property was substantially caused by inherent risks associated with the design, construction, or maintenance of a public improvement.”  (Id. at 1105.)  In other words, the dentists had to “demonstrate that the inherent risks posed by the sewer system as deliberately designed, constructed, or maintained manifested and were a substantial cause of its property damage.”  (Id. at 1108.)  As mentioned above, the Court held that the dentists failed to prove that any neglect by the City in maintaining its sewage system was the substantial cause of their harm when the dentists “failed to fulfill a responsibility to install a backwater valve, and that reasonable requirement would have prevented or substantially diminished the risk of the mishap that spawned this case.” (Id. at 1111.)

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The City of Orville is a significant win for public entities.  Going forward, strict liability will not necessarily apply whenever plaintiff’s in inverse condemnation cases are harmed by government projects.  Instead, the analysis will turn on the inherent risks of the project and whether any harm to private property from those risks were substantially caused by the project.  To evaluate the foregoing, it’s now appropriate to consider the plaintiff’s own acts or omissions.  It will be interesting to find out how lower courts will apply this new standard.