Trustee outlines unique challenges of fire victim payouts

The task of running a trust tasked with distributing money from a settlement between PG&E Corp. and people who lost their homes and businesses to several California wildfires poses a series of daunting challenges, said the retired justice in charge of it.

"This is by far the most difficult task I've undertaken," said retired 4th District Court of Appeal Justice John K. "Jack" Trotter, who subsequently served as a neutral with JAMS.

Part of the problem is the sheer number of claims. While Trotter has handled wildfire mass tort claims before, his work on a pair of San Diego County wildfires involved more than 2,000 lawsuits against San Diego Gas & Electric.

This time, he's dealing with more than 250,000 claims submitted by fire victims and their lawyers.

The settlement, negotiated between PG&E Corp. and plaintiffs' attorneys and approved by U.S. Bankruptcy Judge Dennis Montali in San Francisco, is a split of cash and PG&E stock that was billed as a $13.5 billion deal but is closer to $11 billion.

In a quirk of the settlement, that amount depends on the performance of PG&E stock, and its largest owner is currently the trust.

In many mass tort claims, the injuries are the same. But the fires involve a range of losses, including emotional distress claims, and missing documentation of the losses because structures and trees burned down, Trotter said.

"They don't have a picture because they all got burned," he said.

The trust has put together a Google Maps database showing what properties looked like before the blazes.

"We trust these people and their lawyers to provide the information," Trotter said in an interview earlier this month. "But we have to verify that."

It's been almost a year since the trust was established, but it took a long time to get started. At the time of its creation, the trust had no staff, infrastructure, or information of the claims of any victims.

"We had to start from nothing," Trotter said. "It's like we opened a regional office of a national insurance company."

Many of the victims don't have attorneys, so Trotter and the trust have hired UC Berkeley School of Law students to help unrepresented plaintiffs file claims online.

According to the trust, $372.8 million has been sent to victims in preliminary and pro rata payments as of June 15. Another update covering the second half of June is expected later this week.

State legislators representing the areas where the North Bay, Butte and Camp fires cost thousands of people their homes and property have expressed dissatisfaction with the pace of the payouts. Last month, they wrote a letter asking Attorney General Rob Bonta to investigate the Fire Victim Trust and its leaders for failing to quickly distribute the money. They complained of a slow pace of payments to victims and high overhead for Trotter and other administrators of the trust.

Trotter responded in a letter by accusing the legislators of making "thoughtless accusations."

Since then, Bonta has declined to comment about the letter or whether there is any sort of inquiry.

Trotter said he's heard nothing from the attorney general's office or the legislators who wrote the letter.

Paul Payne, spokesman for state Sen. Bill Dodd, D-Vacaville, said Tuesday his boss and the other legislators had not heard from Bonta or -- to his knowledge -- attempted to contact Trotter or the trust.

Trotter was less pointed in an interview, saying he and legislators "have the same interests at heart."

But he also noted the settlement was not negotiated by the trust, and that PG&E's status in bankruptcy made it difficult to get started. "Bankruptcy was a year and a half delay," Trotter said. It took until the end of February for all of the claim forms to be submitted, and then many of those had missing information that needed to be addressed, he said.

The complex settlement, including 477,743,590 shares of PG&E stock, created its own complications and concerns. The stock portion of the settlement had to get special approval from the Internal Revenue Service, the state, and Montali to allow the trust to exchange shares with PG&E so the new shares could be sold without taking a capital-gains tax hit, he said.

Then Trotter, with the help of advisers, must decide when to start selling shares of a corporation that has lagged badly and faces additional headwinds because his own trust will be dumping stock.

"When do you sell? You're coming into fire season," Trotter said. "Those are things that wake you up in the middle of the night."

PG&E stock, already doing poorly, has faded in recent months and closed Tuesday at $10.10. That will reduce the amount of the settlement unless the stock rebounds, but of course it could fall further.

"Every point is a half-billion dollars in value," Trotter said.

Meanwhile, the settlement must help pay for things like private roads in Paradise, where most of the town is private roads, he said.

Trotter said he hopes to keep making payments as quickly as possible but said some larger claims will take longer -- and he still doesn't know exactly how much money he will have to distribute given the stock price uncertainty.

"It will definitely go into next year," he said.