With housing prices and tax revenues declining rapidly beginning in 2007, Vallejo found itself struggling to meet its payroll-particularly the generous salaries it paid to police and firefighters. In May 2008, hoping to win relief from bondholders and force renegotiations of its contracts with city employees, Vallejo became the largest U.S. municipality to seek bankruptcy protection since Orange County, California, in 1994. The city turned to Marc Levinson for help.
Levinson faced immediate opposition from the city’s police, fire, electrical, and managerial employee unions. The unions fought hard to stop the bankruptcy, but in September 2008, following an eight-day trial in Sacramento, U.S. bankruptcy court judge Michael McManus granted protection under Chapter 9 of the bankruptcy code. In February, Levinson argued against the unions’ appeal of the judge’s decision before the U.S. Court of Appeals for the Ninth Circuit. A decision is pending.
