A bankruptcy court will decide whether a trust to pay fire victims can intervene in an arbitration dispute between PG&E and its insurers.

SAN FRANCISCO (CN) – A federal bankruptcy judge on Tuesday refused to divest himself of an insurance dispute that could bring victims of forest fires up to $ 400 million or more likely to be caused by the equipment by Pacific Gas and Electric.

Retired Judge John K. Trotter of California’s Fourth Appeals District heads a multibillion-dollar trust established as part of a plan to get PG&E out of Chapter 11 bankruptcy last year. In February, Trotter sued 22 former PG&E board members and executives in state court for breach of fiduciary duty. PG&E ceded its right to pursue these claims to the Fire Victim Trust as part of a settlement agreement reached last year.

But the maximum that fire victims can receive in the trial is limited to PG&E’s maximum insurance coverage for liability claims against its former officers and directors. The maximum payback is estimated to be between $ 200 million and $ 400 million or more, according to Fire Victim Trust attorney Frank Pitre.

Last month, Trotter sued PG&E and 15 of its insurance companies in state court to try to participate in a private arbitration process that will determine the maximum payout. PG&E referred the case to federal bankruptcy court, arguing that the bankruptcy court has exclusive jurisdiction over disputes between PG&E and the Fire Victim Trust.

Trotter filed a motion to refer the matter back to state court, arguing that the right of the trust to intervene in the insurance arbitration dispute is a matter of purely state law which does not concern not the bankruptcy court.

After more than an hour of arguments via Zoom videoconference on Tuesday, US bankruptcy judge Dennis Montali ruled in favor of PG&E.

“I will reject the hoist motion,” Montali said.

Citing lines from Trotter’s lawsuit, Montali noted that the trust described the dispute as “an essential part of the reorganization plan” and a “fundamental premise” of the bankruptcy plan.

“The underlying rights are not governed by the common law of the state, but by the charter that created the trust,” said Montali. “Justice Trotter would not exist if this trust was not created as a result of the bankruptcy plan.”

Fire Victim Trust attorney David Molton argued that nothing in the dispute requires a judge to interpret any part of PG&E’s Chapter 11 bankruptcy plan. He said that the resolution of this lawsuit depends on a single question – whether the trust has the right, under state law, to intervene in an insurance dispute of which it is the sole beneficiary. .

“It has nothing to do with the plan. It has nothing to do with bankruptcy, ”Molton said. “It has to do with California law.”

Montali said he found Molton’s attempt to “reframe” the issue as a simple matter of state law was futile.

“If we do the animal test and say if he’s quack and has webbed legs, we can’t call him a turkey,” Montali said. “It’s duck.

In its motion to send the case back to state court, attorneys for the Fire Victim Trust said PG&E’s decision to immediately send the case to bankruptcy court last month “smacked of forum shopping.” .

On Tuesday, Montali said the same charge could be brought against Trotter for deciding to press charges in state court in the first place.

“Maybe what the trustee did looks like forum shopping too because he could have sued here,” Montali said.

Trotter acknowledged in a letter to layoff victims in January that the trust is $ 1 billion below expected value due to PG&E’s lower than expected stock price. The trust aimed to make $ 13.5 billion available to fire victims through a combination of cash and liquidated shares of PG&E. Over 86,000 compensation claims have been filed with the trust.

Also on Tuesday, PG&E made its first appearance in Sonoma County Superior Court to face 33 criminal charges related to the 2019 Kincade Fire, which burned approximately 77,000 acres, razed 174 buildings and caused the evacuation of 200,000 residents.

PG&E attorney Brad Brian told Sonoma County Judge Mark Urioste that the company intends to file a motion to dismiss 25 charges accusing it of causing air pollution emissions. PG&E did not plead and the next hearing is scheduled for May 25.

Criminal charges filed in Sonoma County also prompted a federal probation officer to report PG&E for a potential probation violation.

U.S. District Judge William Alsup, who oversees PG&E probation for convictions related to the 2010 San Bruno pipeline explosion, ordered the company to appear in federal court on May 4 to discuss the alleged violation of probation.

PG&E has been ordered not to violate federal or state laws as a condition of his federal probation, which expires in January 2022.