Last fall, the “Camp Fire” burned over 150,000 acres of land and killed 85 people in Northern California. Although investigators have determined how the fire was started, it is unclear whether the responsible party will be brought to justice. The reason why? They have declared bankruptcy.
Like most other Wisconsinites, who are not accustomed to seeing such horrors in our part of the country, the attorneys in our office were shocked by the news reports and viral video clips from the Camp Fire. Walls of flame devoured everything in their path — including many people who were trapped in their cars. It is still sickening to think of.
Investigators determined the fire was caused by electrical transmission lines owned and operated by Pacific Gas and Electricity (PG&E). On the hook for billions of dollars in damage, the utility company filed for Chapter 11 bankruptcy protection.
When PG&E filed for bankruptcy, it became the largest utility to ever do so. The company is reportedly over $50 billion in debt, not counting the amount it will owe to victims of the Camp Fire under California’s strict fire liability laws.
When a company is facing this sort of massive, unknown liability, bankruptcy is often the best option — for everyone involved. Why? Our bankruptcy laws require that every creditor be paid if at all possible, while at the same time allowing the business to move forward.
Perhaps fire victims will not be paid back for 100% of their losses, but allowing PG&E to restructure and continue operating rather than shutting down will ensure they get something.
It is likely that the bankruptcy court will estimate the fire damages, direct PG&E to come up with some percentage of that amount, then require victims to make claims on that fund while barring future lawsuits.
Not Shirking Their Duty
Companies who file for bankruptcy in the face of lawsuits are not shirking their responsibility to the public. They are taking advantage of the law to create some certainty in an uncertain situation. Filing for bankruptcy hits pause on all other litigation involving the company and pulls some lawsuits into the bankruptcy process.
Knowing a defendant is bankrupt, or will be if a major verdict comes down against them, incentivizes the potential plaintiffs to negotiate a solution that will allow all plaintiffs — instead of just the first to file — to get some sort of compensation. There’s probably not enough money to compensate everyone fully, especially if the company has lots of other debt, but the bankruptcy process ensures victims are treated fairly and equally.
It will be interesting to see how the PG&E case moves forward since the amounts at stake are so large. It may also set the precedent for future cases across the country where a man-made natural disaster wreaks havoc. We will be keeping a close eye on it.
If your business is facing legal debts that may drive it into bankruptcy, Hanson & Payne LLC is ready to advise you and guide you through the process. Contact us today to schedule an initial consultation.