Robert Waldon v. Arizona Public Service Co.

FILED
NOT FOR PUBLICATION
MAR 02 2016
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

ROBERT WALDON, an individual, and No. 14-55076
SIR WALDON, INC., a California
Business Entity, individually and on behalf D.C. No. 3:13-cv-02086-H-KSC
of all others similarly situated, DBA
Oggi’s Pizza,
MEMORANDUM*
Plaintiffs–Appellants,

v.

ARIZONA PUBLIC SERVICE
COMPANY, an Arizona Corporation; et
al.,

Defendants–Appellees.

Appeal from the United States District Court
for the Southern District of California
Marilyn L. Huff, District Judge, Presiding

Argued and Submitted February 9, 2016
Pasadena, California

Before: FARRIS, CLIFTON, and BEA, Circuit Judges.

*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.

1
 Plaintiffs brought this suit as a putative class action on behalf of “[a]ll

individuals and business entities located within the State[] of California who

incurred economic damages” from a 2011 blackout that started in Arizona and

spread to parts of California and Mexico. They alleged that Arizona Public Service

Company (“APS”), an Arizona-based electric utility,1 violated federal electricity-

reliability standards, see 16 U.S.C. § 824o, which caused the ensuing cascading

blackout, and that APS is thus negligent per se under Arizona law. The district

court determined that California law, not Arizona law, applied and dismissed the

case under Fed. R. Civ. P. 12(b)(6) because the plaintiffs failed to state a claim

under California law. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

1. The district court correctly concluded that California law does not

recognize plaintiffs’ cause of action for negligence per se. In California, the

violation of a statute creates a presumption of negligence, but does not give the

plaintiff a negligence cause of action if the law does not otherwise impose a duty

on the defendant. See Cal. Evid. Code § 669; Ramirez v. Nelson, 188 P.3d 659,

664–66 (Cal. 2008); Rice v. Ctr. Point, Inc., 65 Cal. Rptr. 3d 312, 319 (Ct. App.

2007). “In the absence of a contract between the utility and the consumer expressly

1
Plaintiffs also brought suit against APS’s parent company and several
unnamed defendants. We use “APS” when referring to all defendants.

2
providing for the furnishing of a service for a specific purpose, a public utility

owes no duty to a person injured as a result of an interruption of service or a failure

to provide service.” White v. S. Cal. Edison Co., 30 Cal. Rptr. 2d 431, 435–36 (Ct.

App. 1994). Plaintiffs were not customers of APS and had no contractual claim to

damages. The district court thus correctly held that plaintiffs failed to state a claim

under California law.

2. Plaintiffs also have not stated a claim under Arizona law. In Arizona,

unlike in California, the violation of a statute may give rise to a cause of action for

negligence per se, even if the law does not otherwise impose a duty in tort on the

defendant. See, e.g., Salt River Valley Water Users’ Ass’n v. Compton, 8 P.2d 249,

251 (Ariz. 1932), abrogated on other grounds by MacNeil v. Perkins, 324 P.2d 211

(Ariz. 1958). An Arizona court “may adopt a statute as the relevant standard of

care if it first determines that the statute’s purpose is in part to protect a class of

persons that includes the plaintiff and the specific interest at issue from the type of

harm that occurred and against the particular action that caused the harm.” Tellez v.

Saban, 933 P.2d 1233, 1237 (Ariz. Ct. App. 1996).

APS’s alleged violations of federal electricity-reliability standards do not

give rise to a claim of negligence per se under Arizona law. Federal regulation

extends to the wholesale electricity market and leaves retail regulation of power

3
distribution to state utility commissions. See, e.g., 16 U.S.C. §§ 824(a), 824o(a)(3);

FERC v. Elec. Power Supply Ass’n, 136 S. Ct. 760, 767–68 (2016). Electricity-

reliability standards exist “to provide for reliable operation of the bulk-power

system,” 16 U.S.C. § 824o(a)(3), not to protect end users from power outages.

Indeed, the statutory scheme gives the power to enforce electricity-reliability

standards to a federal agency and a self-regulatory body, see id. § 824o(e), not to

electricity consumers. Federal electricity-reliability standards thus create a duty

only between electric utilities and the government, and a violation of the reliability

standards does not support a claim of negligence per se under Arizona law. Cf.

Sullivan v. Pulte Home Corp., 354 P.3d 424, 427–28 (Ariz. Ct. App. 2015); Gilbert

Tuscany Lender, LLC v. Wells Fargo Bank, 307 P.3d 1025, 1028–29 (Ariz. Ct.

App. 2013).

Two other points further buttress this conclusion. First, the federal

electricity-reliability standards do not “proscribe certain or specific acts,” but

create “a general standard,” which “does not support negligence per se.” Hutto v.

Francisco, 107 P.3d 934, 937 (Ariz. Ct. App. 2005); see Griffith v. Valley of Sun

Recovery & Adjustment Bureau, Inc., 613 P.2d 1283, 1285 (Ariz. Ct. App. 1980).

Second, “[a]lthough negligence actions are part of Arizona’s common law, a

negligence action against a public utility for service interruption or other economic

4
losses is not.” U.S. Airways, Inc. v. Qwest Corp., 361 P.3d 942, 947 (Ariz. Ct. App.

2015). Accepting the plaintiffs’ theory would create broad state-law liability for

public utilities under a federal statutory and regulatory scheme that would conflict

with Arizona public policy. See id. at 949; see also Lips v. Scottsdale Healthcare

Corp., 229 P.3d 1008, 1010 (Ariz. 2010) (en banc) (“Courts have not recognized a

general duty to exercise reasonable care for the purely economic well-being of

others, as distinguished from their physical safety or the physical safety of their

property. This reticence reflects concerns to avoid imposing onerous and possibly

indeterminate liability on defendants and undesirably burdening courts with

litigation.” (citation omitted)).

For these reasons, plaintiffs did not state a claim under either California law

or Arizona law. Furthermore, the district court correctly concluded that amendment

of the plaintiffs’ complaint would be futile, as neither state’s law provides for tort

liability under the circumstances of this case. The district court’s order granting

APS’s motion to dismiss is thus affirmed.

AFFIRMED.2

2
We grant the motion of Edison Electric Institute, American Public Power
Association, National Rural Electric Cooperative Association, and Electric Power
Supply Association for leave to file an amicus curiae brief in support of APS. We
also grant the requests by plaintiffs and APS for judicial notice.

5