The New Jersey Board of Public Utilities (BPU) has rejected a proposal to disallow from rates "potentially stranded costs" incurred by Atlantic City Electric Co., an electric utility, under...
Of Blackouts and Lawsuits
Class-action claims for widespread utility service interruptions are a growing trend.
During the dog days of summer, a severe heat wave settles over the service territory of an electric utility. Electricity demand reaches an all-time peak as customers turn their air conditioners to the highest setting. Service interruptions occur throughout the utility's territory as high loads and low voltages cause breakers to trip, fuses to operate, transformers to overheat, and equipment to fail. When the heat at last subsides, the utility wants to repair its damaged image among customers and its worsened relationship with regulators.
But what kind of legal exposure does a utility face as a result of losses caused by the blackout-such as spoiled food and damaged electrical equipment for residential customers, and business interruption for commercial customers? Is that exposure limited to individual claims by disgruntled customers, or can the claims of all customers be litigated in a single proceeding to secure an aggregate damages award on behalf of all affected customers ()?
Plaintiffs today are all too quick to cry negligence when they have suffered a loss. Whether the case can be litigated as a class action will vastly affect the legal exposure facing the utility, literally making the difference between a claim of hundreds versus millions of dollars. Blackout class actions have been brought against utilities in Texas, Louisiana, Illinois, Arizona, New York, and New Jersey, and at least two have resulted in multi-million dollar settlements-all of which suggests that class actions for widespread service interruptions are a growing trend.
The Blackout Context
Several aspects of a widespread blackout make the use of the class-action device attractive. First, there is usually a large population of customers who lost power, and they can form a class to assert a common claim. Second, while the damages of individual class members are normally modest, aggregation of those claims results in a large number, often in the millions or tens of millions of dollars. And finally, public utilities are sufficiently flush (and insured) to be good for the judgment. As the infamous bank robber Willie Sutton put it, he robbed banks because "that's where the money is." 1
The principal cause of action in an electricity blackout class-action case normally is negligence. In most states, negligence requires the plaintiff to prove: (1) a duty of care to take reasonable steps to protect the plaintiff from harm; (2) that the defendant breached a standard of care on a particular matter, usually proven by expert testimony; (3) that the defendant's breach directly caused the plaintiff to suffer some loss; and (4) the amount of damages sustained.
Class actions generally are disfavored in the negligence context because, oftentimes, each plaintiff is injured as a result of differing and multiple accidents or events. As a result, the proofs offered at trial will differ among class members. For example, a class action against a hospital on behalf of all persons injured by medical malpractice is largely unheard of, since a finding of liability (or non-liability) for one incident of malpractice will have little or nothing to