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WEIL, GOTSHAL & MANGES LLP

Stephen Karotkin (pro hac vice) 

(stephen.karotkin@weil.com) 

Ray C. Schrock, P.C. (pro hac vice) 

(ray.schrock@weil.com) 

Jessica Liou (pro hac vice) 

(jessica.liou@weil.com) 

Matthew Goren (pro hac vice) 

(matthew.goren@weil.com) 

767 Fifth Avenue 

New York, NY 10153-0119 

Tel: 212 310 8000 

Fax: 212 310 8007 

KELLER & BENVENUTTI LLP 

Tobias S. Keller (#151445) 

(tkeller@kellerbenvenutti.com) 

Jane Kim (#298192) 

(jkim@kellerbenvenutti.com) 

650 California Street, Suite 1900 

San Francisco, CA 94108 

Tel: 415 496 6723 

Fax: 650 636 9251 

Attorneys for Debtors and Debtors in Possession

CRAVATH, SWAINE & MOORE LLP

Paul H. Zumbro (pro hac vice) 

(pzumbro@cravath.com) 

Kevin J. Orsini (pro hac vice) 

(korsini@cravath.com) 

Omid H. Nasab (pro hac vice) 

(onasab@cravath.com) 

825 Eighth Avenue 

New York, NY 10019

Tel: 212 474 1000 

Fax: 212 474 3700 

UNITED STATES BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

In re: 

PG&E CORPORATION,

 - and - 

PACIFIC GAS AND ELECTRIC 

COMPANY,

Bankruptcy Case No. 19-30088 (DM)

Chapter 11 

(Lead Case) 

(Jointly Administered) 

DEBTORS’ RESPONSE TO THE 

OPPOSITIONS FILED BY THE UNITED 

STATES OF AMERICA, THE STATE OF 

CALIFORNIA AND ADVENTIST 

HEALTH ON CERTAIN CLAIMS 

SUBJECT TO ESTIMATION UNDER 

SECTION 502(c) OF THE BANKRUPTCY 

CODE 

Date: December 17, 2019

Time: 10:00 a.m. PST 

Place: United States Bankruptcy Court 

 Courtroom 17, 16th Floor 

 San Francisco, CA 94102 

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). 

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PG&E Corporation (“PG&E Corp.”) and Pacific Gas and Electric Company 

(the ”Utility”), as debtors and debtors in possession (collectively, “PG&E” or the “Debtors”) in 

the above-captioned Chapter 11 cases (the “Chapter 11 Cases”), filed a notice on November 1, 

2019, that designated certain claims filed by the United States of America (including any 

department, agency or instrumentality thereof, the “U.S.A.”), the State of California (including any 

department, agency or instrumentality thereof, the “State”), and Adventist Health System/West and 

Feather River Hospital d/b/a Adventist Health Feather River (“Adventist”) (collectively, the 

“Opposing Parties”), are unliquidated and subject to estimation under Section 502(c) of Title 11 

of the United States Code (the “Bankruptcy Code”), (Dkt. 4553), (the “Notice”). 

The Debtors hereby submit this response to the Opposition of the United States of 

America to Notice of Debtors’ Designation of Claims Filed by the United States of America, the 

State of California and Adventist Health System as Unliquidated and Subject to Estimation under 

Section 502(c) of the Bankruptcy Code, (Dkt. 4771), (the “U.S.A. Opposition”); Response of the 

California State Agencies to Debtors’ Notice of Designation of Claims Filed by the State of 

California as Unliquidated and Subject to Estimation under Section 502(c) of the Bankruptcy Code 

[Docket No. 4553], (Dkt. 4774), (the “State Opposition”); and The Adventist Claimants’ Objection 

to the Notice of Debtors’ Designation of Claims Filed by the United States of America, the State of 

California and Adventist Health System as Unliquidated and Subject to Estimation under Section 

502(c) of the Bankruptcy Code [DE # 4553], (Dkt. 4783), (the “Adventist Opposition”, and 

collectively with the U.S.A. Opposition and the State Opposition, the “Oppositions”). 

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TABLE OF CONTENTS 

Page 

TABLE OF AUTHORITIES .............................................................................................................. IV

MEMORANDUM AND POINTS OF AUTHORITIES .......................................................................1

I. INTRODUCTION .....................................................................................................................1

II. BACKGROUND .......................................................................................................................3

A. The Northern California Wildfires.................................................................................3

B. The Estimation Motion. .................................................................................................4

C. The Estimation Decision and Withdrawal of Reference ................................................4

D. Proceedings Following the Withdrawal of Reference ...................................................4

E. The Debtors’ Designation and the Oppositions .............................................................5

III. ARGUMENT .............................................................................................................................7

A. Legal Standards ..............................................................................................................7

B. Because there is a bona fide dispute as to the Debtors’ liability, the Contested 

Claims are not subject to ready determination. ..............................................................9

C. The nature of the dispute here renders the claims unliquidated and subject to 

estimation. ....................................................................................................................12

CONCLUSION ....................................................................................................................................15

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TABLE OF AUTHORITIES 

 Page(s) 

Cases 

F.D.I.C. v. Wenberg (In re Wenberg), 94 B.R. 631 (B.A.P. 9th Cir. 1988), 

aff’d, 902 F.2d 768 (9th Cir.1990) .........................................................................................1, 8, 11 

Graves v. Arpaio, 623 F.3d 1043 (9th Cir. 2010) ..................................................................................9 

In re A & B Assocs., L.P., No. 17-40185-EJC, 2019 WL 1470892 

(Bankr. S.D. Ga. Mar. 29, 2019) ......................................................................................................7 

In re Audre, Inc., 202 B.R. 490 (Bankr. S.D. Cal. 1996), aff’d, 216 B.R. 19 

(B.A.P. 9th Cir. 1997) ....................................................................................................................13 

In re Audre, Inc., 216 B.R. 19 (B.A.P. 9th Cir. 1997) .........................................................................13 

In re Duque, No. CC-05-1069-MaMcB, 2005 WL 6960181 

(B.A.P. 9th Cir. Dec. 30, 2005) ...................................................................................................9, 4 

In re Enriquez, 315 B.R. 112 (Bankr. N.D. Cal. 2004) ........................................................................9

In re Ho, 274 B.R. 867 (B.A.P. 9th Cir. 2002) ............................................................................ passim 

In re Keenan 201 B.R. 263 (Bankr. S.D. Cal. 1996) .....................................................................12, 13 

In re Lane, 68 B.R. 609 (Bankr. D. Hawaii, 1986) ............................................................................7, 8 

In re Lionel, L.L.C., No. 04-17324, 2007 WL 2261539 

(Bankr. S.D.N.Y. Aug. 3, 2007) ....................................................................................................13 

In re N. Am. Health Care, Inc., 544 B.R. 684 (Bankr. C.D. Cal. 2016) ................................................8 

In re Nicholes, 184 B.R. 82 (B.A.P. 9th Cir. 1995) .....................................................................8, 9, 12 

In re Nova Real Estate Inv. Tr., 23 B.R. 62 (Bankr. E.D. Va. 1982) ....................................................8

In re Slack, 187 F.3d 1070 (9th Cir. 1999) .................................................................................. passim 

In re Sylvester, 19 B.R. 671 (B.A.P. 9th Cir. 1982) ........................................................................8, 12 

Smith v. Marsh, 194 F.3d 1045 (9th Cir. 1999) ...................................................................................10 

Statutes & Rules 

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

11 U.S.C. § 502(b) .............................................................................................................................2, 7 

Pub. Util. Code § 2106 ...........................................................................................................................3 

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Other Authorities 

6 Witkin, Summary 11th Torts § 1912 (2019) .......................................................................................1 

House Report No. 95–595 95th Cong., 1st Sess. 354 (1977) ................................................................8 

Senate Report No. 95–989, 95th Cong., 2nd Sess. 65 (1978)................................................................8 

CAL FIRE, Butte Fire Report (Apr. 28, 2016) ......................................................................................3

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MEMORANDUM AND POINTS OF AUTHORITIES 

I. INTRODUCTION 

The Debtors filed these Chapter 11 Cases mainly because of the tragic wildfires that 

occurred in Northern California in 2015, 2017 and 2018. PG&E filed these cases with the goal of 

establishing an orderly, fair and expeditious process to resolve PG&E’s liabilities resulting from those 

Wildfires,1 while preserving and maximizing the value of PG&E’s business enterprise for the benefit 

of all of its economic stakeholders. In furtherance of that goal, this Court determined that estimating 

the Wildfire Claims pursuant to Section 502(c) of the Bankruptcy Code is appropriate—in fact 

necessary—because liquidating all of the Wildfire Claims would unduly delay the administration and 

resolution of these Chapter 11 Cases. (Dkt. 3648 at 4.) The Opposing Parties, however, contend that 

a subset of their claims are liquidated and not subject to estimation. 

Under Ninth Circuit law, claims are unliquidated when they are not subject to “ready 

determination”. In re Ho, 274 B.R. 867, 875 (B.A.P. 9th Cir. 2002) (quoting In re Wenberg, 94 B.R. 

631, 634 (B.A.P. 9th Cir. 1988)). Whether a debt is subject to ready determination “depend[s] on 

whether the amount is easily calculable or whether an extensive hearing will be needed to determine

the amount of the debt, or the liability of the debtor.” Id. at 874 (emphasis added) (quoting In re Slack, 

187 F.3d 1070, 1074 (9th Cir. 1999)). The Debtors contest their legal liability for the Wildfire Claims, 

including the subset of claims the Opposing Parties contend are liquidated. Resolving the Debtors’ 

liability with respect to the Wildfire Claims involves a number of complex issues including, but not 

limited to, the recoverability of certain categories of damages (such as the cost of rebuilding damaged 

structures, rather than the accepted standard of diminution in value, see 6 Witkin, Summary 11th 

Torts § 1912 (2019) (“the basic and normal rule uses diminution in value as the measure; i.e., the 

difference between the market value of the land before and after the injury”)), and the reasonableness 

of the Debtors’ business practices with respect to vegetation management and electrical maintenance. 

1

 As used herein, the terms “Wildfires” and “Wildfire Claims” refer to the 2015 Butte Fire, the 

2018 Camp Fire and the following 2017 North Bay Wildfires: (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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It cannot be disputed that an extensive hearing—involving months of pre-trial preparation and 10 

scheduled trial days before Judge Donato—is required to resolve the liability of the Debtors for the 

Wildfire Claims of all parties. The Opposing Parties’ Wildfire Claims are no different from the 

Wildfire Claims of any other party: they are unliquidated and subject to estimation.2 Moreover, 

because the Opposing Parties’ Wildfire Claims are no different from other Wildfire Claims, the same 

issues of liability will be heard in the Wildfire Claims estimation process. Therefore, estimating the 

Opposing Parties’ Wildfire Claims along with other Wildfire Claims is the most efficient means to 

administer the estate, serving the purpose of Bankruptcy Code Section 502(c).3 

The Opposing Parties misconstrue Ninth Circuit law, and put undue emphasis on 

certain statements the Court made without having the benefit of briefing from the parties on the issue. 

The ability to calculate an alleged claim to the dollar—or even to the penny—is a red herring. The 

Ninth Circuit Bankruptcy Appellate Panel put it well: “[w]hile a dispute as to liability will not 

‘necessarily render a debt unliquidated’ . . . the nature of this dispute does.” In re Ho, 274 B.R. at 875 

(quoting In re Slack, 187 F.3d 1070, 1074 (9th Cir. 1999)). The fact that there has been no 

determination of the Debtors’ liability for the Wildfire Claims is what is legally relevant here, not the 

reams of backup documentation nor any “to the penny” calculations. The nature of the dispute as to 

liability in these Chapter 11 Cases compels the result that the Wildfire Claims of the U.S.A, the State 

and Adventist must be estimated in the Section 502(c) proceedings before the United States District 

Court for the Northern District of California (the “District Court”), just like all other Wildfire 

Claims.4 

2

 In addition to contending that the Contested Claims (as defined below) are unliquidated and subject 

to estimation, the Debtors reserve all rights to object to any and all of the Opposing Parties’ claims 

(including the Contested Claims) on any ground contemplated by Section 502(b) of the Bankruptcy 

Code or any other applicable law. 

3

 To the extent the Opposing Parties’ real issue is the degree to which they are entitled to participate 

in the District Court estimation proceedings, the Debtors do not object to the full participation of the 

U.S.A. and the State (Adventist’s interests are sufficiently represented by the TCC). 

4

 As explained in the Notice, the Debtors included in the list of claims in the Notice all claims 

asserted against the Debtors that arise from a wildfire, including claims that do not arise from the 

Wildfires that are subject to the estimation proceedings before the District Court (the “Additional

Wildfire Claims”). (Dkt. 4553 at 9.) The Debtors are not seeking to estimate the Additional 

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II. BACKGROUND 

A. The Northern California Wildfires 

On September 9, 2015, a wildfire started in Amador County, California (the “Butte 

Fire”). According to CAL FIRE, the Butte Fire burned over 70,800 acres within Amador and 

Calaveras counties, destroyed approximately 965 structures and resulted in two fatalities and one 

injury.5 Beginning on October 8 and 9, 2017, multiple wildfires spread through Northern California, 

including the counties of Napa, Sonoma, Butte, Humboldt, Mendocino, Lake, Nevada and Yuba 

(collectively the “North Bay Fires”). According to CAL FIRE, the North Bay Fires consisted of 

21 major fires that burned over 245,000 acres, destroyed an estimated 8,900 structures, and resulted 

in 44 fatalities.6 (Am. Decl. of Jason P. Wells in Support of First Day Motions and Related Relief 

[Dkt. 263] (the “Wells Declaration”) at 13-14.) On November 8, 2018, a wildfire began near the city 

of Paradise in Butte County, California (the “Camp Fire”). According to CAL FIRE, the Camp Fire 

consumed 153,336 acres and resulted in 86 fatalities and the destruction of 13,972 residences, 528 

commercial structures and 4,293 other buildings. (Wells Decl. at 11.) 

To date, thousands of Wildfire Claims have been filed in these Chapter 11 Cases. For 

each fire, claimants allege causes of action for, inter alia, inverse condemnation, negligence (causing 

bodily harm, loss of profits/income and property damage), private nuisance, public nuisance, premises 

liability, trespass, violation of Public Utility Code § 2106, wrongful death, survival actions and/or 

negligent infliction of emotional distress. The Debtors have conceded causation, but not liability, for 

all of the Wildfires except the Tubbs Fire for purposes of estimation. 

Wildfire Claims in the estimation proceedings before the District Court, but reserve all rights related 

to the allowance or disallowance of the Additional Wildfire Claims and the determination of the 

amounts thereof. (Id.) The Additional Wildfire Claims are therefore not at issue in this brief. 

5 See CAL FIRE Report at 4, dated April 28, 2016, https://www.fire.ca.gov/media/5443/butte-15-caaeu-024918_redacted.pdf. 

6

 An additional fire, the Maacama fire, was not initially separately reported by CAL FIRE. 

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B. The Estimation Motion. 

On January 29, 2019, the Debtors commenced with this Court voluntary cases under 

Chapter 11 of the Bankruptcy Code. On July 18, 2019, the Debtors filed Debtors’ Motion Pursuant 

to 11 U.S.C. §§ 105(a) and 502(c) for the Establishment of Wildfire Claims Estimation Procedures, 

(Dkt. 3091), (the ”Estimation Motion”). The Estimation Motion sought to establish the framework 

under which the Debtors’ aggregate liability for all contingent and/or unliquidated claims arising out 

of the Wildfires could be determined. (Dkt. 3091 at iii.) The Debtors moved for estimation of the 

Wildfire Claims because, inter alia, as soon as practicable “[t]ens of thousands of California residents 

whose lives have been affected by the Wildfires need to know whether, and how much, they will 

recover from PG&E so they can continue the hard but necessary work of rebuilding lives that have 

been devastated by the Wildfires.” (Dkt. 3091 at 1.) 

C. The Estimation Decision and Withdrawal of Reference 

On August 21, 2019, the Court found that “[the Debtors] need[] to implement the 

bankruptcy procedure for estimation of its unliquidated claims for its reorganization purposes” and 

recommended withdrawal of the reference with respect to the estimation proceedings. (Dkt. 3648 

at 3, 7.) The Court reasoned that the Wildfire Claims must be estimated “[b]ecause it would be 

impossible to liquidate thousands of tort claims in a matter of months, or possibly years”. (Id. at 3.) 

The District Court accepted the Court’s recommendation and ordered the partial withdrawal of the 

reference of the estimation proceedings for the Wildfire Claims. (Dist. Ct. Dkt. 2 at 1.) 

D. Proceedings Following the Withdrawal of Reference 

On August 27, 2019, the Court held a status conference regarding the estimation 

proceedings. The State asserted that its Wildfire Claims were liquidated and therefore not subject to 

the estimation proceedings before the District Court. (Aug. 27 Hr’g Tr. 113:13-114:8.) The U.S.A. 

took the same position. (Id. at 123:11-14.) The Court, the U.S.A., the State and the Debtors then 

engaged in a discussion about the standards for what constitutes an unliquidated claim that is subject 

to estimation under section 502(c) of the Bankruptcy Code. (Id. at 114:9-123:25.) The Court did not 

reach a determination on the 502(c) issue during the hearing. (See id.) Instead, at the October 23, 

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2019 Omnibus Hearing, the Court set a briefing schedule and hearing date for the 502(c) 

“liquidated/unliquidated” issue. (Oct. 23, 2019 Hr’g Tr. at 45:18-55:20; see also Dkt. 4540 at 2-3.) 

In the District Court, the estimation proceedings have begun to move forward. The 

District Court set a ten-day hearing and discovery has commenced. To date, the Debtors have 

produced over 3.3 million documents to the other parties to the estimation proceedings. The parties 

have disclosed fact witness lists that include 45 individuals and the parties have scheduled 

28 depositions. The parties have also disclosed a potential of 27 expert witnesses. There will be expert 

reports, discovery related to the experts’ sources, rebuttal reports and expert depositions prior to the 

start of the proceedings. During the estimation proceedings, the District Court will have to resolve 

complex issues such as the liability of the Debtors for some or all of the Wildfires (the Debtors have 

conceded causation (other than for the Tubbs Fire) for purposes of estimation but not liability), the 

proper method of damages loss calculation and the reasonableness of PG&E’s vegetation management 

and electric maintenance programs. Because of the vast and complex issues involved in the estimation 

proceedings, the District Court scheduled bi-weekly status conferences to take place until the 

proceedings begin. 

E. The Debtors’ Designation and the Oppositions 

On November 1, 2019, the Debtors filed the Notice. (Dkt. 4553.) The Notice 

designated certain claims filed by the U.S.A., the State and Adventist as unliquidated and subject to 

the estimation proceedings before the District Court. (Id.) The U.S.A., the State and Adventist filed 

the Oppositions in response to the Notice on November 15, 2019. The Oppositions argue that certain 

claims filed by the U.S.A., the State and Adventist are liquidated and not subject to estimation because 

those claims are specified to the exact dollar amount or the specific dollar amount allegedly can be 

determined in a simple hearing. (U.S.A. Opp. at 5-7; State Opp. at 6-17; Adventist Opp. at 6-10.7) 

7

 Adventist in particular also latches on to certain statements made by the Court during hearings. 

(See, e.g., Adventist Opp. at 1.) While statements of the Court are always relevant, statements from 

the bench are different in kind from a reasoned opinion following briefing on the issues and are not 

determinative of the issues presented. The Debtors believe that the Court, after having reviewed the 

briefing, will agree that the Wildfire Claims of the Opposing Parties are, in fact, subject to 

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Each of the Opposing Parties contend that a subset of their claims actually are 

liquidated and thus not subject to the estimation proceedings. According to publicly available data on 

Prime Clerk’s website, the Opposing Parties have submitted 68 Wildfire Claims, totaling 

approximately $8.6 billion. Out of the 68 Wildfire Claims, the Opposing Parties are contending that 

28 Wildfire Claims are liquidated either in full or in part (the “Contested Claims”).8

The U.S.A. has submitted 24 Wildfire Claims for amounts totaling approximately 

$4.2 billion. The U.S.A. contends that five of its claims are liquidated—three claims from the National 

Park Service related to the Atlas, Butte and Tubbs Fires, and two claims from the Federal Emergency 

Response Agency (FEMA) for costs related to the Butte Fire and the North Bay Fires. (U.S.A. Opp. 

at 5-7.) The U.S.A. concedes that five of its claims are unliquidated—one claim from FEMA related 

to the Camp Fire, two claims from the Bureau of Land Management (BLM) related to the Camp and 

Butte Fires, and two claims from the Small Business Administration (SBA) related to the Camp and 

North Bay Fires. (U.S.A. Opp. at 3-4.) 

The State has submitted 43 Wildfire Claims for amounts totaling approximately 

$3.5 billion. The State contends that 22 of its Wildfire Claims are unliquidated either in full or in part. 

The claims are from numerous state agencies and relate to the all of the Wildfires except the Tubbs 

Fire. (State Opp. at 5-17.) The State does not contend that any of the State’s claims related to the 

Tubbs Fire are liquidated. (Id.) 

Adventist has submitted one Wildfire Claim for an amount totaling approximately 

$1.0 billion.9 Adventist apportions its Wildfire Claim into amounts that are unliquidated and amounts 

estimation because they are “unliquidated” under applicable Ninth Circuit precedent properly 

applied to the facts of these Chapter 11 Cases. 

8

 A summary chart of the Contested Claims is attached hereto as Exhibit A. Notably, the Opposing 

Parties do not explain in the Oppositions why they are contending that certain of their Wildfire 

Claims are liquidated in nature while others are not. For example, the U.S.A. concedes that FEMA’s 

claim with respect to the Camp Fire (Claim No. 59692) in unliquidated and should be subject to 

estimation, (U.S.A. Opp. at 3-4), while it contends that FEMA’s claims with respect to the North 

Bay Fires (Claim No. 59734) and Butte Fire (Claim No. 59783) are liquidated, (id. at 6), but 

provides no reasoning or explanation for the concession and contentions. 

9

 While Adventist has filed one Wildfire Claim against PG&E Corp., (Claim No. 59459), and one 

Wildfire Claim against the Utility, (Claim No. 59996), because the claims seek exactly the same 

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that are liquidated. Adventist contends that slightly under $143 million of its Wildfire Claim is 

liquidated and concedes that over $850 million out of the $1.0 billion of its asserted Wildfire Claim 

damages are unliquidated. (Adventist Opp. at 1-3.) 

As discussed further below, the arguments in the Oppositions ignore binding precedent 

and do not support a finding that the Contested Claims should be excluded from the estimation 

proceedings. 

III. ARGUMENT 

The Contested Claims are subject to estimation because there is a bona fide dispute as 

to the Debtors’ liability, which dispute will require extensive hearings to resolve. Therefore, this Court 

should enter an order to the effect that the Contested Claims of the Opposing Parties are subject to and 

included in the estimation proceedings pending before the District Court. 

A. Legal Standards 

Section 502(c) of the Bankruptcy Code provides that the Court “shall” estimate “any 

contingent or unliquidated claim, the fixing or liquidation of which, as the case may be, would unduly 

delay the administration of the case.” 11 U.S.C. § 502(c)(1). Courts have explained that: 

Estimation serves two purposes: First, it is designed to avoid the need 

to await the resolution of outside disputes or lawsuits to determine the 

amount owed by means of anticipating and estimating the likely 

outcomes of those disputes/lawsuits. Second, it is designed to promote 

fair distribution to creditors through a realistic assessment of uncertain 

claims. 

In re A & B Assocs., L.P., No. 17-40185-EJC, 2019 WL 1470892, at *34-35 (Bankr. S.D. Ga. Mar. 

29, 2019) (citation omitted). All decisions concerning whether a claim should be included in the 

estimation process ultimately work from this proposition: efficiency in administering the estate.10 As a 

recovery for alleged damages suffered from the Camp Fire, the Debtors are treating Adventist’s 

Wildfire Claims as one claim for the purposes of this Response. (See Adventist Opp. at 2.) The 

Debtors hereby reserve all rights to object to any and all of Adventist’s claims on any ground 

contemplated by Section 502(b) of the Bankruptcy Code or any other applicable law. 

10 As explained in In re Lane: 

The legislative history of Section 502(c) supports this interpretation and 

makes it clear that Congress, in drafting Section 502(c), intended that 

the Court should estimate any claim, actual liquidation of which would 

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court in this Circuit acknowledged, “[i]importantly, the principal consideration in estimating 

unliquidated claims must be an accommodation to the underlying purposes of the Bankruptcy Code”, 

and “Congress has subordinated the goal of accuracy with respect to determining the value of 

unliquidated claims to the overarching goal of avoiding undue delay in a case’s administration—

because it has made such estimation mandatory under section 502(c)”. In re N. Am. Health Care, Inc., 

544 B.R. 684, 688, 689 (Bankr. C.D. Cal. 2016). 

Because the Bankruptcy Code does not define “unliquidated”, In re Sylvester, 19 B.R. 

671, 672-73 (B.A.P. 9th Cir. 1982), courts must interpret the meaning of the term. In the Ninth Circuit, 

the question of whether a claim is liquidated turns on whether it “is subject to ready determination and 

precision in computation of the amount due”. In re Ho, 274 B.R. at 874 (emphasis added) (quoting In 

re Nicholes, 184 B.R. 82, 90-91 (B.A.P. 9th Cir. 1995)). The “ready determination” inquiry turns “on 

whether the amount is easily calculable or whether an extensive hearing will be needed to determine

the amount of the debt, or the liability of the debtor.” In re Slack, 187 F.3d 1070, 1074 (9th Cir. 1999) 

(emphasis added) (citing F.D.I.C. v. Wenberg (In re Wenberg), 94 B.R. 631, 633 (B.A.P. 9th Cir. 

1988), aff’d, 902 F.2d 768 (9th Cir.1990)). 

The Ninth Circuit Bankruptcy Appellate Panel (the “B.A.P.”) has clarified that this 

means where liability is disputed, “if the dispute itself . . . prevents the ready determination of the 

unduly delay closing of the estate. The Senate and House reports on this 

subsection contain identical language as follows: “Subsection (c) 

requires the estimation of any claim liquidation of which would unduly 

delay the closing of the estate, such as a contingent claim, or any claim 

for which applicable law provides only an equitable remedy, such as 

specific performance. This subsection requires that all claims against 

the debtor be converted into dollar amounts.” 

In re Lane, 68 B.R. 609, 611 (Bankr. D. Haw. 1986) (quoting In re Nova Real Estate Inv. Tr., 23 

B.R. 62, 65 (Bankr. E.D. Va. 1982) (first citing H.R. Rep. No. 95–595, at 354 (1977); and then citing 

S. Rep. No. 95–989, at 65 (1978))). The fact that in this case the estimation proceedings will convert 

all Wildfire Claims into an aggregate dollar amount rather than estimating individual claims on a 

claims-by-claims basis does not change the analysis—efficiency in administering the Debtors’ 

estates requires that the Contested Claims be included in the District Court estimation proceedings. 

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amount due, the debt is unliquidated”. In re Ho, 274 B.R. at 874 (quoting In re Nicholes, 184 B.R. 

82, 90-91 (B.A.P. 9th Cir. 1995)). The Opposing Parties rely heavily on certain dicta in Slack that 

suggest that issues of liability are not relevant for purposes of the liquidated/unliquidated issue. But 

the B.A.P. in Ho expressly states that “Slack should not be read to remove that issue [i.e., the issue of 

liability for purposes of the determination of whether a debt is liquidated or unliquidated] from the 

analysis.” Id. at 874. Courts in the Ninth Circuit therefore must look at “the nature of the dispute” in 

determining whether the dispute renders a claim unliquidated. In re Duque, No. CC-05-1069-MaMcB, 

2005 WL 6960181, at *4 (B.A.P. 9th Cir. Dec. 30, 2005). 

B. Because there is a bona fide dispute as to the Debtors’ liability, the Contested 

Claims are not subject to ready determination. 

The Opposing Parties rely on a reading of Slack that has been clarified by more recent 

Ninth Circuit precedent, which makes it clear that the Debtors’ position that the Contested Claims are 

not subject to ready determination is the correct one under controlling Ninth Circuit law. The 

Opposing Parties argue that the Contested Claims are liquidated because they have submitted proofs 

of claims showing the exact dollar amounts of the Contested Claims and take the position that the 

Debtors disputing liability as to the Contested Claims is not relevant to the analysis. (U.S.A. Opp. at 

4-6; State Opp. at 5-6; Adventist Opp. at 6-7.) The Opposing Parties rely heavily on Slack to support 

their position that “a debt is liquidated even if liability . . . is disputed.” (U.S.A. Opp. at 5; State Opp. 

at 5 (both citing In re Slack, 187 F.3d at 1075); see also Adventist Opp. at 7 (asserting that “the mere 

fact that the Debtors may dispute their liability [does not] preclude Adventist’s claims from being 

liquidated” (citing In re Slack, 187 F.3d at 1075).11) The Opposing Parties read Slack’s holding in an 

11 The Opposing Parties do not put forth any arguments that the Contested Claims are liquidated 

because the Debtors’ liability dispute will be decided at a simple hearing. (See, e.g., Adventist Opp. 

at 9 (arguing that certain costs are liquidated because determining the amount of loss “does not 

require ‘an extensive and contested evidentiary hearing’” (quoting In re Enriquez, 315 B.R. 112, 122 

(Bankr. N.D. Cal. 2004))).) The legal issue is not whether the math is easily computed; it is whether 

the liability is subject to ready determination. And the answer to that question here is “no”. If the 

Opposing Parties raise arguments in their forthcoming reply briefs that the Debtors’ liability dispute 

can be resolved at a simple hearing, the Court should not consider such arguments as arguments 

raised for the first time in a reply brief are waived and may not be considered by the Court. See 

Graves v. Arpaio, 623 F.3d 1043, 1048 (9th Cir. 2010) (holding that “arguments raised for the first 

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unduly broad manner and overlook case law from the B.A.P. that rejects such a broad interpretation 

of Slack. The Opposing Parties focus exclusively on the “precision in computation” prong of the Slack 

holding, and ignore entirely the “ready determination” prong. 

In Slack, the Ninth Circuit held that “a dispute regarding liability will not necessarily

render a debt unliquidated”, but a debt may be rendered unliquidated when “an extensive hearing will 

be needed to determine the amount of the debt, or the liability of the debtor”. 187 F.3d at 1074 

(emphasis added). The debtor in Slack filed for relief under Chapter 13 of the Bankruptcy Code. Id. 

at 1072. Prior to the debtor filing for Chapter 13 relief, a creditor filed an action against him in state 

court under various tort-based causes of action. Id. The state court entered a tentative ruling that 

found the debtor liable, but the state court did not issue a final judgment until after the debtor filed for 

Chapter 13 relief. Id. In the Chapter 13 proceeding, the creditor filed a proof of claim in the amount 

of the damages from the pending state court action. Id. The debtor argued that the creditor’s claim 

was unliquidated because the state court’s final judgment came down after the debtor filed his 

bankruptcy petition. Id. 

The court rejected the debtor’s argument. The court held that “the mere assertion by 

the debtor that he is not liable for the claim will not render the debt unliquidated”, but instead the 

inquiry is “[w]hether the amount is easily calculable or whether an extensive hearing will be needed 

to determine the amount of the debt, or the liability of the debtor.” Id. at 1074. In rejecting the debtor’s 

argument that a debt is not liquidated until “amount and actual liability” are established, the court 

made note of the state court’s tentative decision finding the debtor liable, which illustrated that no 

extensive hearing was required to determine the debtor’s liability. Id. at 1075. 

The Opposing Parties attempt to craft Slack’s holding into a broad rule that disputes as 

to liability have no bearing on whether a claim is liquidated. But that is not what Slack holds, as the 

later-decided Ho makes clear. There, the B.A.P. held that, post-Slack, the law of the Ninth Circuit 

remains that “whether a debt is liquidated . . . turns on the distinction between a simple hearing to 

time in a reply brief are waived”); Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999) (“[A]s an 

argument raised for the first time in a reply brief, it is not an argument that we may consider here.”).

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determine the amount of a certain debt, and an extensive and contested evidentiary hearing in which 

substantial evidence may be necessary to establish amounts or liability”. In re Ho, 274 B.R at 874-75 

(emphasis in original) (citing In re Wenberg, 94 B.R. 631, 634 (B.A.P. 9th Cir. 1988)); see also In re 

Sugg, No. 14-60916-fra13, 2014 WL 3671421, at *2 (Bankr. D. Or. July 22, 2014) (finding that a 

claim was unliquidated because the debtor’s liability could not be determined “absent an extensive 

hearing or trial” (citing In re Ho, 274 B.R. at 873, 875)). 

Ho makes clear that the dicta the Opposing Parties cite from Slack “must be tempered 

by prior Ninth Circuit precedent (which Slack did not overrule) and the facts of that case.” In re Ho, 

274 B.R. at 873. Because the underlying facts in Slack—the state court’s tentative liability ruling—

demonstrated that the debtor’s liability was not seriously in dispute, the court explained that Slack 

should not be read to establish a broad rule that “liability disputes never play a role in determining 

whether a debt is unliquidated.” Id. at 875. Instead, the appropriate analysis is whether or not the 

dispute as to liability keeps the claim from being readily determinable. Id. In Ho, the B.A.P. found 

that the dispute as to liability concerning a contractual claim rendered the debt unliquidated even 

though debt allegedly owed to a creditor could be “ascertained to the penny”. Id. (emphasis added). 

As the court explained: 

[I]n this case, there would need to be allegations of liability and an 

extensive hearing to determine Debtor’s liability for the Great Tone 

contract debt. The amount of the open book account debt allegedly 

owed to Great Tone can be ascertained to the penny. But not even 

Great Tone contends that Debtor is personally liable. Therein lies the 

rub. This is not a case where all that is lacking is a final determination 

as to the debtor’s liability. In addition, even if Debtor is liable, it is 

not self evident that she is liable for the entire amount of the debt. 

While a dispute as to liability will not “necessarily render a debt 

unliquidated,” Slack, 187 F.3d at 1074, the nature of this dispute does. 

In re Ho, 274 B.R. at 875 (emphasis added) (footnotes omitted). Therein lies the rub indeed. Based 

on this precedent, the Court must look at the nature of the dispute in this particular case, and not just 

on the precision with which the Opposing Parties can calculate their asserted claims. 

The Opposing Parties’ focus on the calculation of the amount of their asserted claims 

misses the key issue here. The ability to produce a number—even one “ascertained to the penny” in 

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the words of Ho—does not render the amount of the claim readily determinable. It would fly in the 

face of Ninth Circuit precedent to find that simply because the Opposing Parties can produce specific 

amounts for their asserted claims from spreadsheets and accounting entries that automatically makes 

those claims liquidated for purposes of Section 502(c). While the Debtors’ may contest the amounts 

specified in the Contested Claims, the primary dispute at issue here concerns the Debtors’ liability for 

the Contested Claims, not the amount of the asserted claims. As explained below, the liability dispute 

at issue here requires an extensive hearing, making the Contested Claims not subject to ready 

determination and therefore unliquidated and subject to estimation. 

C. The nature of the dispute here renders the claims unliquidated and subject to 

estimation. 

Because an extensive hearing is required to resolve the dispute as to the Debtors’ 

liability, the Contested Claims are unliquidated and subject to estimation. 

As explained above, courts must look at “the nature of the dispute” in determining 

whether the dispute renders a claim unliquidated, In re Nicholes, 184 B.R. at 90, and disputes requiring 

“extensive hearing[s]” are the types of disputes that render claims unliquidated, In re Ho, 274 B.R. at 

874. Courts in the Ninth Circuit have held that liability disputes involving unlitigated tort claims, 

including negligence actions, are unliquidated because of the extensive hearings required to resolve 

such disputes. In re Nicholes, 184 B.R. at 89; In re Sylvester, 19 B.R. at 673. 

The Opposing Parties cite to In re Keenan for the proposition that courts have adopted 

the definition of “unliquidated” from the 109(e) context to apply in Chapter 11 matters as well. 

(See, e.g., U.S.A. Opp. at 5 (citing In re Keenan, 201 B.R. 263, 265 (Bankr. S.D. Cal. 1996).) 

In Keenan, the court found that a tort claim asserted against a Chapter 11 debtor was subject to ready 

determination and thus liquidated where “the state court case [concerning the tort claim] did proceed 

to judgment based on a jury verdict, and as of the date of the filing of the bankruptcy was readily 

calculable.” In re Keenan, 201 B.R. 263, 266 (Bankr. S.D. Cal. 1996). The court noted that the 

process of 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”. Id. Therefore, estimation is inappropriate where “a case has already 

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proceeded to judgment”. Id. Similarly, in Audre, another case cited by the U.S.A. in defining a 

liquidated claim for purposes of Chapter 11, (U.S.A. Opp. at 5), the Court found a claim to be subject 

to ready determination where the claim had been determined by a state court judgment. In re Audre, 

Inc., 216 B.R. 19, 30 (B.A.P. 9th Cir. 1997) (“[T]he amount of the claim is not unliquidated because, 

as of the date of the filing of the [C]hapter 11 case, it was easily subject to ready determination—the 

Family Court had already determined the amount of the claim to be $11.5 million.”). The B.A.P. 

affirmed its agreement with the lower court’s assessment that “even if the Court were to estimate the 

claims based upon the Family Court judgment, the claims would be estimated in the amount of the 

judgment.” In re Audre, Inc., 202 B.R. 490, 498 (Bankr. S.D. Cal. 1996), aff’d, 216 B.R. at 30-31. 

On the contrary, where, like here, there is no pre-petition judgment or settlement of the 

claims, estimation is appropriate. See In re Lionel, L.L.C., No. 04-17324, 2007 WL 2261539, at *2 

(Bankr. S.D.N.Y. Aug. 3, 2007) (“[W]hen the liquidation of a claim is premised on litigation pending 

in a non-bankruptcy court, and the final outcome of the matter is not forthcoming, the bankruptcy 

court should estimate the claim.”). Here, there has been no judgment that has determined a fixed 

amount of the damages of the Opposing Parties. Unlike the claims in Keenan and Audre, the Wildfire 

Claims of the Opposing Parties (like all other Wildfire Claims in these cases) are not susceptible to 

ready determination because the Debtors’ liability has not been determined and because the damages 

calculations has multiple components. Indeed, the bankruptcy court in Keenan found that “[h]ad the 

case not proceeded to trial and judgment, it might have been difficult to conclude that the amount of 

the claim was susceptible to ready determination because of the multiple components of the damages 

portion of the fraud claims.” In re Keenan, 201 B.R. at 266. 

In the estimation proceedings, the Debtors are contesting their legal liability for any 

claims arising out of the Wildfires, including the Contested Claims. Resolving the Debtors’ liability 

dispute as to the Contested Claims will require extensive hearings. In the estimation proceedings in 

the District Court, the Debtors have produced over 3.3 million documents to the other parties in the 

estimation proceedings. The parties have disclosed fact witness lists that include 45 individuals and 

the parties have scheduled 31 depositions. The parties have also disclosed a potential of 27 expert 

witnesses. There will be expert reports, discovery related to the experts’ sources, rebuttal reports and 

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expert depositions prior to the start of the proceedings. During the estimation proceedings, the District 

Court will have to resolve complex issues such as liability of the Debtors for some or all of the 

Wildfires (the Debtors have conceded causation (other than for the Tubbs Fire) for purposes of 

estimation, but not liability), the proper method of damages loss calculation and the reasonableness of 

PG&E’s vegetation management and electric maintenance programs. The complexity of resolving the 

Debtors’ liability is precisely why this Court found that estimation was necessary, and the District 

Court agreed. (See Dkt. 3648 at 4-7 (explaining that there are “several complex issues” that “are 

inexorably intertwined” in resolving these Chapter 11 Cases).) Notably, the foregoing facts show how 

extensive the estimation proceedings will be, and the District Court has streamlined the estimation 

proceedings to the greatest extent possible to resolve the Debtors’ liability and estimated damages in 

a prompt manner. A separate full blown litigation over the Debtors’ liability for the Contested Claims 

would be at least as extensive, not to mention redundant. 

Courts have found that tort claims often involve bona fide disputes with respect to 

liability and damages that render claims unliquidated. In Duque, the debtor “maintain[ed] that there 

[wa]s a bona fide dispute as to his liability in [a] civil tort action” that was the basis of the claim at 

issue and that “extensive hearings w[ould] be required to resolve the issues of liability and damages”. 

2005 WL 6960181, at *7. The claimant in Duque “contend[ed] that her claim for special damages 

was readily ascertainable from the spreadsheet, itemizations, medical bills, invoices, and other 

documentation, which she provided to both [the debtor] and the court.” Id. The B.A.P. determined 

that the claims at issue were unliquidated because, inter alia, “a resolution of the liability and damages 

issues would require extensive hearings and evidence from both parties.” Id. at *8. The B.A.P. 

explained that “[t]he fact that [the debtor] did not provide rebuttal evidence in bankruptcy court was 

irrelevant, as that action must be tried in state court, and [the claimant] did not request an evidentiary 

hearing in bankruptcy court.” Id. In so finding, the court noted that “[c]laims that are not capable of 

ready and precise determination without an extensive evidentiary hearing, because of a bona fide 

dispute, frequently involve pending tort or personal injury litigation.” Id. (citations omitted). 

So too here, the determination of the Debtors’ liability will not come after a simple 

hearing, but rather will require a complicated, extensive hearing that resolves numerous issues on the 

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applicability of complex legal doctrines and reasonableness of the Debtors’ business practices. The 

nature of this dispute renders the Contested Claims unliquidated under Ninth Circuit law. 

CONCLUSION 

WHEREFORE the Debtors respectfully request that the Court find that the Contested 

Claims are unliquidated and subject to estimation and order further relief as the Court may deem just 

and appropriate. 

Dated: December 5, 2019 

 WEIL, GOTSHAL & MANGES LLP 

 CRAVATH, SWAINE & MOORE LLP 

 KELLER & BENVENUTTI LLP

/s/ Paul H. Zumbro

Paul H. Zumbro 

Attorneys for Debtors and Debtors in Possession

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