Cravath Swaine & Moore is advising PG&E, the nation’s largest utility, on the Chapter 11 reorganization the company announced it is filing as it faces billions of dollars in damages from lawsuits related to the catastrophic wildfires in California in 2017 and 2018.
The move will allow Pacific Gas & Electric Corp. to hold off creditors and continue operating while it tries to put its finances in order. It comes as the judge overseeing the company’s probation following its 2016 safety-related felony conviction is considering ordering the company to inspect its entire electric grid and turn off power during high winds if it can’t assure operations in such conditions.
PG&E’s decision to submit to in-court reorganization comes after a public relations and legal catastrophe related to the possibility that the company’s aging and improperly maintained power lines played a direct role in sparking the wildfires that ravaged vast areas of Northern California, causing dozens of deaths and hundreds of thousands of evacuations. State officials are investigating the role of the company’s power lines in the recent fires as well as the cause of a blaze that led to massive destruction in Santa Rosa last year.
The Chapter 11 filing allows PG&E to have all of the wildfire claims consolidated into a single proceeding before a bankruptcy judge, not a jury—a move that could shield it from massive jury verdicts.
Chapter 11 reorganization represents “the only viable option to address the company’s responsibilities to its stakeholders,” Richard Kelly, chairman of PG&E’s board of directors, said in a statement.
Cravath was one of several law firms, which also included Wilson Sonsini Goodrich & Rosati and Quinn Emanuel Urquhart & Sullivan, enlisted by PG&E in its defense against the many legal claims made following fires.
In an official statement, PG&E said it had provided the 15-day advance notice of its Chapter 11 restructuring as required under California law and stated that it hopes the reorganization will “support the orderly, fair and expeditious resolution of its potential liabilities resulting from 2017 and 2018 Northern California wildfires, and will assure the company has access to the capital and resources it needs to continue to provide safe service to customers.”
The statement emphasized PG&E’s determination to work with regulators and policymakers in the assessment of different options for delivering natural gas and electric service in what the releases characterized as “an environment that continues to be challenged by climate change.”
Leading the charge for Cravath’s corporate team are partners Erik Tavzel and Andrew Elken. Cravath’s litigators in this matter include partners Evan Chesler, Julie North, Darin McAtee, Timothy Cameron, Kevin Orsini, Omid Nasab, and Damaris Hernandez. On the restructuring side, Cravath’s team includes partners Paul Zumbro, Stephen Kessing, and Nicholas Dorsey.
PG&E is not a new client of Cravath’s. The firm represented the company prior to the wildfires on various matters, including acting as an adviser in the aftermath of the explosion of a natural gas pipeline in San Bruno, on Sept. 9, 2010, which caused a massive fire and led to eight deaths and dozens of injuries. PG&E was ordered to pay a $3 million fine and serve five years’ probation for violating the Pipeline Safety Act and obstructing the National Transportation Safety Bureau’s investigation into the cause of the blast.
Two years before the wildfires of 2017, KQED questioned whether lessons had been learned from the San Bruno incident and whether the public was any safer. U.S. District Judge William Alsup, who is supervising PG&E’s probation, has repeatedly questioned the company’s safetey practices since the latest disaster broke out. Alsup is set to hold a hearing on the terms of PG&E’s probation on Jan. 30.
PG&E did not immediately respond to a request for comment.
Ross Todd contributed reporting to this story.