Category Archives: Chapter 9

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Despite Earlier Ruling, Stockton Judge Confirms Plan Leaving Pension Obligations Intact

One month ago, Judge Christopher Klein ruled in the city of Stockton, CA bankruptcy case that public employee pension obligations can be impaired in municipal bankruptcy cases under Chapter 9 of the Bankruptcy Code.  Last week, however, Judge Klein approved the plan of adjustment for Stockton that left public pension obligations intact over the vociferous … Continue Reading

Stockton Judge: Pension Obligations Are Not Impervious to Impairment In Chapter 9 Bankruptcy. What Comes Next?

The perception that public employee pension obligations cannot be impaired in bankruptcy suffered a damaging blow several months ago in the City of Detroit bankruptcy case, and has now been fatally wounded by the recent ruling of Judge Christopher Klein in the Chapter 9 case of Stockton, California.  Although Judge Klein’s decision is not likely … Continue Reading

Heard About Detroit? The First Word on Treatment of Public Employee Pension Benefits in Chapter 9 (And Absolutely Not the Last)

Last week’s ruling by Judge Stephen Rhodes finding the City of Detroit eligible for protection under Chapter 9 of the U.S. Bankruptcy Code has rightly received considerable attention. The determination that Detroit has met the standards under Section 109(c) of the Bankruptcy Code to be a debtor under Chapter 9 was widely expected. The surprising … Continue Reading

Stockton Bankruptcy Settlement Preserves Pensions

The Chapter 9 bankruptcy case of Stockton, California has come to an unexpectedly quick and consensual resolution. The outcome here, which will see the city’s pension obligations maintained, is particularly surprising given the vehement opposition of Stockton’s bond insurers at the outset of the case. The bond insurers, who backstopped approximately $240 million of the … Continue Reading

Detroit Emergency Manager Posits Sale of Art Masterpieces as Bankruptcy Looms -Van Gogh(ing) Once, Twice, Sold?

Kevyn Orr, the emergency manager appointed by Michigan Governor Rick Snyder to try to resolve the Detroit financial crisis, has effectively replaced the Detroit mayor, former NBA legend Dave Bing. However, it is Orr who in the upcoming weeks will need to hit the equivalent of a three-point shot at the buzzer if Detroit is to avoid … Continue Reading

Now It Gets Interesting – Stockton, CA Found Eligible to Remain in Chapter 9

Nearly nine months after it filed for protection under Chapter 9 of the Bankruptcy Code, a federal bankruptcy judge last week determined that the city of Stockton, California has satisfied the requirements of Section 109(c) of the Bankruptcy Code and may proceed with its efforts to adjust its massive bond, pension and employee obligations. Section 109(c) … Continue Reading

Steel Cage Match Between Calpers and Bond Investors Continues in San Bernardino Chapter 9 Case

The battle in California municipal bankruptcies between bond investors and Calpers, the California public employee pension system, began in the Stockton Chapter 9 bankruptcy case and continues unabated in the bankruptcy case of San Bernardino. The issues at stake – whether  California state laws protecting public employee pension obligations are pre-empted and superseded by Congress’s Article … Continue Reading

Panic in Detroit? Motor City Moves Closer to Possible Chapter 9 Filing

Detroit has seen signs of revival in its urban core following the near-death experiences of GM and Chrysler. Unfortunately, its municipal finances remain beaten down by the city’s long and precipitous decline over the past several decades. Labor and legacy costs, incurred when the auto industry thrived and the population well exceeded a million citizens, are now … Continue Reading

Game On in Stockton, CA Chapter 9 Case – Bond Insurer Sets Focus on Calpers

The Olympics may be over, but a potential clash of titans is gearing up in the Chapter 9 bankruptcy case of Stockton, California. Municipal bond insurer National Public Finance Guarantee Corporation (“National”) has challenged Stockton’s eligibility to be a debtor under Chapter 9 of the Bankruptcy Code, and is focusing expressly on the city’s alleged failure … Continue Reading

Throwing Money (Literally) Down the Sewer – Jefferson County and Warrant Holders Square Off on Sewer System Operating Expenses

U.S. Bankruptcy Court Judge Thomas Bennett last month upheld the Chapter 9 bankruptcy filing of Jefferson County, Alabama, the largest municipal bankruptcy case in history. As has been widely reported, the County’s financial woes were precipitated by the disastrous funding of upgrades to its sewer system. Not surprisingly, given the billions of dollars at stake and the … Continue Reading

The Right Kind of Broke? Judge Weighs Deeply Insolvent County’s Eligibility For Chapter 9 Protection

The travails of Jefferson County, Alabama are well known. Ordered by a federal court to upgrade its sewer system in the late 1990’s, the project was marred by corruption, cost overruns and financing with complex derivatives that ultimately saddled the County with over $3 billion in debt. In addition, an occupational tax that provided the primary source … Continue Reading