44553.00001

ALAN J. STONE 

Partner 

55 Hudson Yards | New York, NY 10001-2163 

T: 212.530.5285 

astone@milbank.com | milbank.com 

November 4, 2019 

VIA ECF 

Honorable Dennis Montali 

United States Bankruptcy Court 

Northern District of California 

450 Golden Gate Avenue, 16th Floor 

San Francisco, CA 94102 

Re: In re PG&E Corporation, Case No. 19-30088 (DM) (Jointly Administered) 

Dear Judge Montali: 

I write on behalf of the Official Committee of Unsecured Creditors (the “Creditors’ 

Committee”) of PG&E Corporation and its affiliated debtors (collectively, the “Debtors”) to seek 

Your Honor’s guidance on the Debtors’ refusal to produce a key company witness and critical 

documents necessary for us to assess the propriety of and present need for the relief requested in 

the Debtors’ Motion for Entry of Orders (I) Approving Terms of, and Debtors’ Entry Into and 

Performance Under, Exit Financing Commitment Letters and (II) Authorizing Incurrence, 

Payment, and Allowance of Related Fees and/or Premiums, Indemnities, Costs and Expenses as 

Administrative Expense Claims (the “Motion”) [Docket No. 4446]. 

The Debtors filed the Motion well past business hours on Wednesday, October 23, 2019, 

seeking authorization to enter into certain Exit Financing Commitments1 and Debt Financing 

Commitment Letters (collectively, the “Financing Commitments”) and to pay related fees, 

premiums, and other costs as administrative expenses. The fees associated with the Financing 

Commitments may amount to over $900 million, all payable by the estate, at a time where a 

credible, competing, and potentially confirmable plan remains on the table. 

 

1

 Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Motion. 

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On Monday morning, October 28, 2019, the Creditors’ Committee issued document 

requests and notices of deposition to the Debtors.2 The Creditors’ Committee noticed the 

depositions of (i) Jason P. Wells, Senior Vice President and Chief Financial Officer of PG&E 

Corporation, (ii) a Rule 30(b)(6) witness for the Debtors, and (iii) Kenneth S. Ziman, Managing 

Director at Lazard Freres & Co. LLC (and declarant here). The Creditors’ Committee also 

issued a set of requests for the production of documents to the Debtors. 

On October 30, 2019, counsel to the Debtors stated that the Debtors would only make 

Mr. Ziman available for deposition in an individual and Rule 30(b)(6) capacity. The Debtors 

refused to make company employee, Mr. Wells, available for deposition because doing so would 

be “unduly burdensome,” “duplicative,” and “unnecessary.” On October 31, 2019, the Debtors 

served responses and objections to the Creditors’ Committee’s document requests and deposition 

notices stating, in relevant part, that the Debtors would not produce documents related to, nor a 

witness to testify on, among other things, (i) the process by which the Debtors solicited potential 

financing parties or (ii) the Debtors’ potential need for additional financing. 

The Creditors’ Committee objects to these positions and has repeatedly attempted to 

engage the Debtors, but has been unable to reach resolution. 

Deposition Testimony of PG&E SVP and CFO Jason P. Wells

The Debtors’ Motion is premised on the notion that the Financing Commitments 

represent a sound exercise of the company’s business judgment. See, e.g., Motion at 25. Mr. 

Wells is the only witness noticed by the Creditors’ Committee who is actually a company 

employee—making his testimony not only warranted, but essential. The Debtors seek authority 

to commit potentially vast amount of fees from the estate under section 363(b)(1) of the 

Bankruptcy Code. Determining whether to authorize a transaction, particularly of this 

magnitude, requires the Court to assess whether the Debtors exercised proper business 

judgment—that is, whether the Debtors acted on an informed basis and in good faith. The 

testimony of a company employee is fundamental to such an inquiry. See In re Global Crossing 

Ltd., 295 B.R. 726 (Bankr. S.D.N.Y. 2003) (noting that courts will not interfere with the 

decisions “of corporate decision-makers” where a showing of the decision-makers’ 

disinterestedness, due care, and good faith is made); see also In re Integrated Res., Inc., 147 B.R. 

650, 656 (S.D.N.Y. 1992) (explaining that the business judgment standard is satisfied where a 

corporation’s decision-makers “acted on an informed basis, in good faith and in the honest belief 

that the action taken was in the best interests of the company”). It is not disputed that Mr. Ziman 

acts not as a corporate decision-maker for the Debtors, but “as advisor to the Debtors in their 

Chapter 11 Cases.”3

 The testimony of Mr. Ziman, both in an individual capacity as an advisor to 

 

2

 The Ad Hoc Committee of Unsecured Creditors (the “AHC”) and Official Committee of Tort 

Claimants (“TCC”) also issued discovery requests to the Debtors, incorporating in part the Creditors’ 

Committee’s requests. 

3

 See Declaration of Kenneth S. Ziman in Support of the Debtors’ Motion for Entry of Orders (I) 

Approving Terms of, and Debtors’ Entry Into and Performance Under, Exit Financing Commitment 

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the Debtors and as a Rule 30(b)(6) witness for the Debtors, does not satisfy the need for 

testimony from a company decision-maker who had a duty to exercise business judgment. 

Counsel to the Debtors further noted that Mr. Wells’ deposition would be unnecessary in 

part because Mr. Wells previously sat for a deposition in a Rule 30(b)(6) capacity on October 11, 

2019, three weeks ago, in connection with the 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]. That matter is separate and distinct from, and the deposition predated, 

the instant motion, and thus did not cover critical aspects of the Motion, including the 

negotiation and appropriateness of the Financing Commitments, the impact of the fees related to 

the Financing Commitments on the plan process, and analyses of alternative financing 

commitments. Moreover, counsel to Mr. Wells repeatedly objected to questions relating to exit 

financing as outside the scope of the deposition and, on more than a few occasions, instructed 

Mr. Wells to not answer such questions. But even the testimony that Mr. Wells was permitted to 

provide on this topic (over counsel’s objection) appeared to conflict with certain representations 

in the Motion and in Mr. Ziman’s declaration.4

 The Creditors’ Committee should be permitted 

to probe these topics with Mr. Wells. 

Finally, and not insignificantly, the Debtors’ circumstances have dramatically changed 

since October 11: PG&E has identified at least one large-scale post-petition fire to which its 

equipment may have contributed, which may impact certain rights and conditions precedent to 

parties’ funding obligations under the Financing Commitments. See Motion at 4 (“Given the 

length of the commitments, the Equity Backstop Parties required certain termination rights and 

conditions precedent to their funding obligations, principally regarding unexpected material 

adverse events such as pre-petition wildfire claims exceeding an agreed threshold, adverse 

regulatory determinations, significant post-petition wildfires and material non-ordinary course 

asserted administrative expense claims.”). Contemporaneous testimony from a company witness 

on these topics is warranted. In sum, Mr. Wells’ October 11 deposition testimony does not in 

any way render a deposition in connection with the Motion unnecessary or duplicative. 

Documents and Testimony Regarding Solicitation Process and Additional Financing 

The Creditors’ Committee further objects to the Debtors’ apparent refusal to produce 

documents related to financing parties the Debtors solicited, pitch materials received from those 

parties, the process by which the Debtors solicited potential financing parties, and the Debtors’ 

 

Letters and (II) Authorizing Incurrence, Payment, and Allowance of Related Fees and/or Premiums, 

Indemnities, Costs and Expenses as Administrative Expense Claims [Docket No. 4447] at ¶ 6. 

4

 The Debtors have designated the relevant portions of the October 11 deposition transcript as 

professional eyes only. The Creditors’ Committee will present the relevant portions of that testimony 

to the Court under seal should it become necessary. 

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potential need for additional financing beyond that requested in the Motion.5 A movant under 

section 363(b) “must establish a business justification for the transaction and the bankruptcy 

court must conclude, from the evidence, that the movant satisfied its fiduciary obligations and 

established a valid business justification.” In re Gulf Coast Oil Corp., 404 B.R. 407, 422 (Bankr. 

S.D. Tex. 2009) (emphasis added); see In re Lionel Corp., 722 F.2d 1063, 1071 (2d Cir. 1983) 

(finding that in considering a motion under section 363(b), a court must “expressly find from the 

evidence presented before [it] at the hearing a good business reason to grant such an 

application”). In brief, the Debtors must provide evidence of good and sound business reasons 

for the proposed transaction. Assessing this requires a deep understanding of the Debtors’ 

solicitation process, including the amount of time and resources expended in seeking and 

reviewing alternative financing commitments, the number of potential alternative financing 

commitments reviewed, and the Debtors’ process for conducting such review.6 Similarly, 

assessing whether the Debtors’ decision to enter into the Financing Commitments constitutes a 

valid exercise of business judgment depends, in part, on whether and to what extent the Debtors 

may need additional financing on top of the financing contemplated in the Motion. 

*** 

The Creditors’ Committee has repeatedly attempted to meet and confer with the Debtors 

on these issues without success. Because the Creditors’ Committee’s response to the Motion is 

due in short order, we respectfully request that the Court schedule a telephonic conference to 

allow the parties to be heard and the Court to determine an appropriate resolution of these 

issues.7

Sincerely, 

/s/ Alan J. Stone 

Alan J. Stone 

 

5

 The Creditors’ Committee requested, in relevant part, (i) “all Documents and Communications 

concerning alternative financing commitments considered by the Debtors, including all potential 

financing parties the Debtors solicited, all pitch materials received from all potential financing parties, 

[and] the process by which the Debtors solicited all potential financing parties” and (ii) “[a]ll 

Documents and Communications concerning the Debtors’ potential need for additional financing.” 

6

 The Motion makes much ado of the Debtors’ solicitation process, citing “extensive negotiations” (see

Motion at 9, 12), evaluation of alternative proposals (id. at 11), and ultimate determinations regarding 

the “better course for the Debtors and their stakeholders” (id. at 9). These representations purportedly 

support the reasonableness of the Financing Commitments of which the Debtors seek approval, and, 

in so doing, necessarily open the door for discovery on them. 

7

 Despite having the Creditors’ Committee’s document requests for a full week, the Debtors are yet to 

produce a single document, and have represented that their production may not be completed until 

Wednesday. In light of this, the Creditors’ Committee reserves the right to seek to adjourn the 

hearing on the Debtors’ Motion. 

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