San Bernardino Seal

The City of San Bernardino may benefit from a recent ruling about paying pensions in the city of Stockton.

By Ryan Hagen, Press-Telegram
Posted: 10/01/14, 11:38 PM PDT |

A decision Wednesday by the judge at Stockton’s bankruptcy trial that allows bankrupt cities to treat the California Public Employees’ Retirement system like other debtors might open the door for other insolvent cities that could want to cut back on expensive pension obligations — including San Bernardino.

The decision by U.S. Bankruptcy Judge Christopher Klein doesn’t formally act as precedent in other bankruptcy cases, but it’s an answer to what had been an open question about the tension between federal bankruptcy law and state protections.

U.S. Bankruptcy Judge Meredith Jury has said that as she considers San Bernardino’s bankruptcy case she considers comparable cases and has referenced Stockton’s case before.

“It’s persuasive but not precedential,” said bankruptcy attorney Michael Sweet of Fox Rothschild in San Francisco, referring to the Stockton decision, “but having paid close attention to what Judge Jury has done in the San Bernardino case, it’s clear that she is well aware of what’s happening in the Stockton case.”

San Bernardino officials haven’t publicly said they want to sever the relationship with CalPERS, its largest creditor in a bankruptcy case that began just after Stockton’s. (Neither did Stockton; the ruling came after a protest by another creditor, Franklin Templeton Investments.)

All of the officials most involved in San Bernardino’s bankruptcy case, including the mayor and city attorney, were unavailable for comment Wednesday because of a bankruptcy mediation meeting, said the city’s public relations firm, Westbound Communications.

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