By Hudson Sangree

Lawyers in the Pacific Gas and Electric bankruptcy case argued for hours Tuesday over competing reorganization plans and how much the utility owes to wildfire victims.

The attorneys shot insults at one another at times during the hearing in U.S. Bankruptcy Court in San Francisco. An attorney for fire victims said the utility was treating those it had harmed as annoyances, while an attorney in PG&E’s camp said the plaintiffs’ lawyers had a “credibility problem.”

The new level of testiness came as the case seemed to be moving toward its endgame.

Over the last two weeks, major parties in the bankruptcy divided into two camps, each with its own reorganization plan, and PG&E reached an $11 billion settlement with insurers. That left only one big question: How much will PG&E pay fire victims?

“It does look like some of the important building blocks of what could be a global consensual deal are beginning to fall into place,” attorney Dennis Dunne, with law firm Milbank, told Judge Dennis Montali. Dunne, who represents the official committee of unsecured creditors, called the recent developments “stunning” with “parties that are willing to write substantial checks.”

On Sept. 13, PG&E announced it had reached an $11 billion settlement with subrogation claimants — the insurers and other parties trying to recoup insurance payments to victims of wildfires sparked by PG&E equipment.

As the insurers locked arms with PG&E and its shareholders, wildfire victims teamed up with investors that hold more than $10 billion in PG&E bonds. It was a coup for bondholders, who offered a reorganization plan that would give PG&E billions of dollars in cash in exchange for a controlling stake in the utility.

The bondholders’ plan would pay fire victims $13 billion and the subrogation claimants $11 billion. PG&E’s plan, as it currently stands, would provide a capped trust of $8.4 billion for fire victims in addition to the $11 billion for subrogation claims. (See Judge to hear PG&E Takeover Plan.)

Montali said he’ll decide whether to allow the bondholders to submit their reorganization plan, to formally compete with PG&E’s proposal, at a hearing on Oct. 7.

Cecily Dumas, a San Francisco bankruptcy attorney, said the fire victims she represents were frustrated and upset, some to the point of tears, that PG&E appeared to be offering insurance companies more money and putting them ahead of people who had lost family members, homes and businesses in the wildfires.

“Regrettably we are in this place … where the victims are lined up behind a creditor plan,” Dumas told the judge.

PG&E, she said, hadn’t shown fire victims a draft of its reorganization plan or met with victims’ lawyers even once.

“They are playing it like we are an irritant, like a rock in your shoe.” Dumas said. “We are not an irritant. We are the communities you burned. We are the loved ones of those whose lives you took. We deserve respect. This is not a chess game.”

PG&E filed for bankruptcy in January, citing $30 billion or more in wildfire damages.

California fire investigators blamed faulty PG&E transmission equipment for starting the Camp Fire, which killed 86 people in Paradise, Calif., and burned down more than 14,000 homes in November 2018. The utility’s equipment started 21 of the 22 the major Northern California fires of October 2017, including three fires that resulted in multiple deaths, investigators with the California Department of Forestry and Fire Protection (Cal Fire) determined.

PG&E is heading toward a trial on the Tubbs Fire, which killed 22 people and destroyed part of the city of Santa Rosa. State fire investigators said a private landowner’s electrical line had sparked the fire, but plaintiffs’ lawyers still hope to convince a jury that PG&E was responsible.

In response to Dumas’ comments, attorney Bruce Bennett, who represents PG&E equity holders, said, “There’s a fundamental credibility problem with the lawyers involved for the wildfire plaintiffs.”

Representatives for fire victims had said, early in the case, that they anticipated about 100,000 claims and uninsured liability of approximately $36 billion, Bennett said. Now they’ve agreed to settle for $13 billion in the bondholders’ plan, and the number of claims may be far fewer than anticipated, he said.

“There’s a problem starting with very high aggressive numbers that are divorced from the actual facts,” he said.

He encouraged the judge to appoint a mediator to help sort out the issue of damages.

Montali noted a separate proceeding in federal court was intended to estimate the amount of wildfire damages PG&E faces. The judge’s ruling in that “estimation proceeding” will be binding, though it would be made moot by a settlement agreement between PG&E and the wildfire victims, Montali said. (See PG&E Bankruptcy Split into Three Parts.)