Municipalities often drive economic development through subsidiaries and affiliated entities. When these “quasi-municipalities” become distressed, however, questions arise as to whether the potential debtor qualifies as a debtor under Chapter 11 or Chapter 9. This uncertainty can lead to litigation over whether the entity may proceed as a Chapter 11 debtor or is a governmental … Continue Reading
The concept of “equitable mootness” is a doctrine of relatively long-standing in bankruptcy jurisprudence. It has been used by courts to avoid determination of issues raised on appeal that would require the unscrambling of a plan previously confirmed and implemented. However, that doctrine has recently been questioned in a variety of decisions. It appears that … Continue Reading
Restructuring partners Mark Salzberg and Karol Denniston, together with financial services partner, Michael Cuda, recently authored a chapter in “Inside The Minds: Chapter 11 Bankruptcy and Restructuring Strategies – Leading Lawyers on Navigating Recent Trends, Cases and Strategies Affecting Chapter 11 Clients” published by Thomson Reuters/Aspatore. In their chapter, entitled “New Developments in Chapter 11 … Continue Reading
Recently the Illinois Supreme Court unanimously rejected legislative pension reform, ruling that the 2013 legislation violated pension protections written into the state’s Constitution. Illinois’ Constitution provides that benefits promised as part of a pension system for public workers cannot be diminished or impaired. With a pension shortfall estimated at $111 billion, Illinois has struggled to … Continue Reading
Recently the Eleventh Circuit agreed to hear Jefferson County’s (“JeffCo”) petition for appeal of U.S. District Court Judge Sharon Blackburn’s ruling refusing to dismiss one of three appeals filed by JeffCo’s sewer system ratepayers. Last fall, Judge Blackburn ruled that while JeffCo’s Chapter 9 plan of adjustment had been confirmed and new sewer warrants issued … Continue Reading
Recently in Chicago’s mayoral primary election, Mayor Rahm Emanuel was forced into a runoff with Cook County Commissioner Jesus “Chuy” Garcia. For many this was an unexpected result that now calls into question who is going to lead Chicago out of its financial wilderness. One has to wonder if the primary results are in response … Continue Reading
Bankruptcy Judge Chris Klein recently issued his formal confirmation opinion in Stockton’s Chapter 9 bankruptcy case. While there were no real surprises, the opinion makes for entertaining reading given the Court’s more than serious conclusion that: …it is doubtful that CalPERS even has standing to defend the City pensions from modification, CalPERS has bullied its … Continue Reading
Illinois Governor Rauner presented his turnaround agenda in his “State of the State” address last week and called for, among other things, the state “to extend to municipalities bankruptcy protections.” Mirroring the proposed legislation introduced by Representative Ron Sandack in January, and reported on in an earlier post, Illinois seems positioned to provide municipalities with clear … Continue Reading
On February 6th, Federal District Judge Francisco Besosa ruled that Puerto Rico’s municipal debt-restructuring law, the “Recovery Act”, was unconstitutional stating that: “The Recovery Act is pre-empted by the federal Bankruptcy Code and is therefore void.” The Court also permanently enjoined current and future government officials from enforcing the Act. Puerto Rico has announced that … Continue Reading
Illinois’ municipal distress is severe and we have witnessed the political maneuvers to address Chicago’s ongoing fiscal dilemma. In 2013, Chicago Mayor Rahm Emmanuel stoked bankruptcy fears citing the city’s ballooning pension obligations that he estimated could exceed $1.6 billion in 2016. Pew Charitable Trusts has reported that among the nation’s five largest cities, Chicago … Continue Reading
Say what you will about Detroit’s bankruptcy case, but when it is all said and done, the value for each of its participants most likely lies in the learning experience. And, experience is sometimes a painful teacher. One of the many take-aways is a framework for what constitutes a workable or “feasible” plan of adjustment … Continue Reading
Last week Judge Klein approved Stockton, California’s plan of adjustment allowing the city to exit bankruptcy without addressing its largest liability – pensions. Stockton’s plan called for budget cuts, haircuts for bondholders, and a sales tax increase approved by voters last fall in reliance, in part, on the City’s promises to hire more police. While … Continue Reading
