US Bankruptcy Judge Dennis Montali appointed to third term

U.S. Bankruptcy Judge Dennis Montali, 81, was reappointed to a third 14-year term on the Northern District of California, the 9th U.S. Circuit Court of Appeals announced Monday.

Since he joined the bench in 1993 he has handled some of the most complex and important cases in the history of the district.

"He's extremely well regarded as one of the smartest and most capable bankruptcy judges around," said UC Hastings College of Law professor Jared Ellias.

Montali recently presided over the Chapter 11 reorganization of Pacific Gas & Electric Corp., which was sued for billions of dollars in damages arising out of Northern California wildfires. He was already intimately familiar with the utility from his handling of its bankruptcy in 2001.

Representatives of state and federal regulators, Gov. Gavin Newsom's office, PG&E shareholders, private equity firms and tens of thousands of wildfire survivors jostled in his courtroom for a year and a half to decide how the company would emerge from bankruptcy, if at all. The judge was tasked with brokering a reorganization deal among dozens of parties with conflicting interests.

The case presented novel areas of law that had not been resolved before on which massive amounts of money was on the line. In re: PG&E Corp., 19-30088 (N.D. Cal., filed Jan. 31, 2019).

The Federal Energy Regulatory Commission, for example, argued that Montali's powers were limited because the agency claimed it had jurisdiction over power supply contracts to ensure they serve the public interest. Montali resolved the issue immediately, criticizing the commission for what he called a "power play" in attempting to undermine his authority.

"Without statutory or Supreme Court authority to support its position, FERC in fact 'presumes to sit in judgment' and second-guess -- no overrule -- decisions of the bankruptcy court," he wrote.

Another contentious order Montali issued related to a request by PG&E to pay bonuses to senior managers. Fierce criticism followed the company for moving to pay more money to executives despite being held responsible for devastating wildfires that displaced thousands of residents and killed dozens of people.

Montali ruled that PG&E could pay the bonuses if it linked issuing them to reaching safety goals.

Ellias said the judge understood that motions such as these often "leave a bad taste in peoples' mouths" and ruling in a one-sided manner could obstruct negotiations. "That's the kind of baby splitting that judges have to do in a thoughtful way," he said. "He ruled that way for the larger goal of getting the parties to reach a deal."

Montali also oversaw the bankruptcies of major law firms following the 2008 financial crisis in cases deciding whether firms that absorbed attorneys from bankrupt competitors must pay the defunct firms for profits they made from cases the new hires brought with them. He sided with the insolvent firms in an order some argued would lead to an increase in law firm bankruptcies and harm lateral movement and client choice.

The state Supreme Court and federal judges in San Francisco disagreed with Montali and reversed him in those cases. In re: Howrey LLP, 14-cv-4883 (N.D. Cal., filed Nov. 4, 2014).

Montali also served for seven years on the 9th Circuit's Bankruptcy Appellate Panel starting in 2000 and was its chief judge from 2008 to 2010.