Editor's Note
California Lawyer

by Martin Lasden

December 2012

If what happens in bankrupt Stockton stays in Stockton, then Pamela A. MacLean's cover story this month ("Sleepless in Stockton") is nothing more than a local tale. But with as many as 20 more cities in California facing the prospect of financial ruin, that doesn't seem likely.

As it happens, MacLean was born and raised in Stockton. Yet in so many ways the city she once knew has all but disappeared. "I was particularly peeved," she says, "when they tore down the domed courthouse that appeared in the final scenes of All the King's Men."

The pace of change accelerated dramatically throughout the 1990s and early 2000s, when a lot of easy money poured in to fuel a building boom that produced as many as 3,000 housing starts in a single year. Of course, it didn't last. And when the bubble burst, the city found itself so deeply in debt that by June of this year its leaders felt compelled to file for bankruptcy protection.

This had never happened to a U.S. city as large as Stockton. But perhaps the more significant development came two months later when, in response to a class action by retirees, the federal judge presiding over the matter ruled that the bankruptcy clause of the U.S. Constitution trumps the contracts clause. In lay-speak the message was sobering: Even vested benefits are unprotected in bankruptcy court.

No entity is more concerned about that ruling than the California Public Employees' Retirement System, the nation's largest public employee pension fund. CalPERS is Stockton's largest unsecured creditor, holding obligations of $147.5 million. But MacLean observes that there's a lot of litigating to do before CalPERS is seriously threatened. In fact, bond insurers have challenged Stockton's very eligibility for Chapter 9 protection. A decision on that objection could come as early as next month.

Also in this issue, Ed Humes profiles Marin County sole practitioner Stephen Joseph, a self-described environmentalist who is fighting what he insists is the good fight against local ordinances banning plastic shopping bags from checkout counters ("The Bag Man"). Joseph argues that plastic bags do less harm to the environment than paper ones. But whether or not he's right, the fact remains that his lawsuits are funded by plastic bag makers. Which doesn't exactly make him a neutral observer.

And finally, as part of our Legally Speaking interview series, we include an excerpt of my conversation with Los Angeles attorney Paul Morantz. You may remember him as the sole practitioner who made a career representing the victims of cults - and almost got murdered in the process ("The Lawyer Synanon Tried to Kill").

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