BRADENTON, Fla. — The federal bankruptcy judge presiding over Jefferson County, Ala.'s Chapter 9 case tossed out billions in claims sought in two major suits.
Judge Thomas Bennett in a ruling Oct. 17 agreed with the county's objections to a $1.63 billion claim filed by attorney Calvin Grigsby representing local elected officials and other ratepayers on the county's sewer system. The ratepayers are also involved in a separate "adversarial" suit in the bankruptcy case contending that it was illegal for the county to issue most of the sewer system warrants, and to use swaps.
Jefferson County's attorneys said Grigsby's claim failed to state a right to payment, and that even if the allegations were true there is no basis for the claim in the bankruptcy code. The county also disputed allegations that the warrants and swaps were illegal.
Grigsby said in an email Oct. 18 that he filed a motion for clarification and reconsideration of the ruling, which he will appeal if the motion is denied. He also said the ratepayer's case "appears to be a factor in forcing a settlement in the $1.6 billion area we are after," because it closely matches the total haircut the county now wants from creditors.
Another $350 million in concessions are being sought from sewer system creditors, in addition to $1.3 billion they approved several months ago. The county said the larger haircut is needed to support refunding of the sewer warrants critical to exiting bankruptcy. About $3.2 billion in warrants are outstanding.
Bennett also denied a claim by a group of sewer system ratepayers led by local resident Charles Wilson. That claim did not state an amount, but is related to another adversarial suit asking for the court to declare the sewer warrants invalid and return warrant proceeds and all fees to the ratepayers.
The claim did not list a specific amount because the suit is on hold, and that prevented the Wilson ratepayers from getting information that would support how much to list in the claim, said attorney Joshua Firth.
"We are fighting this plan on several fronts, and [the claim] ruling only impacted our status as a creditor of the county," Firth said.
The ruling did not impact the Wilson ratepayers' objection to the county's plan of adjustment filed in a separate challenge, he added.
"We stand by our prior objection, and the potential impact it could have on the municipal financing markets," said Firth. "The plan, as it currently stands, has numerous feasibility issues and potential legal impasses to overcome, and falls woefully short of being a good potential investment for bond buyers and financial advisors."
Bennett said attorneys for both claimants could still be heard at the confirmation hearing on the county's plan of adjustment currently set for Nov. 12.
