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DOCS_SF:102107.2 08442/030

Isaac M. Pachulski (CA Bar No. 62337) 

Debra I. Grassgreen (CA Bar No. 169978) 

PACHULSKI STANG ZIEHL & JONES LLP 

150 California Street, 15th Floor 

San Francisco, CA 94111 

Telephone: (415) 263-7000 

Facsimile: (415) 263-7010 

Email: dgrassgreen@pszjlaw.com 

 

Eric Seiler (admitted pro hac vice) 

Jason C. Rubinstein (admitted pro hac vice) 

FRIEDMAN KAPLAN SEILER AND ADELMAN LLP 

7 Times Square 

New York, NY 10036-6516 

Telephone (212) 833-1103 

Facsimile (212) 373-7903 

Email: eseiler@fklaw.com 

Attorneys for The Baupost Group, L.L.C., 

as the managing general partner and investment 

manager for certain entities that indirectly 

hold subrogation claims 

UNITED STATES BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

In re: 

PG&E CORPORATION, 

 -andPACIFIC GAS AND ELECTRIC 

COMPANY, 

Debtors. 

☐ Affects PG&E Corporation 

☐ Affects Pacific Gas and Electric 

Company 

Affects both Debtors 

* All papers shall be filed in the lead case, 

No. 19-30088 (DM)

Case No. 19-30088 (DM) 

Chapter 11 

(Jointly Administered) 

JOINDER IN THE AD HOC GROUP OF 

SUBROGATION CLAIM HOLDERS’ REPLY 

IN SUPPORT OF DEBTORS’ MOTION 

PURSUANT TO 11 U.S.C. §§ 363(b) AND 105(A) 

AND FED. R. BANKR. P. 6004 AND 9019 FOR 

ENTRY OF AN ORDER (I) AUTHORIZING 

THE DEBTORS TO ENTER INTO 

RESTRUCTURING SUPPORT AGREEMENT 

WITH THE CONSENTING SUBROGATION 

CLAIMHOLDERS, (II) APPROVING THE 

TERMS OF SETTLEMENT WITH SUCH 

CONSENTING SUBROGATION 

CLAIMHOLDERS, INCLUDING THE 

ALLOWED SUBROGATION CLAIM 

AMOUNT, AND (III) GRANTING RELATED 

RELIEF 

Date: October 23, 2019 

Time: 10:00 a.m. (Pacific Time) 

Place: United States Bankruptcy Court 

 Courtroom 17, 16th Floor 

 San Francisco, CA 94102 

Case: 19-30088 Doc# 4365 Filed: 10/21/19 Entered: 10/21/19 16:28:40 Page 1 of

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DOCS_SF:102107.2 08442/030

The Baupost Group, L.L.C., as the managing general partner and investment manager for 

certain entities that indirectly hold subrogation claims (“Baupost”) hereby submits this Joinder (the 

“Joinder”) in the Reply of the Ad Hoc Group of Subrogation Claim Holders in Support of Debtors’ 

Motion Pursuant to 11 U.S.C. §§ 363(b) and 105(A) and Fed. R. Bankr. P. 6004 and 9019 for Entry 

of An Order (I) Authorizing the Debtors to Enter into Restructuring Support Agreement with the 

Consenting Subrogation Claimholders, (II) Approving the Terms of Settlement with Such Consenting 

Subrogation Claimholders, Including the Allowed Subrogation Claim Amount, and (III) Granting 

Related Relief [Dkt. No. 4348] (the “Subrogation Group Reply”). Baupost is a substantial creditor 

of these estates, a major holder of insurance subrogation claims, and a member of the Steering 

Committee of the Ad Hoc Group of Subrogation Claim Holders (the “Ad Hoc Subrogation 

Group”).1 

Notwithstanding the flurry of objections to the Motion,2 one thing is not fairly disputable—

settling $20 billion of asserted subrogation claims against these estates for $11 billion is a good idea. 

Instead of challenging this critical component of the proposed settlement (the substantial 

compromise of the subrogation claims), the objections to the Motion fall into two general categories: 

objections to specific provisions of the restructuring support agreement (“RSA”) and objections to 

the Debtors’ plan of reorganization. The former—objections to the RSA—are relatively narrow and 

have been fully addressed in the Subrogation Group Reply in which Baupost joins. Significantly, 

the Ad Hoc Subrogation Group and the Debtors have agreed to certain key modifications to the RSA 

in response to the objections. Objections to specific provisions of the Debtors’ plan need not be 

determined in connection with approval of the RSA. The RSA simply binds the Debtors to 

prosecute a plan consistent with its terms; the Court is not being asked to determine at this time 

whether that plan is confirmable. There will be ample time for interested parties to object to the 

Debtors’ plan and for the Debtors to make any appropriate modifications to it. 

 

1

 Baupost’s holdings of equity, subrogation claims, other unsecured wildfire claims, and other rights are set 

forth in the Fifth Amended Verified Statement of the Ad Hoc Group of Subrogation Claim Holders Pursuant 

to Bankruptcy Rule 2019 [Dkt. No. 4302]. 

2

 Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Subrogation 

Group Reply.

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DOCS_SF:102107.2 08442/030

Baupost submits this Joinder to underscore an important attribute of the Ad Hoc Subrogation 

Group’s $11 billion proposed settlement with the Debtors that the TCC overlooks: the proposed 

settlement makes it more, not less, likely that the Debtors will remain solvent and that individual 

Fire Victims will be paid in full. 

The TCC argues that the Court should not approve the proposed settlement now because, 

until the estimation proceedings before Judge Donato “are completed in March, no one in these 

Cases can credibly argue that they know what is required to pay Fire Victims in full.” TCC 

Opposition to Motion [Dkt. No. 4232] at 2. The TCC further argues that, in a scenario in which this 

Court approves the proposed settlement and Judge Donato then “estimate[s] high” (i.e., estimates the 

individual Fire Victims’ damages at a level that significantly exceeds the cap contemplated by the 

Debtors’ proposed plan), the Debtors could be rendered insolvent and have insufficient distributable 

value to fully pay the Ad Hoc Subrogation Group’s $11 billion allowed claim and also pay 

individual Fire Victims for “the entirety of their damages.” Id. at 3. To avoid the Debtors’ 

insolvency and a scenario in which individual Fire Victims are not paid in full, the TCC insists that 

the treatment of the Ad Hoc Subrogation Group’s claims should be resolved “solely in connection 

with plan confirmation”—or at least deferred until some unspecified point when the TCC has 

complete confidence that individual “Fire Victims will receive an actual recovery of their actual 

damages, in full.” Id. 

The TCC’s argument fails to appreciate that the Ad Hoc Subrogation Group members’ 

settlement of their $20 billion in claims for $11 billion at this stage of the case dramatically increases 

the likelihood that the Debtors will remain solvent and be able to pay individual Fire Victims in full 

even if Judge Donato were to “estimate high.” The reason for this is that the same factual and legal 

findings that would be necessary for the Debtors’ liability to the individual Fire Victims to be 

“estimate[d] high” would also result in the Ad Hoc Subrogation Group’s members being entitled to 

recover damages that approach or even exceed $20 billion. First, the Debtors would need to be 

found (or estimated to be) liable for the Tubbs Fire—which alone was responsible for approximately 

40% of the tens of billions of dollars in property damage, as well as other injuries, caused by the 

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DOCS_SF:102107.2 08442/030

2017 and 2018 Northern California Wildfires.3 If the individual Fire Victims fail to establish the 

Debtors’ liability for the Tubbs Fire, they will be unable to recover for any of their billions of dollars 

in claimed injuries arising from that fire. Second, the Debtors would need to be found (or estimated 

to be) negligent in connection with the 2017 and 2018 Northern California Wildfires. If the 

individual Fire Victims are unable to establish the Debtors’ negligence for any particular fire, they 

will be unable to recover for personal injury, wrongful death, or emotional distress relating to that 

fire. At most, they will be able to recover damages for their uninsured property losses—and then 

only if the Debtors are deemed liable under the theory of inverse condemnation. See generally 

Baker v. Burbank-Glendale-Pasadena Airport Auth., 39 Cal. 3d 862, 866 (1985) (inverse 

condemnation action arises only from the “the taking or damaging . . . of property”). Thus, the only 

scenario in which the Debtors’ liability to the individual Fire Victims is “estimate[d] high” is one in 

which the individual Fire Victims establish that the Debtors’ equipment caused the Tubbs Fire and 

that the Debtors’ negligence was responsible for all of the major 2017 and 2018 Wildfires (including 

the Tubbs Fire). 

In this scenario, if the Court declines to approve the proposed settlement and the Ad Hoc 

Subrogation Group’s members, litigating side-by-side with the individual Fire Victims, prevail in 

demonstrating that PG&E caused the Tubbs Fire and acted negligently, the Ad Hoc Subrogation 

Group members’ damages would approach or even exceed $20 billion—an amount that, in 

combination with the individual Fire Victims’ damages, could tip the Debtors into insolvency and 

impair their ability to pay individual Fire Victims in full. 

The proposed settlement redounds to the benefit of the individual Fire Victims by 

substantially reducing the risk of the Debtors’ insolvency and freeing up over $9 billion in estate 

value from which the individual Fire Victims (including uninsured individual Fire Victims who have 

no conceivable made-whole claims) can look to recover in a scenario in which they prevail in 

establishing that PG&E equipment caused the Tubbs Fire and that PG&E’s negligence caused the 

2017 and 2018 Northern California Wildfires. 

 

3 See Debtors’ Motion Pursuant 11 U.S.C. §§ 105(a) and 502(c) for the Establishment of Wildfire Claims 

Estimation Procedures [Dkt. No. 3091], at 20 (“The TCC estimates the Tubbs Fire caused at least $18 billion 

in damages.”).

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DOCS_SF:102107.2 08442/030

The TCC obviously recognizes the benefits of the Court’s granting the Ad Hoc Subrogation 

Group members an $11 billion allowed claim. The TCC’s own filed plan of reorganization [Dkt. 

No. 4257] is premised on the Ad Hoc Subrogation Group members’ claims being “settled and 

allowed in the aggregate amount of $11 billion,” as part of a plan that would cap the individual Fire 

Victims’ damages (together with those of Public Entity claimants) at $14.5 billion irrespective of an 

estimation in excess of that amount. Presumably, the TCC believes that its proposed plan (which 

contemplates a cap on the individual Fire Victims’ claims that is billions of dollars higher than the 

cap embedded in the Debtors’ proposed plan) would not make the Debtors insolvent. This confirms 

that (1) there is, in fact, no dispute among the parties with respect to the appropriateness of the 

Debtors’ $11 billion proposed settlement with the Ad Hoc Subrogation Group’s members, and (2) 

allowing the Ad Hoc Subrogation Group’s claims in this amount will enable the Debtors to pay the 

individual Fire Victims and the Public Entity claimants in full and thereby fulfill, and obtain the 

benefits of, AB 1054. 

Finally, it is clear that the TCC and Noteholders’ joint plan would be unconfirmable in an 

“estimate high” scenario in which the Court has also rejected the proposed $11 billion settlement. 

Even after leaving little to no value for existing equity holders, the TCC and Noteholders’ joint plan 

assumes that the Debtors have at most $25.5 billion in value to distribute between and among the Ad 

Hoc Subrogation Group’s members, the individual Fire Victims, and the Public Entity claimants. If 

the proposed settlement is not approved and the Ad Hoc Subrogation Group’s members establish 

their entitlement to more than $20 billion of this amount, then the TCC and Noteholders’ joint plan 

will be unable to satisfy the claims of all Fire Victims and, consequently, could not be confirmed. 

 

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DOCS_SF:102107.2 08442/030

Dated: October 21, 2019 PACHULSKI STANG ZIEHL & JONES LLP 

/s/ Debra I. Grassgreen 

Isaac M. Pachulski 

Debra I. Grassgreen 

- and – 

Eric Seiler (admitted pro hac vice) 

Jason C. Rubinstein (admitted pro hac vice) 

FRIEDMAN KAPLAN SEILER 

AND ADELMAN LLP 

Attorneys for The Baupost Group, L.L.C., 

as the managing general partner and investment 

manager for certain entities that indirectly 

hold subrogation claims

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