Stay in PG&E bankruptcy lifted so utility can settle suit not involving fires

SAN FRANCISCO -- A bankruptcy judge allowed a non-wildfire plaintiff to proceed with her case against the Pacific Gas and Electric Corp. Tuesday, despite concerns by the utility about "opening the floodgates" to other lawsuits that are temporarily paused.

U.S. Bankruptcy Judge Dennis Montali partially lifted the stay and is permitting both sides to engage in settlement discussions.

"When do we return to business as usual?" Montali asked.

Plaintiff Wendy Nathan sued PG&E in 2017 after she said she was injured falling on a sidewalk negligently maintained by PG&E. Liability is not disputed and the only question remaining is the value of Nathan's damages, according to her attorney, Seth I. Rosenberg of Emergent LLP.

An Alameda County Superior Court judge ordered both sides to engage in mediation before Aug. 30, but the case was paused after PG&E filed for bankruptcy.

Montali refused to lift the stay in an earlier tentative ruling but departed from the decision at the Tuesday hearing.

Rosenberg said the case could reasonably be settled in a day because discovery is already complete and four other claims over the negligently maintained sidewalk were resolved before the case was halted. He added, "If unsuccessful, we can just go back to where we were."

Montali was unaware a judge ordered mediation and asked PG&E attorneys if they believe they cannot engage in settlement discussions.

"What if a lawyer for PG&E says to a lawyer for the claimant that we'll put this to bed if you agree to X dollars," Montali said. "Done. Claim liquidated. End of story. I don't think the stay is the problem."

PG&E attorney Jessica Liou said, "We would agree if it's not a court order."

"What if it's not a court order, but I tell you to do it anyway?" Montali shot back. He added that he has to determine when PG&E "gets back to business as usual" litigating cases that "goes with the territory of running a multibillion-dollar utility," such as standard personal injury cases like Nathan's lawsuit.

Liou said it is "still too early to force [PG&E] to defend itself" while having to structure its reorganization. It would be an "imposition" to force mediation on the utility, she continued.

Montali remained unconvinced and said engaging in mediation is the "normal expectation," even without a court order.

"I have to have a better sense as to what the utility will do to take care of this category of claim," he said. "To the extent there are multiple claims like Nathan's and unlike the highly emotional fire claims, it may reveal a methodology for a settlement model to fit the others."

PG&E spokesman James Noonan said: "We appreciate the judge's attention to this matter and look forward to working with the parties in question toward a resolution of their claim." In re: PG&E Corp., 19-30088 (N.D. Cal., filed Jan. 31, 2019).

Montali also approved Tuesday the retention of Morrison & Foerster LLP attorneys as "special regulatory counsel" and KPMG LLP attorneys as "information technology, risk and legal support counsel."

The utility has spent at least $84 million in legal fees related to its bankruptcy, according to a March court filing.

In an unrelated issue the judge considered for months, Montali ruled on Friday the Federal Energy Regulatory Commission has no authority to determine whether PG&E can reject up to $42 billion worth of contracts with energy companies.

"Without statutory or Supreme Court authority to support its position, [the Federal Energy Regulatory Commission] in fact 'presumes to sit in judgment' and second-guess -- no, overrule -- decisions of the bankruptcy court," Montali wrote.

Commission attorneys argued federal regulators should be involved to ensure the public interest is being served.