RSA Approval Motion: Objection Response Chart as of December 2, 20191

I. Issues Addressed by Amended and Restated RSA

# Objection Objecting 

Party

Clarifying Changes to the RSA/ Plan of 

Reorganization

Judge Montali 

Considerations2 Solution 

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. 3

#1 and #2 -

Appear to be 

resolved 

satisfactorily.

Clarification to be made on the record 

at RSA Approval Motion hearing: 

“For the avoidance of doubt, the

RSA’s definition of ‘IP Claims’ does 

not include (i) Wildfire Claims held by 

Governmental Units, or (ii) Public 

Entities Wildfire Claims.” 

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 and #2 -

Appear to be 

resolved 

satisfactorily.

Clarification to be made on the record 

at RSA Approval Motion hearing: 

“For the avoidance of doubt, the 

RSA’s definition of ‘Subrogation 

Claims’ does not include (i) Wildfire 

Claims held by Governmental Units, 

or (ii) Public Entities Wildfire 

Claims.”

 

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”), and sets forth the changes the Debtors and Ad 

Hoc Subrogation Group are prepared to make in response to Judge Montali’s Tentative Considerations on Objections to Amended and Restated Restructuring Support 

Agreement [Dkt. No. 4872]. 

2 As set forth in the Tentative Considerations on Objections to Amended and Restated Restructuring Support Agreement [Dkt. No. 4872]. 

3 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. 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 1

of 30
- 2 -

# Objection Objecting 

Party

Clarifying Changes to the RSA/ Plan of 

Reorganization

Judge Montali 

Considerations2 Solution 

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.

#3 - The Subro 

Group and the 

Debtors appear 

duty bound to 

negotiate 

“together” with 

other creditor 

constituencies or 

in mediation. The 

court does not 

believe that is a 

constructive 

approach and 

believes that 

portion of the 

RSA should be 

disapproved.

 Section 2(b)(ii) shall be further 

amended to now provide:

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;”

4 The RSA obligates 

the Debtors4to file 

a plan that pays 

UCC, TCC

[Dkt. Nos. 

4236 (p. 7), 

 Section 3(a)(i) of the Amended RSA now 

provides:

#4- This portion 

of the RSA 

addresses a 

 Each instance in the prior version 

of the RSA that was conditioned 

on a Bankruptcy Court 

 

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

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 2

of 30
- 3 -

# Objection Objecting 

Party

Clarifying Changes to the RSA/ Plan of 

Reorganization

Judge Montali 

Considerations2 Solution 

subrogation 

claimants 100% of 

their allowed 

claims, even if the 

Debtors are 

insolvent.

4629 (pp.5-

6)]

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.

situation that may 

exist 

“provided...the 

Bankruptcy Court 

determines 

Debtors are 

insolvent....” As a 

practical matter 

the court may not 

be able to make 

such a 

determination 

without the 

initiation of a 

contested matter, 

opposition 

thereto, etc. The 

court believes the 

more appropriate 

outcome would be 

that the Debtors, 

if they concede 

that they are 

insolvent, would 

terminate the 

RSA. Following 

any such

determination, 

there would be no 

precondition that 

any such revised 

plan would not –

or would –

subordinate the

determination is now conditioned 

on the Debtors making an 

“Insolvency Determination.”

 A new Section 5(c)(ii) shall be 

added to the RSA, which will 

allow the Debtors to terminate the 

RSA if the Debtors make an 

Insolvency Determination: “The 

Debtors may terminate this 

Agreement if, upon the advice of 

the Debtors’ professionals (after 

consultation with the Ad Hoc 

Professionals), the Debtors 

reasonably determine in good 

faith at any time prior to 

confirmation of the Plan, that 

the Debtors are insolvent for all 

purposes in the Chapter 11 

Cases as of the time such 

determination is made (whether 

as a result of judicial findings 

arising from the Estimation 

Proceedings, litigation related to 

the IP Claims, the incurrence of 

post-petition wildfire liabilities 

or otherwise) (such 

determination, subject to the 

Requisite Consenting Creditors’ 

right to promptly contest any 

such determination with the 

dispute to be determined by the 

Bankruptcy Court whose 

determination shall be binding 

for purposes of this Agreement, 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 3

of 30
- 4 -

# Objection Objecting 

Party

Clarifying Changes to the RSA/ Plan of 

Reorganization

Judge Montali 

Considerations2 Solution 

Subro Group 

claims to the IP 

Claims.

an “Insolvency Determination”). 

If the Debtors make an 

Insolvency Determination and 

elect to terminate this 

Agreement (a “Debtor 

Insolvency Termination”), the 

Allowed Subrogation Claim 

Amount shall be binding in the 

Chapter 11 Cases, and shall 

survive termination of this 

Agreement unless the Requisite 

Consenting Creditors elect to 

pursue a higher claim amount as 

set forth below [Section 5(d) of 

the RSA].”

 The definition of Insolvent Plan in 

Section 3(a)(i) of the RSA shall be 

revised as follows: “...provided

that if the Bankruptcy Court 

determines the Debtors are 

insolvent make an Insolvency 

Determination, 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”);”

 The Consenting Creditors’ rights 

in section 2(a)(ii) with regard to an 

Insolvent Plan shall be revised as 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 4

of 30
- 5 -

# Objection Objecting 

Party

Clarifying Changes to the RSA/ Plan of 

Reorganization

Judge Montali 

Considerations2 Solution 

follows: “provided further that if 

the Debtors make an Insolvency 

Determination and the Debtors file 

an Insolvent Plan, the Consenting 

Creditors shall be free to vote for 

or against such Insolvent Plan, 

object to confirmation of (and/or 

solicitation of votes for) such 

Insolvent Plan on any grounds,

and, subject to the Consenting 

Creditors’ rights to terminate the 

RSA and seek a higher claim 

amount as set forth below, the 

Subrogation Claims will continue 

to be allowed in the Allowed 

Subrogation Claim Amount;”

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 

#5 and #6 -

Appear to be 

satisfactory 

resolutions of the 

pending 

objections.

No solution required. 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 5

of 30
- 6 -

# Objection Objecting 

Party

Clarifying Changes to the RSA/ Plan of 

Reorganization

Judge Montali 

Considerations2 Solution 

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 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 6

of 30
- 7 -

# Objection Objecting 

Party

Clarifying Changes to the RSA/ Plan of 

Reorganization

Judge Montali 

Considerations2 Solution 

individual plaintiffs and the Debtors in 

comparable prepetition incidents, copies 

of which have been filed with the 

Bankruptcy Court under seal. 

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 

Adventist 

Claimants 

[Oct. 23 

 Section 3(a)(iii) of the Amended RSA 

clarifies that the releases will be mutual 

and now provides:

#5 and #6 -

Appear to be 

satisfactory 

No solution required.

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 7

of 30
- 8 -

# Objection Objecting 

Party

Clarifying Changes to the RSA/ Plan of 

Reorganization

Judge Montali 

Considerations2 Solution 

Debtors, such 

plaintiff must 

release its insurer, 

but the insurer is 

not required to 

provide a “mutual 

release” to the 

insured. 

Hr’g Tr. at 

198:7-

200:4, Dkt. 

No. 4637 

(p. 4)] 

o “ . . . provided that the 

Confirmation Order shall deem 

each holder of a Subrogation 

Claim that is a beneficiary of a 

release and waiver of madewhole 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.

resolutions of the 

pending 

objections

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 

#7 - Comments 

regarding 

Bankruptcy Court 

determination of 

insolvency are 

much the same as 

indicated above in 

#4.

See discussion on item I.4 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 8

of 30
- 9 -

# Objection Objecting 

Party

Clarifying Changes to the RSA/ Plan of 

Reorganization

Judge Montali 

Considerations2 Solution 

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 

#8 - A five 

business day 

notice procedure 

for an amendment 

to the RSA 

appears to be too 

short.

Amend section 9 of the RSA to 

provide: “...this Agreement shall be 

subject to Bankruptcy Court approval 

on not less than five twenty-one

(521) Business Days days’ notice, 

subject to the right of any Party to 

move for shortened notice.”

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 9

of 30
- 10 -

# Objection Objecting 

Party

Clarifying Changes to the RSA/ Plan of 

Reorganization

Judge Montali 

Considerations2 Solution 

Court approval on not less than 

five (5) Business Days’ notice.”

 See Amended RSA pp. 

18-19.

9 The release in the 

plan is not a 

consensual thirdparty 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 

#9 - The parties 

should address 

what would 

happen if a 

submitter of a 

ballot did not 

indicate either an 

opt-in or an optout to the release 

provisions. Is 

“opt-out” the 

default?

In that same 

objection, the 

explanation 

appearing at page 

7 of 19 appears 

satisfactory.

Plan to be revised to clarify that an 

“opt out” of plan releases is the default 

for a party that fails to indicate a 

choice on its ballot. 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 10

of 30
- 11 -

# Objection Objecting 

Party

Clarifying Changes to the RSA/ Plan of 

Reorganization

Judge Montali 

Considerations2 Solution 

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:

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 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 11

of 30
- 12 -

# Objection Objecting 

Party

Clarifying Changes to the RSA/ Plan of 

Reorganization

Judge Montali 

Considerations2 Solution 

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.”

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 12

of 30
- 13 -

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

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

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.

#1 - The court is 

of the view that 

the question of

whether the $11 

billion payment 

to the Subro 

Group would

force the IP 

parties to take 

non-cash 

consideration is a

plan issue that 

need not be dealt 

with in 

consideration of 

the RSA.

No solution required. 

2 Approving the 

Amended RSA and 

its $11 billion cash 

claim now would 

SLF Fire 

Victims 

[Oct. 23 

Hr’g Tr. at 

 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 

#2- The court 

does not share 

the view that 

approval of the 

No solution required. 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 13

of 30
- 14 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

undermine the 

mediation order. 

215:19-

216:9]

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 multibillion 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. 

RSA will 

undermine the 

mediation 

process. 

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 

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. 

#3 and #4- The 

court is satisfied 

with the 

explanation 

provided by the 

Subro Group.

No solution required. 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 14

of 30
- 15 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

potential 

obligations (e.g.

estimated IP 

claims, Kincade 

Fire claims, etc.). 

 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 

#3 and #4- The 

court is satisfied 

with the 

explanation 

provided by the 

Subro Group.

No solution required. 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 15

of 30
- 16 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

accounting for any interest or attorneys’ 

fees, both of which are routinely awarded in 

state court subrogation litigation).

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 classwide 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 

#5- The court 

will not address 

the question of 

whether the TCC 

is estopped as the 

Subro Group’s 

explanation is 

argumentative. It 

is correct, 

however, that the 

RSA is 

predicated upon 

confirmation of a 

plan that must 

comply with AB 

1054. Further, 

the made-whole 

doctrine should 

be considered on 

a claim-by-claim 

basis and perhaps 

needs to be 

resolved 

independently of 

the RSA 

determination 

through AP 19-

3053.

The RSA and the order approving 

the RSA would not determine any 

claimant’s made whole rights, if 

any. Such parties can assert made 

whole claims on a claim-by-claim 

basis, except to the extent such 

individuals voluntarily agree to 

settle their claims and execute a 

release. Adjudication of the 

Adversary Proceeding can proceed 

on its own timeline and does not 

impact RSA approval. The Ad Hoc 

Group will respond to the 

Complaint by the applicable 

deadline.

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 16

of 30
- 17 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

(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. 

#6 and #7- The 

court agrees with 

the Subro Group 

that insurers can 

pursue and settle 

claims 

independently of 

those of their 

insureds. Further, 

11 U.S.C. § 509 

does not appear 

to be implicated 

although 

applicable state 

law does.

No solution required. 

7 If AHG members 

claim rights under 

Bankruptcy Code 

Section 509, then 

they are 

subordinated as codebtors. If the 

AHG’s members

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 does not 

#6 and #7- The 

court agrees with 

the Subro Group 

that insurers can 

pursue and settle 

claims 

independently of 

those of their 

No solution required. 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 17

of 30
- 18 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

are not co-debtors, 

then they have no 

rights under 

Section 509.

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.

insureds. Further, 

11 U.S.C. § 509 

does not appear 

to be implicated 

although 

applicable state 

law does.

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.

#8- The court 

rejects the 

contention that 

the RSA violates 

the Subro 

Group’s 

obligations and 

duties of good 

faith under 

California law or 

California 

No solution required.

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 18

of 30
- 19 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

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), 

4629 (pp. 

6-7), 4637 

(pp. 2-3)] 

 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 nonconsensual discharge of claims against nondebtors under a plan, or a non-consensual 

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

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 

#9- The court 

agrees with the 

Subro Group. It 

makes no 

comment 

regarding TCC 

proposed plan’s 

inclusion of third 

party releases. It 

also agrees with 

the Subro Group 

that the 

Settlement 

Payment 

Condition is not 

coercive and 

essentially does 

leave the parties 

the same choice 

absent approval 

of the RSA. Hard 

choices are still 

choices, not 

coercion.

No solution required.

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 19

of 30
- 20 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

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 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 20

of 30
- 21 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

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 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 ordinarycourse insurance claims by insureds arising 

under their insurance policies.

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 21

of 30
- 22 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

 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 classwide 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. 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 22

of 30
- 23 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

 The Settlement Payment Condition is

equitable—the AHG is giving up 

approximately $9 billion in claims.

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

10 The Allowed 

aggregate 

subrogation claim 

is potentially nonbinding in the 

event the Debtors 

are insolvent. 

Thus, the AHG has 

a one-way 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 

#10- See 

comment above 

(I, #4) regarding 

the consequence 

of Debtors being 

determined to be 

insolvent.

Comment I, #4: 

“This portion of 

the RSA 

addresses a 

situation that 

may exist 

“provided...the 

Bankruptcy 

Court determines 

Debtors are 

insolvent....” As 

a practical matter 

the court may not 

be able to make 

such a 

determination 

without the 

initiation of a 

contested matter, 

opposition 

thereto, etc. The 

court believes the 

See discussion on item I.4 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 23

of 30
- 24 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

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.

more appropriate 

outcome would 

be that the 

Debtors, if they 

concede that they 

are insolvent, 

would terminate 

the RSA. 

Following any 

such 

determination, 

there would be 

no precondition 

that any such 

revised plan 

would not – or 

would –

subordinate the 

Subro Group 

claims to the IP 

Claims.”

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 

#11- The court 

agrees that the 

Subro Group can 

make a strategic 

decision about 

voting for or 

against the plan. 

Either way, AB 

1054 says what it 

says if Debtors 

are unable to 

emerge by its 

deadline. The 

No solution required.

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 24

of 30
- 25 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

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 will 

determine an appropriate reserve. That 

process need not unduly delay anything.

consequences of 

a $20 billion 

claim asserted by 

the Subro Group 

need not be 

addressed at this 

point.

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).

#12 - The court 

agrees with the 

Subro Group that 

the RSA

can include 

common features 

found in other 

restructuring

support 

agreements.

No solution required.

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.

#13 and #14 -

The RSA 

releases appear 

to be 

symmetrical and 

reciprocal and 

need not be 

disapproved.

No solution required.

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 25

of 30
- 26 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

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.

#13 and #14 -

The RSA 

releases appear 

to be 

symmetrical and 

reciprocal and 

need not be 

disapproved.

No solution required.

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.

#15 - The notion 

of including 

consents by fire 

victims as part of 

a confirmation 

order implicates 

the adequacy of 

any disclosure 

statement. The 

court prefers a 

simple statement 

included in any 

ballot submitted 

to and returned 

by the fire 

victims.

To be addressed in the proposed 

ballots. Does not impact approval 

of the RSA. 

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. 

#16 – The court 

has no comment.

No solution required.

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

17 The proposed 

settlement and 

TCC [Dkt. 

Nos. 4232 

 In re A & C Props., 784 F.2d 1377 (9th Cir. 

1986) establishes the test for evaluating a 

#17 - While A & 

C Properties is 

The TCC cites to In re AWECO, 

Inc., 725 F.2d 293 (5th Cir. 1984) 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 26

of 30
- 27 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

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.

(pp. 5-7), 

4629 (pp. 

5-7)]

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. 

generally the 

authority to test 

the reasonability 

of a settlement 

under Fed. R. 

Bankr. P. 9019, 

the court is 

inclined to agree 

with the TCC 

that scrutiny 

under the “fair 

and equitable” 

test appears 

appropriate in 

this case.

for the proposition that the court 

should review the proposed 

settlement under the “fair and 

equitable” standard. The AWECO

court applied the “fair and 

equitable” standard because that 

settlement contemplated a 

distribution to junior creditors prior 

to confirmation of any plan over the 

objection of senior creditors. 

Approving the RSA does not result 

in any immediate distribution. 

Whether the distributions in this 

case are ultimately fair and 

equitable can be determined at the 

Confirmation Hearing. 

Even if the “fair and equitable” 

standard applies, the RSA 

settlement satisfies the four relevant 

factors set forth in A&C Properties: 

(i) the probability of success in the 

litigation; (ii) the difficulties, if any, 

to be encountered in the matter of 

collection; (iii) the complexity of 

the litigation involved, and the 

expense, inconvenience and delay 

necessarily attending it; and (iv) the 

paramount interest of the creditors 

and a proper deference to their 

reasonable views in the premises. 

As explained in the Debtors’ 

original motion seeking approval of 

the RSA [Dkt. No. 3992] and its 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 27

of 30
- 28 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

 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.

reply in support of the motion [Dk. 

No. 4339], the RSA settlement is 

fair and equitable for multiple 

reasons, including it (a) resolves 

highly complex, uncertain and 

highly fact specific litigation 

involving twenty-two separate fires 

and thousands of claims, and (b) 

represents an approximately 45% 

reduction in the value of the claims 

being asserted by the Ad Hoc 

Subrogation Group, thereby 

benefiting all estate creditors. 

Under the “fair and equitable” 

standard the court’s 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); see also 

In re College Properties, Ltd., 2007 

WL 7540957 (9th Cir. B.A.P. Aug. 

14, 2007) (implying fair and 

equitable standard applies to 

evaluation of settlement involving 

insider); In re Pac. Gas and Elec. 

Co., 304 B.R. 395, 404 (Bankr. 

N.D. Cal. 2004) (approving 

settlement under fair and equitable 

standard that provided release of

insiders). Accordingly, applied 

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 28

of 30
- 29 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

here, the RSA settlement satisfies 

the fair and equitable standard. 

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.

#18 and #19 -

The exigencies 

of this complex 

case are such that 

the court is not 

worried that 

approval of the 

RSA constitutes 

an impermissible 

sub rosa plan, 

nor does it 

constitute 

impermissible 

solicitation under 

11 U.S.C. § 

1125.

No solution required.

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 

#18 and #19 -

The exigencies 

of this complex 

case are such that 

the court is not 

worried that 

approval of the 

RSA constitutes 

an impermissible 

No solution required.

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 29

of 30
- 30 -

# Objection Objecting 

Party AHG Brief Response Judge Montali Considerations Solution

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-bk-14135-RK, Dkt. 

No. 1807 (approving post-petition plan 

support agreement barring party to vote in 

favor of alternate transaction). 

sub rosa plan, 

nor does it 

constitute 

impermissible 

solicitation under 

11 U.S.C. § 

1125.

Case: 19-30088 Doc# 4921-1 Filed: 12/02/19 Entered: 12/02/19 11:31:05 Page 30

of 30