RSA Approval Motion: Objection Response Chart1

I. Issues Addressed by Amended and Restated RSA

# Objection Objecting Party Clarifying Changes to the RSA/ Plan of Reorganization

1 The RSA definition of “IP 

Claims” could be interpreted 

to include claims held by 

Government Units (as defined 

in section 101(27) of the 

Bankruptcy Code). 

U.S. Department 

of Justice, Civil 

Division 

[Dkt. No. 4237 

(pp. 3-5)]

• The definition of “IP Claims” in the Amended RSA now provides: 

o “‘IP Claims’ means any Wildfire Claim that is not a Public 

Entities Wildfire Claim or, a Subrogation Claim or any 

Wildfire Claim asserted by any Governmental Unit (as 

defined in section 101(27) of the Bankruptcy Code).”

▪ See Amended RSA p. 4. 2

2 Claims of Governmental 

Units should not be included 

as Subrogation Claims.

California 

Governor’s 

Office of 

Emergency 

Services and 

California 

Department of 

Veterans Affairs

[Dkt. No. 4220 

(p. 2)]

• The definition of “Subrogation Claim” in the Amended RSA now 

provides: 

o “‘Subrogation Claims’ means.... For the avoidance of doubt, 

Subrogation Claims shall not include the claims of any 

Governmental Unit (as defined in section 101(27) of the 

Bankruptcy Code) and any such claims shall not be the 

subject of, or compromised under, this Agreement.”

▪ See Amended RSA p. 6. 

1 This chart has been prepared for administrative convenience to set forth the changes made in the Amended and Restated RSA (“Amended RSA”) filed by 

the Debtors in the Notice of Filing of Amended and Restated Restructuring Support Agreement [Dkt. No. 4554] (“Notice of Amended RSA”). For the 

avoidance of doubt, this chart is purely illustrative and is qualified entirely by reference to the terms of the Amended RSA. 

2 Citations to the Amended RSA are to pages numbers in the blackline copy of the Amended RSA filed in the Notice of Amended RSA unless otherwise 

specified. 

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# Objection Objecting Party Clarifying Changes to the RSA/ Plan of Reorganization

3 The RSA prohibits the Ad 

Hoc Subrogation Group 

(“AHG”) from negotiating 

with other creditor 

constituencies to achieve 

global consensus.

TCC, UCC, 

Bondholder 

Group, Governor 

Newsom

[Dkt. Nos. 4232 

(p. 5), 4236 (pp. 

6-7), 4241 (pp. 

3-4), 4640 (p. 5)]

• Section 2(b)(ii) of the Amended RSA now provides:

o “Subject to the terms and conditions hereof, for the duration of 

the Support Period, each Consenting Creditor shall not...(ii) 

subject to the proviso in Section 2(a)(iii) hereof as to voting,

directly or indirectly, file, propose, support, solicit, assist, 

encourage, or participate in the formulation of or vote for any 

Alternative Restructuring or settlement of the Subrogation 

Claims other than as set forth herein, provided that nothing 

herein precludes the Debtors and the Ad Hoc Subrogation 

Group from negotiating together with any other creditor 

constituencies or participating in mediation to achieve 

global consensus;”

▪ See Amended RSA p. 8.

4 The RSA obligates the 

Debtors3to file a plan that

pays subrogation claimants 

100% of their allowed claims, 

even if the Debtors are 

insolvent.

UCC, TCC

[Dkt. Nos. 4236 

(p. 7), 4629 

(pp.5-6)]

• Section 3(a)(i) of the Amended RSA now provides:

o “Subject to the terms and conditions hereof, for the duration of 

the Support Period, the Company shall...(i) use commercially 

reasonable efforts to propose and pursue the Plan and seek the 

entry of a Confirmation Order, which incorporate the terms of 

the Settlement including any conditions thereto (including all of 

the terms hereof relating to the treatment of, and distributions 

on Subrogation Claims and the Aggregate Subrogation 

Recovery), provided that if the Bankruptcy Court 

determines the Debtors are insolvent, the Debtors may file a 

revised plan that does not pay subrogation claimants $11 

billion in cash on $11 billion of allowed claims, provided, 

however, that such revised plan shall not subordinate the 

class of Subrogation Claims to the class of IP Claims (an 

“Insolvent Plan”);”

▪ See Amended RSA p. 9.

3 Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Amended RSA.

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# Objection Objecting Party Clarifying Changes to the RSA/ Plan of Reorganization

5 Under section 3(a)(iii) of the 

RSA, if an insured individual 

plaintiff settles with the 

Debtors, such party is 

required to release ordinary 

course insurance claims 

against their insurer. 

TCC, Adventist 

Claimants

[Dkt. Nos. 4232 

(pp. 19-20), 

4239 (pp. 5-8)]

• Section 3(a)(iii) of the Amended RSA was modified to narrow the 

scope of the release as follows, and the draft form of release is now 

attached to the Amended RSA:

o “Subject to the terms and conditions hereof, for the duration of 

the Support Period, the Company shall . . .(iii) upon entry into 

any settlement with any holder or holders of IP Claims that 

fixes the amount or terms for satisfaction of an IP Claim, 

including with respect to rights against a post-Effective Date 

trust established for the resolution and payment of such Claims, 

require, as a condition to payment or other distribution to or for 

the benefit of such holder pursuant to such settlement or other 

agreement, that the holder of the IP Claim contemporaneously 

execute and deliver a release and waiver of any and all claims 

to the fullest extent permitted by law against all parties in 

interest in the Chapter 11 Cases, including any potential 

made-whole claims against present and former holders of 

Subrogation Claims, which release shall be in form and 

substance reasonably acceptable to the Debtors the 

Requisite Consenting Creditors substantially in the form 

attached hereto as Exhibit B (the “Settlement Payment 

Condition”)...”

▪ See Amended RSA pp. 9-10.

• The Form of Release attached as Exhibit B to the Amended RSA 

provides: 

o “Releasor is not releasing any claims Releasor may have 

against any Releasee other than the Releasor’s foregoing release 

of made-whole claims.”

▪ See ¶ 4, Ex. B to Amended RSA. 

• The scope of release is consistent with releases entered into between 

insured individual plaintiffs and the Debtors in comparable prepetition 

incidents, copies of which have been filed with the Bankruptcy Court 

under seal. 

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# Objection Objecting Party Clarifying Changes to the RSA/ Plan of Reorganization

o Exhibit A (Butte Fire Release) Sample Language: “The 

subrogation claims, if any, of Plaintiff’s property insurers, if 

any, are excepted from this release and the [PLAINTIFFS] 

agree that they will not submit any further claim or receive any 

further benefit from their property insurers that may give rise to 

any additional or further subrogation claims for any property 

loss caused directly or indirectly by the Fire.”

o Exhibit B (San Bruno Release) Sample Language: “The

subrogation claims, if any, of the undersigned’s property insurer 

is excepted from this release and the undersigned agrees that 

they will not submit any further claim or receive any further 

benefit from their property insurer that may give rise to any 

additional or further subrogation claims for any property loss 

caused directly or indirectly by the Accident.” 

6 If an insured individual 

plaintiff settles with the 

Debtors, such plaintiff must 

release its insurer, but the 

insurer is not required to 

provide a “mutual release” to 

the insured. 

Adventist 

Claimants [Oct. 

23 Hr’g Tr. at 

198:7-200:4, 

Dkt. No. 4637 

(p. 4)] 

• Section 3(a)(iii) of the Amended RSA clarifies that the releases will be 

mutual and now provides:

o “ . . . provided that the Confirmation Order shall deem 

each holder of a Subrogation Claim that is a beneficiary of a 

release and waiver of made-whole claims executed by a 

holder of an IP Claim as set forth herein to have released 

such holder of an IP Claim from any claim to such holder’s 

recovery from the Debtors on account of such settled IP 

Claim;”

▪ See Amended RSA pp. 9-10.

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# Objection Objecting Party Clarifying Changes to the RSA/ Plan of Reorganization

7 If the Debtors are insolvent, 

the Debtors are required to 

pursue a plan that finds 

prepetition wildfire claims are 

satisfied, which may not be 

possible. 

UCC

[Dkt. No. 4236 

(pp. 7-8)]

• Section 3(a)(v) of the Amended RSA clarifies that if the Bankruptcy 

Court determines that the Debtors are insolvent, then the Debtors shall 

not be obligated to seek the finding set forth in Section 3(a)(v)(A): 

o “Subject to the terms and conditions hereof, for the duration of 

the Support Period, the Company shall . . . (v) propose and 

pursue the Plan and seek entry of a Confirmation Order that 

contain (and the Plan and Confirmation Order any plan and 

confirmation order pursued by the Debtors shall contain) the 

following provisions, findings and orders, as applicable in 

substantially the form set forth below (the “Findings and 

Orders”), provided that, if the Bankruptcy Court determines 

the Debtors are insolvent, the Debtors will not be required 

to pursue a plan or confirmation order with the finding set 

forth in Section 3(a)(v)(A) below...(A) the Bankruptcy Court 

‘has determined that the resolution of the insolvency proceeding 

provides funding or establishes reserves for, provides for 

assumption of, or otherwise provides for satisfying any 

prepetition wildfire claims asserted against the electrical 

corporation in the insolvency proceeding in the amounts agreed 

upon in any pre-insolvency proceeding settlement agreements 

or any post-insolvency settlement agreements, authorized by the 

court through an estimation process or otherwise allowed by the 

court;’”

▪ See Amended RSA p. 10.

8 The RSA would allow the 

Debtors and AHG to amend 

the RSA without further 

Bankruptcy Court approval. 

Bondholder 

Group

[Dkt. No. 4241 

p. 4-5)]

• Section 9 of the Amended RSA now provides:

o “. . . Notwithstanding anything herein to the contrary, any 

material modifications or amendments to this Agreement 

shall be subject to Bankruptcy Court approval on not less 

than five (5) Business Days’ notice.”

▪ See Amended RSA pp. 18-19.

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# Objection Objecting Party Clarifying Changes to the RSA/ Plan of Reorganization

9 The release in the plan is not a 

consensual third-party release.

TCC

[Dkt. No. 4232 

(pp. 19-20)]

• The newly filed Plan’s definition of “Releasing Parties” now requires 

claimants to opt-in to releases, consistent with the Bondholders/TCC's 

plan: 

o “Releasing Parties means, collectively, and, in each case, in 

their capacities as such... (c) any holder of a Claim that is 

Unimpaired under the Plan that does not file a timely 

objection to the releases provided for in Section 10.9(b) of 

the Plan; (d) any holder of a Claim (i) who votes to accept 

or reject the Plan, or (ii) whose vote to accept or reject the 

Plan is solicited but that does not vote either to accept or to 

reject the Plan and, in each case, does not indicate solicited 

and voluntarily indicates on a duly completed bBallot

submitted on or before the Voting Deadline that such holder 

opts out of into granting the releases set forth in Section 

10.9(b) 10.9(b) of the Plan to the extent permitted by 

applicable law, provided that such holder’s opt-in, opt-out, 

or failure to complete that portion of the Ballot shall not in 

any way affect the classification or treatment of such 

Claim...”

• Section 10.9(b) of the Plan was amended to clarify the limited scope of 

the release being given by Other Wildfire Claim Holders—a defined 

term which includes insured individual plaintiffs—to holders of 

“Subrogation Wildfire Claims’:

o “...and nothing herein shall be deemed to impose a release 

by holders of Other Wildfire Claims of insurance claims 

arising under their insurance policies against holders of 

Subrogation Wildfire Claims, other than any rights such 

holder may elect to release as part of any settlement as set 

forth in Section 4.19(f)(ii) hereof.”

• In addition section 10.9(c) of the Plan was added to clarify that the Plan 

does not impose any non-consensual releases:

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# Objection Objecting Party Clarifying Changes to the RSA/ Plan of Reorganization

o “Only Consensual Non-Debtor Releases. Except as set forth 

under Section 4.19(f)(ii) hereof, for the avoidance of doubt, 

and notwithstanding any other provision of this Plan, 

nothing in the Plan is intended to, nor shall the Plan be 

interpreted to, effect a nonconsensual release by a holder of 

a Claim in favor of a party that is not a Debtor, it being 

acknowledged that such holder shall be deemed to release a 

party that is not a Debtor under the Plan solely to the extent 

that such holder consensually elects to provide such Plan 

release in accordance with the opt-in release procedures set 

forth herein or in any applicable Ballot. The holder of a 

Claim shall receive the same amount of consideration under 

the Plan whether or not such holder elects to release a party 

that is not a Debtor in accordance with the opt-in release 

procedures set forth herein or in any applicable Ballot.”

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II. Objections Unaddressed by Clarifying Changes to the Amended RSA and Revised Plan

# Objection Objecting 

Party

AHG Brief Response

I. Why Approval of the Amended RSA Should Not Be Delayed due to Cash Considerations or Other Proceedings

1 The settlement is unfair 

because it provides $11 

billion in cash to

holders of Subrogation 

Claims and would 

force individual 

plaintiffs (“IPs”) to 

take non-cash 

consideration.

TCC Dkt. 

No. 4629 (p. 

5)]

• The Amended RSA does not “force” the IP’s to take any particular form of 

consideration. Approval of the Amended RSA will not result in the confirmation 

of any particular plan, and any plan filed pursuant to the Amended RSA will have 

to satisfy the Bankruptcy Code’s requirements for confirmation. The form of 

consideration that IPs will ultimately receive will be determined by the plan of 

reorganization, as confirmed by the Bankruptcy Court, not any restructuring 

support agreement. 

• The settlement embodied in the Amended RSA is predicated on a solvent debtor 

case, where claims of IPs would be satisfied in full. 

• The issue of consideration can be dealt with even if the Amended RSA is 

approved via mediation, or negotiations between the Debtors, TCC and 

Bondholder Group. For example, a plan under which the Bondholder Group

receives take back paper or equity at plan value on account of their claims would 

free up billions of dollars in cash that could be used to pay wildfire victims.

2 Approving the 

Amended RSA and its 

$11 billion cash claim 

now would undermine 

the mediation order. 

SLF Fire 

Victims

[Oct. 23 

Hr’g Tr. at 

215:19-

216:9]

• The Amended RSA is a major building block in the development of a consensual 

plan of reorganization. Settlements are encouraged in bankruptcy and the AHG is 

the largest creditor constituency to make a deal with the Debtors to date. 

• Approving the Amended RSA would increase the odds of a successful mediation 

because it will eliminate a key issue—the valuation of Subrogation Claims. No 

party in interest has seriously challenged the reasonableness of allowing the 

Subrogation Claims in the substantially reduced amount of $11 billion; but no one 

should assume that the AHG would accept this multi-billion reduction in the 

context of an attempted retrade of other components of the Amended RSA that are 

an integral part of this settlement.

• Rejecting the settlement will set the case back months by injecting a major new 

variable into the mediation, causing parties to become further entrenched in their 

positions and jeopardizing the resolution of these cases on the needed timeline.

The Bankruptcy Court should be facilitating deal making not discouraging it. 

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# Objection Objecting 

Party

AHG Brief Response

3 Motion to approve the

Amended RSA should 

be delayed until the 

resolution of the 

estimation proceeding

because it guarantees 

the payment of $11 

billion in cash to 

insurers without regard 

to other potential 

obligations (e.g.

estimated IP claims, 

Kincade Fire claims, 

etc.). 

TCC [Dkt. 

No. 4629 

(pp. 5-6)]

• Section 3(a)(i) of the Amended RSA clarifies that the AHG would not receive an 

$11 billion cash payment under all plan scenarios.

• The Amended RSA does not “guarantee” the receipt of $11 billion in cash—any 

plan filed pursuant to the Amended RSA must still meet the Bankruptcy Code’s

tests for confirmation and be confirmed by the Bankruptcy Court. 

• The Debtors have reasonably exercised their business judgment that the multibillion dollar reduction in the amount of Subrogation Claims under the Amended 

RSA is a reasonable quid pro quo for the Debtors’ commitment to file and pursue 

a plan that provides for this form of consideration. Any eventual plan that 

incorporates the terms of the Amended RSA will still need Bankruptcy Court

approval. 

• The issue of consideration can still be dealt with in mediation, or negotiations 

between the Debtors, Equity Group, TCC and Bondholder Group even if the 

Amended RSA is approved. For example, a plan could provide for the 

Bondholder Group (who are not discounting their claims) to receive some take 

back paper or equity at plan value, that would free up billions of dollars in cash 

that could be used to pay wildfire victims.

4 Compromise should 

not be approved until 

after the Tubbs trial 

verdict because a 

victory on Tubbs for 

the Debtors may mean 

AHG is getting more 

than 100 cents on 

Subrogation Claims.

TCC [Oct. 

23 Hr’g Tr. 

at 153:2-8]

• The very purpose of a settlement is to weigh litigation risk and come to a 

reasonable resolution. The flip side of the TCC’s argument is that in the event of a 

victory for the plaintiffs in the Tubbs trial, the AHG likely would insist on a far 

higher aggregate allowed claim to settle its claims.

• In any event, in all scenarios, AHG will be able to establish that it is not getting 

more than 100 cents on their claims, as $15.1 billion has already been paid to 

victims with billions more to come (before accounting for any interest or

attorneys’ fees, both of which are routinely awarded in state court subrogation 

litigation).

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# Objection Objecting 

Party

AHG Brief Response

II. Why the Amended RSA Does Not Violate the Rights of Individual Insured Parties 

5 The Amended RSA 

impairs insured IPs’ 

rights under the made 

whole doctrine to be

paid in full before 

subordinated 

Subrogation Claims.

TCC [Dkt. 

Nos. 4232 

(pp. 10-15), 

4629 (p. 5)]

• The TCC is estopped from making class-wide subordination arguments given its 

previous representations to the Bankruptcy Court, and the TCC/Bondholder plan 

provides for the same $11 billion allowed claim. The TCC’s backtracking on its 

agreement to not litigate the subordination issue—a position that now contradicts 

its own plan—is further evidence of its role as an unreliable negotiation counter 

party. Rewarding the TCC’s about-face would only further embolden it to 

continue taking unrealistic bargaining positions and further polarize parties in 

these cases. 

• In any event, the TCC’s made whole arguments fail on the merits for reasons 

including:

o The made whole rule does not dictate the order in which subrogation 

claimholders and underlying insureds must settle—Chandler is explicit on 

this point—and subrogation claimholders historically settle before IPs. See

Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115 (9th Cir. 2010).

o The Amended RSA is predicated on the eventual confirmation of a plan 

that pays wildfire victims in full (i.e., pursuant to the absolute priority rule 

and AB 1054). 

• California made whole law does not support class wide subordination of 

Subrogation Claims because (i) the application of the made whole doctrine must 

be analyzed on a claim by claim basis, and (ii) the insurer participation exception 

to the made whole rule applies here given the AHG members’ participation in the 

Tubbs trial and estimation proceeding.

6 Insured IP claims and 

Subrogation Claims are 

a single and indivisible 

claim. 

TCC [Dkt. 

Nos. 4232 

(pp. 7-8), 

4629 (p. 6)]

• The Ninth Circuit’s decision in Chandler confirms that insurers can pursue and 

settle Subrogation Claims independently of their insureds.

• Insurers may settle first so long as the insureds, in the end, get paid in full, which 

is fully expected in this case. 

7 If AHG members claim 

rights under 

Bankruptcy Code 

Section 509, then they 

TCC [Dkt. 

Nos. 4232 

(pp. 10-15), 

4629 (p. 5)]

• This argument is based on the false premise that subrogation claimants can seek 

subrogation only under Bankruptcy Code Section 509 and not under applicable 

California law. The subrogation claimants are entitled to pursue rights of 

subrogation under Section 509 and under state law. In other words, Section 509 

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# Objection Objecting 

Party

AHG Brief Response

are subordinated as codebtors. If the AHG’s 

members are not codebtors, then they have 

no rights under Section 

509.

does not necessarily define the scope of the AHG’s claims, or even necessarily 

apply to those claims.

• Members of the AHG are not co-debtors of PG&E whose claims are subordinated 

pursuant to Section 509(c) because, under Ninth Circuit case law, codebtor status 

is reserved for “a limited class of creditors, namely, true co-debtors” such as a 

“surety, guarantor, or comaker” who are “liable with the debtor on the obligation 

owed to the creditor.” See Hamada v. Far East Nat’l Bank (In re Hamada), 291 

F.3d 645, 650 (9th Cir. 2002). Like the issuer of the letter of credit in Hamada, 

the contractual obligation of an insurer to its insured under an insurance policy is 

the primary obligation of the insurer which exists independently of, and does not 

depend on, the liability of any third party tortfeasor to the insured.

8 The proposed 

settlement violates 

insurers’ and hedge 

funds’ duties of good 

faith and California 

insurance regulations. 

TCC [Dkt. 

No. 4232 

(pp. 17-18)]

• Insurers’ duty of good faith is satisfied by paying what the insured is due under the 

insurance policy. There is no authority suggesting that an insurer’s settlement of a 

Subrogation Claim can amount to bad faith.

• Under the plain terms of the Amended RSA and proposed plan, the AHG will be 

unable to enforce any releases to the extent they violate California insurance 

regulations.

III. Why the Amended RSA Releases are Permissible

9 The Settlement 

Payment Condition in 

the Amended RSA 

would require IPs to 

give impermissible 

third-party releases or 

coerce them into 

granting such releases. 

TCC, U.S. 

Department 

of Justice, 

Civil 

Division, 

Adventist

Claimants, 

[Dkt. Nos. 

4232, 

(pp.19-20), 

4237 (pp. 3-

5), 4239 

(pp. 5-8), 

• The Settlement Payment Condition does not implicate Ninth Circuit case law, 

such as Resorts Int’l, Inc. v. Lowenschuss (In re Lowenschuss), 67 F.3d 1394 (9th 

Cir. 1995), that relies on Section 524(e) of the Bankruptcy Code to prohibit the 

non-consensual discharge of claims against non-debtors under a plan, or a nonconsensual release of the liability of non-debtors by way of a permanent injunction 

or other Bankruptcy Court order. This is because the Debtors’ plan involves 

neither. Confirmation of the Debtors’ plan will not discharge any potential made 

whole claim, and the Confirmation Order will not enjoin the prosecution of any 

such claim. Lowenschuss and similar cases do not address consensual third party 

releases that a creditor can choose to provide (or not provide) as part of a 

settlement.

o A ruling in the prior PG&E chapter 11 case found a non-debtor release to 

be permissible, where a claimant consents to the release of his or her

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# Objection Objecting 

Party

AHG Brief Response

4629 (pp. 6-

7), 4637 

(pp. 2-3)] 

claims against a non-debtor. See In re Pac. Gas and Elec. Co., 304 B.R. 

395, 418 n.26 (Bankr. N.D. Cal. 2004) (finding the legal principle set forth 

in Lowenschuss to be “inapplicable” because “the Plan does not discharge 

or release nondebtors from claims that belong to others (except the

Commission, which has consented to the release)”) (emphasis added). 

• This objection mischaracterizes the Amended RSA. The Amended RSA requires 

that a voluntary settlement of an IP’s claim with the Debtor or a plan trust (as 

applicable) and payment of such a claim be pursuant to a settlement conditioned 

on the release. If the individual believes that the settlement amount offered by the 

Debtors or plan trust is inadequate, it can litigate with the Debtors or plan trust (as 

applicable) for the excess and, in the event it obtains a judgment that the Debtors 

or plan trust cannot fully satisfy, proceed with any made whole claim it may have 

against the applicable insurer for the deficiency. 

o TCC’s own proposed plan includes third-party releases that are granted by 

electing creditors.

• The purpose of subrogation claims is to “prevent the insured from obtaining a 

double recovery (and thus being unjustly enriched) and to place the responsibility 

for paying the loss on the party who caused the loss.” See Chandler 598 F.3d at 

1117.

o The Amended RSA release achieves this purpose, and therefore is 

expressly supported by Chandler which permits an insurer to recover from 

the tortfeasor even if the injured party has yet to recover.

o The construct provided under the Amended RSA places the primary 

responsibility for losses caused by the Debtors on the Debtors, by 

essentially requiring the IPs first to seek a fully compensatory recovery 

from the Debtors or plan trust. If the IP is not satisfied with the settlement 

amount offered by the Debtors or plan trust, rather than absolving the 

Debtors of liability, the IP may proceed against both the Debtors and 

underlying insurer to recover the shortfall. 

o Indeed, this scenario was expressly addressed in the Chandler decision, 

where the Ninth Circuit said that it “is not convinced that an insured could 

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# Objection Objecting 

Party

AHG Brief Response

circumvent the rule espoused by the Court” by simply suing the tortfeasor 

and settling for $1.00. Chandler at 1121. In other words, an insured has 

no right under the made whole rule to choose to pursue its claim, in whole 

or in part, against its insurer instead of the tortfeasor.

• The release would not extinguish insureds’ claims against their insurers for 

ordinary-course insurance claims by insureds arising under their insurance 

policies.

• In the context of a “paid in full” plan (i.e., the plan contemplated by the Amended 

RSA), IPs will not have made whole claims in any event (and certainly not on a 

class-wide basis). 

o The release comports with the language of AB 1054 and is therefore “belt 

and suspenders.”

• The made whole release is needed so that there is not an incentive for the trustee 

of the individual wildfire trust, or individual lawyers that represent both insured 

and uninsured claimants, to overpay an uninsured claimant because they can 

underpay an insured claimant who retains the right to proceed against his or her 

insurer, and to prevent the claims from being settled for less than fair value 

because of the perceived ability to pursue the insurers.

• The objection that the Settlement Payment Condition is “coercive” because it 

“forces” IPs to either settle with the plan trust or take his or her chances litigating 

against the Debtors or the plan trust ignores that IPs would have essentially the 

same choice absent the proposed settlement. That is, the individual would have to 

choose between settling with or litigating against the Debtors to recover his or her 

losses. If forcing the individual to choose between settlement and litigation is 

unacceptably coercive, there is no settlement framework that would survive 

scrutiny. 

• The Settlement Payment Condition is equitable—the AHG is giving up 

approximately $9 billion in claims.

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# Objection Objecting 

Party

AHG Brief Response

IV. Why Specific Amended RSA and Form of Release Provisions are Permissible 

10 The Allowed aggregate 

subrogation claim is 

potentially non-binding 

in the event the Debtors 

are insolvent. Thus, 

the AHG has a oneway option to pursue a 

higher claim amount, 

and the proposed 

settlement does not 

benefit the Debtors’ 

estates or creditors. 

UCC, 

Bondholder 

Group, 

Governor 

Newsom

[Dkt. Nos. 

4236 (pp. 3-

5), 4241 (p. 

4), 4640 

(pp. 4-5)]

• Termination provisions, triggered by circumstances that frustrate a party’s purpose 

in entering into the agreement and are beyond its control, are routine contractual 

terms. Such provisions are often structured as “one way options” because 

individual parties have divergent purposes for entering into the agreement, and 

one party’s purpose may be frustrated by a development that is of little 

significance to the other party. 

• The Debtors also have “one way” options in certain circumstances under the 

Amended RSA—e.g., in the event of a default by Consenting Creditors holding at 

least 5% of RSA claims, the Debtors can elect to terminate and eliminate the 

Allowed aggregate subrogation claim in favor of litigating the claim amount or not 

terminate and hold the Consenting Creditors to the $11 billion allowed claim.

• The AHG negotiated a “one-way” option in the insolvency context (just as the 

Debtors negotiated a one-way option in other contexts) because the $11 billion 

settlement is premised on receiving $11 billion in value from a solvent debtor. If 

the Debtors are insolvent—which is outside the control of the AHG—then, in 

addition to the risk of not receiving the bargained for $11 billion in value, the 

Consenting Creditors (i) would be subject to potential further reduction from made 

whole claims asserted by insured IPs, and (ii) would be able to seek a higher claim 

amount, but subject to challenges by parties in interest. The circumstances that 

would permit the Consenting Creditors to seek a higher claim amount are all 

outside of their control.

11 Amended RSA 

approval would give 

AHG ability to assert 

$20 billion claim on 

eve of confirmation in 

insolvent case thereby 

causing undue delay 

UCC [Oct. 

23 Hr’g Tr. 

at 216:18-

217:9]

• The AHG will make a strategic choice when it comes to voting for or against an 

insolvent plan, whether it wants to keep its claim or pursue a higher claim. 

Practically speaking this can’t happen on the eve of confirmation. 

• The objectors have offered no explanation of how the Debtors could satisfy AB 

1054 in a scenario where they are insolvent; and, if insolvency would in any event 

render the Debtors unable to satisfy AB 1054, the Debtors will not need to emerge 

by the end of June 2020. The June 30 deadline would therefore be irrelevant.

• This argument is entirely speculative. If the Amended RSA terminates, the most 

likely scenario is a renegotiated claim amount or a litigated confirmation fight that 

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# Objection Objecting 

Party

AHG Brief Response

will determine an appropriate reserve. That process need not unduly delay 

anything.

12 Amended RSA 

requirement that the 

AHG vote against the 

TCC/Bondholder plan 

is unreasonable. 

TCC, UCC, 

Bondholder 

Group, 

Governor 

Newsom

[Dkt. Nos. 

4232 (p. 

24), 4236 

(pp. 6-7), 

4241 (p. 3), 

4640 (p. 5)]

• This provision is a common feature in other restructuring support agreements. 

Indeed, many of the objecting parties and their counsel have negotiated or 

participated in restructuring support agreements involving similar provisions in 

other cases. Such a provision does not prevent a global resolution with other 

parties in interest. 

• The termination of exclusivity does not make this provision unreasonable. It is a 

common term in restructuring support agreements; it is meaningless except in a 

context where exclusivity has been lifted; and the existence of competing plans is 

the fact pattern where it is particularly relevant (in fact, this is the only

circumstance where such a provision is relevant at all).

13 Release language 

should not require 

acknowledgment that 

releasing party is “paid 

in full”

Adventist 

Claimants

[Dkt. No. 

4637 (p. 3)]

• The Amended RSA’s form of release (“Form of Release”) was filed to narrow 

concerns. 

• The Form of Release has been narrowly tailored to release only made whole 

claims, and the AHG remains willing to work with objectors on further 

refinements on this point ahead of confirmation.

14 Release language 

should not be limited to 

insurers releasing 

victims for claims to 

amounts recovered 

“from the Debtors”

Adventist 

Claimants

[Dkt. No. 

4637 (pp. 3-

4)]

• The Amended RSA’s Form of Releases was designed to be purely symmetrical. 

Said differently, the injured party is asked to release made whole claims against its 

insurer (i.e. claims to the insurer’s recovery from the Debtors), and in return the 

insurers will be deemed to release any claims to the amounts injured parties 

recover from the debtors.

15 Releases should be 

signed, not ordered 

through a confirmation 

order.

Adventist 

Claimants

[Dkt. No. 

4637 (pp. 3-

4)]

• The AHG did not want to hold up payments to insureds while insurers were 

tracked down to sign individual mutual releases. So the confirmation order 

mechanism in the Amended RSA was born out of convenience and a desire to

facilitate swift payments to victims from a plan trust.

• Currently holders of an estimated 96% in dollar amount of Subrogation Claims 

and over 80% in number of all claimants have signed up to the Amended RSA. 

The mutual release is unquestionably consensual as to those parties.

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# Objection Objecting 

Party

AHG Brief Response

16 Why are government 

entities not required to 

sign similar releases?

Adventist 

Claimants

[Dkt. No. 

4637 (p. 3)]

• Most government agencies have settled their Subrogation Claims. 

• Insurance carriers are less concerned about made whole risk associated with such 

claims. 

V. The Applicable Standard of Review is Deferential to the Debtors’ Business Judgment

17 The proposed 

settlement and entry 

into the Amended RSA 

should be subject to a 

heightened version of 

the “fair and equitable” 

standard rather than the 

more deferential 

business judgment 

standard because it was 

negotiated between the 

Debtors and an insider.

TCC [Dkt. 

Nos. 4232 

(pp. 5-7), 

4629 (pp. 5-

7)]

• In re A & C Props., 784 F.2d 1377 (9th Cir. 1986) establishes the test for 

evaluating a Rule 9019 settlement motion in the Ninth Circuit.

o When evaluating a 9019 motion, “[i]t has been held that the court’s proper 

role is “‘to canvas the issues and see whether the settlement falls below the 

lowest point in the range of reasonableness.’” In re Pacific Gas and Elec. 

Co., 304 B.R. 395, 417 (Bankr. N. D. Cal. 2004) (internal citations 

omitted). 

• The Debtors are authorized to use estate property outside of the ordinary course of 

business upon a showing that the Debtors have exercised their business judgment. 

See In re Walter, 83 B.R. 14, 17 (B.A.P. 9th Cir. 1988) (“The bankruptcy court 

has considerable discretion in deciding whether to approve or disapprove the use 

of estate property by a debtor in possession, in the light of sound business 

justification.”).

• There is no factual basis for applying a different test here. Baupost is not an 

“insider” as defined by Section 101(31) of the Bankruptcy Code for reasons 

including: (i) it is not an officer, director, affiliate, managing agent or partner of 

the Debtors, and (ii) it is not a “person in control” of the Debtors as evidenced by 

Baupost (a) holding less than 5% of the currently traded common shares, and (b) 

not being part of the Jones Day-represented shareholder group. 

• Baupost is one member of a group that contains over 100+ institutions, the 

overwhelming majority of which are the insurance companies that acquired their 

claims by compensating victims of the fires.

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# Objection Objecting 

Party

AHG Brief Response

VI. Remaining Objections Should be Overruled

18 The settlement is an

impermissible sub rosa

plan 

TCC [Dkt. 

No. 4232 

(pp. 24-25).

• Establishing the existence of a sub rosa plan in the context of a settlement is a 

high burden that is satisfied only in “extreme circumstances.” See In re Tower 

Auto. Inc., 241 F.R.D. 162, 169 (S.D.N.Y. 2006) (internal citations omitted); In re 

McClure, 2015 WL 1607365, at *8 (Bankr. C.D. Cal. Apr. 2, 2015) (“First, it is 

not clear that the sub rosa plan objection applies to anything other than § 363 

sales, and possibly settlement agreements.”) (emphasis added).

• Chapter 11’s requirements are not being “short circuited”—the effectiveness of 

the Debtors’ Plan contemplated by the settlement is contingent on a yet to come 

plan confirmation process and confirmation order. Distributions to the various 

classes of creditors set forth in the Debtors’ plan will not be made until the 

Bankruptcy Court confirms such plan.

19 Impermissible 

solicitation pursuant to 

Section 1125

BOKF, U.S. 

Department 

of Justice, 

Civil 

Division 

[Dkt. Nos. 

4231 (p. 6); 

4237 (p.5)]

• No violation of Bankruptcy Code Section 1125(b) exists here because there was 

no specific request for an official vote to either accept or reject a plan. In fact, 

Section 2(a)(ii) of the Amended RSA requires each Consenting Creditor to 

covenant to “vote or cause to be voted (when solicited to do so in accordance with 

this Agreement after receipt of a Disclosure Statement approved by the 

Bankruptcy Court and by the applicable deadline for doing so)...”

• The first words on the Amended RSA are in bold and capitalized: “This 

Agreement is not, and shall not be deemed, a solicitation for consents to any 

chapter 11 plan of reorganization pursuant to sections 1125 and 1126 of the 

Bankruptcy Code...”

• Post-petition RSAs are allowed in the Ninth Circuit, so long as the agreements are 

not actually requests for an official vote. See In re Nesbitt Portland Property LLC, 

2013 WL 4401333 at *2 (Bankr. C.D. Cal. June 19, 2019); In re Art and 

Architecture Books of the 21st Century, (Bankr. C.D. Cal.), Case No. 2:13-bk14135-RK, Dkt. No. 1807 (approving post-petition plan support agreement barring 

party to vote in favor of alternate transaction). 

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Attachment A

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Attachment B

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