PG&E Judge Rejects Bid to Throw Out Victims’ Bankruptcy Vote

By Steven Church and Mark Chediak | May 18, 2020

The judge overseeing PG&E Corp.’s bankruptcy rejected an effort by dissident fire victims to upend voting on the California utility’s reorganization plan.

Judge Dennis Montali said during a hearing Friday that he planned to deny a motion asking to throw out votes on the company’s Chapter 11 plan cast by families and businesses who lost homes, property and loved ones in the blazes.

PG&E shares climbed 2% to close at $11.33 on Friday.

Some fire victims who want to change the payout deal claimed that Mikal Watts, a lawyer representing the largest group of victims, has a potential conflict of interest that has tainted the six-week voting process, which ended Friday afternoon. The judge will consider the results of the creditor votes when deciding whether to approve PG&E’s plan to reorganize, which includes a $13.5 billion payment to about 80,000 residents and businesses harmed by Northern California wildfires.

Watts said Friday that the bankruptcy judge’s ruling is “appropriate, founded in facts and the law.”

“The motion was nothing more than an attempt to achieve earned media to try to get people to change their vote,” Watts said, adding that more than 95% of his clients who have cast ballots have voted in favor of the PG&E plan.

Lawyers representing thousands of people who have claims against PG&E have been lobbying their clients to vote in favor of the reorganization proposal.

A dissident group of victims, including a former member of the official fire victim’s committee that helped negotiate the $13.5 billion deal, asked the judge to throw out thousands of votes cast by clients of Watts, alleging he has a possible conflict because his law firm received a loan that was backed in part by two major PG&E investors.

Watts, who represents more than 16,000 victims, has disclosed that Centerbridge Partners LP, a PG&E shareholder, and Apollo Global Management Inc., a PG&E bondholder, bought stakes in a $100 million line of credit provided in September to his law firm by Stifel Financial Corp.

The lawyer has said his loan was a general credit line to fund all of his firm’s cases and not just the PG&E litigation. Watts said there is no conflict of interest because Centerbridge and Apollo don’t have a right to control his litigation decisions and they have no right to a share of his legal fees from the PG&E case. Watts also has said he disclosed the financing arrangement during in-person and virtual meetings with his clients.

Attorneys for fire victims including Watts ultimately reached a deal with PG&E and the company’s shareholders to set up the $13.5 billion trust that will be funded in half with stock and in half with cash.

Will Abrams, a fire victim who filed the motion to designate votes solicited in bad faith, said he was disappointed in the bankruptcy judge’s decision.

“Rather than producing a call for sunlight and process transparency, it seems my motion has driven these critical matters further into the dark,” Abrams said.

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