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United States Court of Appeals for the Ninth Circuit
December 6, 2021, Argued and Submitted, San Francisco, California; August 29, 2022, Filed
[*1051] LUCERO, Circuit Judge:
This case involves an oddity in bankruptcy law: a solvent bankrupt. Specifically, it involves [**6] Pacific Gas & Electric Company ("PG&E"), which sought chapter 11 protection in a bid to proactively address massive potential liabilities related to a series of wildfires in Northern California. But PG&E was, and has remained, solvent. Its assets at the time of the bankruptcy filing exceeded its known liabilities by nearly $20 billion. As a result, several creditors—including plaintiffs, the Ad Hoc Committee of Holders of Trade Claims—claimed PG&E must pay postpetition interest at the rates required by their contracts in order for their claims to be "unimpaired" by the reorganization plan. See 11 U.S.C. § 1124(1). In other words, plaintiffs argued PG&E had to honor its contractual obligations before its shareholders reaped a surplus from the bankruptcy estate. The bankruptcy court and the district court disagreed. They concluded that In re Cardelucci, 285 F.3d 1231 (9th Cir. 2002), and the text of the Bankruptcy Code limited plaintiffs to recovery of postpetition interest at the much lower federal judgment rate. We have jurisdiction under 28 U.S.C. § 158(d)(1) and REVERSE.
PG&E filed for chapter 11 bankruptcy in January 2019. The company initiated the proceedings in response to catastrophic wildfires that occurred in Northern California during the preceding years. Following [**7] the fires, PG&E faced tens of billions of dollars in potential liabilities to fire victims, in addition to the tens of billions of dollars the company owed pursuant to its outstanding contractual commitments.3 However, the company was solvent at the time of filing: it reported $71.4 billion in assets compared to $51.7 billion in known liabilities. PG&E nonetheless insisted bankruptcy was necessary to resolve its wildfire liabilities and ensure the liquidity needed to sustain operations. The company has never contested its ability to pay non-wildfire creditors in full.
After PG&E filed for bankruptcy, California enacted Assembly Bill 1054 ("A.B. 1054"). See Act of July 12, 2019, ch. 79, 2019 Cal. Stat. 1888 (codified in scattered sections of Cal. Pub. Util. Code). The act created a multi-billion-dollar safety net to compensate future victims of utility fires. Cal. Pub. Util. Code §§ 3284, 3288. For PG&E to participate in the fund, A.B. 1054 required that the bankruptcy court confirm its reorganization plan by June 30, 2020. Id. § 3292(b).
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
46 F.4th 1047 *; 2022 U.S. App. LEXIS 24269 **
IN RE PG&E CORPORATION; PACIFIC GAS & ELECTRIC COMPANY, Debtors; AD HOC COMMITTEE OF HOLDERS OF TRADE CLAIMS, Appellant, v. PACIFIC GAS AND ELECTRIC COMPANY, Appellee.
Subsequent History: Rehearing denied by, En banc Pac. Gas & Elec. Co. v. PG&E (In re PG&E Corp.), 2022 U.S. App. LEXIS 27851 (9th Cir. Cal., Oct. 5, 2022)
Prior History: [**1] Appeal from the United States District Court for the Northern District of California. D.C. No. 4:20-cv-04570-HSG. Haywood S. Gilliam, Jr., District Judge, Presiding.
Official Comm. of Unsecured Creditors v. Pg&E Corp., 2021 U.S. Dist. LEXIS 96081, 2021 WL 2007145 (N.D. Cal., May 20, 2021)
postpetition, unimpaired, impaired, solvent-debtor, equitable, solvent debtor, bankruptcy court, solvent, federal judgment, allowed claim, pre-Code, equitable right, courts, confirmation, contractual, accruing, default, holder, unsecured creditor, contractual right, rights, plaintiffs', designated, repeal, cases, state law, entitles, interest rate, wildfire, district court
Governments, Legislation, Interpretation, Bankruptcy Law, Reorganizations, Plans, Impairment of Claims, Plan Contents, Mandatory Provisions, Plan Confirmation, Consensual Confirmations, Prerequisites, Impaired Class Consent, Plan Acceptance, Liquidations, Estate Property Distribution, Distributions Among Unsecured Classes, Fairness Requirement, Bankruptcy, Estate Property Distribution, Claims, Allowance of Claims