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TIMOTHY S. LAFFREDI (WI SBN 1055133) 

Assistant United States Trustee

MARTA E. VILLACORTA (NY SBN 4918280)

Assistant United States Trustee

GREG M. ZIPES (NY SBN 2478014)

Trial Attorney 

CAMERON M. GULDEN (MN SBN 310931)

Trial Attorney 

United States Department of Justice

Office of the U.S. Trustee 

450 Golden Gate Avenue, Suite 05-0153

San Francisco, CA 94102

Telephone: (415) 705-3333

Facsimile: (415) 705-3379

Email: marta.villacorta@usdoj.gov

Attorneys for Andrew R. Vara, Acting United States Trustee for Region 31

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

In re:

PG&E CORPORATION,

- and -

Bankruptcy Case

No. 19-30088 DM (Lead Case)

No. 19-30089 DM

Chapter 11

(Jointly Administered)

Date: December 17, 2019

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

Place: Hon. Dennis Montali

450 Golden Gate Avenue

16th Floor, Courtroom 17

San Francisco, CA 94102

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)

UNITED STATES TRUSTEE’S RESPONSE

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 AND TCC TO ENTER INTO RESTRUCTURING SUPPORT AGREEMENT 

WITH THE TCC, CONSENTING FIRE CLAIMANT PROFESSIONALS, AND 

SHAREHOLDER PROPONENTS, AND (II) GRANTING RELATED RELIEF

 

1

Andrew R. Vara, Acting United States Trustee for Region 3, is acting in this appointment for 

Tracy Hope Davis, United States Trustee for Region 17, who has recused herself.

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Andrew R. Vara, Acting United States Trustee for Region 3 (the “United States 

Trustee”), by and through his undersigned counsel, submits this objection and response (the 

“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 and the Official 

Committee of Tort Claimants (the “TCC”) to enter into and perform under that certain 

Restructuring Support Agreement, dated as of December 6, 2019 (the “Tort Claimant RSA”), 

among the Debtors, the TCC, the Consenting Fire Claimant Professionals,2 and Shareholder 

Proponents (the “RSA Motion”) (ECF No. 5038).

I. RESPONSE

As a preliminary matter, the United States Trustee acknowledges the difficult challenges 

the Debtors face in trying to fashion a settlement with tens of thousands of claimants while trying 

to meet the plan confirmation deadline of June 30, 2020. The United States Trustee requests 

further information before the Court approves the wide-ranging relief sought in the RSA Motion: 

(a) The Court has emphasized the need to provide due process, particularly for the 

fire victims. The Debtors must explain why the RSA Motion, which proposes to 

cap the Debtors’ liability to these victims at $13.5 billion, must be heard on 

shortened notice over the holiday season. The parties to the RSA appear to have 

arbitrarily chosen December 20, 2019 as the termination date of the RSA and 

have used that deadline to argue for an expedited hearing. See RSA at 6. The 

Debtors should explain why this matter cannot be adjourned. 

(b) Relatedly, the RSA should not usurp the plan process. The Debtors should 

confirm that the RSA is not intended to circumvent the requirements of 11 U.S.C. 

§ 1129, including, as appropriate, the absolute priority rule and the best interest of 

creditors test. 

 

(c) The RSA Motion describes an opt-in procedure for releases under any plan. The 

Debtors should clarify that the proposed releases will not violate the Ninth Circuit 

prohibition of third-party releases. 

Absent adequate explanations relating to the above concerns, the RSA Motion should not 

be approved at this time with such short and limited notice.

 

2 Unless otherwise indicated, all capitalized terms in this Response have the meanings defined in 

the RSA Motion. 

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A. Background

1. On January 29, 2019, the Debtors commenced the above-captioned cases by filing 

voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. ECF No. 1. 

2. No trustee has been appointed in the Debtors’ cases. See generally Case Dockets.

3. On February 12, 2019, the United States Trustee appointed an Official Committee 

of Unsecured Creditors. ECF No. 409. On February 15, 2019, the United States Trustee 

appointed the TCC. ECF No. 453.

4. The Debtors’ latest monthly operating report for the month of October 2019 

(“October MOR”) shows an unaudited balance sheet of over $85 billion in assets and total 

shareholder equity of close to $9 billion. Copies of the relevant pages of the October MOR are 

attached as Exhibit A. 

B. The RSA Motion

5. The movants filed the RSA Motion on December 9, 2019, ECF No. 5038, as well 

as a motion to shorten time (the “Motion to Shorten”). ECF No. 5040.

6. On December 9, 2019, the Court entered an order granting the Motion to Shorten

Time, requiring objections by December 16, 2019, at 12:00 p.m. PST, and setting a hearing for 

December 17, 2019, to consider the RSA Motion. ECF No. 5046.

7. The RSA Motion announces a global settlement among the Debtors, the TCC, and 

the law firms, which the Debtors state represent individuals holding approximately 70% in 

number of prepetition fire claims filed against the Debtors (the “Consenting Fire Claimant 

Professionals”), and certain funds and accounts managed by Abrams Capital Management, LP 

and Knighthead Capital Management, LLP (the “Shareholder Proponents”). RSA Motion at 8

(unless otherwise noted, the page numbers are generated by the Court’s filing system).

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8. The parties have resolved, among other things, the treatment and discharge of 

individual fire claims under the Debtors’ chapter 11 plan. Over $36 billion in asserted 

prepetition fire liabilities will be resolved through the contribution by the Debtors of cash and 

stock with an aggregate value of $13.5 billion and assignment of certain rights and causes of 

action (the “Settlement Payment”) to a trust established for the benefit of the fire claimants. 

The settlement is embodied in the Tort Claimants RSA and term sheet annexed thereto as Exhibit 

A (the “Term Sheet”).

9. Specifically, “each holder of a HoldCo Fire Victim Claim shall have its Claim 

permanently channeled to the Fire Victim Trust, and such Claim shall be asserted exclusively 

against the Fire Victim Trust in accordance with its terms, with no recourse to the Debtors, the 

Reorganized Debtors, or their respective assets and properties.” See RSA Motion, Ex. A (Term 

Sheet) at 5 (Article II-Classification of Claims and Interests). 

10. According to the RSA Motion, the TCC represents a diverse group of over 70,000 

claimants. However, only those “who have formally appeared in these Chapter 11 Cases and 

requested service pursuant to Bankruptcy Rule 2002” will receive notice of the settlement.

Therefore, the vast majority of the claimants are not receiving notice of a motion that will impact 

their rights. 

11. In the declaration of Jessica Liou in support of the Motion to Shorten (ECF No. 

5041), Ms. Liou states that an expedited hearing is necessary because “if the Tort Claimants 

RSA is not approved by this Court by December 20, 2019, it automatically terminates. The 

Tubbs trial is scheduled to begin with jury selection on January 7, 2020, with the estimation 

proceedings to commence before the District Court shortly thereafter on February 18, 2020.” 

See Liou Declaration at ¶ 7. 

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C. Argument 

1. The Debtors Should Explain Why Notice Is Sufficient.

The Certificate of Service has confirmed that a limited group was served with the RSA 

Motion. ECF No. 5103. Most of the listed “Consenting Fire Claimant Professionals” have not 

filed Bankruptcy Rule 2019 statements, but it appears obvious that many of the fire claimants are 

not receiving individual notice of a motion that will impact their rights.

3 See In re Braniff 

Airways, Inc., 700 F.2d 935, 940 (5th Cir. 1983) (agreement outside a plan that attempts “to 

specify the terms whereby a reorganization plan is to be adopted, the parties . . . must scale the 

hurdles erected in Chapter 11”).

The only reason for a hearing on December 17, 2019 appears to be because the parties 

have set December 20, 2019 as the date the RSA terminates by its own terms. See RSA at 6. 

The Tubbs trial is scheduled for February, and that trial by itself will not fix the rights of all the 

fire victims. See Liou Declaration at ¶ 7. The Debtors should explain whether the hearing on the 

RSA Motion can be adjourned. 

2. The RSA Should Not Usurp the Plan Process.

At a global level, any plan needs to meet the priority scheme and the best interest test as 

codified under 11 U.S.C. § 1129 of the Bankruptcy Code. In this case (absent universal 

agreement by creditors to some other treatment), all unsecured claims must receive payment in 

full before equity receives anything. As the Supreme Court stated in Czyzewski v. Jevic Holding 

Corp., the Bankruptcy Code “sets forth a basic system of priority, which ordinarily determines 

the order in which the bankruptcy court will distribute assets of the estate.” 137 S. Ct. 973, 979

 

3 Of the tort victims, only those “who have formally appeared in these Chapter 11 Cases and 

requested service pursuant to Bankruptcy Rule 2002” will receive notice. RSA Motion at 25-26. 

The TCC represents a diverse group of over 70,000 claimants. RSA Motion at 24.

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(2017). The Chapter 11 process is more flexible than the Chapter 7 process, which must follow 

the prescribed order of priority under 11 U.S.C. §§ 507 and 726. However, “a bankruptcy court 

cannot confirm a plan that contains priority-violating distributions over the objection of an 

impaired creditor class.” Id. Further, 11 U.S.C. § 105(a) does not authorize the approval of a 

non-plan priority-skipping distribution, as this Court cannot “alter the balance struck by the 

statute.” Id. at 987 (quoting Law v. Siegel, 134 S. Ct. 1188, 1198 (2014)); see also Braniff, 700 

F.2d at 939-40 (analyzing and ultimately overruling a bankruptcy court approved agreement that 

“thwart[ed] the Code’s carefully crafted scheme for creditor enfranchisement where plans of 

reorganization are concerned”).

The Debtors must explain the purpose of the RSA. If the purpose is to commit a group of 

consenting fire claimants to a certain course of action, that is one matter. If the RSA is to be 

used as a cudgel at the plan confirmation stage to argue that fire claimants’ rights are 

predetermined before the plan process has played out, with its intricate panoply of creditor 

protections, that is another. 

3. The Releases May Be Overly Broad

The RSA states that “each Consenting Fire Claimant Professional shall use all reasonable 

efforts to advise and recommend to its existing and future clients (who hold Fire Victim Claims) 

to (i) support and vote to accept the Amended Plan, and (ii) to opt-in to consensual releases 

under Section 10.9(b) of the Amended Plan . . . .” RSA at 5. The Amended Plan has now been 

filed and retains the following as additional released parties: 

[S]uch entities’ predecessors, successors, assigns, subsidiaries, affiliates, managed 

accounts and funds, current and former officers and directors, principals, equity 

holders, members, partners, managers, employees, subcontractors, agents, 

advisory board members, restructuring advisors, financial advisors, attorneys, 

accountants, investment bankers, consultants, representatives, management 

companies, fund advisors (and employees thereof), and other professionals, and 

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such entities’ respective heirs, executors, estates, servants, and nominees, in each 

case in their capacity as such.

Amended Plan, Redline Version, ECF No. 5102, Section 1.161. 

Third party releases are generally prohibited in the Ninth Circuit. Resorts International, 

Inc. v. Lowenschuss (In re Lowenschuss), 67 F.3d 1394, 1401-02 (9th Cir.1995). The Debtors 

should describe the effect on the RSA of a subsequent finding by the Court that the releases are 

overly broad or invalid. 

WHEREFORE, for the reasons set forth above, the RSA Motion should be denied or 

adjourned. 

Dated: December 16, 2019 Andrew R. Vara

Acting United States Trustee, Region 3

By: /s/ Timothy S. Laffredi

 Timothy S. Laffredi 

 Assistant United States Trustee

Greg M. Zipes

Trial Attorney

Cameron M. Gulden

Trial Attorney

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Case: 19-30088 Doc# 4865 Filed: 11/26/19 Entered: 11/26/19 13:57:21 Page 7 of

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Case: 19-30088 Doc# 5124 Filed: 12/16/19 Entered: 12/16/19 11:38:07 Page 11

of 14
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Case: 19-30088 Doc# 4865 Filed: 11/26/19 Entered: 11/26/19 13:57:21 Page 8 of

 17

Case: 19-30088 Doc# 5124 Filed: 12/16/19 Entered: 12/16/19 11:38:07 Page 12

of 14
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Case: 19-30088 Doc# 4865 Filed: 11/26/19 Entered: 11/26/19 13:57:21 Page 9 of

 17

Case: 19-30088 Doc# 5124 Filed: 12/16/19 Entered: 12/16/19 11:38:07 Page 13

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Case: 19-30088 Doc# 4865 Filed: 11/26/19 Entered: 11/26/19 13:57:21 Page 10

 of 17

Case: 19-30088 Doc# 5124 Filed: 12/16/19 Entered: 12/16/19 11:38:07 Page 14

of 14