Saying she wants to "light a fire" under attorneys in the case, U.S. Bankruptcy Judge Meredith Jury scheduled a summary judgment hearing on San Bernardino, Calif.'s eligibility for bankruptcy.
The Chapter 9 case has been mired down for months while creditors and the city wrangle over discovery issues.
Setting the Aug. 28 hearing date, the judge told attorneys Wednesday that it's time to move the case forward.
Jury had allowed the creditors and city attorneys to conduct what she termed "informal discovery" in the hopes that they would share information and work through some of the discovery issues without her having to rule.
At a hearing held last month, the creditors said they planned to depose Michael Busch, president of Urban Futures, the company hired by the city as a financial advisor in the bankruptcy proceedings.
The judge had hoped through that process creditors would be able to answer some of the questions they have related to the city's finances and be able to move forward on arguments related to whether the city is eligible to be in bankruptcy.
The judge would have to deem the city eligible to be in bankruptcy under Chapter 9, the segment of bankruptcy law related to municipalities, before the city can move forward in negotiations with creditors. The ultimate goal then would be to adopt a plan of adjustment to enable the city to exit bankruptcy.
After hearing from Michael Lubic, an attorney representing the California Public Employees' Retirement System, Jury said she wanted to go ahead and schedule deadlines for attorneys to file motions on discovery issues and set a July 17 hearing as an interim status hearing.
CalPERS has questioned the city's eligibility for bankruptcy after San Bernardino skipped payments to the retirement system and wants to be able to claw those payments back outside the bankruptcy process.
Jury said some of the arguments Lubic was making that were supposed to be aimed at discovery issues were related to issues of eligibility.
"You seem to have enough facts to make that argument to me," Jury said during the hearing.
In the months since the first status hearing Dec. 20, CalPERS attorneys and attorneys for the city's unions have argued that they did not have a clear enough view of the city's financial picture to file motions on issues related to eligibility.
Jury determined at Wednesday's hearing that creditors have indeed gained enough information for the case to move forward.
"I'm not trying to cut off your discovery," Jury said. "I'm just trying to figure out a format."
Her hope was that by Wednesday's hearing the various parties would have narrowed discovery requests down to issues she could rule on.
"The process is going on 10 months now," Jury said.
Lubic argued that the city has stopped holding meetings with CalPERS and the unions over the past few months.
"The city says let's get past the hump of eligibility and then we will start negotiations," Jury said. "What I'm hearing is that they were talking and then stopped and focused on trying to balance the budget and get past eligibility."
She then set Aug. 28 as the date for a summary judgment on the eligibility issue.
"Thank you. I think this may be the most important day in the case in terms of being able to turn the corner," said Ron Oliner, the attorney for San Bernardino Police Officers Association. "I would suggest we figure out whether the city is eligible to be in bankruptcy, or not, before we figure out if these contracts should be rejected."
Oliner said from his perspective sometimes it seemed like the tail was wagging the dog.
But CalPERS' trio of attorneys including Lubic said after the hearing that a decision on the eligibility issue might not even occur at the Aug. 28 hearing.
"This could go three ways," Lubic said.
The judge could grant a motion determining the city is eligible to be in bankruptcy that day; she could deny the motion because of the disputed issues of material fact and set a trial date; or she could decide more discovery is needed and push that hearing forward, he said.
"I think she is narrowing the factual and discovery issues," Lubic said. "No one thinks she will rule on Aug. 28."
