Analyst: With 'Inverse Condemnation,' PG&E Bankruptcy Might Not Be Right Call?

Partners Tara Kaushik and Robert Labate were mentioned by Forbes on whether the legal theory, inverse condemnation, could be used by Pacific Gas & Electric (PG&E) in bankruptcy court. California has a strict legal doctrine that holds private utility companies responsible for damage to private property by their equipment without regard to negligence or fault which appears to be the key rationale behind PG&E's bankruptcy plan.

During a conference call, Ms. Kaushik explained that previous litigation in California state court has been unsuccessful in overturning the application of inverse condemnation to investor-owned utilities. Ms. Kaushik noted that this strategy could be difficult due to numerous legal obstacles and the issue of if the federal bankruptcy court has the legal authority to rule on a state law.

Mr. Labate discussed that while bankruptcy courts can and do preempt state laws with respect to debtor/creditor issues, it is rare that the preemption of state law in regard to inverse condemnation would occur.

"It is not something the bankruptcy court is likely to take on," Mr. Labate stated.

READ: Analyst: With 'Inverse Condemnation,' PG&E Bankruptcy Might Not Be Right Call?