Ryan Hagen, Staff Writer
Posted: 12/04/2012 06:42:30 PM PST

The judge handling San Bernardino’s bankruptcy likely will not lift a stay so CalPERS can sue over missed pension payments, several attorneys studying the legal battle predicted Tuesday.

That could save expensive legal fees for the city, which plans to resume payments in fiscal year 2013-14 and repay the rest later because it says paying earlier would ruin the city.

The two cities’ bankruptcy cases are being watched because they cover untested legal ground and touch on potential changes to the California Public Employee Retirement System – the nation’s largest retirement system – but there are also practical concerns, said bankruptcy attorney Karol Denniston.

“Despite all the legal complexity, we actually are faced with a very simple economic math problem,” Denniston said. “We have x amount of money to deal with y amount of liability, and the sooner the parties are given ability – not necessarily authority – to negotiate, the better.”

Denniston, who helped draft a law governing California bankruptcies known as AB 506, led a webinar about the bankruptcy cases in San Bernardino and Stockton along with Louis T. DeLucia, also of the San Francisco law firm Schiff Hardin.

Both tentatively predicted that bankruptcy Judge Meredith Jury would refuse to lift the stay, which means CalPERS would remain unable to sue in state court for payments the city stopped making when it filed for bankruptcy Aug. 1. Those payments total about $6.9 million so far, according to CalPERS.

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