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PG&E Corp. has lost a challenge to a California law that holds it liable for property damage from fires related to its equipment, a win for wildfire victims seeking to collect billions of dollars in the utility’s bankruptcy, WSJ Pro Bankruptcy reported. Bankruptcy Judge Dennis Montali said on Nov. 27 that the principle of inverse condemnation applies to PG&E, rejecting an argument that the utility was attempting to invoke to limit the amount it owes for homes and businesses destroyed by the fires. When it filed for chapter 11 protection in January, PG&E estimated it faced damage claims of more than $30 billion related to fires that swept its service territory in 2017 and 2018. Under the doctrine of inverse condemnation, PG&E can be held liable for property damage from fires caused by its equipment, even if it wasn’t negligent. PG&E is in talks with fire victims about a chapter 11 plan that could pay them about $13.5 billion. The utility and the fire victims, however, are still preparing to litigate over whether PG&E is legally liable and how much it will have to pay. The decision from Judge Montali cuts some of the ground out from under PG&E in both negotiations and litigation, depriving the utility of the ability to argue that holding it strictly liable isn’t fair. Read more. 

In related news, a tentative ruling on a key piece of PG&E Corp.’s restructuring strategy could help California’s largest utility move toward a deal that would end its bankruptcy, WSJ Pro Bankruptcy reported. Bankruptcy Judge Dennis Montali on Nov. 26 issued preliminary rulings on objections to PG&E’s $11 billion settlement with insurance companies that covered damage claims from catastrophic wildfires that drove the utility to bankruptcy. The settlement is slated for formal review in December in the U.S. Bankruptcy Court in San Francisco, where Judge Montali is presiding over the utility’s bankruptcy, which is among the largest U.S. corporate chapter 11 cases ever based on assets. Outside of court, negotiations continue about a revised chapter 11 exit plan for PG&E, which is trying to fend off a bankruptcy takeover by bondholders led by Elliott Management Corp. The San Francisco company is trying to match a $13.5 billion offer bondholders made to wildfire victims as part of a competing chapter 11 plan. PG&E’s current plan provides $8.4 billion to fire victims. Read more. 

Edison International is warning it may cut power to as many as 14,000 homes and businesses in Southern California as a wildfire burns near Santa Barbara, Bloomberg News reported. The Cave Fire began Monday afternoon and has ripped through about 4,100 acres in the Santa Ynez mountains, prompting more than 6,300 evacuations, according to Santa Barbara County officials. It also threatens Edison’s transmission lines that provide power to the region, officials said. The blaze has left about 1,400 customers without power, and Edison has preemptively cut off electricity to 350 others to prevent live wires from sparking more fires in high winds, a spokeswoman said. The utility may expand the blackouts if conditions worsen, she said. California utilities have cut power to millions of people this year to prevent live wires from sparking wildfires in high winds. It comes after the state’s largest utility, PG&E Corp., filed for bankruptcy in January facing $30 billion in liabilities from blazes blamed on its equipment.

In late 2016, a group of plaintiffs’ lawyers took the stage at the year’s largest gathering of their colleagues to talk up a promising new target. For 30 minutes, they laid out arguments linking the popular weedkiller Roundup to cancer. An arm of the World Health Organization had pegged Roundup’s main chemical ingredient as a probable carcinogen the year before, and it was quickly becoming a focus of the plaintiffs’ bar, the Wall Street Journal reported. Some product-liability lawyers in the audience in Las Vegas were skeptical. Tying exposure from everyday products like Roundup to cancer often is less straightforward than linking illness to medications or medical devices, said Chase Givens, a lawyer with the Cochran Firm who attended the event. But the presenters’ track records mounting complex cases got the audience’s attention. Three years later, more than 42,700 farmers, landscapers and home gardeners have sued Bayer AG, Roundup’s manufacturer, claiming the company knew the herbicide posed a cancer risk but failed to warn consumers. Bayer is contesting the lawsuits and argues that scientific research and regulatory reviews, including from the Environmental Protection Agency, prove Roundup’s safety. Behind the surge in lawsuits is a little-known, sophisticated legal ecosystem that includes marketing firms that find potential clients, financiers who bankroll law firms, doctors who review medical records, scientists who analyze medical literature and the lawyers who bring the cases to court. Building up thousands of cases against a single target gains momentum at conferences like the one in Las Vegas, called Mass Torts Made Perfect.

Coal as a source of fuel both in the U.S. and abroad. U.S. coal production dropped to 756 million tons last year from more than 1 billion in 2014 and is expected to continue to decline, according to the Energy Information Administration, the Wall Street Journal reported. About 60 percent of the nation’s coal is mined by companies that have been through bankruptcy over the past five years, according to Prof. Joshua Macey, a Cornell Law School visiting assistant professor who has written about industry restructuring. But the number of potential buyers for coal businesses is shrinking, creating a dilemma for courts that are charged with deciding what to do with troubled mines. Bankruptcy courts are often asked to weigh proposed asset sales involving buyers that may not have the financial or technical wherewithal to mine coal. But rejecting those deals can mean sticking states with abandoned, environmentally devastated lands and putting more miners out of work. State regulators have the chance in bankruptcy court to oppose sales to undercapitalized or underprepared owners, said Peter Morgan, a lawyer for the Sierra Club, an environmental organization. “But those regulators are in an impossible position,” he said. “If the courts hold up the deals, then the company might abandon the properties, in which case the states become responsible, and they would rather let someone [else] at least take a shot.”

Attorneys believe as many as 100,000 people are eligible to receive payments for damages they suffered during the devastating California wildfires of recent years. But wildfire victims of previous years must wait for PG&E to exit bankruptcy to get any payout from the utility, the Associated Press reported. And as the 2019 wildfire season takes another toll on Northern California and the utility’s equipment is blamed for new fires, the number of homes destroyed ticks up. More victims are filing claims against the company, potentially reducing the payout all victims and creditors could receive. In its bankruptcy plan, PG&E has pledged to pay $8.4 billion to wildfire victims and an additional $11 billion to compensate insurance companies for their payouts. A competing proposal made by bondholders seeking to gain control of PG&E would pay wildfire victims $13.5 billion. It’s unclear how much the total liabilities for wildfire victims will amount to, and the matter is being litigated.

Mallinckrodt Plc CFO Bryan Reasons said that the company may be set up in a way that allows for a “unique” settlement to resolve opioid suits, echoing previous comments about spinning off its Specialty Generics business where the legal exposure could be contained, Bloomberg News reported. “We feel like we potentially have a structure for a settlement, might be a little bit unique to our legal entity structure,” Reasons said on Nov. 20. The CFO made similar comments at a June conference where he stated his confidence that the opioid litigation risk was limited to Mallinckrodt’s Specialty Generics business. The company had stated plans earlier in 2019 to spin off the unit for a sale, but suspended that process as liabilities mounted. “A full chapter 11 filing is unlikely to be the anchor part of any plan for which management is pushing,” BI analyst Mike Holland said. But putting only the specialty generics business into bankruptcy protection, “would be a goal, in my view.” Alternatively, Holland said, some interpret the CFO’s statements as possibly referring to a plan to spin off and place the specialty generics unit, in combination with some cash, in a trust to comprise a settlement consideration.

Insys Therapeutics Inc., the first opioid maker to use bankruptcy to cope with legal trouble stemming from the national addiction crisis, is struggling to wind up its affairs in the face of a wave of protests, WSJ Pro Bankruptcy reported. The manufacturer, which manufactured an under-the-tongue formulation of the powerful painkiller Fentanyl, filed for chapter 11 protection in June after its former top leaders were convicted of racketeering. Insys sold its businesses and is trying to win creditor support and court approval for a chapter 11 plan that spells out how the proceeds will be distributed. Rounding up support for the plan hasn’t been easy for the company, which yesterday pushed off for the second time a key preliminary test of its payout proposal. The chapter 11 plan proposed by Insys would leave a payout of $15 million to $20 million for creditors, and other possible revenue streams, such as royalties from products, according to court papers filed by a court-appointed creditor committee. Government lawyers said public creditors, such as the states and cities, are entitled to at least as much of Insys’s cash as private creditors, including suppliers. Liability releases for Insys are still under discussion, lawyers told Judge Kevin Gross yesterday. Judge Gross has set a Dec. 4 hearing for Insys to deliver a preliminary chapter 11 plan report to tell creditors what they will get, and what they will give up, if the arrangement is confirmed. Read more. 

In related news, Insys outlined a deal yesterday to divide its dwindling cash among governments, insurers, hospitals and individuals who accused the company of fueling the U.S. opioid crisis, Reuters reported. The company was largely adopting a plan it had filed in September, which now had the support of numerous groups that initially opposed it, said Brenda Funk, who represents the company, at yesterday’s hearing before a Bankruptcy Judge Kevin Gross in Delaware. The Insys agreement established the company owed various parties a combined $1 billion, well below the billions of dollars that could have been claimed. In addition, the Department of Justice would have a claim of $243 million, along with undetermined claims for forfeiture and restitution. Read more. 

The defunct for-profit Globe University has filed for chapter 11 bankruptcy protection, saying it owes many millions of dollars in connection with fraud actions taken against the school by the state of Minnesota, the Minneapolis Star Tribune reported. The petition filed in federal court on Wednesday by the former Woodbury, Minn.-based school comes two weeks after the Minnesota Supreme Court sided with former criminal justice students at Globe and its affiliated Minnesota School of Business (MSB) in ruling that anyone who attended the programs can receive a tuition refund. The filing lists Globe’s assets ranging from $100,000 to $500,000, with debts from $10 million to $50 million. The state’s claims are the largest by far among the creditors, but the U.S. Education Department also has a claim of roughly $850,000 in connection with student loans. The state attorney general’s office sued the schools five years ago, alleging they misled students by suggesting they would be able to work as police and probation officers. The students, among them a large number of veterans using GI Bill benefits, enrolled in the schools’ criminal justice program only to later discover that their degree failed to meet requirements for becoming police and probation officers in Minnesota.

The Catholic Diocese of Rochester returned to court yesterday regarding the multiple child victim’s act lawsuits filed against it, RochesterFirst.com reported. Continental Insurance made a motion to move the case from bankruptcy court to state court. That’s one of the insurance companies that could be on the hook for what the diocese experts to be tens of million of dollars in lawsuit payouts. The judge ultimately denied that move. “The problem with that is it could create delays and could slow things down in the bankruptcy court,” said survivor’s attorney Steve Boyd. “From the diocese and the survivors point of view we have a shared interest that there be as much insurance as possible.” The judge instructed the diocese to file a motion for mediation with the insurance companies. The attorneys believe the judge will support that motion.

California Governor Gavin Newsom (D) wants PG&E Corp. to add state-appointed members to its board as part of the utility giant’s reorganization, Bloomberg News reported. Newsom’s administration pushed for this, along with several other conditions, to be included in PG&E’s restructuring plan during a meeting yesterday with the company and other parties in its bankruptcy case. Newsom also wants a governance structure that would give these board members greater management authority over the utility if it fails to meet certain safety performance standards, the governor’s office said yesterday. The pressure on Newsom to force an overhaul at PG&E has escalated in recent weeks as the company plunged millions into darkness to keep its power lines from igniting wildfires. The company filed for chapter 11 protection in January after its equipment was tied to a series of 2017 and 2018 blazes that left it with $30 billion in estimated liabilities. Earlier this month, Newsom threatened to take over PG&E if the company fails to emerge from bankruptcy by a state-imposed deadline of June 30, 2020, and improves its operations before next year’s wildfire season.