Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.
By Stephanie Cumings
Dec. 30 — San Bernardino's firefighters lost another battle in the city's “ongoing bankruptcy saga” when a federal judge held that the city's charter doesn't ban the outsourcing of firefighting services to a private company.
Judge Otis D. Wright, II, found that just because some sections of the charter “presuppose the existence of an internal fire department does not mean they require the creation of an internal fire department.”
The court found that a city attorney opinion which said that outsourcing was prohibited was of “little worth,” noting that interpreting a charter like this is the “bread and butter of the judicial branch.”
After San Bernardino filed for Chapter 9 bankruptcy in August 2012, it tried to renegotiate its collective bargaining agreement with the San Bernardino Professional Firefighters Local 891 (24 BBLR 1035, 8/9/12). Chapter 9 is a special form of bankruptcy available to municipalities.
The negotiations were unsuccessful, and the bankruptcy court allowed the city to set aside the collective bargaining agreement. On appeal, the district court upheld the rejection of the agreement, finding that the city had made reasonable efforts to negotiate and that the union's arguments were “legally unsupported and lazy” (27 BBLR 689, 5/14/15).
After the agreement had been discarded, the city began to consider outsourcing firefighting services as a way to save money. It received proposals from both the County of San Bernardino and a private company called Centerra Group LLC.
The firefighters sued the city and sought a declaration that both the city's charter and state law prohibited the proposed outsourcing. The bankruptcy court found that no such prohibition exists and the firefighters appealed.
The city tried to claim that the state law issue was moot because it had elected to outsource to the county and not a private company. But the firefighters claimed the county deal was in danger of falling through, and so the private outsourcing remained a potential outcome.
The district court agreed that various potential “deal breakers” had been threatening the deal with the county, and so the city did not appear to have totally ruled out outsourcing to a private company.
Nevertheless, the district court found this wouldn't violate state law. The court said that the California constitution grants charter cities sovereignty over “municipal affairs.” The court ultimately found that outsourcing firefighting services is a “municipal affair” as opposed to a “statewide concern.”
“While a city's firefighting services may occasionally impact those outside the city—such as when they assist with firefighting efforts in neighboring cities—this does not overcome the overwhelmingly local nature of the service,” the court said. “It follows, then, that the [c]ity's decision as to the most cost-effective way to provide those services is also itself a municipal affair.”
The court said that a charter city's power derives from the constitution, and therefore “the lack of a statute authorizing a city to outsource firefighting services to private entities is not a restriction on a charter city's ability to do so.”
As to the charter, the court said that “[n]othing in the [c]harter expressly states that firefighting services cannot be outsourced.” One pertinent section of the charter “simply empowers the [c]ity to establish a fire department; it does not require the [c]ity to create a fire department, let alone a fire department staffed by [c]ity employees,” the court said.
The firefighters also relied on a 1991 opinion from the city attorney that interpreted the charter as prohibiting the outsourcing of police services, but the court said this opinion was “not entitled to any deference” and was “of little worth.”
The court said that the city attorney “does not possess any more expertise than the Court on this issue.” It added that the opinion was based solely on the city attorney's interpretation of the “four corners of the [c]harter.”
“Such inquiry is the bread and butter of the judicial branch,” the court said.
The firefighters were represented by Corey William Glave of Hermosa Beach, Calif., and David M. Goodrich of SulmeyerKupetz APC, Los Angeles.
The city was represented by Fred Neufeld, Laura L. Buchanan, and Paul Robert Glassman of Stradling Yocca Carlson and Rauth PC, Santa Monica, Calif., and Gary David Saenz of the San Bernardino City Attorney's Office, San Bernardino, Calif.
To contact the reporter on this story: Stephanie Cumings in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jay Horowitz at email@example.com
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