Entered on Docket
June 17, 2020
EDWARD J. EMMONS, CLERK
U.S. BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA

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Signed and Filed: June 17, 2020

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UNITED STATES

________________________________________
DENNIS MONTALI
U.S. Bankruptcy
Judge
BANKRUPTCY
COURT

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NORTHERN DISTRICT OF CALIFORNIA

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In re:

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PG&E CORPORATION,
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- and )
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PACIFIC GAS AND ELECTRIC COMPANY, )
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Debtors.
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☐ Affects PG&E Corporation
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☐ Affects Pacific Gas and
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Electric Company
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☒ Affects both Debtors
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* All papers shall be filed in
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the Lead Case, No. 19-30088 (DM).
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Bankruptcy Case
No. 19-30088-DM
Chapter 11
Jointly Administered

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MEMORANDUM DECISION – CONFIRMATION OF DEBTORS’ AND SHAREHOLDER
PROPONENTS’ JOINT CHAPTER 11 PLAN OF REORGANIZATION

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I.

INTRODUCTION
These cases are among the most complex in U.S. bankruptcy

history.

They involve difficult legal, financial, practical and

personal issues.

They were filed because of overwhelming damage

claims following the devasting 2015 – 2018 Northern California
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wildfires, leaving thousands of victims who suffered from those

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wildfires owed billions of dollars, plus thousands more of

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traditional non-fire creditors of various types, also owed

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billions of dollars.
There is no need to elaborate in detail.

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All of the

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victims, all of the over sixteen million PG&E customers in

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Northern California, indeed all of Northern California if not

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the rest of the country, know the story.

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court comes down to one critical question:

The issue before the
whether to confirm

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the Debtors’ and Shareholder Proponents’ Joint Chapter 11 Plan

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of Reorganization (“the Plan”).

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necessary to implement that Plan to make it effective.

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so, however, is one more important step toward facilitating the

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process of paying those victims and creditors. If the court does

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not confirm the Plan, the only option appears to be leaving the

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Debtors where they have been for the last seventeen months.

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Leaving tens of thousands of fire survivors, contract parties,

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lenders, general creditors, allegedly defrauded investors,

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equity owners and countless others with no other options on the

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horizon is not an acceptable alternative.

Doing

For the reasons that follow, the court will confirm the

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If so, there are still steps

Plan.

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II.

OVERVIEW OF DECISION
Debtors have made a convincing case for confirmation of the

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Plan.

To satisfy the June 30, 2020, deadline of AB 1054, the

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court will set forth the necessary elements of its decision to
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confirm the Plan and to dispose of objections to it.

Later this

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week, it will hold a hearing to settle any final adjustments

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necessary for it to enter its Order Confirming Chapter 11 Plan

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(“OCP”).1

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Debtors filed extensive exhibits to support confirmation.

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In addition, they filed the following sworn statements in lieu

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of direct oral testimonies:

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(Dkt. #7507) (“Pullo Dec”); Declaration of Jason P. Wells (Dkt.

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#7510) (“Wells Dec”); Declaration of John Boken (Dkt. #7514)

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(“Boken Dec”); and Declaration of Kenneth S. Ziman (Dkt. #7512)

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(“Ziman Dec”), and in conjunction with the Pullo Dec, Wells Dec

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and Boken Dec, the “Supporting Declarations”.

Declaration of Christina Pullo

Having considered the Supporting Declarations, the exhibits

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and the arguments of counsel at the confirmation trial held

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between May 27 and June 8, 2020, the court concludes that the

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Plan should be confirmed.

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//

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The following discussion constitutes the court’s findings of
fact and conclusions of law in narrative form as authorized by
Fed. R. Bankr. P. 7052(a). Appellate courts in the Ninth
Circuit review decisions “with special scrutiny” when a trial
court “engage[s] in the regrettable practice of adopting the
findings drafted by the prevailing party wholesale.” Stormans,
Inc. v. Wiesman, 794 F.3d 1064, 1075 (9th Cir. 2015), citing
Silver v. Exec. Car Leasing Long–Term Disability Plan, 466 F.3d
727, 733 (9th Cir. 2006), and Sealy, Inc. v. Easy Living, Inc.,
743 F.2d 1378, 1385 (9th Cir. 1984). Consequently, the court
sees no need for adopting verbatim Debtors’ proposed findings of
fact and conclusions of law.
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 III. COMPLIANCE WITH BANKRUPTCY CODE SECTION 1129(a) AND (b)2
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The following are factual determinations the court must
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make, together with legal conclusions the court must draw, as a
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predicate to issuance of the OCP that will follow.
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The Debtors have the burden of proving satisfaction of the
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applicable elements of section 1129(a) and (b) by a
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preponderance of the evidence and have satisfied that burden.
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The Disclosure Statement,3 the Disclosure Statement
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Supplement, the Plan, the Disclosure Statement and Solicitation
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Procedures Order, the Solicitation Packages, the Ballots
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(including, without limitation, the Direct Fire Claim Ballots
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and the Fire Victim Master Ballots), the Notices of Non-Voting
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Status, and the Confirmation Hearing Notice, have been
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transmitted, served, and published in compliance with the
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Disclosure Statement and Solicitation Procedures Order, the
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Rules, the Bankruptcy Local Rules, and the Scheduling Order.
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Such transmittal, service, and publication were adequate and
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sufficient, and no other or further notice is or shall be
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required.
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The Plan Proponents (and, as applicable, each of their
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respective Representatives) participated in good faith in
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negotiating at arm’s length the Plan and all contracts,
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Unless otherwise indicated, all chapter, section and rule
references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532,
and to the Federal Rules of Bankruptcy Procedure, Rules 10019037 (the “Rules”).
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All capitalized terms used throughout have the meanings set
forth in the underlying documents that appear throughout the
record of this case; for brevity they are not redefined here.
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instruments, releases, agreements, and documents related to, or

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necessary to, implement, effectuate, and consummate the Plan,

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including the Plan Settlements, Plan Documents, and all

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contracts, instruments, agreements, and documents to be executed

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and delivered in connection with the Plan.

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As shown by the Pullo Dec, votes to accept or reject the

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Plan have been solicited and tabulated fairly, in good faith,

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and in a manner consistent with the Bankruptcy Code, the Rules,

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and the Solicitation Procedures as approved by the Court.

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The Plan complies in all respects with the applicable

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provisions of the Bankruptcy Code, including without limitation,

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sections 1122 and 1123.

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Administrative Expense Claims, Professional Fee Claims, DIP

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Facility Claims, and Priority Tax Claims, the Plan designates

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thirty (30) Classes of Claims and four (4) Classes of Interests.

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The Claims or Interests placed in each Class are substantially

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similar to other Claims or Interests, as the case may be.

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business, factual, and legal reasons exist for separately

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classifying the various Classes of Claims or Interests.

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Classes do not unfairly discriminate between holders of Claims

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and Interests.

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In addition to providing for

Valid

Such

The Plan satisfies section 1122 and 1123(a)(1).

Article III of the Plan identifies the Unimpaired “NonVoting Classes”:
Class 1A (HoldCo Other Secured Claims), Class 2A
(HoldCo Priority Non-Tax Claims), Class 3A
(HoldCo Funded Debt Claims), Class 4A (HoldCo
General Unsecured Claims), Class 5A-IV (HoldCo
Ghost Ship Fire Claims), Class 6A (HoldCo
Workers’ Compensation Claims), Class 7A (HoldCo
Environmental Claims), Class 8A (HoldCo
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Intercompany Claims), Class 9A (HoldCo
Subordinated Debt Claims), Class 11A (HoldCo
Other Interests), Class 1B (Utility Other Secured
Claims), Class 2B (Utility Priority Non-Tax
Claims), Class 3B-II (Utility Reinstated Senior
Note Claims), Class 3B-V (Utility PC Bond (2008 F
and 2010 E) Claims), Class 4B (Utility General
Unsecured Claims), Class 5B-IV (Utility Ghost
Ship Fire Claims), Class 6B (Utility Workers’
Compensation Claims), Class 7B (2001 Utility
Exchange Claims), Class 8B (Utility Environmental
Claims), Class 9B (Utility Intercompany Claims),
Class 10B (Utility Subordinated Debt Claims),
Class 11B (Utility Preferred Interests), and
Class 12B (Utility Common Interests).
Article III of the Plan identifies the Impaired “Voting
Classes”:
Class 5A-I (HoldCo Public Entities Wildfire
Claims), Class 5A-II (HoldCo Subrogation Wildfire
Claims), Class 5A-III (HoldCo Fire Victim
Claims), Class 10A-I (HoldCo Common Interests),
Class 10A-II (HoldCo Rescission or Damage
Claims), Class 3B-I (Utility Impaired Senior Note
Claims), Class 3B-III (Utility Short-Term Senior
Note Claims), Class 3B-IV (Utility Funded Debt
Claims), Class 5B-I (Utility Public Entities
Wildfire Claims), Class 5B-II (Utility
Subrogation Wildfire Claims), and Class 5B-III
(Utility Fire Victim Claims).
Article IV of the Plan specifies the treatment of Claims

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and Interests in such Voting Classes.

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section 1123(a)(3).

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The Plan complies with

The Plan provides for the same treatment by the Debtors for

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each Claim or Interest in each respective Class, unless the

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holder of a particular Claim or Interest has agreed to less

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favorable treatment of such Claim or Interest.

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complies with section 1123(a)(4).

The Plan

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The Wells Dec, the Boken Dec, the Ziman Dec, the Debtors’

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exhibits, and the record establish the following: the Plan, the

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Plan Documents, and the various documents and agreements set

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forth in the Plan Supplement and the Exhibits to the Plan

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provide adequate and proper means for the Plan’s implementation,

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including, without limitation, (i) the imposition of the

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Channeling Injunction, (ii) the establishment and funding of the

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Fire Victim Trust, the Subrogation Wildfire Trust, and the

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Public Entities Segregated Defense Fund, (iii) payment in Cash

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in satisfaction of the Public Entities Wildfire Claims, (iv) the

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issuance of the New Utility Funded Debt Exchange Notes, the New

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Utility Long-Term Notes, and the New Utility Short-Term Notes,

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the Plan Funding Documents (as defined below), and Debt Backstop

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Approval Order, or any similar approvals granted following the

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conclusion of trial, as applicable, (v) the issuances and

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incurrences necessary to obtain or effectuate the Plan Funding

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or the Exit Financing, the Plan Funding Documents, and Debt

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Backstop Approval Order or any similar approvals granted

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following the conclusion of trial, as applicable, and (vi) the

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offer, sale, distribution, and issuance of any equity

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securities, equity forward contracts or other equity-linked

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securities necessary to obtain any of the Plan Funding or as

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otherwise contemplated by the Plan, the Backstop Commitment

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Letters, or the Equity Backstop Approval Order, as applicable

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(including, without limitation, to authorize and reserve for

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issuance New HoldCo Common Stock to be issued pursuant to any

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such transaction or upon the exercise, conversion or settlement

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of any such equity forward contracts or other equity-linked

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securities).

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The Plan complies with section 1123(a)(5).

The certificates of incorporation, articles of

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incorporation, bylaws, limited liability company agreement or

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similar governing documents, as applicable, of each Debtor have

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been or will be amended on or prior to the Effective Date to

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prohibit the issuance of nonvoting equity securities in

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accordance with section 1123(a)(6).

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To the extent known and determined, the identity and

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affiliation of the persons who will serve as members of the New

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Board have been disclosed in the Plan Supplement [and on the

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record of the Confirmation Hearing], with the identities of the

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remaining members of the boards of directors or managers of the

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Reorganized Debtors to be disclosed, together with their

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affiliations, on or before the Effective Date as provided in

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Exhibit G of the Plan Supplement, which sets forth who shall

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serve as officers of the Reorganized Debtors (as may be modified

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pursuant to the Plan Supplement).

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established that the appointment to, or continuance in, such

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positions of such persons is consistent with the interests of

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the holders of Claims against and Interests in the Debtors and

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public policy.

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Agreement and the Fire Victim Trust Agreement, attached as

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Exhibits C and D, respectively, to the Plan Supplement, name the

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Subrogation Wildfire Trustee and the Fire Victim Trustee,

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respectively.

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1129(a)(5).

The Plan Proponents have

Additionally, the Subrogation Wildfire Trust

The Plan satisfies sections 1123(a)(7) and

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The provisions of the Plan, including, without limitation,

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approval of the Public Entities Plan Support Agreements, are

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appropriate and not inconsistent with the applicable provisions

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of the Bankruptcy Code.

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settlements embodied in the Subrogation Claims RSA, the Tort

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Claimants RSA, the Noteholder RSA, the Federal Agency

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Settlement, and the State Agency Settlement remain in full force

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and effect.

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The Court’s prior approvals of the

The Plan satisfies section 1123(b).

The Plan is dated and identifies the entities submitting
the Plan as proponents, thereby satisfying Rule 3016(a).
The Plan is in accord with applicable provisions of Title
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The Plan Proponents have proposed the Plan in accord with

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the provisions of Title 11, in good faith and not by any means

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forbidden by law, as required by sections 1129(a)(2) and (3).

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Any payment made or to be made by any of the Debtors for

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services or for costs and expenses in or in connection with the

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Chapter 11 Cases, or in connection with the Plan and incident to

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the Chapter 11 Cases has been approved by, or is subject to the

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approval of, the Court as reasonable.

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of the California Public Utilities Commission (the “CPUC” or the

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“Commission”) in I.19-09-016 [approving the Plan], the Utility

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shall reimburse the Commission for payment of the fees and

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expenses incurred by the Commission for its outside counsel and

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financial advisor for services rendered relating to the Chapter

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11 Cases, related proceedings and associated financings, and

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will not seek cost recovery of the Commission’s costs for such

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fees and expenses.

Pursuant to the decision

Such reimbursement for fees and expenses
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incurred by the Commission shall not be subject to any further

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approval or review for reasonableness by the Court, the fee

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examiner for the Chapter 11 Cases, or any other party in

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interest.

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1129(a)(4).

The foregoing constitute compliance with section

The CPUC has approved the Plan as satisfying the Wildfire

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Legislation (AB 1054) requirement that it be neutral, on

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average, to ratepayers.

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subject to CPUC review processes and are not a result of the

Any future rate increases will be

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Plan.

The Federal Energy Regulatory Commission has likewise

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consented to the Plan with respect to the treatment of the FERC

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Tariff Rate Proceedings.

The Plan satisfies section 1129(a)(6).

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The Disclosure Statement, the Disclosure Statement

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Supplement, the Plan, the Plan Supplement, the Boken Dec, and

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the other evidence proffered or adduced at the Confirmation

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Hearing (i) are persuasive and credible, (ii) have not been

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controverted by other evidence, and (iii) establish that each

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holder of an impaired Claim or Interest either has accepted the

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Plan or will receive or retain under the Plan, on account of

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such Claim or Interest, property of a value, as of the Effective

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Date, that is not less than the amount such holder would receive

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or retain if the Debtors were liquidated under chapter 7 of the

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Bankruptcy Code on such date.

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1129(a)(7).

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The Plan satisfies section

The Non-Voting Classes are Unimpaired under the Plan and

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are presumed to have accepted the Plan pursuant to section

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1126(f).

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Certification, Classes 5A-I (HoldCo Public Entities Wildfire

As reflected in the Pullo Dec and Voting

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Claims), 5A-II (HoldCo Subrogation Wildfire Claims), 5A-III

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(HoldCo Fire Victim Claims), 10A-I (HoldCo Common Interests),

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3B-I (Utility Impaired Senior Note Claims), 3B-II (Utility

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Reinstated Senior Note Claims), 3B-IV (Utility Funded Debt

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Claims), 5B-I (Utility Public Entities Wildfire Claims), 5B-II

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(Utility Subrogation Wildfire Claims), and 5B-III (Utility Fire

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Victim Claims) have voted to accept the Plan.

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The treatment of Administrative Expense Claims and Priority

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Non-Tax Claims pursuant to Sections 2.1, 2.2, 2.3, 4.2, and 4.17

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of the Plan, respectively, satisfies the requirements of

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sections 1129(a)(9)(A) and (B).

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Claims pursuant to Section 2.4 of the Plan satisfies the

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requirements of section 1129(a)(9)(C).

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The treatment of Priority Tax

Classes 5A-I (HoldCo Public Entities Wildfire Claims), 5A-

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II (HoldCo Subrogation Wildfire Claims), 5A-III (HoldCo Fire

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Victim Claims), 10A-I (HoldCo Common Interests), 3B-I (Utility

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Impaired Senior Note Claims), 3B-III (Utility Short-Term Senior

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Note Claims), 3B-IV (Utility Funded Debt Claims), 5B-I (Utility

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Public Entities Wildfire Claims), 5B-II (Utility Subrogation

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Wildfire Claims), and 5B-III (Utility Fire Victim Claims) are

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Impaired under the Plan and have accepted the Plan, determined

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without including any acceptance of the Plan by any insider.

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The Plan complies with section 1129(a)(10).

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The evidence proffered or adduced at the Confirmation

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Hearing establishes that the Plan, subject to the occurrence of

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the Effective Date, is feasible and that confirmation of the

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Plan is not likely to be followed by liquidation, or the need

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for further financial reorganization of the Debtors or the
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Reorganized Debtors.

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1129(a)(11).

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The Plan complies with section

All fees payable under section 1930 of chapter 123 of title

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28 of the United States Code, as determined by the Court, have

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been paid or will be paid pursuant to Section 12.5 of the Plan.

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Pursuant to Section 12.5 of the Plan, on the Effective Date, and

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thereafter as may be required, such fees, together with

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interest, if any, pursuant to section 3717 of title 31 of the

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United States Code, shall be paid by each of the Debtors.

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The

Plan complies with section 1129(a)(12).
Pursuant to Section 8.5 of the Plan, all Employee Benefit

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Plans are deemed to be, and shall be treated as, executory

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contracts under the Plan and, on the Effective Date, shall be

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assumed pursuant to sections 365 and 1123.

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payments which are accrued and unpaid as of the Effective Date

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pursuant to the Employee Benefit Plans shall be made by the

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Reorganized Debtors on the Effective Date or as soon as

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practicable thereafter and, therefore, the Plan satisfies the

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requirements of section 1129(a)(13).

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All outstanding

The Debtors are not required by a judicial or

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administrative order, or by statute, to pay any domestic support

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obligations, and therefore, section 1129(a)(14) is inapplicable.

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The Debtors are not individuals, and therefore, section
1129(a)(15) is inapplicable.
Each of the Debtors is a moneyed, business, or commercial

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corporation or trust, and therefore, section 1129(a)(16) is

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inapplicable.

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 Section 1129(a)(8) has not been satisfied with respect to

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Class 10A-II.

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other order once the court is advised as to the outcome of the

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mediation referred to in Section IV, B.
The Plan is the only Plan currently on file, and therefore,

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This discussion will be completed in the OCP or

section 1129(c) is inapplicable.
The principal purpose of the Plan is not the avoidance of

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taxes or the avoidance of the application of section 5 of the

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Securities Act of 1933, thereby satisfying section 1129(d).

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IV.

DISCUSSION OF OBSTACLES TO CONFIRMATION
A.

Registration Rights Agreement

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A major issue of contention and distress with numerous fire

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survivors and others was the lack of detail about the ability of

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the Fire Victim Trustee to monetize any of the Trust’s share of

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Debtor PG&E Corporation’s publicly traded stock in the future.

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The court was reluctant to oversee an exercise in futility,

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namely confirming a Plan doomed to fail within weeks by not

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becoming effective.

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The Plan Proponents, the TCC and the Trustee, with the

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invaluable assistance of Judge Randall Newsome as court-

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appointed mediator, resolved their differences, agreed upon

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crucial elements defining how to value Effective Date equity to

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be issued to the Trust and the equitable means of protecting the

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Fire Victim Trust, the diluted old equity and the new equity

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under various circumstances.

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other documents, the Order Approving the Parties’ Joint

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Stipulation Regarding the Registration Rights Agreement and

These have been embodied in, among

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Related Agreement of the Fire Victim Trust (Dkt. #7918) and the

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Order Approving the Parties’ Joint Stipulation Regarding

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Normalized Estimated Net Income (Dkt. #7919).

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B.

Securities Claim Litigation

As of the date of this Memorandum Decision, the parties are
engaged in mediation regarding this matter.

The court will

issue an appropriate order later.

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C.

Objection by Mr. William B. Abrams

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During the course of these cases, creditor William B.
Abrams has been an active and passionate advocate for the rights
of fire victims like himself.

He has filed multiple objections

to confirmation of the Plan asserting, among other things, that
that the Plan is not feasible as Debtors will lack financial
viability to perform it.

He has steadfastly argued that the

Plan was not proposed in good faith and “has been leveraged for
the primary purposes of investor short-term payouts at the
detriment of plan integrity.”

He has observed that throughout

the case, “the Debtors had every intention of leveraging the
victim trust agreement, the registration rights agreement and
the ‘hush and gag’ clauses within the TCC RSA to undermine the
agreed $13.5B victim settlement and to make certain material
changes to the financing of their plan.”
For the reasons stated elsewhere in this Memorandum
Decision, the court has determined that the Plan is feasible and
thus will OVERRULE Mr. Abrams’ feasibility argument on the basis
of the powerful and virtually uncontroverted evidence presented
by the Debtors.

And while the court appreciates Mr. Abrams’
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concerns about the fairness of the negotiated Plan, it disagrees

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with him that the TCC has been “hushed and gagged” about

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deficiencies.

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challenged provisions of the Plan that it finds problematic, but

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it nonetheless supports confirmation.

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To the contrary, the TCC has appeared and

As to Mr. Abrams’ concerns that investors have highjacked

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the plan process, the court notes that multiple parties have

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participated in this case, including separate groups of

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unsecured creditors represented by the OCUC and the TCC.

These

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various parties have actively and consistently acted to protect

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their own constituencies’ interests.

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get all these parties to reach agreements satisfactory to each

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of them.

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they were just one group of many participating in the process.

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The mediator was able to

That mediation was not controlled by equity holders;

Finally, Mr. Abrams’ contentions that the Plan is

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detrimental to the fire victims is belied by the overwhelming

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acceptance of the Plan by these creditors.

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for a better PG&E, for a better environment and a better

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Northern California, safe from wildfires, while aspirational and

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well-intended, is not something the Bankruptcy Code or this

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court can deliver.

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The court therefore OVERRULES Mr. Abrams’ objections to

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confirmation.

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D.

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Mr. Abrams’ desire

Objection by Oklahoma Firefighters Pension and
Retirement System.

The Oklahoma Firefighters Pension and Retirement System

27

(“OFPRS”) objects to the release of Debtors’ unassigned claims

28

and causes of action against former officers and directors.

In

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particular, OFPRS contends that Debtors’ assignment of certain

2

claims and causes of action to creditors is too narrow, as

3

section 1.8 of the Plan limits the recovery for such claims

4

“solely to the extent of any directors and officers’ Side B

5

Insurance Coverage.”

6

constitutes an improper discharge.

7

OFPRS asserts that this provision
The court disagrees.

As the court discusses elsewhere, this court’s decision in

8

PG&E I allows a debtor to confirm a plan that releases its

9

claims against third parties.

Here, Debtor has agreed to carve

10

out of the Plan’s release provisions and to assign to creditors

11

certain of its claims against third parties, on the condition

12

that any recovery on these claims would be limited to its Side B

13

Insurance Coverage.

14

a vacuum; rather, the parties in the mediated settlement

15

involving Debtors, the TCC, the OCC and others agreed that

16

liability would be limited to Side B Insurance Coverage.

17

Furthermore, OFPRS’s class (Class 10A-I -- Holdco Common

18

Interests) voted overwhelmingly to accept the Plan,

19

notwithstanding the limitation on the source of recovery.

20

Accordingly, the court hereby OVERRULES the objection filed by

21

OFPRS.

22
23
24
25
26
27

E.

Debtor did not propose this restriction in

Objections by the OCUC and Others

Over the last few weeks, Plan Proponents, the OCUC and
other objecting parties have filed a flurry of documents
relating to the OCUC’s initial objection (Dkt. #7300) to
confirmation.

At a hearing on June 16, 2020, counsel for

Debtors indicated that the parties have resolved most of the

28
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contested matters, with three remaining issues requiring

2

resolution by the court.

3

decisions on them.

4

1.

The following are the court’s

Modification of Plan Section 8.2(e).

5

The OCUC contends that the Plan Proponents have improperly

6

designated General Unsecured Claims (as defined in the Plan) as

7

unimpaired.

8

and corresponding Paragraph 34(d) of the proposed OCP

9

impermissibly provide for a broad and automatic disallowance of

10

prepetition indemnification or contribution claims arising from

11

the rejection or assumption of executory contracts, even when an

12

affected creditor has filed a proof of claim asserting such a

13

contingent claim.

14

June 11, 2020 (Dkt. #7896):

In particular, the OCUC asserts that Section 8.2(e)

As the OCUC stated in its response filed on

15
16
17
18
19
20
21

[T]he Debtors’ proposed modifications to
Section 8.2(e) of the Plan and Paragraph 34(d) of
the Confirmation Order continue to refer to the
“full release and satisfaction of any Claims against
any Debtor or defaults by any Debtor . . . arising
under any assumed executory contract or unexpired
lease.” See Debtors’ Response at 4-5 (emphasis
added). This is contrary to Bankruptcy Code section
365(b)(1)(A), which is expressly limited to
“defaults.”

22

Id. (emphasis added).

23

Debtors, on the other hand, argue that defaults should be

24

handled in a manner consistent with section 365, alluding to

25

comments made by the court at a hearing on June 4.

26

Debtors modified Section 8.2(e) of the Plan and Paragraph 34(d)

27

of the proposed OCP as follows:

Nonetheless,

28
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 Assumption or assumption and assignment of any
executory contract or unexpired lease pursuant to
the Plan or otherwise shall result in the full
release and satisfaction of any Claims and Causes of
Action against any Debtor or defaults by any Debtor
arising under any assumed executory contract or
unexpired lease at any time before the date that the
Debtors assume or assume and assign such executory
contract or unexpired lease, whether monetary or
nonmonetary, including all Claims arising under
sections 503(b)(9) or 546(c) of the Bankruptcy Code,
any defaults of provisions restricting the change in
control or ownership interest composition, or any
other bankruptcy related defaults. Any proofs of
Claim filed with respect to executory contract or
unexpired lease that has been assumed or assumed and
assigned shall be deemed disallowed and expunged,
without further notice to or action, order, or
approval of the Bankruptcy Court to the fullest
extent permitted under applicable law.

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16

See Plan Proponents’ Response filed on June 14, 2020 (Dkt.
#7939 at pgs. 2-3).

claim is not “permitted under applicable law,” an unsecured
creditor retains its right to assert that defense.

17
18
19
20
21
22
23
24
25

To the extent a particular assignment of a

The OCUC objected to this proposed modification, contending
that Debtors were wrongfully attempting to assume the benefits
of executory contracts without assuming their burdens, citing
NLRB v. Bildisco & Bildisco, 465 U.S. 513, 531 (1984); Elliott
v. Four Seasons Props. (In re Frontier Props., Inc.), 979 F.2d
1358, 1367 (9th Cir. 1992) (“the cost of assumption is nothing
short of complete mutuality and requires performance in full
just as if bankruptcy had not intervened.”) (internal quotation
omitted).4

26
27
28

4

Citing First Circuit law, the OCUC also argued that
section 502(e)(1)(B) is applicable only when an estate is
insolvent. Juniper Dev. Grp. v. Kahn (In re Hemingway
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The problem arises upon consideration of the consequences

2

of a debtor’s assumption of an executory contract, whether under

3

section 365 or as part of a plan as contemplated by section

4

1123(b)(2).

5

well established.

6

there has been a default.

7

operates (with certain exceptions); if the latter, the debtor

8

must cure defaults, provide compensation and/or provide adequate

9

assurances, etc.

10

Rejection is easy to apply, and the concepts are
But assumption is permissible whether or not
If the former, section 365(a)

See sections 365(b)(A)-(C).

The Plan, in Section 8.2, sets forth how monetary defaults

11

must be dealt with.

To be consistent with section 1124,

12

particularly with assumed contracts on which there are no

13

defaults, the counterparty must be afforded all of the rights

14

preserved for it under the “cure”, “reinstate”, and “compensate”

15

(twice) provisions of subsections (A)-(D) and the “not otherwise

16

alter” provisions of subsection (E).

17

and satisfaction” and “or nonmonetary” revisions to section

18

8.2(e) and Paragraph 34(d) of the OCP are too ambiguous,

19

particularly since assumption includes executory contracts

20

having no extant defaults.

Debtors’ proposed “release

The OCUC’s insistence on the precise

21
22
23
24
25
26
27
28

Transport, Inc.), 993 F.2d 915, 923 (1st Cir. 1993) (“The sole
purpose served by section 502(e)(1)(B) is to preclude redundant
recoveries on identical claims against insolvent estates in
violation of the fundamental Code policy fostering equitable
distribution among all creditors of the same class”) (emphasis
added).
This court disagrees. Nothing in the plain language of
section 502(e)(1) limits its applicability to insolvent estates.
Furthermore, the court could not locate any Ninth Circuit cases
that hold that solvent debtors cannot object to the allowance of
claims.
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language of section 365, and the court’s appreciation of section

2

1124, should control.

3

appropriate language for the OCP.

4
5

2.

Counsel should meet and confer on

Definition of Fire Claim

The OCUC also objects to the definition of “Fire Claim,”

6

contending that Debtors must clarify that claims for

7

indemnification and contribution against Debtors asserted by

8

providers of goods and services are not Fire Claims (and are

9

thus not channeled to the Fire Victim Trust).

10
11

Otherwise, the

claims of those providers of goods and services are impaired.
The definition is clear.

A claim asserted by a provider of

12

goods and services, whether or not a counterparty to an assumed

13

executory contract, that suffered damages from the Fires (as

14

defined in Section 1.86), is impaired and should be channeled to

15

the Fire Victims Trust.

16

“in any way arising out of the Fires” (See Section 1.78), but

17

arise out of the rejection of an executory contract or are part

18

of the cure of an assumed one, they should be dealt with under

19

Article VIII of the Plan and section 365.

20

If its damages were not caused by or

The court agrees with Debtors that “in the unlikely event

21

that a dispute arises,” a court can resolve them.

But it is

22

best to avoid ambiguity before the problem arises.

Counsel for

23

Debtors and the OCUC should also meet and confer on appropriate

24

clarifying language for the OCP, consistent with this ruling.

25

3.

26

Deadline for the Assumption and Rejection of
Executory and Unexpired Leases

27

The OCUC and others object to what the Debtors call a

28

“modest” request for an extension of fifteen additional business
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days to amend their schedules to assume or reject executory

2

contracts.

3

necessary, the press of the business of confirmation is heavy

4

even for the Debtors and their attorneys.

5

opponents is slight, and the discrete and possibly indefensible

6

question of whether to move a contract being assumed to one

7

being rejected is more disappointing to the counterparty than

8

its burden in calculating its damages.

9

problematical, but not something any party who does business

While it is regrettable that this request has become

The impact on

The converse is more

10

with Debtors cannot handle.

Because of the obvious solvency of

11

the Debtors, the court does not worry that this slight

12

adjustment to the timing for a very particular issue would have

13

altered any counterparty’s decision to object to confirmation.

14

For consistency, the Debtors’ requested extension and the

15

additional time for responses should be the same:

16

(calendar, not business) both ways.

17

order granting these extensions or include them in the OCP.

18
19
20
21

F.

thirty days

Debtors should upload an

Exculpation and Release Clauses

The United States Trustee and others object to certain
release and exculpation provisions of the Plan.
1.

22

Release of Claims Held by Debtors (Plan Section
10.9(a))

23

Section 10.9(a) releases certain rights and causes of

24

action held by Debtors, excluding the Assigned Rights and Causes

25

of Action defined in section 1.8 of the Plan.

26

objected to these releases.

27

releasing all claims against the released parties, but only

28

those claims that it will continue to hold as of and after the

Multiple parties

Significantly, Debtors are not

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Effective Date.

Consequently, Section 10.9(a) is not “a broad

2

sweeping provision that seeks to discharge or release nondebtors

3

from any and all claims that belong to others.”

4

Credit Suisse (In re Blixseth), No. 16-35304, 2020 WL 3089263,

5

at *5 (9th Cir. June 11, 2020).

6

in Blixseth, “a discharge in bankruptcy does not extinguish the

7

debt itself but merely releases the debtor from personal

8

liability.... The debt still exists, however, and can be

9

collected from any other entity that may be liable.”

Blixseth v.

As noted by the Ninth Circuit

Id. at 6.

10

Id. at *5-6, citing Landsing Diversified Props.-II v. First

11

Nat’l Bank & Tr. Co. of Tulsa (In re W. Real Estate Fund), 922

12

F.2d 592, 600 (10th Cir. 1990) (alteration in original) (quoting

13

In re Lembke, 93 B.R. 701, 702 (Bankr. D.N.D. 1988)); see also

14

Lewis v. Scott (In re Lewis), 97 F.3d 1182, 1185 (9th Cir.

15

1996).

16

Moreover, this court has previously held that claims held

17

by a debtor are property of the estate and may be released as

18

part of a plan.

19

18, n.26 (“PG&E I”) (“it is permissible for a plan to provide

20

for the settlement or adjustment of any claim ‘belonging to the

21

debtor or to the estate.’”).

22

Debtors of claims belonging to them can be approved only if it

23

represents a valid exercise of their business judgment and

24

satisfies the fair, reasonable, and adequate standard set by

25

Rule 9019, as defined by the Ninth Circuit in Martin v. Kane (In

26

re A&C Props.), 784 F.2d 1377, 1381 (9th Cir. 1986).

See In re Pac. Gas & Elec., 304 B.R. 395, 416-

That said, such a release by

PG&E I,

27
28
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304 B.R. at 416.5

2

PG&E I that a Rule 9019 review may not be necessary when

3

creditors have overwhelmingly voted in favor of the plan; here,

4

however, some of the objecting creditors hold unimpaired claims

5

and thus were unable to vote on the plan.

6

not compel third parties to release whatever claims they could

7

assert, individually or collectively, against the Released

8

Parties.

9

they may have against the Released Parties.

Nonetheless, this court also acknowledged in

Section 10.9(a) does

Such third parties can still pursue whatever claims

10

In light of the foregoing, the court OVERRULES the

11

objections to the release set forth in section 10.9(a) of the

12

Plan.
2.

13

Release of Claims Held by Non-Debtors (Plan
Section 10.9(b)

14
Section 10.9(b) of the Plan provides that Releasing Parties

15
16
17
18
19
20
21

(defined in Section 1.180 as the Debtors, the Reorganized
Debtors, and “any holder of a Claim or Interest that is
solicited and voluntarily indicates on a duly completed Ballot
[that it] opts into granting such releases”) have released
Debtors and other non-debtor parties identified in section
1.179.

22
23
24
25
26
27
28

5

Debtors have not demonstrated how the proposed releases set
forth in section 10.9(a) satisfy the requirements set forth in
A&C Propertiess for determining whether a settlement is fair and
reasonable under Rule 9019. The factors to be weighed by a
court include: (a) the probability of success in the litigation;
(b) the difficulties, if any, to be encountered in the matter of
collection; (c) the complexity of the litigation involved, and
the expense, inconvenience and delay necessarily attending it;
(d) the paramount interest of the creditors and a proper
deference to their reasonable views in the premises. Id.
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Multiple parties have objected to this provision,

2

contending that it is an improper release of claims held by

3

non-debtors.

4

mandated.

5

affirmatively opt-in to a release of their claims.

6

in Section 10.9(b) are consensual and require an affirmative

7

opt-in by the affected creditor, the court determines that such

8

releases do not violate section 524(e), which prohibits only

9

nonconsensual third-party releases.

The proposed release, however, is not universal or

Rather, it requires the non-debtor parties to
As releases

Consensual third-party

10

releases do not run afoul of section 524(e) or governing Ninth

11

Circuit law such as Resorts Int’l v. Lowenschuss (In re

12

Lowenschuss), 67 F.3d 1394, 1401-02 (9th Cir. 1995).

13

Section 524(e)

provides that “[e]xcept as provided in

14

subsection (a)(3) of this section, discharge of a debt of the

15

debtor does not affect the liability of any other entity on, or

16

the property of any other entity for, such debt.”

17

Ninth Circuit stated in Lowenschuss that it “has repeatedly

18

held, without exception, that [section] 524(e) precludes

19

bankruptcy courts from discharging the liabilities of non-

20

debtors,” those holdings arose in cases where voting creditors

21

did not affirmatively opt to discharge non-debtors.

22

cases, creditors or classes of creditors were deemed to have

23

consented to releases of third parties simply by voting in favor

24

of the plan or by not voting at all.

25

PG&E I, Lowenschuss is inapplicable when a non-debtor has

26

consented to the third-party release:

27
28

While the

In these

As this court observed in

This court is bound by, and does not question, the
legal principle set forth in Lowenschuss, in In re
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2
3
4
5

American Hardwoods, Inc., 885 F.2d 621, 626 (9th Cir.
1989), and in Underhill v. Royal, 769 F.2d 1426, 1432
(9th Cir. 1985) that liabilities of nondebtors cannot
be discharged through a plan. This legal principle,
however, is inapplicable here because (unlike in
Lowenschuss, American Hardwoods, and Underhill ) the
Plan does not discharge or release nondebtors from
claims that belong to others (except the Commission,
which has consented to the release).

6
7

PG&E I, 304 B.R. at 418 n.26.

See also In re Station Casinos,

8

Inc., No. 09-52477, 2011 WL 6813607 (Bankr. D. Nev. June 08,

9

2011) (“A release of non-debtor third parties voluntarily and

10

knowingly given by a creditor or equity holder in connection

11

with a chapter 11 plan does not implicate the concerns regarding

12

third party releases discussed by the Ninth Circuit Court of

13

Appeals in Lowenschuss).

14

does not bar the voluntary opt-in releases contained in the Plan

15

and therefore OVERRULES objections to these provisions.
3.

16

The court concludes that Lowenschuss

Exculpation Provisions

17

Multiple parties, including the United States Trustee,

18

objected to provisions exculpating non-debtors for actions taken

19

in the course of the plan approval process.

20

rejected similar objections in the Blixseth.

21

that section 524(e) does not bar an exculpation clause

22

protecting “various participants in the Plan approval process.”

23

Blixseth, 2020 WL 3089263, at *5.

24

Corp., 228 F.3d 224, 245–46 (3d Cir. 2000), the Ninth Circuit

25

observed:.

26
27
28

The Ninth Circuit
The court held

Citing In re PWS Holding

Consistent with our analysis, the Third Circuit has
upheld an exculpation clause similar to the one here
at issue. PWS, 228 F.3d at 245–46. In doing so, the
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 debtors there were members of the creditors’ committee
and related professionals and individuals. At the same
time, and more broadly, PWS stated that “Section
524(e), by its terms, only provides that a discharge
of the debtor does not affect the liability of
nondebtors on claims by third parties against them for
the debt discharged in bankruptcy,” id. at 245
(emphasis added), and held that the partial
exculpation for acts committed during the process of
developing and confirming a Chapter 11 plan did not
“affect the liability of another entity on a debt of
the debtor within the meaning of § 524(e),” id. at
247.

1
2
3
4
5
6
7
8
9

Blixseth, 2020 WL 3089263, at *6.
In concluding that the Bankruptcy Code does not prohibit an

10
11
12
13
14
15
16
17
18

exculpation clause protecting various parties who participated
in the approval process, the Ninth Circuit held that any such
exculpation clause should relate only to that process.
*5.

Id. at

Section 10 covers a lot of players, a number of documents

and a number of events and activities.

That reach is consistent

with the complexities and difficulties of these cases, and
comports with the contours of such a provision as recognized in
Blixseth.

The court OVERRULES these objections.

19

G.

Objections by Patricia Garrison, et. al.

20

Creditor Patricia Garrison (Dkts. #7194, #7378), along with

21

the parties that joined her (Dkts. #7309, #7451), objected on

22

the grounds that the Plan impermissibly classified fire victims

23

in different classes and that she has not been dealt with in

24

good faith as required by section 1129(a)(3).

25

subject claims all arise from fires, Ms. Garrison believes they

26

should be in the same class.

Because the

27

Section 1122(a) requires that a claim must be placed in a

28

particular class only if the claim is substantially similar to
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other claims in the class.

Further, claims that are similar may

2

be placed into separate classes “if the debtor can show a

3

business or economic justification for doing so.”

4

76, LLC, 465 B.R. 525, 536 (9th Cir. BAP 2012), aff'd, 578 F.

5

App'x 644 (9th Cir. 2014) (citing Barakat v. Life Ins. Co. of

6

Va. (In re Barakat), 99 F.3d 1520, 1526 (9th Cir.1996).

7

have separated these claims into three categories: Fire Victim

8

Claims, Subrogation Wildfire Claims, and Public Entities

9

Wildfire Claims.

In re Loop

Debtors

They argue that separate classification is

10

necessary because, specific to the Subrogation Wildfire Claims,

11

those claims are based on different legal theories of liability.

12

Further, each class receives distributions through different

13

procedures tailored to that class, and the classes have accepted

14

different treatment pursuant to executed settlement agreements.

15

For these reasons, Debtors have provided an adequate business

16

justification for separate classification and the court

17

OVERRULES Ms. Garrison on this point.

18

In addition, Ms. Garrison’s second argument fails.

A plan

19

is proposed in good faith, in part, if creditors have been dealt

20

with in a fundamentally fair manner.

21

re Stolrow's Inc., 84 B.R. 167, 172 (9th Cir. BAP 1988) (citing

22

In re Jorgensen, 66 B.R. 104, 109 (9th Cir. BAP 1986).

23

assert that fundamental fairness has been achieved here as the

24

Plan consists of a mostly consensual resolution that addresses

25

all claims and reflects considerable negotiation and agreement

26

with all major parties.

27

that the Plan has been proposed in good faith.

28

See section 1129(a)(3); In

Debtors

As such, the court agrees with Debtors

The court OVERRULES these objections.
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 H.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27

Objections by Anita Freeman, GER Hospitality, LLC,
et al.

Creditors Anita Freeman, GER Hospitality, LLC, et al. filed
a joint objection (Dkt. #7316) raising a number of issues that
have mostly been dealt with in other parts of this Memorandum
Decision.

In this section, the court addresses a specific

component of this objection, namely the split of consideration
between stock and cash to fire victims.

Ms. Freeman asserts

that fire victims are impermissibly being treated differently
from other creditors as they are receiving a distribution that
includes shares of stock.

The court iterates that this

treatment was agreed upon by the parties in the Tort Claimants
RSA, and that fire victims voted in favor of this treatment.

As

stated immediately above, the court has already found that
separate classification of the different types of fire victims
is permissible, and Ms. Freeman offers nothing to show that the
separate treatment is discriminatory, or that the accepted
treatment by the class is somehow impermissible.
As such, differing treatment is not an issue and the
OVERRULES the objections on this point.
One final thought about these objections is in order.

From

comments made at the confirmation trial by Ms. Freeman’s
counsel, and thereafter in a post-confirmation CERTAIN FIRE
VICTIMS PROPOSED MODIFICATIONS TO DEBTORS PLAN AND CONFIRMATION
ORDER (Dkt. #7935), it is apparent that the real objection here
is that there should have been a better outcome, whether with
more money, more stock, less involvement by hedge funds or even
liquidation.

The court ignored those proposed modifications and

28
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OVERRULES these objections now.

2

for the present Plan, and to sustain these objections would be

3

to ignore the wishes of that very strong majority.

4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27

I.

The impaired classes have voted

Brief Summary of Prior Rulings

Several parties have raised objections related to issues
that have been dealt with previously in this case.

In this

section, the court will dispose of the objections that have
already been adjudicated by this court.
The court incorporates by reference its Memorandum Decision
Regarding Postpetition Interest (Dkt. #5226) and its
Interlocutory Order Regarding Postpetition Interest (Dkt.
#5669).

As postpetition interest is provided for in the Plan as

required, this decision effectively overrules all objections
which raise improper payment of postpetition interest, including
the UCC (Dkt. #7300), the Ad Hoc Trade Claim Holders (Dkt.
#7288), and Mizuho Bank, Ltd (Dkt. #7221).

Any other objections

not specifically listed here are also OVERRULED on this point.
The court incorporates by reference its Memorandum Decision
on Inverse Condemnation (Dkt. #4895) and accompanying order
(Dkt. #4949).

Any objections not specifically listed here are

OVERRULED on this point.

The remaining “Issue 2” (see the

Corrected Joint Statement, Dkt. #7875) will be dealt with by
separate order or in the OCP.
Finally, the court incorporates by reference its prior
decision regarding challenges to the Fire Victims Trust
Agreement and the Claims Resolution Procedures, namely, the
Memorandum on Objection of Adventist Health, A&T, Paradise

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Entities and Comcast to Trust Documents (Dkt. #7597).

2

including the SLF Fire Victims Group (Dkt. #7544), Mary Wallace

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(Dkt. #7367),6 Helen Sedwick (Dkt. #7377), the International

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Church of the Foursquare Gospel (Dkt. #7308), Eric and Julie

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Carlson (Dkt. #7363), 7 and Karl Knight (Dkt. #7366) all objected

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to confirmation on grounds that were already dealt with by this

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court’s decision and are OVERRULED, setting aside any objections

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related to the aforementioned “Issue 2” (see the Corrected Joint

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Statement, Dkt. #7875) which will be dealt with by separate

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order or in the OCP.

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listed here are also OVERRULED on this point.

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J.

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Parties

Any other objections not specifically

Remaining Objections

Any objections to confirmation not dealt with specifically
in this Memorandum Decision, or reserved for further order, are
OVERRULED.

Objections to the admissibility of any evidence

offered in connection with the confirmation trial will be the
subject of a separate order to be issued prior to or
concurrently with the OCP.
//
//
//

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6

Ms. Wallace also objected on the ground that she did not
have adequate time to vote for the Plan. The court accepts
Debtors’ representation that she was sent the relevant materials
in early April and OVERRULES this objection.
7

Creditors here also asserted that they should be permitted
to vet Trust Oversight Committee members as they are appointed,
and the court OVERRULES this objection as there is no legal
basis for the court to order this.
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 V.

CONCLUSION

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The court intends to issue the OCP on Friday, June 19,
2
2020, after counsel for the Debtors has had an opportunity to
3
revise it in accordance with any provisions of the Memorandum
4
Decision and any developments occurring before then.

To that

5
end, it has scheduled a hearing on June 19, 2020, at 12:00 Noon
6
to resolve any remaining disagreements about the form of the
7
OCP.

Participation at the hearing will be limited to counsel

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for the Plan Proponents, the two Official Committees and any
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party to the reserved disputes identified in this Memorandum
10
Decision.
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**END OF MEMORANDUM DECISION**
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