(Reuters) - The leaders of Mammoth Lakes, Calif., voted Monday to approve a bankruptcy filing for the ski resort town, just days after Stockton, Calif., became the most populous U.S. city to turn to bankruptcy court for protection from its creditors.
The vote by the Mammoth Lakes town council to seek Chapter 9 bankruptcy protection was unanimous, according to a statement on the town's website.
The town of about 8,000 residents in the Sierra Nevada mountains about 300 miles north of Los Angeles saw no other options after its largest creditor, Mammoth Lakes Land Acquisition, refused to negotiate concessions, the statement said. Mammoth Lakes Land Acquisition won a $43 million legal judgment against the town stemming from a property development dispute that began in 2006.
A new state law requires financially troubled municipalities to attempt mediation with their creditors before they may file for bankruptcy.
Mammoth Lakes Land Acquisition lawyer Dan Brockett said the town invited the company to enter into mediation only to follow the law until it could move forward with a bankruptcy filing.
The mediation in our view was something they would do to check a box, Brockett told Reuters, adding that his client will contest the town's eligibility for bankruptcy.
We're going to fight this, Brockett said. This whole idea we forced them into bankruptcy is nonsense.
Brockett said the town snubbed a plan by his client that would allow it to pay off the judgment over 30 years.
Lawyers for Stockton, a city of nearly 300,000 people in California's Central Valley, are due to appear at Sacramento court this week. The city filed for Chapter 9 bankruptcy protection last week.