Joel R. Glucksman
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201-896-7095 jglucksman@sh-law.comFirm Insights
Court Denies Creditors' Document Request in Alabama Bankruptcy Case
Author: Joel R. Glucksman
Date: February 8, 2013
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In the ongoing bankruptcy case of Jefferson County Alabama, Wall Street creditors who petitioned the court for access to county documents relating to city sewer-system rates will not be permitted to view the records, a bankruptcy court has ruled.
U.S. Bankruptcy Judge Thomas Bennett denied a request by creditors to examine the documents used by policymakers in the county to determine and set sewer-system rates, which the creditors argue are too low, according to Reuters. The trustee for the bondholders, Bank of New York Mellon, argues that the rates – which are a central part of the county’s municipal bankruptcy filing – and the information used to set them are central to future court proceedings, during which creditors will try to increase the rates. The bondholders argue that the rates passed on November 6 are too low and will not enable the county to make principal and interest payments on the debt in the future.
Roughly $3.14 billion of the county’s debt is the result of sewer system construction and financing costs.
Judge Bennett disagreed with the creditors’ claims and sided with the county, which said the claims are without merit and violate laws that guarantee policymakers an element of privacy when making certain decisions, Reuters reports.
“The trustee would run roughshod over the privileges protecting the county’s communications with its lawyers and the lawyers’ communications with retained experts,” the county said in a brief.
Although the county will not be required to release this information to creditors, Judge Bennett did not specify if officials at the consulting firm CH2M Hill – which worked on the sewer projects – would be required to answer questions during upcoming bankruptcy hearings. He said he would rule on the matter if it was brought forth in future proceedings.
Jefferson County, Alabama, filed for Chapter 9 protection under bankruptcy law in 2011. Although proceedings are still ongoing, the county has been forced to cut expenses significantly and slash hundreds of jobs in the meantime.
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