In re City of Stockton

AMENDED 1 OPINION REGARDING CONFIRMATION AND STATUS OF CALPERS

Resolving the single objection to confirmation of the chapter 9 plan of adjustment of debts by the City of Stockton necessitates answering the threshold question whether, as a matter of law, pension contracts entered into by the City, including the pension administration contract, may be rejected pursuant to Bankruptcy Code § 365. 11 U.S.C. § 365 .

After answering that question of law in the affirmative, we come to the main question: whether, as matters of law and fact, the City’s chapter 9 plan should be confirmed even though the plan does not directly impair the City-sponsored pensions.

Franklin Templeton Investments (“Franklin”) objects to confirmation, contending that the City’s failure to modify pensions means that the plan (1) is not proposed in good faith and (2) that Franklin’s unsecured claim should be separately classified so that Franklin can be deemed to be a separate, non-accepting class as to which the plan may be confirmed only if, with respect to Franklin, it is fair and equitable and does not unfairly discriminate against it. 11 U.S.C. §§ 1122 (a), 1129(a)(3) & 1129(b).

If Franklin’s unsecured…