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Jon R. Schlueter 106302
Peter B. Schlueter 155880
SCHLUETER & SCHLUETER
Meserve/ Sanborn 2nd Floor
1 08 Orange Street, Smte 8
Redlands, CA 92373
voice: (909) 381-4888
Fax: (909) 381-9238
[email protected]
[email protected]
Attorneys for Creditor and Party-in-Interest, Jessica Weeda
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNL-\
In re:
CITY OF SAN BERNARDINO,
CALIFORJ.\TIA,
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Debtor.
Case No.: 6:12-bk-28006-MJ
Chapter 9
Limited objection to City of San
Bernardino's Motion for Entry of an
Order (1) Directing ad approving
form of notice; and (2) Setting
deadline for filing objections to
petition; Memorandum of Points
and Authorities.
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1 Jessica Weeda, a creditor and party-in-interest of the City of San
2 Bernardino, California (the "Debtor," or the "City"), respectfully submits this
3 objection to the City's Motion for Entry of an Order (1) Directing and Approving
4 Form of Notice; and (2) Setting Deadline for Filing Objections to Petition dated
5 August 9, 2012 [Docket No. 46] and respectfully represents as follows:
6 Introduction
7 1. Jessica Weeda objects to the City' s request for an accelerated deadline
8 for objections to its bankruptcy eligibility as set forth in its Motion, in which the
9 City is asking this Court to set a deadline in less than one month for objections to
10 its chapter 9 petition, when the only pleading the City has filed to enable such
11 creditors and parties-in-interest to evaluate (and consider lodging their
12 objections) as to whether the City is indeed eligible to be a chapter 9 debtor is a
13 "bare bones" Statement of Qualifications Under Section 1 09( c). Setting such a
14 deadline, before the City's creditors and parties-in-interest have been given an
15 opportunity to review and analyze the City' s financial information in support of
16 eligibility and conduct discovery, is patently unfair and unreasonable.
17 2. Reviewing such information is key to enabling parties to evaluate
18 whether the City has met the section 1 09( c) eligibility requirements, particularly
19 in light of the fact that the City did not commence a neutral evaluation process or
20 engage in any negotiations with creditors prior to commencing its chapter 9 case,
21 and in view of recent press reports of accounting discrepancies in the City's
22 books and records (including improper fund requisitions) that have not yet been
23 addressed by the City. To date, the City has not provided its creditors with any
24 information which would enable them to determine whether the City is eligible
25 to be a chapter 9 debtor.
26 3. Accordingly, the only "fair and reasonable'' way to proceed is for this
27 Comito set a discovery schedule in which the Debtor would make available
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documents and witnesses for creditors to conduct a fair I 09( c) analysis, and set a
2 deadline for objections after such production is made that will give creditors a
3 reasonable period to review the City' s filed materials, propound discovery and
4 depositions, if necessary, and then carefully consider whether an objection
5 to eligibility is warranted, and if so, on what basis. While National acknowledges
6 (but does not necessarily agree to) the City' s statements that the bankruptcy
7 filing itself was necessitated by fiscal emergency, there is no justification offered
8 for abbreviating a creditors ' fundamental right to contest the bankruptcy without
9 providing basic information about the City' s finances which is critical to an
10 eligibility analysis.
11 Background
12 4. Jessica Weeda, is the assignee of a claim by Laura Guarino for
13 attorney's fees and costs. The City resisted a California Public Records Act
14 request Cal. Govt. Code 6250 et seq.) After Ms. Guarino filed suit, the City
15 belatedly furnished the requested records. Under Cal. Govt. Code 6259, subd.
16 (d), the prevailing record-requestor in a CPRA lawsuit gets attorney's fees and
17 costs. This attorney fees award "is mandatory ifthe plaintiffprevails." (Filarsky
18 v. Superior Court (2002) 28 Cal.4th 419, 427 (emphasis added); see also Los
19 Angeles Times v. Alameda Corridor Transportation Authority( 2001) 88
20 Cal.App.4th 1381, 1391)
21 5. The Superior Court denied the request for some $55,000 in fees and
22 costs. That decision never became final because it was on appeal at the time that
23 the City filed under Chapter 9. The Superior Court abused its discretion.
24 6. Ms. Weeda has standing to object. See, Collier on
25 943.02[2]: "Creditors"; also 11 U.S.C. 943.
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Argument
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A. The Debtor Has Not Filed All of Its Eligibility Pleadings
2 14. In the Motion, the City asks this Court to set a deadline of September
3 21, 2012 for filing objections to its chapter 9 petition and eligibility to be a
4 debtor in chapter 9. The City asserts that imposing an expedited deadline upon
5 creditors is "fair and reasonable" while at the same time, to date, the City has
6 only filed a "bare bones" Statement of Qualifications Under Bankruptcy Code
7 Section 1 09( c). See Motion at 6. Setting a deadline for objections to the petition
8 before creditors and parties-in-interest have even had a chance to review all of
9 the City's pleadings in support of eligibility- which the City says will include a
10 memorandum, declarations and numerous exhibits and which may or may not be
11 filed in the next few weeks as promised - does not enable such creditors and
12 parties-in-interest an opportunity to determine whether the proposed deadline
13 will give them enough time to evaluate whether the City has satisfied the
14 eligibility requirements. Such an approach is patently unfair and unreasonable.
15 Parties-in-interest cannot know how much time will be required to analyze and
16 conduct discovery to verifY the City's bankruptcy eligibility until the City files
17 its eligibility pleadings and makes persons knowledgeable of the City's financial
18 affairs available to review such materials as may be required by creditors. Thus,
19 any discussion of an eligibility objection deadline should be tabled until the
20 Debtor produces its eligibility papers and parties in interest have had a
21 reasonable amount of time to analyze those papers to determine the amount of
22 discovery necessary to verifY the Debtor' s eligibility statements.
23 B. Parties-in-Interest are 'Nithout Vital Information Because the Debtor Chose not to
24 Engage in the AB 506 Neutral Evaluation Process
25 15. In 2011, the California legislature passed, and Governor Brown
26 signed, Assembly Bill 506 ("AB 506"), codified by California Government Code
27 section 53760 et seq. Before commencing a chapter 9 case, AB 506 requires
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1 financially-distressed municipalities to either (I) engage in a neutral evaluation
2 process with its creditors, or (2) declare a fiscal emergency. See Cal. Gov. Code
3 53760.
4 16. The idea underlying a neutral evaluation process is that prior to
5 commencing achapter 9 case, a municipality should attempt to negotiate with all
6 of its creditors, present them with the relevant financial and other information
7 and attempt to negotiate a consensual resolution of the municipality's debts. See
8 generally 2011 Cal. Stat. ch. 675 1-2. This sentiment is echoed in the Bankruptcy
9 Code's requirements for chapter 9 debtors. To be eligible for a chapter 9
10 bankruptcy, the City must prove that it meets the requirements ofBankruptcy
11 Code section 1 09( c), which provides that an entity may be a chapter 9 debtor if
12 such entity:
13 (I) is a municipality;
14 (2) is specifically authorized, in its capacity as a municipality or by name,
15 to be a debtor under such chapter by State law, or by a governmental
16 officer or organization empowered by State law to authorize such
17 entity to be a debtor under such chapter;
18 (3) is insolvent;
19 ( 4) desires to effect a plan to adjust such debts; and
20 (5) (A) has obtained the agreement of creditors holding at least a majority
21 in amount of the claims of each class that such entity intends to impair
22 under a plan in a case under such chapter;
23 (B) has negotiated in good faith with creditors and has failed to obtain the
24 agreement of creditors holding at least a majority in amount of the claims
25 of each class that such entity intends to impair under a plan in a case under
26 such chapter;
27 (C) is unable to negotiate with creditors because such negotiation is
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impracticable; or
2 (D) reasonably believes that a creditor may attempt to obtain a transfer that
3 is avoidable under section 54 7 of this title.
4 11 u.s.c. 109.
5 17. Chapter 9 petitions should be viewed "with a jaded eye." In re N.YC.
6 Off-Track Betting Corp., 427 B.R. 256,264 (Bankr. S.D.N.Y. 2010). "Principles
7 of dual sovereignty, deeply embedded in the fabric of this nation and
8 commemorated in the Tenth Amendment of the United States Constitution,
9 severely curtail the power of bankruptcy courts to compel municipalities to act
10 once a petition is approved." I d.; see also In re Sullivan County Reg 'l Refuse
11 Disposal Dist., 165 B.R. 60, 82 (Bankr. D.N.H. 1994) ("Considering the
12 bankruptcy court's severely limited control over the debtor once the petition is
13 approved, access to Chapter 9 relief has been designed to be an intentionally
14 difficult task"). Thus, given the restrictions on controlling a debtor's actions
15 once it enters chapter 9 and the limitations on creditors' rights, courts should
16 carefully regulate a municipality's ability to be a chapter 9 debtor.
17 18. Here, the City elected not to commence a neutral evaluation process or
18 conduct any prepetition negotiations with its creditors. Thus, the City cannot
19 meet the requirements of section 109(c)(5)(A) or (B), which the City has to
20 satisfy even if it asserts that it has complied with AB 506 by declaring a fiscal
21 emergency. And as a result of the City's election to file for bankruptcy
22 without negotiating with its creditors, the creditors have not been provided any
23 information with which to evaluate whether the City meets the remaining section
24 109(c) requirements. Accordingly, the Court should order the Debtor to make
25 available documents and witnesses required for a section 1 09( c) analysis and
26 should set an eligibility objection deadline far enough out so that parties-in-
27 interest have a reasonable amount of time to conduct discovery into the Debtor's
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bankruptcy eligibility.
C. Based on the Dearth of Information Provided by the Debtor in this Case, the
Court Should Extend the Proposed Eligibility Objection Deadline and Order
Further Discovery Relating to the Debtor's Chapi er 9 Eligibility
19. This Court should provide creditors with an adequate opportunity to,
first and
foremost, review all of the City's pleadings in support of eligibility, which, to
date, have not been filed. Second, the Court should provide creditors with the
opportunity to conduct basic discovery to determine whether the City has met the
eligibility requirements before it sets the deadline for objections to the City's
chapter 9 petition. National proposes the following discovery schedule:
Parties serve discovery requests on City - 5 days after City files
remainder of pleadings in support of eligibility


City's responses to discovery requests and document production due
- 2 weeks after discovery requests served
Depositions of City- 2 weeks after City responds to discovery
requests and produces documents
20. This discovery schedule will provide creditors with sufficient time to
(1) review relevant eligibility documents from the City, (2) depose any witnesses
in connection with the City's eligibility, and (3) allow creditors to evaluate
whether the City meets the section 1 09( c) eligibility requirements. Setting an
objection deadline before creditors have even had a chance to review the City's
pleadings in support of eligibility and conduct discovery is patently unfair and
unreasonable to creditors.
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vVHEREFORE, National respectfully requests that this Court issue an Order (i)
2 setting a reasonable deadline after parties have had an opportunity to conduct
3 discovery on the City for objections to the City's chapter 9 petition; (ii) issuing a
4 discovery schedule in connection with objections to the City's chapter 9 petition;
5 and (iii) granting such other and further relief as is just and proper under the
6 circumstances.
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Date: October 23,2012 SCHLUETER & SCHLUETER
By: (JrYJ ~ .l_Lr__(,z;ic_
Page: 8-
Attorney for Plaintiff
Jon R. Schlueter
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PROOF OF SERVICE OF DOCUMENT
I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is:
1 08 Orange Street, Suite 8, Redlands, CA 92373
A true and correct copy of the foregoing document entitled (specify): Limited objection to City of San Bernardino's
Motion for Entry of an Order (1) Directing and approving form of notice; and (2) Setting deadline for filing objections to
petition; Memorandum of Pionts and Authorities
will be served or was served (a) on the judge in chambers in the form and manner required by LBR 5005-2(d) ; and (b) in
the manner stated below:
1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEFl : Pursuant to controlling General
Orders and LBR, the foregoing document will be served by the court via NEF and hyperlink to the document. On (date)
- ------ I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that
the following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated
below:
0 Service information continued on attached page
2. SERVED BY UNITED STATES MAIL:
On (date) 1 0/24/2012 , I served the following persons and/or entities at the last known addresses in this bankruptcy
case or adversary proceeding by placing a true and correct copy thereof in a sealed envelope in the United States mail.
first class, postage prepaid, and addressed as follows. Listing the judge here constitutes a declaration that mailing to the
judge will be completed no later than 24 hours after the document is filed.
See attached list.
lZI Service information continued on attached page
3. SERVED BY PERSONAL DELIVERY. OVERNIGHT MAIL. FACSIMILE TRANSMISSION OR EMAIL (state method
for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on (date) , I served
the following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to
such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration
that personal delivery on, or overnight mail to, the judge will be completed no later than 24 hours after the document is
filed.
0 Service information continued on attached page
I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct.
1012412012 Jon Schlueter ~ ~
Date Printed Name i8tUfe
This form is mandatory. It has been approved for use by the United States Bankruptcy Court for tile Central District of California.
June 2C12 F 9013-3.1 .PROOF.SERVI CE
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City of San Bernardino
Case Number: 6:12-bk-28006-MJ
Service List
United States Trustee (RS)
3801 University Avenue, Suite 720
Riverside, CA 92501-3200
(951) 276-6990
(951) 276-6973 (fax)
[email protected]
Everett L Green
Michael J Bujold
US Department of Justice
3685 Main St Ste 300
Riverside, CA 92501
951-276-6061
951-276-6063
951-276-6973 (fax)
Michael.J .Bujold@usdoj .gov
everett.l.green@usdoj. gov
City of San Bernardino, California
City Hall
300 North "D" Street
San Bernardino, CA 92418
Paul R. Glassman
Stradling Y occa Carlson & Rauth
100 Wilshire Blvd Ste 440
Santa Monica, CA 9040 1
Page 1 of5
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City of San Bernardino
Case Number: 6:12-bk-28006-MJ
Service List
Page 2 of5
20 Largest Creditors
California Public Employees Retirement System
CalPERs Headquarters
Lincoln Plaza North
400 Q Street
Sacramento, CA 95811
2006 City of San Bernardino Taxable Pension
Obligation Bonds, 2005, Series A
Wells Fargo Bank, N.A. Corporate Trust Services
Special Accounts Group -
MAC N9311-115
625 Marquette A venue,
Minneapolis, MN 5 54 79
Kohl's Corporate Offices
NS6 W17000 Ridgewood Drive
Menomonee Falls, Wisconsin 53051
US Bank, N.A., Trustee (x3)
633 West 5th Street, 24th Floor
Los Angeles, California 90071
California Infrastructure Bank and Economic
Development Bank (CIEDB)
1001 "I" Street, 19th Floor,
Sacramento, California 9S814
Comerica Leasing Corporation
611 Anton Blvd,
Costa Mesa, CA 92626
New World Systems Corporation
888 W Big Beaver Rd # 600
Troy, MI 48084
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City of San Bernardino
Case Number: 6:12-bk-28006-MJ
Service List
MARQUETTE BANK,
10000 W 151 st Street
Orland Park, Illinois 60462
c/o Thomas Askounis
Askounis & Darcy PC
Page 3 of5
401 North Michigan Avenue, Ste 550
Chicago, IL 60611
phone: 312.784.2400
Bank of America
c/o Western Alliance Equipment Finance Inc.,
1400 East Washington, Suite 1400,
Phoenix, AZ 85004
Public Agency Retirement Services
PO Box 12919,
Newport Beach, CA 92658-2919
c/o Dennis Yu, CEB S
Senior Vice President
Public Agency Retirement Services (PARS)
4350 Von Karman Avenue, Ste. 100
Newport Beach, CA 92660
800-540-6369 x1 04
American Traffic Systems
Michael Bolton, COO
American Traffic Solutions Inc.,
7681 E. Gray Rd,
Scottsdale, Al, 85260
SUN TRUST EQUIPMENT FINANCE & LEASING
CORPORATION
POBOX 79194
BALTIMORE, CA 21279-0194
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City of San Bernardino
Case Number: 6:12-bk-28006-MJ
Service List
Page 4 of5
SAN BNDO CITY PROFESSIONAL FIREFIGHTERS LOCAL
891
POBOX 2703,
San Bernardino, CA 92406
c/o Corey Glave, Esq.
Attorney at Law
1042 2nd Street
Hermosa 8each, CA 90254
Cell: 323-547-0472
Tim Burgess,
1625 Iowa A venue,
Riverside, California 92507
603384 - AECOM USA INC
1178 PA YSPHERE CIR
CHICAGO, IL 6067 4
1458- CEPLAN TECHNOLOGIES INC
1897 PRESTON WHITE DR
RESTON, VA 20191
61423 8 - NIKOLA CONSTRUCTION CORPORATION
18012 COWAN 290
IRVINE, CA 92614
SAN BERNARDINO COUNTY SOLID WASTE
825 E 3rct ST #207
SAN BERNARDINO, CA 924150017
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CitY of San Bernardino
Case Number: 6:12-bk-28006-1\1J
Service List
Page 5 of5
Special l'lotice Parties
Ban!' of . \J.1Jer:c2,
C 'o Frandzel Robins Bloom & Csato, L.C.
Attn: Andrew K. Alp .r
6500 'vVi lshire Boulevard, 17
111
:1oor
Los .\ngele..,, CA 90048
Richard J. Ellis
3909 West Mi ty 'Willow lane
Gl endale. AZ 0-403 1
Aron !v1. Oliner
Duane Morris LLP
One l\.1arket Plaza
Spear Tower, Suite 2200
Sar: F'"ancis o, CA 94 05-1127
Lawrence A. Larose, Esq.
Samuel S. Kohn, Esq.
& Strawn LLP
200 Parh. Avenue
New 1\TY 1 0 i 66
Matthew M. walsh. Esq.
Gregory A. Esq.
\Vinston & Stravvn LLP
333 South Grand 38th Floor
Los Angeles. CA 90071
COREY W. VE, #164746
SBCPFattomevta ..:mail.com
.. --
Anorncy at Law
1042 2nd Street
Hcrmos:l B ach, California 90254