San Bernardino Seal

By Ryan Hagen, The Sun
Posted: 12/13/13, 12:04 PM PST |

LOS ANGELES >> U.S. District Judge Dolly Gee agreed Friday to let San Bernardino’s largest creditor appeal directly to the 9th Circuit Court of Appeals, opening another front in the battle between the city and the California Public Employees’ Retirement System.

If the 9th Circuit agrees to take the case, CalPERS will argue that U.S. Bankruptcy Judge Meredith Jury was wrong when she decided in August that the struggling city qualified for bankruptcy protection.

Meanwhile, Jury will continue overseeing the bankruptcy case, and U.S Bankruptcy Judge Gregg Zive will continue leading mediation sessions that reportedly are progressing well.

As Jury herself said, that progress could stall if CaLPERS or other parties decide they’re better off dragging their feet or focusing attention on the appeals process, argued the city’s bankruptcy attorney, Paul Glassman of Stradling Yocca Carlson & Rauth.

Gee said she didn’t anticipate that happening.

“I’m sensitive to these pragmatic appeals,” Gee said, “and I think it would be foolish for CalPERS to go to mediation and take the stance that they’re going to win on appeal and (therefore) they’re not going to negotiate in good faith.”

City Attorney Gary Saenz said after the hearing that he was “certainly hopeful” Gee was correct, and Mayor Pat Morris echoed that, but said he expected the greater harm from the decision would come from spreading thin city resources.

“We’ve already expended a great deal, and there’s people from the Finance Department, city attorney’s office, mayor’s office — all concentrating on this case and on mediation before Judge Zive,” Morris said. “This is another (burden). It reminds me of the Doublemint commercials — ‘double your pleasure, double your fun’ — but this is double the pain.”

However, Morris said he was not surprised by the ruling, which comes a few days before a Michigan judge is asked to certify a direct appeal of an unconnected but closely watched request for certification of direction appeal of a bankruptcy judge’s decision that Detroit could cut worker pensions.

Unlike San Bernardino, Detroit is not contesting the request, said Michael Ryan, the attorney for CalPERS.

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