By Hudson Sangree

The federal judge overseeing PG&E’s bankruptcy relinquished a major part of the case dealing with wildfire damages to another federal judge while a third part of the case is heading to state court for resolution.

U.S. Bankruptcy Judge Dennis Montali said he understood the divided process is awkward, but he wanted to speed up the case and protect the rights of fire victims.

He decided a federal district court judge, not a bankruptcy judge, should estimate the wildfire damages, which are a key component of the utility’s bankruptcy.

Some parties have suggested PG&E might be required to pay $10 billion to $40 billion to victims of the wildfires that scorched Northern California in the past two years.

“I felt compelled to toss the ball to the district court,” Montali told lawyers during a bankruptcy hearing Tuesday. The judge said he would be doing a disservice to victims to try to rush through the complex and unusual proceeding while attending to the rest of the massive bankruptcy case.

Phyllis J. Hamilton, chief judge for the Northern District of California, approved Montali’s request to assign the estimation proceeding to a trial judge. District Court Judge James Donato, whose courtroom is in the same building as Montali’s, will now hear the matter.

Montali said the state Legislature’s July passage of AB 1054 had increased the pressure to resolve PG&E’s bankruptcy more quickly. The law allows PG&E to share in a $21 billion wildfire damages fund administered by the state but only if it exits bankruptcy by June 30, 2020. (See Calif. Wildfire Relief Bill Signed After Quick Passage.)

“While that may seem a long way in the future, and no doubt is far too long for thousands of victims, the complexity of these Chapter 11 cases, the requirements of Chapter 11 and the need for parallel hearings and rulings by the California Public Utilities Commission — most of which pertain to regulatory matters and contractual obligations that exist apart from the wildfire claims — impose very difficult time limits on all parties, including the court,” the judge wrote.

A CPUC attorney told the judge Tuesday the commission would need time to weigh the effects of a reorganization plan on ratepayers and PG&E’s financial stability.

Earlier this month, Montali agreed to allow claims against PG&E over the October 2017 Tubbs Fire to be decided in state court.

The Tubbs Fire, which killed 22 people, destroyed more than 5,600 structures and leveled a section of Santa Rosa, Calif., was the most destructive in state history until the Camp Fire in November 2018 killed 86 people and burned 18,804 structures, destroying most of the town of Paradise.

Investigators with the California Department of Forestry and Fire Protection (Cal Fire) blamed the Camp Fire on a faulty PG&E transmission line but said the Tubbs Fire was caused by shoddy wiring on private property.

Plaintiffs’ lawyers still want a judge or jury to decide PG&E’s liability for the Tubbs Fire, however, and Montali agreed on Aug. 16 to lift a stay on legal actions against the company and allow the matter to go to state court on an expedited basis. (See Only PG&E Can File Bankruptcy Plan, Judge Says.)

PG&E has said it plans to file a reorganization plan by Sept. 9, but that plan can’t be finalized without a better idea of the damages from the Camp Fire, the Tubbs Fire and a rash of other fires in October 2017, most of which have been blamed on PG&E equipment.

The utility has indicated it wants to establish a “capped fund” to pay wildfire victims, but Montali said he needs to know where to set the cap before approving a compensation fund.