Creditor files appeal in Stockton pension fight
Appeal could extend Stockton pension and bankruptcy fight
Late last month, a federal judge approved a plan from the City of Stockton that will allow the city to attempt to emerge from bankruptcy while maintaining its pension obligations. Now that decision is being appealed by a city creditor, threatening to drag out the pension fight.
Franklin Templeton Investments filed an appeal last week challenging the Oct. 30 decision that approved Stockton’s reorganization plan. Franklin was one of the big losers in the pension settlement. The city owes the firm $36 million, but will receive just 12 cents on the dollar under the approved settlement.
The Stockton case has received national attention. It is a major test of the sanctity of public pensions in California, and the judge in the case raised questions that led observers to believe a major pension ruling could follow.
On Oct. 1, U.S. Bankruptcy Judge Christopher Klein ruled that Stockton had the right to slash its payments to CalPERS, a decision that sent shock waves through the pension world and had public employee unions howling in protest. Ultimately, Klein approved the city’s reorganization plan which leaves the city’s pensions untouched.
The Sacramento Bee reported Franklin is ready to continue its fight. The company is taking its case to the 9th Circuit Bankruptcy Appellate Panel in Pasadena.
“We intend to continue to fight for a fair and equitable recovery for our fund investors,” said Franklin spokeswoman Stacey Coleman in an email to the Bee. She added that Franklin believes Klein “made many factual and legal errors in concluding that the Stockton plan satisfies the applicable requirements of the Bankruptcy Code.”