20 June 2014

The Python Squeezes San Bernadino

Go here to read the latest, albeit somewhat cryptic, news about the Chapter 9 bankruptcy of struggling San Bernadino. (Or should it be the struggling Chapter 9 of San Bernadino? Actually, both the case and the city can charitably be described as "struggling.") For some of my earlier thoughts about the San Bernadino bankruptcy go here and here.

In any event, San Bernadino appears to be the only city in California history that has failed to make the payments CalPERS (California Public Employees Retirement System) deems necessary to fund the city's retirement obligations to its employees. The city then filed Chapter 9 bankruptcy and has come to agreement with all its creditors but one (guess who?) to take less than what's owed. CalPERS won't agree to take one cent less than what it deems owed and bases its position on California state law notwithstanding its displacement by federal bankruptcy law.

Why doesn't San Bernadino stand on its rights under federal law and tell CalPERS to take a long walk off a short pier? Would YOU want to litigate with an entity that has $277 billion under management and is willing to spend whatever is necessary to get its way? Lose at the Bankruptcy Court? No problem; appeal to the District Court. Lose again? Take it to the Ninth Circuit Court of Appeals? Lose there? Let's knock on SCOTUS's door.

San Bernadino is a city of limited resources. It can't afford the fight and so has apparently capitulated.

The golden rule in action: He who has the gold makes the rules.

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