KPIX5 asks Mike Danko about the criminal charges brought against PG&E for its role in the Kincade fire.  Danko explains that even if a jury renders a guilty verdict, no one at PG&E will go to jail.  It’s the civil justice system, not the criminal justice system, that compensates victims for their losses.

 

Kincade Fire and PG&E - Mike Danko Explains
Danko Explains What PG&E Indictment Means

CNBC asked me and Governor Newsom about PG&E’s future.

PG&E hopes to exit bankruptcy by June 30.  It’s plan calls for $13.5 billion to be set aside for its victims to make claims against.  The trouble is, if PG&E can’t get its planned approved by June 30, it will lose access to a $21 billion fund that will help protect its financial condition in the event of future wildfires.  If it can’t get access to the fund, its lenders and others who are providing support for the plan will back out of the deal.

The Governor dislikes PG&E’s plan and is talking about having the state take over PG&E.  If PG&E’s exit plan falls apart, how will victims be paid for their losses?

Watch online.

How will State takeover of PG&E affect wildfire victims?

What does the settlement mean?

The settlement is an agreed-upon plan for ending the bankruptcy. If the settlement is approved, PG&E will fund a trust for Wildfire victims and certain public entities, for $13.5 Billion.  All victims’ claims against PG&E will be converted to a claim against the trust fund.  PG&E will be allowed to exit bankruptcy and move forward with its business with no further liability to victims.  Each victim’s claim will satisfied solely through the trust that PG&E funded.

How much will each claimant get from the trust fund?

The settlement does not resolve any individual claim.  The amount each victim gets will depend on the victim’s specific loss and the proof that their lawyers provide in the legal proceedings that have, until now, been put on hold because of PG&E’s bankruptcy.

Is $13.5 Billion enough to pay everyone?

We don’t know yet because the claims filed to date have not yet been evaluated.  We do know, however, that far fewer wildfire victims have filed claims than was anticipated when negotiations began.  At this point, there is no reason to believe the fund will be insufficient.

Why  couldn’t we get more than $13.5 billion?

Our financial analysis concluded that this fund is the largest that PG&E could raise and survive as an ongoing business.  The alternative – forcing PG&E out of business and selling off its assets – is called a “liquidation.”  In a liquidation, PG&E’s other creditors would be paid first and victims would get less, if anything at all.  In short, allowing PG&E to stay in business provides to victims the most compensation.

I’ve heard half the fund is going to be in PG&E stock.  What good is stock in a bankrupt company?

The fund will take stock in the new company that emerges from bankruptcy.  The stock will be valued based on the new company’s assets and projected income stream.  We believe that the stock to be deposited into the trust will be fairly valued.

But don’t victims need cash?

No victim will be required to accept stock in settlement of his claim.  The trust will sell stock to pay claims in cash as required.  The stock is only a mechanism to fund the trust.

What needs to happen for the bankruptcy deal to be approved?

The governor must approve the plan.  To do so, he must satisfy himself that going forward PG&E will be economically viable and that it can operate safety.  The CPUC must approve the plan from a regulatory perspective.  The wildfire victims must approve it.  And the bankruptcy judge must approve the plan as not being unfair to PG&E’s other creditors. 

How long will it take for the plan to be approved and the trust funded?

We are hoping for March or April.

When will the victims be paid?

Once it is set up, each victim may proceed to trial against the fund, just as he or she could have against PG&E.  That process could be lengthy.  One aspect of the agreed upon plan, however, is that it will allow claimants to obtain expedited settlements so they don’t have to wait as long as a trial might take.  In fact, allowing victims a way to obtain cash settlements more quickly was a key term during the bankruptcy negotiations.  The procedures for quicker settlements has not yet been finalized.  We are hoping, however, that the first payments to claimants who use the expedited  (quicker) settlement procedures will be made in a matter of months after the plan is approved and the trust funded, rather than years as might be expected otherwise.

 

I told the New York Times that PG&E filed bankruptcy not because it needed to but because it wanted to “use the bankruptcy rules to their benefit to limit their liability to victims.” And they have it as front page news today.

But it was back in January I told KRON4 the same thing. I explained that PG&E filed bankruptcy for one reason only — because it figured it could use the bankruptcy laws to hold on to more of its corporate profits at the expense of its victims.

They are doing this now because they have spent millions to determine what is the best scenario for the shareholders and they have found the best way for holding on to the most money and keeping it out of the hands of victims is bankruptcy,” said Danko.

Now the New York Times explains exactly how PG&E’s plan is panning out:

  • PG&E has set up a claims deadline that is too short and too arbitrary for the victims to comply with;
  • PG&E’s bankruptcy filing makes people think its not worth it to make a claim because PG&E doesn’t have money when it in fact does; and
  • PG&E is allowing victims to believe (incorrectly) that they can’t get money from PG&E if they have received money from their insurance company.

The deadline for filing a claim is October 21.  We’re hoping that the New York Times article encourages victims to step forward before the deadline and file a claim even if they are not sure about whether they are entitled to compensation.

 

Opinion Rejects Common Caltrans Defense Strategy

Chris Chandler was killed as he crossed busy El Camino Real in a marked crosswalk. We argued at trial that Caltrans should have known that the crosswalk was dangerous because of an accident that occurred in a similar crosswalk 20 miles away. The jury agreed, and awarded the family $9.5 million.

Caltrans appealed arguing that the jury should never have been allowed to hear about the accident at the intersection 20 miles from where Chandler was killed because, the Caltrans argued, it was an entirely different intersection. Caltrans argued that, because there had been no record of pedestrian accidents at the particular crosswalk where Chandler was killed, it could not have known of the danger.

The Court of Appeal ruled that the evidence was properly put before the jury and affirmed the jury’s unanimous $9.5 million verdict.

Because the two intersections and accidents were sufficiently similar in material ways and provided the State with actual or constructive notice of the dangers of placing marked crosswalks with no safety enhancements at uncontrolled El Camino intersections, the trial court did not abuse its discretion in allowing plaintiffs to present evidence of the [other] accident.

The Court of Appeal’s decision is important. Caltrans almost always seeks to avoid liability by arguing that, unless there have been multiple injuries or deaths at the particular intersection in question, Caltrans could not have known of any undue risk, and thus should not be held liable. It will be harder for Caltrans to make that argument in the future.

 

What’s today’s “motion for relief from stay” all about?

The dispute about PG&E’s total liabilities.

When it filed bankruptcy, PG&E said its liabilities as a result of the 2017 and 2018 wildfires totaled at least $30 billion. Yet, PG&E now proposes to resolve all wildfire claims by funding a trust for wildfire claimants of substantially less — about $14 billion.

What explains the difference? Well, after the bankruptcy, Cal Fire determined that PG&E’s facilities did not cause the Tubbs fire – the most costly of the 2017 fires. Rather, according to Cal Fire, the Tubbs fire started at wires on private property. Thus, PG&E argues it is not responsible for the Tubbs fire after all and so should not have to pay Tubbs claims. Damages for the Tubbs fire amount to as much as $18 billion, by some estimates. Subtract that amount from PG&E’s original $30 billion estimate and, PG&E argues, a $14 billion trust fund should be adequate to pay all the claims for which PG&E is in fact liable.

Tubbs claimants, however, have a different view. Even if the Tubbs fire was ignited by power lines on private property — not by PG&E distribution lines — PG&E should still be held liable because the fire wouldn’t have started that night had PG&E turned off the power as it was supposed to. Therefore, PG&E should not be let off the hook for a mere $14 billion. Rather, its total bill is well over $30 billion, even using PG&E’s estimates.

Why the dispute matters now.

PG&E cannot get out of bankruptcy until PG&E and its victims agree, or the bankruptcy judge decides, how much PG&E owes. The fire survivors argue that they will never come to an agreement with PG&E concerning the size of the trust fund that PG&E should establish unless and until the issue of PG&E’s liability for the Tubbs fire is decided. Further, the law does not allow for the bankruptcy judge to decide the whether PG&E caused the Tubbs fire.  That key issue must be decided by either a federal trial court, or by a state trial court.

If the bankruptcy judge sends the issue to a federal trial court, it will take years to reach trial.  Thus, the survivors are asking the bankruptcy judge to send eight Tubbs cases back to state court in San Francisco, where they were when PG&E filed bankruptcy back in January. (Two of the eight clients are represented by the NorCalFireLawyers.) Because the victims in those eight cases are elderly and infirm, state law allows the state court judge to fast-track the trials and have them heard in about 120 days.

Once the state court decides whether PG&E is liable for the Tubbs fire, then PG&E and the fire survivors will be in a better position to agree on the size of the trust fund that will be necessary for PG&E to exit bankruptcy.  And if they can’t agree, then the bankruptcy judge can weigh in, keeping in mind the trial court’s determination.

The bankruptcy judge will hear arguments on July 24. He will likely decide that day or soon thereafter whether to send the eight cases to state trial court, or to federal trial court, or to do something else with them.