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

STUTZMAN BROMBERG ESSERMAN

& PLIF

KA, P.C. 

2323 BRYAN STREET, SUITE 2200 

DALLAS, TX 75201-2689 

TELEPHONE: 214-969-4900 

OBJECTION TO MOTION RE POSTPETITION FINANCING

Sander L. Esserman (Admitted Pro Hac Vice)

Cliff I. Taylor (Admitted Pro Hac Vice)

STUTZMAN, BROMBERG, ESSERMAN & PLIFKA, P.C. 

2323 Bryan Street, Suite 2200 

Dallas, TX 75201-2689 

Telephone: 214-969-4900 

Email: esserman@sbep-law.com

Scott Summy 

John Fiske (CSBN 249256) 

BARON & BUDD, P.C. 

3102 Oak Lawn Avenue #1100 

Dallas, TX 75219 

Telephone: 214-521-3605 

Email: ssummy@baronbudd.com 

Christopher H. Hart (CSBN 184117) 

Kimberly S. Fineman (CSBN 184433) 

NUTI HART LLP 

411 30TH Street, Suite 408 

Oakland, CA 94609-3311 

Telephone: 510-506-7152 

Email: kfineman@nutihart.com 

Attorneys for Public Entities Impacted by the Wildfires 

UNITED STATES BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA 

In re 

PG&E CORPORATION, 

and 

PACIFIC 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 

Lead Case, Jointly Administered 

OBJECTION OF THE PUBLIC 

ENTITIES TO MOTION OF DEBTORS 

PURSUANT TO 11 U.S.C. §§ 105, 362, 

363, 364, 503, AND 507, AND FED. R. 

BANKR. P. 2002, 4001, 6003, 6004 AND 

9014 FOR INTERIM AND FINAL 

ORDERS (I) AUTHORIZING THE 

DEBTORS TO OBTAIN SENIOR 

SECURED, SUPERPRIORITY, 

POSTPETITION FINANCING, (II) 

GRANTING LIENS AND 

SUPERPRIORITY CLAIMS, (III) 

MODIFYING THE AUTOMATIC STAY, 

(IV) SCHEDULING FINAL HEARING 

AND (V) GRANTING RELATED 

RELIEF 

Date: February 27, 2019 

Time: 9:30 a.m. 

Place: 450 Golden Gate Avenue, Ctrm 17 

 San Francisco, CA 94102 

Case: 19-30088 Doc# 494 Filed: 02/20/19 Entered: 02/20/19 11:18:51 Page 1 of 7
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

STUTZMAN BROMBERG ESSERMAN

& PLIF

KA, P.C. 

2323 BRYAN STREET, SUITE 2200 

DALLAS, TX 75201-2689 

TELEPHONE: 214-969-4900 

2 

OBJECTION TO MOTION RE POSTPETITION FINANCING

The Public Entities1 hereby file this Objection of The Public Entities to Motion of Debtors 

Pursuant to 11 U.S.C. §§ 105, 362, 363, 364, 503, and 507, and Fed. R. Bankr. P. 2002, 4001, 

6003, 6004 and 9014 for Interim and Final Orders (I) Authorizing the Debtors to Obtain Senior 

Secured, Superpriority, Postpetition financing, (II) Granting Liens and Superpriority Claims, 

(III) Modifying the Automatic Stay, (IV) Scheduling Final Hearing and (V) Granting Related 

Relief (the “Objection”). In support of the Objection, the Public Entities state as follows: 

I. 

INTRODUCTION 

 The Public Entities consist of the representative governmental bodies of communities 

that were devastated by the 2017 Northern California Wildfires2

 and the 2018 Camp Fire.3 The 

Public Entities have requested that the United States Trustee form an official committee of Public 

Entities comprised of the Public Entities.4 

 The Public Entities each hold unliquidated unsecured claims against the Debtors arising 

out the 2017 Northern California Wildfires and the 2018 Camp Fire. More specifically, the 

Public Entities have suffered significant damages to many public services, including, but not 

 1

 The Public Entities consist of the following California public entities with claims against the Debtors 

arising out of damages from the 2017 Northern California Wildfires and the 2018 Camp Fire: (a) 

Calaveras County Water District, (b) Napa County, (c) City of Napa, (d) Mendocino County, (e) Lake 

County, (f) City of Clearlake, (g) Nevada County, (h) Yuba County, (i) City of Santa Rosa, (j) Sonoma 

County, (k) Sonoma County Agricultural Preservation and Open Space District, (l) Sonoma County 

Community Development Commission, (m) Sonoma County Water Agency, (n) Sonoma County 

Sanitation District, (o) Town of Paradise, and (p) Butte County. 

2

 The 2017 Northern California Wildfires began on October 8, 2017 when multiple wildfires spread 

through Northern California, including Napa, Sonoma, Butte, Humboldt, Mendocino, Del Norte, Lake, 

Nevada and Yuba Counties, as well as the area surrounding Yuba City. The Debtors acknowledge that 

the 2017 Northern California Wildfires consumed 245,000 acres of land, resulting in at least 44 fatalities 

and the destruction of an estimated 8,900 structures. See Declaration of Jason P. Wells in Support of First 

Day Motions and Related Relief, Docket No. 27 at p. 12-13. 

3

 The 2018 Camp Fire began on November 8, 2018 near the city of Paradise, Butte County, California. 

The Debtors acknowledge that the 2018 Camp Fire consumed 153,336 acres of land, resulting in at least 

86 facilities and the destruction of 13,972 residences, 528 commercial structures and 4,293 other 

buildings. See id. at p. 11-12. 

4

 In the event the United States Trustee does not appoint an official committee for the Public Entities, the 

Public Entities intend to request such relief from this Court under 11 U.S.C. § 1102(a)(2), which provides 

that “[o]n request of a party in interest, the court may order the appointment of additional committees of 

creditors or of equity security holders if necessary to assure adequate representation of creditors or of 

equity security holders.” 

Case: 19-30088 Doc# 494 Filed: 02/20/19 Entered: 02/20/19 11:18:51 Page 2 of 7
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

STUTZMAN BROMBERG ESSERMAN

& PLIF

KA, P.C. 

2323 BRYAN STREET, SUITE 2200 

DALLAS, TX 75201-2689 

TELEPHONE: 214-969-4900 

3 

OBJECTION TO MOTION RE POSTPETITION FINANCING

limited to, parks, roads, bridges, sidewalks, culverts, drains, storm and water systems (both 

damage to and contamination of such systems), traffic lights, stop signs, public landscaping, art, 

lost capacities in reservoirs, water storage and landfills. In addition, dead or dying trees, soil 

erosion, debris flows, flooding, and mudslides that resulted from the wildfires are a threat to the 

public welfare and safety of the communities represented by the Public Entities. In the face of 

this significant destruction, the Public Entities’ damages have been compounded by (1) loss of 

revenue from property, sales, and other taxes, (2) loss of revenue-generating assets and services, 

(3) increased costs from workers’ compensation claims and overtime, (4) increased use and need 

of law enforcement, emergency response personnel, and other public safety services, and (5) 

other damages. 

 The Public Entities object to the relief requested by the Debtors in the Motion of Debtors 

Pursuant to 11 U.S.C. §§ 105, 362, 363, 364, 503, and 507, and Fed. R. Bankr. P. 2002, 4001, 

6003, 6004 and 9014 for Interim and Final Orders (I) Authorizing the Debtors to Obtain Senior 

Secured, Superpriority, Postpetition financing, (II) Granting Liens and Superpriority Claims, 

(III) Modifying the Automatic Stay, (IV) Scheduling Final Hearing and (V) Granting Related 

Relief (the “DIP Facility Motion”)5

 on the following grounds: 

(1) The Debtors have failed to demonstrate that the proposed grant of a First 

Priority Lien on the Debtors’ causes of action under Chapter 5 of the 

Bankruptcy Code in favor of the DIP Lenders, and to the detriment of the 

Debtors’ unsecured creditors, is proper under the circumstances of these 

bankruptcy cases; and 

(2) The Debtors improperly propose to exclude administrative expense 

claims under 11 U.S.C. §§ 503(b)(3)(D) and 503(b)(4) from the CarveOut.6

 5

 Capitalized terms used in this Motion and not otherwise defined shall have the meaning ascribed to 

them in the DIP Facility Motion. 

6

 “Carve-Out” shall have the meaning ascribed to it in ¶10 of the Court’s Interim Order Pursuant to 11 

U.S.C. §§ 105, 362, 363, 364, 503, and 507 and Fed. R. Bankr. P. 2002, 4001, 6004 and 9014 (I) 

Authorizing Debtors to Obtain Senior Secured, Superpriority, Postpetition Financing, (II) Granting Liens 

and Superpriority Claims, (III) Modifying the Automatic Stay, (IV) Scheduling Final Hearing, and (V) 

Granting Related Relief (Docket No. 217). 

Case: 19-30088 Doc# 494 Filed: 02/20/19 Entered: 02/20/19 11:18:51 Page 3 of 7
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

STUTZMAN BROMBERG ESSERMAN

& PLIF

KA, P.C. 

2323 BRYAN STREET, SUITE 2200 

DALLAS, TX 75201-2689 

TELEPHONE: 214-969-4900 

4 

OBJECTION TO MOTION RE POSTPETITION FINANCING

II. 

BACKGROUND 

 On January 29, 2019 (the “Petition Date”), the Debtors filed voluntary petitions for relief 

under Chapter 11 of the Bankruptcy Code. 

 On the Petition Date, the Debtors filed the DIP Facility Motion, requesting interim and 

final relief with respect to a $5.5 billion credit facility on a secured, superpriority basis. 

 On January 31, 2019, this Court entered its Interim Order Pursuant to 11 U.S.C. §§ 105, 

362, 363, 364, 503, and 507, and Fed. R. Bankr. P. 2002, 4001, 6003, 6004 and 9014 (I) 

Authorizing the Debtors to Obtain Senior Secured, Superpriority, Postpetition Financing, (II) 

Granting Liens and Superpriority Claims, (III) Modifying the Automatic Stay, (IV) Scheduling 

Final Hearing and (V) Granting Related Relief (the “Interim Order”), which granted certain of 

the relief requested by the Debtors in the DIP Facility Motion on an interim basis, subject to the 

entry of a Final Order. 

 In the DIP Facility Motion, the Debtors seek a Final Order allowing the Debtors to grant 

to the DIP Lenders and/or the DIP Agents a perfected first priority security interest and lien on 

essentially all of the Debtors’ unencumbered assets and property.7

 This first lien would attach 

to, inter alia, all the Debtors’ causes of action under Chapter 5 of the Bankruptcy Code 

(“Avoidance Actions”) (See DIP Facility Motion, Docket No. 23 at p. 21). The Public Entities 

object to any such grant of a lien on the Avoidance Actions. 

 In the DIP Facility Motion, the Debtors further seek a Final Order granting to the DIP 

Lenders and/or DIP Agents a superpriority administrative expense claim for all of the Debtors 

DIP Obligations under the DIP Loan Documents, which claims would only rank junior to the 

Carve-Out claims and have priority over all other claims against the Debtors. Notably, the 

Carve-Out does not include claims by unofficial committees or others seeking reimbursement 

on the basis of substantial contribution to the estate under 11 U.S.C. §§ 503(b)(3)(D) and 

503(b)(4). The Public Entities assert that the DIP Liens and DIP Superpriority Claim should 

 7

 The Debtors seek to grant to the DIP Lenders and/or the DIP Agents a junior perfected security interest 

and lien on the any and all of the other assets and property of the Debtors to the extent such assets are 

subject to valid, perfected and non-avoidable liens in favor of third parties that were in existence on the 

Petition Date. 

Case: 19-30088 Doc# 494 Filed: 02/20/19 Entered: 02/20/19 11:18:51 Page 4 of 7
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

STUTZMAN BROMBERG ESSERMAN

& PLIF

KA, P.C. 

2323 BRYAN STREET, SUITE 2200 

DALLAS, TX 75201-2689 

TELEPHONE: 214-969-4900 

5 

OBJECTION TO MOTION RE POSTPETITION FINANCING

rank junior to substantial contributions claims under 11 U.S.C. §§ 503(b)(3)(D) and 503(b)(4) 

and such should be included in any carve-out with the other estate professionals. 

III. 

OBJECTION 

A. The Court should not approve a first priority security interest and lien on the 

Avoidance Actions for the benefit of the DIP Lenders and to the detriment of the 

Debtors’ unsecured creditors. 

This Court’s Guidelines for Cash Collateral and Financing Stipulations provide that the 

Court will not ordinarily approve the waiver of, or liens on any of the estate’s rights arising 

under 11 U.S.C. §§ 544, 545, 547, 548, 549 or 553, or the proceeds of any such rights 

(Guidelines for Cash Collateral and Financing Stipulations at E.7). The Court’s guidelines are 

consistent with the notion that Chapter 5 causes of action are to be maintained for the benefit of 

a debtor’s entire creditor body. See Rahl v. Bande, 316 B.R. 127, 131 (S.D.N.Y. 2004) 

(recognizing that Section 544 avoidance actions are to be asserted for the benefit of all creditors 

the rights that any individual creditor has under applicable state law to avoid fraudulent 

transfers). 

 In light of the Court’s general disapprobation of the granting of liens to the DIP Lenders 

on the Avoidance Actions (or the proceeds thereof), the Debtors must show some extenuating 

circumstances that would warrant the Court’s deviation from its guidelines. The Debtors have 

failed to do so. Instead, the Debtors merely claim that “the DIP Lenders were unwilling to 

extend $5.5 billion in credit without such terms” and “the terms of the DIP Facilities are 

otherwise favorable to the Debtors and their estates” (DIP Facility Motion, Docket No. 23 at p. 

35). If the Debtors’ perfunctory rationale was sufficient for this Court to deviate from its own 

guidelines, the guidelines would be rendered meaningless. 

 A proposed financing should not be approved where the purpose of the financing is to 

benefit only certain creditors rather than the estate or where the arrangement would skew the 

conduct of the bankruptcy case. See In re Ames Dept. Stores, Inc., 115 B.R. 34, 38-39 (Bankr. 

S.D.N.Y. 1990) (reviewing case law and concluding that the “cases consistently reflect that the 

court’s discretion under section 364 is to be utilized on grounds that permit reasonable business 

Case: 19-30088 Doc# 494 Filed: 02/20/19 Entered: 02/20/19 11:18:51 Page 5 of 7
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

STUTZMAN BROMBERG ESSERMAN

& PLIF

KA, P.C. 

2323 BRYAN STREET, SUITE 2200 

DALLAS, TX 75201-2689 

TELEPHONE: 214-969-4900 

6 

OBJECTION TO MOTION RE POSTPETITION FINANCING

judgment to be exercised so long as the financing agreement does not contain terms that 

leverage the bankruptcy process and powers or its purpose is not so much to benefit the estate 

as it is to benefit a party-in-interest”). Here, the request by the Debtors for approval of a Final 

Order that would allow for the pledge of the estates’ interests in the Avoidance Actions as 

security for the DIP Loan benefits only the DIP Lenders to the detriment of all the other creditors 

in these bankruptcy cases. The Debtors’ DIP Facility Motion should be denied to the extent 

that it provides for such a prejudicial lien. 

B. The Debtors improperly propose to exclude administrative expense claims under 

11 U.S.C. §§ 503(b)(3)(D) and 503(b)(4) from the Carve-Out. 

The Debtors propose that the DIP Liens and DIP Superpriority Claim be granted priority 

over all other claims in this bankruptcy, except for the Carve-Out administrative claims, which 

receive priority up to $25 million but are limited to (a) U.S. Trustee fees and Clerk of Court 

fees, (b) fees and expenses (not to exceed $100,000) of a trustee under 11 U.S.C. § 726(b),8

 and 

(c) fees and expenses of the Debtors’ professionals and the professionals of the official 

committees formed in these cases. Conspicuously missing from the list of Carve-Out claims 

are claims for substantial contribution to the estate under 11 U.S.C. §§ 503(b)(3)(D) and 

503(b)(4). There is no reason why administrative expense claims approved by this Court under 

11 U.S.C. §§ 503(b)(3)(D) and 503(b)(4) should not have the same priority of payment under 

the Carve-Out as claims for professionals of the Debtors or the official committees. 

 Where a creditor or others makes a substantial contribution to a bankruptcy 

reorganization and is awarded its actual, necessary expenses under 11 U.S.C. 503(b)(3)(D) or 

its counsel is awarded compensation under 11 U.S.C. 503(b)(4), those administrative claims 

have the same priority under 11 U.S.C. § 507(a)(2) as do the administrative claims of the debtor 

 8

 The Public Entities object to the Debtors’ proposed cap of $100,000 for the fees and expenses of a 

trustee under 11 U.S.C. § 726(b). The proposed cap is inadequate. Any relief granted the Debtors in the 

Final Order should provide for a reasonable amount to be allocated for the fees and expenses of a trustee. 

...Continued 

Case: 19-30088 Doc# 494 Filed: 02/20/19 Entered: 02/20/19 11:18:51 Page 6 of 7
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

STUTZMAN BROMBERG ESSERMAN

& PLIF

KA, P.C. 

2323 BRYAN STREET, SUITE 2200 

DALLAS, TX 75201-2689 

TELEPHONE: 214-969-4900 

7 

OBJECTION TO MOTION RE POSTPETITION FINANCING

or an official committee.9 To exclude such claims from the Carve-Out would not only be unduly 

prejudicial, it could discourage creditors and others from potentially contributing to the estate.10 

C. The Public Entities reserve their right to further object. 

The Public Entities reserve their right to adopt any other objection filed in these 

bankruptcy cases pertaining to the relief requested by the Debtors in the DIP Facility Motion. 

IV. 

CONCLUSION 

WHEREFORE, the Public Entities respectfully request that (a) their objection be 

granted, (b) the proposed Final Order be amended consistent with these objections, and (c) the 

Public Entities be granted such other and further relief as the Court deems just and proper. 

 

Dated: February 20, 2019 STUTZMAN, BROMBERG, ESSERMAN & 

PLIFKA, P.C. 

 By: /s/ Sander L. Esserman 

 Sander L. Esserman 

Attorneys for Public Entities Impacted by the Wildfires 

Dated: February 20, 2019 BARON & BUDD, P.C. 

 By: /s/ Scott Summy

 Scott Summy

Attorneys for Public Entities Impacted by the Wildfires 

Dated: February 20, 2019 NUTI HART LLP 

 By: /s/ Kimberly S. Fineman 

 Kimberly S. Fineman 

Attorneys for Public Entities Impacted by the Wildfires 

 9

 Section 507(a)(2) provides that all Section 503(b) claims are to receive the same priority of payment. 

Administrative claims for compensation and reimbursement to the Debtors and the official committees is 

provided for in Section 503(b)(2) by reference to 11 U.S.C. § 330(a). 

10 Notably, the DIP Lenders would be provided an opportunity to object to an application for allowance 

of an administrative expense claims made under 11 U.S.C. §§ 503(b)(3)(D) and 503(b)(4) if they 

believed such an award to be unwarranted.

Case: 19-30088 Doc# 494 Filed: 02/20/19 Entered: 02/20/19 11:18:51 Page 7 of 7