1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

UNITED STATES BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

 

WEIL, GOTSHAL & MANGES LLP

Richard W. Slack (pro hac vice) 

(richard.slack@weil.com) 

Jessica Liou (pro hac vice) 

(jessica.liou@weil.com) 

Matthew Goren (pro hac vice) 

(matthew.goren@weil.com) 

767 Fifth Avenue 

New York, NY 10153-0119 

Tel: 212 310 8000 

Fax: 212 310 8007 

KELLER BENVENUTTI KIM LLP 

Jane Kim (#298192) 

(jkim@kbkllp.com) 

David A. Taylor (#247433) 

(dtaylor@kbkllp.com) 

Thomas B. Rupp (#278041) 

(trupp@kbkllp.com) 

650 California Street, Suite 1900 

San Francisco, CA 94108 

Tel: (415) 496-6723 

Fax: (415) 636-9251 

Attorneys for Debtors and Reorganized Debtors 

In re: 

PG&E CORPORATION,

 - and - 

PACIFIC GAS AND ELECTRIC 

COMPANY,

Chapter 11 Case No. 19-30088 (DM)

(Lead Case) 

(Jointly Administered) 

REORGANIZED DEBTORS’ MOTION FOR 

ENTRY OF AN ORDER (I) APPROVING 

SETTLEMENTS RESOLVING DISPUTES WITH 

CERTAIN INSURERS, AND (II) GRANTING 

RELATED RELIEF 

Date: October 27, 2022 

Time: 11:00 a.m. (Pacific Time)

Place: (Tele/Videoconference Only) 

 United States Bankruptcy Court 

Courtroom 17, 16th Floor 

 San Francisco, CA 94102 

Obj. Deadline: October 20, 2022, 4:00 p.m. (Pacific 

Time) 

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). 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 1

of 28
ii 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

PG&E Corporation and Pacific Gas and Electric Company (together, “PG&E,” the 

“Debtors,” or the “Reorganized Debtors,” as applicable), hereby submit this motion (the 

“Motion”), pursuant to sections 363(b) and 105(a) of title 11 of the United States Code (the 

“Bankruptcy Code”) and Rule 9019 of the Federal Rules of Bankruptcy Procedure (the 

“Bankruptcy Rules”), for entry of an order: (i) approving the settlements, by and among the 

Reorganized Debtors and certain of PG&E’s insurance carriers, annexed as Exhibits A and B (the 

“Insurance Settlements”) to the contemporaneously filed Declaration of Richard W. Slack (the 

“Slack Declaration”); and (ii) granting related relief. 

In support of the Motion, the Reorganized Debtors submit: (i) the Declaration of John R. 

Simon (the “Simon Declaration”); and (ii) the Declaration of David B. Goodwin (the “Goodwin 

Declaration”), filed contemporaneously herewith. A proposed form of order granting the relief 

requested herein is annexed as Exhibit C (the “Insurance Settlements Proposed Order”) to the 

Slack Declaration. 

 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 2

of 28
iii 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Table of Contents 

Page 

I. PRELIMINARY STATEMENT ...............................................................................................1

II. JURISDICTION ........................................................................................................................4

III. BACKGROUND .......................................................................................................................4

A. The D&O Policies and the Arbitration ..........................................................................4

B. The D&O Action and the Plan .......................................................................................6

C. The Securities Litigation ................................................................................................8

D. The Securities Claims ....................................................................................................9

IV. NEGOTIATION OF THE INSURANCE SETTLEMENTS ..................................................11

V. MATERIAL TERMS OF THE INSURANCE AND D&O ACTION SETTLEMENTS .......11

A. Insurance Settlements ..................................................................................................11

B. D&O Action Settlement ...............................................................................................14

VI. BASIS FOR RELIEF REQUESTED ......................................................................................16

A. The Insurance Settlements are in the Best Interests of the Debtors’ Estates and 

Should be Approved Pursuant to Bankruptcy Rule 9019 ............................................16

1. The Probability of Success in Litigation ..........................................................18

2. Potential Difficulties in Collecting Any Judgment ..........................................19

3. The Complexity and Expense of Any Litigation .............................................19

4. The Interests of Creditors.................................................................................20

B. The Insurance Settlements are a Sound Exercise of the Debtors’ Business Judgment 

and Should be Approved ..............................................................................................21

VII. NOTICE ...................................................................................................................................22

 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 3

of 28
iv 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

TABLE OF AUTHORITIES 

 Page(s) 

Cases 

In re Alaska Fishing Adventure, LLC, 

594 B.R. 883 (Bankr. D. Alaska 2018) ..........................................................................................22 

In re Am. Bldg. Storage, LLC, 

2007 WL 7532281 (B.A.P. 9th Cir. Apr. 2, 2007) ........................................................................19 

In re ASARCO, L.L.C., 

650 F.3d 593 (5th Cir. 2011) .........................................................................................................21 

City Sanitation v. Allied Waste Servs. of Mass., LLC (In re Am. Cartage, Inc.), 

656 F.3d 82 (1st Cir. 2011) ............................................................................................................16 

Comm. of Asbestos-Related Litigants v. Johns-Manville Corp. (In re Johns-Manville Corp.), 

60 B.R. 612 (Bankr. S.D.N.Y. 1986) .......................................................................................21, 22 

In re Integrated Res., Inc.

147 B.R. 650 (S.D.N.Y. 1992) .......................................................................................................22 

Johnson v. Quantum Learning Network, Inc., 

2017 WL 747462 (N.D. Cal. Feb. 27, 2017) .................................................................................18 

In re Laser Realty, Inc. v. Fernandez (In re Fernandez), 

2009 WL 2913685 (Bankr. D.P.R. Mar. 31, 2009) .......................................................................18 

In re Lionel Corp., 

722 F.2d 1063 (2d Cir. 1983).........................................................................................................21 

Martin v. Kane (In re A&C Props.), 

784 F.2d 1377 (9th Cir. 1986) .................................................................................................16, 17 

In re Montgomery Ward Holding Corp., 

242 B.R. 147 (D. Del. 1999) ..........................................................................................................21 

Myers v. Martin (In re Martin), 

91 F.3d 389 (3d Cir. 1996).............................................................................................................19 

Nellis v. Shugrue, 

165 B.R. 115 (S.D.N.Y. 1994) .......................................................................................................17 

Officers for Justice v. Civil Serv. Comm’n of City & Cnty. of San Francisco, 

688 F.2d 615 (9th Cir. 1982) ...................................................................................................19, 21 

In re Open Med. Inst., Inc., 

639 B.R. 169 (B.A.P. 9th Cir. 2022)..............................................................................................18 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 4

of 28
v 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

In re Pac. Gas & Elec. Co., 

304 B.R. 395 (Bankr. N.D. Cal. 2004) ....................................................................................17, 20 

In re Schmitt, 

215 B.R. 417 (B.A.P. 9th Cir. 1997)..............................................................................................18 

In re Waksberg, 

2014 WL 5285648 (B.A.P. 9th Cir. Oct. 15, 2014) .......................................................................19 

In re Walter, 

83 B.R. 14 (B.A.P. 9th Cir. 1988)..................................................................................................21 

Statutes 

11 U.S.C. § 105(a) ........................................................................................................................ ii, 21 

11 U.S.C. § 363(b) .................................................................................................................. ii, 21, 22 

28 U.S.C. § 157(b) ...............................................................................................................................4 

28 U.S.C. § 1334 ..................................................................................................................................4 

28 U.S.C. §§ 1408 ................................................................................................................................4 

28 U.S.C. §§ 1409 ................................................................................................................................4 

Other Authorities 

Fed. R. Bankr. P. 2002 ......................................................................................................................22 

Fed. R. Bankr. P. 9019 ...................................................................................................... ii, 16, 18, 23 

Bankr. Local Rule 5011-1(a)................................................................................................................4 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 5

of 28
 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

MEMORANDUM OF POINTS AND AUTHORITIES 

I. PRELIMINARY STATEMENT1

Through this Motion, the Reorganized Debtors seek this Court’s approval of the Insurance 

Settlements, which resolve nearly all the disputes in an ongoing arbitration with respect to certain 

of PG&E’s insurance carriers relating to PG&E’s 2017 and 2018 directors and officers liability 

insurance policies (the “D&O Policies”). The Insurance Settlements were heavily and carefully 

negotiated over a significant amount of time and were reached with the help of an experienced 

mediator. Each of the Insurance Settlements requires as a condition to its effectiveness that this 

Court approve its terms. The Insurance Settlements will allow the Reorganized Debtors to 

implement the settlement with the PG&E Fire Victim Trust (the “FVT”) of certain claims that were 

assigned by the Debtors to the FVT pursuant to the Plan (the “FVT Claims”) that are being pursued 

in the case captioned Trotter v. Williams, et al., Lead Case No. CGC-17-562591 (S.F. Super. Ct.) 

(the “D&O Action”). Under the Plan, the FVT Claims can only be paid from “Side B” insurance 

proceeds, which proceeds will be paid to the FVT only after the Insurance Settlements become 

effective. 

In addition, the Reorganized Debtors believe that the Insurance Settlements will aid in the 

potential resolution of claims asserted in the action entitled In re PG&E Corp. Securities Litigation, 

No. 5:18-cv-03509-EJD (N.D. Cal.) (the “Securities Litigation”) and the separate proofs of claim 

filed in the Chapter 11 Cases by the holders of the Debtors’ debt and equity securities holders 

(“Securities Claims”). Although there is no current settlement of these securities claims, the 

resolution of the dispute with certain of PG&E’s insurance carriers provides certainty of the 

availability of insurance proceeds to cover a meaningful portion of a potential settlement of those 

claims. 

The D&O Policies provide coverage both to PG&E’s directors and officers and to PG&E 

itself, up to the total annual limits of liability of $200 million for each year, which limits apply to 

1

 Capitalized terms used but not herein defined have the meanings ascribed to them in the Insurance 

Settlements or the Debtors’ and Shareholder Proponents’ Joint Chapter 11 Plan of Reorganization 

dated June 19, 2020 [Docket No. 8048] (together with all exhibits and schedules thereto and as may 

be modified, supplemented, or amended from time to time, the “Plan”), as applicable. 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 6

of 28
2 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

aggregate defense costs, settlements, and judgments covered under the D&O Policies. PG&E 

sought coverage under the D&O Policies for various potential liabilities arising from, among other 

things, the FVT Claims, the Securities Litigation, and the Securities Claims, including 

indemnification claims for costs and potential liabilities incurred by the Debtors’ former directors 

and officers.2 

The insurance carriers that issued the D&O Policies (collectively, the “D&O Insurers”) 

have taken the position that the claims arising out of the 2017 North Bay Fires and the claims arising 

out of the 2018 Camp Fire all share a “common nexus,” such that all of the claims fall exclusively 

within PG&E’s 2017 tower of D&O Policies (the “2017 Tower”) and do not trigger the additional 

$200 million in directors and officers coverage provided by PG&E’s 2018 tower of D&O Policies 

(the “2018 Tower”). As the Court is aware, PG&E disagrees with the D&O Insurers’ position and, 

pursuant to the mandatory dispute resolution procedures set forth in the 2017 Tower and 2018 Tower 

D&O Policies, commenced a confidential arbitration (the “Arbitration”) to seek a ruling that the 

claims arising out of the 2018 Camp Fire fall within PG&E’s 2018 Tower. The Arbitration has been 

stayed pending approval of the Insurance Settlements. 

The Insurance Settlements will resolve the claims asserted in the Arbitration by the 

Reorganized Debtors against the Settling Insurers (as defined below).3 Under the Insurance 

Settlements, the Settling Insurers have agreed to pay an aggregate of $272 million under the D&O 

Policies ($200 million under the 2017 Tower and $72 million under the 2018 Tower) to resolve the 

Arbitration.4 In exchange, the Reorganized Debtors and the individual insureds have agreed to 

release the Settling Insurers from all further claims under the 2017 Tower and under the D&O 

2

 Defendants Lewis Chew, Fred J. Fowler, Maryellen C. Herringer, Richard C. Kelly, Roger H. 

Kimmel, Richard A. Meserve, Forrest E. Miller, Eric D. Mullins, Rosendo G. Parra, Barbara L. 

Rambo, Anne Shen Smith, and Barry Lawson Williams (collectively, the “D&O Action Director 

Defendants”); Defendants Kevin Dasso, Anthony F. Earley, Jr., Patrick M. Hogan, Christopher P. 

Johns, Gregg L. Lemler, Steve E. Malnight, and Geisha J. Williams (collectively, the “D&O Action 

Officer Defendants,” and together with the D&O Action Director Defendants, the “D&O Action 

Defendants”). 

3 As discussed below, the Insurance Settlements do not resolve disputes with respect to four of the 

2018 Tower D&O Policies. 

4 The D&O Insurers have declined to settle claims under four of the D&O Policies in the 2018 

Tower, with total limits of liability of $40 million.

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 7

of 28
3 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Policies in the 2018 Tower that are the subject of the Insurance Settlements, and to request dismissal 

of the Arbitration against the Settling Insurers with respect to the D&O Policies that are the subject 

of the Insurance Settlements. 

Approving the Insurance Settlements is in the best interests of the Debtors’ estates because 

it will allow the parties to finally resolve various costly and protracted proceedings. As noted above, 

approving the Insurance Settlements will allow the Reorganized Debtors to implement an agreement 

with the FVT (the “D&O Action Settlement”), pursuant to which the FVT will receive $117 

million from the Insurance Settlements to resolve the claims that the FVT is pursuing against 

PG&E’s former directors and officers in the D&O Action. A copy of the D&O Action Settlement 

is attached as Exhibit D to the Slack Declaration. Pursuant to the Plan, the D&O Action Settlement 

amount must be paid solely from any insurance proceeds available under the D&O Policies’ “Side 

B” coverage. Although the D&O Action Settlement is not conditioned upon obtaining Court 

approval, that settlement is conditioned upon this Court’s approval of the Insurance Settlements. 

More importantly, the Insurance Settlements provide the Reorganized Debtors and their 

stakeholders, including the FVT, with certainty as to the minimum amount of insurance proceeds 

available to satisfy the FVT Claims in the D&O Action (and potentially to settle the Securities 

Litigation and Securities Claims). 

Entry into the Insurance Settlements is a reasonable and appropriate exercise of the 

Reorganized Debtors’ business judgment. By entering into the Insurance Settlements, the 

Reorganized Debtors will eliminate significant potential liabilities and ongoing and potential future 

costs in the Arbitration and the D&O Action. Moreover, even if the Reorganized Debtors (or the 

D&O Action Defendants) were to prevail in each of these disputes, the costs of ongoing litigation 

over the FVT Claims would inevitably erode the D&O Policies’ limits of liability to the detriment 

of the Reorganized Debtors and the FVT, whose assigned right to pursue the claims in the D&O 

Action is capped under the Plan to the extent of any remaining Side B Coverage available under the 

D&O Policies. Thus, the Insurance Settlements will allow the Reorganized Debtors to avoid further 

substantial expenses. 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 8

of 28
4 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Accordingly, the Reorganized Debtors respectfully request that the Court grant this Motion 

and approve the Insurance Settlements. 

II. JURISDICTION 

This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. § 1334, the Order 

Referring Bankruptcy Cases and Proceedings to Bankruptcy Judges, General Order 24 (N.D. Cal. 

Feb. 22, 2016), and Rule 5011-1(a) of the Bankruptcy Local Rules for the United States District 

Court for the Northern District of California. This is a core proceeding pursuant to 28 U.S.C. 

§ 157(b). Venue is proper before the Court pursuant to 28 U.S.C. §§ 1408 and 1409. 

III. BACKGROUND 

A. The D&O Policies and the Arbitration 

PG&E purchased the D&O Policies that comprise the 2017 Tower and the 2018 Tower and 

has rights to certain insurance proceeds under those D&O Policies. Each of the D&O Policies is 

written on a “claim first made” basis and, generally speaking, covers: (i) PG&E’s former directors 

and officers, for any non-indemnifiable losses incurred in their capacity as officers or directors of 

PG&E (the “Side A Coverage”); (ii) PG&E, for any losses arising from the indemnification 

obligations it owes to the directors and officers for claims against them (the “Side B Coverage”); 

and (iii) PG&E, for any losses it incurs as a result of securities claims made directly against PG&E 

(sometimes referred to as entity liability coverage) (the “Side C Coverage”). Goodwin Declaration 

¶ 3. 

The shared coverage available under each year of the D&O Policies is subject to an 

aggregate limit of liability of a total of $200 million for each D&O Policy year, such that when 

proceeds are paid out under any of Side A, Side B, or Side C, the total remaining shared coverage 

available under that year of D&O Policies is reduced by the amount of that payment. Id. ¶ 4. Thus, 

any payment made under any of the Side A, Side B, or Side C Coverages reduces the coverage that 

is available under all sides of the respective D&O Policy year from which those proceeds are drawn. 

In total, the two years of D&O Policies with Side A, Side B, and Side C Coverage provide for an 

aggregate of $400 million in total limits of liability. 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 9

of 28
5 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

PG&E submitted timely claims under both towers of the D&O Policies to cover defense 

costs and potential liabilities arising from the allegations in the Amended Complaint (defined and 

discussed below). However, the D&O Insurers took the position that the claims asserted in the 

Amended Complaint do not trigger coverage under the 2018 Tower, contending that the claims all 

share a “common nexus” and arise out of the 2017 North Bay Fires. PG&E disagreed with that 

position and, pursuant to the mandatory dispute resolution procedures set forth in the D&O Policies, 

the parties actively engaged in an arbitration proceeding before a panel of experienced arbitrators. 

Among other things, the parties to the Arbitration briefed and argued to the panel whether claims 

made in the Securities Litigation and/or the D&O Action were deemed first made only during the 

policy period of the 2017 Tower or also contained claims that could be deemed first made during 

the policy period of the 2018 Tower and thus triggered both years of D&O Policies. PG&E, with 

the concurrence of the insurers, subsequently requested that the arbitration panel withhold issuance 

of any award while the parties engaged in settlement discussions. 

PG&E now has reached settlement agreements with all insurers in the 2017 Tower and 

insurers issuing certain of the D&O Policies in the 2018 Tower (the “Settling Insurers”). Under 

the settlements, the Settling Insurers have agreed to pay an aggregate of $272 million under their 

respective D&O Policies, which encompass both the 2017 Tower D&O Policies and all but four of 

the 2018 Tower D&O Policies. The Settling Insurers have agreed to make this payment to resolve 

PG&E’s claims for coverage and to fund the settlement of the D&O Action, to fund any settlement 

of the Securities Litigation and the Securities Claims, and to fund certain defense fees and expenses 

PG&E has incurred in connection with the D&O Action, Securities Litigation and the Securities 

Claims. PG&E and the individual insureds have agreed under the Insurance Settlements to release 

all insurance claims against the Settling Insurers for the 2017 Tower and 2018 Tower (apart from 

claims under the four D&O Policies that are not included in the settlements (the “Non-Settling 

Policies”)) related to the Securities Litigation, the Securities Claims, the D&O Action, and the other 

matters noticed in the Insurance Settlements, as well as PG&E’s related defense costs. 

The Insurance Settlements are contingent on this Court’s approval. The parties have 

informed the arbitrators of the Insurance Settlements and have requested that they stay the 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 10

of 28
6 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Arbitration until this Court rules on the Motion to approve the Insurance Settlements. The parties 

have further agreed to request that, if this Court grants the Motion and the Insurance Settlements 

become effective and this Court’s order approving the Insurance Settlements becomes final, the 

arbitrators dismiss with prejudice the claims PG&E and the individual insureds asserted against the 

Settling Insurers in the Arbitration with respect to the D&O Policies covered by the Insurance 

Settlements. The Arbitration will continue with respect to the Non-Settling Policies that certain 

insurers have chosen not to settle and the Arbitration therefore will re-commence with respect to 

$40 million of the $200 million available insurance in the 2018 Tower. If the Reorganized Debtors 

are successful in the arbitration against the insurance carriers that issued the Non-Settling Policies, 

there would be up to an additional $40 million available to the Reorganized Debtors to, among other 

things, contribute to a settlement of the Securities Litigation and Securities Claims. 

B. The D&O Action and the Plan 

On November 20, 2017, the Firemen’s Retirement System of St. Louis filed the D&O Action 

in the Superior Court of California, San Francisco County. See Stockholder Derivative Complaint 

for Breach of Fiduciary Duties and Unjust Enrichment, D&O Action (the “D&O Action Initial 

Complaint”). The D&O Action Initial Complaint alleged two causes of action, breach of fiduciary 

duty and unjust enrichment, against certain individual officers and directors of the Debtors, with the 

Debtors themselves as nominal defendants. Id. The D&O Action Initial Complaint alleged that the 

individual officers and directors violated their fiduciary duties and unjustly enriched themselves by 

disseminating inaccurate information to shareholders, failing to correct misconduct, allowing the 

Debtors to avoid safety regulations and fail to perform proper maintenance, resulting in damages to 

the Debtors in connection with the 2017 North Bay Fires. Id. at 1-2. Other shareholders 

subsequently filed additional directors and officers actions, some of which were consolidated in a 

single proceeding, before the San Francisco Superior Court. 

By Order dated June 20, 2020 [Docket No. 8053], the Court confirmed the Plan. The Plan 

became effective on July 1, 2020 [Dkt. No. 8252] (the “Plan Effective Date”). Pursuant to the 

Plan, the Reorganized Debtors may object to claims until the later of (i) one hundred and eighty 

(180) days after the Plan Effective Date and (ii) such later date as may be fixed by the Court for 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 11

of 28
7 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

cause shown. See Plan § 7.1. By Order dated May 19, 2022 [Dkt. No. 12432], the Court extended 

the deadline for the Reorganized Debtors to object to claims to December 19, 2022, without 

prejudice to the Reorganized Debtors’ right to seek additional extensions thereof. The Plan further 

vests the Reorganized Debtors with the discretion and authority to compromise, settle, otherwise 

resolve, or withdraw any objections to Disputed Claims. See Plan § 7.2. 

As set forth in Section 6.7 of the Plan, the FVT was established to, among other purposes, 

administer, process, settle, resolve, satisfy, and pay certain claims arising out of the 2015 Butte Fire, 

the 2017 North Bay Fires, and the 2018 Camp Fire, (collectively, the “Fires”), and prosecute or 

settle the Assigned Rights and Causes of Action (as defined in Section 1.8 of the Plan). The 

Assigned Rights and Causes of Action included “any and all rights, claims, causes of action, and 

defenses related thereto relating directly or indirectly to any of the Fires that the Debtors may have 

against . . . former directors and officers of the Debtors solely to the extent of any directors and 

officers’ Side B Insurance Coverage.” 

On February 24, 2021, the FVT filed its first amended complaint and, on November 18, 

2021, filed its second amended complaint in the D&O Action. See Second Amended Complaint, 

D&O Action (the “D&O Action Amended Complaint”).5 The D&O Action Amended Complaint 

alleges two causes of action against the D&O Action Defendants, both for breach of fiduciary duty, 

one in connection with the 2017 North Bay Fires and the other in connection with the 2018 Camp 

Fire. D&O Action Amended Complaint at 1-4. In March 2022, the D&O Action Defendants filed 

motions for summary judgment, which were set to be heard on May 27, 2022. 

Although the Reorganized Debtors are not defendants in the D&O Action, the Plan provides 

that recoveries on the D&O Action can only come from insurance proceeds from the Side B 

coverage of the D&O Policies, which policies are assets of the Reorganized Debtors. See Plan § 

8.7. Moreover, because the D&O Policies have finite limits of liability, any insurance proceeds 

used to settle the D&O Action would then not be available to settle Securities Claims filed in the 

5

 Although the D&O Action was originally filed by a third-party plaintiff, the FVT took control of 

the consolidated D&O Action as a result of the Plan’s assignment of the causes of action. Under 

the terms of the D&O Action Settlement, the sole remaining non-consolidated directors and officers 

action will be dismissed with prejudice. 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 12

of 28
8 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Chapter 11 Cases or to resolve the Securities Litigation (and the potential indemnity claims arising 

from continued litigation of and/or resolution of those claims). Thus, the Reorganized Debtors have 

a strong and necessary interest in the settlement of the D&O Action. 

On May 11, 2022, the court presiding over the D&O Action held a status conference and 

stayed all proceedings until May 23, 2022, in light of the tentative settlement that the parties had 

reached. On May 31, 2022, pursuant to a stipulation and proposed order, the court indefinitely 

stayed the action pending the finalization and execution of the D&O Action Settlement. 

C. The Securities Litigation 

In June 2018, two purported securities class actions, entitled David C. Weston v. PG&E 

Corporation, et al. and Jon Paul Moretti v. PG&E Corporation, et al., were filed in the United 

States District Court for the Northern District of California (the “District Court”). These actions 

alleged that PG&E, as well as certain of its then-current and former officers and directors, made 

material misrepresentations and omissions in various PG&E public disclosures related to, among 

other things, vegetation management and other issues connected to the 2017 North Bay Fires in 

violation of the federal securities laws. On September 10, 2018, both of the actions were 

consolidated as the Securities Litigation, and the Public Employees Retirement Association of New 

Mexico (“PERA”) was appointed as lead plaintiff. The Securities Litigation was automatically 

stayed against the Debtors on January 29, 2019, when the Debtors commenced the Chapter 11 

Cases. On February 22, 2019, a third purported securities class action was filed, entitled York 

County on behalf of the York County Retirement Fund, et al. v. Rambo, et al., which also alleged 

securities violations against certain then-current and former officers and directors of PG&E, as well 

as the underwriters of four public offerings of notes from 2016 to 2018. On May 7, 2019, this action 

was also consolidated into the Securities Litigation. 

On May 28, 2019, PERA filed the Third Amended Consolidated Class Action Complaint in 

the Securities Litigation on behalf of a yet uncertified class of all persons and entities who, during 

the period from April 29, 2015 through November 15, 2018, both dates inclusive (the “Class 

Period”), purchased or otherwise acquired publicly traded PG&E securities. See Securities 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 13

of 28
9 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Litigation Dkt. No. 121 (the “Amended Complaint”).6 The Amended Complaint alleges that the 

Debtors, as well as certain of the Debtors’ prepetition officers and directors and underwriters, 

violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 

promulgated thereunder by allegedly making material misrepresentations and omissions in various 

PG&E public disclosures related to, among other things, vegetation management and other issues 

connected to the 2017 North Bay Fires. See Amended Complaint ¶¶ 17-23. The Amended 

Complaint also asserts claims under Sections 11 and 15 of the Securities Act of 1933 against certain 

of the Debtors’ prepetition officers, directors, and underwriters based on alleged material 

misrepresentations and omissions in connection with the note offerings related to, among other 

things, the Debtors’ vegetation management and wildfire safety measures. See Amended Complaint 

¶¶ 498-505.7 The Amended Complaint also includes claims concerning equipment management 

and other issues connected with the 2018 Camp Fire. See Amended Complaint ¶¶ 33-38. 

On October 4, 2019, the non-debtor defendants (certain directors and officers of the Debtors 

and underwriters) in the Securities Litigation (collectively, the “Non-Debtor Securities 

Defendants”) moved to dismiss all of the claims asserted in the Amended Complaint. See Securities 

Litigation, Dkt. Nos. 148, 155. On April 29, 2021, the District Court indicated that it intended to 

stay the Securities Litigation pending resolution of the Securities Claims in the Chapter 11 Cases 

pursuant to the Securities Claims Procedures (as defined below) adopted by this Court. See 

Securities Litigation Dkt. No. 198. PERA opposed a stay of the Securities Litigation. The District 

Court has not further ruled on its intention to stay the Securities Litigation, certified any proposed 

class, or decided the pending motions to dismiss. 

D. The Securities Claims 

As this Court is aware, approximately 8,768 Securities Claims were filed, on a proof of claim 

form approved by the Court, seeking to recover damages for alleged losses relating to prepetition 

6

 The named plaintiffs in the Securities Litigation are PERA, York County on behalf of the County 

of York Retirement Fund, City of Warren Police and Fire Retirement System, and Mid-Jersey 

Trucking Industry & Local No. 701 Pension Fund. 

7

 The Amended Complaint does not name the Debtors as defendants; it states, however, that the 

Debtors would have been named as defendants but for the automatic stay. See Amended Complaint 

¶¶ 509–10. 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 14

of 28
10 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

purchases of the Debtors’ debt and equity securities as a result of alleged inadequate or fraudulent 

disclosures or non-disclosures of information during the Class Period (holders of such claims, 

“Securities Claimants”). Securities Claimants filed proofs of claim against the Debtors which on 

their face seek approximately $8.7 billion. 

On September 1, 2020, the Reorganized Debtors filed a motion [Dkt. No. 8964] to establish 

certain procedures designed to aid in the resolution of the Securities Claims (the “Securities Claims 

Procedures”). The Court entered an order approving the Securities Claims Procedures on January 

25, 2021. See Dkt. No. 10015. The Securities Claims Procedures authorize the Reorganized 

Debtors to, among other things: (i) request the trading information necessary to assess the viability 

and calculate the potential amount of any allowed claims under the federal securities laws for each 

Securities Claim; (ii) exchange settlement offers and counteroffers with Securities Claimants and 

their representatives; (iii) submit Securities Claims to mandatory, non-binding mediation; and/or 

(iv) object to certain groups of Securities Claims on an omnibus basis. See, e.g., Dkt. No. 10015, 

Ex. A. 

As explained in previous filings and updates filed with the Bankruptcy Court, the 

Reorganized Debtors have endeavored to obtain complete, transaction-level data for each alleged 

Securities Claim. See, e.g., Second Securities Claims Status Report (Apr. 5, 2022) [Dkt. No. 12114] 

(the “Second Securities Claims Status Report”). For certain of those Securities Claimants that 

submitted complete trading information and worked with the Reorganized Debtors’ claims and 

noticing agent to resolve all discrepancies, the Reorganized Debtors were able to begin making 

individual settlement offers earlier this year. As detailed in the Second Securities Claims Status 

Report, the Reorganized Debtors have utilized the Securities Claims Procedures to make significant 

progress in addressing Securities Claims filed against the Debtors. Currently, the Reorganized 

Debtors have expunged (through objection or settlement) approximately 1,800 claims, representing 

approximately $946 million in face amount of those claims. The settlement process under the 

Securities Claims Procedures has been effective in resolving Securities Claims and reducing and 

avoiding litigation and related costs and expenses for both the Reorganized Debtors and Securities 

Claimants. 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 15

of 28
11 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Although the Securities Claims Procedures process has proven to be effective, thousands of 

Securities Claims remain unresolved. 

IV. NEGOTIATION OF THE INSURANCE SETTLEMENTS 

In February 2022, in pursuit of, among other things, a resolution of the Arbitration and FVT 

Claims, the parties retained an experienced mediator and scheduled several formal mediation 

sessions. See Goodwin Declaration ¶ 11. In advance of the mediation sessions, the parties conferred 

and exchanged information among themselves and also submitted detailed mediation statements 

and exhibits to the mediator. Id. With the mediator’s active participation and assistance, and 

extensive arm’s-length negotiations over the course of several months, the parties were ultimately 

able to reach the Insurance Settlements and the D&O Action Settlement. Id. 

V. MATERIAL TERMS OF THE INSURANCE AND D&O ACTION SETTLEMENTS 

The principal terms of the Insurance Settlements and D&O Action Settlement are 

summarized below.8

A. Insurance Settlements9

Settlement 

Overview 

The Insurance Settlements consist of two separate but related 

settlements with the D&O Insurers and involve all but four of PG&E’s 

D&O Policies. The first is between the Reorganized Debtors and 

insurers that either issued coverage in both the 2017 Tower and the 2018 

Tower or only in the 2018 Tower (the “First Insurance Settlement”). 

The second is between the Reorganized Debtors and the settling 

insurance carriers that are only in the 2017 Tower (the “Second 

Insurance Settlement”). The terms of the First Insurance Settlement 

and Second Insurance Settlement are very similar. The key difference, 

described more fully below, is that the First Insurance Settlement 

resolves all of the claims under the 2018 Tower apart from four of the 

2018 Tower policies, totaling $40 million in coverage, and the Second 

Insurance Settlement resolves the claims of all four of the D&O Insurers 

that are only in the 2017 Tower. Collectively, the First Insurance 

8

 These summaries are qualified in their entirety by reference to the provisions of each of the 

Insurance Settlements and the D&O Action Settlement, as applicable. To the extent that any 

discrepancies exist between the summaries described in this Motion and the terms of the Insurance 

Settlements or the D&O Action Settlement, the terms of the Insurance Settlements and the D&O 

Action Settlement, as applicable, shall govern. 

9 Capitalized terms used in this section but not herein defined have the meanings ascribed to such 

terms in the Insurance Settlements. 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 16

of 28
12 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Settlement and Second Insurance Settlement constitute the Insurance 

Settlements. 

Effective Date The Insurance Settlements become effective upon the Court’s approval 

of the Insurance Settlements in the Chapter 11 Cases. 

If the Court’s approval of the Insurance Settlements is reversed in a final 

order, the Insurance Settlements will become void ab initio, the parties 

will be restored to all rights and obligations prior to executing the 

Insurance Settlements, and PG&E will direct that any insurance payment 

be returned to the Settling Insurers within thirty days of the reversal 

order becoming final, with PG&E paying any unpaid balance within 

fifteen days of notification. 

Payment by 

Insurers 

Aggregate Payment 

The Settling Insurers shall pay an aggregate $272 million to the 

Reorganized Debtors as follows: $200 million from the 2017 Tower, 

representing the entire available coverage under that tower; and $72 

million from the 2018 Tower, out of the $160 million in coverage settled 

of the under the 2018 Tower (which in total provides $200 million in 

coverage).10 The Settling Insurers therefore have agreed to pay 100% of 

the 2017 Policies and 45% of the $160 million represented by the 

Settling Insurers in the 2018 tower. The $40 million of the 2018 Tower 

that is not settling reflects the amounts insured under the Non-Settling 

Policies.11 The D&O Insurers issuing the Non-Settling Policies (“NonSettling Insurers”) and PG&E will therefore continue to arbitrate their 

dispute over coverage with respect to the total of $40 million in limits 

under those policies. The amounts to be paid by each Settling Insurer is 

detailed in a schedule set forth in the Insurance Settlements (the 

“Payment Schedule”). 

Most Favored Nations Provision 

 If the Reorganized Debtors, the D&O Action Defendants, and 

the Non-Debtor Securities Defendants (collectively, the 

“Insureds”) agree in a settlement to accept payment from a NonSettling Insurer in the 2018 Tower, then the payments owed by 

the Settling Insurers under the First Insurance Settlement under 

10 The insurers settling as part of the 2018 Tower are: Associated Electric & Gas Insurance Services 

Limited, Swiss Re Corporate Solutions America Insurance Corporation, f/k/a North American 

Specialty Insurance Company, Great Lakes Insurance SE, Endurance Risk Solutions Assurance Co., 

Berkley Insurance Company, Allianz Global Risks US Insurance Company (“Allianz”) (with 

respect to the seventh layer excess policy), Continental Casualty Company, Twin City Fire 

Insurance Company, Argonaut Insurance Company, and Energy Insurance Mutual Limited. 

11 The Non-Settling Policies are: Lloyd’s Syndicate Barbican D&O US Consortium 2018 9679 BAR 

1955 (with respect to the eighth layer excess policy), Starr Indemnity & Liability Company (with 

respect to the eleventh layer excess policy), Allianz (with respect to the twelfth layer excess policy), 

and Houston Casualty Company (with respect to the thirteenth layer excess policy). 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 17

of 28
13 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

the 2018 Tower will be reduced to the lowest percentage of 

policy limits that any Non-Settling Insurer is paying under its 

Non-Settling Policy (the “Reduced Payment”), in which case 

the Payment Schedule amounts as to the 2018 Tower D&O 

Policies shall automatically be amended to the Reduced Payment 

and, if the original payment amount had already been made, then 

the Reorganized Debtors would pay to each Settling Insurer with 

a 2018 Tower D&O Policy the difference between said amount 

and the amount of the Reduced Payment. 

 This provision does not apply if the Insureds agree to voluntarily 

accept payment from a Non-Settling Insurer: (i) in satisfaction of 

an Arbitration Award in the current Arbitration for an amount 

that implicates less than the remaining limits of liability of the 

2018 Tower D&O Policies, or (ii) after an award is issued in the 

Arbitration in favor of the Insureds on certain cross-motions 

submitted to the arbitration panel on October 7, 2021. 

 

 The provision does not affect the $200 million in payments that 

certain of the Settling Insurers agreed to pay the Reorganized 

Debtors under the 2017 Tower. 

Related Settlements 

The Insureds will use reasonable efforts to complete settlements of the 

Securities Litigation (including the Securities Claims) and the D&O 

Action with respect to PG&E securities. The Insurance Settlements are 

binding upon the occurrence of the Effective Date regardless of whether 

such settlements become final. 

Exhaustion of 

Policies 

If the Insurance Settlements are approved and become final, the 2017 

Tower and the 2018 Tower D&O Policies with the Settling Insurers will 

be exhausted and there will be no insurance proceeds available for any 

additional claims against those policies. In addition, if PG&E is 

successful in the Arbitration against the four Non-Settling Policies, any 

funds it recovers may potentially (but need not) be used to reimburse 

itself for settlement payments and fees and expenses in connection with 

the Securities Litigation and the Securities Claims. 

Mutual Releases 2017 Insurer Releases 

Upon payment by the Settling Insurers as provided under the Insurance 

Settlements, the Insureds shall release, acquit, remise, and discharge the 

2017 Tower D&O Insurers from any and all claims, disputes, costs and 

demands under their respective 2017 Tower D&O Policies, including 

but not limited to any extra-contractual or claims of bad faith, based 

upon, arising out of or relating to any, some, and/or all of the following: 

(1) the matters noticed in the Insurance Settlements (the “Noticed 

Matters”), (2) defense costs incurred in connection with the Noticed 

Matters, (3) the acts, failures to act, omissions, misrepresentations, 

statements, misstatements, facts, events, or occurrences alleged or which 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 18

of 28
14 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

could have been alleged in the Noticed Matters; (4) wildfires that 

occurred on or before May 20, 2020 (subparts (1) through (4) above are 

collectively referred to as the “Released Matters”); and (5) the 2017 

Tower D&O Policies, including without limitation any allegation that 

any Settling Insurer breached any obligation under the 2017 Tower 

D&O Policies. 

2018 Insurer Releases 

Upon payment by the Settling Insurers as provided under the Insurance 

Settlements, the Insureds release, acquit, remise, and discharge the 2018 

Tower D&O Insurers from any and all claims, disputes, controversies, 

fees, costs and demands under the 2018 Tower D&O Policies (excepting 

any claims for breach of the Insurance Settlements and not including the 

Non-Settling Policies), including but not limited to any extra-contractual 

claims or claims of bad faith, based upon, arising out of or relating to 

any, some, and/or all of the following: (1) the Released Matters; and (2) 

the 2018 Tower D&O Policies, including without limitation any 

allegation that the 2018 Tower D&O Insurers breached any obligation 

under the 2018 Tower D&O Policies. 

Insured Releases 

Upon payment by the Settling Insurers as provided for under the 

Insurance Settlements, the Settling Insurers shall release, acquit, remise, 

and discharge the Insureds from any and all claims, disputes, 

controversies, fees, costs and demands under the 2017 Tower D&O 

Policies and the 2018 Tower D&O Policies (excepting any claims for 

breach of the Insurance Settlements and not including the Non-Settling 

Policies) including but not limited to any extra-contractual or claims of 

bad faith, based upon, arising out of or relating to any, some, and/or all 

of the following: (1) the Released Matters; (2) the D&O Policies that 

were the subject of the Insurance Settlements, including without 

limitation any allegation that any Insured breached any obligation under 

such D&O Policies; and (3) based upon, arising out of or relating to any 

rights to recoup the payments made pursuant to the Insurance 

Settlements, other than as provided in the payment reduction provision 

of the First Insurance Settlement. 

B. D&O Action Settlement12

D&O Action Settling 

Parties 

The parties to the D&O Action Settlement Agreement include: 

12 Capitalized terms used in this section but not herein defined have the meanings ascribed to such 

terms in the D&O Action Settlement. 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 19

of 28
15 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

(i) The FVT; 

(ii) The D&O Action Defendants; and 

(iii) The Reorganized Debtors. 

Effective Date The D&O Action Settlement Effective Date shall be the date on which 

all of the following conditions have been satisfied: 

1. Full execution of the D&O Action Settlement by the D&O 

Action Settlement Parties; 

2. An order from the Court approving a settlement by and 

between PG&E and its insurance carriers; and 

3. Dismissal of Hagberg v. Chew, Case No. CGC-19-573190 

(S.F. Super. Ct.). 

Payment Source Payment for the D&O Action Settlement shall come solely from 

proceeds from Side B Insurance Coverage, as defined in the Plan. 

None of the Settlement Amount is being paid by the Reorganized 

Debtors and the D&O Defendants shall have no personal 

responsibility or liability for the D&O Action Settlement Amount. 

Settlement Amount 

and Releases 

D&O Action Settlement Amount 

In full and final settlement of the D&O Action, the FVT shall receive 

a total lump sum of $117,000,000 solely from insurance proceeds 

within 30 business days of the D&O Action Settlement Effective 

Date. 

Release of Claims 

Effective upon receipt of the Settlement Amount, the FVT, on behalf 

of itself and Customary Related Parties, shall release the D&O Action 

Defendants, PG&E, the Settling Insurers,13 and all of their respective 

Customary Related Parties, from any and all claims (including 

unknown claims) which are or were held at any point from the 

beginning of time to the Effective Date, arising out of, relating to, or 

in connection with (i) the rights, claims, and causes of action that 

PG&E assigned to the FVT under the Plan that were or could have 

been pursued against the D&O Action Defendants, including but not 

limited to the facts, transactions, acts, occurrences, statements, 

representations, and/or omissions that were or could have been 

asserted in the D&O Action; and (ii) any claims related to the pursuit 

and/or defense of the D&O Action, including but not limited to claims 

for malicious prosecution, litigation sanctions, breach or violation of 

the Plan, or breach of PG&E’s assignment of claims or the implied 

covenant of good faith and fair dealing in connection therewith. 

13 This release will only apply to the 2017 Tower and the 2018 Tower D&O Policies and not to any 

other insurance policies. 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 20

of 28
16 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

D&O-PG&E Release The D&O Action Defendants will agree with PG&E to a specific 

release of PG&E for claims regarding the FVT’s claims that are being 

released in this Agreement, other than the D&O Action Defendants’ 

claims for fees and expenses in connection with the D&O Action. 

This release is not intended to and will not supersede any other 

indemnification rights or limit any other present or future claims by 

the D&O Action Defendants for indemnification by PG&E. 

VI. BASIS FOR RELIEF REQUESTED 

A. The Insurance Settlements are in the Best Interests of the Debtors’ Estates and 

Should be Approved Pursuant to Bankruptcy Rule 9019 

Bankruptcy Rule 9019(a) provides that “[o]n motion by the trustee and after notice and a 

hearing, the court may approve a compromise and settlement.” Fed. R. Bankr. P. 9019(a). 

Compromises and settlements are normal and welcomed occurrences in chapter 11 because they 

allow a debtor and its creditors to avoid the financial and other burdens associated with litigation 

over contentious issues and expedite the administration of the bankruptcy estate. See Martin v. 

Kane (In re A&C Props.), 784 F.2d 1377, 1380-81 (9th Cir. 1986). The decision to approve a 

particular compromise lies within the sound discretion of the Court. Id. A proposed compromise 

and settlement should be approved when it is “fair and equitable” and “in the best interest of the 

[debtor’s] estate.” Id. at 1381. 

The standard for approval of settlements under Bankruptcy Rule 9019 is deferential to the 

debtor’s judgment and merely requires a court to ensure that the settlement does not fall below the 

lowest point in the range of reasonableness in terms of benefits to the estate. See City Sanitation v. 

Allied Waste Servs. of Mass., LLC (In re Am. Cartage, Inc.), 656 F.3d 82, 91-92 (1st Cir. 2011) 

(“The task of both the bankruptcy court and any reviewing court is to canvass the issues and see 

whether the settlement falls below the lowest point in the range of reasonableness . . . If a trustee 

chooses to accept a less munificent sum for a good reason (say, to avoid potentially costly litigation), 

his judgment is entitled to some deference.”) (citing In re Thompson, 965 F.2d 1136, 1145 (1st Cir. 

1992)); Nellis v. Shugrue, 165 B.R. 115, 123 (S.D.N.Y. 1994) (a court need not be aware of or 

decide the particulars of each individual claim resolved by the settlement or “assess the minutia of 

each and every claim;” rather, a court “need only canvass the issues and see whether the settlement 

falls ‘below the lowest point in the range of reasonableness’”) (quoting In re W.T. Grant Co., 699 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 21

of 28
17 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

F.2d 599, 608 (2d Cir. 1983)); In re Pac. Gas & Elec. Co., 304 B.R. 395, 417 (Bankr. N.D. Cal. 

2004) (“It has been held that the court's proper role is ‘to canvas the issues and see whether the 

settlement falls below the lowest point in the range of reasonableness.’”) (quoting In re Drexel 

Burnham Lambert Group, Inc., 134 B.R. 493, 496–97 (Bankr.S.D.N.Y.1991)). 

Courts in the Ninth Circuit consider four factors in determining whether a settlement should 

be approved: “(1) the probability of success in litigation, with due consideration for the uncertainty 

in fact and law; (2) the difficulties, if any, to be encountered in the matter of collecting any litigated 

judgment; (3) the complexity and likely duration of the litigation and any attendant expense, 

inconvenience, and delay; and (4) the paramount interest of the creditors and the proper deference 

to their reasonable views.” In re A&C Props., 784 F.2d at 1380. It is not necessary that the 

conclusions reached in the consideration of each of the above factors support the settlement, but 

taken as a whole, the conclusions must favor the approval of the settlement. See In re Pac. Gas & 

Elec. Co., 304 B.R. at 417 (citing In re WCI Cable, Inc., 282 B.R. 457, 473-74 (Bankr. D. Or. 

2002)). 

The Insurance Settlements are a significant achievement. The Insurance Settlements 

represent a reasonable compromise of a dispute that has been the subject of an extensive arbitration 

between the Reorganized Debtors and the D&O Insurers that has been pending for nearly two and 

a half years. Although the Reorganized Debtors are confident in their position regarding the 

Arbitration, substantial uncertainties still exist, and it is possible that the Reorganized Debtors could 

arbitrate and obtain less than the total of $272 million that is being paid by the Settling Insurers 

under the 2017 and 2018 D&O Policies. 

More importantly, the timing of the Insurance Settlements and the certainty of being paid at 

least $272 million under the D&O Policies allowed the Reorganized Debtors to be able to reach the 

D&O Action Settlement and to seek further reasonable settlements with respect to the Securities 

Litigation and Securities Claims. Absent approval of the Insurance Settlements, the conditions 

necessary to effectuate the D&O Action Settlement will not occur, and the Reorganized Debtors 

will not have certainty of a minimum amount of money to resolve the Securities Litigation and 

Securities Claims. 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 22

of 28
18 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Each of the factors that courts consider in connection with a request to approve a settlement 

under Bankruptcy Rule 9019 weigh heavily in favor of approving the Insurance Settlements, as set 

forth below. 

1. The Probability of Success in Litigation 

In evaluating the probability of success, the Court need not conduct a “mini-trial on the 

merits” of these disputes. In re Schmitt, 215 B.R. 417, 423 (B.A.P. 9th Cir. 1997). Rather, the 

Court should defer to the Reorganized Debtors’ assessment of the probability of success and risks 

of further litigation. See, e.g., In re Open Med. Inst., Inc., 639 B.R. 169, 183 (B.A.P. 9th Cir. 2022) 

(affirming approval of settlement agreement where bankruptcy court “agreed with the Trustee’s 

assessment” and “described the odds of success as a ‘coin flip’”). 

The Insurance Settlements were heavily negotiated and, accordingly, recognize and 

appropriately take into account the risk of an adverse outcome in the Arbitration. Although the 

Reorganized Debtors are confident in their position, arbitration is inherently unpredictable and 

uncertain, which favors settlement. See Johnson v. Quantum Learning Network, Inc., 2017 WL 

747462, at *1 (N.D. Cal. Feb. 27, 2017) (“Courts have noted that uncertainty favors approval of a 

settlement.”) (citing Browning v. Yahoo! Inc., 2007 WL 4105971, at *10 (N.D. Cal. Nov. 16, 2007); 

In re Laser Realty, Inc. v. Fernandez (In re Fernandez), 2009 WL 2913685, at *3 (Bankr. D.P.R. 

Mar. 31, 2009) (“The Court concludes that the uncertainty of the litigation between the debtors and 

Citibank weighs heavily in favor of the approval of the Settlement Agreement.”).

The Reorganized Debtors, with the assistance of, and after receiving advice from, their 

counsel and other advisors, carefully considered the risks, complexity, and expense associated with 

continuing the Arbitration, and they determined in their business judgment that resolving the 

Arbitration as provided in the Insurance Settlements is reasonable and in the best interests of the 

Debtors’ estates. See Simon Declaration ¶¶ 7-11. Moreover, the availability of a minimum of $72 

million in insurance proceeds from the 2018 Tower would substantially reduce the amount of cash 

or other consideration that the Reorganized Debtors would need to pay in any settlement of the 

Securities Litigation and the Securities Claims. Thus, the Reorganized Debtors properly considered 

not only the direct benefits of resolving the Arbitration, but also the benefits of resolving, and 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 23

of 28
19 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

potentially resolving, various other interrelated proceedings. Officers for Justice v. Civil Serv. 

Comm’n of City & Cnty. of San Francisco, 688 F.2d 615, 628 (9th Cir. 1982) (“It is the complete 

package taken as a whole, rather than the individual component parts, that must be examined for 

overall fairness.”). 

2. Potential Difficulties in Collecting Any Judgment 

The Reorganized Debtors expect that the D&O Insurers likely would be able to pay any 

amounts ultimately awarded by the panel in the Arbitration. However, the Reorganized Debtors 

also consider prompt receipt of the settlement amounts from the Settling Insurers to be critical to 

the timely settlement of the FVT Claims, as well as to any future settlements of the Securities 

Litigation and the Securities Claims, and believe this outweighs the fact that any arbitration award 

eventually issued against the Settling Insurers would likely be fully collectable. 

3. The Complexity and Expense of Any Litigation 

Compromises are favored precisely to “minimize litigation and expedite the administration 

of a bankruptcy estate.” Myers v. Martin (In re Martin), 91 F.3d 389, 393 (3d Cir. 1996). Multiple 

courts within the Ninth Circuit have found that expensive, contentious litigation weighs in favor of 

compromise, even after trial has commenced. See In re Am. Bldg. Storage, LLC, 2007 WL 7532281, 

at *6 (B.A.P. 9th Cir. Apr. 2, 2007) (“Likewise, the factor of ‘complexity’ and ‘expense’ of litigation 

weighs in favor of the settlement. The record shows that the litigation was highly contentious, and 

the second phase of the trial had not even been set yet.”); In re Waksberg, 2014 WL 5285648, at 

*10 (B.A.P. 9th Cir. Oct. 15, 2014) (finding that this factor favored settlement when there “already 

had been very time consuming and extremely costly” litigation and would require further expense 

and time to resolve). 

The Insurance Settlements will similarly serve to reduce litigation and arbitration, minimize 

expense, and expedite the administration of the estate. While the initial phase of the Arbitration is 

nearly complete, approval of the Insurance Settlements is a condition precedent for the Reorganized 

Debtors’ entry into the D&O Action Settlement, which is itself a complex case that has proven to 

be expensive. While the ultimate recovery on the FVT Claims can only come from insurance 

proceeds, the expenses of the litigation largely fall on the Reorganized Debtors. Indeed, much of 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 24

of 28
20 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

the discovery in that action is of the Reorganized Debtors and has been borne by the Reorganized 

Debtors either directly or indirectly as a result of potential indemnification obligations. 

In addition, if the Reorganized Debtors are able to settle the Securities Litigation and the 

Securities Claims as facilitated by the Insurance Settlements, the Reorganized Debtors would avoid 

the cost and expense of further securities litigation in two courts – the District Court in the case of 

the Securities Litigation and this Court in connection with the proof of claim process – where the 

Reorganized Debtors would otherwise expect to incur significant cost. Indeed, any future discovery 

in either forum would almost certainly also focus on the Debtors and the Reorganized Debtors, 

including testimony from many current and former PG&E officers and employees. 

Entry into the Insurance Settlements will therefore save the time, expense and risk associated 

with further litigation in the Arbitration and the D&O Action. This factor thus favors approval of 

the Insurance Settlements. 

4. The Interests of Creditors 

This factor also supports approval of the Insurance Settlements. Approval of the Insurance 

Settlements will expedite distribution of insurance proceeds to the FVT – whose beneficiaries 

comprise a significant constituency of the Debtors’ creditors – and ensure that it receives a recovery 

on the claims that it was assigned under the Plan and has been pursuing in the D&O Action. 

Specifically, approving the Insurance Agreements will allow the Reorganized Debtors and FVT to 

effectuate the D&O Action Settlement, under which the FVT will receive $117 million in insurance 

proceeds. 

Although the PG&E Plan paid creditors in full, and thus the benefit to creditors under the 

Plan other than the fire claimants and the FVT is neutral, the Insurance Settlements are in the best 

interests of the Reorganized Debtors and their economic stakeholders. See In re Pac. Gas and Elec. 

Co., 304 B.R. at 417 (holding the fourth A & C Properties factor favored approval of settlement 

where objecting creditors were paid in full); see also Officers for Justice, 688 F.2d at 628 (“It is the 

complete package taken as a whole, rather than the individual component parts, that must be 

examined for overall fairness.”). 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 25

of 28
21 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

In the Reorganized Debtors’ business judgment, the Insurance Settlements are fair, 

reasonable, and equitable, and in the Reorganized Debtors’ best interests. They should thus be 

approved. 

B. The Insurance Settlements are a Sound Exercise of the Debtors’ Business 

Judgment and Should be Approved 

The Court should approve the Insurance Settlements because the Insurance Settlements fall 

well within the Reorganized Debtors’ sound business judgment. As set forth in the Simon 

Declaration, the Reorganized Debtors carefully considered the Insurance Settlements and weighed 

the cost and benefits of continuing the Arbitration. In making that decision, the Reorganized 

Debtors obtained advice from experienced counsel. After receiving that advice, the Reorganized 

Debtors determined that sound business justifications exist to enter into the Insurance Settlements. 

Section 363(b) of the Bankruptcy Code provides, in pertinent part, that “[t]he [debtor], after 

notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property 

of the estate.” 11 U.S.C. § 363(b)(1). Section 105(a) of the Bankruptcy Code further provides that 

the “court may issue any order, process, or judgment that is necessary or appropriate to carry out 

the provisions of this title.” 11 U.S.C. § 105(a). Together, these sections of the Bankruptcy Code 

provide the Court with ample authority and discretion to grant the relief requested herein. See In re 

Lionel Corp., 722 F.2d 1063, 1071 (2d Cir. 1983); In re Walter, 83 B.R. 14, 17 (B.A.P. 9th Cir. 

1988) (“The bankruptcy court has considerable discretion in deciding whether to approve or 

disapprove the use of estate property by a debtor in possession, in the light of sound business 

justification.”); In re ASARCO, L.L.C., 650 F.3d 593, 601 (5th Cir. 2011) (“The business judgment 

standard in section 363 is flexible and encourages discretion.”); In re Montgomery Ward Holding 

Corp., 242 B.R. 147, 153 (D. Del. 1999) (use of assets outside the ordinary course of business 

permitted if “sound business purpose justifies such actions”); Comm. of Asbestos-Related Litigants 

v. Johns-Manville Corp. (In re Johns-Manville Corp.), 60 B.R. 612, 616 (Bankr. S.D.N.Y. 1986) 

(“Where the debtor articulates a reasonable basis for its business decisions (as distinct from a 

decision made arbitrarily or capriciously), courts will generally not entertain objections to the 

debtor’s conduct.”). 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 26

of 28
22 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Once a debtor articulates a valid business justification under section 363 of the Bankruptcy 

Code, a presumption arises that the debtor’s decision was made on an informed basis, in good faith, 

and in the honest belief that the action was in the best interest of the company. See In re Integrated

Res., Inc., 147 B.R. 650, 656 (S.D.N.Y. 1992) (noting that business judgment principles apply in 

the chapter 11 context and that “[c]ourts are loath to interfere with corporate decisions absent a 

showing of bad faith, self-interest, or gross negligence”); In re Alaska Fishing Adventure, LLC, 594 

B.R. 883, 889 (Bankr. D. Alaska 2018) (noting in the section 363(b) context that “a bankruptcy 

court should determine only whether the trustee's judgment was reasonable and whether a sound 

business justification exists supporting the sale and its terms”) (internal quotation marks omitted); 

In re Johns-Manville Corp., 60 B.R. at 615–16 (“[T]he Code favors the continued operation of a 

business by a debtor and a presumption of reasonableness attaches to a debtor’s management 

decisions”). Thus, if a debtor’s actions satisfy the business judgment rule, then the transactions in 

question should be approved under section 363(b)(1) of the Bankruptcy Code. 

For all the reasons discussed above, the Reorganized Debtors’ actions here easily meet this 

requirement and, therefore, the Insurance Settlements should be approved. 

VII. NOTICE 

Notice of this Motion will be provided to (i) the Office of the United States Trustee for 

Region 17 (Attn: Andrew Vara, Esq. and Timothy Laffredi, Esq.); (ii) the Settling Insurers; (iii) the 

FVT; (iv) the D&O Action Defendants; (v) all counsel and parties receiving electronic notice 

through the Court’s electronic case filing system; and (vi) those persons who have formally 

appeared in these Chapter 11 Cases and requested service pursuant to Bankruptcy Rule 2002. The 

Reorganized Debtors respectfully submit that no further notice is required. 

No previous request for the relief sought herein has been made by the Reorganized Debtors 

to this or any other court. 

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

the relief requested herein as a sound exercise of the Reorganized Debtors’ business judgment, 

appropriate under Bankruptcy Rule 9019, and in the best interests of the Debtors’ estates, creditors, 

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 27

of 28
23 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

shareholders, and all other parties in interest, and (ii) such other and further relief as the Court may 

deem just and appropriate. 

Dated: September 29, 2022 

WEIL, GOTSHAL & MANGES LLP 

 KELLER BENVENUTTI KIM LLP 

By: _s/ Richard W. Slack 

 Richard W. Slack 

Attorneys for Debtors and Reorganized 

Debtors

Case: 19-30088 Doc# 13015 Filed: 09/29/22 Entered: 09/29/22 16:37:28 Page 28

of 28