1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Dennis F. Dunne (admitted pro hac vice) 

Samuel A. Khalil (admitted pro hac vice) 

MILBANK LLP 

55 Hudson Yards 

New York, New York 10001-2163 

Telephone: (212) 530-5000 

Facsimile: (212) 530-5219 

and 

Gregory A. Bray (SBN 115367) 

Thomas R. Kreller (SBN 161922) 

MILBANK LLP 

2029 Century Park East, 33rd Floor 

Los Angeles, CA 90067 

Telephone: (424) 386-4000 

Facsimile: (213) 629-5063 

Counsel for the Official Committee 

of Unsecured Creditors

UNITED STATES BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

In re: 

PG&E CORPORATION 

 - and - 

PACIFIC GAS AND ELECTRIC 

COMPANY,

Debtors.

Case No. 19-30088 (DM) 

Chapter 11 

(Lead Case) 

(Jointly Administered) 

STATEMENT AND RESERVATION OF 

RIGHTS OF THE OFFICIAL COMMITTEE 

OF UNSECURED CREDITORS REGARDING 

SUBROGATION CLAIM IMPAIRMENT 

ISSUE 

Date: January 14, 2020 

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

Place: United States Bankruptcy Court 

 Courtroom 17, 16th Floor 

 450 Golden Gate Avenue 

 San Francisco, CA 94102 

Re: Docket No. 4540 

 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). 

Pursuant to the Bankruptcy Court’s Order Establishing Pre-Confirmation Briefing and 

Hearing Schedule for Certain Legal Issues (the “Briefing Order”) [Docket No. 4540], the Official 

Committee of Unsecured Creditors (the “UCC”) appointed in the chapter 11 cases of the aboveCase: 19-30088 Doc# 4897 Filed: 11/27/19 Entered: 11/27/19 15:10:55 Page 1 of

4
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

2 

44553.00001

captioned debtors (the “Debtors”), hereby respectfully submits this statement and reservation of 

rights with respect to the following issue: “whether HoldCo Subrogation Wildfire Claims or Utility 

Subrogation Wildfire Claims that are settled and allowed as provided in the Subrogation Claims 

Settlement . . . are impaired for chapter 11 plan purposes.” See Briefing Order ⁋ 10. 

When the Briefing Order was entered, the hearing on the RSA Motion1 was set for 

November 13, 2019. The sequence of events thus would have provided the parties with the benefit 

of a ruling on the RSA Motion prior to the submission of briefs on the Subrogation Claims 

impairment issue. This timing was logical, because the outcome of the RSA Motion directly 

impacts whether and how the proposed settlement of the Subrogation Claims will work, in the 

context of the Debtors’ Plan and otherwise—issues that are directly germane to the Subrogation 

Claims impairment issue. 

Subsequent to the entry of the Briefing Order, the Court, at the request of the Debtors, has 

several times continued the hearing on the RSA Motion. The RSA Motion is now scheduled to be 

heard on December 4, 2019. This development has inverted the originally contemplated sequence 

of events, such that the deadline for briefing the Subrogation Claims impairment issue now 

precedes the hearing on the RSA Motion. The problem this creates is that, without knowing the 

actual terms on which the Court may approve the RSA Motion, if at all, it is speculative at this 

time to engage in arguments with respect to the impairment of the Subrogation Claims. Indeed, 

the Court has already indicated in its Tentative Considerations on Objections to Amended and 

Restated Restructuring Support Agreement [Docket No. 4872] that it is not inclined to approve the 

RSA Motion without certain material revisions. The UCC therefore reserves it rights to more fully 

 

1

 See 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 [Docket No. 3992] (the “RSA Motion”). Capitalized terms not defined herein 

shall have the meanings ascribed to them in the RSA Motion.

Case: 19-30088 Doc# 4897 Filed: 11/27/19 Entered: 11/27/19 15:10:55 Page 2 of

4
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

3 

44553.00001

address this issue in its reply brief after the Court has ruled on the RSA Motion and after there is 

more certainty as to the impact of the various terms of the RSA on the proposed settlement and 

plan treatment of the Subrogation Claims. 

Nonetheless, as a preliminary matter, the UCC maintains that the RSA (at least as presently 

proposed), not the Debtors’ plan of reorganization (the “Debtors’ Plan”), acts in all material 

respects to resolve the claims of the Subrogation Claimants, such that the Subrogation Claims are 

not impaired under the Debtors’ Plan, which would merely implement that prior resolution. For 

example: 

• The settlement would immediately grant the Subrogation Claimants an allowed $11 

billion claim for all purposes in these cases, unless the Subrogation Claimants opt 

out of the settlement (RSA § 5(f)(iii)(D)); 

• The RSA determines the treatment of this allowed claim—payment in full in cash 

(RSA § 4); and 

• The settlement compels the Subrogation Claimants’ acceptance of the Debtors’ 

Plan. (RSA § 2(a)(ii)). 

In analogous circumstances, courts have recognized that where plan treatment merely 

consists of satisfaction of claims in a manner agreed to under a pre-plan settlement of those claims, 

the class in which those claims reside is not impaired. See, e.g., In re Drexel Burnham Lambert 

Grp., 960 F.2d 285, 290 (2d Cir. 1992) (explaining that where a postpetition settlement agreement 

established the rights of the members of the class of security litigation plaintiffs and the plan 

satisfied their claims in accordance with such settlement, “the class members were unimpaired 

within the meaning of 11 U.S.C. § 1124(1).”). Moreover, in In Matter of Wabash Valley Power 

Ass’n., 72 F.3d 1305, 1321 (7th Cir. 1996), the Seventh Circuit made a distinction between claims 

subject to a settlement that is contingent on plan confirmation and claims that have been finally 

settled prior to confirmation. Specifically, the Seventh Circuit held that where “a claim has been 

settled prior to confirmation of a reorganization plan . . . confirmation therefore leaves the parties’ 

Case: 19-30088 Doc# 4897 Filed: 11/27/19 Entered: 11/27/19 15:10:55 Page 3 of

4
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

4 

44553.00001

rights unaffected.” 

The treatment of the Subrogation Claims is a foregone conclusion if the Court approves 

the RSA Motion. See RSA §5(f)(iii)(D) (“absent delivery of an Allowance Termination Notice, 

the occurrence of an Insolvency Termination, or termination by the Debtors of this Agreement in 

accordance with Section 5(e)(i) hereof, the Allowed Subrogation Claim Amount, and each holder’s 

share thereof, shall remain an allowed claim and binding in these Chapter 11 Cases even if a Debtor 

is in breach of this Agreement.”). 

Given applicable law, the UCC continues to challenge the position that the Subrogation 

Claims are impaired. As stated above, however, this issue is intertwined with the ultimate form of 

the RSA as approved by the Court. As such, the UCC believes that the issue of whether the 

Subrogation Claims are impaired is not yet ripe, and expressly reserves its rights to further brief 

the issue presented following the Court’s final decision with regard to the RSA Motion. 

Dated: November 27, 2019 

MILBANK LLP 

/s/ Gregory A. Bray . 

DENNIS F. DUNNE 

SAMUEL A. KHALIL 

GREGORY A. BRAY 

THOMAS R. KRELLER 

Counsel for the Official Committee of 

Unsecured Creditors 

Case: 19-30088 Doc# 4897 Filed: 11/27/19 Entered: 11/27/19 15:10:55 Page 4 of

4