CalPERS Loses Appeal Over San Bernardino Bankruptcy

December 3, 2013
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The California Public Employees’ Retirement System (CalPERS) has been a vocal opponent of San Bernardino’s decision to seek municipal protection under Chapter 9 of the bankruptcy law, but its repeated challenges to the city’s bankruptcy eligibility have not achieved the desired result. Now, it has lost another round in bankruptcy court. Last week, U.S. Bankruptcy Judge Meredith Jury rejected CalPERS’ request for the right to challenge the city’s bankruptcy eligibility by a direct appeal to the U.S. 9th Circuit Court of Appeals. Judge Jury had handed down an earlier ruling in August, confirming the city’s eligibility for Chapter 9 bankruptcy protection, despite heavy protest from the pension fund. CalPERS had argued that the city was using legal proceedings to avoid meeting its payment obligations. In this initial filing, the fund also said the city did not act in good faith or attempt to adjust its debts – both of which are required under the U.S. Bankruptcy Code. In her most recent ruling, Judge Jury affirmed that granting CalPERS’ second request to appeal would waste valuable time and resources. Additionally, representatives for the city said that the repeated challenges by CalPERS only served to interrupt and delay the mediation process, which is critical to ensuring that creditors are justly compensated. “The procedure asserted by CalPERS, in the Court’s view, is duplicative and not an efficient use of judicial resources,” Jury wrote, according to the San Bernardino Sun. “If this court had granted certification, CalPERS has proposed to also file a Motion for Leave in the 9th Circuit. This duplication is inefficient and possibly may lead to inconsistent results.” Despite the ruling, CalPERS has stated that it will not give up its challenges to the bankruptcy, and has already taken the issue to a U.S. District Court judge. “Although we disagree with the [bankruptcy] judge’s decision, we will continue to pursue our appeal and uphold our fiduciary duty to guarantee our members receive the public pensions that were bargained with their employer and promised,” said CalPERS, according to the Sacramento Bee. San Bernardino currently owes CalPERS more than $14 million.