PG&E to Face California Jury Over Billions in Tubbs Fire Damages

(Bloomberg) -- Victims of the second-most destructive fire in California history will get a chance to try and persuade a jury that PG&E Corp. should pay them as much as $18 billions in damages.

U.S. Bankruptcy Judge Dennis Montali on Friday lifted a freeze on lawsuits tied to the 2017 Tubbs fire, which killed 22 people and destroyed more than 5,600 structures in Sonoma and Napa counties, opening the door for victims pursuing claims against PG&E to start preparing for a trial.

California fire investigators said days before PG&E filed for bankruptcy the utility didn’t cause the Tubbs fire, finding instead that it was sparked by a private electrical system outside a home near Calistoga.

But attorneys for a group of victims and insurance companies that paid damages have disputed the state’s findings in bankruptcy court papers. They say their evidence indicates the fire was started by PG&E equipment and want a jury to decide whether the company is to blame for the biggest of the 2017 wine country fires. The lawyers also say that PG&E failed to cut power to the area despite the high fire risk.

Montali’s ruling means “it’s going to be up to a jury to decide what PG&E’s role in the Tubbs Fire was,” and how much the utility should pay, Mike Danko, a lawyer representing fire victims said in an email. Arguments and evidence will be aired in open court, he said, adding, “if all goes well, we’ll have the jury’s answer in a matter of months.”

Under California law, the Tubbs victims will get a trial within five months, Danko said.

While PG&E may have to fight the fire victims’ claims in court, it did score a victory Friday by retaining control of a multibillion-dollar bankruptcy exit plan.

In a separate ruling, Montali sided with the utility and rejected requests from two groups of creditors who wanted to propose their own ways to restructure the company. Montali said opening up the bankruptcy to competing plans at this point would have led to “expensive, lengthy and uncertain disputes” that wouldn’t benefit the fire victims.

PG&E has outlined its plan to exit the biggest utility bankruptcy in U.S. history, promising to largely protect the value of its shares. The company says it plans to file the proposal by September 9.

Claims Estimates

Lawyers for PG&E also wanted the bankruptcy court to determine how much the utility could be on the hook for from the Tubbs fire through a proceeding that would estimate claims. The “estimation has to begin now,” the company said in court papers. The California legislature imposed a June 30, 2020, deadline for the resolution of the bankruptcy and a confirmable plan needs to be ready by January for the California Public Utilities Commission’s consideration.

PG&E reiterated in a statement that the California Department of Forestry & Fire Protection, known as Cal Fire, found the Tubbs fire wasn’t related to PG&E equipment. The utility said it will cooperate with the state court.

The determination of PG&E’s potential liability is one of the key issues that will need to be resolved for the company to exit bankruptcy. When PG&E filed for Chapter 11 protection at the end of January, the move froze lawsuits in connection with the blaze and other fires.

Allowing the suits to advance “will definitively bring a resolution as to debtors’ liability in the Tubbs fire, and provide an important data point that most likely will facilitate resolution of the wildfire tort claims in this case,” Montali wrote in Friday’s order.

The official committee that speaks for the fire’s victims and a group of holders of fire insurance claims said in court papers that the Tubbs claims make up about one-third of an estimated $54 billion in total claims tied to the 2017 and 2018 fires. The Tubbs fire was the most destructive in state history until November’s Camp Fire killed 86 people and leveled the town of Paradise. State investigators said the Camp Fire was sparked by a PG&E transmission line.

“Establishing PG&E’s liability with respect to the Tubbs Fire is a crucial component to resolving these Chapter 11 cases,” an ad hoc group of insurance claim holders, which supported lifting the stay, said in an email statement.

In an effort to prevent future liabilities from crippling them PG&E, Sempra Energy and Edison International signed off on the creation of a $21 billion wildfire fund that any one of them could tap the next time a power line sparks a catastrophic blaze. California lawmakers rushed to pass legislation for the creation of the fund in July as the state heads into yet another wildfire season.

The case is PG&E Corp., 19-30088, U.S. Bankruptcy Court Northern District of California (San Francisco)

--With assistance from Allison McNeely and Steven Church.

To contact the reporters on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net;Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, ;Lynn Doan at ldoan6@bloomberg.net, Joe Schneider, John Harney

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