25 July 2014

"Does the Constitution Work"?

An answer to the question of whether the U.S. Constitution works would seem to be straightforward enough. At least, that is, until we discover how contentious is the answer to the implicit preceding question: For what end was the Constitution designed? Try answering that question and the wheels quickly fall off the bus. The scope of disagreement on the end of the Constitution is sufficiently wide as as to make consensus on whether it works impossible.

Enter my Regent Law School colleague Craig Stern. Stern sidesteps the seemingly intractable discussion of the Constitution's end and asks the question of "for whom?" You can download his enlarged essay published in the Akron Journal of Constitutional Law & Policy by going here. It's only fourteen pages in length so I won't do much to summarize except to say that Stern examines the presuppositions of the Framers with respect to the nature and extent of popular virtue and religion necessary to maintain the republican form of government provided by the Constitution. And, Stern wonders aloud, what can be concluded about the Constitution's workability if those presuppositions no longer hold?

A great piece to get folks thinking about the supra-constitutional fundamentals.

24 July 2014

Standard Form Contracts and Servility: Why Contracts Scholars Should Care

In mid-July in a post here about some of the latest scholarship on standard-form contracts (including a piece by colleague Kenny Ching that you can download here), I asked a question: Why do contracts scholars work to find a reason to reduce the normative obligation of consumers below their own sense of moral obligation? In other words, many scholars seek ways to reduce the legal (if not moral) obligation arising from form contracts that consumers never read and that sellers know aren't read.

It turns out that empirical research shows generally that consumers believe they are morally obliged to perform (or give up virtually all rights to any remedy) according to the terms of the contract. So why do scholars care? It's not likely their opinions will influence consumers or courts.

It turns out that Nick Wolterstorff provides an answer. Long ago, in 2009 to be exact, I posted at great length on Wolterstorff's book, Justice: Rights and Wrongs. (Go here for a post with instructions on how to get to the wayback machine.) Almost all talk of wrongs deals with violations of rights. That's certainly the way lawyers usually think of wrongs.

But the concept of a wrong is more broadly located in the notion of disrespect of an-other's worth, and the other can be oneself. (Go here for more details from Wolterstorff.) If human beings have inherent worth (as I believe) or even if they have only bestowed worth (per Wolterstorff), then it follows that they can disrespect themselves. As example of what C.S. Lewis calls servility, Wolterstorff quotes at length from Thomas Hill, Jr.'s article, "Servility and Self-Respect" (download from JSTOR here) beginning  as follows: "Hill is imagining a servile black man whom he calls 'Uncle Tom':
He always steps aside for white men ... He displays the symbols of deference to whites, and of contempt toward blacks ... Imagine, too, that he is not playing a game. he is not the shrewdly prudent calculator who knows how to make the best of a bad lot ... He accepts without question the idea that, as a black, he is owed less than whites. ... The attitude which he displays is that what he values, aspires for, and can demand is of less importance than what whites value, aspire for, and can demand.
Hill's Americanized, race-based setting should not obscure his larger point: "a recipient of an action may have a mistaken view as to her worth." Others, then, who profit by a recipient's misapprehension of his or her worth also commit a wrong even though the recipient does not believe so.

If, as the Christian tradition asserts (see my article, Looking for Bedrock: Accounting for Human Rights in Classical Liberalism, Modern Secularism, and the Christian Tradition (download here)), human beings have non-instrumental worth, then it is certainly arguable that engaging in transactions with "fine print" the recipient never reads, and that the agent knows the recipient will not read, and which eliminates all or virtually all remedies, for more than the market price, is morally wrong. The recipient has been wronged even if, after the fact, when the remedy-eliminating terms are brought to her attention, she believes she is limited by them. Such servility misunderstands her worth and its (ab)use by the agent should not be passed off as merely the morality of the marketplace.

What, one may then ask, has this to do with the response of the law to such a state of affairs? The positive law may not, as such, address the problem and abuse of servility; they are neither crimes nor torts. This does not mean, however, that a judge need implement servility as a matter of private law. I'll leave to others whether the remedy is not to enforce such terms or simply to reconfigure the recipient's obligation as one to pay only the market price.

23 July 2014

Not Really News About Detroit

Go here to read an article in the Christian Science Monitor reporting two bits of news. First, Detroit's retirees have voted in favor of a Chapter 9 "plan of adjustment" that will trim but not drastically cut their benefits. As I described here, at least one class of creditors must vote in favor of the plan for it to be confirmed and Detroit now has that vote.

But the affirmative vote of one class isn't enough. Ideally, Detroit would get the vote of each and every class of creditors including its long-suffering bondholders like Syncora (here, here, and here). If a class of creditors votes against a plan, Detroit can still confirm it if (and that's a big "if") the court agrees to cram it down. 

Cram down, however, requires that the plan "not discriminate unfairly" and that's the second bit of news reported by the Monitor. Bondholders including Syncora say that they'll fight on the ground that the plan discriminates unfairly against them. In other words, the cuts suffered by retirees are far less than those proposed for the bondholders, which, they will argue, is unfair.

This is hardly news. I posted here  about the likelihood of just such a development. And, for what it's worth, I think the bondholders have a good argument. You can read my published article Municipal Bankruptcy: When Doing Less Is Doing Best (download here) to find out why.

A cage match between Detroit and its retirees on the one side and the bondholders on the other would be an academic delight. It would not, however, be in the best interests of anyone. The "Chickie run" is about to commence. Let's hope someone swerves before anyone drives off the cliff.

22 July 2014

Acceleration in Detroit: It's Feasible!

I haven't posted incessantly about the Detroit Chapter 9 bankruptcy. At least I don't think I have. (You can judge for yourself by going here, here, here, here, and here for my "Top 5.") I'll post later on the early voting results but today I'll post a link here to the "Expert Report of Martha E.M. Kopacz Regarding the Feasibility of the City of Detroit Plan of Adjustment." Ms. Kopacz's Feasibility Report is a big deal because the bankruptcy court must find that a city's plan is feasible in order to confirm it. In other words, even if everyone voted in favor of the plan, it could not be approved if the court did not believe it was feasible.

Well, one might think, if feasibility is such a big deal, just what is it? How does the law define "feasibility." Good luck looking for a definition; there isn't one. Which is a point made in the Feasibility Report by a citation to my yet-unpublished article, Who Bears the Cost? The Necessity of Taxpayer Participation in Chapter 9 (which you can download for yourself by going here). (I had presented an earlier version of this article at the Widener Law Journal symposium in April.)

Law professors often wonder what happens to what we publish. Does anyone read it? Does it make a difference? One way to measure the effectiveness of legal scholarship is to see how often and where others cite to it, and so the quote from my article in the Feasibility Report represents a bit of validation for my efforts. And what was the quote?
What is merely unclear in chapter 11 is an impenetrable fog in chapter 9. Section 1129(a)(11) of the Bankruptcy Code is not incorporated into chapter 9.131 Instead, section 943(b)(7) simply makes an undefined “feasibility” a requirement of confirmation of a plan of adjustment.
But back to the Feasibility Report. It's 226 pages long (although that count includes some appendices) so it's a bit of a slog to read it. Two points stand out. First, Ms. Kopacz provides her definition of feasibility on which she will base her ultimate conclusion:
Is it likely that the City of Detroit, after the confirmation of the Plan of Adjustment, will be able to sustainably provide basic municipal services to the citizens of Detroit and to meet the obligations contemplated in the Plan without the significant probability of default.
Second, is the Feasibility Report's bottom line:
Based on this work, I conclude that:
(a) The City’s plan is feasible as required by 11 U.S. C. § 943(b)(7); and
(b) The assumptions that underlie the City’s plan of adjustment projections regarding its revenues, expenses and plan payments are reasonable.
I won't pursue any further details at this point although I am particularly interested to know how the Feasibility Report decides which municipal services are "basic" and which can be jettisoned. That question is the subject of the article on which I am currently working for a symposium at Campbell University Law School that will take place in October. Too late for Detroit's confirmation hearing (set to begin in mid-August), which means I'll be able to use what happens in Detroit as grist for the mill.

21 July 2014

Life in the Not-Yet: Carl Trueman's "A Church for Exiles"

In the August/September issue of First Things magazine, theologian-professor Carl Trueman published a superb piece titled "A Church for Exiles." You can read it online here for free even if you're not a First Things subscriber. And by superb I mean just that. Trueman is an excellent writer whose passion for the Church and its people is matched by his insight, historical awareness, and clarity of expression. (You can read my comments from several years ago about Trueman's conference remarks here, here, and here. A comment about an earlier First Things piece can be found here.)

To summarize: for its professed beliefs regarding matters most particularized in sexual ethics, the Christian Church in the West, and more immediately America, is about to experience exile, "though not an exile which pushes us to the geographical margins. It's an exile to cultural irrelevance." If that's the case, Trueman goes on to ask, what currently subsisting form of American Christianity offers its adherents the best kit for dealing with life in a world in which their beliefs and practices are particularly unwelcome?

Trueman quickly disposes of the bulk of American Evangelicalism because a large majority of Evangelicals have tied themselves to the idea of America as a providentially significant key in the growth of God's kingdom on earth. Other than anger and bitter resentment, Evangelicalism won't have much to offer as America morphs from the Chosen nation into a low-intensity version of the Beast. And if that's not bad enough, Evangelicalism's individualism and capitulation to the forms of the market have gutted the Church as Church, the body of Christ. Evangelicalism's retreat to Moral Therapeutic Deism will continue as its number dwindle.

Trueman next evaluates the wherewithal of the American version of the Church of Rome to deal with its impending exilic marginalization. One might think Roman Catholics, who until well into the 20th century were marginalized by the Protestant Establishment and who have withstood significant attacks by anti-clerical forces in Europe and oppression in Communists-dominated countries and survived with its witness intact, would be able to do so here. Not so fast, concludes Trueman,
When opposition to gay marriage comes to be seen as the moral equivalent to white supremicism, it is doubtful that the Roman Catholic Church will be able to maintain both her current position on the issue and her status in society. She too will likely be shunted to the margins. ... Catholicism's institutional footprint is so large--and Catholic theological (and emotional) investment in [America] so significant--that the temptation to preserve the Church's place in society will be very great. This preservation will require compromise, even complicity, and it will very likely blur the clarity and undermine the integrity of Christian witness.
Well, where does that leave us? If, as Trueman believes, neither of the two largest institutional forms of Christianity in America will be able to flourish when circumstances become less amenable, is there another live option? Is there another form of Christian life and identity in the United States that is prepared to exist and perhaps even thrive in the coming hothouse of social exile?

In fact, there is: "Reformed Christianity equips [its adherents] well for exile because it was itself forged in a time of exile, often by men who were literal exiles." Two facets of the Reformed expression of the Christian faith make it well-suited for an exilic existence. First, Reformed doctrine with its emphasis on God's sovereignty come what may provides a secure source of hope for the faithful. Our present salvation and future destiny depend neither on personal success nor institutional prestige. It is grounded rather in the certainty of God's promises to his people individually and corporately.

Second, Reformed worship's Word-centered simplicity and simplified but disciplined (and disciplining) liturgics orients the attention and longing of its worshipers away from this-worldly success in politics and cultural transformation and toward the world-to-come's blessings in Christ. Regularly rehearsing their union with Christ in worship, neither mediated by a priesthood nor atomized by a market-centered Evangelical individualism, provides Reformed folk with a "robust confidence [that] will serve us well at a time when the indifference or hostility of the world presses upon us and encourages crises of self-confidence."

One might uncharitably characterize Trueman's take on the dialectic of Church and world and the former's impending exile within the latter as deliberately setting the bar low so as not to be disappointed. Alternatively, it could be construed as merely a prolix description of Trueman's micro-sized ecclesiastical home, the Orthodox Presbyterian Church. Not only would such characterizations be uncharitable, they would not take into account the cogency of his arguments for which I recommend ad fontes; follow the link above and read them for yourself.

Nonetheless, I believe Trueman's account omits in turn both a theological and a phenomenological consideration. The exilic motif draws its narrative, ethical, and theological description of our current/impending situation principally from the account of Israel's Exile from the Promised Land. The prophets Jeremiah and Ezekiel as well as the writings of Daniel provide the Scriptural foundation for exilic analysis. Certain New Testament writings, particularly the epistles of Peter, pick up the theme of exile for the nascent Church. But as Oliver O'Donovan has observed, the theme of exile does not exhaust the New Testament understanding of the place of the Church in the world. The resurrection and ascension of Christ, not only his sojourn on earth, are relevant to the Church's life here and now.

While I appreciate Trueman's desire to avoid the simple-minded triumphalism of some Reformed (!) one-kingdom transformationalists, it seems he fails to to give sufficient regard to the more-than-millennium-long positive cultural trajectory of the West. Not that Trueman ignores the social effects of the Christian faith, but his weighing of them against the coming exile seems unbalanced. (For some insights on this topic see my piece, Looking for Bedrock: Human Rights in Classical Liberalism, Modern Secularism, and the Christian Tradition, which you can download here.) Such cultural transformation has had serious downs as well as ups and Trueman is likely correct to predict the coming social exile. Yet even that truth should not blind us to the possibility of yet another reversal in the course of God's providential ordering of history.

Trueman's omission of the phenomenon of the contemporary charismatic movement means he has left off another plausible response to the Church's coming exile in American society. I have commented on the need to addresses the charismatic movement on its own terms here. To be sure, the place of the "modern day renewal movement" can largely be subsumed within contemporary Evangelicalism when it comes to social and political matters in the United States. Largely but not completely. Pentecostals and to a lesser extent charismatics survived on the fringe of American society throughout much of the twentieth century. To a certain extent the current efflorescence of this branch of Christianity has coincided with its "mainstreaming" into an ever-more flexible Evangelicalism but charistmaticism's inherent ability to pivot quickly should not be disregarded as a source of strength if Trueman's predictions come to pass.

Waiting for Good Cash in Milwaukee

You can read a short piece from the Wall Street Journal here about the attorneys for the creditors of the Archdiocese of Milwaukee who have been waiting for over a year to get paid. (Disclosure: Although not mentioned by name, my former firm is also waiting for its share, albeit far less than the the lead creditors firm.) For my previous comments on the bankruptcy of the Archdiocese of Milwaukee go here and here.

Professionals including attorneys in large Chapter 11 cases, such as that of the Archdiocese, ultimately get paid only what is approved by the bankruptcy court. In most cases, however, the court requires the debtor to pay a portion, typically 80%, on a monthly basis on the assumption that the 20% held back will be enough to cover anything the court ultimately disallows. In this case, the Archdiocese claimed over a year ago that it couldn't afford to pay even the reduced amount because it projected only a small positive cash flow for the near future. It turns out, at least according to the attorneys for the creditors, that the receipts of the Archdiocese have exceeded its expenses by more than what was projected.

The lead firm for the Archdiocese's creditors, Pachulski Stang Ziehl & Jones is owed $1.9 million, and so it's no surprise they're getting a bit antsy. The firm claims there's enough in the kitty to pay it and further suggests that the Archdiocese has indicated that it would pay if the law firm would drop the battle to get the cash held in a cemetery trust fund thrown in the pot for creditors. Lawyers for the Archdiocese deny creating any such implication.

Fun and games in the world of bankruptcy.

17 July 2014

(Classical) Liberalism and Libertarianism (Public Choice)

Nathan Schlueter has a well-written piece in the August issue of First Things magazine that you can read here. (Warning: behind paywall.) Schlueter's title is straightforward: "Libertarian Delusions: Exposing the Flaws in Libertarian Thinking." I've previously expressed my reservations about libertarianism as a political philosophy, which you can read here, here, and here. My concerns are several but a principal one is that a political philosophy without an anthropology and ethical framework is a dead end at best and a wide road to perdition at worst. Thankfully, most libertarians, like Randy Barnett, have a working version of both and so avoid the dangers of an "ideal type" libertarian.

Schlueter constructs such an ideal type from three fundamental libertarian contentions: the libertarian claim of self-ownership, its belief that the powers of the state are no greater than that of individuals, and that the limitation of individuals remain the case whether acting in the privae or public sphere. This latter insight falls under the rubric of public choice theory.

Schlueter deals well with the first two points but I want to focus on the third because I am making use of public choice theory in an article that will be presented at a symposium on municipal bankruptcy at Campbell University Law School in October. (Working title: "Who Bears the Burden? The Place of Municipal Residents in Chapter 9." It's a follow-on to Who Bears the Cost? The Necessity of Taxpayer Participation in Chapter 9 that you can download here.

According to Schlueter, James Buchanan and Gordon Tullock should be regarded as the founders of public choice theory. FWIW, I would include Paul Samuelson and Charles Thiebout among them. In any event, as Schlueter explains, public choice theory is the application of the insights (and limitations) of neo-classical economics to the workings of civil government:
Seen through the ... lens of economics, political activity is a form of economic exchange, and the state is an external means for realizing private and individual values. Public-choice theory purports to explain political action not as we would like it to be but as it actually occurs: shady backroom deals, pork-barrel politics, logrolling, administrative abuses of power, etc.
Such a focus on the phenomena of political life runs the danger of eviscerating the notion of public service. In other words, libertarianism as applied through public choice theory turns all political activity into another market. Such an approach goes further than the often-justified skepticism political life engenders and turns cynicism into a virtue:
The state exists merely as an external means for realizing private and individual ends. In the words of James Buchanan, “collective action is viewed as the action of individuals when they choose to accomplish purposes collectively rather than individually, and the government is seen as nothing more than the set of processes, the machine, which allows such collective action to take place.” Conceived in this way, state action is legitimate only when, like a market exchange, it satisfies the preferences of every individual.
Schlueter overstates the case a bit. Libertarians are not, as he notes in his essay, anarcho-capitalists. His assertion is true of libertarians only if the government action is not one necessary to vindicate life, liberty, or property. Outside those areas, Schlueter's characterization of libertarianism is correct.

Unanimous consent will never be reached in a polity of significant size so it turn out that in a world of public choice most of what government does is a quid for the quo of political support (votes, campaign contributions, etc.) In other words, from the public choice point of view, unless it is protecting one of the legitimate troika of individual interests, civil government is putting its coercive powers up for sale to the highest bidder.

But note: this is not an empirical conclusion but one that the theory entails. If public choice theory is true, then resentment of virtually all government action is justified. But what if public choice theory is not true; instead, what if there is a legitimate role for government as such? Go here, here, here, and here to read some earlier animadversions on this possibility.

In short, in Schlueter's account, classical liberalism has within it the resources to ground a small positive role for the modern civil state. You can read what I think about the subject and how such liberalism (as opposed to libertarianism and contemporary "progressivism") rests upon Christian foundations in Looking for Bedrock: Accounting for Human Rights in Classical Liberalism, Modern Secularism, and the Christian Tradition (download here).

15 July 2014

More on Standard Form Contracts: Moral Sensibilities

Earlier this month I posted about colleague Kenny Ching's new article, What We Consent to When We Consent To Form Contracts: Market Price (you can read what I wrote here). Now I've read another excellent article on the same topic, this one by Tess Wilkinson-Ryan titled A Psychological Account of Consent to Fine Print (download here). (If you think her name sounds familiar, I posted about another of Wilkinson-Ryan's articles two months ago here.)

In any event, while Kenny approached the extent of the binding nature of a form contract that is not read from a normative perspective, Wilkinson-Ryan looks at the phenomenon from the ground up, so to speak. Among other questions she examines is why people who unthinkingly sign such contracts feel a moral obligation to abide by them. At this point she brings up the phenomenon of mortgagors continuing to pay mortgages on homes they purchased when their value has fallen far below the amount of the mortgage debt. I addressed the normative implication of such promises here and here. This phenomenon puzzles Wilkinson-Ryan but nonetheless,
Surveys of homeowners and experimental questionnaire studies both offer evidence that homeowners do not walk away from their mortgages because they consider their loan obligations to be morally binding contracts.
Indeed, some surveys report the same sense of moral obligation with respect to unread terms: "when contract terms are clear and unambiguous, questionnaire participants report that breach of a standard form contract is no less morally problematic than breach of a negotiated contract." The results of other surveys is more mixed on the sense of moral obligation with respect to unread terms of contracts. Thus, Wilkinson-Ryan conducted her own extensive survey of attitudes toward the moral obligation toward standard form contracts.

In short--and this is much condensed--the only statistically variable was the length of the contract but that only in connection with the expectation that the consumer should read the contract. And, remarkably, this variable had no effect on the sense of moral obligation to perform:
Even though subjects reported that it is unreasonable to expect a consumer to read a 15-page contract, they nonetheless felt that the non-reading consumer was as responsible for his non-readership as the consumer who had only two pages of terms to wade through.
Wilkinson-Ryan goes on to explore the why's of such moral sensibilities and her insights are fully worth reading. But you'll have to do that on your own. My take-away is slightly different: Why do contracts scholars work to find a reason to reduce the normative obligation of consumers below their own sense of moral obligation? There is, I believe, a good reason but I'd like to hear from the scholars active in this area before I propose an answer.

14 July 2014

Voting in Detroit: Introduction

The New York Times has a short piece here about the closing of voting on Detroit's "plan of adjustment." Readers might be interested to know that a city's creditors are divided into "substantially similar" classes, such a holders of a particular bond issue, retirees governed by one of several retirement plans, ordinary creditors, equipment lessors, employees, etc. Ideally--and in fact most of the time--all classes vote in favor of the plan. (Log rolling in action.) But note, that for a class of creditors to vote for the plan more than one-half in number and two-thirds in amount of creditors in that class must vote for the plan, a sort of modified super-majority requirement.

The NYT piece also makes an important point although without explanation. At least one class must vote in favor of the plan for it even to be considered by the court. What does this mean if, in fact, typically all classes vote for a plan?

If one or more classes vote against the plan but at least one votes for it, the court may go ahead and confirm the plan anyway, a process known as cramdown. If the city asks the court to cram the plan down the throats of non-consenting creditors, the plan must meet several additional requirements. One of those is that the plan be "fair and equitable," something Syncora, for example, would claim this plan fails to accomplish.

There is a second speed bump on the way to cramdown: the plan must also "not discriminate unfairly." This hurdle will be the most difficult for Detroit to overcome. You can learn all you want to know (and more) about "unfair discrimination" by reading my article Municipal Bankruptcy: When Doing Less Is Doing Best by downloading it here. Many classes of bondholders might use this requirement to fight cramdown.

But remember: Detroit doesn't even get to try to cram down its plan unless at least one class votes in its favor, which is why the prevailing sense that the retirees are voting "yes" is so important. Even if the retirees are on board, Detroit may still face a tough battle for confirmation. But without them, the current plan is dead in the water.

11 July 2014

No Surprise for Syncora

Earlier this month I posted here on the occasion of the rare success by a litigant in getting a higher court to order a lower court to do its job. Writs of mandamus as they are called are rarely sought and even more rarely granted.

I also remarked that "only once in practice did I come close to seeking a writ of mandamus because one expects that, if granted, the lower court will simply rule against the position of the party getting the higher court's order."

Lo and behold, according to Reuters that's just what happened to Syncora: the District Court ruled on the appeal of the Bankruptcy Court's decision and it ruled against Syncora.

I have no rooting interest on this issue. I haven't read the original order, the briefs on appeal, or even the District Court's decision (which isn't yet available on WestLaw). I'm confident Syncora's lawyers expected this result and had already prepared a notice of appeal to the Sixth Circuit. Stay tuned for further developments in Detroit's case.

Two Top Tens

A week or so ago my article, Municipal Bankruptcy: When Doing Less Is Doing Best (download here) was one of the ten most frequently downloaded article from the Social Science Research Network (SSRN) website in the category of Political Economy: National, State & Local Government; Intergovernmental Relations eJournal.

But that was last week.This week the article made it the top ten again. Go ahead and download your very own version.

Not that I care about being in the top ten, mind you.

10 July 2014

Hazy With Threat of Avalanche: Bankrupt Stockton Is Inching Toward Confirmation

Judge Christopher Klein held a hearing in the municipal Chapter 9 bankruptcy of Stockton, California on Tuesday. Stockton and all its creditors but one have agreed on a plan of adjustment. Go here to read why that that one, Franklin Bond Funds, was mighty unhappy. Franklin's most straightforward objection to its treatment was that the city planned to pay it only $150,000 for the value of the golf course on which Franklin had the equivalent of a mortgage. That's all it's worth, claimed the city. On the other hand, Franklin's appraiser opined that the value of the golf course was upwards of $7 million. (If you want to learn more about how appraisers value income-producing property read a short account from a year ago of my interview of the authors of A Practical Guide to Bankruptcy Valuation here. If you're really interested you can listen to the podcast of my interview with them, a link to which is embedded in my post--but only if you're a member of the American Bankruptcy Institute.)

Where was I? Oh yes, the value of the golf course. According to Judge Klein the golf course is worth $4 million, which is what Stockton will need to pay Franklin either in a lump sum or over time with interest. (I know this because I followed the live tweeting from the hearing by Roger Phillips @rphillipsblog ). This is a bump in the road but hardly fatal of the feasibility of Stockton's plan. (For more about the peculiar Chapter 9 notion of feasibility download my article Who Bears the Cost? The Necessity of Taxpayer Participation in Chapter 9 by going here or simply read my earlier blog post here.)

Of greater significance to Stockton, Detroit, and beyond were Judge Klein's comments about the behemoth California Public Employees Retirement System (CalPERS). For my most recent post explaining the stranglehold CalPERS has on cities in California go here. Judge Klein let it be known that he isn't so sure CalPERS has the power it believes it has. For a summary of the judge's remarks check out Ed Mendel's blog here.

Even though it's clear the judge would be willing to cut CalPERS down to size, I think it's unlikely Stockton will take him up on the challenge. Stockton simply doesn't have the gumption to take on a mammoth public pension fund with virtually unlimited financial resources. Of course, the fact that Stockton's city government are wimps doesn't preclude the judge from refusing to confirm the plan. Perhaps he's read my article Municipal Bankruptcy: When Doing Less is Doing Best (download here) in which I strongly advocate that the court refuse to confirm a plan that "discriminates unfairly" unless all parties agree. I had assumed that there would be at least one nonconsenting party to carry the fight. In Stockton, perhaps Franklin will take up the court's invitation. If it does--and prevails--the ramifications for cities in financial distress will be enormous.