1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 PG&E CORP., Case No. 4:22-cv-02833-HSG

8 Plaintiff,

ORDER AFFIRMING BANKRUPTCY

9 v. COURT

10 CALIFORNIA DEPARTMENT OF Re: Dkt. No. 8

WATER RESOURCES,

11 Defendant.

12 13 Before the Court is Appellant PG&E Corporation and Pacific Gas and Electric Company, 14 as debtors and reorganized debtors (together, the “Debtors” or “PG&E”) appeal of the Bankruptcy 15 Court’s Order Regarding Dispute Between Debtors and California Department of Water 16 Resources entered on April 22, 2022. BR Dkt. No. 12207.1 Having carefully considered the 17 briefs,2 the Court AFFIRMS the Bankruptcy Court’s order. 18 I. BACKGROUND 19 A. PG&E’s Bankruptcy And Chapter 11 Plan 20 On January 29, 2019, the Debtors commenced voluntary cases for relief under chapter 11 21 of title 11 of the United States Code (“Bankruptcy Code”) in the United States Bankruptcy Court 22 for the Northern District of California (“Bankruptcy Court”). Significantly, the Debtors needed to 23 propose a plan of reorganization that satisfied the requirements of A.B. 1054. In light of the 24 “increased risk of catastrophic wildfires,” A.B. 1054 created the “Go-Forward Wildfire Fund” as a 25 multi-billion dollar safety-net to compensate future victims of public utility fires by “reduc[ing] 26 1 “BR Dkt. No.” references are to the Bankruptcy Court’s docket, Case No. 19-30088 (DM) 27 (Bankr. N.D. Cal.). “Dkt. No.” references are to this Court’s docket. 1 the costs to ratepayers in addressing utility-caused catastrophic wildfires,” supporting “the credit 2 worthiness of electrical corporations,” like the Debtors, and providing “a mechanism to attract 3 capital for investment in safe, clean, and reliable power for California at a reasonable cost to 4 ratepayers.” A.B. 1054 § 1(a). 5 For the Debtors to qualify for the Go-Forward Wildfire Fund, however, A.B. 1054 6 required, among other things, the Debtors to obtain an order from the Bankruptcy Court 7 confirming a plan of reorganization by June 30, 2020. See A.B. 1054 § 16, ch. 3, 3292(b). After 8 more than sixteen months of negotiations among a variety of stakeholders, and following 9 confirmation hearings that spanned several weeks, the Debtors’ Plan of Reorganization dated June 10 19, 2020 (“Plan”) was confirmed by the Bankruptcy Court on June 20, 2020 and became effective 11 on July 1, 2020 (“Effective Date”). 12 B. The CDWR Claims Dispute 13 1. The Cotenancy Agreement And CDWR’s Decision To Terminate 14 This dispute arises from the termination of a 1984 Agreement of Cotenancy in the Castle 15 Rock Junction-Lakeville 230- kV Transmission Line (the “Cotenancy Agreement”) between 16 Appellee California Department of Water Resources (“CDWR”), PG&E, and Silicon Valley 17 Power and Northern California Power Agency (“SVP/NCPA”). Under Section 14.3 of the 18 Cotenancy Agreement the termination process begins with the terminating party providing one- 19 year advance notice to all parties. BR Dkt. No. 11889-2 at 36.3 Under Section 14.5, if all 20 remaining cotenants decide to no longer operate the transmission line, the terminating cotenant 21 must pay removal costs. Id. at 36-37. Under Section 14.6, when a cotenant terminates and the 22 other cotenants wish to continue operating the line, the terminating party must pay “financial 23 obligations incurred prior to its effective date of termination.” Id. at 37-38. Section 13.2 provides 24 that disputes between the parties shall be subject to binding arbitration. Id. at 30-33. 25 On July 30, 2018, CDWR delivered notice to each cotenant of its intention to terminate its 26 participation in the operation of the transmission line. BR Dkt. No. 11889-3. PG&E and 27 1 SVP/NCPA initially opposed CDWR’s termination pending “payment of its proportional share of 2 reasonable estimated costs associated with decommissioning and removal of the New Line.” BR 3 Dkt. No. 11896 at 12. On October 18, 2019, CDWR filed a proof of claim in the Chapter 11 cases 4 in the amount of $101,026.75 for overpayment of operation and maintenance fees following 5 termination. BR Dkt. No. 11889-8. 6 2. CDWR’s Termination And The Chapter 11 Plan And Confirmation Order 7 Following objections by various California agencies, including CDWR, and a hearing on 8 the Debtors’ reorganization, the Bankruptcy Court entered the order (the “Confirmation Order”) 9 confirming the Plan on June 20, 2020. BR Dkt. No. 8053. Under the Plan and Confirmation 10 Order, executory contract disputes were to be resolved by the Bankruptcy Court. Id. at 33-35. 11 Additionally, the Bankruptcy Court retained post-confirmation jurisdiction over matters arising 12 under, arising out of, or related to the Plan. BR Dkt. No. 8053-1 at 90. 13 On February 1, 2022, CDWR moved for relief in the Bankruptcy Court, arguing that (1) 14 Appellants sought to negate its termination of the Agreement by contending that the Agreement 15 was “live” and could have been assumed on confirmation of Debtor’s plan, (2) CDWR did not 16 owe any removal costs for termination to be effective, and (3) Appellants refused to pay CDWR’s 17 claim. BR Dkt. No. 11887 at 6. CDWR argued that “[t]here is no authority in the [Cotenancy] 18 Agreement to demand future removal costs from a departing Cotenant when there has been no 19 decision by the Remaining Cotenants to discontinue operating the Line, much less demand 20 payment of such removal costs from a cotenant before a termination can become effective.” BR 21 Dkt. No. 11887 at 12-13. CDWR argued that in the event of termination, the specific terms in 22 Sections 14.5 controlled over the general terms in Section 14.6. BR Dkt. No. 11887 at 19 23 (“Removal costs were negotiated and included in the contract under Section 14.5 only for the 24 situation where all the cotenants decided to terminate the Agreement.”). Additionally, CDWR 25 argued that the matter should not be referred to arbitration because the Bankruptcy Court retained 26 jurisdiction to resolve executory contract and claim disputes. Id. at 6. 27 One day later, Appellants moved to modify the Plan injunction and compel arbitration, 1 asserting that CDWR must “pay the remaining parties its proportionate share of estimated costs, 2 including those of operation, maintenance, and removal, prior to terminating its participation in 3 the agreement.” BR Dkt. No. 11896 at 7. PG&E argued that the issue of termination inherently 4 encompassed removal cost liability, stating that “CDWR cannot terminate its participation in the 5 Cotenancy Agreement without first complying with its obligation under the Cotenancy Agreement 6 to pay a pro rata share of estimated removal costs to PG&E and the remaining Cotenants.” Id. at 7 17. 8 On March 8, 2022, the Bankruptcy Court granted CDWR’s motion and denied Appellants’ 9 motion for arbitration. BR Dkt. No. 11999. The Bankruptcy Court held that “[t]he determination 10 of whether the Agreement is an executory contract that may be assumed, and if so under what 11 circumstances and leading to what consequences, is clearly a core matter for determination.” Id. at 12 5. 13 Following the March 8 ruling, the Bankruptcy Court invited further proceedings regarding 14 CDWR’s removal cost liability. BR Dkt. No. 11999 at 7-8. SVP/NCPA attempted to intervene, 15 but the Bankruptcy Court denied its motion on March 21, 2022. BR Dkt. No. 12054 at 3 16 (“[SVP/NCPA] remained on the sideline, casting their fate with the Reorganized Debtors.”). The 17 Bankruptcy Court did not make any decision with respect to a separate contract between CDWR 18 and SVP/NCPA titled the “Transmission Services Agreement” (“TSA”). BR Dkt. No. 12147 at 4; 19 BR Dkt. No. 12207 at 3. 20 3. Final Briefing and Adjudication By The Bankruptcy Court 21 On March 25, 2022, Appellants filed a memorandum stating that they would pay the 22 CDWR claim of $101,026.75 and that no further action by the Bankruptcy Court was needed 23 (including with respect to determining CDWR’s removal costs). BR Dkt. No. 12076. Appellants 24 and SVP/NCPA then initiated an ultimately unsuccessful arbitration proceeding on March 30, 25 2022. BR Dkt. No. 12129-1 at 6-20, 22- 24. On April 13, 2022, the Bankruptcy Court issued a 26 tentative ruling in response to the March 25 memorandum, characterizing PG&E’s strategy as an 27 “inappropriate and improper change of position and forum shopping” and stating that the “Debtors 1 12147 at 3. On the merits, the Court stated its intent to rule in favor of CDWR “based upon (1) 2 the record that there are no material facts in dispute; (2) that CDWR’s interpretation of the 3 applicable sections of the Cotenancy Agreement is correct; (3) that CDWR does not owe any 4 estimated future removal costs or anything else to Debtors and the remaining cotenants under the 5 Cotenancy Agreement; and (4) there are no damages to be assessed, by this court or by arbitration, 6 under that agreement.” Id. at 3-4. During a hearing later that day, the Court held that an adversary 7 proceeding was not required because “the way this dispute played out afforded both sides adequate 8 due process.” Apr. 13, 2022 Hr’g Tr. at 28. The Bankruptcy Court entered its final order on April 9 22, 2022, BR Dkt. No. 12207, and PG&E appealed on May 5. BR Dkt. No. 12311. 10 II. LEGAL STANDARD 11 District courts have jurisdiction to hear appeals from final judgments, orders, and decrees 12 of bankruptcy judges. 28 U.S.C. § 158. The Court reviews the timeliness of PG&E’s appeal de 13 novo. Saunders v. Band Plus Mortgage Corp. (In re Saunders), 31 F.3d 767 (9th Cir. 1994) (per 14 curiam). The Court reviews whether the Bankruptcy Court has discretion to deny a motion to 15 compel arbitration de novo. In re Thorpe Insulation Co., 671 F.3d 1011, 1019 (9th Cir. 2012) 16 (“Thorpe”). If the Court determines that the Bankruptcy Court had discretion, the Court applies 17 the abuse of discretion standard. Id. The Court reviews whether an adversary proceeding was 18 required under a harmless error standard. In re Downey Reg'l Med. Ctr.-Hosp., Inc., 441 B.R. 120, 19 123 (B.A.P. 9th Cir. 2010) (“Downey”). In assessing the determination of removal cost liability 20 under the Cotenancy Agreement, the Court reviews the Bankruptcy Court’s contract interpretation 21 de novo. Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 681 (9th Cir. 2009). 22 III. DISCUSSION 23 PG&E asserts that the Bankruptcy Court erred in several respects in denying its motion for 24 arbitration and interpreting the Cotenancy Agreement in CDWR’s favor. PG&E argues that (A) 25 its appeal is timely; (B) the Bankruptcy Court committed reversible error in denying arbitration as 26 to the liability of removal costs under the Cotenancy Agreement; (C) an adversarial proceeding 27 was required; and (D) the Bankruptcy Court wrongly interpreted the Cotenancy Agreement in 1 remaining arguments without merit, and accordingly affirms the Bankruptcy Court. 2 A. The PG&E Appeal is Timely 3 Because bankruptcy proceedings embrace numerous individual controversies, the rules of 4 finality are “somewhat relaxed.” In re Mayer, 28 F.4th 67, 70 (9th Cir. 2022) (citation omitted). 5 Courts look to whether an order resolves and seriously affects substantive rights such that there is 6 “nothing more for the Bankruptcy Court to do in that proceeding.” See Ritzen Grp., Inc. v. 7 Jackson Masonry, LLC, S. Ct. 582, 592 (2020); see also In re Mayer, 28 F.4th at 71. 8 On appeal, PG&E contends that the April 22 order was the first final appealable order. 9 Appellant’s Reply at 5-6. CDWR, on the other hand, contends that the March 8 order was final 10 and immediately appealable, making this appeal untimely in its entirety. Appellee’s Opp. at 1. 11 The Court agrees with PG&E. 12 Because the March 8 order did not definitely resolve the disputes raised in the motions 13 filed by PG&E and CDWR, the Court finds that the order was not final. The order granted 14 CDWR’s motion and denied PG&E’s motion, both of which raised the issue of removal cost 15 liability. BR Dkt. No. 11999 at 7. The order did not conclusively foreclose arbitration, at least as 16 to damages, but instead set a briefing schedule for further proceedings. BR Dkt. No. 11999 at 7 17 (instructing parties that “Debtors have until March 25, 2022, to file a memorandum…. [C]DWR 18 has until April 8, 2022, to file a reply memorandum…. After that the matter will stand submitted 19 unless the court decides to consider oral argument.), 7-8 (“If Debtors prevail on [removal cost 20 liability], the court will revisit [whether] the question of the amount [of] [C]DWR’s future liability 21 upon termination should be determined through arbitration or via a damages trial in this court.”). 22 While PG&E did not appeal the March 8 order, it did attempt to resolve the dispute by filing its 23 offer to pay CDWR’s claim in full within the appeal window. BR Dkt. No. 12076. Responding to 24 this memorandum, the court issued a tentative ruling on April 13 and its final order on April 22. 25 BR Dkt. No. 12147; BR Dkt. No. 12207. Thus, this court determines that the April 22, 2022 order 26 was the first final order such that PG&E’s appeal is timely given the “somewhat relaxed” standard 27 1 that applies.4 2 B. The Bankruptcy Court Appropriately Denied Arbitration 3 1. The Matter Before the Bankruptcy Court Was Not Moot 4 As a preliminary matter, the Court finds there was a justiciable controversy before the 5 Bankruptcy Court. See Murphy v. Hunt, 455 U.S. 478, 481 (1982) (determining that a court must 6 dismiss a case as moot if it cannot effectively grant relief because the issues presented are no 7 longer ‘live’ or the parties lack a legally cognizable interest in the outcome). Despite PG&E’s 8 contention that payment of CDWR’s claim resolved the dispute, its agreement to pay did not 9 resolve the matter, because whether the 2019 termination was effective absent a payment of 10 removal cost liability was the threshold issue that would determine whether the Cotenancy 11 Agreement remained executory such that it could be assumed. Even PG&E argued that 12 termination was not effective without resolution of estimated future removal cost liability. BR 13 Dkt. No. 11896 at 7 (arguing that “the Cotenancy Agreement requires that CDWR pay the 14 remaining parties its proportionate share of estimated costs, including those of operation, 15 maintenance, and removal, prior to terminating its participation in the agreement”), 17 (“PG&E’s 16 argument [is] that CDWR cannot terminate its participation in the Cotenancy Agreement without 17 first complying with its obligation under the Cotenancy Agreement to pay a pro rata share of 18 estimated removal costs to PG&E and the remaining Cotenants”) (emphasis added). The 19 Bankruptcy Court thus appropriately identified PG&E’s decision to pay CDWR’s claim as a 20 belated and strategic attempt to shift issues already before the court to arbitration. BR Dkt. No. 21 12147 at 3 (“The court regards this tactic of Debtors [as] an inappropriate and improper change of 22 position and forum shopping because they had lost in the forum of their choice, and now were, 23 reluctantly, before this same court to decide what it plainly identified as a critical and discrete 24 issue.”). The Court concludes that the issue was not moot, and a justiciable controversy was 25 before the Bankruptcy Court. 26

27 4 The Bankruptcy Court entered a docket text order on April 10, 2022 stating the prior March 8, 2. Removal Cost Liability Was A Core Bankruptcy Matter 1 The Ninth Circuit has instructed that “[non-core] proceedings are unlikely to present a 2 conflict sufficient to override by implication the presumption in favor of arbitration, whereas core 3 proceedings implicate more pressing bankruptcy concerns.” Thorpe, 671 F.3d at 1021 (citation 4 and quotations omitted). “Core proceedings consist of all actions arising under title 11 and also 5 those arising in a case under title 11.” In re GACN, Inc., 555 B.R. 684, 693 (B.A.P. 9th Cir. 6 2016). Additionally, certain claims may be so “inextricably intertwined” with core conduct so as 7 to warrant deeming them to be core claims. See Thorpe, 671 F.3d at 1022 (affirming the 8 bankruptcy and district court’s determination that a breach of contract claim was core because it 9 was inextricably intertwined where adjudication of the claim presented a potential conflict with 10 bankruptcy administration); see also In re Harris, 590 F.3d 730, 739 (9th Cir. 2009) (determining 11 that claims for breach of a settlement agreement were core because they were “inextricably 12 intertwined with the sale of estate assets —the literal administration of the bankruptcy”); In re 13 Harris Pine Mills, 44 F.3d 1431, 1438 (9th Cir. 1995) (determining that state law claims against 14 the bankruptcy trustee that were “inextricably intertwined with the trustee's sale of property 15 belonging to the bankruptcy estate involved a core proceeding”). 16 On appeal, PG&E contends that the Bankruptcy Court erred in determining that the 17 removal cost liability issue presented a core claim. PG&E asserts that removal cost liability is 18 “unrelated to the core issues of whether the Cotenancy Agreement is executory and the allowance 19 of the claims asserted in the CDWR Claim.” Appellant’s Brief at 19. CDWR counters that the 20 Bankruptcy Court appropriately interpreted its own order in holding that it had reserved 21 jurisdiction to decide “all disputes related to executory contract and claims issues on confirmation 22 and that such issues were core issues.” Appellee’s Opp. at 4, 17-18. The Court agrees with 23

CDWR.

24 The Plan and Confirmation Order expressly reserved jurisdiction for the Bankruptcy Court 25 to resolve executory contract, cure and claims allowance disputes. Sections 34 and 67 of the Plan 26 and Confirmation Order provide that “in the event of an unresolved dispute regarding… any other 27 matter pertaining to assumption, assumption and assignment, or the Cure Amounts required by 1 section 365(b)(1) of the Bankruptcy Code (each, a “Cure Dispute”), such Cure Dispute shall be 2 resolved by a Final Order of the Court,” and that if any government entity disputes whether a 3 contract is executory “any such dispute shall be resolved by the Bankruptcy Court.” BR Dkt. No. 4 8053 at 35, 61. Referencing these provisions, the Bankruptcy Court held that “[t]he determination 5 of whether the Agreement is an executory contract that may be assumed, and if so under what 6 circumstances and leading to what consequences, is clearly a core matter.” BR Dkt. No. 11999 at 7 5. Appellants themselves argued that removal cost liability and termination validity had to be 8 resolved together. BR Dkt. No. 11896 at 8 (“CDWR’s Proof of Claim cannot be adjudicated in a 9 vacuum without resolution of [the removal cost] issue.”). 10 Because removal cost liability was inherently linked to the parties’ rights and obligations 11 in the event of termination, it was inextricably intertwined with the core executory contract and 12 claims resolution issues before the Bankruptcy Court. Thus, the Court finds that the Bankruptcy 13 Court had discretion to deny PG&E’s request for arbitration as to this core matter. 14 3. The Bankruptcy Court’s Denial of Arbitration Was Not An Abuse of Discretion 15 The Ninth Circuit has held that “[i]n core proceedings… the bankruptcy court, at least 16 when it sees a conflict with bankruptcy law, has discretion to deny enforcement of an arbitration 17 agreement.” Thorpe, 671 F.3d at 1021. Thorpe instructs that the Bankruptcy Code’s purpose is to 18 centralize disputes concerning a debtor’s legal obligations and protect creditors and reorganizing 19 debtors from piecemeal litigation. Id. at 1023 (“Arbitration of a creditor's claim against a debtor, 20 even if conducted expeditiously, prevents the coordinated resolution of debtor-creditor rights and 21 can delay the confirmation of a plan of reorganization.”). On appeal, PG&E contends that 22 arbitration is mandatory under the Cotenancy Agreement and that resolving any removal cost 23 liability does not conflict with the Plan. Appellant’s Brief 21-22. CDWR responds that the 24 Bankruptcy Court did not abuse its discretion in denying arbitration because resolution of this 25 issue in arbitration could conflict with the administration of the Plan. Appellee’s Opp. at 20. The 26 Court agrees with CDWR. 27 The Bankruptcy Court appropriately applied Thorpe’s principles in denying arbitration. 1 The Bankruptcy Court found “a risk that an outcome achieved via arbitration, at least on the issues 2 of whether the Agreement was to [sic] the reserved assumption provisions of the Plan at all, and 3 whether [C]DWR could be required to pay anything after it gave its notice of termination, would 4 conflict with those policies articulated by Thorpe and memorialized in the Plan and the 5 [Confirmation Order].” BR Dkt. No. 11999 at 6. The Plan expressly provided for Bankruptcy 6 Court jurisdiction over executory contract issues, and CDWR was entitled to pursue its rights 7 under that Plan. The Bankruptcy Court properly applied Thorpe in finding that arbitration of the 8 issue raised by PG&E presented a potential conflict, and did not abuse its discretion in so ruling. 9 C. The Bankruptcy Court's Decision Not To Require An Adversary Proceeding, Even If Erroneous, Was Harmless. 10 Under the harmless error standard “if the absence of an adversary proceeding did not cause 11 prejudice, form should not be elevated over substance.” Downey, 441 B.R. at 127. PG&E argues 12 that the Bankruptcy Court erred in not initiating an adversary proceeding to resolve removal cost 13 liability. The Bankruptcy Court stated that its resolution of the issue was “functionally the same” 14 as an adversary proceeding. Apr. 13, 2022 Hr’g Tr. at 28. The Court agrees with the Bankruptcy 15 Court and determines that even assuming arguendo that it was error not to require an adversary 16 proceeding, any such error was harmless. 17 The question before the Court is whether the procedural differences between a contested 18 matter and an adversary proceeding prejudiced PG&E. See Downey, 441 B.R. at 127. In 19 conducting a harmless error analysis, a court must apply the Strata four-factor test, considering 20 whether: (1) the material facts were few and undisputed, (2) the dispositive issues were pure 21 questions of law, (3) neither party expressed any discontent with the contested matter procedures 22 the bankruptcy court utilized, and (4) the reviewing court is satisfied that neither the factual record 23 nor the quality of the presentation of the arguments would have been materially different had there 24 been an adversary proceeding. In re Strata Title, L.L.C., 2014 WL 661174, at *9 (B.A.P. 9th Cir. 25 2014) (“Strata”). 26 While PG&E only argues that the third and fourth Strata factors favor reversal, the Court 27 1 concerning removal cost liability were undisputed because the two parties simply applied their 2 interpretations of the provisions of the Cotenancy Agreement to agreed-upon facts. BR Dkt. No. 3 11999 at 7 (“There are no material facts in dispute regarding whether DWR should or should not 4 be ordered to pay its share of the net loss upon termination of the Agreement.”). Second, the only 5 remaining issues were dispositive legal questions concerning the proper interpretation of the 6 Cotenancy Agreement. BR Dkt. No. 11999 at 7 (“[C]DWR looks to Section 14.5 of the 7 Agreement to insulate it from such a charge because the other parties continued to operate under 8 it,” while “Debtors rely on Section 14.7 to hold DWR responsible for its share for termination in 9 the future”). Third, although PG&E did seek arbitration as to removal cost liability, it did not seek 10 an adversarial proceeding until April 13, 2022, despite filing two prior briefs. Apr. 13, 2022 Hr’g 11 Tr. at 9. The fact that PG&E did not seek an adversary proceeding until well into the case, and 12 then did so only orally at a hearing, undermines the persuasiveness of its current argument. 13 Fourth, the Court is satisfied that neither the factual record nor the quality of presentation would 14 have been materially different in an adversary proceeding, because the parties had adequate notice 15 of the issue, submitted extensive briefs addressing it and were granted argument. See Downey, 16 441 B.R. at 129 (determining that no adversarial proceeding was necessary as “[the appellant] has 17 not identified any discoverable fact that would have changed the outcome of the court's ruling”); 18 see also Strata, 2014 WL 661174, at *8 (determining that an adversarial proceeding was not 19 necessary as the appellant merely offered “vague and overstated” claims of unfairness). 20 PG&E argues that the “expedited procedure… submarined it” by (1) requiring it to address 21 removal cost liability – which it claims it never asserted, and (2) denying it the opportunity to 22 assert its claim. Appellant’s Brief at 32. These assertions are not supported by the record. The 23 Bankruptcy Court considered PG&E’s argument that it was entitled to removal costs and 24 appropriately rejected it. BR Dkt. No. 11896 at 12; BR Dkt. No. 11999 at 7. Most importantly, 25 PG&E fails to show that the procedural differences between a contested matter and an adversary 26 proceeding prejudicially affected the development of the material facts or the legal analysis. See 27 Downey, 441 B.R. at 129 (determining that “[the defendant’s] proposed discovery and expert 1 written contract and the meaning of a statute are questions of law”). 2 Accordingly, even assuming (without deciding) that the Bankruptcy Court erred in not 3 permitting PG&E to file an adversary proceeding, any such error was harmless. 4 D. The Bankruptcy Court Properly Interpreted The Cotenancy Agreement 5 PG&E finally argues that the Bankruptcy Court’s substantive resolution of the dispute 6 regarding the Cotenancy Agreement was erroneous. The Court reviews the Bankruptcy Court’s 7 contract interpretation de novo. Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 681 (9th Cir. 2009) 8 (determining that contract interpretation is question of law that is reviewed de novo). The Court 9 disagrees with PG&E and finds that the Bankruptcy Court correctly ruled that CDWR did not owe 10 11 any removal cost upon termination. The Cotenancy Agreement presents two alternative scenarios 12 for making an effective termination following the required advance notice. Under Section 14.5, in 13 which all cotenants terminate, “[i]f the removal is performed at a net loss, [PG&E], or its 14 successor as operator of the New Line, shall be reimbursed by the other Cotenants for their 15 respective shares of such net loss in proportion to their Ownership Interests.” Id. at 97-98. By 16 contrast, under Section 14.6, when a cotenant terminates and the other cotenants wish to continue 17 18 operating the line, they may do so effective as of the date the selling cotenant terminates so long as 19 all “financial obligations incurred prior to its effective date of termination” are paid. Id. at 98-99. 20 Because without dispute the other cotenants continued to operate the line, the Bankruptcy Court 21 had to resolve the issue under Section 14.6. 22 On appeal, PG&E contends that that the term “financial obligations” in Section 14.6 23 encompasses removal costs, and that “there is no reason to apply a different outcome [concerning 24 removal costs] than that dictated by Section 14.5 upon full termination of the Agreement.” 25 26 Appellant’s Brief at 33. But that argument is simply inconsistent with the plain language of the 27 agreement, as the Bankruptcy Court found in accepting CDWR’s argument and rejecting PG&E’s. 1 Artex Risk Sols., Inc., 974 F.3d 1051, 1063 (9th Cir. 2020) (“It is a standard rule of contract 2 || interpretation that specific terms control over general ones.”); see also Gen. Ins. Co. of Am. v. 3 Truck Ins. Exch., 242 Cal. App. 2d 419, 426 (Ct. App. 1966) (explaining that “a specific provision 4 || relating to a particular subject will govern in respect to that subject, as against a general provision, 5 even though the latter, standing alone, would be broad enough to include the subject to which the 6 more specific provision relates”). Courts “do not have the power to create for the parties a 7 contract that they did not make and cannot insert language that one party now wishes were there.” 8 9 Dameron Hosp. Assn. v. AAA N. California, Nevada & Utah Ins, Exch., 229 Cal. App. 4th 549, 10 569 (2014). Additionally, the Bankruptcy Court properly interpreted the Cotenancy Agreement in 11 determining CDWR’s proof of claim because “‘a bankruptcy court can only consider an objection

12 |! to aclaim and thus overcome the presumption of its validity by examining the contract itself and © = 13 the circumstances surrounding its formation.” In re G.I. Indus., Inc., 204 F.3d 1276, 1280 (9th 14 Cir. 2000). Thus, because Section 14.5 is unequivocal and controls in the factual situation here 15 2 16 over the more general terms in Section 14.6, the Court affirms the Bankruptcy Court’s conclusion

5 7 that CDWR does not owe any removal costs under the Cotenancy Agreement.

IV. CONLCUSION

19 The Court AFFIRMS the Bankruptcy Court’s ruling in its entirety. The Clerk is directed to 20 |) close the case. 21

IT IS SO ORDERED.

22 Dated: 5/10/2023 23 24 .

HAYWOOD S. GILLIAM, JR.

25 United States District Judge 26 07 > Given the holdings in this order, the Court need not address the parties’ arguments regarding whether PG&E impliedly consented to jurisdiction or whether the Bankruptcy Court had 2g || constitutional authority to enter a final judgment. Appellant’s Brief at 35-37; Appellee’s Opp. 24- 26.