City of Prichard, Alabama

Filing 16

ORDER granting 13 Motion for Certification as set out. Appellees' request to present additional questions for certification is denied. Signed by Judge Kristi K. DuBose on 5/17/2011. (Attachments: # 1 Clerks Certification) (cmj)

IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION

IN RE:

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CITY OF PRICHARD, ALABAMA

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Appellant.

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Civil Action No. 1:10-00622-KD-M

ORDER
This action is an appeal of an order from the United States Bankruptcy Court for the
Southern District of Alabama which dismissed Appellant’s Chapter 9 petition for bankruptcy
(doc. 1, notice of appeal). The Bankruptcy Court dismissed the petition after finding that the
City of Prichard lacked the capacity, under Alabama law, to file this petition. The matter is now
before the Court on the City of Prichard, Alabama’s motion to certify an unresolved issue of
state law to the Alabama Supreme Court (doc. 13), the brief of Appellant City of Prichard (doc.
12) and the brief of Appellees Scott A. Balzer, et al. (doc. 14).
On October 9, 2009, the City of Prichard, Alabama filed a bankruptcy petition under
Chapter 9 of Title 11 of the United States Code. In order to be a debtor under Chapter 9, a
municipality must be “specifically authorized, in its capacity as a municipality or by name, to be
a debtor under such chapter by State law, or by a governmental officer or organization
empowered by State law to authorize such entity to be a debtor under such chapter.” 11 U.S.C. §
109(c)(2).
Alabama’s statute which authorizes a municipality to file bankruptcy provides:

The governing body of any county, city or town, or municipal authority organized
under Article 9, Chapter 47 of this title which shall authorize the issuance of
refunding or funding bonds may exercise all powers deemed necessary by the
governing body for the execution and fulfillment of any plan or agreement for the
settlement, adjustment, refunding, or funding of the indebtedness of the county,
city or town, or municipal authority organized under Article 9, Chapter 47 of this
title not inconsistent with the provisions of law relating to the issuance of
refunding or funding bonds. Without limiting the generality of any of the
foregoing powers, it is expressly declared that the governing body shall have the
power to take all steps and proceedings contemplated or permitted by any act of
the Congress of the United States relating to the readjustment of municipal
indebtedness, and the State of Alabama hereby gives its assent thereto and hereby
authorizes each county, city or town, or municipal authority organized under
Article 9, Chapter 47 of this title in the state to proceed under the provisions of
the acts for the readjustment of its debts.
Ala. Code § 11-81-3 (1975) (as amended).
The parties dispute the application of this statute. Appellant argues that this statute
authorizes a municipality in Alabama such as the City of Prichard, to file a Chapter 9 bankruptcy
proceeding even though it has not issued refunding or funding bonds. Appellees argue that the
statute authorizes only a municipality which has outstanding refunding or funding bonds to file a
Chapter 9 bankruptcy proceeding. Moreover, Appellees argue that because the City of Prichard
does not have outstanding refunding or funding bonds its petition was correctly dismissed by the
Bankruptcy Judge.
The Court has reviewed the motion, Appellant’s briefs, and Appellees’ brief, and it
appears to this Court that resolution of this appeal involves questions or propositions of law of
the State of Alabama that are determinative of the cause, and there appears to be no clear,
controlling precedent in the decisions of the Alabama Supreme Court.
Accordingly, the motion to certify is GRANTED and the United States District Court for

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the Southern District of Alabama hereby certifies the following question of law of the State of
Alabama to the Alabama Supreme Court for instructions concerning such question of law, based
upon the facts recited herein, pursuant to Rule 18, Alabama Rules of Appellate Procedure, as
follows:
Whether Ala. Code § 11-81-3 (1975) (as amended) requires that an Alabama
municipality have refunding or funding bond indebtedness as a condition of
eligibility to proceed under Chapter 9 of Title 11 of the United States Code ?
The motion to certify having been granted,1 the appeal is STAYED pending resolution of
this question by the Alabama Supreme Court.
DONE and ORDERED this 17th day of May, 2011.

s/ Kristi K. DuBose
KRISTI K. DuBOSE
UNITED STATES DISTRICT JUDGE

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Appellees’ request to present additional questions for certification is DENIED.

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