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JACOB T. BEISWENGER (S.B. #321012)

jbeiswenger@omm.com 

O’MELVENY & MYERS LLP 

400 South Hope Street 

Los Angeles, California 90071-2899 

Telephone: (213) 430-6000 

Facsimile: (213) 430-6407 

Attorneys for Governor Gavin Newsom 

 

NANCY A. MITCHELL (pro hac vice)

nmitchell@omm.com 

MATTHEW L. HINKER (pro hac vice) 

mhinker@omm.com 

O’MELVENY & MYERS LLP 

7 Times Square 

New York, New York 10036 

Telephone: (212) 326-2000 

Facsimile: (213) 326-2061 

UNITED STATES BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

In re: 

PG&E CORPORATION, 

-andPACIFIC GAS & ELECTRIC 

COMPANY, 

Debtors. 

Case No. 19-30088 (DM) 

Chapter 11 

(Lead Case) 

(Jointly Administered) 

OBJECTION OF GOVERNOR GAVIN 

NEWSOM TO DEBTORS’ MOTION 

PURSUANT TO 11 U.S.C. §§ 363(B) AND 

105(A) AND FED. R. BANKR. P. 6004 

AND 9019 FOR ENTRY OF AN ORDER 

(I) AUTHORIZING THE DEBTORS TO 

ENTER INTO RESTRUCTURING 

SUPPORT AGREEMENT WITH THE 

CONSENTING SUBROGATION 

CLAIMHOLDERS, (II) APPROVING 

THE TERMS OF SETTLEMENT WITH 

SUCH CONSENTING SUBROGATION 

CLAIMHOLDERS, INCLUDING THE 

ALLOWED SUBROGATION CLAIM 

AMOUNT, AND (III) GRANTING 

RELATED RELIEF 

[Docket Nos. 3992 and 4554] 

Date: November 13, 2019 

Time: 10:00 a.m. (Pacific Time) 

Place: United States Bankruptcy Court 

 Courtroom 17, 16th Floor 

 San Francisco, CA 94102 

 

 Affects PG&E Corporation 

 Affects Pacific Gas & Electric 

Company 

 Affects both Debtors 

*All papers shall be filed in the Lead 

Case, No. 19-30088 (DM) 

Case: 19-30088 Doc# 4640 Filed: 11/09/19 Entered: 11/09/19 20:53:39 Page 1 of

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Governor Gavin Newsom, by and through his counsel, O’Melveny & Myers LLP, 

respectfully submits this objection (the “Objection”) in response to the Debtors’ Motion Pursuant 

to 11 U.S.C. §§ 363(b) and 105(a) and Fed. R. Bankr. P. 6004 and 9019 for Entry of an Order (I) 

Authorizing the Debtors to Enter into Restructuring Support Agreement with the Consenting 

Subrogation Claimholders, (II) Approving the Terms of Settlement with Such Consenting 

Subrogation Claimholders, Including the Allowed Subrogation Claim Amount, and (III) Granting 

Related Relief [Docket No. 3992] (the “Subrogation Settlement and RSA Motion”).1 Governor 

Newsom files this Objection in his official capacity as Governor of the State of California, but not 

on behalf of any agency, department, unit or entity of the State of California.2 In support of the 

Objection, Governor Newsom respectfully states as follows: 

PRELIMINARY STATEMENT 

1. Approval of the Subrogation Settlement and RSA Motion is premature and this 

Court should further adjourn the hearing on the settlement until the Court can review it, and its 

terms, in the context of a broader resolution of these chapter 11 cases. In addition, the Amended 

and Restated Restructuring Support Agreement (the “Amended RSA”) [Docket No. 4554] 

undermines the competitive plan process created just weeks ago by this Court when it terminated 

the Debtors’ exclusivity, and the Amended RSA must be modified if it is to be approved at any 

point. 

2. The Amended RSA is yet another example of legal maneuvering by parties 

apparently more focused on securing procedural advantages for their own pecuniary interests than 

on reaching a fair and expeditious resolution of this bankruptcy. Many of the holders of Subrogation 

Claims are sophisticated financial institutions that bought the claims at a discount after the insurers 

paid out claims. Certain of those institutions also hold equity in PG&E and may be seeking to 

leverage the settlement of Subrogation Claims to better position those holdings. These tactics may 

 

1 Capitalized terms used but not defined herein have the meaning given to such terms in the Subrogation Settlement 

and RSA Motion.

2

 The Attorney General has appeared in these proceedings on behalf of certain agencies and departments of the State 

of California.

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be commonplace in bankruptcy proceedings, but they are unacceptable in these chapter 11 cases, 

which are causing ongoing harm to California, its residents, and economy. 

3. The adjournment of the Subrogation Settlement and RSA Motion will not adversely 

affect compensation for insured fire victims, who already should have received payment from their 

insurance companies. Instead, adjournment will force the financial institutions holding Subrogation 

Claims to continue to negotiate and facilitate a global resolution of PG&E’s chapter 11 cases. 

4. AB 1054, the wildfire safety bill signed into law on July 12, 2019, required PG&E 

to make fundamental changes to gain access to the Wildfire Fund and to resolve these chapter 11 

cases in a manner consistent with that statute. California’s expectations for PG&E are clearly set 

out in statute: 

a. PG&E must be restructured to provide safe, reliable, and affordable electric service 

to its customers; 

b. Wildfire claims must be paid in the full amount authorized by this Court; 

c. The restructuring must be consistent with California’s climate goals; and 

d. The plan of reorganization must be neutral, on average, to PG&E’s ratepayers. 

PG&E previously represented to this Court that it intends to meet the requirements of AB 1054 as 

part of its resolution of these chapter 11 cases and the financing required for any party to exit these 

chapter 11 cases is likely contingent on PG&E obtaining access to the Wildfire Fund. 

5. AB 1054 also requires PG&E to resolve this bankruptcy proceeding by June 30, 

2020—before next fire season—to access the Wildfire Fund. PG&E’s poorly executed and overly 

broad use of power shut offs in recent weeks starkly demonstrates how critical the June 30 deadline 

is for the state, its residents, and its economy. The power shut offs plunged millions of Californians 

into darkness for days and imperiled the lives of thousands of elderly and medically vulnerable 

residents. These power shut offs forced hundreds of thousands of children to miss nearly a week of 

school and negatively impacted state and local economies by disrupting businesses. This 

bankruptcy—voluntarily filed by PG&E—must be resolved so the state of California can get on 

with the urgent business of fundamentally transforming this utility into one that can provide safe, 

affordable and reliable power. 

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6. The seemingly incessant litigation and stalling tactics undertaken by the financial 

stakeholders in these chapter 11 cases—often at the expense of involuntary creditors (e.g. the 

wildfire victims)—inspires little confidence that they can achieve resolution of these cases on a 

schedule and in a manner that meets the expectations of California. In the event they cannot or will 

not do so, the state of California will present its own plan for resolution of these cases. 

7. In light of the uncertainty regarding PG&E’s path to exit these chapter 11 cases, it 

is premature to approve a settlement engineered to hinder the viability of a plan proposed by any 

party other than the Debtors. In addition, the Amended RSA must be modified to prevent 

Subrogation Claim holders from impeding confirmation of a competing plan if such a plan provides 

the best resolution of these chapter 11 cases. 

OBJECTION 

8. The proposed settlement embodied in the Amended RSA irrevocably obligates the 

Debtors to pay the Allowed Subrogation Claim Amount ($11 billion), but allows holders of 

Subrogation Claims to terminate the Amended RSA and pursue a higher claim in circumstances 

that are adverse to the interests of other potential plan proponents. Given the uncertainty related to 

the plan that will resolve these chapter 11 cases, and the possibility that the state will need to pursue 

its own plan, the Allowed Subrogation Claim Amount may be an impediment to confirmation of a 

plan of reorganization.3 It is simply too early to tell. 

9. In addition, the Amended RSA contains provisions that render the settlement 

embodied in the Amended RSA unfair and inequitable, unreasonable, not in the best interests of 

the estate, anti-competitive or otherwise objectionable. If the Amended RSA is to be considered at 

any point in these chapter 11 cases, those provisions should be modified. Certain of those provisions 

are addressed below. 

A. The Allowed Subrogation Claim Amount is Not Binding

10. The Allowed Subrogation Claim Amount purports to be binding in these chapter 11 

cases. However, the Amended RSA contains multiple provisions that allow the Requisite 

 

3 The Official Committee of Tort Claimants also raises serious intercreditor issues in its Complaint for Declaratory 

Judgment Subordinating and Disallowing Claims and for an Accounting [Docket No. 4628] that cast further doubt on 

whether the Subrogation Settlement and RSA Motion can be approved at this point in these chapter 11 cases. 

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Consenting Creditors to elect to terminate the Amended RSA and seek payment in full of the 

previously compromised Subrogation Claims. This could empower the Subrogation Claim holders, 

some of whom hold other substantial financial stakes in the company, to obstruct an alternative 

settlement—even when their Subrogation Claims are treated the same. Any settlement approved by 

this Court should require Consenting Creditors to vote for any plan, or deem the Subrogation 

Creditors unimpaired by any plan, that provides Subrogation Claims with $11 billion in cash. 

B. Prohibitions on voting against any Alternative Restructuring

11. The Amended RSA requires Consenting Creditors to vote their RSA Claims against 

any plan, plan proposal, restructuring proposal, offer of dissolution, winding up, liquidation, sale 

or disposition, reorganization, merger or restructuring of the Company other than Plan. See

Amended RSA § 2(a)(iii). Any settlement approved by this Court should require the Consenting 

Creditors to support any Alternative Restructuring, or deem the Subrogation Creditors unimpaired, 

so long as the Subrogation Claims receive $11 billion in cash. 

C. Requirement that Ad Hoc Subrogation Group and Debtors Negotiate Together

12. The Amended RSA precludes the Debtors and the Ad Hoc Subrogation Group from 

negotiating with any other creditor constituencies unless the Debtors and Ad Hoc Subrogation 

Group negotiate together. See Amended RSA §2(b)(ii). This provision is inappropriate and 

inconsistent with the Bankruptcy Court’s orders terminating the Debtors’ exclusive periods. It 

should be stricken. Moreover, to the extent the state of California proposes its own plan, all parties 

must be free to discuss issues with the State. 

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK 

 

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CONCLUSION 

13. The Subrogation Settlement and RSA Motion should be further adjourned given the 

uncertainty related to the resolution of these chapter 11 claims and the serious issues raised by the 

Official Committee of Tort Claimants in its recent filings or denied. 

Dated: November 9, 2019

 O’MELVENY & MYERS LLP 

By: /s/ Jacob T. Beiswenger

 

JACOB T. BEISWENGER 

By: /s/ Nancy A. Mitchell

 

NANCY A. MITCHELL 

MATTHEW HINKER 

Attorneys for Governor Gavin Newsom 

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