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WEIL, GOTSHAL & MANGES LLP

Stephen Karotkin (pro hac vice)

(stephen.karotkin@weil.com)

Ray C. Schrock, P.C. (pro hac vice)

(ray.schrock@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 LLP

Tobias S. Keller (#151445)

(tkeller@kellerbenvenutti.com)

Jane Kim (#298192)

(jkim@kellerbenvenutti.com)

650 California Street, Suite 1900

San Francisco, CA 94108

Tel: 415 496 6723

Fax: 650 636 9251

Attorneys for Debtors and Debtors in Possession

CRAVATH, SWAINE & MOORE LLP

Paul H. Zumbro (pro hac vice)

(pzumbro@cravath.com)

Kevin J. Orsini (pro hac vice)

(korsini@cravath.com)

Omid H. Nasab (pro hac vice)

(onasab@cravath.com)

David A. Herman (pro hac vice)

(dherman@cravath.com)

825 Eighth Avenue

New York, NY 10019

Tel: 212 474 1000

Fax: 212 474 3700

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION

In re: 

PG&E CORPORATION,

 - and -

PACIFIC GAS AND ELECTRIC 

COMPANY,

Bankruptcy Case No. 19-30088 (DM)

Chapter 11

(Lead Case) 

(Jointly Administered)

DEBTORS’ MOTION PURSUANT TO 

11 U.S.C. §§ 105(a) AND 502(c) FOR THE 

ESTABLISHMENT OF WILDFIRE 

CLAIMS ESTIMATION PROCEDURES

Date: August 14, 2019

Time: 9:30 a.m. PST

Place: United States Bankruptcy Court

Courtroom 17, 16th Floor

San Francisco, CA 94102

Objection Deadline: August 7, 2019

Debtors.

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DEBTORS’ MOTION FOR THE ESTABLISHMENT OF ESTIMATION PROCEDURES

19-30088 (DM)

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 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). 

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

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

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

“Motion”), pursuant to sections 105(a) and 502(c) of title 11, United States Code (the “Bankruptcy 

Code”) for entry of an order establishing procedures and schedules for the estimation of the 

Debtors’ aggregate liability for contingent and/or unliquidated claims arising out of the 2015, 2017 

and 2018 Northern California Wildfires (the “Wildfires” and the “Wildfire Claims”),1 as 

described in the accompanying Memorandum of Points and Authorities. In support of the Motion, 

the Debtors respectfully submit the Declaration of Kevin J. Orsini (the “Orsini Declaration”), filed 

contemporaneously herewith.

A proposed form of order granting the relief requested herein is annexed hereto as 

Exhibit A (the “Proposed Order”). 

 1 For the avoidance of doubt, as used in this Motion and the Proposed Order, the terms “Wildfires” 

and “Wildfire Claims” refer to the 2015 Butte Fire, the 2018 Camp Fire and the following 22 2017 

North Bay Wildfires: (1) Adobe; (2) Atlas; (3) Blue; (4) Cascade; (5) Cherokee; (6) Highway 37; (7) 

Honey; (8) La Porte; (9) Lobo; (10) Maacama; (11) McCourtney; (12) Norrbom; (13) Nuns; (14) 

Oakmont/Pythian; (15) Partrick; (16) Pocket; (17) Point; (18) Potter/Redwood; (19) Pressley; (20) 

Sullivan; (21) Sulphur and (22) Tubbs.

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TABLE OF CONTENTS

I. INTRODUCTION .....................................................................................................................1

II. JURISDICTION ........................................................................................................................8

III. BACKGROUND .......................................................................................................................9

A. The Northern California Wildfires.................................................................................9

B. The Debtors File for Relief Under Chapter 11 ............................................................11

C. The Bar Date ................................................................................................................11

IV. BASIS FOR RELIEF REQUESTED ......................................................................................12

A. Claims Estimation Is Required in this Case.................................................................12

B. Estimation Methodology..............................................................................................15

1. Phase 1: Applicability of Inverse Condemnation to PG&E............................16

2. Phase 2: The Tubbs Fire .................................................................................20

3. Phase 3: Final Estimation Hearing..................................................................24

V. NOTICE...................................................................................................................................25

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TABLE OF AUTHORITIES

Page(s)

Cases

In re A & B Assocs., L.P.,

No. 17-40185-EJC, 2019 WL 1470892 (Bankr. S.D. Ga. Mar. 29, 2019) ..............................13

A.H. Robins Co. v. Piccinin,

788 F.2d 994 (4th Cir. 1986) ...............................................................................................9, 13

In re Adelphia Bus. Sol., Inc.,

341 B.R. 415 (Bankr. S.D.N.Y. 2003).....................................................................................13

Albers v. Cty. of Los Angeles,

398 P.2d 129 (Cal. 1965).....................................................................................................5, 17

Am. Tower Corp. v. City of San Diego,

763 F.3d 1035 (9th Cir. 2014) .................................................................................................20

In re Aquaslide ‘N’ Dive Corp.,

85 B.R. 545 (B.A.P. 9th Cir. 1987)......................................................................................3, 21

In re Armstrong World Indus., Inc.,

348 B.R. 111 (D. Del. 2006)..........................................................................................3, 13, 15

Barham v. S. Cal. Edison Co.,

74 Cal. App. 4th 744 (Ct. App. 1999)......................................................................................18

Bittner v. Borne Chemical Co., Inc.,

691 F.2d 134 (3d Cir. 1982).........................................................................................15, 16, 21

Bunch v. Coachella Valley Water Dist.,

935 P.2d 796 (Cal. 1997).........................................................................................................21

In re Chateaugay Corp.,

111 B.R. 67 (Bankr. S.D.N.Y. 1990).........................................................................................3

In re Cont’l Airlines,

981 F.2d 1450 (5th Cir. 1993) .................................................................................................13

In re Corey,

892 F.2d 829 (9th Cir. 1989) ...................................................................................................21

In re Dow Corning, Corp.,

211 B.R. 545 (Bankr. E.D. Mich. 1997)..................................................................................15

In re Eagle-Picher Indus., Inc.,

189 B.R. 681 (Bankr. S.D. Ohio, 1995).............................................................................14, 15

In re Farley, Inc.,

146 B.R. 748 (Bankr. N.D. Ill. 1992) ......................................................................................16

In re Federal-Mogul Global Inc.,

330 B.R. 133 (D. Del. 2005)........................................................................................14, 15, 16

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In re G-I Holdings, Inc.,

323 B.R. 583 (Bankr. D.N.J. 2005) .........................................................................3, 15, 16, 20

In re Garlock Sealing Techs., LLC,

504 B.R. 71 (Bankr. W.D.N.C. 2014).............................................................................. passim

In re Gawker Media LLC,

571 B.R. 612 (Bankr. S.D.N.Y. 2017).....................................................................................15

Gutierrez v. Cty. of San Bernardino,

198 Cal. App. 4th 831 (Cal. Ct. App. 2011)........................................................................5, 18

Holtz v. Superior Court,

475 P.2d 441 (Cal. 1970).....................................................................................................5, 17

In re Imaging3, Inc.,

634 F. App’x 172 (9th Cir. 2015) ........................................................................................4, 14

Knick v. Twp. of Scott, Pa.,

139 S. Ct. 2162 (2019).........................................................................................................6, 20

In re Lionel LLC,

No. 04-17324, 2007 WL 2261539 (Bankr. S.D.N.Y. Aug. 3, 2007).......................................13

In re Mud King Prods., Inc.,

514 B.R. 496 (Bankr. S.D. Tex. 2014) ....................................................................................13

In re N. Am. Health Care, Inc.,

544 B.R. 684 (Bankr. C.D. Cal. 2016).................................................................................3, 16

Orkin v. Taylor,

487 F.3d 734 (9th Cir. 2007) ...............................................................................................5, 19

Owens Corning v. Credit Suisse First Bos.,

322 B.R. 719 (D. Del. 2005)......................................................................................................3

Pacific Bell Tel. Co. v. S. Cal. Edison Co.,

208 Cal. App. 4th 1400 (Ct. App. 2012)............................................................................18, 19

In re POC Properties, LLC,

580 B.R. 504 (E.D.Wisc. 2017).........................................................................................16, 21

In re Residential Capital,

519 B.R. 890 (Bankr. S.D.N.Y. 2014).....................................................................................14

In re S.G. Phillips Constructors, Inc.,

45 F.3d 702 (2d Cir. 1995).................................................................................................16, 20

Siewert v. Christy (In re Finley, Kumble, Wagner, Heine, Underberg, Manley, 

Myerson, & Casey),

194 B.R. 728 (S.D.N.Y. 1995).................................................................................................15

In re Specialty Prod. Holding Corp.,

No. BR 10-11779-JKF, 2013 WL 2177694 (Bankr. D. Del. May 20, 2013) ......................3, 14

In re Standard Insulations, Inc.,

138 B.R. 947 (Bankr. W.D. Miss. 1992) ...........................................................................16, 20

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Ulloa v. McMillin Real Estate & Mortg., Inc.,

57 Cal. Rptr. 3d 1 (Cal. Ct. App. 2007)...................................................................................21

In re USG Corp.,

290 B.R. 223 (Bankr. D. Del. 2003)........................................................................................17

Statutes & Rules

11 U.S.C. § 502(b)(9) ..........................................................................................................................11

11 U.S.C. § 502(c) .....................................................................................................................3, 12, 13

11 U.S.C. § 1107(a) .............................................................................................................................11

11 U.S.C. § 1108..................................................................................................................................11

28 U.S.C. § 157..................................................................................................................................5, 8

28 U.S.C. § 157(b).................................................................................................................................9

28 U.S.C. § 157(b)(1)(B).......................................................................................................................4

28 U.S.C. § 157(b)(2)(B)...............................................................................................................14, 17

28 U.S.C. § 1408....................................................................................................................................9

28 U.S.C. § 1409....................................................................................................................................9

B. L. R. 5011-1(a)..................................................................................................................................8

Cal. Civ. Proc. Code § 1036 ................................................................................................................17

Fed. R. Bankr. P. 1015(b) ....................................................................................................................11

Fed. R. Bankr. P. 2002.........................................................................................................................25

Pub. Util. Code § 2106.........................................................................................................................11

Other Authorities

6 Witkin, Summary 11th Torts § 1912 (2019).......................................................................................7

Cal. Const., Art. I, § 19........................................................................................................................17

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MEMORANDUM OF POINTS AND AUTHORITIES

I. INTRODUCTION

These Chapter 11 Cases were necessitated by the tragic wildfires that occurred in 

Northern California in 2017 and 2018. PG&E filed these cases to establish an orderly, fair and 

expeditious process to resolve PG&E’s liabilities resulting from those Wildfires, while preserving and 

maximizing the value of PG&E’s business enterprise for the benefit of all of its economic stakeholders. 

Time is of the essence in reaching that goal. Tens of thousands of California residents whose lives 

have been affected by the Wildfires need to know whether, and how much, they will recover from 

PG&E so they can continue the hard but necessary work of rebuilding lives that have been devastated 

by the Wildfires. In addition, legislation that passed in the California State Assembly last week has 

set a deadline of June 30, 2020, for these Chapter 11 Cases to be “resolved pursuant to a plan” for 

PG&E to be eligible to participate in a newly-created wildfire insurance fund that is intended to 

“support[] the credit worthiness of electrical corporations, and provide[] a mechanism to attract capital 

for investment in safe, clean, and reliable power for California at a reasonable cost to ratepayers”. 

A.B. 1054, 2019 Assemb. (Cal. 2019). For PG&E to enjoy the benefit of this insurance against future 

wildfire liability, the legislation requires this Court to determine by June 30, 2020, that the plan 

satisfies the prepetition Wildfire Claims in “the amounts agreed upon in any pre-insolvency 

proceeding settlement agreements or post-insolvency settlement agreements, authorized by the court 

through an estimation process or otherwise allowed by the court”.

The fundamental issue that needs to be resolved in order for the Debtors to emerge 

from Chapter 11 is the value of the tens of thousands of unadjudicated, unliquidated Wildfire Claims 

to be addressed in a Chapter 11 plan. It has become clear, however, at this point that the stakeholders 

have materially divergent views of that issue. While PG&E has taken accounting charges of $14 

billion in connection with the 2017 and 2018 Wildfire Claims, the Official Committee of Tort 

Claimants (the “Tort Claimants Committee” or the “TCC”) has asserted in recent filings that they 

believe the damages for the victims of the 2017 and 2018 Wildfires are $54 billion or more. (TCC 

Motion for Stay Relief (Dkt. No. 2843) at 4.) The TCC came up with this number not by engaging 

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in any meaningful analysis of the actual damages suffered by victims, but instead simply by 

multiplying the amounts paid out by insurance companies for the 2017 and 2018 Wildfires by three 

(i.e., 3 times) because, they claim, such a ratio has been used in resolving claims for certain other fires. 

Such an unscientific approach, divorced completely from any analysis of the facts of the 2017 and 

2018 Wildfires, cannot serve as the basis for a resolution of these cases. Indeed, even the Ad Hoc 

Group of Subrogation Claim Holders (the “Ad Hoc Subrogation Group”) has repudiated the TCC’s 

approach, stating that it disagrees “with the assertion that a ratio of total losses to insured losses for 

past wildfires should be used to predict the losses for the 2017 and 2018 Northern California 

wildfires”. (Ad Hoc Subrogation Group Motion for Stay Relief (Dkt. No. 2863) at 4 n.3.) As yet 

another data point, and in stark contrast to the TCC’s proposal, the Ad Hoc Committee of Senior 

Unsecured Noteholders (the “Ad Hoc Noteholder Group”) has taken the position that all Wildfire 

Claims are valued at no more than $16 billion, subject to an upward adjustment of up to 15% based 

on the outcome of an estimation proceeding. (Ad Hoc Noteholder Group Motion to Terminate the 

Debtors’ Exclusivity Periods (Dkt. No. 2741) at 4-5; 27.)

The Debtors remain optimistic that all stakeholders, working together, will ultimately 

reach a negotiated resolution and that the Debtors will be able to propose a consensual plan of 

reorganization. That is the best path toward expeditiously compensating victims who deserve 

compensation and ensuring that PG&E can continue to provide safe, reliable and clean energy to 

Northern California. PG&E is already making significant progress down that path. On June 19, 2019, 

PG&E settled with 18 public entities, including cities, counties, districts and public agencies in the 

very communities that have been most directly affected by the Wildfires, to resolve their claims in a 

Chapter 11 plan for an aggregate amount of $1 billion. Discussions and negotiations with other 

constituencies are ongoing. To date, however, the Debtors and the remaining parties have not reached 

a consensus, and the Debtors have concluded that there must be a formal process to address the parties’ 

remaining disputes in a timely manner in the event they cannot settle the claims. The initiation of that 

process—including addressing important threshold legal and other gating issues as described further 

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below—will also encourage the parties to continue working towards a negotiated resolution. As the 

Court is well aware, deadlines and potential resolution of material legal issues can encourage the 

parties to reach a consensus, as would a framework for estimating claims based on actual damages. 

By this motion, the Debtors seek to establish an estimation procedure to create exactly 

that environment to foster settlement negotiations, which is in the public interest and in the interest of 

the various direct economic stakeholders in these Chapter 11 Cases. An estimation process also will 

enable the Debtors and the Court to, among other things, determine plan feasibility and voting issues, 

and preserve the Debtors’ ability to satisfy the legislative requirement that any Chapter 11 plan satisfy 

the Wildfire Claims in an amount that is agreed-upon or is “authorized by the court through an 

estimation process or otherwise allowed by the court”. The estimation process must begin now to give 

the Debtors the best chance to emerge from Chapter 11 by the legislative deadline of June 30, 2020, 

thereby enabling the Debtors to participate in the newly-created wildfire fund. 

Estimation for these purposes is a core proceeding that is standard in mass tort 

bankruptcies. See, e.g., In re Aquaslide ‘N’ Dive Corp., 85 B.R. 545 (B.A.P. 9th Cir. 1987); In re 

Armstrong World Indus., Inc., 348 B.R. 111 (D. Del. 2006); Owens Corning v. Credit Suisse First 

Bos., 322 B.R. 719 (D. Del. 2005); In re N. Am. Health Care, Inc., 544 B.R. 684 (Bankr. C.D. Cal. 

2016); In re Specialty Prod. Holding Corp., No. BR 10-11779-JKF, 2013 WL 2177694 (Bankr. D. 

Del. May 20, 2013); In re G-I Holdings, Inc., 323 B.R. 583 (Bankr. D.N.J. 2005); In re Chateaugay 

Corp., 111 B.R. 67 (Bankr. S.D.N.Y. 1990).

Estimation is also mandatory here. Under Section 502(c) of the Bankruptcy Code, the 

Court “shall” estimate “any contingent or unliquidated claim, the fixing or liquidation of which, as 

the case may be, would unduly delay the administration of the case.” 11 U.S.C. § 502(c) (emphasis 

added). Just as in the other mass tort bankruptcies cited above and discussed below, liquidating each 

of the tens of thousands of individual claims one by one during the course of these Chapter 11 Cases 

would be impossible without undermining the objective of paying victims promptly and fairly. 

Litigating claims individually would take years, impede the successful reorganization of the Debtors, 

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delay distributions to wildfire victims and all other creditors and preclude PG&E from participating 

in the wildfire fund. There is no question that such a delay would be “undue” and contrary to the 

interests of all economic stakeholders. 

That leaves the question of exactly how the estimation process should be structured in 

these cases. These are highly complex Chapter 11 Cases involving tens of thousands of claims related 

to more than two dozen different fires that started at different times, in different places and by different 

means. Estimation of the Wildfire Claims will require the Court to examine a number of critical issues 

relating either to the likelihood of success on the merits (and therefore value) of certain claims or to 

the proper calculation of the aggregate damages suffered by the claimants. Given the importance of 

time—both for the benefit of the wildfire victims and in light of the wildfire fund deadline—the 

Debtors are proposing a three-phased approach to estimation that will enable adjudication of the most

critical threshold issues—the issues that have the highest financial stakes and therefore the best chance 

of driving negotiated resolutions—as soon as possible and, indeed, much more quickly than those 

issues could be determined in the state court system. To facilitate that process and ensure maximum 

efficiency, the Debtors are prepared to agree that as part of their proposed estimation process they will 

not contest causation with respect to any Wildfire for which the California Department of Forestry and

Fire Protection (“CAL FIRE”) has concluded PG&E is responsible. That means the Debtors will not 

contest causation for estimation purposes with respect to the 2018 Camp Fire or any of the 22 separate 

2017 North Bay Fires listed in section III.A below, except the 2017 Tubbs Fire. The general 

parameters of the estimation process proposed by Debtors are as follows: 

First, the Debtors request that the Court promptly examine the threshold legal issue of 

whether, pursuant to the state law doctrine of “inverse condemnation”, PG&E may be held strictly 

liable for Wildfire Claims asserting property damage even where PG&E was not negligent. The 

question of whether claims based on inverse condemnation must be disallowed as a matter of law is a 

core proceeding with respect to all Wildfire Claims. 28 U.S.C. § 157(b)(1)(B) (“Core proceedings 

include, but are not limited to [] allowance or disallowance of claims against the estate”); In re 

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Imaging3, Inc., 634 F. App’x 172, 175 (9th Cir. 2015) (“Allowance and disallowance of claims against 

an estate are specifically listed as ‘core’ proceedings under 28 U.S.C. § 157.”). The applicability of 

inverse condemnation materially impacts the value of claims arising out of the Wildfires, because 

without strict liability, a claimant would have to prove that PG&E was negligent. 

As discussed in more detail below, the California Supreme Court has consistently 

explained that the “underlying purpose of [inverse condemnation] is to distribute throughout the 

community the loss inflicted upon the individual by the making of the public improvements: to 

socialize the burden . . . that should be assumed by society”. Holtz v. Superior Court, 475 P.2d 441, 

445 (Cal. 1970) (internal citations and quotation marks omitted). Inverse condemnation thus serves 

as a form of social insurance, financed by the general public, based on the premise that the costs of 

damage from a public good “can better be absorbed, and with infinitely less hardship, by the taxpayers 

as a whole”. Albers v. Cty. of Los Angeles, 398 P.2d 129, 137 (Cal. 1965). The public entity inverse 

condemnation defendant serves merely as a conduit to socialize losses suffered by one individual 

among the public at large through taxes or utility rate increases; the public entity does not itself bear 

the loss. This loss distribution framework is the constitutional “underpinning [of] inverse 

condemnation”. Gutierrez v. Cty. of San Bernardino, 198 Cal. App. 4th 831, 837 (Cal. Ct. App. 2011). 

That framework is absent, however, with respect to an investor-owned utility, since an investor-owned 

utility cannot spread losses across even its own ratepayers without approval from the California Public 

Utilities Commission (the “CPUC”). While some lower California courts have nonetheless concluded 

that inverse condemnation still applies to PG&E even absent the “constitutional underpinning”, the 

CPUC itself has noted that those courts have “done so without really grappling with the salient 

difference between public and private utilities”. (See Orsini Decl. Ex. A, at 21:29-22:15.) Because 

California’s highest court has not yet ruled on this precise issue, this Court “must predict how the 

state’s highest court would decide the question”. Orkin v. Taylor, 487 F.3d 734, 741 (9th Cir. 2007). 

In addition, even if inverse condemnation does apply to PG&E under California state law, it is an 

unconstitutional taking and a violation of PG&E’s substantive due process rights under the United 

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States Constitution. Those federal issues are also ripe for immediate adjudication by this Court. 

Knick v. Twp. of Scott, Pa., 139 S. Ct. 2162, 2179 (2019). 

As set forth in the Proposed Order, the Debtors propose to file their brief supporting 

disallowance of all inverse condemnation claims within one week of entry of that order. 

Second, as noted above, the only Wildfire which the Debtors will contest causation for 

the purposes of estimation is the Tubbs Fire. The Tubbs Fire was the largest of the 2017 wildfires. It 

destroyed more than 5,000 homes and resulted in insurance payouts estimated to exceed $5 billion. 

Importantly, the evidence shows that PG&E did not cause the Tubbs Fire. Indeed, two separate 

investigatory teams from CAL FIRE have ruled out PG&E equipment as a cause.2 Because both 

individual and insurance subrogation claimants are demanding compensation from PG&E for damages 

incurred by the Tubbs fire despite the CAL FIRE determination, addressing PG&E’s likelihood of

liability (if any) related to the Tubbs Fire is a crucial threshold issue in determining the aggregate 

amount required to resolve all Wildfire Claims. 

On this point, the Debtors, the TCC and the Ad Hoc Subrogation Group are in 

agreement. The TCC has described the Tubbs Fire as a “gating issue” and stated that the “parties 

cannot negotiate a consensual plan if the [liability] landscape could change” as dramatically as it would 

if PG&E were liable for Tubbs. (TCC Motion at 19-20.) The Ad Hoc Subrogation Group has said 

the goal of moving these cases “toward a confirmable plan of reorganization expeditiously and 

efficiently” can “best be achieved by answering the question that most separates the key parties 

negotiating a plan: Is PG&E liable for the devastating 2017 Tubbs Fire?”. (Ad Hoc Subrogation 

Group Motion at 1.) All stakeholders also agree that the question of Tubbs liability can be prepared 

for a hearing quickly. The only dispute is whether this Court should address this issue that cuts to the 

core of these Chapter 11 Cases or, instead, whether this Court should lift the stay and allow a trial of 

a very small, unrepresentative sampling of claims to be tried before a jury to reach a verdict on both 

causation and damages. If this Court were to lift the stay, any such verdict would be subject to years 

 2 See CAL FIRE Report, dated January 20, 2019, 

https://www.fire.ca.gov/programs/fire-protection/reports/incident-reporting-collection/.

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of state court appeals and of limited binding effect in the Chapter 11 Cases, not to mention being 

completely contrary to the Debtors’ need to emerge from Chapter 11 by June 30, 2020. 

As discussed below, and as will be discussed in the Debtors’ forthcoming objections to 

the motions of the TCC and the Ad Hoc Subrogation Group seeking relief from the stay, the proper 

and most expeditious forum for addressing PG&E’s responsibility for the Tubbs Fire is this Court, 

where all Wildfire Claimants and all other interested parties can be heard and can participate directly 

or through formal representative committees with fiduciary duties to their members. In this way, the 

Court can assess the Debtors’ potential responsibility with respect to all claims arising out of the Tubbs 

Fire, not just a hand-selected few. The Debtors propose the Court schedule a hearing on the limited 

issue of causation of the Tubbs Fire on October 7, 2019, or as soon as possible thereafter. The Debtors 

also request that the Court direct the Debtors, TCC and Ad Hoc Subrogation Group to negotiate a prehearing schedule once that hearing date has been set and propose it to the Court promptly. 

Third, the final phase of the proposed estimation process would involve the Court’s 

determination of aggregate values of the Wildfire Claims. This phase, unlike the first two phases, 

would need to occur after the October 21, 2019, Bar Date so that all stakeholders would have 

knowledge of the number of claimants and the aggregate amount of alleged claims in these 

proceedings. By the time of the Phase 3 hearing, the Court will have determined the threshold 

questions of the applicability of inverse condemnation and likelihood of liability for the Tubbs Fire.3 

Phase 3 would involve the resolution of questions around the likelihood of success of the Wildfire 

Claims on other issues such as negligence, the recoverability of certain categories of damages (such 

as the cost of rebuilding damaged structures, rather than the accepted standard of diminution in value, 

see 6 Witkin, Summary 11th Torts § 1912 (2019) (“the basic and normal rule uses diminution in value 

 3 While all three phases could, in theory, be collapsed into a single phase that would begin after the 

Bar Date, that would be far less efficient and expeditious. The purpose of the proposed three-phase 

approach is to allow the stakeholders and the Court to make the best use of the time between now and 

the Bar Date to address critical issues that will be necessary to the final estimation ruling while 

simultaneously giving all stakeholders certainty on those critical issues as soon as possible. 

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as the measure; i.e., the difference between the market value of the land before and after the injury”)) 

and the aggregate estimate of overall damages based upon sampling of claims and expert testimony. 

The Debtors submit that all stakeholders should work together to agree upon the mechanics and 

schedule for Phase 3 or, if consensus cannot be achieved, submit competing proposals to the Court. If 

circumstances allow, such proceedings could take place in coordination with or as part of a plan 

confirmation hearing. Rather than request the Court to wade into those details now, the Debtors 

propose that the Court schedule the Phase 3 estimation hearing to begin in early December 2019 and 

direct the parties to report back within three weeks of entry of the Proposed Order with further details 

about Phase 3. 

In summary, the Debtors propose the following schedule of proceedings: 

Phase 1: Inverse Condemnation

Briefs in support of Debtors’ position One week after entry of the Proposed Order

Briefs in opposition Three weeks after opening briefs

Replies in support of Debtors’ position Two weeks after opposition briefs

Hearing on inverse condemnation Two weeks after reply briefs

Phase 2: Tubbs Fire

Proposed pre-hearing schedule Two weeks after entry of the Proposed Order

Hearing on Tubbs Fire Beginning October 7, 2019, for three weeks

Phase 3: Final Estimation Hearing

Proposed pre-hearing schedule Three weeks after entry of the Proposed Order

Final estimation hearing Early December (no later than Dec. 16)

II. JURISDICTION

The Court has jurisdiction to consider this matter pursuant to 28 U.S.C. §§ 157 and 

1334, the Order Referring Bankruptcy Cases and Proceedings to Bankruptcy Judges, General Order 

24 (N.D. Cal.), and Rule 5011-1(a) of the Bankruptcy Local Rules for the United States District Court 

for the Northern District of California (the “Bankruptcy Local Rules”). Estimation for the purpose 

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of aiding the development of a plan of reorganization and for determining the feasibility of any such 

plan is a core proceeding pursuant to 28 U.S.C. § 157(b). See A.H. Robins Co. v. Piccinin, 788 F.2d 

994, 1012 (4th Cir. 1986). Venue is proper before the Court pursuant to 28 U.S.C. §§ 1408 and 1409.

III. BACKGROUND

A. The Northern California Wildfires

On September 9, 2015, a wildfire started in Amador County California (the “Butte 

Fire”). According to CAL FIRE, the Butte Fire burned over 70,800 acres within Amador and 

Calaveras counties, destroyed approximately 965 structures and resulted in two fatalities and one 

injury.4 As of January 29, 2019 (the “Petition Date”), PG&E was aware of approximately 2,000 

complaints on behalf of at least 4,000 plaintiffs related to the Butte Fire. As of the Petition Date, 

approximately 25% of those claims remained unliquidated and/or contingent. 

Beginning on October 8 and 9, 2017, multiple wildfires spread through Northern 

California, including the counties of Napa, Sonoma, Butte, Humboldt, Mendocino, Lake, Nevada and 

Yuba (collectively the “North Bay Fires”). According to CAL FIRE, the North Bay Fires consisted 

of 21 major fires that burned over 245,000 acres, destroyed an estimated 8,900 structures, and resulted 

in 44 fatalities.

5

 (Am. Decl. of Jason P. Wells in Support of the First Day Motions and Related Relief 

[Docket No. 263] (the “Wells Declaration”) at 13-14.) 

The most destructive of the North Bay Fires was the Tubbs Fire, which began in the 

area of Highway 128 and Bennett Lane in Calistoga. The Tubbs Fire accounts for the largest number 

of potential claims against the Debtors stemming from the North Bay Fires, including the majority of 

structures destroyed and/or damaged in the North Bay Fires. According to CAL FIRE, the Tubbs Fire 

burned 36,807 acres in both Napa and Sonoma Counties, destroyed 5,636 structures, damaged an 

 4 See CAL FIRE Report, dated April 28, 2016, https://www.fire.ca.gov/media/5443/butte-15-ca-aeu024918_redacted.pdf. 

5 An additional fire, the Maacama fire, was not initially separately reported by CAL FIRE.

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additional 317 structures, and resulted in 22 fatalities.6 By contrast, all of the other North Bay Fires 

combined resulted in the same number of fatalities, destroyed 2,597 structures and damaged 1,026 

structures. (Orsini Decl. ¶ 3.) On January 20, 2019, CAL FIRE issued an investigative report that 

ruled out PG&E equipment as the cause of the Tubbs Fire.7 This is the only significant North Bay 

Fire that CAL FIRE concluded was not started by PG&E, and the only fire for which—to the Debtors’ 

knowledge—CAL FIRE assigned two separate investigative teams. 

As of the Petition Date, PG&E was aware of approximately 700 complaints on behalf 

of 3,600 plaintiffs related to the North Bay Fires. (Wells Decl. at 15.) Plaintiffs brought claims against 

PG&E with respect to 22 separate fires: (1) Adobe; (2) Atlas; (3) Blue; (4) Cascade; (5) Cherokee; 

(6) Highway 37; (7) Honey; (8) La Porte; (9) Lobo; (10) Maacama; (11) McCourtney; (12) Norrbom; 

(13) Nuns; (14) Oakmont/Pythian; (15) Partrick; (16) Pocket; (17) Point; (18) Potter/Redwood; 

(19) Pressley; (20) Sullivan; (21) Sulphur and (22) Tubbs.8 The cases had been coordinated in the San 

Francisco County Superior Court and, as of the Petition Date, were in the midst of liability discovery. 

(Wells Decl. at 15.) Many significant liability depositions had neither been taken nor scheduled, and 

no damages discovery had been conducted. (Orsini Decl. ¶ 2.) 

On November 8, 2018, a wildfire began near the city of Paradise in Butte County, 

California (the “Camp Fire”). According to CAL FIRE, the Camp Fire consumed 153,336 acres and 

resulted in 86 fatalities and the destruction of 13,972 residences, 528 commercial structures and 4,293 

other buildings. (Wells Decl. at 11.) As of January 11, 2019, the Debtors were aware of approximately 

46 complaints on behalf of at least 2,000 plaintiffs related to the Camp Fire. (Wells Decl. at 14-15.) 

As of the Petition Date, no civil discovery had been taken with respect to the Camp Fire.

 6 See CAL FIRE Report, dated January 20, 2019, https://www.fire.ca.gov/programs/fireprotection/reports/incident-reporting-collection/.

7 See CAL FIRE Report, dated January 20, 2019, https://www.fire.ca.gov/programs/fireprotection/reports/incident-reporting-collection/.

8 The Adobe, Norrbom, Nuns, Partrick and Oakmont/Pythian fires involved overlapping terrain and 

together with the Pressley fire are often referred to collectively as the Nuns Complex fires.

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For each fire, claimants allege causes of action for, inter alia, inverse condemnation, 

negligence (causing bodily harm, loss of profits/income and property damage), private nuisance, 

public nuisance, premises liability, trespass, violation of Public Utility Code § 2106, wrongful death, 

survival actions and/or negligent infliction of emotional distress. PG&E has acknowledged that its 

transmission facilities near Pulga ignited the Camp Fire and had previously acknowledged causation 

for the Butte Fire. As noted above, if the Proposed Order is entered, PG&E will not contest causation 

with respect to any of the 2017 or 2018 Wildfires, except for with respect to the Tubbs Fire.9 

B. The Debtors File for Relief Under Chapter 11

On January 29, 2019, the Debtors commenced with this Court voluntary cases under 

Chapter 11 of the Bankruptcy Code. The Debtors continue to operate their businesses and manage 

their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy 

Code. The Debtors’ Chapter 11 Cases are being jointly administered for procedural purposes only 

pursuant to Bankruptcy Rule 1015(b). On February 12, 2019, the United States Trustee (the “U.S. 

Trustee”) appointed an Official Committee of Unsecured Creditors (the “Creditors Committee”). 

On February 15, 2019, the U.S. Trustee appointed the Tort Claimants Committee. Additional 

information regarding the circumstances leading to the commencement of the Chapter 11 Cases and 

the Debtors’ businesses and capital structure is set forth in the Wells Declaration.

C. The Bar Date

On May 1, 2019, the Debtors filed a Motion of Debtors Pursuant to 11 U.S.C. 

§§ 502(b)(9) and 105(a), Fed. R. Bankr. P. 2002, 3003(c)(3), 5005, and 9007, and L.B.R. 3003-1 for 

Order (I) Establishing Deadline for Filing Proofs of Claim, (II) Establishing the Form and Manner of 

Notice Thereof, and (III) Approving Procedures for Providing Notice of Bar Date and Other 

Information to All Creditors and Potential Creditors [Dkt. No. 1784] (the “Bar Date Motion”). A 

 9 With respect to the Camp Fire, while the Debtors have accepted CAL FIRE’s determination that 

PG&E transmission facilities near Pulga ignited the fire, the Debtors have not formed a conclusion 

as to whether a second fire ignited nearby as a result of vegetation contact with its electrical 

distribution lines and reserve all rights concerning that causation issue. 

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hearing on the Bar Date Motion was held on June 26, 2019. At the hearing, the Court established a 

Bar Date of October 21, 2019, and approved the Debtors’ proposed noticing procedures and 

customized proof of claims forms for both individual and subrogation (insurance) Wildfire Claims. 

IV. BASIS FOR RELIEF REQUESTED

Section 502(c) of the Bankruptcy Code requires this Court to estimate the Wildfire 

Claims given the practical impossibility of liquidating each claim individually without severely 

impairing the interests of all stakeholders and delaying for years the resolution of these cases. 

Estimation for at least voting and plan feasibility purposes therefore is not discretionary, regardless of 

the extent to which estimation also may prove useful for other purposes (such as establishing trusts 

with specified funding amounts as part of a Plan) later in these proceedings. (See infra Part IV.A.) 

The discretionary question, instead, is how the Court should estimate the Wildfire 

Claims. The Bankruptcy Code and applicable case law leave the manner in which estimation is 

conducted to the sound discretion of the Bankruptcy Court. The guiding principles under the 

circumstances of these cases should be efficiency and fairness. In particular, the stakeholders and the 

Court would benefit most from a process that presents discrete, but material, threshold issues as 

quickly as practicable while the Wildfire Claimants, the Debtors and the other stakeholders avail 

themselves of the time between now and the final estimation hearing to develop the information 

necessary to assess the dollar value of the aggregate claims and, at the same time, pursue negotiated 

resolutions. The Debtors’ process achieves these goals by creating a phased estimation hearing that 

tees up for the Court the most material issues first in order to help the stakeholders realistically value 

their claims and to facilitate reaching a consensus. (See infra Part IV.B) The Debtors’ proposed 

process also provides the best chance for the Debtors to meet the June 30, 2020, legislative deadline 

to emerge from Chapter 11. 

A. Claims Estimation Is Required in this Case

Section 502(c) of the Bankruptcy Code provides that the Court “shall” estimate “any 

contingent or unliquidated claim, the fixing or liquidation of which, as the case may be, would unduly 

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delay the administration of the case.” 11 U.S.C. § 502(c) (emphasis added). Claims estimation 

enables the parties and the court to “avoid the need to await the resolution of outside lawsuits to 

determine issues of liability or amount owed by means of anticipating and estimating the likely 

outcome of these actions,” and to “promote a fair distribution to creditors through a realistic 

assessment of uncertain claims.” In re Adelphia Bus. Sol., Inc., 341 B.R. 415, 422 (Bankr. S.D.N.Y. 

2003) (quoting In re Cont’l Airlines, 981 F.2d 1450, 1461 (5th Cir. 1993)). Estimation “provides a 

means for a bankruptcy court to achieve reorganization, and/or distribution of claims, without awaiting 

the results of [potentially protracted] legal proceedings.” Adelphia, 341 B.R. at 422 (citing

Continental Airlines, 981 F.2d at 1461); In re Lionel LLC, No. 04-17324, 2007 WL 2261539, at *2 

(Bankr. S.D.N.Y. Aug. 3, 2007) (estimation avoids lengthy proceedings that result in “delayed 

distributions, which in turn, greatly devalue the claims of all creditors as they cannot use the assets 

until they receive them”) (citation omitted); Armstrong, 348 B.R. at 123-125 (D.Del. 2006); In re A & 

B Assocs., L.P., No. 17-40185-EJC, 2019 WL 1470892, at *34-36 (Bankr. S.D. Ga. Mar. 29, 2019). 

Estimation is mandatory here. There simply is no practical ability to liquidate tens of 

thousands of Wildfire Claims individually, and even attempting to engage in such a process would 

unduly delay the resolution of these Cases. As courts have recognized, it is a “mandatory obligation 

of the bankruptcy court” to estimate claims “if failure to do so ‘would unduly delay the administration 

of the case.’” A.H. Robins Co. v. Piccinin, 788 F.2d 994, 1011 (4th Cir. 1986); see also In re A & B 

Assocs., L.P., 2019 WL 1470892, at *35 (“numerous bankruptcy courts have held that ‘[e]stimation 

pursuant to Bankruptcy Code section 502(c) is mandatory where adjudication of the claim would 

unduly delay the administration of the bankruptcy case’”); In re Mud King Prods., Inc., 514 B.R. 496, 

510 (Bankr. S.D. Tex. 2014) (“Claims estimation ‘is a procedural device that is to be used when 

adjudication and liquidation of a claim would take an unreasonably long time’” (internal quotation 

omitted).). Litigating individual Wildfire Claims to their conclusion would take years, needlessly 

delaying compensation to Wildfire Claimants with legitimate claims and imposing extraordinary and 

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unnecessary costs and delay on the Debtors and the other stakeholders. Such a process would be 

directly contrary to the very purpose of these Chapter 11 Cases. (Wells Decl. at 4-5.) 

Moreover, as the TCC acknowledges, there can be no dispute that estimating claims 

for the purposes of voting and plan feasibility, as the Debtors propose here, is a core proceeding. See 

TCC Motion at 10 (“The estimation of a personal injury claim for the purpose of voting on a plan or 

feasibility determination is a core proceeding, 28 U.S.C. § 157(b)(2)(B), and does not necessarily 

implicate a claimant’s jury trial rights”.). The proceedings the Debtors are proposing are a common 

feature of bankruptcies, like this one, that involve a large number of contingent and unliquidated tort 

claims. See, e.g., In re Specialty Prod. Holding Corp., 2013 WL 2177694, at *1 (involving “estimation 

of the amount of contingent or unliquidated . . . mesothelioma claims caused by exposure to the 

Debtors’ asbestos”); In re Garlock Sealing Techs., LLC, 504 B.R. 71, 73 (Bankr. W.D.N.C. 2014) 

(determining the “responsibility for causing mesothelioma and the aggregate amount of money that is 

required to satisfy its liability to present claimants and future victims”); In re Federal-Mogul Global 

Inc., 330 B.R. 133, 154 (D. Del. 2005); In re Eagle-Picher Indus., Inc., 189 B.R. 681, 682 (Bankr. 

S.D. Ohio, 1995), as amended (Dec. 14, 1995) (estimating “present and future asbestos-related 

personal injury claims in the aggregate” “so that a proper allocation of plan funding assets can be made 

as between the unsecured creditors and the PI Trust created by the plan”). Although the question of 

how the Court should estimate the Wildfire Claims may turn out to be complicated, the fact that the 

Court is empowered to conduct this estimation for the proposed purposes is not genuinely in dispute.

Likewise, it is beyond dispute that this Court is authorized to decide threshold legal 

questions that determine the allowance or disallowance of claims against the Debtors. See 28 U.S.C. 

§ 157(b)(2)(B) (“Core proceedings include, but are not limited to . . . allowance or disallowance of 

claims against the estate”); In re Imaging3, Inc., 634 F. App’x 172, 175 (9th Cir. 2015) (“Allowance 

and disallowance of claims against an estate are specifically listed as “core” proceedings under 28 

U.S.C. § 157.”). A ruling that a contingent or unliquidated claim is not enforceable against the Debtors 

as a matter of law and therefore must be disallowed is a core proceeding. See, e.g., In re Residential 

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Capital, 519 B.R. 890, 905 (Bankr. S.D.N.Y. 2014) (“[T]his court has jurisdiction over the allowance 

or disallowance of personal injury tort claims”); In re Dow Corning, Corp., 211 B.R. 545, 554-555 

(Bankr. E.D. Mich. 1997) (bankruptcy court has jurisdiction to adjudicate defenses to tort claims).

The TCC argues extensively in its stay relief motion that estimation of personal injury 

claims is impermissible if it is done for purposes of distribution, but that is not an issue the Court needs 

to address on this Motion.10 There is no question that estimating the Wildfire Claims is permissible 

for at least some purposes, including voting and plan feasibility, which is all that is proposed here. 

Whether and to what extent the results of that estimation ultimately may be used to determine the 

amount of consideration to be provided to claimants or groups of claimants as part of a Plan, 

consensual or otherwise, is a question that can be determined, if it is presented, at a later stage. 

B. Estimation Methodology

As noted above, the Bankruptcy Court has broad discretion to determine the process 

and methodology for claims estimation. Neither the Bankruptcy Code nor the Bankruptcy Rules set 

forth a procedure for estimating claims; instead, the court may use “whatever method is best suited to 

the particular contingencies at issue”. Bittner v. Borne Chemical Co., Inc., 691 F.2d 134, 135 (3d Cir. 

1982). “The principal consideration in estimating unliquidated claims must be an accommodation to 

 10 Addressing that issue would involve deciding a variety of issues not presented in this Motion. The 

lion’s share of the Wildfire Claims are for property damage resulting from the Wildfires. This raises 

a number of issues, including: (1) whether claims of emotional distress that are incidental to property 

damage claims, which comprise the vast majority of alleged personal injury claims here, are properly 

characterized as personal injury tort claims for jurisdictional purposes, see, e.g., In re Gawker Media

LLC, 571 B.R. 612, 623 (Bankr. S.D.N.Y. 2017) (“incidental claims of emotional injury do not suffice 

to transform a tort claim into a personal injury tort when it otherwise would not be”); Siewert v. 

Christy (In re Finley, Kumble, Wagner, Heine, Underberg, Manley, Myerson, & Casey), 194 B.R. 728, 

734 (S.D.N.Y. 1995) (incidental claims of emotional damages do not “transform [a] business tort into 

a personal injury tort”) and (2) whether funding a resolution of personal injury claims with a limited 

fund trust as part of a confirmed plan amounts to a “de facto liquidation” notwithstanding the multitude 

of mass tort bankruptcies that have done exactly that. See, e.g., In re Armstrong World Indus., Inc., 

348 B.R. 111, 115 (D. Del. 2006); In re G-I Holdings, Inc., 323 B.R. at 623; In re Fed.-Mogul Glob., 

Inc., 330 B.R. 133, 136-37 (D. Del. 2005); In re Garlock Sealing Techs., 504 B.R. at 74; In re EaglePicher Indus., 189 B.R. at 682. Debtors reserve all rights with respect to these and other issues raised 

in the TCC’s separate stay relief motion. 

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the underlying purposes of the Bankruptcy Code,” In re N. Am. Health Care, 544 B.R. 684, 688 

(Bankr. C.D. Cal. 2016), and those purposes include “promoting the quick and efficient administration 

of the estate,” In re Fed.-Mogul Glob., 330 B.R. at 154. Moreover, by fairly and accurately estimating 

claims, the Court will be helping those victims with legitimate, allowable claims. 

In estimating the value of a claim, “the court is bound by the legal rules which may 

govern the ultimate value of the claim”. See Bittner v. Borne Chem. Co., 691 F.2d 134, 135 (3d Cir. 

1982). The value of any claim depends upon a variety of factors, including, importantly, the strength 

of the Debtors’ defenses to liability under non-bankruptcy law. In re Garlock Sealing Techs., 504 

B.R. at 73 (ruling that the “best evidence” of the debtor’s “responsibility” in an asbestos liability 

estimation “is the projection of its legal liability that takes into consideration causation, limited 

exposure and the contribution of exposures to other products”); In re POC Properties, LLC, 580 B.R. 

504, 509 (E.D.Wisc. 2017) (employing methodology of estimating tort claims that took into account 

the likelihood that “each party’s version might or might not be accepted by a trier of fact”); In re 

Farley, Inc., 146 B.R. 748, 753-54 (Bankr. N.D. Ill. 1992) (estimating personal injury claim by 

discounting stipulated damages by the high probability that the debtor would not be found liable). In 

accordance with those principles, the Debtors propose the following estimation approach. 

1. Phase 1: Applicability of Inverse Condemnation to PG&E

As explained above, the Court has as part of its core jurisdiction the right—indeed the 

obligation—to disallow in an estimation proceeding claims that are unenforceable against the debtor 

as a matter of substantive nonbankruptcy law, regardless of the nature of those claims. In re S.G. 

Phillips Constructors, Inc., 45 F.3d 702, 705 (2d Cir. 1995) (“Because nothing is more directly at the 

core of bankruptcy administration . . . than the quantification of all liabilities of the debtor, the 

bankruptcy court’s determination whether to allow or disallow a claim is a core function.”); see also 

In re G-I Holdings, Inc., 323 B.R. at 607; In re Standard Insulations, Inc., 138 B.R. 947, 953-54 

(Bankr. W.D. Miss. 1992). By “reject[ing] unsubstantiated claims” based on invalid liability theories, 

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“[t]he Court will protect those who have been truly harmed”. In re USG Corp., 290 B.R. 223, 225 

(Bankr. D. Del. 2003) (emphasis added). 

Determining the viability of inverse condemnation claims is exactly the type of core 

proceeding under 28 U.S.C. § 157(b)(2)(B) that this Court should address as a matter of law as soon 

as possible. Any assessment of the likelihood of success of the Wildfire Claims turns materially on 

the resolution of the threshold question that will be presented in Phase 1: does strict liability apply to 

the fires caused by PG&E, or can the Wildfire Claimants prevail only upon a showing of negligence? 

The judicially created doctrine of inverse condemnation arises from the Takings Clause 

of the California Constitution, which provides that “Private property may be taken or damaged for a 

public use and only when just compensation . . . has first been paid to . . . the owner.” Cal. Const., 

Art. I, § 19. The theory behind inverse condemnation is that a private party whose property was 

“damaged for a public use”—i.e., by a public improvement—should not bear the entire loss; instead, 

the loss should be borne by the public for whose benefit the improvement was made. See, e.g., Holtz v. 

Superior Court, 475 P.2d 441, 444 (Cal. 1970) (“The ‘underlying purpose of [inverse condemnation] 

is to distribute throughout the community the loss inflicted upon the individual by the making of the 

public improvements.”) In other words, the taking of (or damage to) private property for public use 

must be publicly compensated. See Albers v. Cty. of Los Angeles, 398 P.2d 129, 136 (Cal. 1965),

(theory of inverse condemnation is that costs of damage to private parties from a public good “can 

better be absorbed, and with infinitely less hardship, by the taxpayers as a whole”). Because inverse 

condemnation is a form of “social insurance,” the standard of recovery is one of strict liability—the 

private property owner need not establish negligence. Rather, inverse condemnation allegedly 

imposes strict liability (including liability for attorneys’ fees) for damages as a result of the design, 

construction and maintenance of utility facilities or other public improvements, including utilities’ 

transmission lines. See Albers, 398 P.2d at 136-37; Cal. Civ. Proc. Code § 1036. 

When inverse condemnation is applied to a true public entity, such as a municipality or 

government utility, that entity serves merely as a conduit for the socialization of losses. The public 

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entity pays an award of inverse condemnation damages to the impacted individual and then socializes 

those damages by recouping them from the public at large though taxes or utility rate increases. The 

public entity does not itself bear the loss. This loss distribution framework is the constitutional 

“underpinning [of] inverse condemnation”. Gutierrez v. Cty. of San Bernardino 198 Cal. App. 4th 

831, 837 (Ct. App. 2011). However, as most acutely demonstrated by these Chapter 11 Cases—

necessitated by the overwhelming potential liabilities under inverse condemnation for the North Bay 

and Camp Fires—this loss distribution framework breaks down when inverse condemnation is applied 

to an investor-owned utility. As a private investor-owned utility, PG&E cannot simply spread the 

losses suffered as a result of inverse condemnation among the public by raising rates or levying taxes 

(as a true public utility would). PG&E has no taxation power and can increase utility rates only with 

the express permission of the CPUC. Inverse condemnation exists based on the theory that the utility, 

rather than absorbing the economic loss, would spread it among the entire community. Since PG&E 

cannot do that, how can inverse condemnation possibly apply when the net result is not cost-spreading 

but rather a naked transfer of resources from one private party (PG&E) to another private party (the 

property owner)? 

It is true that two intermediate California court decisions have addressed this question 

and extended inverse condemnation liability to privately owned utilities. See Pacific Bell Tel. Co. v. 

S. Cal. Edison Co., 208 Cal. App. 4th 1400 (Ct. App. 2012) (“Pacific Bell”); Barham v. S. Cal. Edison 

Co., 74 Cal. App. 4th 744 (Ct. App. 1999) (“Barham”). However, both decisions did so based on the 

express (incorrect) assumption that privately owned utilities, just like governments and public entities, 

would be able to spread the cost of inverse condemnation liability among the benefitted public. See, 

e.g., Pacific Bell, 208 Cal. App. 4th at 1407. More recently, however, the CPUC, the regulatory body 

empowered by California law to set rates for utilities like the Debtors, has expressly rejected that 

assumption. (Orsini Decl. Ex. B.) Calling the cost-spreading rationale “unsound” and insisting that 

inverse condemnation liability is “not relevant” to rate recovery, the CPUC denied an application by 

privately owned utility San Diego Gas & Electric (“SDG&E”) to recover $379 million in uninsured 

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costs resulting from the settlement of claims for inverse condemnation based on wildfires within 

SDG&E’s service territory. Id. at 65. Thus, unlike a public entity, PG&E has no guarantee that it can 

engage in the very loss-spreading that forms the constitutional underpinning of inverse condemnation. 

Privately owned utilities like PG&E are now caught in a whipsaw between unlimited strict inverse 

condemnation liability as a result of the prior California intermediate appellate decisions and the 

CPUC’s refusal to take that liability into account in rate recovery. 

As several CPUC Commissioners have recognized, that regulatory framework 

undercuts the constitutional basis for applying inverse condemnation to PG&E. (Orsini Decl. Ex. A. 

at 21:29-22:15 (CPUC Commissioner explaining that “courts applying the cases to public utilities have 

done so without really grappling with the salient difference between public and private utilities, which 

is that there’s no guaranty that . . . private utilities can recover the cost from their rate payers”); Orsini 

Decl. Ex. C at 5 (CPUC President explaining that “the logic for applying inverse condemnation to 

utilities—costs will necessarily be socialized across a large group rather than borne by a single injured 

property owner, regardless of prudence on the part of the utility—is unsound. . . .”); see also id. at 6.) 

California trial courts addressing these questions (including with respect to PG&E)

have been constrained by the decisions of California’s intermediate appellate court in Barham and 

Pacific Bell, which were premised on the incorrect assumption that private utilities would have the 

right to socialize the costs as discussed above. This Court is not constrained by the reasoning of those 

cases or by their faulty assumptions. Instead, this Court is obligated to reach its own conclusion about 

how the California Supreme Court would address this question that it has never confronted, and that 

no intermediate court has considered since the CPUC expressly disclaimed any notion of lossspreading and thereby destroyed the foundation of the doctrine as applied to investor-owned utilities 

like the Debtors. See Orkin v. Taylor, 487 F.3d 734, 741 (9th Cir. 2007) (“If the state’s highest 

appellate court has not decided the question presented, then we must predict how the state’s highest 

court would decide the question.”). This Court is not constrained to follow intermediate appellate 

decisions if it is “convinced by other persuasive data that the highest court of the state would decide 

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otherwise”. Am. Tower Corp. v. City of San Diego, 763 F.3d 1035, 1047 (9th Cir. 2014). The CPUC 

pronouncements described above—not to mention the clear holdings of the California Supreme Court 

on the constitutional basis and rationale for inverse condemnation—are just such persuasive data. 

The assertion of inverse condemnation liability against the Debtors also raises 

significant questions under the United States Constitution. Because PG&E does not have the right to 

spread any losses it is forced to pay as a result of inverse condemnation claims, the application of 

inverse condemnation to PG&E effects an uncompensated transfer of property from one private party 

(PG&E) to another private party (the claimant). That uncompensated taking of PG&E’s property 

violates the Fifth Amendment of the United States Constitution as incorporated against the state of 

California by the Fourteenth Amendment and Article I, section 19 of the California Constitution. That 

federal constitutional issue is directly within the jurisdiction of this Court and is ripe for immediate 

adjudication under the Supreme Court’s recent decision in Knick v. Township of Scott, Pennsylvania, 

139 S. Ct. 2162 (2019).

The question of whether any inverse condemnation claims can be allowed presents a 

pure issue of law; there are no disputed facts. The Court has core jurisdiction to address this issue 

now, and doing so will significantly aid the stakeholders in valuing their claims. In re S.G. Phillips 

Constructors, Inc., 45 F.3d 702, 705 (2d Cir. 1995); see also In re G-I Holdings, Inc., 323 B.R. at 607; 

In re Standard Insulations, Inc., 138 B.R. 947, 953-54 (Bankr. W.D. Miss. 1992). 

2. Phase 2: The Tubbs Fire

As stated, the Tubbs Fire was the largest of the Wildfires that occurred in 2017, 

resulting in 22 fatalities, the destruction of more than 5,000 homes and insurance payouts estimated to 

be greater than $5 billion. The TCC estimates the Tubbs Fire caused at least $18 billion in damages, 

and the Ad Hoc Subrogation Group agrees this is a critical issue to resolve if the parties are to have 

the best chance of arriving at a negotiated resolution. Both of those groups have argued strongly that 

the issue of Tubbs causation needs to be decided as soon as possible. The Wildfire Claimants believe 

they can be ready to litigate both causation and damages (for a subset of claimants) approximately 120 

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days from now. The Debtors agree that speed is important and propose the Court schedule a hearing 

on the issue of causation to begin no later than October 7, 2019.

Estimating the Debtors’ Tubbs Fire liability (if any) is within this Court’s core 

jurisdiction. This Court has “the right and duty . . . to estimate these tort claims for the purpose of 

confirming a plan under Chapter 11”. In re Aquaslide, 85 B.R. at 549. A threshold question in 

estimating an unliquidated tort claim is to assess the probability of success of that claim. See In re 

Garlock Sealing Techs., 504 B.R. at 73; In re POC Props., 580 B.R. at 509. Groups of claims that 

have no merit as a matter of law should be estimated at zero because those claims, if litigated, 

ultimately would be disallowed. See In re Corey, 892 F.2d 829, 834 (9th Cir. 1989) (affirming zero 

estimate because of “the highly speculative nature” of the claims); Bittner, 691 F.2d at 139 (affirming 

valuation of contract claims at zero based on the ultimate merits of the state law claim); In re 

Aquaslide, 85 B.R. 546 (valuing claim at zero where claimant did not plead that he used product 

manufactured by debtor). It is, therefore, routine for bankruptcy courts to assess the factual merits of 

an unadjudicated state law tort claim as part of an estimation process. That is all the Debtors are 

requesting here; they are not requesting that individual claims be liquidated.

During the Phase 2 estimation hearing, the Debtors will put on evidence confirming 

that PG&E did not cause the Tubbs Fire, and therefore, that its aggregate liability with respect to 

claims arising from the Tubbs Fire should be estimated at zero. See Ulloa v. McMillin Real Estate & 

Mortg., Inc., 57 Cal. Rptr. 3d 1, 4 (Cal. Ct. App. 2007) (‘“Causation’ is an essential element of a tort 

action.”); Bunch v. Coachella Valley Water Dist., 935 P.2d 796, 800 (Cal. 1997) (causation is an 

element of inverse condemnation liability). CAL FIRE has ruled out PG&E equipment as a potential 

cause of the Tubbs Fire, concluding that the fire “was caused by a private electrical system adjacent 

to a residential structure.”11 The Debtors would expect to call the CAL FIRE investigators as 

witnesses at the hearing, along with other expert and percipient fact witnesses (including the numerous 

 11 CAL FIRE News Release, CAL FIRE Investigators Determine the Cause of the Tubbs Fire, 

(January 24, 2019), https://www.fire.ca.gov/media/5032/tubbscause1v.pdf. 

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first responders who were already deposed in the state court proceedings and whose testimony, 

photographs and videos confirm that PG&E could not have started the Tubbs Fire). The evidence will 

show that the Tubbs Fire began as a result of illegally installed and poorly maintained customer-owned 

equipment for which the Debtors had no legal responsibility. The Tubbs Fire and the devastation that 

it caused was a horrible tragedy. But that tragedy, and the attendant loss of life and property, is the 

responsibility of the property owners at 1128 Bennett Lane and their insurers, not the Debtors. 

The Debtors will also rebut the theories put forth by the Tubbs Fire claimants, who 

attack CAL FIRE’s conclusions with respect to the Tubbs Fire while simultaneously adopting as 

unassailable CAL FIRE’s conclusions that PG&E caused every other 2017 and 2018 Wildfire for 

which claims have been asserted. For example, the evidence will show that the Ad Hoc Subrogation 

Group is incorrect when it asserts that the Tubbs Fire was caused by an “arc flash [that] occurred at 

9:20:46 PM on October 8, 2017” near PG&E’s electrical lines. (Ad Hoc Subrogation Group Motion 

at 7.) The subrogation plaintiffs assert that this arc flash, which was recorded on video, was 

“inexplicably ignored” by CAL FIRE in determining that PG&E’s equipment was not the cause of the 

Tubbs Fire. Id. To the contrary, CAL FIRE considered and rejected the possibility that the arc flash 

was related to the cause of the Tubbs Fire. Indeed, CAL FIRE’s lead investigator on the Tubbs Fire 

and drafter of the CAL FIRE report considered and rejected an email from the North Bay Fires 

plaintiffs’ investigator regarding the arc flash and included it as an attachment to the CAL FIRE report. 

See id.; CAL FIRE Report, Attachment J4. Other presentations regarding potential causes of the Tubbs 

Fire, including the video footage, were also considered and enclosed by CAL FIRE as attachments to 

its report and rejected. CAL FIRE Report, Attachment J2. CAL FIRE did not “ignore” the evidence 

of the arc flash; it reviewed that evidence and determined that it did not relate to the cause of the Tubbs 

Fire. Electrical analysis of PG&E’s system as well as expert analysis of the surveillance video 

confirms this conclusion.

Finally, the evidence will also show that the TCC is incorrect in asserting that PG&E 

caused the Tubbs Fire because it “failed to deenergize its lines”. TCC Motion for Relief at 5. Prior 

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to the North Bay Fires, the CPUC had explicitly confirmed that PG&E did not have an obligation to 

develop a policy to de-energize its electrical lines in order to prevent wildfires. (Orsini Decl. Ex. D at 

49 (“Unlike Southern California, the need for electric utilities to develop fire-prevention plans in 

Northern California is not clear cut.”).) The CPUC also emphasized that “there is a strong presumption 

that power should remain on for public safety reasons”. (Orsini Decl. Ex. E at 30.) PG&E’s deenergization practices were influenced by the specific environment in Northern California; 

accordingly, practices in other parts of California are not probative.12 Moreover, de-energization 

policies are explicitly designed to prevent wildfires from being caused by utility equipment, not to 

prevent the possibility that faulty (and illegally installed and improperly maintained) customer 

equipment could start a fire. This issue raises important legal questions that may be addressed either 

at the hearing before this Court or in advance through dispositive motions on undisputed facts. 

As the Court is aware, the TCC and the Ad Hoc Subrogation Group have requested 

relief from the automatic stay to liquidate the claims of just a small number of Tubbs Fire claimants 

in state court. The Debtors will object to those requests and will not repeat here all of the arguments 

to be presented in their objection. However, it does bear mentioning that estimation is an obviously 

superior means of resolving the Debtor’s threshold responsibility for these claims, as it will allow all

interested parties to be heard and will lead to the resolution of issues, including key legal issues such 

as legal duty and proximate cause. Further, resolution through estimation will apply equally to all

stakeholders, not just a cherry-picked subset of Wildfire Claimants where any possible binding effect 

on PG&E, in the event a victory by the Wildfire Claimants in a state court proceeding, would have to 

await the outcome of years of appeals. Alternatively, the Wildfire Claimants would argue that any 

victory by PG&E in such a proceeding has zero preclusive effect on the thousands of other claims. 

 12 Orsini Decl. Ex. D at 49 (“To our knowledge, there has never been an instance in Northern California 

where strong winds have caused power lines to ignite large-scale wildfires.”); see Orsini Decl. Ex. F 

at 2 (noting that “[t]here are a number of significant changes in the conditions that are prevalent in 

Southern California and/or SDG&E’s service territory that support implementation of proactive deenergization”). 

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Resolution of these issues in estimation will also aid in plan formation, voting and confirmation (none 

of which is true with respect to a state court trial).

Estimation is also far more expeditious. While the TCC and the Ad Hoc Subrogation 

Group make predictions about how soon the Tubbs Fire can be tried in state court, that is ultimately 

up to the state court and will depend upon the outcome of various procedural issues that are likely to 

take some time to resolve in state court. By contrast, this Court controls its own calendar and can set 

a date certain right now for the Phase 2 estimation hearing that has the best chance of allowing the 

Debtors to emerge from Chapter 11 by June 30, 2020. Some liability discovery (but no damages 

discovery) already had been conducted regarding the Tubbs Fire in prepetition litigation. As set forth 

in the Proposed Order, the Debtors believe the Phase 2 estimation hearing can and should begin no 

later than October 7, 2019. If the Wildfire Claimants think they can complete all causation and

damages discovery with respect to more than a dozen claimants in 120 days, they can hardly complain 

that approximately 90 days are insufficient for just causation discovery. 

Finally, estimation is also more efficient. Prior to the initiation of these cases, the 

Debtors explained to the state court that a Tubbs Fire trial would last five to seven weeks. The state 

court trial requested by the TCC and the Ad Hoc Subrogation Group will take at least that long. With 

the TCC’s series of amendments to its motion to add additional plaintiffs, it will likely take even 

longer. Given the nature of an estimation hearing and the ability to limit a hearing in Phase 2 to the 

question of causation (including whether PG&E can be responsible because it did not de-energize its 

lines even if someone else’s illegal equipment started the fire), PG&E believes the hearing can be held 

over the course of no more than three weeks.

3. Phase 3: Final Estimation Hearing

Finally, the Court should hold a final Phase 3 hearing to estimate the aggregate amount 

of the Wildfire Claims, after taking into account the Court’s determinations in Phases 1 and 2, to begin 

no later than December 16, 2019. The Debtors anticipate that this hearing will involve addressing 

some fire-specific legal questions that bear on the likelihood of success on the merits with respect to 

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certain of the Wildfires, but that a central feature of this stage of the proceedings will be the 

presentation of expert testimony concerning the aggregate amount required to resolve all Wildfire 

Claims. See, e.g., Garlock, 504 B.R. at 87 (describing estimation cases that made use of expert 

testimony as a part of valuation of claims). As discussed above, determining that aggregate amount 

will be materially advanced by the completion of the first two phases of the estimation proceedings, 

as proposed by the Debtors above. The Debtors further propose that the parties report back to the 

Court within three weeks of the entry of the Proposed Order with further details about Phase 3. The 

Debtors submit that the Phase 3 hearings should begin no later than December 16, 2019, thereby giving 

the Debtors every possible opportunity to emerge from Chapter 11 prior to the June 30, 2020 

legislative deadline. 

V. 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) counsel to the Creditors 

Committee; (iii) counsel to the TCC; (iv) the Securities and Exchange Commission; (v) the Internal 

Revenue Service; (vi) the Office of the California Attorney General; (vii) the California Public 

Utilities Commission; (viii) the Nuclear Regulatory Commission; (ix) the Federal Energy Regulatory 

Commission; (x) the Office of the United States Attorney for the Northern District of California; 

(xi) counsel for the agent under the Debtors’ debtor in possession financing facility; and (xii) those 

persons who have formally appeared in these Chapter 11 Cases and requested service pursuant to 

Bankruptcy Rule 2002. The Debtors respectfully submit that no further notice is required.

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

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

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

Dated: July 18, 2019

 WEIL, GOTSHAL & MANGES LLP

 CRAVATH, SWAINE & MOORE LLP

 KELLER & BENVENUTTI LLP

 /s/Kevin J. Orsini

 Kevin J. Orsini

Attorneys for Debtors and Debtors in Possession

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