In re: PG&E Corporation

Background

PG&E Corporation and Pacific Gas and Electric Company filed Chapter 11 bankruptcy cases in 2019. Their reorganization plan was confirmed in June 2020 and became effective on July 1, 2020. The plan and confirmation order gave the bankruptcy court authority over certain disputes involving executory contracts and claims.

The dispute involved a 1984 Agreement of Cotenancy concerning a transmission line among the California Department of Water Resources (CDWR), PG&E, and the City of Santa Clara, doing business as Silicon Valley Power, and the Northern California Power Agency (SVP & NCPA). CDWR gave notice in 2018 that it intended to end its participation. CDWR later filed a bankruptcy claim for $101,026.75 concerning overpayment of operation and maintenance fees after termination.

CDWR asked the bankruptcy court to rule that it did not owe estimated future removal costs before its termination became effective. PG&E opposed that request and sought arbitration, arguing that CDWR had to pay its proportional share of estimated costs, including removal costs, before terminating its participation. SVP & NCPA supported PG&E’s position but chose not to participate in the substance of CDWR’s motion.

The bankruptcy court granted CDWR’s motion and denied PG&E’s motion for arbitration. After that ruling, SVP & NCPA sought permission to intervene and submit a brief concerning the relationship between the Cotenancy Agreement and a separate Transmission Services Agreement. The bankruptcy court denied that request as untimely. The bankruptcy court later entered its April 22, 2022 order, which SVP & NCPA appealed.

Issues on Appeal

The district court addressed two issues: whether SVP & NCPA had standing to appeal and whether the bankruptcy court improperly denied their request to intervene. The court did not need to decide whether arbitration was properly denied, whether the bankruptcy court correctly interpreted the Cotenancy Agreement, whether an adversary proceeding was required, or whether the bankruptcy court had constitutional authority to enter a final judgment.

Standing

The court held that SVP & NCPA had both constitutional standing and the bankruptcy-specific requirement that an appellant be directly and adversely affected by the order. They alleged concrete injuries to their contractual and financial interests because the bankruptcy court’s ruling foreclosed removal-cost payments they claimed were available when CDWR terminated the Cotenancy Agreement. The court also found that a favorable decision could remedy those alleged injuries.

Intervention

The court concluded that SVP & NCPA were parties in interest under 11 U.S.C. § 1109(b) because they were parties to the Cotenancy Agreement and creditors in the Chapter 11 case. But the court held that this status did not give them an unlimited right to intervene at any time. Their request still had to be timely under the principles governing intervention.

The court upheld the bankruptcy court’s finding that the request was untimely. SVP & NCPA waited until after the bankruptcy court had denied PG&E’s arbitration motion and granted CDWR’s motion. They had received CDWR’s motion, attended the hearing at which removal-cost liability was discussed, and chose not to argue the substance of CDWR’s motion. Allowing them to participate later would have given them a second opportunity to argue the merits and could have prejudiced CDWR. The district court also noted that the bankruptcy court had not adjudicated any rights under the separate Transmission Services Agreement and that PG&E and SVP & NCPA had common arguments concerning the Cotenancy Agreement.

Disposition

The district court held that the bankruptcy court did not abuse its discretion in denying SVP & NCPA’s request to intervene as untimely. It AFFIRMED the bankruptcy court’s ruling and directed the clerk to close the case.