BRADENTON, Fla. — The 11th Circuit Court of Appeals Thursday granted permission for nine petitioners to directly appeal federal Judge Thomas Bennett’s ruling that stripped a state-court appointed receiver of the right to run Jefferson County, Ala.’s sewer system.
The issue is of importance to the bond market because there is no known precedent for the treatment of a receiver in a Chapter 9 bankruptcy case.
Bennett ruled earlier this year that the sewer system belonged to the county, which should control it during the bankruptcy case.
Bank of New York Mellon filed suit in Alabama state court to obtain a receiver for the sewer system after Jefferson County defaulted on $3.2 billion of sewer warrants in 2008, and refused to raise sewer rates. BNY Mellon is trustee for the sewer debt.
John S. Young was appointed receiver in late 2010. He is among those who were granted permission to appeal Bennett’s ruling Thursday.
Jefferson County also filed an appeal saying that the appellate court’s ruling would help move its bankruptcy case forward, and would determine whether the sewer system debt would be considered as part of the county’s plan of adjustment.
Others granted permission to appeal Bennett’s ruling were Assured Guaranty Municipal Corp., Financial Guaranty Insurance Co., Bank of America, Syncora Guarantee Inc., Bank of Nova Scotia and JPMorgan.
