SAN FRANCISCO (CN) – California wildfire victims urged a bankruptcy judge Wednesday to block state and federal agencies from taking a $4 billion slice for emergency response costs out of Pacific Gas and Electric’s limited $13.5 billion settlement fund for fire victims.
The Federal Emergency Management Agency seeks to recover $3.9 billion spent on disaster aid, repairing infrastructure, fighting fires and cleanup costs. In January, FEMA’s regional director said the agency has a legal obligation to go after PG&E to recoup taxpayer dollars. He also blamed fire victims’ lawyers for excluding FEMA from settlement talks with PG&E when they set up a $13.5 billion trust for all wildfire claims, including government claims.
On Wednesday, attorney Eric Goodman of the Tort Claimants Committee that represents fire victims argued the Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988 only allows FEMA to recoup costs from an entity that intentionally causes a disaster.
“They have no evidence of specific intent to cause harm,” Goodman said.
U.S. Bankruptcy Judge Dennis Montali was quick to point out that before reaching a deal with PG&E, fire victims had accused the utility of acting with intentional disregard when it failed to maintain power equipment and clear trees near power lines as required by state regulations.
“I’ll admit we said some things about PG&E in this case, but we never accused them of arson,” Goodman said.
Representing FEMA, Department of Justice lawyer Michael Tye said PG&E knew a wildfire was likely to result from its faulty maintenance, especially after fires in 2015 and 2017 took lives and property before the deadliest blaze in state history, the Camp Fire, sparked in 2018.
“They had several fires in succession giving them knowledge of the likely result,” Tye said.
Goodman read excerpts of a deposition in which a FEMA official acknowledged the agency had no evidence of PG&E’s “specific intent to cause harm.”
The agency maintains that “specific intent” is not required to prove someone intentionally caused a disaster. PG&E’s intentional failure to maintain its power equipment created dangerous conditions that sparked the fires, Tye said.
“When the debtors saw the scores of FEMA personnel, heavy equipment and tractors, did the debtors really think a bill would never come due,” the Justice Department lawyer asked.
Moving on to a $2.7 billion claim filed by the California Office of Emergency Services (Cal OES), a lawyer for the state agency conceded $2.4 billion of that claim overlaps with the $3.9 billion sought by FEMA. Federal law requires California seek reimbursement of FEMA funds, or it could be held liable to pay them back.
Beyond the $2.4 billion, California seeks another $290 million in non-FEMA funds it spent on firefighting, infrastructure repairs and emergency aid to victims.
Fire victims argue that Cal OES should first recover those costs from 14 cities, counties and local government agencies that will receive $1 billion under the terms of PG&E settlement reached last June.
The fire victims further contend that Cal OES cannot seek reimbursement for firefighting and emergency aid costs because the agency did not directly perform those services. Rather, it doled out money to agencies like the California Department of Forestry and Fire Protection, or Cal Fire, that provided those services.
Deputy state attorney general Matthew Heyn rejected that argument. Cal OES “funded all these claims and tasked all these agencies to help with the fires,” he said.
Heyn also asked Montali to reject the “false premise” that if he allows Cal OES to recoup money that it must come from a limited $13.5 billion trust for fire victims.
“That’s not something that’s necessary under bankruptcy case law. That’s a construct created by the [Tort Claimants Committee Restructuring Support Agreement],” Heyn said, referring to fire victims’ settlement deal with PG&E.
Though the law does not require government claims be deducted from the settlement fund, Judge Montali reminded the deputy AG that “it’s the state of play today.”
Heyn said Cal OES objects to the plan structure, which requires all approved government claims come from the $13.5 billion trust for fire survivors. Half of that trust will be funded by liquidated stock in a reorganized PG&E.
“At the moment there’s nothing pending to deal with that,” Montali said.
After more than two hours of debate, Montali took the arguments under submission.