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Richard A. Lapping (SBN: 107496)

Trodella & Lapping LLP

540 Pacific Avenue

San Francisco, CA 94133

Telephone: (415) 399-1015

Facsimile: (415) 651-9004

 Rich@TrodellaLapping.com

Attorneys for Valero Refining Company-California 

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION

In re:

PG&E CORPORATION,

-andPACIFIC GAS & 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).

Case No.: 19-30088-DM 

Chapter 11 

MOTION FOR RELIEF FROM STAY BY 

VALERO REFINING COMPANYCALIFORNIA 

Date: February 26, 2019 

Time: 9:30 a.m. 

Place: Courtroom 17 

450 Golden Gate Avenue, 16th Floor

San Francisco, California

Judge: Hon. Dennis Montali

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TABLE OF CONTENTS

I. Introduction and Summary of the Facts.................................................................................... 4

II. Argument .................................................................................................................................. 5

A. Legal Standard .............................................................................................................. 5

B. Application of the Curtis Factors.................................................................................. 6

1. Whether the relief will result in a partial or complete resolution of the

issues................................................................................................................. 6

2. The lack of any connection with or interference with the bankruptcy 

case.................................................................................................................... 7

3. Whether the foreign proceeding involves the debtor as a fiduciary ................. 8

4. Whether a specialized tribunal has been established to hear the 

particular cause of action and whether that tribunal has the expertise to 

hear such cases.................................................................................................. 8

5. Whether the debtor’s insurance carrier has assumed full financial 

responsibility for defending the litigation......................................................... 8

6. Whether the action essentially involves third parties, and the debtor 

functions only as a bailee or conduit for the goods or proceeds in 

question........................................................................................................... 10

7. Whether the litigation in another forum would prejudice the interests 

of other creditors, the creditor's committee and other interested parties ........ 11

8. Whether the judgment claim arising from the foreign action is subject 

to equitable subordination............................................................................... 11

9. Whether movant’s success in the foreign proceeding would result in a 

judicial lien avoidable by the debtor under Section 522(f)............................. 11

10. The interests of judicial economy and the expeditious and economical 

determination of litigation for the parties ....................................................... 11

11. Whether the foreign proceedings have progressed to the point where 

the parties are prepared for trial...................................................................... 12

12. The impact of the stay and the balance of hurt ............................................... 13

III. Conclusion .............................................................................................................................. 14

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TABLE OF AUTHORITIES

Cases

Am. Safety Indem. Co. v. Vanderveer Estates Holding, LLC (In re Vanderveer Estates 

Holding, LLC), 328 B.R. 18, 25 (Bankr. E.D.N.Y. 2005)...................................................... 10

Christensen v. Tucson Estates, Inc. (In re Tucson Estates, Inc.), 912 F.2d 1162, 1166 (9th 

Cir. 1990)............................................................................................................................ 5, 11

Class Five Nev. Claimants v. Dow Corning Corp. (In re Dow Corning Corp.), 280 F.3d 648 

(6th Cir. 2002)......................................................................................................................... 11

Groshong v. Sapp (In re MILA, Inc.), 423 B.R. 537, 543 (9th Cir. BAP 2010)................................. 10

In re Curtis, 40 B.R. 795 (Bankr. D. Utah 1984) ................................................................................. 5

In re Howrey, 492 B.R. 19, 24 (Bankr. N.D. Cal. 2013);..................................................................... 6

In re Kronemyer, 405 B.R. 915, 921 (9th Cir. BAP 2009)................................................................... 6

In re Pac. Gas & Elec. Co., 279 B.R. 561 571 (Bankr. N.D. Cal. 2002) ............................................. 7

In re Roger, 539 B.R. 837, 844-45 (C.D. Cal. 2015............................................................................. 6

Kane v. Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988)............................................................. 11

Phillips v. Noetic Specialty Ins. Co., 919 F. Supp. 2d 1089, 1099 (S.D. Cal. 2013)............................ 9

Quintrall v. Nunes (In re Quintrall), 2007 Bankr. LEXIS 4831, *10-*11 (9th Cir. BAP July 

5, 2007) ................................................................................................................................... 12

Santa Clara Cty. Fair Ass'n v. Sanders (In re Santa Clara Cty. Fair Ass'n), 180 B.R. 564, 

566-67 (9th Cir. BAP 1995)................................................................................................ 7, 13

Truebro, Inc. v. Plumberex Specialties Products, Inc. (In re Plumberex Specialties Products, 

Inc.), 311 B.R. 551, 559 (Bankr. C.D. Cal. 2004) .................................................................... 6

Statutes

11 U.S.C. § 362(d)(1) ........................................................................................................................... 4

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TO THE COURT AND ALL PARTIES AND THEIR ATTORNEYS OF RECORD: 

Creditor Valero Refining Company-California (“Valero”) hereby moves this Court for relief 

from the automatic stay pursuant to 11 U.S.C. § 362(d)(1) (the “Motion”), to allow the completion of 

pretrial proceedings, trial, post-trial motions and any appellate proceedings in or in connection with 

VALERO REFINING COMPANY-CALIFORNIA, a Delaware corporation v. PACIFIC GAS & 

ELECTRIC COMPANY, a California corporation, pending as Case No. 2:17-cv-01350-TLN-EFB in 

United States District Court for the Eastern District of California before the Honorable Troy L. 

Nunley, United States District Judge (the “District Court Action”). 

Valero does not seek relief from the stay to pursue any enforcement of any judgment it may 

obtain in the District Court Action. 

This Motion is based on the accompanying Declaration and Request for Judicial Notice of 

John Cox (“Cox Decl.”), the points and authorities set forth below, and on such other and further 

evidence and matters that the Court may consider at the hearing of the Motion. 

I. Introduction and Summary of the Facts

As alleged in First Amended Complaint, the District Court Action arises out of an incident on 

May 5, 2017 in which PG&E breached its duties, contractual and otherwise, resulting in a complete 

power outage to Valero’s Benicia refinery (“The Refinery”). (Cox Decl., Ex. 1.) The loss of power 

caused an emergency shutdown of the Refinery, an extended period of flaring and significant

damage to the complex Refinery equipment. (Id.) The Refinery remained out of service for an 

extended period of time depriving Valero of revenues and causing fuel supply disruptions in 

Northern California. (Id.) Valero alleges and has developed evidence of damages in excess of 

Seventy-Five Million Dollars ($75,000,000). (Id.) Additionally, Valero had filed a motion in the 

District Court Action to amend its complaint to allege punitive damages, which had been briefed and 

taken under consideration by the District Court at the time of PG&E commenced this case. (Cox 

Decl., Ex. 2.)

The District Court Action was commenced on June 30, 2017. (Cox Decl., Ex. 2.) PG&E 

filed its answer and demand for jury trial on October 23, 2017. (Id.) There are no counterclaims or 

crossclaims against third parties. (Id.) On October 26, 2017, the District Court issued a pre-trial 

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scheduling order, modified by stipulations on November 14, 2017 and June 18, 2018, that provided, 

among other things, a close of fact discovery by August 24, 2018, designations of expert witnesses 

by October 19, 2018, supplemental expert disclosures by November 16, 2018, and setting the 

deadline for dispositive motions to be heard by February 7, 2019, and setting the jury trial for June 3, 

2019. (Id.) 

All fact discovery, including 19 depositions, has been completed, and all expert depositions 

(seven in all) except one (the eighth) have been taken. (Cox Decl., ¶6.) On January 10, 2019, 

PG&E filed a Motion for Partial Summary Judgment, on January 22, 2019, Valero filed its 

opposition to PG&E’s motion. (Cox Decl., Ex. 2.) On January 31 2019, following notice of this 

bankruptcy case, the District Court issued a minute order that the case be administratively closed but 

that it may be reopened at the request of the parties. (Id.)

The facts and legal issues in the District Court Action are complex and vigorously disputed. 

(Cox Decl., ¶7.) 

II. Argument

A. Legal Standard

A party may move for relief from automatic stay under 11 U.S.C. § 362, which provides that 

a bankruptcy court shall grant relief from the stay upon a showing of cause. 11 U.S.C. § 362(d)(1). 

Cause is determined on a case-by-case basis. Christensen v. Tucson Estates, Inc. (In re Tucson 

Estates, Inc.), 912 F.2d 1162, 1166 (9th Cir. 1990) (citation omitted). In determining whether cause 

exists to permit an action to proceed in a nonbankruptcy forum, courts often analyze the twelve 

factors set forth in In re Curtis, 40 B.R. 795 (Bankr. D. Utah 1984). These factors, known as the 

Curtis factors, are:

1. Whether the relief will result in a partial or complete resolution of 

the issues;

2. The lack of any connection with or interference with the 

bankruptcy case;

3. Whether the foreign proceeding involves the debtor as a fiduciary;

4. Whether a specialized tribunal has been established to hear the 

particular cause of action and whether that tribunal has the expertise 

to hear such cases;

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5. Whether the debtor’s insurance carrier has assumed full financial 

responsibility for defending the litigation;

6. Whether the action essentially involves third parties, and the debtor 

functions only as a bailee or conduit for the goods or proceeds in

question;

7. Whether the litigation in another forum would prejudice the 

interests of other creditors, the creditor's committee and other 

interested parties;

8. Whether the judgment claim arising from the foreign action is 

subject to equitable subordination;

9. Whether movant’s success in the foreign proceeding would result in 

a judicial lien avoidable by the debtor under Section 522(f);

10. The interests of judicial economy and the expeditious and 

economical determination of litigation for the parties;

11. Whether the foreign proceedings have progressed to the point 

where the parties are prepared for trial; and

12. The impact of the stay and the balance of hurt.

Curtis, 40 B.R. at 799–800 (internal citations omitted); see also In re Roger, 539 B.R. 837, 844-45 

(C.D. Cal. 2015); In re Howrey, 492 B.R. 19, 24 (Bankr. N.D. Cal. 2013); Truebro, Inc. v. 

Plumberex Specialties Products, Inc. (In re Plumberex Specialties Products, Inc.), 311 B.R. 551, 

559 (Bankr. C.D. Cal. 2004). The Ninth Circuit has recognized that “the Curtis factors are 

appropriate, nonexclusive, factors to consider in deciding whether to grant relief from the automatic 

stay to allow pending litigation to continue in another forum.” In re Kronemyer, 405 B.R. 915, 921 

(9th Cir. BAP 2009). While the Curtis factors are widely used to determine the existence of cause, 

not all of the factors are relevant in every case, nor is a court required to give each factor equal 

weight. Plumberex, 311 B.R. at 560. “The most important factor in determining whether to grant 

relief from the automatic stay to permit litigation against the debtor in another forum is the effect of 

such litigation on the administration of the estate.” Roger, 539 B.R. at 846, citing Curtis, 40 B.R. at 

806. 

B. Application of the Curtis Factors

1. Whether the relief will result in a partial or complete resolution of the issues

In the context of this bankruptcy case, Valero has a potential claim that is contingent, 

unliquidated and disputed by PG&E. If Valero filed a proof of claim in this case based on its claims 

and damages in the District Court Action, at some point in the future, PG&E would no doubt object 

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to such a claim, requiring resolution of all the fact and legal issues presently before the District 

Court. Further, PG&E must address any Valero claim in its reorganization plan, and if an objection 

is made and not resolved, the issue of voting by Valero would need to be addressed. Relief from 

stay as requested by Valero completely resolves these issues. 

This factor favors relief from stay.

2. The lack of any connection with or interference with the bankruptcy case

As noted above, interference with the bankruptcy case is the most important factor. Roger, 

539 B.R. at 846. Here, resolution of the District Court Action will not interfere with the bankruptcy 

case. The District Court Action did not cause this bankruptcy and will not be a significant matter in 

the bankruptcy case. See In re Pac. Gas & Elec. Co., 279 B.R. 561 571 (Bankr. N.D. Cal. 2002). 

(analyzing abstention factors). PG&E has a separate litigation firm, Steptoe & Johnson LLP, at hand 

and fully prepared to try the case. Its expert witnesses are fully briefed and ready to testify. This 

litigation will not be a distraction to PG&E’s reorganization professionals, who have not been and 

will not need to be involved. 

PG&E will need to commit resources to resolve this dispute at some point. Doing so now, 

while everything is fresh in the minds of all counsel and witnesses, will undoubtedly cost less than 

indefinite delay followed by duplicative efforts to reconstruct evidence and preparation down the 

road. Other than the relatively modest expense of concluding the litigation, there is no interference 

with the chapter 11 case. And, the litigation expense itself is “irrelevant to this Curtis factor” and 

has been repeatedly held to be legally impermissible as a basis for denying stay relief. Roger, 40 

B.R. at 847, 848, citing and quoting Santa Clara Cty. Fair Ass'n v. Sanders (In re Santa Clara Cty. 

Fair Ass'n), 180 B.R. 564, 566-67 (9th Cir. BAP 1995) (“Ordinarily, litigation costs to a bankruptcy 

estate do not compel a court to deny stay relief”). In Roger, the district court reversed a bankruptcy 

court decision denying relief from stay on, among other grounds, “the lack of any evidence 

regarding the costs of litigating the State Court Action versus the Roger Bankruptcy . . .” 40 B.R. at 

851. 

Equally impermissible as a factor is any consideration of whether PG&E might hope in vain 

to obtain a more favorable outcome in bankruptcy court. As observed by the district court in Roger, 

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To the extent the Bankruptcy Court's decision rested on such an 

assumption, the Bankruptcy Court committed legal error. See Tucson 

Estates, 912 F.2d at 1167 (“An underlying assumption made by the 

bankruptcy court was that its decision on this issue and the

misappropriation damages claim might be different from the state 

court's. Yet state law governs both issues, so both courts should reach 

the same result.”).

Roger, 40 B.R. at 848, n. 5.

This factor supports granting relief from the stay. 

3. Whether the foreign proceeding involves the debtor as a fiduciary

This factor is not applicable.

4. Whether a specialized tribunal has been established to hear the particular 

cause of action and whether that tribunal has the expertise to hear such cases

Although the District Court is not a specialized tribunal in a strict sense, that court has direct 

and detailed knowledge of the issues after having presided over the litigation for eighteen months. 

This factor leans toward granting relief from the stay. 

5. Whether the debtor’s insurance carrier has assumed full financial 

responsibility for defending the litigation

Based on its review of PG&E’s insurance policies obtained in discovery, Valero understands 

that PG&E has liability insurance coverage for some or all of the claims asserted in the District 

Court Action, up to a per-occurrence limit well over , and subject to an aggregate

(“SIR”). The policies provide for coverage of all sums that 

PG&E becomes They also 

provide that the defense costs reduce or exhaust limits, including an underlying aggregate limit such 

as the SIR. Thus, they are “wasting” policies. 

The applicable insurers are 

 (Cox Decl., Exhibits 3 and 4.) The applicable 

insurance policies (the “Policies”) are claims-made policies with a coverage period, as applicable to 

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the Valero refinery incident, from . As such, the Policies are 

not, to Valero’s knowledge, subject to claims from the Northern California wildfires that occurred in 

October 2017. Valero has no knowledge as to what other claims against PG&E may be covered by 

the Policies. Nor does Valero have knowledge of the extent to which the SIR underlying the Policies

has been satisfied by payment of defense costs or indemnity by PG&E. 

Regardless of whether PG&E has not or never does satisfy payment of the SIR amount, the

Policies will provide coverage for Valero’s claims to the extent the damages exceed the SIR amount. 

The Policy contains an condition (to which 

also follows form), which provides in its entirety as follows:

 

 

(Cox. Decl., Exhibit 3, p. 14, Condition M.) In addition, the Policy contains a Bankruptcy or 

Insolvency condition (to which also follows form) which provides: 

 (Cox. Decl., 

Exhibit 3, p. 13, Condition G.)

Courts have repeatedly held that under California law, as well as in the application of similar 

insurance provisions, that “payment of the SIR is not a condition precedent to coverage under the 

terms of Defendant’s policy.” Phillips v. Noetic Specialty Ins. Co., 919 F. Supp. 2d 1089, 1099

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(S.D. Cal. 2013). The policy in Phillips had a provision, similar to the above term, that provided that 

the insolvency of the insured would not relieve the insurer of its obligations under the policy. Id. at 

1098. Adopting a contrary interpretation would “conflict with public policy as reflected by 

California’s direct action statute.” Id. at 1099. Further, the court noted: 

Other courts have recognized that even without a direction [sic] action 

statute, a SIR requirement may be void as a matter of public policy if 

non-compliance by the insured voided coverage of existing claims. 

Gulf Underwriters Ins. Co. v. Burris, 674 F.3d 999, 1005 (8th Cir. 

2012), reh'g denied (May 3, 2012). See also Rosciti v. Ins. Co. of 

Pennsylvania, 659 F.3d 92, 99 (1st Cir. 2011).

Id. at n. 5. See also Am. Safety Indem. Co. v. Vanderveer Estates Holding, LLC (In re 

Vanderveer Estates Holding, LLC), 328 B.R. 18, 25 (Bankr. E.D.N.Y. 2005) (applying 

similar Illinois law to the same effect).

In addition, to the extent that the Policies cover Valero’s damages, once determined in the 

District Court Action, then the insurance proceeds should be paid to Valero independent of any 

bankruptcy distributions, barring other considerations. Although it remains unsettled whether 

liability insurance proceeds are property of the estate, Groshong v. Sapp (In re MILA, Inc.), 423 B.R. 

537, 543 (9th Cir. BAP 2010), their potential availability (in that case, for defense of directors and 

officers) at a minimum points towards granting relief from stay. Id. at 545. 

To be sure, determination of whether available insurance proceeds from the Policies are 

sufficient to cover and pay all eligible claims must be made by the bankruptcy court. But in the 

meantime, if PG&E should exhaust its SIR by payment of defense costs in this or other litigations, it 

will then have insurance coverage for its defense costs in the District Court Action. 

This factor favors relief from stay. 

6. Whether the action essentially involves third parties, and the debtor 

functions only as a bailee or conduit for the goods or proceeds in question

This factor is not applicable.

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7. Whether the litigation in another forum would prejudice the interests of 

other creditors, the creditor's committee and other interested parties

The District Court Action is a two-party dispute between Valero and PG&E. Resolution of 

the dispute will result in the liquidation of Valero’s claim; and will remove the contingent and 

disputed designations, if any, of the claim. As noted above, the potential for insurance coverage of 

all or part of the liability on the claim further removes this dispute outside the spheres of interest of 

other parties. Only in the unlikely event that multiple claims exceeding the coverage limits are made 

against PG&E’s insurance coverage for the year applicable to the Valero incident will any other 

party potentially be affected by Valero’s claim. But that would be true no matter what forum 

determines liability and damages and is no reason not to have the claim liquidated. Bankruptcy 

courts have capably addressed insurance shortfalls in numerous cases. See, e.g., Class Five Nev. 

Claimants v. Dow Corning Corp. (In re Dow Corning Corp.), 280 F.3d 648 (6th Cir. 2002); Kane v. 

Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988). 

This factor favors relief from stay. 

8. Whether the judgment claim arising from the foreign action is subject to 

equitable subordination

This factor is not applicable.

9. Whether movant’s success in the foreign proceeding would result in a 

judicial lien avoidable by the debtor under Section 522(f)

This factor is not applicable.

10. The interests of judicial economy and the expeditious and economical 

determination of litigation for the parties

Curtis Factors 10, 11 and 12 invoke reasoning similar to that applied in bankruptcy cases in 

connection with abstention. “Where a bankruptcy court may abstain from deciding issues in favor of 

an imminent state court trial involving the same issues, cause may exist for lifting the stay as to the 

state court trial.” In re Tucson Estates, Inc., 912 F.2d at 1166. 

Judicial economy would be well served by granting relief from stay. The District Court 

Action involves issues of state law, not bankruptcy issues. The case is complex and difficult due to 

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the highly technical electrical engineering and refinery operations evidence and testimony expected 

regarding the responsibility for the outage that occurred on May 5, 2017. (Cox Decl., ¶ 7.) But most 

important, the burden on the bankruptcy docket to take on this dispute would be too great at a time 

when the court is addressing myriad bankruptcy issues resulting from the largest utility in the United 

States commencing a chapter 11 case. 

[T]he legislative history of section 362(a) indicates that judicial 

economy provides sufficient cause to lift the stay to permit the 

prosecution of actions pending elsewhere against a debtor:

[I]t will often be more appropriate to permit proceedings 

to continue in their place of origin, when no great 

prejudice to the bankruptcy estate would result, in order 

to leave the parties to their chosen forum and to relieve 

the bankruptcy court from many duties that may be 

handled elsewhere.

Santa Clara County Fair, 180 B.R. at 566, citing H.R. Rep. No. 95-

595, at 341 (1977); S. Rep. No. 95-989, at 50 (1978), reprinted in 1978 

U.S.C.C.A.N. 5787, 5836 (emphasis added).

Quintrall v. Nunes (In re Quintrall), 2007 Bankr. LEXIS 4831, *10-*11 (9th Cir. BAP July 5, 2007).

Here, there is no prejudice to the bankruptcy estate, only advantage. This factor favors relief 

from stay. 

11. Whether the foreign proceedings have progressed to the point where the 

parties are prepared for trial

This is exactly the situation in the District Court Action on the date the petition was filed. 

Fact discovery had closed; expert discovery had closed except for a single remaining deposition. 

Dispositive motions have been filed and briefed, except for a reply memorandum on PG&E’s motion 

for partial summary judgment. The final pretrial conference was scheduled for April 4, 2019. Trial 

was set for June 3, 2019. 

This factor favors relief from stay. 

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12. The impact of the stay and the balance of hurt

Valero will be prejudiced by delay in presenting this complex case if relief from stay is not 

granted. As the Bankruptcy Appellate Panel observed: 

Additionally, the court reasoned that [plaintiff] could be prejudiced by 

delay in the manner that all plaintiffs are prejudiced by failing 

memories and the like, and that the [debtor] would not be greatly 

prejudiced by granting [plaintiff] relief since it would have to defend 

itself in either forum.

In re Santa Clara Cty. Fair Ass'n, 180 B.R. at 566. Likewise, the costs associated with a pencils 

down freeze and a later revival at some indefinite point in the future will undoubtedly result in 

duplication of efforts and increase Valero’s overall litigation costs. On the contrary, proceeding to 

trial now will not increase the litigation costs to PG&E. As the Bankruptcy Appellate Panel further 

observed: 

The [debtor] does not argue that resolution of [plaintiff’s] claim in the 

bankruptcy court would be less taxing on the estate than defense in the 

district court forum, but rather that it will be costly to the estate in 

either forum. On this basis, the Association's argument amounts to a 

request for delay, which may have some merit, but falls far short of 

balancing the considerations used by the court in properly exercising 

its discretion. 

Id. at 567. The impact of the stay, without relief, prejudices Valero. The balance of the hurt clearly 

favors Valero’s motion to lift the stay. 

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Trodella & Lapping LLP

540 Pacific Avenue

San Francisco, CA 94133

III. Conclusion

There is nothing to be gained, and much to be lost, by delaying determination of the issues in

this litigation before the District Court. The relevant Curtis factors all point to relief from stay. 

Based on all of the foregoing, the Court should grant the Motion.

Dated: February 5, 2019 TRODELLA & LAPPING LLP

By: /s/ Richard A. Lapping 

Richard A. Lapping

Attorneys for Valero Refining CompanyCalifornia

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