After the market closed on August 16, Judge Montali, who is presiding over the bankruptcy of PG&E Corp. (NYSE:PCG), issued his decision (docket 3571) to grant relief from an automatic stay filed by Tubbs Fire victims, which will allow the trial to proceed in California Superior Court for those victims seeking billions in damages caused by the 2017 wildfire. Some PG&E shareholders are worried that a runaway California jury could grant huge damages to victims that could wipe-out shareholders under a reorganization plan. The judge also ruled on Friday against two motions (dockets 3569 and 3570) to terminate the exclusive period for PG&E to file a Ch.11 reorganization plan.
Automated Stay
Under section 362 of the Bankruptcy Code, various actions are automatically stayed when a company files for Ch.11 bankruptcy. Under section 362(d)(1), a bankruptcy judge may grant relief from the stay for "cause". The Code does not define standards for relief-it is by case by case basis. It is very common for motions to be filed requesting relief and the court fairly frequently grants these requests, but it is very rare for the granting of the relief from a stay to have such a dramatic impact. The market value for PG&E dropped over $1.3 billion on Monday following the filing. Judge Montali did not, however, rule on the specific merits of the Tubbs litigation.
Key Legal Issues for the Two Parties
I would expect PG&E to basically stick to findings of Cal Fire report from January, since they already “won”, in their opinion, the causation issue. I would be shocked if they wonder too far from the findings in that investigation.
The case for the fire victims, in my opinion, will be a three front attack
Problems With Cal Fire Report
1) Faulty Reasoning
On page 78 of the
