Bloomberg News

Harrisburg Judge Rejects Appeal of Bankruptcy Dismissal

December 14, 2011

(Updates with excerpt from court filing in second paragraph.)

Dec. 13 (Bloomberg) -- The Harrisburg, Pennsylvania, city council lost a bid to appeal dismissal of the city’s bankruptcy petition as the judge in the case ruled a procedural step had come too late.

U.S. Bankruptcy Judge Mary D. France refused to give the council extra time to file a so-called notice of appeal, the first step in trying to overturn the dismissal. France criticized the attorney, who handled the council’s case, Mark Schwartz, saying he erred by not filing the appeal soon after she threw out the bankruptcy on Nov. 23.

“His failure to act is inexplicable and unjustifiable,” France wrote in an opinion issued today in Harrisburg.

The council put the capital city of Pennsylvania into bankruptcy in October, disregarding a state law that banned such a filing. Under Chapter 9 of the federal bankruptcy code, state authorization is necessary, so France threw out the case. Schwartz and the council had tried to persuade France that the state ban violated Pennsylvania’s constitution.

Schwartz said he waited to file the notice until after the judge issued a written opinion justifying her ruling on Dec. 5. He needed time to read the opinion and consult with the city council, he said in a phone interview. The last day to file the appeal, based on France’s oral ruling on Nov. 23, was Dec. 7.

’Time to Digest’

“It took time to digest the 30-page opinion, and it took time to canvass people,” Schwartz said.

He said he is considering his legal options.

Harrisburg, a city of 49,500, faces a debt five times its general-fund budget because of an overhaul and expansion of an incinerator that doesn’t generate enough revenue. Guaranteed debt is about $242 million, with $65 million overdue, according to the bankruptcy petition.

On Dec. 1, a state judge confirmed the appointment of David Unkovic, chief lawyer for the state economic development department, as a receiver to run the city. Unkovic has the power to overrule the city council and Harrisburg’s mayor.

The case is In re City of Harrisburg, Pennsylvania, 11-06938, U.S. Bankruptcy Court, Middle District of Pennsylvania (Harrisburg).

--With assistance from Romy Varghese in Philadelphia. Editor: Fred Strasser, Steve Farr

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

To contact the reporter on this story: Steven Church in Wilmington at schurch3@bloomberg.net


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