Pacific Gas & Electric paid law firm Cravath, Swaine & Moore LLP more than $75.7 million for the one-year period before the giant California energy utility sought Chapter 11 bankruptcy protection.
Cravath disclosed that PG&E paid $45 million of the fees during the 90 days before its bankruptcy filing on Jan. 29. In some bankruptcies, a debtor can recover money paid to creditors during the 90 days before the filing, if the payments were used to pay “antecedent debt,” meaning that they weren’t paid for contemporaneous services or goods.
Cravath disclosed these payments in March 22 court filings seeking court permission to continue to represent PG&E as its “corporate and litigation counsel.” Cravath’s application is scheduled for an April 23 hearing before Dennis Montali, U.S. Bankruptcy Judge for the Northern District of California.
Professional service providers for bankruptcy estates, including attorneys, accountants, and financial advisers, must have their employment approved by the bankruptcy judge before they can be paid for their services.
PG&E also wants to employ several other firms. Weil, Gotshal & Manges LLP has filed an application to be approved as bankruptcy counsel. The law firm also has applied to approve Jenner & Block as special corporate defense counsel. The court hasn’t yet ruled on these applications.
Cravath has represented PG&E in general corporate affairs and as counsel in extensive litigation over injuries sustained in massive Northern California wildfires in 2015 (the Butte fire) and 2017 (the Camp fire). PG&E has said its equipment failure likely contributed to the fires.
Potential liability in excess of $30 billion from these fires was the driving force behind PG&E filing bankruptcy.
Professionals who have been approved by the bankruptcy court must file applications to be paid as well, subject to creditors’ objections and court approval. No professionals have yet applied for compensation in the case.
The case is In re: PG&E Corp., Bankr. N.D. Cal., 19-30088, Application to Employ 3/22/19.