PG&E moves to stop payment to some fire victims who settled after bankruptcy filing

As widely expected, Pacific Gas & Electric Co.'s Chapter 11 filing Tuesday had immediate implications for several pending claims against the company -- including some plaintiffs whose fire lawsuit settlements have not been paid. The filing could also have political implications as PG&E fights for survival.

The case was filed by attorneys with New York's Weil, Gotshal & Manges LLP and Keller & Bellvenutti LLP of San Francisco. In re: PG&E Corporation, 19-30089 (N.D. Cal. Bankruptcy Ct., filed Jan. 29, 2019).

The debtor's complaint included a motion to approve $5.5 billion in debtor-in-possession financing. The California Public Utilities Commission gave its approval for this money during a contentious hearing on Monday.

At a hearing Tuesday afternoon in San Francisco, U.S. Bankruptcy Judge Dennis Montali approved a bridge order so the company could keep operating, and set another hearing for Thursday.

The complaint lists assets of $71.4 billion and liabilities at $51.7 billion. Critics of the company have noted PG&E isn't insolvent, but the filing lists $30 billion in "potential liability with respect to the 2017 and 2018 Northern California wildfires."

"The debtors' decision to seek relief under Chapter 11 ... represents the only viable alternative under the stark circumstances with which the debtors are faced, and is in the best interests of all of the debtors' stakeholders, including their millions of customers, employees, wildfire claimants, other creditors, employees and shareholders," the complaint said.

Wildfire victims might have gotten a glimpse of what's in store as PG&E quickly moved to stop payment on several settlements it already agreed to from the 2015 Butte Fire.

Amanda L. Riddle represents 24 families who settled with PG&E in late November over damages from the Butte Fire. PG&E's Jan. 14 announcement that it intended to seek Chapter 11 protection came after 13 of those families had been paid, but not the other 11 with total claims of about $4 million.

This prompted days of letters back and forth between plaintiffs' attorneys and counsel for the utility. The next set of four payments were due last Thursday but were never paid. Butte Fire Cases, JCCP 4853 (Sac. Super. Ct., filed Feb. 24, 2016).

"They refused to give us a straight answer," said Riddle, a partner with Corey, Luzaich, de Ghetaldi & Riddle LLP in Millbrae. "PG&E said, 'We don't know, we hope and expect to.'"

"They knew on [Jan. 23] whether the wire transfer was scheduled," he added.

Riddle said she knows of at least three dozen plaintiffs represented by other attorneys in the consolidated case who have also been told they won't be paid.

She said plaintiffs asked Sacramento County Superior Court Judge Allen H. Sumner to enforce the current settlement agreements, but he declined, citing the pending Chapter 11 filing. The plaintiffs have the option of filing a breach of contract claim, Riddle added, but said this too would end up as part of the Chapter 11 case.

Much of PG&E's potential liability relates to the 2018 Camp Fire in Butte County, the worst in state history. PG&E hasn't been found liable for the blaze by state regulators, but its stock price plunged as numerous lawsuits have been filed.

Richard K. Bridgford is part of a group of attorneys suing PG&E in Butte County over the Camp Fire. He had a more hopeful perspective, citing both the company's extensive assets and institutional shareholders who have an interest in its survival.

"I think they are going to have sufficient cash flow and assets to compensate victims," said the founding partner with Bridgford, Gleason & Artinian in Newport Beach, adding that the Chapter 11 filing could actually speed up the process.

Bridgford is also part of a suit against Southern California Edison over the 2018 Woolsey Fire in Los Angeles and Ventura counties.

"PG&E's claims are somewhere between three to 10 times bigger," Bridgford said. "Southern California Edison is not, in my understanding, anywhere near what we'd call in the zone for a bankruptcy filing."

State lawmakers quickly pledged PG&E's move would not interfere with the state's power supply or greenhouse gas goals.

Assemblyman Marc Levine, D-Marin County, announced Tuesday he may push for changes to a recent law that allows PG&E to issue bonds to cover the cost of fires if it is found to not be negligent, and pass those costs on to consumers. The bill did not cover the 2018 fires, however.

"The Legislature and the administration have an obligation to ensure that the company's ratepayers and fire victims are prioritized over shareholders," Levine said in a press release. "This effort should include reexamining provisions in SB 901 that might be advantageous to PG&E but no longer warranted given its bankruptcy filing."

The company has likely further eroded its support in Sacramento by announcing a $2.5 million payout to its now-former CEO and $75,000 raises for board members.

A motion filed with the bankruptcy court on Tuesday said the company planned to go ahead with $130 million in 2018 bonuses to 14,000 employees, with some receiving as much as $90,000. It argued the bonuses "are critical to ensuring that employees stay motivated and reach higher performance standards" to help the company recover.