East Bay Express: Will Lehman Abandon Oak Knoll?, November 3, 2010


In its newest set of Chapter 11 plans for its California land ventures, the bank has introduced language that could prevent more than 85 other public agencies affected by 17 California projects affected by the bankruptcy case from enforcing their police powers at SunCal sites. Police powers — defined in the US Constitution as those powers not expressly delegated to the federal government, covering everything from planning and zoning to public safety — are exactly how Oakland got its foot in the Santa Ana courthouse door. Neither a creditor nor a debtor in the bankruptcy case, the city used its police powers to force the bankrupt entity to remedy its blights, tear down the fire hazards, and obey the law.

Now, as mortgage-lender Lehman pushes forward with a new set of plans and a seemingly expedited schedule — a November 5 court date slated as a hearing on disclosure statements for the plans has been upgraded to a hearing on the plans themselves — the bank is confounding public agencies statewide with language that the Oakland city attorney's office believes is "inadequate," "unclear," and unlawful.

"Bankruptcy is not a get-out-of-obeying-the-law-free card," Russo said. "It shields you from creditors but it doesn't forgive you or absolve you from living up to the law like everybody else."

Describing the plan that would cover Oak Knoll, Lehman sketches the terms of an injunction that would stop anyone holding a claim against the debtor, past or future, "including but not limited to states and other governmental units," from "commencing or continuing in any manner any action or other proceeding;" "enforcing, attaching, executing, collecting or recovering in any manner any judgment, award, decree, or order;" or "creating, perfecting, or enforcing any Lien or encumbrance" against the relevant Lehman entities or those who might ultimately land the deed to Oak Knoll.