valdes arguing on behalf of california attorney general bill lockyer and city and county of san francisco in these consolidated appeals the issue needs to feel today is very straightforward and action be severed and removed to the bankruptcy court the answer has to be no because congress expressly intended for these actions to go forward and not to be removed to bankruptcy court and section fourteen fifty  is the purpose of a restitution claim to seek monetary damages for a past wrong under seventy two hundred where it's alleged here as a law enforcement action that only the a g m the city can bring under seventeen two hundred which makes it billion well that has not been determined we are still in the liability phase of the state court action for seventeen to well what's your theory it will depend on who the court determines has interest in the money and to whom it's entitled now are several ways that the restitution could be returned to those that the court determines it's untitled and one way maybe for a constructive trust to be established so that that can be administered separately or it could go back to the utility but only for the support your claim for restitution well restitution understood that seven thousand two hundred cause of action in those language of the statute provides that we can seek relief where there has been a violation and it's clear when this has been a violation  presumption that there's been harm so when the restitution is sought as part of the seven thousand two hundred cause of action it's to deter the conduct from happening again and here it serves that purpose because the corporation and the directors use their control over the utility which they also serve as directors for to transfer money to the corporation for their own benefit and as a result now is that the case that you i think someone we've got now twenty it's a letter i think it was mor seeing how past restitution how does that prevent future harm well here the restitution is not such a return the money to the utility it's not as it's turn and it's a deterrent because it forces the corporations  amount that the court determines is appropriate so it may very well be the court may determine it's five billion which is the amount that was transferred or it could be something smaller than that i realize you're not to this point in the case but  would be a different situation yes but here the state was not a creditor or the city but they were not creditors in the bankruptcy proceedings the action was against non debtors and the money to be paid was not going to be paid by the utilities so there was no threat that there would be the proceeds would somehow be depleted and the bankruptcy court properly recognized that by remanding the entire seven thousand two hundred action along with the remedies and it further recognized that the law york component in order to protect the public and to fill its deterrence purpose and that's what's happening here and why it's part of the cause of action and why it was could not be severed from the law enforcement action under fourteen well it wouldn't be probably not since instance it could be property the state depending on how the state court determined who the money would go to but that is she was not before this court because whether or not the money was property of the only would you don't we reach that issue if you decided that this was not a place of regulatory action and therefore you have to decide whether or not this was the cause of action that the bankruptcy court had jurisdiction over under thirteen thirty four but there's no need to and that emanates from its long foresman nature and that makes it different from any other positive action that any other private party can bring so whatever the cause of action the better might be able to bring against the corporation and directors it's not your honors last questions and that is whether or not the city and county of san francisco and the a g had a remedy after judge walker determined that the restitution was proper you see it was a cause of action it was propert and i think you hit it right on the head your honor indeed they did and it is not an uncommon course of action for a creditors committee a creditor creditor or another party in interest to file a motion with the bankruptcy court and ask the court for authority to bring an action against a third party because the action has merit the debtor is not inclined to do so or has refused to do so and in this case they would have made the argument that this debtor should be suing its officers directors and parent corporation it's not likely to do so and therefore we would like the authority to do so on behalf of the state and i dare say that after judge walker reversed judgment tali judge montopoli would be would have been quite inclined to hear such a motion they also had another remedy required to do that they were not required to do that they made a strategic election to put their eggs in the appeal basket and they decided not to do that because but they could have they could have kept the action alive now they didn't prove their bankruptcy the bankruptcy judge found that the restitution action was not property of the estate and it was appealed to judge walker and judge walker reversed judgment tali and found that rest of my understanding ok so at that point they could have gone back to judg tali and they could have said well judge walker has found that this action is property of the state we now want to prosecute this action against the corporation on behalf of the state because the debtor won't do it and we can expect the standard to sue its own parish but they also had another follows the complaints by both parties in several places are arguing that restitution be made to return the money to the utility judg tally and judge walker in their decisions both quoted from those portions of the complaint and made definitive rulings that you know any event if there was a success in this claim that the money would flow back to the utility and would stop there because a phony supreme court in the pacific land research case has said and followed by korea supply and kraus all cited in our brief that the remedy of restitution under seventeen two hundred is to bring back the money to the hands of the party wrong there is no basis at that point from this litigation for the money to go anyplace else now and where on that point from iraq is a true that under the chapter eleven plan there was  hundred percent pay after creditors yes so at this point if the money were given back to corporation that would simply be a transfer of assets and would not be distributed and creditors and that's partially correct but i don't believe entirely and successful and hypothetically the corporation had returned four billion dollars to the debtor presumably they would have had to borrow that much money to pay its to pay the creditors but i wanted to make the other point that they failed to do to take strategically an objection to the plan of reorganization the plan of reorganization provided that the utility and its parent would read as one of its terms would resolve all their disputes and release each other including including all claims within what the supreme court calls the lowest range of result of reasonableness if the settlement doesn't meet the reasonableness standard then it cannot be included in a plan of reorganization the attorney general and city and county of san francisco objections to the plan they did not contest the evidence and they didn't appeal the confirmation hearing they could have tried to also keep this claim alive by appealing the confirmation order and saying that the bankruptcy judge erred in finding that it was reasonable the government but it also has a private right of action component to it private citizens can bring actions to recover money now what the attorney general and the city county san francisco are attempting to do here is two things they're attempting to say that when they bring a lawsuit it is per se a police and regulatory action notwithstanding the fact that the that the action is primarily peculiar and never sought in the state court to obtain a preliminary injunction on their injunctive action judge kramer in the state court has made a ruling on how the fines would be assessed if indeed fines were determined to be assessable against the corporation's officers and directors and the aggregate the maximum of those fines based on his ruling will not exceed one hundred thousand dollars well i think that's i guess what i'm struggling with that it's clear that say an individual can't go against p g any r can't go against enron or whatever so that there is that police power you know something to that the attorney general can bring the force of all government to stop you know the public from think twice about doing it we're protecting the public because they're not going to do this again if they know that that something could be done well but the restitution the nature of recovering restitution has been determined  circuit in quite a number of cases that we cite in our brief dunbar pool charter first mortgage as being actions that are not brought primarily within the police power and have been severed from the police power cause of action from the from the not accepted from the state government has repeatedly been state from bringing actions against debtors on restitution how do you know how do you distinguish marange do you think that that has any bearing on this at all or do you think the fact that  makes a completely different i don't think that marette relates directly to the issues that are that are there before this court i think that the issues that are before this court focused on  boiled down to the root issue is the cause of action primarily for restitution the fact that they've sought to recover four and a half billion dollars for the debtor this is not this is an unusually different case from a typical government action dispute normally the government is suing the debtor and the debtor saying it's a peculiar reaction you can't sue me here the government is bringing a cause of action that is owned by the debtor against a third party to bring money back into the bankruptcy of state i can't think of anything that is more peculiar even now you have to weigh that in part against the other remedies that they're seeking the fines the injunctive relief the penalties and ask yourself is this is just the graveling of this action to bring forward a half billion dollars back into this state or is the gravel in of this action a police our action to assess fines to assess there and then they get to the question of what what's the appropriate remedy where was the harm what was what harm was caused by the corporations actions so also with a fraudulent conveyance conveyance action a shareholder derivative action and the many other types of lawsuits for bankruptcy can be brought by third parties against third parties to collect money but once that are enchanters into bankruptcy the bankruptcy law says that those causes of action  your honor is that bankruptcy courts and federal district courts are the proper court to determine what is a police power action that is accepted from removal and also six separate from the automatic stay the california supreme court by saying that the seven thousand two hundred action is fundamentally a law enforcement action doesn't reach the ultimate determination as to whether they are taking a cause of action that is property of the bankruptcy estate you know it's just the way they  actions are not accepted from the automatic state are not accepted for removal and that's what i'm saying i'm not suggesting that they're not bringing this action in their own name and that we're there stead are not in bankruptcy under section seven thousand two hundred that they didn't have a right to bring it what i'm suggesting is that the playing field changed when this better went into chapter eleven and we have to look at bankruptcy law to determine whether the state can continue to prosecute the restitution claim and i'm suggesting to you that all of the cases that cause of action under no circumstances will be removable to federal court what will happen in that situation is to fall first in the grounds case the ny circuit said it is acceptable for state courts in federal district courts who are not the district in which the bankruptcy sits to make determinations about the extent of the automatic stay and the police power exception but the bankruptcy court in the federal district court in the district where the bankruptcy cases is the ultimate determinant of whether the police power action exists or does not exist now if you don't allow the removal of a cause of action in which the argument is made that they are acting outside the police and regulatory power then they are asking the only option then would be for the state court to make that decision the other parties the defendant would argue in the state court if they accept the state is violating the automatic state if the if the if the debtor or in this case p g and e corp went back to the bankruptcy court and asked the bankruptcy court to make a determination as to whether the automatic stay is being violated by result of the notice to remove all which forces which forces somebody's hand to determine whether or not that removal was proper and that's a determination that is made in this instance by the bankruptcy court or another to you know the street  the state from filing an action against a bankrupt interest in state court to collect a state income tax which we all know is a cuneo reaction and must be brought in the bankruptcy court but they would tack on to that tax case and action for a penalty for failure to pay taxes timely and they would argue that that can't be removed because the police power action well they would remove it or the other side would remove it to the bankruptcy court to the bankruptcy court within this time whether or not it meet meet this court argue if this court makes the decision that the remedies are several and because the penalty action is police power none of it can be removed which is their assertion the whole thing would go back including the collection of the tax i have no i have a substantive love california only at that point does the remedy come into play well they may not be entitled you know depending on what the violation is they may not be entitled to any remedy whatsoever that mean that i mean i also want to make one last point i believe that they have conceded the severance issue and the reason is this when we were moved to the case to bankruptcy court judge montopoli made a decision that the city and county of san francisco's for conversion and for unjust enrichment were indeed property of the state and could be remembered he also made the decision that the attorney general's action for violation of the bad manipulation of the bankruptcy code city and county did appeal the are carved out or the severance of the unjust enrichment claim and the conversion claim to judge walker and judge walker affirmed judgment trolly of on those two actions he said those are property of the state and they should stay in the bankruptcy court and the city and county didn't appeal that's of the ninth circuit so they have acknowledged that certain actions can be severed and kept in the bankruptcy court what they're arguing here now is but you can't sever restitution from our other police and regulatory  or at least there was there was a finding in favor of the holding company on all material issues to believe that would collateral and stop you i think it would depend on what the findings were for fun not finding a violation different well that would have to be that there wasn't an unlawful unfair or fraudulent act or business practices so it would depend on what they did or what alleged those acts are business practices were and this is really just nothing more than a client for restitution a private private climb to read to you know education a private rights to recover this four billion dollars this is people and the holding company conditions that we allege were violated in our law enforcement actions were intended to protect the public and so it's a much broader group so they're consistent but of course the right players are included as part of the public into chunks and making us proceed with one area first before we can get to the rest so it's taking a while but the decision is not is not final and there was a presumption it was based on judge walker's decisions so whether or not