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CRAVATH, SWAINE & MOORE LLP

Paul H. Zumbro (pro hac vice)

(pzumbro@cravath.com)

Kevin J. Orsini (pro hac vice)

(korsini@cravath.com)

Omid H. Nasab (pro hac vice)

(onasab@cravath.com)

Worldwide Plaza

825 Eighth Avenue

New York, NY 10019

Tel: 212 474 1000

Fax: 212 474 3700

KELLER & BENVENUTTI LLP

Tobias S. Keller (#151445)

(tkeller@kellerbenvenutti.com)

Jane Kim (#298192)

(jkim@kellerbenvenutti.com)

650 California Street, Suite 1900

San Francisco, CA 94108

Tel: 415 496 6723

Fax: 650 636 9251

Attorneys for Debtors 

and Debtors in Possession

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION

In re:

PG&E CORPORATION,

- and –

PACIFIC GAS AND ELECTRIC

COMPANY,

Debtors.

 Affects PG&E Corporation

 Affects Pacific Gas and Electric Company

 Affects both Debtors

* All papers shall be filed in the Lead Case 

No. 19-30088 (DM).

Bankruptcy Case 

No. 19-30088 (DM)

Chapter 11

(Lead Case) (Jointly Administered)

DEBTORS’ SUPPLEMENTAL STATEMENT 

REGARDING DEBTORS’ APPLICATION 

PURSUANT TO 11 U.S.C. § 327(a) AND FED. 

R. BANKR. P. 2014(a) AND 2016 FOR 

AUTHORITY TO RETAIN AND EMPLOY 

COMPASS LEXECON, LLC AS ECONOMIC 

CONSULTANTS TO THE DEBTORS NUNC 

PRO TUNC TO PETITION DATE

Re: Dkt. No. 1756

Date: May 22, 2019

Time: 9:30 a.m. (Pacific Time)

Place: United States Bankruptcy Court

Courtroom 17, 16th Floor

San Francisco, CA 94102

Case: 19-30088 Doc# 2072 Filed: 05/17/19 Entered: 05/17/19 14:39:48 Page 1 of

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PG&E Corporation (“PG&E Corp.”) and Pacific Gas and Electric Company (the 

“Utility”), as debtors and debtors in possession (collectively, “PG&E” or the “Debtors”) in the 

above-captioned chapter 11 cases (the “Chapter 11 Cases”), hereby submit their Supplemental 

Statement (the “Supplemental Statement”) in response to (i) questions posed by this Court at the 

May 9, 2019 hearing regarding Debtors’ Application (the “Application”), filed on April 29, 2019 

(ECF No. 1756), and the Supplement to the Application filed on May 3, 2019 (ECF No. 1842) 

(collectively, the “Supplemented Application”) for authority to retain and employ Compass 

Lexecon, LLC (“Compass”) pursuant to section 327(a) of title 11 of the United States Code (the 

“Bankruptcy Code”) and Rules 2014(a) and 2016 of the Federal Rules of Bankruptcy Procedure 

(the “Bankruptcy Rules”), as economic consultants for the Debtors effective as of the Petition 

Date, and (ii) the statement of the Official Committee of Tort Claimants (“TCC”) (ECF No. 1860), 

filed on May 6, 2019, regarding the Supplemented Application. 

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ARGUMENT

A. Current Status

For the reasons set forth in the Supplemented Application, Debtors continue to maintain 

that it is vital that Compass be retained to continue assisting Cravath and the Debtors with 

analyzing and assessing the losses and potential damages associated with the Northern California 

Wildfires (as defined in the Application), and potentially serving as a potential expert witness in 

these Chapter 11 Cases. Compass has provided, and continues to provide, critical analysis and 

loss assessment data to Cravath and the Debtors, and Cravath’s and Debtors’ inability to continue 

working with Compass would gravely prejudice the Debtors and the Debtors’ estates, not least by 

requiring any replacement firm to re-incur additional, unnecessary costs re-doing the work that 

Compass has already done. There would also be an unnecessary time delay as that new firm gets 

up to speed. 

In an effort to resolve issues relating to Compass’s retention application in a collaborative 

and consensual manner, counsel for Debtors and Compass have been working together to explore 

ways to address the concerns of the United States Trustee (“UST”) and the TCC. To that end, 

Debtors and Compass have proposed an arrangement with the Unsecured Creditors Committee 

(“UCC”) pursuant to which Compass would share with the UCC’s financial advisor FTI 

Consulting, Inc. (“FTI”) a significant volume of publicly-available damages-related data already 

obtained and assessed for reliability by Compass over the course of many months. Debtors believe 

that sharing this data will preserve estate resources by saving FTI and the UCC valuable time and 

costs that would otherwise be spent obtaining much if not all of the same data and assessing its 

parameters and reliability, as Compass has done.

This data-sharing proposal will in no way, however, compromise the independence of the 

actual analyses or potential expert testimony to be subsequently provided by either Compass or 

FTI. Compass will continue to perform its work for Cravath and the Debtors, and FTI will continue 

to perform its work for the UCC, both in an entirely separate and independent manner. Consistent 

with the Supplemented Application, there will be no contact or communication between FTI and 

Case: 19-30088 Doc# 2072 Filed: 05/17/19 Entered: 05/17/19 14:39:48 Page 3 of

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Compass professionals regarding the estimation of wildfire claims as a result of this data sharing 

arrangement, and no influence or supervision or direction asserted by either consultant over the 

other. 

In light of this data-sharing proposal, as well as discussions between counsel for Compass 

and the UST, it is Debtors’ counsel’s understanding that the UST is willing to withdraw its prior 

objections to the Compass retention application. Counsel for the TCC has also advised Debtors’ 

counsel that the TCC will withdraw their Statement opposing the retention of Compass if they 

receive the same publicly-available damages-related data that is to be provided to the UCC under 

the arrangement described above, at the same time and on the same terms as the data is provided 

to the UCC. That is acceptable to Debtors. 

Debtors and Compass are hopeful that this arrangement will resolve all issues surrounding 

Debtors’ retention of Compass, and allow Compass to be retained by consent. Debtors anticipate 

that both the UST and the TCC will each file something themselves with the Court withdrawing 

their Objections and Statement respectively. 

But even in the event that that does not happen, for whatever reason, Debtors continue to 

believe that there is no basis for Compass’s retention not to be confirmed. For the reasons detailed 

in prior submissions and below, and in the accompanying submission of Compass, it remains 

unclear whether Compass’s retention requires formal approval under section 327(a) of the 

Bankruptcy Code. Should there be agreement amongst all parties that Compass’s retention is not 

required under section 327(a) of the Bankruptcy Code, Debtors are happy to withdraw their 

application but only subject to a clear understanding and agreement by all stakeholders that there 

will be no subsequent arguments or objections concerning Compass’s disinterestedness in these 

Chapter 11 Cases, or the independence of its analysis, work or testimony. Otherwise, Debtors 

respectfully submit that, for the reasons stated in the Supplemented Application and below, 

Compass’s retention should be approved under section 327(a) of the Bankruptcy Code. 

B. Compass and FTI Are Not Presumptively Adversarial.

At the May 9, 2019 hearing, the Court asked the Debtors to provide their views on whether 

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FTI and Compass “[a]re adverse to one another” in the same way that lawyers are, by function of 

their ethical and fiduciary obligations to their clients. See May 9, 2019 Tr. at 10:8-21, 12:8-10. 

The Court raises an excellent question. Debtors do not believe that the role of any of the economic 

consultants and potential testifying witnesses in these cases are necessarily adversarial. Compass 

will perform its analysis on behalf of Cravath and the Debtors, and FTI will do the same on behalf 

of the UCC. Presumably, other economic consultants or damages experts retained by other parties 

will do the same thing. From Debtors’ perspective, and consistent with the obligations that Debtors 

hold to the various stakeholders in these cases, Compass has been and will be asked to quantify 

and assess the potential wildfire-related liabilities in a fair, reasonable and objective manner, 

playing the role of what the Court has referred to as a “truth-seeker” in the evaluation and 

assessment of wildfire claims. See May 9, 2019 Tr. at 12:8-10. The process of quantifying and 

assessing the potential wildfire-related liabilities will require each expert to apply its professional 

judgment and experience to the raw data. The fact that this may result in the experts reaching 

different potential claims estimations does not, by itself, make the experts adversaries. Instead, 

the various estimations will be tested by the parties in interest.

C. The Court Should Permit the Retention of Compass by the Debtors. 

1. It is Not Clear Whether Compass’s Retention Is Required Under 

Section 327(a) of the Bankruptcy Code.

Despite the assertions of the TCC, it is far from clear that a formal retention application 

under 327(a) of the Bankruptcy Code was required for Compass. Courts have held that not every 

person employed by debtors is a “professional person” within the meaning of section 327(a) of the 

Bankruptcy Code. See In re Blair, 329 B.R. 358 (B.A.P. 9th Cir. 2005). A “professional person 

is one who takes a central role in the administration of the bankruptcy estate and in the bankruptcy 

proceedings” (emphasis added). Id. While the work Compass has done and is doing for the 

Debtors is crucially important, Compass’s work has little to do with the Debtors’ administration 

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of the bankruptcy estate and/or the bankruptcy proceedings.1 

2. Even If Compass’s Retention Is Subject to Court Approval Under 

Section 327(a), Approving Compass’s Retention Is Appropriate.

First, contrary to the TCC’s submission, the Debtors’ Application for Compass’s retention 

is not untimely. See ECF No. 1860 at pgs. 8-9. As noted above, the Debtors do not believe 

Compass’s post-petition work to date falls within the scope of section 327(a) of the Code, but filed 

the Application in light of the UCC’s proposed retention of FTI, out of an abundance of caution 

and to preserve the Debtors' right to continue using Compass' services throughout the Chapter 11 

Cases. See ECF No. 1756 at pg. 9, n. 2. Moreover, as the Debtors made clear and this Court 

recognized, the Debtors have been in contact with the UST to submit drafts of various retention 

applications on a rolling basis. See March 13, 2019 Tr. at 6:9-14. This Court has shown flexibility 

in the enforcement of filing deadlines for retention applications. See February 13, 2019 Tr. at 

95:21-16. Moreover, there has been no prejudice to any party in these Chapter 11 cases flowing 

from the timing of Debtors’ application regarding Compass’s retention. 

Second, Compass meets the “disinterestedness” requirement of section 327(a) and does not 

“hold or represent an interest adverse to the estate”. See 11 U.S.C. § 327(a). While the TCC refers

to Compass as “an ‘affiliate’ of FTI under the Bankruptcy Code”, there is simply no per se

disqualifier for a professional under the Bankruptcy Code or Bankruptcy Rules for purposes of 

determining disinterestedness based on affiliation with another non-debtor alone, as this Court 

observed. See April 24, 2019 Tr. at 55:12-20, 65:4-6. Furthermore, the TCC’s arguments that

Compass has an adverse interest arising out of its relationship with FTI are not only conclusory 

 1 On this basis, Debtors have retained and anticipate retaining subject matter experts in connection 

with the wildfire claims; Debtors do not intend to seek this Court’s approval for the retention of 

these experts under section 327(a) of the Bankruptcy Code. It is also on this basis that Debtors did 

not previously file a retention application for Compass under section 327(a), and have done so 

solely out of an abundance of caution and to preserve Debtors’ right to continue using Compass’s

services in the event that the Court approves the UCC’s retention of FTI.

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and speculative,

2 but are disproved by the factual record put before the Court by both Debtors and 

Compass. See Declaration of Adel Turki in Support of Debtors Application to Retain and Employ 

Compass Lexecon, LLC as Economic Consultants (ECF No. 1757) at pgs. 6-7. FTI and Compass 

have both confirmed that there is a clear business separation between the two legal entities, that 

there will be no FTI supervision of Compass’s work (or vice versa) and that there will be no 

exchange of information related to the work performed as part of their retention in these Chapter 

11 cases. See id.; April 24, 2019 Tr. at 44:1-7. Consequently, there is no actual or potential 

conflict or even an appearance of impropriety arising out of Compass’s affiliation with FTI.3

Third, the TCC’s claim that the Debtors’ application may not be approved absent a “full

disclosure of [Compass’s] scope of services” is unsupported by any legal basis.4

 See ECF No. 

1860 at pgs. 9-10 (emphasis added). Furthermore, the Debtors have made it very clear that 

Compass’s services include analyzing losses and potential damages arising out of the Northern 

California Wildfires. To provide details beyond this point would require Debtors to disclose the 

particular methodologies, assumptions and analytical frameworks undertaken by Compass on 

behalf of Debtors, which is entirely premature at this point. Furthermore, any requests to disclose 

Compass’s methods, analyses and conclusions cannot be maintained, as they are protected under 

the work product doctrine, since Compass has, and will continue to serve as consultants to 

 2 The TCC alleges that “it seems apparent that FTI can set Compass’ corporate policy and oversee 

its operations” and “[b]ased on this potential for control and the predisposition for Compass to act 

in the economic interest of its parent, it is unclear how Compass can demonstrate it does not 

represent an interest adverse to the Debtors”. See ECF No. 1860 at pg. 6 (emphasis added).

3 Courts have advised against disqualifications based on “appearances of impropriety” alone, 

because doing so would “allow horrible imaginings alone to carry the day”. In re Marvel Entm't 

Grp., Inc., 140 F.3d 463, 477 (3d Cir. 1998) (court rejecting the Trustee’s invitation to read an 

appearance of conflict disqualification into section 327(a)).

4 The TCC cites various cases in support of this statement, but not a single one of them pertains to 

the disclosure of the scope of services to be provided by the professional that is sought to be 

retained. ECF No. 1860 at pg. 10. Instead, the cases merely address disclosure obligations in the 

context of the court’s “disinterestedness” and “adverse interest” analyses (i.e., disclosure 

obligations that the TCC does not allege the Debtors or Compass have failed to meet). See, e.g., 

In re Thomas, 476 B.R. 579, 586 (N.D. Cal. 2012) (stating merely that an attorney’s duty to 

disclose under the Bankruptcy Code and Rules extends to all facts that may be pertinent to a court’s 

determination of whether it is disinterested or holds an adverse interest to the estate). 

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attorneys and its work has been wholly undertaken in anticipation of litigation and at the direction 

of counsel. See Fed. R. Bankr. P. 9014(c), Fed. R. Civ. P. 26(b)(3)(A).

D. The TCC’s Argument That the Debtors and the UCC Should Share a 

Financial Advisor Is Unavailing. 

Finally, the TCC’s argument that it “should not be required to fight against two different 

advisory firms, both of whom are attacking the value of tort claims” (ECF No. 1860 at pg. 5) is 

contrived, because each of the significant parties in these Chapter 11 cases, including the TCC, is 

entitled to retain its own independent economic advisor to assist with matters related to this 

bankruptcy proceeding. Additionally, the UCC and the Debtors are fiduciaries to two different 

groups, and thus it is not practical, customary, or appropriate to share advisors. 

WHEREFORE the Debtors respectfully request entry of an order granting (i) the relief requested 

in the Debtors’ Supplemented Application as a sound exercise of the Debtors’ business judgment 

and in the best interests of their estates, creditors, shareholders, and all other parties interests, and 

(ii) such other and further relief as the Court may deem just and appropriate.

Dated: May 17, 2019

CRAVATH, SWAINE & MOORE LLP

KELLER & BENVENUTTI LLP

By: _/s/ Paul Zumbro___________

Paul Zumbro

Attorneys for Debtors

and Debtors in Possession

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