RIVERSIDE >> San Bernardino is moving toward a confirmation hearing — the final stage in a bankruptcy that began in 2012 — in October after a somewhat bumpy hearing Thursday with the last creditor to object to the stage before that.
That penultimate stage is approval of the so-called disclosure statement, and most of the city’s creditors reached settlements with the city that require them to support the disclosure statement and confirmation of the Plan of Adjustment.
But attorneys for an organization called the Big Independent Cities Excess Pool — BICEP — took issue with the way they said BICEP was described in the disclosure statement.
BICEP is a group of six mid-sized cities that pool coverage for liability claims, including an unknown number of civil rights claims against San Bernardino that total more than $1 million. The city and BICEP disagree about how to handle those claims of more than $1 million.
The city’s filing included a section that it said was word-for-word the position of BICEP,
That objection “incurred the ire” of U.S. Bankruptcy Judge Meredith Jury.
“This is extraordinary, and I had never seen anything like it,” Jury said of BICEP’s objection, “where an objecting creditor is given the full opportunity to say whatever they wanted. The opponent adopted their language verbatim. And yet they’re still crying.”
Franklin Adams, the attorney for BICEP, said there was a simple explanation for that: The city wasn’t telling the truth about the language being verbatim, despite saying it did.
“We gave them language. They did not put it in,” Adams said. “They have misled the court today to our detriment. That’s not the only place.”
Most of BICEP’s statement was included in the city’s, but it omitted a few sentences, said the city’s bankruptcy attorney, Paul Glassman.
“It is true we changed some of the language where we thought either was not true or did not make sense, but then we sent it back to BICEP and said, ‘Here’s what we’re proposing to put in,’” Glassman said in court. “We did not receive a response back, nor did BICEP raise in any objection (in their filing).”
Jury suggested the city file the disclosure statement with the original language from BICEP, add a section explaining their disagreement, and work together with Adams to include a summary paragraph saying that there is a disagreement.
“What they (the people with the claims against the city) need to know is that there is a dispute about how this is going to work, and they can’t count on it, if they happen to be in that class of more than a million, other than the city will pay what it promises for the unsecured class,” Jury said.
Unsecured claims receive 1 cent for every dollar they’re owed, under the city’s bankruptcy plan.
Jury will decide whether to favor the city or BICEP on that point before confirming the city’s bankruptcy plan, she said.
The first of what could be multiple hearings on whether to confirm the bankruptcy plan — and thus move the city out of bankruptcy — was scheduled Thursday for Oct. 14.
First, the city will mail ballots to creditors July 29 asking them whether they approve of the plan. Creditors will have until Sept. 2 to return those ballots.