IN RE PG&E Corporation

Background

PG&E’s debtors began voluntary Chapter 11 bankruptcy cases on January 29, 2019. The bankruptcy court confirmed PG&E’s reorganization plan on June 20, 2020, and the plan became effective on July 1, 2020.

The dispute concerned a November 2018 fire in Magalia, California, known as the 2018 Camp Fire. Liza Sims, individually and on behalf of her mother’s estate, and Thomas and Jaydene Gardner had pending state-court claims arising from the fire. They filed four proofs of claim based on the same underlying facts.

Under the plan, fire claims against PG&E were discharged through a channeling injunction and were to be adjudicated and paid through the Fire Victim Trust. The plan defined “Fire Claim” broadly to include claims arising from the covered fires, including punitive and exemplary damages. The appellants did not challenge the plan or confirmation order before it was entered.

In April 2023, PG&E asked the bankruptcy court to enforce the channeling injunction against nineteen remaining state-court fire cases, including the appellants’ cases. The bankruptcy court granted PG&E’s request. The appellants appealed to the district court.

Issues and arguments

The appellants argued that the bankruptcy court exceeded its authority under 11 U.S.C. § 105 by issuing and enforcing the channeling injunction. They also argued that 11 U.S.C. § 523(a)(6) prevented the discharge of their punitive-damages claims, that enforcement violated their due process rights, and that the bankruptcy court improperly considered declarations by PG&E’s counsel, Keith Eggleton.

PG&E responded that the plan and confirmation order discharged the appellants’ claims and directed them to the Fire Victim Trust. PG&E also argued that § 523(a)(6) applies only to individual debtors, not corporate debtors, and that the declarations were properly considered or, alternatively, that any error was harmless.

Court’s analysis

The district court agreed with PG&E. It held that the appellants’ punitive-damages claims fell within the plan’s definition of Fire Claims because the appellants admitted that their claims arose from the 2018 Camp Fire. The plan and confirmation order therefore discharged the claims through the channeling injunction and directed them to the Fire Victim Trust.

The court rejected the argument based on § 523(a)(6). It stated that the statute applies only to individual debtors and that PG&E was a corporate debtor. The bankruptcy court therefore did not exceed its authority by discharging the appellants’ claims under the plan and confirmation order.

The court also held that the appellants’ due process rights were not violated. They had an opportunity to challenge the plan and confirmation order but did not do so, and the confirmation order had been final for three years. The court found no authority supporting an effort to overturn the channeling injunction at that stage.

Finally, the district court held that the bankruptcy court did not abuse its discretion by considering the Eggleton declarations. The declarations provided relevant background about the remaining state-court cases and related proceedings. The district court added that any error would have been harmless because the bankruptcy court could have ruled for PG&E based on the appellants’ opposition brief and their admission that their claims arose from the Camp Fire.

Disposition

The court AFFIRMED the Bankruptcy Court’s ruling in its entirety and directed the clerk to close the case.