Though Jefferson County, Ala.'s elected leaders are playing tug of war with the lawyers hired by Wall Street banks to protect their $3.2 billion investment in the county's sewer system, Bankruptcy Judge Thomas Bennett has pushed the chapter 9 case into unexplored parts of bankruptcy law, the Wall Street Journal reported on Saturday. Jefferson County filed for chapter 9 protection in November 2011 in an attempt to trim payments to JPMorgan Chase & Co. and other bondholders who extended $3.6 billion that the county began borrowing in 1997 to stop its sewer system's more than 3,000 miles of pipe from leaking raw sewage into Alabama rivers. As the case has proceeded, county officials have cut government jobs and limited work on its streets and leaky sewer pipes. The county has threatened to shut down major operations at its hospital for the poor, and the line of people waiting to renew licenses and permits often wraps around the municipal building. For banks and other financial firms, the fear is that the case could create law that would scare off investors in the $3.7 trillion municipal-bond market. Judge Bennett has played an active role as lawyers squabble over every technicality. He forced the county's $1,050-per-hour private attorney to interpret the fine print of municipal accounting rules to construct legal arguments around the county's desire to make bondholders pay for most of the bankruptcy costs. The county's request, an unprecedented attempt to have creditors cover chapter 9 costs, remains unresolved. Unsatisfied with the information that lawyers put before him on whether Alabama state rules restrict counties and towns from filing for bankruptcy, Judge Bennett sent his law clerks to a Montgomery library to dig up details for a dense, 28-page decision in March that enabled the case to continue.
