Court abstains from motion to terminate Central Falls, R.I., receiver

By Caroline Salls

Pittsburgh, June 13 - The U.S. Bankruptcy Court for the District of Rhode Island has abstained from and dismissed a motion by the City of Central Falls, R.I.'s city council to terminate Central Falls' state receivership, according to a Wednesday court filing.

On May 18, the city asked the court to strike the city council's motion, arguing that "the bankruptcy court lacks subject-matter jurisdiction to interfere with state and local governance."

Since Rhode Island General Laws say that the state's director of revenue can terminate a municipal receivership at any time, the city said the termination of receivership is a state function, not a federal function.

The city council asked the court to "dismiss and discharge" the city's receiver on May 4.

"By the time of the hearing on this motion, the receiver will have over-stayed its time limit as a change in the form of government as expressed by the Rhode Island Supreme Court," the council said in the motion.

The council said the two-year time limit will expire on July 16 at the latest.

As a result, the city council said the bankruptcy court should discharge the receiver, order it to file a final interim account and report, "vacate and surrender the offices of government" and prohibit it from taking any more actions related to Central Falls' government.

In Wednesday's ruling, judge Frank J. Bailey said he was abstaining from adjudicating the motion to terminate and dismissing that motion "without prejudice to renewal in a Rhode Island state court of appropriate jurisdiction."

New receiver

As previously reported, John F. McJennett III will serve as the city's new receiver, effective June 1, as the city's recovery moves into a new phase.

Judge Robert G. Flanders, Jr. was the receiver for more than a year, and Rhode Island governor Lincoln D. Chafee said there would be a period of overlap as McJennett becomes acquainted with the position and Flanders transitions out.

Central Falls filed for bankruptcy on Aug. 1, 2011. Its Chapter 9 case number is 11-13105.

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