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A federal judge rebuked the ‘bully’ CalPERS in the case of Stockton’s bankruptcy.
by Steven Greenhut | REASON.COM | February 13, 2015
“If you have the facts on your side, pound the facts,” goes the old legal adage. “If you have the law on your side, pound the law. If you have neither on your side, pound the table.” A newly published federal court decision found the California Public Employees’ Retirement System was merely banging the legal table with its “iron fist” in the Stockton bankruptcy case.
Judge Christopher Klein rejected the pension fund’s argument that California cities could not reduce pension benefits even in bankruptcy. The decision could dramatically change the way pensions are handled in future bankruptcy proceedings, even though the judge upheld the city’s workout plan, which leaves existing pensions untouched while “impairing” creditors.
The judge was clear: When California cities go bankrupt, pensions can be cut. After Klein made that point in his verbal ruling in October, CalPERS shot back in a statement: “The ruling is not legally binding on any of the parties … or as precedent in any other bankruptcy proceeding ….” Now it seems legally binding and precedential.
