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BAKER 

&

HOSTETLER LLP

ATTORNEYS AT LAW

SAN FRANCISCO

Robert A. Julian (SBN 88469)

Cecily A. Dumas (SBN 111449)

BAKER & HOSTETLER LLP

1160 Battery Street, Suite 100

San Francisco, CA 94111

Telephone: 628.208.6434

Facsimile: 310.820.8859

Email: rjulian@bakerlaw.com

Email: cdumas@bakerlaw.com

Eric E. Sagerman (SBN 155496)

Lauren T. Attard (SBN 320898)

BAKER & HOSTETLER LLP

11601 Wilshire Blvd., Suite 1400

Los Angeles, CA 90025-0509

Telephone: 310.820.8800

Facsimile: 310.820.8859

Email: esagerman@bakerlaw.com

Email: lattard@bakerlaw.com

Counsel to the Official Committee of Tort Claimants

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)

Bankruptcy Case 

No. 19-30088 (DM)

Chapter 11

(Lead Case)

(Jointly Administered)

STATUS CONFERENCE STATEMENT 

OF THE OFFICIAL COMMITTEE OF 

TORT CLAIMANTS

Date: September 24, 2019

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

Place: United States Bankruptcy Court

Courtroom 17, 16th Floor

San Francisco, CA 94102

Case: 19-30088 Doc# 3931 Filed: 09/18/19 Entered: 09/18/19 15:44:22 Page 1 of

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SAN FRANCISCO

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The Official Committee of Tort Claimants (“TCC”) in the chapter 11 cases of PG&E 

Corporation (“Holdco”) and Pacific Gas and Electric Company (the “Utility,” and collectively with 

Holdco, the “Debtors”), hereby submits its Status Conference Statement in connection with the 

Status Conference currently scheduled for September 24, 2019, at 9:30 a.m., in the above-captioned 

court (the “Bankruptcy Court”), and respectfully represents as follows:

A. The Debtors’ Progress Toward a Confirmable Plan is Illusory.

The Debtors’ bankruptcy cases (the “Bankruptcy Cases or “Cases”) are not about 

restructuring business debts. The Debtors’ statements from the commencement of the Bankruptcy 

Cases have indicated that the purpose of the proceedings is to address tort claims arising from the 

2017 and 2018 wildfires. Their actions in the Cases are consistent with the statements. Under the 

Joint Chapter 11 Plan of Reorganization filed by the Debtors on September 9, 2019 (“Plan”), claims 

other than claims arising from wildfires are unimpaired. The Debtors also have announced that 

they do not intend to reject power purchase agreements (“PPAs”) notwithstanding the disputes 

before the Federal Energy Regulatory Commission (“FERC”) and this Court.

So, the measure of progress toward confirmation of a plan must be evaluated by the Debtors’ 

progress toward treatment of tort claims. Here, the Debtors have relied on smoke and mirrors 

instead of meaningful progress.

B. Public Entity Settlement Provides Disparate Treatment of Similarly Situated 

Tort Claimants.

First, the Debtors announced to the Court and the media their settlement with public entities 

(the “PE Settlement”) for $1 billion. As it turns out, however, the public entities included in the 

settlement are based on the happenstance of having been represented by the Stutzman firm and its 

co-counsel. The settlement includes 18 public entities. It does not include many, many other 

similarly situated public entities. For example, the TCC has been informed that both the Paradise 

Irrigation District and the Paradise School District that sustained losses in the Camp Fire have 

substantial claims (upwards of $100 million) that were not included in the $1 billion settlement. 

Case: 19-30088 Doc# 3931 Filed: 09/18/19 Entered: 09/18/19 15:44:22 Page 2 of

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ATTORNEYS AT LAW

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There are many other local public entities that were not included in the PE settlement.1 For the 

Debtors to have announced a “public entity” settlement is disingenuous.

Also, the Debtors openly recognize that substantial claims may be asserted by the State of 

California (Cal Fire remediation costs and other claims) and the United States (FEMA claims and 

other claims), that collectively may be in the billions of dollars, are not included in the announced 

PE Settlement. 

The Debtors’ apparent treatment all these public entity claims that they have not resolved 

under the Plan is to include them in a class with fire victims and channeled to a resolution trust. 

This proposed treatment has the effect of diluting the funds available to pay victims. The disparity 

between the Stutzman settling parties and the other public entities makes it impossible to determine 

whether those parties will receive comparable compensation for their losses.

C. The Settlement with Subrogation Claimants Violates the Absolute Priority 

Rule.

The Debtors recently announced a settlement with the holders of subrogation claims 

(“Subrogation Claimants”) in the aggregate amount of $11 billion (“Subrogation Claims”), 

subject to Bankruptcy Court approval. The Debtors propose to allow these Subrogation Claims 

and liquidate the claims. Under the Plan as described in the Debtors’ press release, the Subrogation 

Claimants will receive on the effective date $11 billion in cash.

The problem with the Subrogation Claimants’ settlement is that the treatment under the Plan 

violates the absolute priority rule. Subrogation is an equitable doctrine that permits an insurer to 

assert the rights and remedies of an insured against a third-party tortfeasor. Chandler v. State Farm 

Mut. Auto Ins. Co., 598 F.3d 1115, 1117 (9th Cir. 2010). The Subrogation Claims are derivative 

of the claims of wildfire victims. When the insurers paid policy benefits to their insureds, they 

acquired the right (whether by contract provision or equity) to pursue recovery of the subrogated 

claims against the Debtors. 

 1 The PE settlement includes an arbitrary twist. The Debtors contest liability for losses in connection with the Tubbs 

fire in Santa Rosa, California. However, under the settlement the settling North Bay public entities may “share” 

settlement proceeds with Santa Rosa even though it is not officially entitled to settlement proceeds. In this way, the 

Debtors hope to eliminate a challenge from Santa Rosa, while still contesting liability for the Tubbs fire with victims. 

This sleight of hand is typical of the Debtors’ arbitrary handling of similarly situated claimants.

Case: 19-30088 Doc# 3931 Filed: 09/18/19 Entered: 09/18/19 15:44:22 Page 3 of

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SAN FRANCISCO

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The insurers’ right of subrogation is subject to a common law exception. The “made whole” 

doctrine “precludes an insurer from recovering any third-party funds unless and until the insured 

has been made whole for the loss.” Chandler, 598 F.3d at 1117.2 “The applicability of the doctrine 

generally depends on whether the insured has been completely compensated for all the elements of 

damages, not merely those for which the insurer has indemnified the insured.” Id. at 1118. The 

doctrine is implicated in these Bankruptcy Cases in the following way: Wildfire victims suffered 

two types of losses—property damages based on their homes or businesses being completely or 

partially destroyed, and personal injury claims based on the trauma of fleeing wildfires bearing 

down on their homes or businesses and dealing with the aftermath of mass disasters the Debtors 

inflicted on their communities. Property damages are covered by insurance; personal injuries, such 

as emotional distress and physical injury are not.

What this means is that most if not all wildfire victims who fled from fires have uninsured

emotional distress damages claims against the Debtors, even if they received insurance payments 

under their policies. Therefore, the made-whole doctrine subordinates most if not all Subrogation 

Claims to the claims of wildfire victims who have not been made whole for all their losses in the 

Bankruptcy Cases. The Subrogation Claims may not be allowed and treated on equal priority with 

victim claims under the Plan without violating the absolute priority rule of Bankruptcy Code section 

1129(b).

The Debtors hope to circumvent the consequence of this well-established equitable 

doctrine. What they are counting on is that hundreds if not thousands of insured victims will not 

file any claims in the Bankruptcy Cases, even claims based on their emotional distress and personal 

injuries. If these victims do not file claims, the corresponding subrogation claim of the insurer 

would not be subject to bar under the made-whole rule because the victim is not asserting his or her 

own uninsured claim against the tortfeasor. Therefore, the Debtors are hoping for a low number of 

claims being filed, or low “participation.” If there are enough victims who received insurance 

 2 California recognizes two exceptions to the applicability of the made-whole rule, neither of which is applicable in 

these Bankruptcy Cases. First, the insured may disclaim the made whole rule through clear and specific language in 

the insurance policy. Second, the rule does not apply if the insurer participates in the prosecution of the insured’s 

claim against the third-party tortfeasor. Chandler, 598 F.3d at 1118. 

Case: 19-30088 Doc# 3931 Filed: 09/18/19 Entered: 09/18/19 15:44:22 Page 4 of

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SAN FRANCISCO

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payments for some or all of their insured losses who do not file claims in the Bankruptcy Case, the 

Debtors hope to elevate the Subrogation Claims to equal priority with the victim claims without 

violating the absolute priority rule. 

D. Misconceptions as to the Right to File Uninsured Claims May Have Adversely 

Affected the Claims Solicitation Process.

The TCC has uncovered a misconception among insured wildfire victims that may have 

enormous due process implications for claims allowance and made-whole if the misconception 

proves to be widespread. Here is the issue: We know the wildfire losses affected tens of thousands 

of people, and the losses are extremely high. This is shown by the settlement of Subrogation Claims 

at $11 billion. Prime Clerk’s claims noticing program included, among other notices, mailings to 

16 million customers. Yet, only a handful of wildfire claims—under 1,500—have been filed to 

date.3

 

Based on sampling of interviews of a few victims in wildfire-affected areas, the TCC has 

preliminarily concluded that victims who received insurance benefits may believe that they are not 

permitted to file claims against the Debtors because they received payments from their insurance 

companies. The TCC fears that hundreds if not thousands of victims who hold valid uninsured and 

underinsured claims are not asserting the claims against the Debtors based on the belief, however 

mistaken, that they would be violating their insurance policies and the terms of the payment of their 

benefits. Once the Subrogation Claims settlement is filed, the names of insureds will be publicly 

available. At that point the TCC will conduct more comprehensive discovery of insurers and 

insureds to find out whether victims are confused and believe that they are prohibited from filing 

emotional distress claims because they received insurance payments. Until the TCC has more 

information concerning the discrepancy between the dollar amount of Subrogation Claims and what 

should be concomitant underinsured or uninsured claims against the Debtors, it must assume that 

the made-whole rule applies to subordinate the entire amount of settled Subrogation Claims. 

 3 The TCC is not suggesting that victims who retained lawyers to prosecute their claims against the Debtors hold this 

misconception. 

Case: 19-30088 Doc# 3931 Filed: 09/18/19 Entered: 09/18/19 15:44:22 Page 5 of

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Therefore, the Plan as currently proposed does not comply with Section 1129 of the Bankruptcy 

Code and may not be confirmed.

The TCC, by raising these preliminary issues in this Status Conference Statement, is not 

waiving, and shall not be construed to have waived, other objections to the Debtors’ proposed Plan, 

all of which are expressly reserved.

Dated: September 18, 2019 Respectfully submitted,

BAKER & HOSTETLER LLP

By: /s/ Cecily A. Dumas

Cecily A. Dumas

Counsel to the Official Committee of Tort 

Claimants 

Case: 19-30088 Doc# 3931 Filed: 09/18/19 Entered: 09/18/19 15:44:22 Page 6 of

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