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DIEMER & WEI, LLP

Kathryn S. Diemer (#133977)

100 West San Fernando Street, Suite 555

San Jose, CA 95113

Telephone: 408-971-6270

Facsimile: 408-971-6271

Email: kdiemer@diemerwei.com

WILLKIE FARR & GALLAGHER LLP

Matthew A. Feldman (pro hac vice)

Joseph G. Minias (pro hac vice)

Benjamin P. McCallen (pro hac vice)

787 Seventh Avenue

New York, NY 10019-6099

Telephone: (212) 728-8000

Facsimile: (212) 728-8111

Email: mfeldman@willkie.com

 jminias@willkie.com

 bmccallen@willkie.com 

Counsel for Ad Hoc Group of Subrogation

Claim Holders

UNITED STATES BANKRUPTCYCOURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

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

Chapter 11

(Lead Case)

(Jointly Administered)

AD HOC GROUP OF SUBROGATION 

CLAIM HOLDERS’ OBJECTION TO 

DEBTORS’ MOTION PURSUANT TO 11 

U.S.C. §§ 105(a) AND 502(c) FOR THE 

ESTABLISHMENT OF WILDFIRE 

CLAIMS ESTIMATION PROCEDURES

[Relates to Docket No. 3091]

Date: August 14, 2019 

Time: 9:30 a.m. (Pacific Time)

Place: United States Bankruptcy Court

Courtroom 17, 16th Floor

San Francisco, CA 94102

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Table of Contents

PRELIMINARY STATEMENT .....................................................................................................1

BACKGROUND .............................................................................................................................6

ARGUMENT...................................................................................................................................9

I. THE DEBTORS’ ESTIMATION PROPOSAL IS AT ODDS WITH 

STATUTORY AND COMMON LAW REQUIREMENTS FOR ESTIMATION 

UNDER THE BANKRUPTCY CODE...............................................................................9

A. The Debtors Ask The Court To Estimate Claims Before All Interested 

Parties Are Required To Appear............................................................................10

B. The Debtors Ask The Court To Exceed The Bounds Of Federal Law In 

Making Its Own Determination On A Settled Question Of State Law..................11

C. The Debtors Ask the Court to Take Unprecedented Actions in Disallowing 

Billions of Dollars of Tubbs Wildfire Claims........................................................18

II. THE COURT SHOULD CONDUCT A SINGLE ESTIMATION PROCEEDING 

USING AS A CRITICAL DATA POINT A SINGLE BELLWETHER TRIAL 

OF THE TUBBS PREFERENCE PLAINTIFFS. .............................................................21

III. THE COURT SHOULD ORDER THE PARTIES TO MEET AND CONFER ON 

THE STRUCTURE OF A SINGLE ESTIMATION PROCEEDING. .............................23

CONCLUSION..............................................................................................................................25

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ii

Table of Authorities

Cases Page(s)

American Tower Corp. v. City of San Diego, 

763 F.3d 1035 (9th Cir. 2014) ...........................................................................................13

Barham v. S. Cal. Edison Co., 

74 Cal. App. 4th 744 (Cal. Ct. App. 1999), 

review denied (Nov. 23, 1999).............................................................................2, 8, 11, 13

Bittner v. Borne Chemical Co., 

691 F.2d 134 (3d Cir. 1982)...............................................................................................18

CUNA Mut. Life Ins. Co. v. Los Angeles Cty. Metro. Transp. Auth., 

108 Cal. App. 4th 382 (Cal. Ct. App. 2003)......................................................................16

Curtis v. Irwin Indus., Inc., 

913 F.3d 1146 (9th Cir. 2019) ...........................................................................................12

In re Eagle-Picher Indus., Inc., 

137 B.R. 679 (Bankr. S.D. Ohio 1992)..............................................................................10

In re Garlock Sealing Technologies, LLC, 

504 B.R. 71 (Bankr. W.D.N.C. 2014)..........................................................................18, 23

Grzybowski v. Aquaslide ‘N’ Dive Corp. (In re Aquaslide ‘N’ Dive Corp.), 

85 B.R. 545 (B.A.P. 9th Cir. 1987)....................................................................................19

Jones v. Heskett (In re Jones), 

106 F.3d 923 (9th Cir. 1997) .............................................................................................12

Jonna Corp. v. City of Sunnyvale, Ca, 

No. 17-CV-00956 (LHK), 2017 WL 2617983 (N.D. Cal. June 16, 2017)........................17

In re Keenan, 

201 B.R. 263 (Bankr. S.D. Cal. 1996)...........................................................................9, 16

In re Keene Corp., 

188 B.R. 903 (Bankr. S.D.N.Y. 1995)...............................................................................10

Kuba v. 1-A Agric. Ass’n, 

387 F.3d 850 (9th Cir. 2004) .............................................................................................17

Marin Mun. Water Dist. v. City of Mill Valley, 

202 Cal. App. 3d 1161 (Cal. Ct. App. 1988) .....................................................................15

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Muniz v. United Parcel Serv., Inc., 

738 F.3d 214 (9th Cir. 2013) .............................................................................................12

Official Comm. of Asbestos Claimants v. Asbestos Prop. Damage Comm. (In re Fed.-Mogul 

Glob. Inc.), 

330 B.R. 133 (D. Del 2005)...............................................................................................16

Orkin v. Taylor, 

487 F.3d 734 (9th Cir. 2007) .............................................................................................12

Owens Corning v. Credit Suisse First Boston, 

322 B.R. 719 (D. Del. 2005)..........................................................................................9, 23

Pac. Bell Tel. Co. v. S. Cal. Edison Co., 

208 Cal. App. 4th 1400 (Cal. Ct. App. 2012), 

as modified (Sept. 13, 2012), review denied (Nov. 14, 2012) ...........................2, 11, 13, 14

In re Pac. Gas & Elec. Co., 

295 B.R. 635 (Bankr. N.D. Cal. 2003) ..............................................................................16

Reardon v. City & County of San Francisco, 

66 Cal. 492 (Cal. 1885)......................................................................................................13

Ryan v. Loui (In re Corey), 

892 F.2d 829 (9th Cir. 1989) .............................................................................................19

United States v. King Mountain Tobacco Co., 

745 F. App’x 700 (9th Cir. 2018), 

cert. denied, No. 18-984, 2019 WL 358379 (U.S. June 10, 2019)....................................17

West v. Am. Tel. & Tel. Co., 

311 U.S. 223 (1940)...........................................................................................................14

Wolfson v. Watts (In re Watts), 

298 F.3d 1077 (9th Cir. 2002) .................................................................................2, 11, 12

Statutes and Other Authorities

11 U.S.C. § 501(a) .........................................................................................................................10

11 U.S.C. § 502(a) .........................................................................................................................10

11 U.S.C. § 502(b)........................................................................................................................11

11 U.S.C. § 502(c) ................................................................................................................. passim

Cal. Pub. Util. Code § 451.2(b)-(c)................................................................................................16

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Cal. Civ. Proc. Code § 36 ..............................................................................................................21

Coordination Proceeding Special Title (Rule 3.550), 

No. CJC170004955, 2018 WL 491364 (Cal. Super. Jan. 4, 2018)......................................6

Fed. R. Bankr. P. 3007(a) ..............................................................................................................11

Order Denying Petition for Writ of Mandate, Prohibition, or Other Appropriate Relief, Pac. Gas 

& Elec. Co. v. Super. Ct. of San Francisco Cty., 

No. A154847 (Cal. Ct. App. Sept. 17, 2018).....................................................................14

Opinion Denying Petition for Review, Pac. Gas & Elec. Co. v. Super. Ct. of San Francisco Cty., 

No. S251585, 2018 BL 431523 (Cal. Nov. 14, 2018) .......................................................14

Order Denying Petition for Writ of Mandate, Prohibition, or Other Appropriate Relief, Pac. Gas 

& Elec. Co. v. Super. Ct. of Sacramento Cty., 

No. C087071 (Cal. Ct. App. June 7, 2018)........................................................................14

Opinion Denying Petition for Review, Pac. Gas & Elec. Co. v. Super. Ct. of Sacramento Cty., 

No. S249429, 2018 BL 292961 (Cal. Aug. 8, 2018) .........................................................14

Order Denying Petition for Writ of Mandate and/or Prohibition and Related Request for Stay, 

Pac. Gas & Elec. Co. v. Super. Ct. of San Mateo Cty., 

No. A146436 (Cal. Ct. App. Oct. 22, 2015)......................................................................14

Order Denying Rehearing of Decision (D.) 17-11-033,

2018 WL 3753814 (Cal. P.U.C. July 12, 2018).................................................................15

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PRELIMINARY STATEMENT

Faced with stay relief motions to try the Tubbs Fire claims, efforts to terminate the 

Debtors’ plan exclusivity, and a deadline to confirm a plan of reorganization in the next eleven 

months, PG&E Corporation and Pacific Gas and Electric Company (collectively, “PG&E” or the 

“Debtors”) ask this Court to implement a cumbersome and disjointed three-stage process to 

estimate their wildfire liability. In their haste, the Debtors propose an estimation process that 

would do more harm than good. The Debtors’ proposal is fundamentally infirm in that it would 

have the Court adjudicate what they characterize as “the most critical threshold issues” before 

the claims Bar Date (as defined below), unnecessarily raising serious due process concerns for 

parties not yet before the Court, in derogation of Sections 501 and 502 of the Bankruptcy Code.

1

 

In addition, the Debtors’ proposal is inefficient, creates unnecessary appellate risk, and in many 

respects runs counter to the purpose of estimation: to estimate the value of the Wildfire Claims 

(as defined below) under California law, as if adjudicated by California trial courts. 

The Ad Hoc Group of Subrogation Claim Holders (the “Ad Hoc Subrogation Group”)

does not dispute that an estimation hearing to address the value of the Wildfire Claims may be 

appropriate. But any such proceeding should be conducted in a single hearing addressing all 

outstanding estimation issues, after discovery and after all claims are filed under the terms of the 

Bar Date order and, ideally, after one or more of the most contentious Wildfire Claims (the 

Tubbs Fire claims) are tried in state court. 

The Debtors’ proposed three-tiered estimation proceeding would begin with an

adjudication of the applicability of inverse condemnation to PG&E, with the benefit of only a 

few weeks of briefing and argument and no evidence. According to the Debtors, the Court 

would “not [be] constrained by the reasoning” of the California courts that have ruled that 

inverse condemnation applies to PG&E, and could issue a determination that would upend a 

 

1

If the Court were going to proceed with any part of the estimation proceeding before the Bar Date, due 

process would require that the Debtors send notice in a manner that mirrored the notice of the claims bar date, so 

that every party that may have a claim that is not yet filed would have the opportunity to respond to the proposed 

estimation process for not yet filed claims.

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principle of California law and be binding on all parties for all claims on the basis of a few 

briefs. This approach is inconsistent with settled Ninth Circuit and California law.

Estimation requires the Court to determine, as best it can, how California courts would 

treat inverse condemnation, and the best evidence of that is undoubtedly the two California Court 

of Appeal rulings that inverse condemnation applies to a utility like PG&E, and the California 

Supreme Court’s refusal (twice) to revisit those determinations. Barham v. S. Cal. Edison Co., 

74 Cal. App. 4th 744 (Cal. Ct. App. 1999), review denied (Nov. 23, 1999); Pac. Bell Tel. Co. v. 

S. Cal. Edison Co., 208 Cal. App. 4th 1400 (Cal. Ct. App. 2012), as modified (Sept. 13, 2012), 

review denied (Nov. 14, 2012). The Debtors’ suggestion that the Court should overrule all of

those courts and speculate that one day the California Supreme Court will change its mind, take 

up the issue and reverse well-settled law, contravenes binding precedent that prohibits this Court, 

absent “convincing evidence” the California Supreme Court would reach a different conclusion,

from doing exactly that. Wolfson v. Watts (In re Watts), 298 F.3d 1077, 1082-83 (9th Cir. 2002). 

Adherence to California law is not only required, but fully consistent with estimation 

under Section 502(c). The state court Wildfire Claims are governed by existing California law. 

If they were tried today in state court, that court would be bound by California’s inverse 

condemnation law. Estimation requires this Court to determine not whether it agrees with the 

California courts, but how they would have ruled in the ordinary course had the claims not been 

stayed by PG&E’s bankruptcy. Put another way, PG&E cannot use this proceeding to invite a 

federal bankruptcy court to overturn what it views as unfavorable California law. 

Moreover, there is no efficiency to be gained by asking the Court to issue a ruling on 

inverse condemnation in isolation at the outset of the estimation process. Inverse condemnation 

typically does not stand alone, but rather appears alongside other theories of liability, such as 

negligence, which, if established, could obviate the need to address the issue of inverse 

condemnation entirely. This dynamic is particularly notable because the Debtors argue that the 

inverse condemnation doctrine violates the U.S. Constitution. Basic precepts of constitutional 

avoidance counsel that the Court should not address what the Debtors have cast as an issue of 

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constitutional law unless it is clear that confronting that argument is necessary, which here 

argues strongly for addressing inverse condemnation in the context of all other claims, and not in 

isolation.

In short, there is significant risk in singling out inverse condemnation for an immediate 

ruling. And while the Debtors baldly assert that inverse condemnation is a “critical” issue, they 

do not present any empirical analysis that ties the issue to a quantifiable effect on the value of the 

Wildfire Claims. The Debtors thus ask the Court to assume that risk with no real showing of 

potential benefit. It makes far more sense to allow the Court to address any arguments the 

Debtors choose to make regarding inverse condemnation in the context of a single estimation 

hearing, during which it can consider all the evidence, claims and defenses related to estimation 

comprehensively, and give the doctrine of inverse condemnation appropriate weight in its overall 

claims estimation analysis. 

Equally imprudent is the Debtors’ proposal to “address[] PG&E’s likelihood of liability 

(if any) related to the Tubbs Fire” in a stand-alone second stage. If the Court prematurely 

conducts a proceeding to estimate Tubbs Fire liabilities over the objection of the victims of those 

fires, it will create a contentious and uncertain issue for appeal that will hang over these 

proceedings, particularly if the Court accepts the Debtors’ position that they should be valued at 

zero, effectively disallowing them. Indeed, none of the cases the Debtors cite suggest that the 

thousands of multifaceted Tubbs Fire property claims are amenable to effective disallowance 

through an estimation proceeding. Should an appellate court later determine that this Court erred 

in exercising jurisdiction over those claims, or in disallowing them wholesale, the completion of 

the case by June 2020 would be in serious jeopardy. The Debtors’ proposal also disingenuously 

suggests that this Court can estimate for voting and plan feasibility purposes, while leaving 

questions about the potential jurisdictional limit on estimating personal injury claims “to a later

stage.” (Mot. at 15.). Given the compressed timetable the parties and Court face, it makes no 

sense to conduct multiple estimation proceedings. The Debtors fail to explain how following 

their proposed course will push these cases toward a timely resolution and not massively 

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inefficient serial estimation proceedings. 

The more prudent course would be to avoid these contested issues and lift the stay to 

allow a bellwether trial of a Tubbs Fire Plaintiff to be conducted in California state court, as the

Official Committee of Tort Claimants (the “TCC”) has requested. The Court’s role in an 

estimation proceeding is to estimate the value of the Wildfire Claims based on how a California 

court would resolve them in the absence of bankruptcy. No amount of litigation in this Court can 

replace the value of a jury verdict on Tubbs liability—the issue all parties agree represents the 

biggest impediment to consensually approving a plan. Regardless of what result the jury 

reaches, this Court can use that verdict with the flexibility offered by estimation under Section 

502(c) to best approximate what the Debtors’ liability for the Tubbs Fire would have been absent 

a bankruptcy filing. The Debtors’ argument that a state court trial will result in time consuming 

appeals misses the mark: the value of the jury verdict is that it will provide the most apt data 

point for the Court’s estimation of the Tubbs Fire claims, and may even provide the necessary 

impetus for a global resolution of the Wildfire Claims, regardless of the outcome. 

Whether or not the Court lifts the stay to permit a state court trial to proceed, it should not 

try to estimate the value of the Tubbs Fire claims separately in advance of all others. There are 

numerous overlapping fact issues shared in common by the Tubbs Fire claims and other Wildfire 

Claims that would make it incredibly inefficient for this Court to estimate the Tubbs Fire claims 

in isolation. For example, PG&E’s policies and practices related to de-energizing and 

maintaining lines will be at issue in evaluating the Tubbs Fire claims, as well as many others. 

More broadly, PG&E’s systemic negligence will be an issue that cuts across the adjudication of 

all Wildfire Claims. Carving out one fire from the rest – all of which are contested 

notwithstanding that PG&E has admitted that its facilities started the 19 other fires at issue2–

would be inherently inefficient and exceedingly impractical given the June 2020 deadline.

The Debtors incorrectly frame estimation and the pending lift stay motions as mutually 

 

2 PG&E concedes only causation. It does not concede that it was negligent or that inverse condemnation 

applies to its actions for any fire. Therefore, these issues must be addressed with respect to all fires.

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exclusive options that the Court must choose between now. That is simply wrong. As discussed 

above, allowing a trial to proceed in state court provides several important benefits, including 

promoting settlement and obtaining an important data point for estimation. At the same time, the 

risk of lifting the stay is nonexistent. There is no reason the parties cannot prepare in the coming 

months to present this Court with evidence that the state court jury would otherwise hear

regarding the Tubbs Fire. In the event the state court proceedings do not move quickly enough, 

the Court has the flexibility to adjust the evidence it hears at an estimation proceeding to account 

for the possibility that it will be unable to factor in a Tubbs Fire result in state court as it 

estimates under Section 502(c). Indeed, as the parties and Court prepare, flexibility in 

connection with the ultimate structure of the estimation hearing is critical at this stage of this 

large, fast-moving and complex case that is constantly evolving as interested stakeholders 

negotiate and work to narrow the issues of disagreement.

In sum, the Court should not chain itself to the convoluted, inefficient, and legally 

dubious estimation procedure urged by the Debtors. Rather, the Court should order the parties to 

meet and confer regarding the scope of a potential estimation proceeding to be calendared in 

December or January. Among other issues, the parties should discuss a schedule for fact and 

expert discovery, pre-trial briefing, trial time and post-trial briefing for a single estimation 

hearing. Any disagreements over the structure and schedule for such a proceeding can be 

presented to the Court promptly, even as discovery progresses. All of this work could proceed in 

parallel to a state court bellwether trial of a Tubbs Fire claim; but even if this Court does not lift 

the stay, all estimation issues can and should be reserved for a single proceeding at the end of the 

year or early January. 

In the event the parties have not reached a resolution of their claims by the time of the 

estimation hearing, this Court will be in a position to conduct a single adjudication of any 

remaining disputed issues, with the benefit of a fully developed record through discovery and 

pre-trial proceedings. This is the most feasible path to estimating the Wildfire Claims in a fast, 

fair and procedurally sound manner—which is what all parties claim that they want—while 

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providing additional time and opportunities for negotiations around a potential plan of 

reorganization. 

For these reasons and those set forth more fully below, the Court should deny the 

Debtors’ Motion.

BACKGROUND

As the Debtors admit, a central purpose of these chapter 11 cases is to assess and resolve 

PG&E’s potential liabilities for the death and destruction wrought by the North Bay and Camp 

Fires. (See Amended Declaration of Jason P. Wells in Support of First Day Motions and Related 

Relief [Docket No. 263] at 4 (hereinafter “Wells Decl.”).) The hundreds of complaints filed on 

behalf of thousands of plaintiffs following the 2017 and 2018 wildfires raise common legal and 

factual issues that cut across categories of plaintiffs, whether it be the individual plaintiffs or 

subrogation plaintiffs. These wildfire actions, which were eventually coordinated in a single 

proceeding, seek to recover for, among other things, wrongful death, personal injury, and 

property damage, based on complaints that allege similar theories of liability, including

negligence and inverse condemnation. Coordination Proceeding Special Title (Rule 3.550), No. 

CJC170004955, 2018 WL 491364, at *2-3 (Cal. Super. Jan. 4, 2018); (Wells Decl. at 14-15.).

During the Coordination Proceeding prior to the Debtors’ bankruptcy, PG&E requested 

that the Tubbs Fire be set for trial before any of the other North Bay Fires, while the individual 

plaintiffs sought to try the Atlas Fire first because of “proof issues common to all vegetation 

management fires” and the fact that Tubbs “implicate[d] a broader range of negligent corporate 

conduct as it relates to wildfire risk management.” (McCallen Decl. Ex. 1 (Joint Case 

Management Conference Statement, California North Bay Fire Cases, JCCP No. 4955, at 2 (Cal. 

Super. Oct. 22, 2018)) (hereinafter “Joint Case Mgmt. Statement”).) At the time, PG&E 

disputed plaintiffs’ causation theory for the Atlas Fire. (Id. at 3, 4 n.1.) In arguing that Tubbs 

should be tried first, PG&E asserted that Tubbs and Atlas would require experts on some of the 

same issues, namely: “cause and origin, weather, LiDAR, de-energization, risk management and 

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damages.” (Id. at 4 n.2.) The state court decided to set a bellwether trial of the Atlas Fire first, 

in part because it appeared to be a simpler case to resolve. (McCallen Decl. Ex. 2 (Case 

Management Order No. 4, California North Bay Fire Cases, JCCP No. 4955, at 2 (Cal. Super. 

Nov. 2, 2018)).) The trial was to include a group of about fifteen plaintiffs that would represent 

the various categories of claims, such as wrongful death, personal injury, and total loss of home. 

(McCallen Decl. Ex. 2 (Case Management Order No. 4, California North Bay Fire Cases, JCCP 

No. 4955, at 4-5 (Cal. Super. Nov. 2, 2018)); McCallen Decl. Ex. 1 (Joint Case Mgmt.

Statement), at 8-9.)

The Debtors cited inverse condemnation as one impetus for their bankruptcy filing, 

explaining that the doctrine “is routinely invoked in California wildfire damages, claims and 

litigation . . . . [and] imposes strict liability . . . for damages as a result of the design, construction 

and maintenance of utility facilities, including utilities’ transmission lines.” (Wells Decl. at 14.) 

PG&E claimed that the doctrine “exacerbated” its “potential liability” for the fires because 

inverse condemnation “imposes strict liability on PG&E regardless of whether it was negligent.”

(Id. at 3.) 

On July 1, 2019, this Court set October 21, 2019 as the deadline for filing proofs of claim 

on prepetition claims (the “Bar Date”) (Order Establishing Bar Date [Docket No. 2806]), 

including all contingent and/or unliquidated claims arising out of the 2015, 2017 and 2018 

Northern California Wildfires (the “Wildfire Claims”).3 After the TCC and the Ad Hoc 

Subrogation Group moved to lift the automatic stay to allow the state court to try Tubbs Fire 

claims, the Debtors filed Debtors’ Motion Pursuant to 11 U.S.C. §§ 105(a) and 502(c) for the 

Establishment of Wildfire Claims Estimation Procedures (the “Motion”). The Motion seeks to 

estimate the Debtors’ aggregate liability for contingent and/or unliquidated claims arising out of 

 

3 The terms “Wildfires” and “Wildfire Claims” refer to the following fires: the 2015 Butte Fire, the 2018 

Camp Fire, and the following twenty-two 2017 North Bay Fires: (1) Adobe; (2) Atlas; (3) Blue; (4) Cascade; (5) 

Cherokee; (6) Highway 37; (7) Honey; (8) La Porte; (9) Lobo; (10) Maacama; (11) McCourtney; (12) Norrbom; 

(13) Nuns; (14) Oakmont/Pythian; (15) Partrick; (16) Pocket; (17) Point; (18) Potter/Redwood; (19) Pressley; (20)

Sullivan; (21) Sulphur; and (22) Tubbs.

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the 2015, 2017 and 2018 Northern California Wildfires. (Mot. at 1.) 

In their Motion, the Debtors assert that they will not contest causation for the Camp Fire 

or any of the 22 separate 2017 North Bay Fires, except for the Tubbs Fire (Id. at 4.), although 

Debtors are careful to assert that they are not liable for any harm caused by the 19 fires they 

admit they started. The Debtors seek “adjudication of the most critical threshold issues” in two

phases, leaving all remaining estimation issues to a third phase. (Id.) In the first phase, the

Debtors argue that this Court should decide “whether claims based on inverse condemnation 

must be disallowed as a matter of law. . . .” (Id.) The Debtors categorize inverse condemnation 

as a “threshold legal issue,” and argue that “there are no disputed facts.” (Id. at 4, 20.) The 

Debtors claim that the doctrine of inverse condemnation should not apply to privately-owned 

entities like PG&E, despite two California appellate decisions holding that it does. (Id. at 19.) 

See Pacific Bell Tel. Co. v. S. Cal. Edison Co., 208 Cal. App. 4th 1400 (Ct. App. 2012), as 

modified (Sept. 13, 2012), review denied (Nov. 14, 2012.); Barham v. S. Cal. Edison Co., 74 Cal. 

App. 4th 744 (Ct. App. 1999) review denied (Nov. 23, 1999). While conceding that California 

trial courts have followed the reasoning of the two appellate opinions, including with respect to 

PG&E itself, the Debtors argue that this Court is unconstrained by those cases and must “reach 

its own conclusions” about how the California Supreme Court would rule, and ask this Court to 

order briefing to commence within one week of issuing an order with a hearing eight weeks after 

entry of the order. (Mot.at 8, 19.) The Debtors also preview an argument that the doctrine, as 

consistently applied by California courts, violates the takings clause of the U.S. Constitution. 

(Id. at 20.) 

The Debtors propose to have the Court address the issue of liability for the Tubbs Fire in 

“Phase 2”, contending that “PG&E’s likelihood of liability (if any) related to the Tubbs Fire is a 

crucial threshold issue in determining the aggregate amount required to resolve all Wildfire 

Claims.” (Id. at 6.) According to the Debtors, it is “routine for bankruptcy courts to assess the 

factual merits of an unadjudicated state law tort claim as part of an estimation process,” and the 

court may estimate those claims at zero. (Id. at 21.) The Debtors propose that the evidentiary 

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hearing on the cause of the Tubbs Fire begin on October 7, weeks before the Bar Date that has 

already been set. (Id. at 8.) 

The Debtors propose that “Phase 3” of their estimation proceeding begin on December 

16, 2019 and address all remaining estimation issues. (Id. at 24.) In that phase, the Court would 

estimate the aggregate value of the Wildfire Claims. (Id.) The Debtors provide few details on 

this final proceeding, stating that the parties could come back to the Court with planned 

proceedings three weeks after the order granting their Motion. (Id. at 25.) 

ARGUMENT

I. THE DEBTORS’ ESTIMATION PROPOSAL IS AT ODDS WITH STATUTORY 

AND COMMON LAW REQUIREMENTS FOR ESTIMATION UNDER THE 

BANKRUPTCY CODE. 

The Court’s role in an estimation proceeding is not to adjudicate the Wildfire Claims, but 

to estimate their value based on how California courts would resolve them in the absence of a 

bankruptcy. See Owens Corning v. Credit Suisse First Boston, 322 B.R. 719, 721-22 (D. Del. 

2005) (given the “‘basic federal rule in bankruptcy. . . that state law governs the substance of 

[state law] claims’ . . . claims are to be appraised on the basis of what would have been a fair 

resolution of the claims in the absence of bankruptcy” (internal quotation marks omitted)); In re 

Keenan, 201 B.R. 263, 266 (Bankr. S.D. Cal. 1996) (“Estimation . . . contemplates that the 

bankruptcy court will, in effect, put itself in the place of a nonbankruptcy court or jury to 

estimate whether a debtor is liable to the claimant . . .”). The Debtors’ proposed approach—

frontloading two cherry-picked issues and resolving them (before the Bar Date) in isolation from 

the myriad legal and factual issues presented by valuing the Wildfire Claims—fundamentally 

misconstrues the nature of the estimation process, ignores governing law, and threatens to bog 

down these proceedings in duplicative and inefficient litigation. The Debtor’s proposal should 

be rejected.

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A. The Debtors Ask The Court To Estimate Claims Before All Interested 

Parties Are Required To Appear.

The Debtors’ motion asks the Court to disallow billions of dollars of claims before those 

claims are even required to be filed. The Debtors seek an immediate ruling from the Court that 

claimants cannot recover property damages based on inverse condemnation (even though 

California law is clear that the claimants can recover such damages), well in advance of the Bar 

Date, and ask the Court to conduct a hearing to “assess the Debtors’ potential responsibility with 

respect to all claims arising out of the Tubbs Fire” two weeks before the Bar Date. (Mot. at 4-7 

(emphasis in original).) Thus, two-thirds of the Debtors’ three-step process would be nearly 

completed before the Bar Date, undercutting the very purpose of having a Bar Date in the first 

place. The Bar Date “is critically important to the administration of a successful chapter 11 case 

. . . serv[ing] the important purpose of enabling the parties to a bankruptcy case to identify with 

reasonable promptness the identity of those making claims against the bankruptcy estate . . . .” In 

re Keene Corp., 188 B.R. 903, 907 (Bankr. S.D.N.Y. 1995) (citations and internal quotations 

omitted); see also In re Eagle-Picher Indus., Inc., 137 B.R. 679, 681 (Bankr. S. D. Ohio 1992) 

(“it is manifest that fixing the number and identity of such claimants will lend considerable 

assistance to the process of arriving at a value of the claims. . . .”). Recognizing as much, the 

Debtors admit that “determination of aggregate values of the Wildfire Claims . . . would need to 

occur after the October 21, 2019, [sic] Bar Date so that all stakeholders would have knowledge 

of the number of claimants and the aggregate amount of alleged claims . . . .” (Mot. at 7.) The 

Debtors do not explain why certain “critical issues” of liability can be resolved before the Bar 

Date and others only after the Bar Date. 

The Debtors’ proposal is also inconsistent with the orderly process for claim allowance 

and disallowance as set forth in Sections 501 and 502. Section 501 allows creditors to file proofs 

of claim. 11 U.S.C. § 501(a). Section 502(a) of the Code provides that a claim filed under 

Section 501 will be deemed allowed unless a party in interest objects. Id. § 502(a). If a party in 

interest objects, the court then determines the amount of the claim for allowance after notice

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(which must be “served on the claimant by first-class mail,” Fed. R. Bankr. P. 3007(a)), and a 

hearing under Section 502(b). 11 U.S.C. § 502(b). Alternatively, and as the Debtors seek here, a 

bankruptcy court can estimate under Section 502(c) any contingent or unliquidated claim “for 

purposes of allowance under this section [Section 502].” Id. § 502(c). The reference to 

allowance under Section 502 presupposes that there is some claim before the Court to be allowed 

or disallowed. In essence, the Debtors are trying to jump the gun and have the Court estimate the 

value of Wildfire Claims under Section 502(c) before those claims are required to be filed and 

can be objected to under Section 501. Conducting any portion of an estimation proceeding prior 

to the Bar Date creates unnecessary due process issues and appellate risk, as well as questions 

about how the result of such proceedings, conducted before certain claimants have filed proofs of 

claim and received notice, can be binding on such claimants, all the while doing nothing to 

advance the orderly administration of this bankruptcy proceeding, as explained below. 

B. The Debtors Ask The Court To Exceed The Bounds Of Federal Law In 

Making Its Own Determination On A Settled Question Of State Law.

The premise of Debtors’ first “phase”—that this Court can ignore controlling California 

state law on the applicability of inverse condemnation and “reach its own conclusion” about 

whether inverse condemnation applies (Mot. at 19)—is simply wrong. California appellate 

courts have twice held that the inverse condemnation doctrine applies to utilities like PG&E. See 

Barham v. S. Cal. Edison Co., 74 Cal. App. 4th 744 (1999), review denied (Nov. 23, 1999); Pac. 

Bell Tel. Co. v. S. Cal. Edison Co., 208 Cal. App. 4th 1400 (2012), as modified (Sept. 13, 2012), 

review denied (Nov. 14, 2012.) On both occasions, the California Supreme Court had the 

opportunity to reverse the decision, but instead denied review. 

The California Court of Appeals decisions on inverse condemnation are binding on this 

Court in estimating the Wildfire Claims. On issues of state law, Ninth Circuit courts, including 

bankruptcy courts, must follow decisions of the California intermediate appellate courts absent 

“convincing” evidence that the California Supreme Court would reject those decisions. See In re 

Watts, 298 F.3d at 1082-83 (“We are bound to follow Smith and Teaman absent convincing 

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evidence that the California Supreme Court would reject the interpretation of section 704.950(c) 

by these two courts.”) (collecting cases); Muniz v. United Parcel Serv. Inc., 738 F.3d 214, 219 

(9th Cir. 2013) (“We should nevertheless follow a published intermediate state court decision 

regarding California law unless we are convinced that the California Supreme Court would reject 

it.”) (citations omitted). The Ninth Circuit recently reaffirmed that the federal courts are “bound 

to follow the rulings of intermediate state courts” absent convincing evidence that they would not 

be followed by the state supreme court. Curtis v. Irwin Indus., Inc., 913 F.3d 1146, 1155 (9th 

Cir. 2019). 

As the facts of Watts illustrate, the “convincing” evidence standard is a high hurdle. 

Watts, a bankruptcy case, turned on the application of California’s homestead exemption. 298 

F.3d at 1080. Prior to Watts, a Ninth Circuit panel had held as a matter of first impression that 

under California law a judgment lien could attach to a homestead under certain circumstances. 

See Jones v. Heskett (In re Jones), 106 F.3d 923 (9th Cir. 1997). But thereafter, the California 

Court of Appeals rejected that approach in two separate cases. Watts, 298 F.3d at 1081-82. 

When the bankruptcy court in Watts strayed from those Court of Appeal decisions, the Ninth 

Circuit reversed, concluding that Court of Appeals decisions were binding in construing 

California law absent convincing evidence that they would be rejected by the California Supreme 

Court—evidence which was as lacking there as it is here. Id. at 1082. 

None of Debtors’ cases are to the contrary. The Debtors cite Orkin v. Taylor, 487 F.3d 

734 (9th Cir. 2007) for the proposition that this Court must “predict” how the California 

Supreme Court would decide the application of inverse condemnation to PG&E. (Mot. at 5.) 

But Orkin does not support the theory that bankruptcy courts are free to disregard the decisions 

of state courts in favor of their own “predictions.” To the contrary, Orkin emphasized that the 

task of the federal court is to “approximate state law as closely as possible in order to make sure 

that the vindication of the state right is without discrimination because of the federal forum.”

487 F.3d at 741 (citations omitted). In so holding, the Ninth Circuit explained that “we take state 

law as it exists without speculating as to future changes in the law.” Id. at 741-42. The Debtors’

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reliance on American Tower Corp. v. City of San Diego, 763 F.3d 1035 (9th Cir. 2014) is equally 

misplaced. (See Mot. at 19-20.) In that case, the Ninth Circuit applied the limited exception for 

disregarding intermediate appellate authority based on “convincing” data and held that a 

California Court of Appeal’s interpretation of a state statute did not control its own interpretation 

of the statute because the appellate court had read certain words out of the statute, violating a 

“fundamental canon of statutory construction” which the court did not believe the California 

Supreme Court would do. 763 F.3d at 1048 (quotation omitted). There, the plain text of the 

statute itself was the convincing data relied upon by the court to determine that the California 

Supreme Court would overrule the appellate court. Id. at 1047.

The Debtors offer no “convincing” evidence that the California Supreme Court would 

reverse the Court of Appeals decisions here. To the contrary, the prospects for reversal are 

exceedingly remote. Inverse condemnation has been settled law in California for over 130 years. 

See Reardon v. City and County of San Francisco, 66 Cal. 492 (Cal. 1885). The California Court 

of Appeal decisions holding that utilities like PG&E are subject to inverse condemnation are 

well-reasoned and directly on point. Like many of the wildfires here, the Barham case involved 

a wildfire that resulted from the failure of a utility’s electric transmission lines during high 

winds. The California Court of Appeals observed that, for inverse condemnation purposes, there 

was no material difference between “publicly” or “privately” owned electrical utilities, and the 

relevant question was thus whether the improvement was for “public use.” 74 Cal. App. 4th at 

753-54. 

In 2012, the Court of Appeals reaffirmed Barham in the Pac. Bell decision. As the court 

in Pac. Bell reasoned, a public utility such as PG&E has “monopolistic or quasi-monopolistic 

authority, deriving directly from its exclusive franchise provided by the state,” that makes it 

“more akin to a governmental entity than to a purely private employer[.]” 208 Cal. App. 4th at 

1406 (internal quotations omitted). Since Pac. Bell, California courts have uniformly rejected 

arguments by privately-owned utilities that they should be exempted from inverse condemnation. 

Indeed, PG&E has repeatedly tried to obtain writs concerning interlocutory rulings on inverse 

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condemnation, including in North Bay Fire-related litigation, and its petitions were all denied by 

the Court of Appeals and, in some cases, the California Supreme Court.4 See West v. Am. Tel. & 

Tel. Co., 311 U.S. 223, 237 (1940) (intermediate appellate court decisions are especially 

persuasive “where . . . the highest court has refused to review the lower court’s decision 

rendered in one phase of the very litigation which is now prosecuted by the same parties before 

the federal court.”).

Were this issue again presented to the California Supreme Court, there is no reason to 

believe that it would grant review, much less reverse Barham and Pac. Bell. The primary 

argument against inverse condemnation advanced by the Debtors here has already been rejected 

by the California Court of Appeals. (Mot. at 17-19.) Specifically, the utility in Pac. Bell argued 

that “as a public utility it does not have taxing authority and may raise rates only with the 

approval of California’s Public Utilities Commission [CPUC].” 208 Cal. App. 4th at 1407. The 

court in Pac. Bell noted that the California legislature could make municipally-owned utilities 

subject to CPUC regulation, and expressed doubts that “such regulation would immunize 

municipal utilities from inverse condemnation liability under the theory that they were no longer 

able to spread the cost of public improvements.” Id. at 1407 n.6. This result is also supported by 

considerations of basic fairness towards the property owners. As the Pac. Bell court emphasized: 

“[f]or an owner whose property is damaged by the operation of a utility, he or she suffers a 

disproportionate share of the cost of the public improvement regardless of whether the utility is 

governmentally or privately owned.” Id. at 1408. Whether property owners can assert an 

inverse condemnation claim should not depend on “the happenstance of which type of utility 

 

4 See Order Denying Petition for Writ of Mandate, Prohibition, or Other Appropriate Relief, Pac. Gas & 

Elec. Co. v. Super. Ct. of San Francisco Cty., No. A154847 (Cal. Ct. App. Sept. 17, 2018); Opinion Denying 

Petition for Review, Pac. Gas & Elec. Co. v. Super. Ct. of San Francisco Cty., No. S251585, 2018 BL 431523 (Cal. 

Nov. 14, 2018); Order Denying Petition for Writ of Mandate, Prohibition, or Other Appropriate Relief, Pac. Gas & 

Elec. Co. v. Super. Ct. of Sacramento Cty., No. C087071 (Cal. Ct. App. June 7, 2018); Opinion Denying Petition for 

Review, Pac. Gas & Elec. Co. v. Super. Ct. of Sacramento Cty., No. S249429, 2018 BL 292961 (Cal. Aug. 8, 2018); 

Order Denying Petition for Writ of Mandate and/or Prohibition and Related Request for Stay, Pac. Gas & Elec. Co. 

v. Super. Ct. of San Mateo Cty., No. A146436 (Cal. Ct. App. Oct. 22, 2015).

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operates in an area[.]” Id. Simply put, arguing, as the Debtors do, that they are right and the 

Court of Appeals is wrong is not “convincing” evidence for reversal.

The Debtors’ argument that inverse condemnation liability should not be imposed on 

them because they may not be allowed to spread the cost to ratepayers fares no better. (Mot. at 

18-19.) As an initial matter, cost-spreading is a policy rationale articulated by California courts 

for a right embedded in California’s constitution, but it is a judicial gloss, not a substantive 

limitation on a constitutional entitlement. Moreover, the ability to spread costs is not even the 

sole rationale cited by California courts for the inverse condemnation doctrine. As one 

California Court of Appeal decision explained, “[w]hen a public entity fails to construct or 

maintain its improvement properly, it takes a calculated risk that damage to private property may 

occur,” and “[i]f damage to private property results, it is proper to require the entity that took this 

risk to bear the loss when damage occurs.” Marin Mun. Water Dist. v. City of Mill Valley, 202 

Cal. App. 3d 1161, 1165 (Cal. Ct. App. 1988). Therefore, inverse condemnation can be 

understood as a doctrine determining the proper party to bear the risk of harm caused by a public 

improvement. 

Moreover, this Court should not accept on its face the Debtors’ assertion that PG&E 

would not be able to spread its losses from being found liable. The Debtors cite a decision by the 

CPUC denying an application by San Diego Gas & Electric (SDG&E) to recover costs resulting 

from the settlement of claims for inverse condemnation (Mot. at 18-19), but this decision does 

not preclude the CPUC from allowing PG&E to recover its inverse condemnation liability if it 

can satisfy the “Prudent Manager” standard. See Order Denying Rehearing of Decision (D.) 17-

11-033, 2018 WL 3753814, at *2 (Cal. P.U.C. July 12, 2018). Further, the “Prudent 

Manager” inquiry is not the same as inquiring as to whether the utility was negligent, but rather 

whether the utility engaged in “good utility practices” as judged by such factors as “costeffectiveness, reliability, safety, and expedition.” Id. (internal quotations omitted). The 

California Legislature also has been considering, among other potential reforms, capping the 

liability that can be imposed on a privately owned utility without recovery from ratepayers. See

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Cal. Pub. Util. Code § 451.2(b)-(c). To the extent PG&E’s ability to recoup its “losses” through 

rate increases is even relevant to the application of inverse condemnation, PG&E may seek 

authority from the CPUC to increase its rates. Determination of any such application would 

involve significant factual issues, belying the Debtors’ claim that inverse condemnation is a pure 

legal issue. 

Equally fundamentally, in asking this Court to disregard California law and decide the 

issue of inverse condemnation de novo, the Debtors misconstrue the role of the bankruptcy court 

in an estimation proceeding. “Estimation . . . contemplates that the bankruptcy court will, in 

effect, put itself in the place of a nonbankruptcy court or jury to estimate whether a debtor is 

liable to the claimant and, if so, to estimate the amount of the debt.” Keenan, 201 B.R. at 266; 

see also In re Pac. Gas & Elec. Co., 295 B.R. 635, 642 (Bankr. N.D. Cal. 2003) (bankruptcy 

court must apply the law of the jurisdiction “governing the nature of the claim”); Official Comm. 

of Asbestos Claimants v. Asbestos Prop. Damage Comm. (In re Fed.-Mogul Glob., Inc.), 330 

B.R. 133, 155 (D. Del 2005) (bankruptcy court “is bound by the legal rules which may govern 

the ultimate value of the claim”). Therefore, in any estimation of inverse condemnation, placing 

itself in the role of a state trial court, which is bound by the appellate court decisions, is exactly 

what this Court must do.

It would also be highly inefficient and a potential waste of the Court’s and the parties’

limited time to prepare for and conduct a hearing on the “applicability” of inverse condemnation 

before everything else. The doctrine may prove entirely irrelevant based on the substantial 

evidence of PG&E’s negligence that the parties intend to present, which may even inform the 

Court’s holding on inverse condemnation. See CUNA Mut. Life Ins. Co. v. Los Angeles Cty. 

Metro. Transp. Auth., 108 Cal. App. 4th 382, 391 (Cal. Ct. App. 2003) (“The question of 

whether there has been inverse condemnation is a mixed question of law and fact.”). All of these 

prudential considerations weigh against accepting the invitation now to speculate about how the 

California Supreme Court would rule now, and instead to reserve judgment on whether such a 

ruling is even necessary.

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The Debtors also contend that inverse condemnation as applied to PG&E violates the 

United States Constitution as an “uncompensated taking of [their] property.” (Mot. at 20.) 

According to the Debtors, a doctrine of strict liability grounded in the California Constitution 

that has been enforced by California courts for many decades actually amounts to such a taking. 

On the merits, this argument fails. First of all, “confiscations of money,” such as an adverse 

money judgment, “are only treated as a taking when the confiscation operates upon or alters an 

identified property interest,” and the Debtors have identified no such interest. United States v.

King Mountain Tobacco Co., 745 F. App’x 700, 702 (9th Cir. 2018), cert. denied, No. 18-984, 

2019 WL 358379 (U.S. June 10, 2019) (citations omitted). Moreover, a party cannot bring a 

Takings Clause claim unless that party “is unable to receive just compensation from the 

government.” Jonna Corp. v. City of Sunnyvale, Ca, No. 17-CV-00956 (LHK), 2017 WL 

2617983, at *6 (N.D. Cal. June 16, 2017) (internal quotations omitted). As detailed above, 

PG&E can seek compensation for whatever “taking” it is alleging by seeking a rate increase 

from the CPUC. Thus, California law and the regulatory scheme do provide for just 

compensation (assuming a “taking” is even involved). 

More importantly for purposes of the Debtors’ pending Motion, this Court should not 

address the Debtors’ dubious Takings Clause argument unless it is absolutely necessary to reach 

that issue. Courts should “abide by the doctrine that federal courts should not decide federal 

constitutional issues when alternative grounds yielding the same relief are available.” Kuba v. 1-

A Agric. Ass’n, 387 F.3d 850, 856 (9th Cir. 2004). Accordingly, the Court should not address 

any federal constitutional challenge to inverse condemnation in isolation before determining 

whether a California court would find the Debtors liable under other theories. Finally, in the 

extremely unlikely event the application of inverse condemnation were determined to be a 

judicial taking in violation of the Fifth Amendment, any just compensation to which PG&E 

would be entitled would have no impact on the value of the Wildfire Claims.5

 

5 PG&E appears to contend that it would be a taking if both of the following facts exist: (1) it is liable for 

inverse condemnation, but (2) PG&E is not allowed to add the liability to rates. Even if PG&E were correct (and for 

the reasons stated above, it is not), depriving California homeowners of the constitutional protection against the 

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C. The Debtors Ask the Court to Take Unprecedented Actions in Disallowing 

Billions of Dollars of Tubbs Wildfire Claims.

The Debtors ask this Court to estimate thousands of Tubbs Fire claims, worth billions of 

dollars, at zero. (Mot. at 21.) This is an abuse of the estimation process. The purpose of an 

estimation is to value claims based on the likely outcome of a state court or jury finding on

liability. If PG&E were not in bankruptcy, it would be subject to serial trials on its liability for 

the Tubbs Fire. There is substantial evidence that PG&E equipment caused the Tubbs Fire, 

including video footage of an arc flash that could only have been caused by a high-voltage 

electrical event on PG&E’s distribution system—the type of electrical event known to start fires. 

Even if the Debtors could create doubt around this issue, the purpose of an estimation is to assess

the Debtor’s likely liability, not decide that a set of multi-faceted, multi-billion dollar claims 

which drove the debtor into bankruptcy in the first place, are worth nothing. 

None of the cases cited by the Debtors for the proposition that “[g]roups of claims that 

have no merit as a matter of law should be estimated at zero” advance their position. Those 

cases involved either highly speculative or previously adjudicated claims, or as in Bittner v. 

Borne Chemical Co., 691 F.2d 134 (3d Cir. 1982), claims that were estimated at zero only

temporarily pending later adjudication in state court. Id. The Debtors provide no authority for 

this Court to estimate at zero the thousands of claims stemming from the Tubbs Fire, essentially 

finding that, in hypothetical state court trials, none of the claimants would be successful. What 

Debtors are asking the Court to do is unprecedented. 

Indeed in one of the Debtors’ mass tort examples, the Court did just the opposite of 

estimating aggregate liability for tort claims at zero. In In re Garlock Sealing Technologies,

LLC, the court stressed that the “estimation process requires a pure (or more academic) analysis 

of [debtor’s] ‘liability’ to claimants, which must be estimated as of [debtor’s] petition date and 

pursuant to state law.” 504 B.R. 71, 94-95, 97 (Bankr. W.D.N.C. 2014) (estimating aggregate 

 

catastrophic taking of their homes by fires caused by PG&E’s equipment would be an unnecessary and inappropriate 

“remedy.” A more appropriate remedy would be to allow PG&E to add its liability to rates so long as it was a 

prudent manager, as California law permits. 

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current and future mesothelioma liability at $125 million using publicly reported mesothelioma 

verdicts and factors such as the debtor’s potential share of the award, and the likelihood of the 

claimant’s recovery). The only claims that court valued at zero were individuals who asserted no 

exposure to the company’s products. Id. at 96.

Ryan v. Loui (In re Corey), which Debtors also cite, is inapposite. 892 F.2d 829 (9th Cir. 

1989). There, the Ninth Circuit held that the district court’s estimation of claims at zero was 

appropriate because of their “highly speculative nature,” emphasizing that the same issue had 

been “litigated vigorously for nearly two decades in various bankruptcy proceedings and in the 

state courts . . . .” The single plaintiff’s personal injury and property damage claims at issue in 

Grzybowski v. Aquaslide ‘N’ Dive Corp. (In re Aquaslide ‘N’ Dive Corp.), 85 B.R. 545, 546 

(B.A.P. 9th Cir. 1987), were equally speculative, given that “[t]he slide in question contained no 

identification, no serial number, no manufacturer’s name or other identifying marks which would 

designate a specific manufacturer.” In sum, estimating a claim at zero—and thus effectively 

disallowing the claim—is reserved for those few cases where the claim suffers from facially 

apparent legal and factual deficiencies.

Moreover, it would be inefficient to estimate the Debtors’ liability for the Tubbs claims 

in one proceeding and then separately estimate the Debtors’ liability for all the other Wildfire 

Claims months later in a separate proceeding. The question of PG&E’s liability for the Tubbs 

Fire is inextricably linked to the question of its liability for other fires, whether on the basis of 

negligence or another theory, presenting such overlapping questions as whether: 

 PG&E was aware that its infrastructure was aging, unsafe, likely to cause fires, and 

vulnerable to environmental conditions, but still failed to properly construct, 

maintain, monitor, repair and replace its electrical equipment (McCallen Decl. Ex. 3

(Master Complaint–Subrogation Plaintiffs, California North Bay Fire Cases, JCCP 

No. 4955 (Cal. Super. Mar. 12, 2018)) ¶ 4);

 PG&E was on notice of the danger posed by its equipment and infrastructure, having 

been repeatedly fined and convicted for crimes for causing wildfires and other 

disasters by failing to mitigate risks (Id. ¶ 5); and 

 PG&E can be held liable for failing to de-energize powerlines in adverse conditions. 

(Id. ¶ 196). 

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Moreover, the Debtors ask the Court to separate out and estimate at zero all Tubbs Fire 

claims—which represent about two-thirds of the Debtors’ potential liability from the 2017 fires 

according to them. The TCC contests that this Court has the authority to do so because they 

argue that the Debtors effectively ask the Court to limit the size of the distribution available to 

personal injury and wrongful death plaintiffs. (Amended Memorandum of Points and Authorities 

in Support of the Motion of the Official Committee of Tort Claimants for Relief from Automatic 

Stay to Permit State Court Jury Trial of 2017 Tubbs Wildfire Claims [Docket No. 2855] at 11-14 

(hereinafter “TCC Memorandum”).) 

The Debtors sidestep this issue in their Motion, arguing that whether estimation of 

personal injury claims for distribution is impermissible “is not an issue the Court needs to 

address on this Motion” because all that they propose is estimation for “voting and plan 

feasibility.” (Mot. at 15.) The Debtors seem to concede that the Court may not be able to 

estimate personal injury claims for purposes of distribution, but do not explain how their 

proposal helps the Court solve this problem, as opposed to leading to the potential for multiple 

estimation proceedings—one on voting and plan feasibility and a second proceeding (perhaps in 

another court) for allowance purposes, which is a tremendously inefficient result. 

In sum, the Debtors have offered no sound reason to split the proposed estimation 

proceeding before this Court into three phases, two of which (inverse condemnation and liability 

for the Tubbs Fire) will take place before the Bar Date; two of which (liability for the Tubbs Fire 

and liability for all of the other fires) will involve overlapping evidence; and one of which 

(inverse condemnation) will involve an unprecedented and dubious effort to have a federal court 

overrule a consistently applied principle of California constitutional law, as well as a federal 

constitutional challenge to that principle, both of which may be obviated, in whole or in part, by 

proceedings in another phrase. Clearly, the Debtors’ estimation proposal was designed to 

promote a strategic advantage, not to implement the most efficient estimation process. For at 

least the reasons discussed above, the Debtors’ proposal for a three-phase proceeding is 

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unworkable and should be rejected. 

II. THE COURT SHOULD CONDUCT A SINGLE ESTIMATION PROCEEDING 

USING AS A CRITICAL DATA POINT A SINGLE BELLWETHER TRIAL OF 

THE TUBBS PREFERENCE PLAINTIFFS.

The primary stakeholders in these cases agree that the key disputed issue standing in the 

way of an agreement on the size of Wildfire Claims (for both individual plaintiffs and 

subrogation claimholders) is the extent of PG&E’s liability for the Tubbs Fire. The question 

whether PG&E’s equipment caused the Tubbs Fire is no minor issue. The Tubbs Fire resulted in 

twenty-two deaths, along with 36,087 acres burned, and more than 5,600 structures destroyed or 

damaged. (Mot. at 9-10.) As matters now stand, the Debtors are asking the Court to make that 

causation assessment in the context of a Section 502(c) estimation proceeding without the benefit 

of any state court findings, and without the benefit of any jury having heard the evidence of 

causation, as would have occurred without a bankruptcy filing. It would be unwise to adopt 

Debtors’ proposed estimation plan when there is a very real possibility that a bellwether Tubbs 

Fire trial could proceed in parallel in state court and conclude in sufficient time for the Court to 

consider the result when estimating the value of the Tubbs Fire claims.

The TCC state law preference plaintiffs are entitled to a trial under California Code of 

Civil Procedure Section 36, which mandates that the court “shall set the matter for trial” within 

120 days of granting the preference motion, and that there shall be “no continuance beyond 120 

days” unless for physical disability or good cause. See Cal. Civ. Proc. Code § 36. The 

California rules dictate that a continuance must be limited to 15 days, and there can only be one 

such continuance for physical disability. Id. It is pure speculation by the Debtors to say that the 

preference motion would not be granted, or that the statutory time-frame will not be complied 

with. Notably, Debtors have it in their power to take steps that would help ensure deadlines were 

met, and this Court could encourage them to do so.

Given that 120 days from the August 14, 2019 hearing is mid-December, assuming the 

lift stay and preference motions are granted promptly, we would expect trial to be set in late 

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December or January. The TCC and Ad Hoc Subrogation Group believe such a trial can be 

conducted within four weeks (or 45 hours per side). The state court would be aware of the 

legislative deadline of June 30, 2020, and certainly would take those steps in its power to help 

the parties meet that deadline. 

The fact that the state court set the Atlas Fire to be tried first before these bankruptcy 

cases were filed does not change the equation. In the pre-bankruptcy landscape, when the trial 

court was administering thousands of claims, the cause of the Atlas Fire was still a matter of 

dispute, and the court’s decision was based at least in part on the fact that Atlas presented a 

simpler causation trial than Tubbs. (See supra p. 7.) Now that the Debtors have stated they will 

concede causation of the Atlas Fire, the largest impediment to restructuring PG&E is 

determining its liability for the Tubbs Fire, and the thousands of additional actions that are on the 

state court’s docket are stayed. Thus, the calculus has changed entirely, and the state court 

would have every incentive to assist in resolving the key open issue in the bankruptcy, which 

could help foster a consensual resolution of all the 2017 and 2018 Wildfire Claims still pending 

on its docket. 

The Ad Hoc Subrogation Group asks the Court to weigh the potential benefits and costs 

of lifting the stay. The benefits are obvious and substantial. The TCC has argued that estimating 

its constituents’ personal injury and wrongful death claims in a way that caps the amount 

available to claimants is inconsistent with governing law. (TCC Memorandum at 14-16.) If the 

Court conducts an estimation proceeding over the TCC’s objection, it increases the likelihood of 

subsequent appeals which, if successful, could impede the Debtors’ ability to confirm a plan by 

June 2020. 

The Court need not reach these complex jurisdictional questions, however, to conclude 

that lifting the stay is the best method to push these cases toward resolution. Lifting the stay 

could lead to a global settlement of the Wildfire Claims, either before or after a jury verdict. 

And if the case does not settle, the Court will have lost nothing but may gain something 

invaluable: a jury’s finding on the Debtors’ liability for the Tubbs Fire. In any future estimation 

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proceeding, such a finding would be the most valuable data point obtainable for determining the 

liability that the Debtors would have faced in state court absent a bankruptcy filing. Owens 

Corning, 322 B.R. at 721-22; Garlock Sealing Techs., 504 B.R. at 94-95.

Concerns about whether an estimation proceeding might result in a de facto cap on tort 

claimants’ and other wildfire victims’ recoveries are matters that can be addressed in the context 

of plan structure and approval post-estimation. It is quite possible that if an estimation 

proceeding is conducted on terms that incorporate the TCC’s concerns by permitting a 

concurrent state court trial on Tubbs Fire claims, the parties will have enough certainty about the 

value of the Wildfire Claims to reach a consensual resolution and plan, or at least agree on the 

scope of estimation proceedings to be held in this Court.

While the benefits of lifting the stay are real, the costs of permitting a parallel-tracked 

state court trial are illusory. Several objectors to the lift stay motions argue that lifting the stay 

would not result in complete, or even partial, resolution of the Tubbs liability issue because if the 

Debtors win a state court trial, other litigants would not be bound by that determination, and if 

the Debtors lose, the law of collateral estoppel would not bind Debtors until all appeals were 

exhausted. (Debtors’ Objection to Lift Stay Motions [Docket No. 3104] at 9; UCC Objection to 

Lift Stay Motions [Docket No. 3101] ¶ 24; Noteholders’ Joinder to UCC Objection to Lift Stay 

Motions [Docket No. 3106] ¶ 4.) This argument is a red herring. The purpose of the lift stay 

motions is not to obtain a final, non-appealable judicial determination of all wildfire liability—

something that could never happen before June 2020. Rather, the import of a state court jury 

determination of Tubbs liability is that it will provide a critical data point, which both individual 

and subrogation claimants would be entitled to outside of bankruptcy court, for the parties and 

the Court in determining the value of the Tubbs Fire claims, either through estimation or 

settlement. 

III. THE COURT SHOULD ORDER THE PARTIES TO MEET AND CONFER ON 

THE STRUCTURE OF A SINGLE ESTIMATION PROCEEDING.

The Debtors’ proposal to conduct a disjointed, three-phase estimation proceeding is 

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inefficient, cumbersome and raises statutory and constitutional concerns. The Ad Hoc 

Subrogation Group urges the Court instead to schedule a single estimation proceeding following 

the passage of the Bar Date and after a state court adjudication of PG&E’s liability for the Tubbs 

Fire. While the state court proceeding is pending, the parties can utilize the time to prepare for 

the estimation proceeding. That proceeding will most likely have to address, in some fashion, 

issues related to the Tubbs Fire, given that the vast majority of the subrogation and individual 

claimants will not be parties to the state court trial. But the extent of the evidence that is heard in 

an estimation proceeding, including related to the Tubbs Fire, can be determined by the Court in 

proceedings leading up to the hearing, with the benefit of pretrial briefing by the parties and the 

knowledge that is gained from discovery and the state court proceedings in the interim.6 

In the short term, the Court should order the TCC, the Ad Hoc Subrogation Group, and 

the Debtors to meet and confer regarding the anticipated length, scope and necessary disclosures 

for a proceeding, which the Court can schedule for December or January, after the parties discuss 

further the scope of the state court trial and commence discovery. The parties can then present 

any disputes to the Court promptly, and discuss with the Court the scope of any further 

proceedings before it. 

 

6 At the appropriate time, the Court theoretically could bifurcate an estimation proceeding between property 

damage and personal injury/wrongful death claims. Here, however, bifurcation likely would not make sense 

because determinations of PG&E’s liability for both claims turn on the same questions of law and fact, which in turn 

rely on the same evidence, particularly in those instances where claimants have suffered both personal injury and 

property damage. Again, however, this is not a determination that the Court needs to make now, but rather with the 

benefit of additional work by the parties here and in state court.

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CONCLUSION

For the reasons stated herein, the Court should deny the Debtors’ Estimation Motion.

Dated: August 7, 2019

Counsel for Ad Hoc Group of Subrogation Claim Holders

WILLKIE FARR & GALLAGHER LLP

/s/ Benjamin P. McCallen

Matthew A. Feldman (pro hac vice)

Joseph G. Minias (pro hac vice)

Benjamin P. McCallen (pro hac vice)

787 Seventh Avenue

New York, NY 10019-6099

Telephone: (212) 728-8000

Facsimile: (212) 728-8111

Email: mfeldman@willkie.com

jminias@willkie.com

bmccallen@willkie.com

DIEMER & WEI, LLP

Kathryn S. Diemer (#133977)

100 West San Fernando Street, Suite 555

San Jose, CA 95113

Telephone: (408) 971-6270 

Facsimile: (408) 971-6271 

Email: kdiemer@diemerwei.com

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