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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

UNITED STATES BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

In re: 

PG&E CORPORATION, 

- and - 

PACIFIC GAS AND ELECTRIC 

COMPANY, 

 Debtors. 

Bankruptcy Case 

No. 19-30088 (DM) 

Chapter 11 

(Lead Case) 

(Jointly Administered) 

REPLY MEMORANDUM OF POINTS AND 

AUTHORITIES IN FURTHER SUPPORT OF 

MOTION OF DEBTORS PURSUANT TO 11 

U.S.C. §§ 363 AND 105(a) FOR AN ORDER 

APPROVING TERMS OF EMPLOYMENT FOR 

NEW CHIEF EXECUTIVE OFFICER AND 

PRESIDENT OF PG&E CORPORATION

Related Doc: Dkt. No. 2662 

Date: August 9, 2019 

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

Place: United States Bankruptcy Court 

 Courtroom 17, 16th Floor 

 San Francisco, CA 94102 

☒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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TABLE OF CONTENTS 

I. JURISDICTION ..................................................................................................................2

II. PRELIMINARY STATEMENT .........................................................................................2

III. THE SEVERANCE PAYMENT IN MR. JOHNSON’S COMPENSATION 

PACKAGE COMPLIES WITH SECTION 503(C)(2) .......................................................3

IV. THE TRANSITION PAYMENT IS APPROPRIATE ........................................................4

V. CONCLUSION ....................................................................................................................5

 

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TABLE OF AUTHORITIES 

 Page(s) 

Cases 

In re MGM Studios Inc., 

459 B.R. 550 (Bankr. S.D.N.Y. 2011) .......................................................................................4 

Pettibone Corp. v. Easley, 

935 F.2d 120 (7th. Cir. 1991) ....................................................................................................4 

Southwest Marine, Inc. v. Danzig, 

217 F.3d 1128 (9th Cir. 2000) ...................................................................................................4 

In re TCI 2 Holdings, 

428 B.R. 117 (Bankr. D.N.J. 2010) ...........................................................................................4 

Statutes 

11 U.S.C. § 105(a) ...........................................................................................................................1 

11 U.S.C. § 363 ...............................................................................................................................1 

11 U.S.C. § 503(c)(2) ...............................................................................................................2, 3, 4 

28 U.S.C. § 157(b) ...........................................................................................................................2 

28 U.S.C. § 1334 ..............................................................................................................................2 

28 U.S.C. § 1408 ..............................................................................................................................2 

28 U.S.C. § 1409 ..............................................................................................................................2 

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MEMORANDUM OF POINTS AND AUTHORITIES 

The Debtors1 submit this Reply in further support of the Motion of Debtors Pursuant to 11 

U.S.C. §§ 363 and 105(a), for an Order Approving Terms of Employment for New Chief Executive 

Officer and President of PG&E Corporation (Docket No. 2662) (“CEO Motion” or “Motion”) 

and in response to the Objections of the United States Trustee (the “U.S. Trustee”) (Docket No. 

3032) (“UST Objection”), and Ghost Ship Warehouse Plaintiffs’ Executive Committee (Docket 

No. 3085) (collectively, the “Objections”). 

 

1

 All capitalized terms used in this memorandum have the meanings assigned to them in the 

Debtors’ CEO Motion, Docket No. 2662, unless otherwise noted. 

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I. JURISDICTION 

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

States District Court for the Northern District of California (the “Bankruptcy Local Rules”). 

This is a core proceeding pursuant to 28 U.S.C. § 157(b). Venue is proper before the Court 

pursuant to 28 U.S.C. §§ 1408 and 1409. 

II. PRELIMINARY STATEMENT 

Notably, neither the Official Unsecured Creditors nor the Official Tort Claimants 

Committee has objected to the CEO Motion. Indeed, no party has raised a credible challenge to 

the Debtors’ business judgment that Mr. Johnson is the right leader to guide PG&E through these 

complex and challenging Chapter 11 Cases. Mr. Johnson brings with him an extensive and proven 

record of prioritizing safety and operational excellence, most recently demonstrated by his time as 

President and CEO of the Tennessee Valley Authority where under his leadership it achieved its 

best safety records in its 85-year history. 

The only substantive objection to the CEO Motion is that filed by the U.S. Trustee that 

takes issue with Mr. Johnson’s compensation package. In particular, the U.S. Trustee argues that 

the severance payment must comply with restrictions of section 503(c)(2) of the Bankruptcy Code, 

even if Mr. Johnson is severed months or years after the Debtors emerge from Chapter 11. Second, 

the U.S. Trustee argues that the Debtors have not demonstrated that Mr. Johnson’s compensation 

package in its entirety is justified under the facts and circumstances under these Chapter 11 Cases 

solely on the basis that the Debtors have not provided sufficient information to address whether 

the transition payment is consistent with industry standards. 

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First, as indicated in the Debtors’ CEO Motion, any severance payment made to Mr. 

Johnson during the pendency of the Chapter 11 cases will comply with 11 U.S.C. § 503(c)(2) of 

the Bankruptcy Code. 

Second, as detailed in the attached Supplemental Declaration from Mr. Friske (“Supp. 

Friske Decl.”), Mr. Johnson’s transition payment is actually below the average transition payment 

awarded by large public companies to recruit CEOs, and the inclusion of a transition payment itself 

is a common part of compensation packages for senior executives who are asked to relocate across 

the country for a new job. 

The Debtors have demonstrated that Mr. Johnson’s compensation package is in line with 

market practice for CEO compensation and appropriate under the challenging circumstances 

facing the Debtors. Mr. Johnson will further the Debtors’ key strategic goals of improving safety 

and expediting emergence from chapter 11. Mr. Johnson’s compensation package is reasonable, 

appropriate, and should be approved. 

III. THE SEVERANCE PAYMENT IN MR. JOHNSON’S COMPENSATION PACKAGE 

COMPLIES WITH SECTION 503(C)(2) 

The U.S. Trustee argues that the Debtors have not established that the severance payment 

in Mr. Johnson’s compensation package complies with section 503(c)(2) of the Bankruptcy Code. 

But as the Debtors stated in the CEO Motion, “[a]ny severance payments to be made to Mr. 

Johnson during the pendency of these Chapter 11 Cases shall be subject to the provisions of the 

Bankruptcy Code,” including obviously section 503(c)(2). CEO Motion at 11 n.6. For the 

avoidance of doubt, the Debtors agree that if severance is payable, or becomes payable, to Mr. 

Johnson during the pendency of the Chapter 11 Cases, or if the decision which triggers the 

severance payment is made during the pendency of the Chapter 11 Cases, the Debtors will comply 

with section 503(c)(2) of the Bankruptcy Code. 

To the extent that the U.S. Trustee is arguing that the restrictions imposed by section 

503(c)(2) should apply even when the Debtors have emerged from Chapter 11, the cases cited by 

the U.S. Trustee do not support that proposition. Indeed, two of the cases cited by the U.S. Trustee 

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are from the American Airlines Chapter 11 case, where the Debtors agreed to a merger and 

determined while the Company was still in Chapter 11 that the CEO would be terminated at or just 

after emergence. In this circumstance, the Court recognized that any such severance was coming 

out of the bankruptcy estate and the severance payment related solely to his service to the Debtors 

pre-emergence. See also In re TCI 2 Holdings, 428 B.R. 117, 172-173 (Bankr. D.N.J. 2010) 

(holding that 503(c)(2) applied where the Plan provided that officers would serve until the 

Effective Date of the plan). Here, the Debtors agree that should the severance be triggered by a 

decision pre-emergence, then 503(c)(2) would apply. But once the Debtors emerge from Chapter 

11, the reorganized entity is no longer subject to the provisions of section 503(c)(2) of the 

Bankruptcy Code. Pettibone Corp. v. Easley, 935 F.2d 120, 122 (7th. Cir. 1991) (“[o]nce the 

bankruptcy court confirms a plan of reorganization, the debtor may go about its business without 

further supervision or approval.”); see also In re MGM Studios Inc., 459 B.R. 550, 555 (Bankr. 

S.D.N.Y. 2011); Southwest Marine, Inc. v. Danzig, 217 F.3d 1128, 1140 (9th Cir. 2000) (“As we 

stated in a different context, once the bankruptcy court confirms a plan of reorganization, the 

debtor is free to go about its business without further supervision or approval of the court, and 

concomitantly, without further protection of the court.”). 

IV. THE TRANSITION PAYMENT IS APPROPRIATE 

The U.S. Trustee also raises an objection to the transition payment in Mr. Johnson’s 

compensation package. 

First, the U.S. Trustee argues that the Debtors have not established that the $3 million 

transition payment is “consistent with industry standards.” CEO Motion at 10 & nn.6-7. As 

demonstrated in the Supplemental Friske Declaration, Mr. Johnson’s transition payment is below 

standard market practice for large public companies. Following an evaluation of 28 companies that 

awarded transition payments to newly hired CEOs over the last four years with a median revenue 

of $4 billion, the Debtors’ employment expert, Willis Towers Watson (“WTW”) found that the 

median transition award was $7.0 million. Supp. Friske Decl. at 2. Mr. Johnson’s $3 million 

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transition payment is below the 10th percentile of transition payments and well-within the range 

of reasonableness for the Debtors’ peer market. As established by WTW’s analysis, Mr. Johnson’s 

transition payment is below-market. 

Second, the U.S. Trustee points out that “the Debtors made the Transition Payment before 

they filed the Motion or obtained the Court’s approval.” But as the U.S. Trustee acknowledges, 

the Debtors have been transparent that Mr. Johnson’s compensation is being paid subject to Court 

approval. See CEO Motion at 10 & n.7. In the event that the Court does not approve parts (or all) 

of Mr. Johnson’s transition payment, Mr. Johnson will voluntarily return those amounts to the 

Debtors. 

Finally, the U.S. Trustee states that the Motion “does not address whether the Debtors are 

on track to satisfy the metrics” of Mr. Johnson’s performance-based compensation, and does not 

disclose the “financial performance metric.” CEO Motion at 10-11. The purpose of this is 

apparently to determine if the metrics are layups. First, the Court has already had extensive 

testimony with respect to the metrics in connection with the 2019 STIP hearing and considered 

whether these same metric are layups. Second, to “address whether the Debtors are on track to 

satisfy the metrics” would require the disclosure of the Debtors’ projected performance, which is 

neither public nor appropriate to disclose. 

 As stated, no party with an economic interest in these cases has objected to the relief 

requested in the CEO Motion. Moreover, as demonstrated above, any legitimate concerns raised 

by the U.S. Trustee have been addressed. The relief requested in the CEO Motion represents a 

sound exercise of the Debtors’ business judgment and complies in all respects with the provisions 

of the Bankruptcy Code. 

V. CONCLUSION 

For the reasons stated herein and in the Debtors’ CEO Motion, the Court should approve 

the terms of Mr. Johnson’s employment. 

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Dated: August 7, 2019 WEIL, GOTSHAL & MANGES LLP 

KELLER & BENVENUTTI LLP 

By : /s/ Stephen Karotkin 

 Stephen Karotkin 

Attorneys for Debtors and Debtors in 

 Possession

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