Arizona Bankruptcy Attorney Blog

Bishop Olmstead is a brave man, and has strong beliefs.

In the video above, he responded to prior criticism.

But the criticism that he received previously may be dwarfed by the coming storm.

Because Bishop Olmstead has recently declared that wine will not be available at most Masses in Phoenix.

Many Catholics will be aghast and angry at the decision: after all, the relevant scripture says eat AND drink, and communion is the purpose of Mass.

Even priests are, well, surprised:

"The majority of priests were stunned and aghast at the announcement, and I hear some are planning to meet to see how best to respond. While the bishop has the authority to make this policy change, there is no scriptural, theological or sacramental rationale that makes any sense."

How angry will parishioners be at what many will see as a clear error?

Will it be enough to cause Catholics to seek other Churches, and drive the Diocese into bankruptcy?

Well, he who lives the longest sees the most; but I can't see a way that Bishop Olmstead will avoid reaping the whirlwind for this decision.

So there's a satellite, and it's falling.

That's not news.

I was a little surprised when NASA said they couldn't tell me where it would land.

I figured I didn't want to be there.

And now it's landed.

Somewhere.

Do you think that if the satellite landed on your office, your cash flow would continue unabated?

I've talked a lot about why it's better to be lucky than smart; obviously, if you can swing both, great. But if you have to chose, go for lucky every day of the week!

Because after Skylab falls on your corner grocery store, you won't be selling nearly as much for a year or two.

And your insurance company will say, in all probability, "We're terribly sorry. If it had been a brontosaurus that sat on your store, you'd be covered for that. Or if a nuclear meltdown had happened in your refrigerator, you'd be covered for that. Or if the store had been ransacked by werewolves, you'd be covered. But hit from above by space debris? No coverage. Sorry."

Then you get to litigate with the insurance company, but litigation takes a lot of time, and the insurance company has your premiums with which to pay a lawyer to fight you to prevent payment to you.

And if it looks like you're going to win, the insurance company may well decide that the money looks good in their pocket until you hit the courthouse steps.

Good business for them, I suppose.

And more bankruptcy cases for me, I know.

So look over your insurance policy from time to time. And see if there are a lot of stories on Google and Facebook about that company not paying claims.

There might be a reason that your premiums are so low!

I'm always interested to see which of my bankruptcy discussions gets the most page views.

Bankruptcy Crossroads is my other bankruptcy blog, and apparently some of the posts there have gotten traction with readers!

That always makes me happy, too.

Here are the top ten bankruptcy blogposts this week from Bankruptcy Crossroads!

Stern v. Marshall: Everything Old is New Again! Hissyfits About Jurisdiction.
Protests on Wall Street
Happy Jobs?
Did Russell Armstrong of Real Housewives Commit Suicide over Finances?
Bankruptcy Does Not Solve All Problems: Danielle Chiesi Would Go to Jail, Anyway.
What's Good About Poverty and Homelessness? Togetherness!
Student Debt: The Ultimate Solution (and No, It's Not a Bankruptcy!)
Worldwide Bankruptcy? Economic Armegeddon? Inquiring Minds Want to Know!
How Does a Country File Bankruptcy? I Mean, What's the Correct Venue? How Many Copies Do You File?
Statistics: Just How Bad IS the U.S. Economy?

Remember my "it's better to be lucky than smart" comments?

Yeah. Neither do I.

But when I read this article about a poor woman with a disabled husband who finally got a job during a depression, it made me very, very sad.

It also made me very, very angry.

I haven't decided what I'm going to do about it, but for starters I want everybody to know about the company that has no heart whatsoever.

And in a world where facebook exists, it's probably a good ideal to avoid doing things that make a lot of people angry.

After all, Old Spice unexpectedly went viral after some funny commercials.

Bad publicity spreads, just like good publicity.

So here's the article that made me cranky; read it, and if it makes you cranky too, ask yourself what you can do about it.

Me, I'm still thinking. But while I'm thinking about it, I'm talking about it, too! Here's the article by Laurie Roberts (and thanks for picking this up, Laurie!):

Laurie Roberts' Columns & Blog

Laurie Roberts is a columnist for The Arizona Republic.

Towing the line on the right to work (or not)

To look at her, Angela Dominguez doesn't appear much of a threat. She's a wife, the mother of four kids. A woman who hit the jackpot this summer, landing a $13-an-hour customer-service job for a local towing company.

Her husband is disabled and can't work, so getting the job at All City Towing was a hallelujah moment -- one that'll allow this formerly homeless family to pay the electric bill without city assistance, one that'll leave them with a little money left over for luxuries. Like school uniforms.

Or maybe not.

The nation's largest towing company -- Dominguez's former employer and the company that holds a city of Phoenix contract worth millions -- is demanding that she quit her new job or be fired. If not, both she and her new employer may be sued.

It seems she must hold the secret Coca-Cola recipe or whatever is the equivalent in the towing business. United Road Towing claims she signed an agreement not to work for the competition for a year.

The Illinois-based company's Arizona lawyer, Robert Mackenzie, sent Dominguez a certified letter on Aug. 25, demanding that she leave her job. Or else.

The "or else" includes threats of injunctions, lawsuits and damages, essentially a promise to cripple her financially "even if URT has not yet suffered any damages as a result of your violation of the Employee Non-Competition and Confidentiality Agreement."

Now, I understand the occasional need for non-compete clauses. They are generally required of people in positions of authority, executives and such who have actual information about a company that could be used by their competitors. But since when are $10-an-hour employees let in on the company secrets?

Dominguez, 36, who says she never signed such an agreement, went to work for URT in 2008. The family had been homeless the previous year, after her former employer closed its Arizona operation. Struggling to rebound, she was happy to get the $10-an-hour job as a call taker. For three years, she worked for URT, the last two as an administrative assistant.

Making it on $10 an hour was tough, she says, but she scraped by, with help from the city's utility assistance program, food stamps and an understanding landlord who never tacked on late fees. Still, after three years, the promised raises never materialized so she started looking for another job, which, in America, is generally allowed.

In June, she went to work for All City Towing, earning $13 an hour as a customer service agent. The extra $500 a month was a godsend, allowing her to meet her bills and even set aside enough for school uniforms for her 12-, 10-, 8- and 7-year-old children.

Well, you can imagine her reaction upon getting URT's letter demanding that she quit: Shock, bewilderment, fear - the 3 a.m. wide-awake-and-wondering-what-to-do kind of fear.
Not even $13 an hour leaves enough left over to hire a good attorney, after all.

Dominguez says All City's managers have never asked her about URT. Even if they had, she says she doesn't know anything confidential.

URT, which operates in Arizona as Shamrock Towing, Fast Towing and All Valley Impound, declined to explain what a $10-an-hour employee might know that would put the company at risk. Or why it's fair to close off options for low-level employees who apparently have no way of earning a decent living unless they leave. But the company did provide this statement:

"Arizona law recognizes and enforces these agreements and they are typical in industries where sensitive sales and marketing information is provided to employees such as Angela," Edward Arensdorf, senior vice president for URT's West Region Operations, wrote.

Jeff Dunn, general manager of Tempe-based All City Towing, says he has no intention of firing Dominguez - nor does he expect her to sign a non-compete clause.

"I don't know what knowledge she could possibly have that could threaten their business," he said. "If they're giving a $10-an-hour employee that knowledge, that's crazy."

That's also something for the Phoenix City Council to think about. URT's towing contract with the city expires on Nov. 30. Why on earth would the city -- meaning its taxpayers -- want to do business with a company that hires lawyers to stop its $10-an-hour employees from finding better jobs?

Dominguez says she liked working for URT, but the last straw came this spring, during a talk with her son.

"My middle son Roman told me, 'Mom, can you just get a job that you can take us to McDonalds once a month?' " she said. "I mean, it seems so little but for it to come out of my son's mouth. That's pretty sad, that I couldn't even provide them a Happy Meal."

The question these days isn't whether she can provide them a Happy Meal but whether she'll be able to provide them with any meal.

Once URT is done with her, that is.

(Column published Sept. 20, 2011, The Arizona Republic)

Remember the "better to be lucky than smart" approach to avoiding a bankruptcy?

I know. Neither do I.

But recently I've gotten to see a lot of hard luck bankruptcy cases.

The hard luck might be a repair crew on the entrance to the shopping center.

Or it might be a federal raid, as in Gibson Guitar (I sure hope they don't have to file a bankruptcy; they employ a lot of U.S. Workers, and make darn good guitars!).

Or your lease might just run out, as with the Scottsdale Six Drive-in Theater, after a good run for 34 years.

Now, you might think that it's just another drive-in theater that couldn't compete with new technology.

Wrong, Celluloid Breath!

The Scottsdale Six Drive-in Theater had been on track for its best year to date.

When I see a business that does everything right, with employees, that puts money into a local economy, and it gets to close its doors just because of bad luck, that makes me sad.

Oh, yeah.

The bad luck that the business experiences?

That gets doubled for the employees.

So does that mean more consumer bankruptcy cases get filed when businesses are unlucky?

Well, yeah.

Remember the "it's better to be lucky than smart bankruptcy avoidance rule"?

Yeah, me neither.

But I've written before about places that were unlucky enough to have a business in a shopping center where the street was being repaired.

For two years.

Not quite as common is the situation that arises when a manufacturing facility is raided based on an interpretation of a law in India.

And the implicit advice that Gibson Guitars was given was simple: use Indian Workers rather than U.S. Workers.

That makes me sad. Seems to me that if there was any question at all on any matter, all government agencies should ask themselves, "will this action take away jobs from U.S. Citizens?"

Now, Gibson Guitar has discussed its position on the raid, and understandably, Gibson is a little cranky about being put out of business, even if it's only temporary.

And the U.S. Workers who had been getting paychecks from Gibson? They're a little cranky, too.

Most Americans would prefer jobs to unemployment.

But here's the Gibson Guitar take on the issue; enjoy reading!

I'm about to start a Crusade.

I'm sick and tired of seeing kids who have gigantic non-dischargeable student debts, advanced degrees in Fingerpainting as Therapy, who can't get a job to save their lives during a depression where the unemployment rate hovers around 17%; and that's just the official U-6 Unemployment Statistic.

The real numbers are far worse!

So here's what needs to happen.

Student loans are simply debts. There's nothing magical about them.

Under prior law, they were dischargeable.

Under the law today, they should be dischargeable.

So let's change that law, Congress!

Tomorrow would be fine.

I know that a lot of bankruptcy lawyers read my blogs, and some of them read my blogs so they can find bankruptcy topics and bankruptcy analysis for their own blogs.

How do I know? Well, mostly because they told me!

But there's a very, very smart bankruptcy lawyer named Jay Fleischman who is a nationally known marketing and practice management expert, and he's bringing a road show to Phoenix, along with Cathy Moran, another well-known name in the consumer bankruptcy field.

You'll notice that part of the seminar is about improving service to consumer debtor bankruptcy clients, and I'm all over that!

So I've already signed up.

And if you practice consumer bankruptcy law in Arizona, and you want to hear from the best how to make your practice run more smoothly, and how to harvest more client happiness (I want all my clients to be happy all the time, although that's an impossible goal; but if I pick up one idea I can apply to my practice as a bankruptcy lawyer in Arizona, that's worth it to me!), you'll sign up also.

Here's the information about the seminar, and I'm as serious as I can be: be there or be square, if you're a consumer bankruptcy attorney in Arizona!

Truth in Advertising spoiler: Jay is a friend of mine. Mind you, he's so smart I'd tell bankruptcy lawyers about this anyway. But he's a great guy, and generous with his knowledge.

Bailouts are interesting things.

I'm not sure I like them very much.

A Bank (UBS) received a bailout of 50 billion from the Swiss Government, and very recently, one of the traders at that bank (UBS trader Kweku Adoboli) has been arrested in connection with a two billion Euro loss.

Was it fraud? Or just bad luck? Inquiring minds want to know!

In either case, my guess is that the Swiss, always careful with their money, will be downright cranky about all this.

And I loved the tone of the video: nothing to see here, keep moving, nothing interesting to see.

Sometimes people who owe debts are a little jumpy, because they know that sooner or later, a trustee's sale will start, or a lawsuit will be served on them, or a garnishment will begin.

And I'm a bankruptcy lawyer in Arizona, and I have been for about thirty years.

But advertisers don't know that these days, I'm on the side of the angels.

At this point in my practice, I represent the debtors, not the creditors.

That is, the prey, not the predators. But since advertisers just know that I'm a bankruptcy attorney, they send me advertisements appropriate for creditor's lawyers, because what do they know?

Now, are your creditors really interested in tracking you down, x-raying your assets, and taking them away from you with as little ado as possible?

Tell you what.

Take a look at the advertisement I found in my e-mail, and you tell me!

Click on logo to view our video

Do you have JUDGMENTS and need to locate Verified Bank Accounts, Proof-of-Employment or Brokerage Accounts?

Moody's is in the business of predicting the future. It has algorithms and analysts who look at numbers and assign credit ratings to very big entities and deals (including the United States, most famously).

Warren Buffett is the media darling of billionaires, and he also is in the predicting the future business, because predicting the future, or causing the future, is the way you become a billionaire with a "b".

The reason I like this video is the following: it may provide comfort to smart business guys who beat themselves up because their business folded.

I routinely talk to gentlemen who tell me they've contemplated suicide while they were contemplating bankruptcy.

The guys who come into my office, obviously, have made one choice. Other folks opt for early-check out, which is probably the wrong choice.

Suicide is forever. Bankruptcy keeps you from buying a new house on credit for two years, or maybe three, depending on who you talk to.

So bankruptcy is a far more flexible remedy than suicide.

But back to our story.

If both Warren Buffett and Moody's failed to notice the gigantic real estate bubble in the United States, how should a poor little millionaire investor?

So if you were a poor little millionaire investor, don't beat yourself up.

An awful lot of doctors, lawyers, cpas, and business owners believed that real estate investing was the way to go, and all of them were and are very smart people.

So don't let one little error in judgment make you believe you're a loser.

Just file your bankruptcy, and get on with your life.

As soon as you get your debts behind you, you'll feel better.

Germany is a very serious country.

The people there work hard, and they have good engineers.

After the Weimar Republic, which overprinted money so much that you needed a wheelbarrow to do your grocery shopping (to take your paper money to the store, not to take your food home), Germany generated a war machine that required the combined efforts of the Allies to defeat.

But it was much easier to defeat German resolve to bail-out Greece.

Germany produces industrial products. A lot of 'em. So when it sells them, Germany makes a lotta Euros. A lotta, I tell you.

Greece makes sheep and wine and some cheese and tomatoes. They're all good, but they don't sell for as many Euros as a Mercedes.

Germany has begun the retreat from Greece, having bailed out the insolvent country one too many times to make German taxpayers happy.

In the retreat, Germany is opening up a discussion that has moved from theoretical to extremely practical: how does a country go bankrupt?

When a country goes bankrupt, how to the creditors file Proofs of Claim?

Where is the First Meeting of Creditors for Greece going to be held?

Inquiring minds want to know!

It's interesting to see what happens when countries make mistakes.

The mistakes you make as a nation don't have exactly the same results that they have when you're an individual, but they're similar.

For instance, right now Germany is preparing for the bankruptcy of Greece.

That will be interesting, because onlookers will be able to tell what happens to a country that borrows too much and is then unable to pay.

Some of that is obvious now; government services and payouts have dwindled to a trickle in Greece, and the Greek Citizens have one primary indoor sport, called "how do I get my money out of this country so the Government can't take it all a way from me with confiscatory taxes?"

Germany, on the other hand, is going to play the part of the irritable lender in the play.

The Greek Politicians, currently, are beating the Greeks, and taking every possible opportunity to squeeze them for taxes, to show the world what good citizens the Greek Politicians are.

My guess is that whoever is currently in office in Greece will be out of office in Greece in about twenty minutes.

Giveaways to buy votes apparently last until the giveaways stop; when voters have to pay the price of the government's generous distributions, they appear to dislike that.

Germany is looking at two different scenarios; one involves Greece returning to the Drachma.

If I were Greece, I'd do exactly that, because then I might have some control over my future.

Apparently, when somebody else controls your money supply, you have less control over your future.

An anti-bankruptcy statute is headed toward California Governor Jerry Brown's desk.

It's designed to prevent insolvent municipalities in California (is that redundant?) from using Chapter 9 Bankruptcy to restructure their debts.

The cute part of Assembly Bill 506, which was proposed by Assemblyman Bob Wieckowski with support from the California Labor Federation, is a required statement that the municipality is unable to meet its obligations within 60 days.

That means, as I see it, that long range bankruptcy-planning for California Cities is about to be outlawed; the municipality will now be required to spend itself into penury before using the appropriate tool to fix the problem: a bankruptcy!

I am attaching what I believe to be the most-amended version of the statute. I don't guarantee that this is the version that will become law, because I'm just a simple back-country bankruptcy lawyer, and not an expert in using the California statute-finder thingamajig.

But here's what may well become law in California almost immediately, the No-escape for California Municipalities Statute:

BILL NUMBER: AB 506 AMENDED
BILL TEXT

AMENDED IN SENATE SEPTEMBER 8, 2011
AMENDED IN SENATE SEPTEMBER 2, 2011
AMENDED IN SENATE AUGUST 31, 2011
AMENDED IN SENATE AUGUST 15, 2011
AMENDED IN SENATE JULY 12, 2011
AMENDED IN SENATE JUNE 29, 2011
AMENDED IN ASSEMBLY MAY 31, 2011
AMENDED IN ASSEMBLY MARCH 31, 2011

INTRODUCED BY Assembly Member Wieckowski

FEBRUARY 15, 2011

An act to amend Section 53760 of, and to add Sections 53760.1,
53760.3, and 53760.5 53760.5, and 53760.7
to, the Government Code, relating to local government.

LEGISLATIVE COUNSEL'S DIGEST

AB 506, as amended, Wieckowski. Local government: bankruptcy:
neutral evaluation.
Under existing law, any taxing agency or instrumentality of the
state may file a petition and prosecute to completion bankruptcy
proceedings permitted under the laws of the United States.
This bill would prohibit a local public entity from filing under
federal bankruptcy law unless the local public entity has
participated in a specified neutral evaluation process with
interested parties, as defined, or the local public entity has
declared a fiscal emergency and has adopted a resolution by a
majority vote of the governing board at a noticed public hearing that
includes findings that the financial state of the local public
entity jeopardizes the health, safety, or well-being of the residents
of the local public entity's jurisdiction or service area absent
bankruptcy protections.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. The Legislature hereby finds and declares all of the
following:
(a) Filing for Chapter 9 can reduce service levels to the
taxpayers and residents of a municipality. In some circumstances, it
can have major short- and long-term fiscal consequences for the
municipality, the surrounding municipalities, and the state. Filing
for bankruptcy protection under Chapter 9 should be considered a last
resort, to be instituted only after other reasonable efforts have
been made to avoid a bankruptcy filing or otherwise appropriately
plan for it. It is in the interest of the state, local governments,
and the public that local governmental entities have sufficiently
sound financial capacity to provide required services to the public
and meet their contractual and other obligations during any
restructuring or financial reorganization process. Furthermore, it is
in the best interest of the public, the state, and local
governmental entities that employees, trade creditors, bondholders,
and other interest holders be included in an appropriate
restructuring process and have an adequate understanding of the
financial capacity of local governmental entities and their
obligations, as a clear understanding of both is necessary for any
restructuring or reorganization process.
(b) To the extent financial relief granted through Chapter 9 can
affect debt service payments, the bondholders have a direct interest
in the Chapter 9 process, particularly prior to filing. Therefore, it
is important for those parties to be able to participate in a
prefiling confidential neutral evaluation process that could assist
parties in reaching a settlement and avoiding a bankruptcy filing or
otherwise lead to a prenegotiated consensual plan of readjustment as
clearly contemplated by Section 109(c) of Title 11 of the United
States Code.
(c) To the extent financial relief granted through Chapter 9 could
affect public employee compensation, employees have a direct
interest in the Chapter 9 process, particularly prior to filing.
Therefore, it is important for those parties to be able to
participate in a prefiling confidential neutral evaluation process
that could assist parties in reaching a settlement or otherwise lead
to a prenegotiated, consensual plan of adjustment and avoid a Chapter
9 filing.
(d) Given the connection between state allocations and local
budgets, the state has a role in assisting municipalities to address
potential insolvency with the goal of averting municipality
bankruptcy filings where possible and providing a process designed to
make the debt restructuring process in or outside of a Chapter 9
bankruptcy as cost effective and efficient as possible for all
participants.
(e) California's taxpayers who rely on public safety, senior,
recreational, municipal health, library, and other public services,
as well as those who own and operate businesses in our communities,
deserve every reasonable and appropriate effort that state and local
government can make to avoid adverse consequences of Chapter 9
bankruptcy filings, particularly where a neutral evaluation may lead
to the avoidance of Chapter 9 filing by an out-of-court resolution of
outstanding obligations and disputes.
(f) Resolving municipal and state business and financial issues in
a timely, fair, and cost-effective manner is an integral part of a
successful government and is in the public interest. It has long been
recognized that alternative dispute resolution proceedings, like a
neutral evaluation, offer an economical, discreet, and expeditious
way to resolve potentially devastating situations.
(g) Through the neutral evaluation process, the neutral evaluator,
a specially trained, neutral third party, can assist the
municipality and its creditors and stakeholders to fully explore
alternatives, while allowing the interested parties to exchange
information in a confidential environment with the assistance and
supervision of a neutral evaluator to determine whether the
municipality's contractual and financial obligations can be
renegotiated on a consensual basis.
SEC. 2. Section 53760 of the Government Code is amended to read:
53760. A local public entity in this state may file a petition
and exercise powers pursuant to applicable federal bankruptcy law if
either of the following apply:
(a) The local public entity has participated in a neutral
evaluation process pursuant to subdivision (a) of
Section 53760.3.
(b) The local public entity declares a fiscal emergency and adopts
a resolution by a majority vote of the governing board pursuant to
Section 53760.5.
SEC. 3. Section 53760.1 is added to the Government Code, to read:
53760.1. As used in this article the following terms have the
following meanings:
(a) "Chapter 9" means Chapter 9 (commencing with Section 901) of
Title 11 of the United States Code.
(b) "Creditor" means either of the following:
(1) An entity that has a noncontingent claim against a
municipality that arose at the time of or before the commencement of
the neutral evaluation process and whose claim represents at least
five million dollars ($5,000,000) or comprises more than 5 percent of
the local public entity's debt or obligations, whichever is less.
(2) An entity that may would have a
noncontingent claim against the municipality
arising out of upon the rejection of an
executory contract or unexpired lease in a Chapter 9 case and whose
claim represents would represent at
least five million dollars ($5,000,000) or comprises more than 5
percent of the local public entity's debt or obligations, whichever
is less.
(c) "Debtor" means a local public entity that may file for
bankruptcy under Chapter 9.
(d) "Good faith" means participation by a party in the neutral
evaluation process with the intent to negotiate toward a resolution
of the issues that are the subject of the neutral evaluation process,
including the timely provision of complete and accurate information
to provide the relevant parties through the neutral evaluation
process with sufficient information, in a confidential manner, to
negotiate the readjustment of the municipality's debt.
(e) "Interested party" means a trustee, a committee of creditors,
an affected creditor, an indenture trustee, a pension fund, a
bondholder, a union that, under its collective bargaining agreements,
has standing to initiate contract or debt restructuring negotiations
with the municipality, or a representative selected by an
association of retired employees of the public entity who receive
income from the public entity convening the neutral evaluation. A
local public entity may invite holders of contingent claims to
participate as interested parties in the neutral evaluation if the
local public entity determines that the contingency is likely to
occur and the claim may represent five million dollars ($5,000,000)
or comprise more than 5 percent of the local public entity's debt or
obligations, whichever is less.
(f) "Local public entity" means any county, city, district, public
authority, public agency, or other entity, without limitation, that
is a municipality as defined in Section 101(40) of Title 11 of the
United States Code (bankruptcy), or that qualifies as a debtor under
any other federal bankruptcy law applicable to local public entities.
For purposes of this article, "local public entity" does not include
a school district.
(g) "Local public entity representative" means the person or
persons designated by the local public agency with authority to make
recommendations and to attend the neutral evaluation on behalf of the
governing body of the municipality.
(h) "Neutral evaluation" is a form of alternative dispute
resolution that may be known as mandatory mediation. A "neutral
evaluator" may also be known as a mediator.
SEC. 4. Section 53760.3 is added to the Government Code, to read:
53760.3. (a) A local public entity may initiate the neutral
evaluation process if the local public entity is or likely will
become unable to meet its financial obligations as and when those
obligations are due or become due and owing. The local public entity
shall initiate the neutral evaluation by providing notice by
certified mail of a request for neutral evaluation to all interested
parties as defined in Section 53760.1.
(b) Interested parties shall respond within 10 business days of
receipt of notice of the local public entity's request for neutral
evaluation.
(c) Interested (1)
The local public entity and the interested parties agreeing to
participate in the neutral evaluation shall , through a mutually
agreed upon process, select the neutral evaluator to oversee
the neutral evaluation process and shall
facilitate all discussions in an effort to resolve their disputes.

(2) If the local public entity and interested parties fail to
agree on a neutral evaluator within seven days after the interested
parties have responded to the notification sent by the public entity,
the public entity shall select five qualified neutral evaluators and
provide their names, references, and backgrounds to the
participating interested parties. Within three business days, a
majority of participating interested parties may strike up to four
names from the list. If a majority of participating interested
parties strikes four names, the remaining candidate shall be the
neutral evaluator. If the majority of participating parties strikes
fewer than four names, the local public entity may choose which of
the remaining candidates shall be the neutral evaluator.
(d) A neutral evaluator shall have experience and training in
conflict resolution and alternative dispute resolution and shall meet
at least one of the following qualifications:
(1) At least 10 years of high-level business or legal practice
involving bankruptcy or service as a United States Bankruptcy Judge.
(2) Professional experience or training in municipal finance and
one or more of the following issue areas:
(A) Municipal organization.
(B) Municipal debt restructuring.
(C) Municipal finance dispute resolution.
(D) Chapter 9 bankruptcy.
(E) Public finance.
(F) Taxation.
(G) California constitutional law.
(H) California labor law.
(I) Federal labor law.
(e) The neutral evaluator shall be impartial, objective,
independent, and free from prejudice. The neutral evaluator shall not
act with partiality or prejudice based on any participant's personal
characteristics, background, values or beliefs, or performance
during the neutral evaluation process.
(f) The neutral evaluator shall avoid a conflict of interest or
the appearance of a conflict of interest during the neutral
evaluation process. The neutral evaluator shall make a reasonable
inquiry to determine whether there are any facts that a reasonable
individual would consider likely to create a potential or actual
conflict of interest. Notwithstanding subdivision (n), if the neutral
evaluator is informed of the existence of any facts that a
reasonable individual would consider likely to create a potential or
actual conflict of interest, the neutral evaluator shall disclose
these facts in writing to the local public entity and all interested
parties involved in the neutral evaluation. If any party to the
neutral evaluation objects to the neutral evaluator, that party shall
notify all other parties to the neutral evaluation, including the
neutral evaluator, within 15 days of receipt of the notice from the
neutral evaluator, the neutral evaluator shall withdraw and a new
neutral evaluator shall be selected pursuant to subdivisions (a) and
(b) of Section 53761.3.
(g) Prior to the neutral evaluation process, the neutral evaluator
shall not establish another relationship with any of the parties in
a manner that would raise questions about the integrity of the
neutral evaluation, except that the neutral evaluator may conduct
further neutral evaluations regarding other potential local public
entities that may involve some of the same or similar constituents to
a prior mediation.
(h) The neutral evaluator shall conduct the neutral evaluation
process in a manner that promotes voluntary, uncoerced decisionmaking
in which each party makes free and informed choices regarding the
process and outcome.
(i) The neutral evaluator shall not impose a settlement on the
parties. The neutral evaluator shall use his or her best efforts to
assist the parties to reach a satisfactory resolution of their
disputes. Subject to the discretion of the neutral evaluator, the
neutral evaluator may make oral or written recommendations for
settlement or plan of readjustment to a party privately or to all
parties jointly.
(j) The neutral evaluator shall inform the local public entity and
all parties of the provisions of Chapter 9 relative to other
chapters of the bankruptcy codes. This instruction shall highlight
the limited authority of United States bankruptcy judges in Chapter 9
such as the lack of flexibility available to judges to reduce or
cram down debt repayments and similar efforts not available to
reorganize the operations of the city that may be available to a
corporate entity.
(k) The neutral evaluator may request from the parties
documentation and other information that the neutral evaluator
believes may be helpful in assisting the parties to address the
obligations between them. This documentation may include the status
of funds of the local public entity that clearly distinguishes
between general funds and special funds, and the proposed plan of
readjustment prepared by the local public entity.
(l) The neutral evaluator shall provide counsel and guidance to
all parties, shall not be a legal representative of any party, and
shall not have a fiduciary duty to any party.
(m) In the event of a settlement with all interested parties, the
neutral evaluator may assist the parties in negotiating a
prepetitioned, preagreed plan of readjustment in connection with a
potential Chapter 9 filing.
(n) If at any time during the neutral evaluation process the local
public entity and a majority of the representatives of the
interested parties participating in the neutral evaluation wish to
remove the neutral evaluator, the local public entity or any
interested party may make a request to the other interested parties
to remove the neutral evaluator. If the local public entity and the
majority of the interested parties agree that the neutral evaluator
should be removed, the parties shall select a new neutral evaluator.
(o) The local public entity and all interested parties
participating in the neutral evaluation process shall negotiate in
good faith.
(p) The local public entity and interested parties shall provide a
representative of each party to attend all neutral evaluation
sessions. Each representative shall have the authority to settle and
resolve disputes or shall be in a position to present any proposed
settlement or plan of readjustment to the
parties participating in the neutral evaluation.
(q) The parties shall maintain the confidentiality of the neutral
evaluation process and shall not disclose statements made,
information disclosed, or documents prepared or produced, during the
neutral evaluation process, at the conclusion of the neutral
evaluation process or during any bankruptcy proceeding unless either
of the following occur:
(1) All persons that conduct or otherwise participate in the
neutral evaluation expressly agree in writing, or orally in
accordance with Section 1118 of the Evidence Code, to disclosure of
the communication, document, or writing.
(2) The information is deemed necessary by a judge presiding over
a bankruptcy proceeding pursuant to Chapter 9 of Title 11 of the
United States Code to determine eligibility of a municipality to
proceed with a bankruptcy proceeding pursuant to Section 109(c) of
Title 11 of the United States Code.
(r) The neutral evaluation established by this process shall not
last for more than 60 days following the date the evaluator is
selected, unless the local public entity or a majority of
participating interested parties want to continue and
elect to extend the process for up to 30 additional
days. The neutral evaluation process shall not last for more than 90
days following the date the evaluator is selected unless the local
public entity and a majority of the interested parties agree to
an extension.
(s)The
(s) The local public entity shall
pay 50 percent of the costs of neutral evaluation, including but not
limited to the fees of the evaluator, and the creditors shall pay
the balance, unless otherwise agreed to by the parties.
(t) The neutral evaluation process shall end if any of the
following occur:
(1) The parties execute an settlement agreement.
(2) The parties reach an agreement or proposed plan of
readjustment that requires the approval of a bankruptcy judge.
(3) The neutral evaluation process has exceeded 60 days following
the date the neutral evaluator was selected, the parties have not
reached an agreement, and the parties do not agree on
extension of neither the local public entity or a
majority of the interested parties elect to extend the neutral
evaluation process past the initial 60 day time period.
(4) The neutral evaluator confirms that a neutral evaluation was
initiated by the local public entity but that no interested parties
participated.
(4) The local public entity initiated the neutral evaluation
process pursuant to subdivision (a) and received no responses from
interested parties within the time specified in subdivision (b).

(5) The fiscal condition of the local public entity deteriorates
to the point that a fiscal emergency is declared pursuant to Section
53076.5 and necessitates the need to file a petition and exercise
powers pursuant to applicable federal bankruptcy law.
(u) If the 60 day time period for neutral evaluation has expired,
including any extension agreed to by the local public entity
of the neutral evaluation past the initial 60 day
time period pursuant to subdivision (r) , and the neutral
evaluation is complete with differences resolved, the neutral
evaluation shall be concluded. If the neutral evaluation process does
not resolve all pending disputes with creditors the local public
entity may file a petition and exercise powers pursuant to applicable
federal bankruptcy law if, in the opinion of the governing board of
the local public entity, a bankruptcy filing is necessary.
SEC. 4. SEC. 5. Section 53760.5 is
added to the Government Code, to read:
53760.5. Notwithstanding Section 53760.3, a local public entity
may file a petition and exercise powers pursuant to applicable
federal bankruptcy law, if the local public entity declares a fiscal
emergency and adopts a resolution by a majority vote of the governing
board at a noticed public hearing that includes findings that the
financial state of the local public entity jeopardizes the health,
safety, or well-being of the residents of the local public entity's
jurisdiction or service area absent the protections of Chapter 9. The
resolution shall make findings that the public entity is or will be
unable to pay its obligations within the next 60 days. Prior to a
declaration of fiscal emergency and adoption of a resolution, the
local public entity shall place an item on the agenda of a noticed
public hearing on the fiscal condition of the entity to take public
comment. The board of supervisors of a county that int
ends to take action pursuant to this section and places a notice
on an agenda regarding a proposed resolution to declare a fiscal
emergency may require local agencies with funds invested in the
county treasury to provide a five-day notice of withdrawal before the
county is required to comply with a request for withdrawal of funds
by that local agency.
SEC. 6. Section 53760.7 is added to the
Government Code , to read:
53760.7. This article shall not impose any liability or
responsibility, in law or equity, upon the state, any department,
agency, or other entity of the state, or any officer or employee of
the state, for any action taken by any local public entity pursuant
to this article, for any violation of the provisions of this article
by any local public entity, or for any failure to comply with the
provisions of this article by any local public entity. No cause of
action against the state, or any department, agency, entity of the
state, or any officer or employee of the state acting in their
official capacity may be maintained for any activity authorized by
this article, or for the act of a local public entity filing under
Chapter 9 of Title 11 of the United States Code, including any
proceeding following a local public entity's filing.
SEC. 5. SEC. 7. The Legislature
finds and declares that Section 4 of this act which adds Section
53760.3 to the Government Code, impose a limitation on the public's
right of access to the meetings of public bodies or the writings of
public officials and agencies within the meaning of Section 3 of
Article I of the California Constitution. Pursuant to that
constitutional provision, the Legislature makes the following
findings to demonstrate the interest protected by this limitation and
the need for protecting that interest:
To facilitate the process to avoid municipal bankruptcy, it is
necessary to provide for secure documents.

The Evening Standard recently published a piece suggesting that the Global Economy, something I think of as The Worst Idea Ever, is heading toward a rough landing.

And when I say "landing", I'm really talking about a place seven or eight feet underground.

Why?

When countries are intertwined economically, and some countries (Greece is the current poster child, but many others are among the usual suspects) keep borrowing and spending on early retirement and big pensions for some of their citizens, and the countries don't make the money to support such lavish government spending, bad things happen.

In specific, the wheels come off the wagon.

Of the world economy.

Because when countries keep borrowing beyond their ability to pay back debts, they eventually hit a point where there is no more money to borrow.

And then things get bad. See Greece, for instance, which is currently the poster child for "bad".

I'm only a simple backcountry bankruptcy attorney, but it's clear to me that when the Chinese Economic Miracle sours, and the phonebanks of India fall silent, and all of Europe is dragged into the economic black hole by Greece, Italy, Spain and Ireland, bad things will happen in the United States.

And the article in the Evening Standard also points out that the United States has been bailing out banks for some time now, and the Bank of America may need a new round of bailouts.

And is the Bank of America too big to fail?

Or only too big to bail?

I have another bankruptcy blog (actually, I have several. Fickle, I guess).

But I like my Bankruptcy Crossroads blog particularly because I built it myself, with my own little hands. So I have some foolish pride about it.

Now, a bankruptcy blog is just a platform to write articles about bankruptcy and insolvency, so I shouldn't be all that proud. But still.

And here are the top ten most-liked bankruptcy posts from that bankruptcy blog this month.

I hope you like them!

And I can count. Really! I just threw in an extra post, as a bonus!

There are those who are cheerleaders for Communist China, and the "Chinese Economic Miracle".

Me? Not so much.

I'm not wild about the acid rain they're sending out of their country, and the massive pollution that China spews into the air and water (lung cancer is the primary cause of death in China these days, I hear).

Mostly I don't like it that so many U.S. jobs have been exported to Red China, and that the United States feels comfortable borrowing from a country that has frequently made policy statements about the destruction of the United States.

And I suppose the easy-going, humorous attitude about trademarks and patents shown by Chinese manufacturers also makes me a little uneasy.

But China has its own problems.

As trade slows down, unemployment is skyrocketing in China. You don't hear about it much because the statistical measures of unemployment in China don't count employees who voluntarily quit; and employees are pressured to quit, rather than be fired.

So the numbers coming out of China are cooked to a remarkable level.

Then there are the loans to businesses made by the Chinese banks.

The bubble associated with those loans will make the bubble in the United States look like...a bubble!

And inflation in China is now running at breakneck speeds, particularly in key areas like food.

But one of the upcoming comeuppances for China is going to be the sort of early-warning signal that we've seen in the United States: a credit downgrade for China is in the works!

Now, I don't wish the Chinese any harm. As long as they send back the jobs they swiped from the U.S., and clean up their country so that the rivers don't run black with sewage and their cities are no longer invisible under a cloud of coal smoke, all is forgiven.

Actually, I guess that I have a Challenge for China.

Go Green, Guys!

We'll be happy to send you our EPA to help you out!

And, actually, that might be the fastest way to build jobs here in the United States.

p.s. the Chinese Economic Miracle is coming to an end, some experts believe. I tend to agree, even without a Doctorate in Economics. There's one simple reason: governments can't run businesses, and when they try, they fail. Every single time. See the country formerly known as the USSR. And the U.S. Post Office.

In an article from Reuters, Pedro Nicolaci da Costa wrote about a recent unemployment report.

Unemployment was up, with U.S. Citizens filing new claims after losing jobs: 414,000 new unemployment applications filed for the week ending September 3, 2011.

Here's my question of the day: has anybody tracked the relationship between the sheer number of regulations and the number of unemployment applications?

I talked recently to a business owner who had previously employed 150 people in a manufacturing business.

He now employs 25, and one of those is a full-time compliance officer, so he doesn't fall afoul of any of the hundreds of regulations controlling his ability to provide jobs.

I have a theory: my theory is that there is an inverse numerical correlation between the number of words in government regulations and the number of jobs in the regulated sector.

Does anybody have a slide rule? Maybe an abacus?

It would make an interesting study.

Oh, yeah. Do you think a bankruptcy lawyer likes to see high unemployment numbers?

The answer is no.

There are a bundle of insolvent cities in the United States.

Some file bankruptcy, some don't.

We'll get to compare how the residents of those cities fare.

My guess is that the folks who live in Harrisburg will be downright cranky that they didn't file bankruptcy when they had a chance, instead of dithering, and dithering, and dithering, with some dither sauce.

At this point, Harrisburg is facing bond defaults, missed payrolls, and a takeover by the State.

None of those would make me a happy camper if I lived in Harrisburg, I think.

On the other hand, things are pretty rosy, by comparison, in Central Falls. Payrolls are being met, and the bond payments are being met, as well.

Elections will be won or lost in the future by politicians who promise to file, or not file, bankruptcy for cities.

Imagine the campaign speech:

"My friends, if I am elected, I will immediately put this city in a bankruptcy! I promise!"

The Dodgers have been a team of legend in the United States since 1928.

The Dodgers won the World Series, when led by Jackie Robinson, the first black major-league baseball player.

The Dodgers rivaled the Yankees during a golden age of baseball in the United States.

And now it looks as though the Dodgers may have a new owner: the Government of China.

A 1.8 billion dollar cash offer has reportedly been made to Frank McCourt by a group backed by Chinese Government-backed investment banks.

Investors fail, and banks fail.

Will we see the day when the Dodgers are owned by the Chinese Government?

Makes you wonder about that whole Globalism Thing, you know?

I've noticed that not many folks are talking about a double-dip recession these days.

I chalk it up to an inability to keep a straight face when saying goofy things.

For the United States to go into a double-dip recession, it would have had to have come out of a recession, right?

And the jobs report for August was abysmal.

Shaila Dewan at The New York Times has discussed the worst job showing in eleven months.

She pointed out that the unemployment rate is 9.1%, and admirably, also she also referenced the sky-high U-6 measure of inflation.

Now, is this a depression?

Well, global manufacturing is down, down, down. Emily Knapp, at Wall Street Cheat Sheet, gives us the numbers, and they awful.

So here's my answer to the question, is this a double-dip recession, or a depression?

It doesn't matter.

I just want it to stop.

Because as long as unemployment is sky-high, people will need to file bankruptcy cases.

Which are down slightly last month.

Go figure!

Private enterprise uses the word "billion" with a "b" far more than the governmental "trillion" with a "t".

But for a start up, a billion dollars is a lot of money.

A bankruptcy joke may be in the transmogrification process.

The gag used to be "how to make a small fortune? Start with a large fortune, and open a restaurant!"

Then it became, "...and start a dot-com!"; then it was "and invest in consumer real estate!"

The newest iteration seems to be "and build solar panels!"

And the newest poster child for that gag is Solyndra, which has announced that it will file a Chapter 11 Bankruptcy Case.

Solyndra is the third solar company to file a bankruptcy in August of this year, following Spectrawatt Inc. and Evergreen Solar Inc.

Now, there was a half a billion dollar loan guarantee made by the Federal Government on behalf of Solara, and there will probably be political fallout from this bankruptcy.

There will also be more bankruptcy cases, simply because 1,100 employees are now laid off, and that will give rise to more bankruptcy cases.

The City of Freemont, California will also feel a pinch, because stuff rolls downhill. A company that was spending a billion dollars was paying Freemont Restaurants, and there will also be more foreclosures and defaulted rental agreements in Freemont, because when the spigot is turned off with no warning, everybody in the vicinity is left holding the bag.

It appears that the bankruptcy was filed one step ahead of regulators, because the half-billion dollar Solara loan was the subject of a subpoena from the Energy and Commerce Committee.

There is now something that's been called "The Solara Effect", which is the reluctance of investors to jump into solar energy start-ups.

Because investors aren't dumb!