CalPERS may challenge the legality of the bankruptcy of San Bernardino, Calif., the U.S. Court of Appeals in San Francisco ruled.
The $282.5 billion California Public Employees’ Retirement System, Sacramento, may try in August to persuade the appeals court to overturn a lower court decision finding that the insolvent city was eligible for bankruptcy protection. CalPERS and the city have been in court-ordered mediation since last year, when U.S. Bankruptcy Judge Meredith Jury ruled the city was entitled to court protection.
San Bernardino sought bankruptcy protection from creditors on Aug. 1, 2012, blaming a fiscal emergency brought on by a $46 million budget shortfall. Since filing, the city has fought its employee unions in an effort to cancel their contracts and quit making certain payments to CalPERS.
CalPERS is among San Bernardino’s biggest creditors. The city failed to make some pension contributions to the pension fund on behalf of employees.