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U.S. Bankruptcy Judge: ‘Don’t Worry, Be Happy’

October 5, 2012

 

Most people are unhappy with the outcome of any legal-settlement cases.

But in the sometimes upside-down world of legal wrangling, universal disappointment is often a good thing, according to the mediating federal judge who helped steer the Town of Mammoth Lakes toward its $29.5 million, $2-million-a-year settlement with Mammoth Lakes Land Acquisition.

“I always tell people when I start a mediation, don’t expect to be happy at the end of the mediation,” said U.S. Bankruptcy Judge Elizabeth Perris.

“I’ve rarely done a mediation where people walk away happy. But what happens in a mediation is that people walk away with an agreement that they can live with, and move on with their lives.

“The fact that you’re not happy with the outcome of this mediation is nothing unusual for those of you who think the deal isn’t what would have made you happy.”

Perris, a federal mediator who worked on the bankruptcy case in Vallejo and who is currently involved in the Stockton bankruptcy case, made her remarks via teleconference at the town council’s unusual meeting on Thursday, Sept. 27.

Speaking from her home base in Portland, Ore., Perris said both Mammoth and MLLA made Herculean efforts to get to a deal, and to proceed with the bankruptcy process would have made no sense for either side.

“The goal of mediation with respect to your town was to get to the point where your town could afford to pay MLLA its judgment and to make it possible for the town to resolve the other disputes that were potentially lingering out there with Terrance Ballas and others that were related to the development contract,” she said.

“Accomplishing that goal would let you reduce uncertainty about how to get a settlement without a bankruptcy.

“Bankruptcies are really expensive, Chapter 9 especially. There are so many unknowns in Chapter 9 because they’re so rare. They tend to be very costly in terms of professional advisors.”

In a 22-minute presentation, Perris recounted her work in the Vallejo case and the implications of that precedent for Mammoth.

“In the City of Vallejo case, which I worked on, it was reported in the press that they paid over $10 million to lawyers and professionals in that case.

“That goes a long way toward paying the MLLA judgment. It’s money that would have been difficult for your town to raise.”

Beyond that, she said, there was no guarantee that the town would have even been eligible to seek relief from bankruptcy.

“It is clear that there would have been a fight over eligibility in your town’s case. The town’s professionals have estimated that fighting the fight was going to require financial support in the range of $2.5 million to $5 million, and there were no assurances that the battle could be won.”

Moreover, Perris said, the court would have required Mammoth to come up with a payment plan, which the judge might refuse to confirm.

“Although the judge couldn’t tell the town how to operate,” Perris said, “the judge could say that he didn’t find the plan to be fair and equitable and to choose not to confirm the plan.”

Finally, Perris said the agreement lets Mammoth get off the living-in-the-past syndrome.

“In addition to letting the town resolve its economic problems in a way that’s manageable,” she said, “it lets you move on with your town’s existence—to let your Town Council, employees and volunteers get back to the business of figuring out what’s best for the future of your town instead of focusing on the past and having to deal with the past.

“One of the things I’ve noticed over the years as a judge watching people litigate many cases, is that litigation forces you to focus on the past. It doesn’t let you focus on the future and making the future brighter.

“Bankruptcy imposes a lot of extra work and costs on the parties. If you’ve accomplished what you set out to accomplish when you went to bankruptcy there’s no reason to stay in bankruptcy.

“Better to move on and not spend the money on lawyers and professionals.”

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