SAN FRANCISCO -- PG&E Corp. and lawyers for wildfire victims urged a bankruptcy judge Wednesday to reject FEMA's demand for a $3.9 billion reimbursement from the troubled utility, saying the government's claim could undermine a carefully crafted plan to compensate victims and exit bankruptcy.
"There's no question this is a cloud over the entire case," said Eric Goodman, a lawyer representing victims of the 2017 wine country fires and 2018 Camp Fire.
The Federal Emergency Management Agency filed a $3.9 billion claim in PG&E's bankruptcy, saying taxpayers deserve to be reimbursed for the assistance the government provided after a succession of fires caused by PG&E's faulty equipment. California's Office of Emergency Services has a claim of its own, for $290 million it spent coordinating cleanup and other activities after the wildfires.
But with hundreds of wildfire victims already expressing displeasure with PG&E's compensation plan, lawyers for PG&E and fire victims said the government claims could blow a major hole in the $13.5 billion settlement the utility has agreed to pay.
Goodman told U.S. Bankruptcy Judge Dennis Montali that the claims must be disallowed, largely because federal law prohibits FEMA from seeking reimbursement unless it can show PG&E deliberately set the Camp Fire and other disasters.
"We didn't intend to cause the fire," said PG&E lawyer Paul Zumbro.
But FEMA's lawyer Michael Tye said PG&E's repeated inability to maintain its power equipment gives the federal government the right to recoup its costs. PG&E "knew a wildfire wass likely to result, as a result of their conduct," Tye told Montali.
The judge said he would rule quickly on the issue.
The question could prove critical to PG&E's efforts to leave bankruptcy by June 30, the deadline set by the Legislature when it created an insurance fund to help buffer utilities against claims from future wildfires.
Under bankruptcy law, PG&E's $13.5 billion payment plan will come up for a vote of the estimated 80,000 wildfire victims. Carving out more than $4 billion for the government agencies could tilt the vote against the proposed settlement, lawyers for the victims said.