Bankruptcy Judge Dennis Montali said on Wednesday that PG&E Corp. needs to explain how it will keep a promise to pay fire victims $13.5 billion in the face of a demand from the Federal Emergency Management Agency for a cut of that money, Bloomberg News reported. Judge Montali is wading into a potential fight for cash between government agencies demanding compensation for their fire recovery efforts, and California residents who say PG&E caused the fires that killed their loved ones and burned their homes. “It should not go unnoticed that January 29, 2020 will mark exactly one year since these chapter 11 cases were filed,” Montali wrote in his memorandum. It’s a reminder, he said, that a crucial June 30 deadline is less than six months away. If a settlement and the company’s reorganization plan aren’t in place by then, PG&E won’t be eligible for a state insurance fund that would shield it from future catastrophic wildfire losses. The committee representing wildfire victims has pledged to back PG&E’s bankruptcy-exit proposal in return for $13.5 billion in cash and stock. But federal and state agencies including FEMA have filed billions of dollars worth of claims that may compete for that sum. Judge Montali ordered PG&E to detail the inner workings of two proposed trust funds designed to compensate victims. Those people need to understand how the company will honor its commitments to them while fulfilling two multibillion-dollar bankruptcy deals with creditors, and still comply with state law, Judge Montali said in a court filing.
A little-noticed tweak to PG&E Corp.’s chapter 11 plan could add millions of dollars to the payout for victims of the California wildfires that forced the utility into bankruptcy, WSJ Pro Bankruptcy reported. In December, PG&E as part of a revised plan to exit bankruptcy signed over to the fire victims its rights to sue outside contractors and consultants involved in the allegedly lax safety practices that fed the blazes. Generally overlooked in the glare of attention focused on the plan’s other changes — including a $5 billion increase in the amount of cash and stock allotted to fire victims — the transfer of the right to sue contractors and consultants has put companies including Davey Tree Expert Co. and McKinsey & Co. squarely in the crosshairs of lawyers for fire victims. Subpoenas were sent last week, as victims lawyers assess the odds of collecting from San Francisco-based PG&E’s contractors for fire damages. Davey Tree’s in-house lawyer, Erika Schoenberger, said in a statement that the company, which provided tree-trimming services for PG&E, denies any fault and will vigorously defend any claims it is to blame for the disastrous fires. Managing vegetation around power lines “is increasingly perilous given a multitude of external factors, including climate driven risks and PG&E’s bankruptcy, which results in contractors becoming targets for lawsuits,” Shoenberger said. Regulators have faulted PG&E for failing to inspect and maintain its equipment, which failed and sparked fires that spread through heavily forested areas. Read more.
In related news, the hard-fought battle that’s kept the biggest utility bankruptcy in U.S. history dragging on for almost a year may finally be ending, Bloomberg News reported. PG&E Corp. is nearing a deal with a group of noteholders led by bond giant Pacific Investment Management Co. and activist investor Elliott Management Corp., who’ve repeatedly sought to derail the company’s $46 billion restructuring plan. The agreement would entitle them to a mix of equity and new debt in the California power giant if they scrap a rival proposal. A deal would turn some of PG&E’s most formidable adversaries into backers of its plan to emerge from bankruptcy and bring it one major step closer to getting a proposal approved by a state-imposed deadline of June 30. The San Francisco-based utility has spent months in court battling the creditors who’ve been offering to inject as much as $20 billion in cash into the company in exchange for virtually all its equity. That would leave California Governor Gavin Newsom as the last major obstacle for PG&E, which was forced into chapter 11 last year after its equipment was blamed for a series of catastrophic wildfires that saddled the company with $30 billion in liabilities. Newsom rejected PG&E’s latest plan and has been pushing the utility to include a provision that would allow the state to take it over should it fail to meet future safety standards. A deal hasn’t yet been struck, and the talks may still break off, the people familiar with the situation said. PG&E said in a statement that it’s been holding discussions with stakeholders on its reorganization and hopes “to make progress over the next week.” Read more.
PG&E Corp. yesterday delayed a courtroom clash with bondholders in favor of continued talks, suggesting that peace is breaking out on a critical front in the utility’s bankruptcy, the Wall Street Journal reported. During a brief appearance in a San Francisco bankruptcy courtroom yesterday, PG&E lawyer Stephen Karotkin gave no details of a possible deal but said it was involved in “constructive negotiations” to resolve a payment dispute PG&E estimates could cost more than $5 billion. Bondholders put the figure at $5.8 billion. Karotkin called off scheduled arguments, hinting at a potential settlement that would quiet demands from creditors for extra payments from PG&E. The dispute concerns bondholders’ demand for compensation for PG&E’s early redemption of their debt. A settlement with bondholders that have been PG&E’s most strident opponents throughout the bankruptcy would speed the company’s exit from chapter 11. PG&E needs to be out of bankruptcy and through the regulatory process by June 30, if it wants to participate in a statewide fund designed to cushion California utilities against the risk of more wildfires. Read more. (Subscription required.)
In related news, the Federal Emergency Management Agency is defending its push to collect $3.9 billion from PG&E Corp. for the relief it provided after the utility’s power lines sparked devastating wildfires in recent years, Bloomberg News reported. Wildfire victims have been fighting the payments to FEMA in court, saying the agency would be taking money from a $13.5 billion pot that bankrupt PG&E had agreed to set aside for them. The U.S. agency has an obligation to seek recovery for the costs of critical services, such as medical expenses and home repairs, that it provided in the aftermath of blazes in 2015, 2017 and 2018, said Bob Fenton, a regional administrator for FEMA. “We have no interest in reducing the funds PG&E owes to survivors,” Fenton said. “We are interested in holding PG&E responsible for the billions of dollars taxpayers provided to assist individuals and communities impacted by wildfires for which they accepted responsibility.” The dispute has pit the victims of catastrophic fires against the very agencies that helped rescue them from the wreckage. California’s emergency services office is supporting FEMA and is seeking an additional $300 million to compensate the state for its efforts. If California didn’t assist FEMA in pursuing reimbursement, the federal agency could try to seek recovery from the state’s coffers, Governor Gavin Newsom’s office said. Read more.
Bishop Edward B. Scharfenberger sought to assure donors that gifts to this year’s Catholic Charities appeal will be used for services and programs to benefit the needy, even as he acknowledged the Buffalo Diocese could pursue chapter 11 protection to settle more than 225 Child Victims Act lawsuits that have been filed against it since August, the Buffalo News reported. Catholic Charities officials yesterday set a fundraising target of $10 million — about $500,000 more than they raised last year. A chapter 11 filing would trigger an intense analysis of the diocese’s assets to determine what could be used to pay settlements. Catholic Charities is separately incorporated from the Buffalo Diocese, which means its assets would not be in play. But each year, the diocese takes a portion of the Catholic Charities appeals and uses it for its own operations. Historically, about $35 of every $100 raised in the appeal goes into the Fund for the Faith, which is controlled by the diocese and is used for ministries such as diocese communications, seminary training and campus ministry.
Victims of wildfires blamed on PG&E Corp.’s power lines and government agencies that provided them disaster relief are tussling over a payout from the bankrupt utility, Bloomberg News reported. PG&E reached a settlement with fire victims to pay a total of $13.5 billion for damages tied to catastrophic blazes. California’s emergency services office and the Federal Emergency Management Agency, known as FEMA, want more than $6 billion — payouts that victims’ attorneys said on Thursday would leave less money for those directly affected by the fires. Every dollar that FEMA and California’s agency receive “is one less dollar available to pay victims,” a committee representing fire victims said in filings to the judge overseeing PG&E’s bankruptcy. The dispute casts a shadow on the settlement PG&E reached with victims that won court approval just last month. The company had spent weeks cobbling together the deal, which is crucial to its efforts to come up with a viable restructuring plan and emerge from bankruptcy by a state-imposed deadline of June 30. FEMA said that it is required by federal law to pursue claims from third parties found responsible for creating disasters. “It is important that responsible parties are held accountable for causing the expenditure of taxpayer dollars,” the agency said in a statement.
As Bishop Edward B. Scharfenberger said last week that a chapter 11 filing by Buffalo’s Catholic diocese is probable in the onslaught of lawsuits from individuals making claims of clergy sex abuse, the diocese needs to be as forthcoming about the abuses its priests and bishop committed, according to a Buffalo (N.Y.) News editorial. While having claims against the diocese moved to bankruptcy court may ultimately result in a more equitable financial settlement for some of the victims than if their cases remain in civil court, it can still leave many feeling they are denied a full hearing. The Buffalo Diocese has been named as a defendant in more than 225 Child Victims Act cases — more than any other entity in the state. The act, signed into law in February 2019 after years of opposition from the Catholic Church, provides a one-year look-back period in which adult survivors of sexual abuse, up until their 55th birthday, can sue an abuser or a negligent institution.
Bayer AG’s settlement talks over tens of thousands of lawsuits alleging its Roundup herbicide causes cancer are heating up as the company’s lawyers meet with individual attorneys representing consumers across the U.S., Bloomberg News reported. The sessions are focused on resolving separate groups of Roundup claims rather than creating a formal global-resolution program. Washington, D.C.-based attorney Ken Feinberg, appointed by a federal judge to serve as a settlement mediator, confirmed the meetings on Thursday. “There are talks with various lawyers around the nation who have significant inventories of Roundup cases,” Feinberg said. “I’m optimistic we can reach a comprehensive settlement of this litigation.” Several trials in California and Missouri have been postponed, which lawyers said reflects the German drug and chemical giant’s effort to resolve the massive litigation exposure it took on with the purchase of the weedkiller’s maker, Monsanto Co., in 2018. To spur settlements, some of Bayer’s lawyers are warning that Monsanto may be forced to seek bankruptcy protection if favorable deals can’t be reached to wipe out the more than 40,000 cases pending and any future suits. Bayer lost its first three trials to consumers who claimed exposure to the weedkiller caused them to develop non-Hodgkin’s lymphoma. Juries in those cases, all in California, awarded a combined total of more than $2.4 billion in damages. Judges later reduced the damages and Bayer has appealed the verdicts.
A group of men who allege they were sexually abused when they belonged to the Boy Scouts of America filed a lawsuit in Washington, D.C., against the organization, testing the limits of the district’s new statute-of-limitations law, the Wall Street Journal reported. The district recently enacted a measure allowing child sex-abuse victims who hadn’t been able to file civil claims because of statutes of limitations to sue the people responsible for the offense and the organizations to which they belonged. The law opened a two-year period, which began in May, to file a claim and generally applies to child sex-abuse victims up to the age of 40. Eight plaintiffs, who filed the lawsuit in federal court in Washington, D.C. on Monday, say that they were abused in states that still have statute-of-limitations laws preventing them from suing. Their lawyers said that the district is the appropriate place to file the lawsuit, in part, because the Boy Scouts were incorporated and domiciled there. It will be up to the courts to determine whether the new law can apply to civil claims for sex abuse that took place outside the district’s jurisdiction.
An affiliate of Owens-Illinois Group Inc., the world’s largest manufacturer of glass container products, filed for bankruptcy today under the weight of thousands of asbestos injury claims, the WSJ Pro Bankruptcy reported. The chapter 11 filing in the U.S. Bankruptcy Court in Wilmington, Del. covers Paddock Enterprises LLC, a subsidiary of publicly traded O-I Glass Inc., which owns the Owens-Illinois glassmaking business made up of 78 glass manufacturing plants in 23 countries. Facing 900 asbestos-related lawsuits and thousands of additional claims, O-I Glass created Paddock to isolate the personal injury liabilities and protect the valuable glass operations from them. The company has spent about $5 billion dealing with roughly 400,000 claims from people who said that they were harmed by asbestos-containing pipe covering and block insulation products sold by a corporate predecessor between 1948 and 1958, according to bankruptcy documents. O-I Chief Executive Andres Lopez said that a chapter 11 reorganization plan “was the most fair and equitable way to obtain certainty and finality” for the legacy asbestos claims that remain. Asbestos claims payments will be suspended until the bankruptcy proceeding is resolved, O-I said.
Bishop Edward B. Scharfenberger referred to a Buffalo (N.Y.) Diocese bankruptcy filing as a "probability" and said that representatives of other Catholic dioceses that went through bankruptcies have told him the process ultimately was the correct way to maintain their missions and address mounting legal claims by childhood victims of clergy sexual abuse, the Buffalo News reported. “What they have said is painful and tedious as it is, that in the long run what resulted was more confidence and that people feel they understand in a credible way what assets are and aren’t available, what the true mission of the diocese is,” he said. Scharfenberger said that he specifically consulted with the Archdiocese of St. Paul and Minneapolis, which filed for bankruptcy in 2015 and emerged last year with a settlement in which it agreed to pay $210 million to victims. He gave no timeline for making a bankruptcy filing for the Buffalo Diocese, but appeared to be leaning toward such a filing, referring to it first as a “possibility” and then calling it the “probability of chapter 11.”
