By Ryan Hagen, The Sun
Posted: 11/13/13, 7:36 PM PST |
RIVERSIDE >> U.S. Bankruptcy Judge Meredith Jury said Wednesday she will decide by Friday whether to certify CalPERS’ attempt to appeal her decision — that San Bernardino is eligible for bankruptcy protection — to the 9th U.S. Circuit Court of Appeals.
Attorneys for the city and for the California Public Employees’ Retirement System both made good arguments, Jury said, and before the end of the week she would issue either the order supplied by CalPERS or a slightly modified version of one supplied by the city.
“You both have good ideas, and I have some good ideas that I have a dilemma as to which is the right place to decide this issue and I’m not going to decide it right now,” she said during a telephonic hearing as she was in the U.S. Bankruptcy Court in Riverside.
Jury ruled in August that the city met all the requirements for Chapter 9 bankruptcy protection, after a year of arguments. CalPERS, the city’s largest creditor, was by that point the only objecting party.
The pension system argued that the city didn’t file for bankruptcy in good faith or desire to effect a plan to adjust its debts, which are both requirements under bankruptcy code.
On one hand, Jury said, it seemed to her that certifying the appeal would disrupt the mediation process and make it more difficult for the city and its creditors to come to a consensual agreement.
“(However,) there is a side of me that could support the 9th Circuit weighing in on these tricky questions of desire and good faith,” she said, because higher courts haven’t given rulings to guide municipal bankruptcy cases. “If there were some definitive rulings, it would give direction to some potential debtor cities as well as creditors in those proceedings, perhaps changing the landscape of how the eligibility battle has become the war that it is.”
She also was skeptical of CalPERS attorney Michael Ryan’s response when she asked what CalPERS would do if she issued the order it wants.
“(You’re saying) if we lose at the 9th Circuit, then we’re going to try again at the district court,” she said. “Which doesn’t seem fair. … That seems like extra work, not less work.”
Ryan said that CalPERS thinks allowing the appeal would be most efficient, and if the appellate court denies the petition “the city will have that arrow in its quiver” for future arguments.
His fear, Ryan said, is the mediation process would produce a plan and it could be three years before CalPERS was able to make its arguments.
And if the circuit court doesn’t think the appeal belonged in the appellate court — as a previous case by the 9th Circuit suggested, according to the city — they don’t have to accept it, Ryan said.
“I think what the court was saying there was we have jurisdiction to determine our jurisdiction,” he said. “That’s the 9th Circuit’s job.”
Paul Glassman, San Bernardino’s bankruptcy attorney, pointed the judge to a decision by a Delaware bankruptcy judge that he said presented compelling arguments as to why the request should be denied.
“Lastly, we invite the court to look at the Simon Schuster decision,” Glassman said. “It’s not that it’s controlling (as precedent). It’s that it’s a thoughtful, analytic decision.”
The way he knew that, Glassman said, is it has the same factors Jury considered when she said at an Oct. 29 hearing that she wouldn’t certify the appeal.
Jury said she would read the decision before making her own.