Wednesday, May 7, 2014

CalPERS Fights for Retirement Security in Detroit

The California Public Employees' Retirement System ("CalPERS") filed an amicus brief in the United States Court of Appeals to support the Committee Retirees of the City of Detroit and others in appealing the bankruptcy court's determination that Detroit is eligible for bankruptcy.  Specifically, CalPERS seeks to reverse the bankruptcy court's ruling that, once a state authorizes a city to file for Chapter 9 bankruptcy, state laws and constitutions no longer control the city's actions.  The bankruptcy court's decision holds that a city can impair the rights of a public pension system in bankruptcy despite state laws prohibiting such impairment. 

In the amicus brief, CalPERS argues the bankruptcy court erred by providing an improper advisory opinion.  The bankruptcy court advised that retirement pensions may be impaired in a manner consistent with the 10th Amendment.  CalPERS argued the bankruptcy court should not have ruled on the constitutional issue when it was unnecessary to the court determining whether Detroit was eligible for bankruptcy.  CalPERS asserted the constitutional issue was not "ripe" for review, meaning it was not ready for the court's consideration.  Federal courts may not enter into a controversy before it has solidified, or before all other available remedies have been exhausted.

CalPERS also argues the bankruptcy court's decision nullifies Bankruptcy Code section 903, which expressly preserves state laws governing municipalities during bankruptcy.  Lastly, CalPERS argued the court's analysis was problematic because the court improperly created a presumption in favor of eligibility in interpreting the good faith filing requirement.  CalPERS seized the opportunity to weigh in on these critical issues affecting the retirement security of more than 1.7 million CalPERS members.