Reading U.S. Bankruptcy Judge Thomas Bennett’s 27-page memorandum opinion can feel a bit like stepping through the looking glass. In essence, the memorandum is about plain language, but try reading it without tying the lobes of your brain in a knot.
For instance, here is a mere subhead from Bennett’s memo. “Tenses: Past means Present, Present means Past, and both mean Past, Present, and Future.”
Got that?
The memo explains Bennett’s order, which he issued Sunday. In it, he undertakes feats of legal heavy-lifting that the Alabama Supreme Court has so far neglected.
At issue is whether Jefferson County has the authority under Alabama law to file for Chapter 9 bankruptcy. The Alabama Code clearly says that counties with bond debt may do so, but technically Jefferson County has no bond debt. Its debts are warrants, which unlike bond debts, do not require a public referendum to authorize, nor must they be competitively bid.
Creditors have argued that, since Jefferson County only has warrants and not bonds, the law does not authorize it to declare bankruptcy.
And the creditors have a half-baked precedent on their side. In 2010, Prichard, Ala., filed for Chapter 9 bankruptcy; however, that city’s creditors persuaded a federal bankruptcy court that, since Prichard had no bond debt, it was not authorized to file for bankruptcy. On appeal, the U.S. District Court “certified” the law to the Alabama Supreme Court. In other words, the federal court asked the Alabama court to explain what it’s supposed to mean, and the federal courts have been waiting ever since.
In the meantime, the court has ruled on such matters as when a fetus becomes a person (something arguably settled already by the United States Supreme Court).
Initially, Judge Bennett also certified the law to the Alabama Supreme Court, and it seemed Jefferson County’s bankruptcy eligibility would depend on that certification, but Sunday, Bennett jumped ahead of them, doing all the work himself. From the complexity of his ruling and the mental gymnastics necessary to write it, it’s probably a good thing Bennett took the job upon himself.
Bennett’s order clearing the way for Jefferson County’s bankruptcy was only two pages, but the memorandum explaining it clearly required more work than the Alabama Supreme Court was willing to give, and perhaps demanded more attention than the county’s $1,000-per-hour lawyers had given in their arguments.
Bennett tries to have fun in the memo, which begins with a little nugget of legislative trivia: The statute that authorizes the county to declare bankruptcy was first written by Amasa Coleman Lee, the original Atticus Finch.
But eight decades of revisions to the Alabama Code have knotted what was once a clear piece of law-making into a tangled legal mess, and Bennett spends a painful 27 pages teasing all those strands apart.
To understand Bennett’s argument, you first have to understand a little about how Alabama law is made. When the Legislature passes an act and the governor signs it into law, the Code Commissioner — an official appointed by the legislature — must then thread it through the Alabama Code. One act can affect multiple sections of the code, and it’s the commissioner’s job to tweak the code according to the legislature’s wishes. To do this, the commissioner has a certain amount of editorial discretion, but when challenged, the original act is the law, not the code commissioner’s interpretation.
Bennett looked back at the original acts. The title of the acts in question indicate they were meant for counties to deal with their “indebtedness,” including a bankruptcy filing, if necessary. None of the text of the acts restrict bankruptcy to bond debt only.
“To the contrary, the wording is expansive by its use of ‘any’ for entities that may refinance indebtedness, and is equally broad by the use of ‘indebtedness,’ which may be refinanced or readjusted in lieu of more restrictive words such as bonds, warrants, or the like, and is similarly comprehensive when describing those counties, cities, and towns that are being authorized and given the State’s assent to file a municipal bankruptcy case,” Bennett wrote.
Ultimately, though, the explanation is only as important as its conclusion: In another victory against its creditors, Jefferson County is officially bankrupt.
