WESTFALL TOWNSHIP – Westfall Township, unable to pay even a small part of a $20 million judgment won by developers David and Barbara Katz, is seeking relief in federal bankruptcy court.  The township has filed a Chapter 9 petition, which affords municipalities protection, without driving the municipality into liquidation, or subjecting the municipality to restrictions on its ability to provide services.

The Katz judgment comprises the bulk of about $22 million the township lists as liabilities.

The Philadelphia law firm of Pepper Hamilton LLP is handling the filing for the Township.  Attorney J. Gregg Miller, Esq., confirmed the filing, but was reluctant to comment on pending litigation.  Miller did say one possible outcome would be to reduce the size of the Katz judgment.

Township Solicitor Robert Bernathy was unavailable this morning.

The judgment stems from a suit, filed by the Katzes, against the Township and two of its supervisors, alleging improprieties dating back more than a decade. 

David Katz had hoped to built up to 1,500 units of residential housing in the township.  Township officials, opposed to the project,  took various actions that resulted in the successful litigation by Katz, ending with the $20.8 million judgment entered in September 2008.

According to court papers obtained by PoconoNews.Net, the township maintains it “… is unable to pay the judgment or even a significant portion thereof”.

“The township simply does not have a sufficient revenue basis to make such a payment”.

In February of this year, the Katzes filed a motion for order compelling the township and its supervisors to pay the judgment.

“Enforcement of the Katzes judgment by mandamus would place the township in imminent jeopardy that its fiscal ability to provide health and safety services to its citizens would be interrupted or entirely curtailed”, contends the petition.

Under a Chapter 9 proceeding, a municipality continues its operation and provides services without interference from the court.   The intent is to allow the municipality to propose a plan to adjust or restructure its  debts.

The bankruptcy petition is dated April 10.  An initial hearing is tentatively scheduled for federal court in Wilkes-Barre this Wednesday, April 15.