PG&E joined by most fire victims in defending settlement

SAN FRANCISCO -- Pacific Gas & Electric Co. teamed up with the committee representing wildfire victims Thursday to defend a $13.5 billion settlement as one of the last steps to confirm the utility's reorganization plan and exit bankruptcy.

Challenged by objectors arguing the deal is underfunded and others insisting they should be treated differently, the defenders of the plan urged a federal judge to ensure the settlement resolves all claims by wildfire victims at the agreed-upon figure.

"If your honor enters this order, there's nothing left to do in this case," PG&E attorney Kevin Orsini said.

U.S. District Judge James Donato emphasized he does not have the authority to resolve the disputes. He said he would simply put a number to the total value of wildfire victim claims, clarifying he "won't make any findings."

"I almost certainly won't take a position on any of that," he said.

Donato, who took the matter under submission, is tasked with determining the value of PG&E's liability to wildfire victims. He was going to preside over a bench trial before the settlement was reached.

PG&E wants him to guarantee all wildfire victim claims will be paid out of the $13.5 billion settlement trust.

Objectors have maintained the deal and PG&E's estimation proposal should be reworked.

During the Thursday video conference, Orsini underscored the historic nature of the settlement. Both sides deposed dozens of witnesses, reviewed millions of pages of documents and engaged in numerous mediation discussions, according to the Cravath, Swaine & Moore LLP partner.

"We can attest that it was one of the most complicated things we were ever involved in in our careers because of the stakes of the circumstances, massive discovery records and data from previous settlements, to find a number we could all agree was a reasonable estimate," he said.

The $13.5 billion figure was agreed to primarily using historical data to project claim valuations using regression analyses, Orsini said. He added that substantially over 50% of wildfire victims voted in favor of PG&E's reorganization plan, but it was "closer to 100%."

Plaintiffs' attorney Elizabeth Cabraser, a partner at Lieff Cabraser Heimann & Bernstein LLP, backed PG&E, explaining the deal creates the largest tort settlement fund ever.

Robert Julian, representing the committee for wildfire victims, echoed characterizations of the settlement as being grounded in substantial data and expert testimony. Donato's ruling should make clear that wildfire victims can file suit against PG&E contractors, such as tree trimmers, that they allege were negligent, he argued.

"When you have two warring parties who have settled, you have the gold standard," he said.

But objectors countered that not enough information about the privileged mediation sessions has been provided to take PG&E at its word the settlement is sufficient. They urged Donato to require PG&E and the committee representing wildfire victims to further prove the trust will not be underfunded.

"There's no evidence put before the court in a proper way -- declarations, evidence by experts or any other information -- to support the $13.5 billion," said Reed Smith partner David Weiss.

The Adventist Health System and AT&T Corp. also took issue with PG&E's proposal. They have maintained their damages should not come out of the $13.5 billion trust because their claims already have a specific damages figure.

The Adventist Health System claims damages of roughly $1 billion, while AT&T seeks $238 million, according to court fillings. They argued their claims are not subject to estimation by Donato.

"It's outside the scope of your authority," said AT&T attorney Benjamin Mintz, an Arnold & Porter Kaye Scholer LLP partner.

Orsini responded the settlement trustee will determine how much their claims are worth. In re: PG&E Corporation and Pacific Gas and Electric Company, 19-CV-05257 (N.D. Cal., filed Aug. 22, 2019).

"What's really going on here is Mintz and others are trying to get themselves out of the amount being set aside to satisfy all fire victim claims," he replied.

While he indicated he was skeptical of AT&T's position, Donato said "I'm not going to resolve this." He directed PG&E and the committee representing wildfire victims to describe the method they used to determine the settlement should be $13.5 billion.

U.S. Bankruptcy Judge Dennis Montali will consider whether to approve PG&E's reorganization plan at a confirmation hearing on May 27. The California Public Utilities Commission will then vote on the proposal the following day.

After the hearing, San Diego plaintiffs' attorney Gerald Singleton said PG&E is looking for security the settlement trust will be limited to $13.5 billion. He highlighted the importance of allowing wildfire victims to seek damages against PG&E contractors. He predicted it could add $500 million to $1 billion to the settlement trust.