A group of Butte County wildfire victims have filed a class action complaint against PG&E as part of the embattled utility’s bankruptcy case, but a 50-year-old court ruling could place wildfire victims near the bottom of the stack of priorities in PG&E’s insolvency proceeding, according to a market researcher and a Bay Area bankruptcy expert.
A 1968 U.S. Supreme Court ruling in connection with a fire that burned down an industrial building, if applied to the PG&E bankruptcy case, potentially would place the claims of the victims of the infernos of recent years at a lower priority than victims of any PG&E-caused wildfires that began after the company’s bankruptcy filing this year.
“Any wildfire victims whose claims arise — meaning, their property catches on fire — from the date of PG&E’s bankruptcy onward will have first priority in the bankruptcy case,” said Jared Ellias, a bankruptcy expert and law professor with the UC Hastings College of the Law. This news organization asked Professor Ellias to assess whether that 1968 Supreme Court decision could come into play in the PG&E bankruptcy case which is being supervised by U.S. Bankruptcy Court Judge Dennis Montali.
That would produce an inferior status for the claims of victims of fires that occurred in 2017, such as the infernos that scorched the North Bay Wine Country and nearby regions; and the 2018 wildfire that roared through Butte County and essentially destroyed the town of Paradise, he said.
“The 2017 and 2018 wildfire victims as well as any other pre-bankruptcy creditor, including the bondholders,” would be treated as unsecured claims with a status well behind fires that might occur in 2019, 2020 or 2021, during the course of the bankruptcy case, according to Ellias.
PG&E listed $51.69 billion in debts and $71.39 billion in assets in its Jan. 29 bankruptcy filing, seeking to reorganize its shattered finances that have been overshadowed by a mountain of potential liabilities arising from the lethal infernos of the last two years.
“To the extent that 2019 is a bad wildfire season, the 2019 victims could end up draining PG&E of a lot of value” that might otherwise have gone to the victims of 2017 and 2018, Ellias said.
This sort of outcome could generate plenty of controversy, according to a Wyco Researcher assessment posted on the Seeking Alpha investment site this week.
“From a political standpoint, there is going to be public outrage that 2019 (and as long as PG&E is in Ch.11) wildfire victims must be paid in full, but victims from 2017 and 2018 may get less than full recovery under a reorganization plan because they are in a lower priority class of unsecured claims,” stated Wyco Researcher, an investment research firm.
The forbidding outlook for those harmed by previous infernos has emerged at the same time that victims of the November 2018 Camp Fire in Butte County have lodged a class action complaint against PG&E. The class action was filed with the bankruptcy court on Feb. 13.
The litigation claims that PG&E failed to properly maintain its aging electricity and power transmission system and didn’t take preventative measures such as de-energizing power lines during hazardous conditions.
“PG&E’s dereliction of these duties resulted in the deadliest and most destructive wildfire in California history,” according to the class action complaint that was made part of the PG&E bankruptcy case.
The class action claimed that PG&E was negligent, caused a private and public nuisance, violated state laws, and violated health and safety codes. The litigation also seeks to apply a California doctrine called inverse condemnation, whereby PG&E and other major power companies in the state could be strictly liable if their equipment was a substantial cause of a fire, even if the utility followed established inspection and safety rules.
David Herndon, Julia Herndon, Gabriell Herndon, Jedidiah Herndon and Estafania Miranda, all Butte County residents, were listed as the principal plaintiffs in the class action arising from the Camp Fire, bankruptcy court records show.
“This catastrophe was preventable,” the class action claimed, the court papers show.
