There are rumors that Pacific Gas and Electric Company (PG&E) will file for bankruptcy following the 2018 Camp wildfire, likely caused by its malfunctioning power line. It is an issue Camp Fire Trial Lawyers have anticipated. We consulted with Victor A. Vilaplana, one of the top bankruptcy lawyers in California and we are reassuring those who were injured and impacted by the wildfire that bankruptcy does not foreclose their rights. He has answered questions from our team to further clarify the situation.
Why would PG&E file bankruptcy?
The immediate reason PG&E would file a bankruptcy would be to stop all lawsuits and prevent the filing of new ones. PG&E could take this “breathing spell” to work out procedures and determine the damages for each victim. The long-term benefit is that it would provide PG&E the opportunity to arrange the means to pay creditors from various sources, and once the plan is confirmed, PG&E could continue operations as long as it complies with the terms of the plan.
Where would PG&E file bankruptcy?
There’s no crystal ball, but PG&E would likely file in San Francisco, CA, which is where it is headquartered. PG&E filed for bankruptcy in 2001 in San Francisco.
What type of bankruptcy would PG&E file?
PG&E could file a Chapter 7 or Chapter 11 bankruptcy. Chapter 7 is a liquidation, which means the company would go out of business and sell all its assets, and the creditors would be paid from the sales proceeds. It is unlikely that PG&E would file a Chapter 7. If it were to file a bankruptcy, it would likely be a Chapter 11, because it would allow the company to continue to operate its business and propose a plan of reorganization to pay creditors. In a Chapter 11 case, creditors get to vote on the plan, but approval does not have to be unanimous. Ultimately, the plan is submitted to the bankruptcy court for its approval of the plan. PG&E filed a Chapter 11 bankruptcy in 2001.
Would a victim be a creditor of PG&E?
Yes. “Creditor” has a broad definition under bankruptcy law. A victim who has filed a lawsuit would be considered a creditor. Even a victim who hasn’t yet filed a lawsuit would also be a creditor for bankruptcy purposes. As a creditor, a victim is entitled to notice of any important proposed actions in the bankruptcy case, and he or she is entitled to vote on any proposed plan.
How quickly can a bankruptcy be filed?
Very quickly. It only requires:
- A resolution of the company’s board of directors to file the bankruptcy petition, and
- A list of creditors and other financial information, which it can assemble after the petition is filed.
What happens to my lawsuit after the bankruptcy is filed?
Once the bankruptcy petition is filed, all actions – including lawsuits – against the company are automatically stayed and cannot proceed except with the permission of the bankruptcy court.
Can the automatic stay be lifted?
Yes. A person who has filed a lawsuit can ask the bankruptcy court to lift the stay. There are a variety of reasons for the court to lift the stay, but it would not be unusual for the bankruptcy court to allow a lawsuit that is already filed to go forward so the court hearing the complaint can fix the amount of the damages to which the victim is entitled. That amount would be the amount to be paid through the bankruptcy plan.
How much would it cost to lift the stay?
Most likely, an official committee of fire victims would be established by the U.S. Trustee (a division of the U.S. Department of Justice) with anywhere from five to 11 members. That committee can hire lawyers and other professionals to help it represent the interests of the victims. The costs of the committee would be paid by PG&E. The committee would work with the company to establish efficient and economical procedures to determine damages, but which will respect such fundamental rights like a right to a jury trial. It is possible that only one committee representing all the various kinds of creditors (suppliers, landlords, employees and victims) would be created, but the victims should make every effort to have the bankruptcy court direct the creation of a committee of victims.
How would the damages be paid?
All claims, including the victims’ claims for damages (both actual and punitive), are paid as set out in the plan. The claims will likely be paid from various sources including insurance, sale of non-essential assets, proceeds from the sale of new stock or bonds, or perhaps bank loans. The claims may be paid over a period of time. In the 2001 bankruptcy, PG&E paid claims of people who had been injured by various actions of the company in full, including punitive damages.
How long can the bankruptcy take?
When PG&E filed in 2001, the plan was approved three years after it filed, and PG&E paid over $10 billion to creditors.
Will my claim be cancelled in the bankruptcy?
Your claim will be paid exclusively through the bankruptcy plan once it is allowed.
Can I participate in the bankruptcy?
Yes. As a creditor, you can request that you get notice of every action the bankruptcy case and, in any event, if you have been listed as a creditor by the company, you will receive notice of every important event in the bankruptcy. You can also ask the U.S. Trustee to appoint you as a member to any committee that is created. You will also be required at some point to file a proof of claim which, if you have filed a lawsuit, can essentially be the filing of the complaint as an attachment to the official proof of claim form. If you haven’t filed a lawsuit, the proof of claim form will require that you explain the basis and the amount of your claim.
Is there a statute of limitations issue if I don’t file my lawsuit after the bankruptcy has begun?
No. If a bankruptcy petition is filed, the statute of limitations that applies to PG&E stops running because of the automatic stay. If there are other parties that might be liable along with PG&E, however, you should file your lawsuit as soon as possible since the automatic stay protects only the company which filed bankruptcy. In this context, it means that your claim against PG&E only is protected.
If you have further questions, we welcome you to contact the Camp Fire Trial Lawyers at 530-755-7810.