Abstract
In 2011, Governor Brown signed AB 506 (Wieckowski), which established a mandated mediation process as a pre-condition to filing for municipal bankruptcy in California. Historically, municipal bankruptcies were a rare occurrence; when three municipalities within the state filed for bankruptcy protections in the summer of 2012, focus on the negotiation process within insolvent municipalities further magnified. To answer whether mandated mediation can prevent municipal bankruptcies and to determine how negotiation applies specifically in these situations, I applied a negotiation condition framework to case studies of California’s recent municipal bankruptcies. Using various public sources of data, including news articles and court statements, my thesis discovered two negotiation conditions affect the process more than any other factor: willingness to participate in negotiations and the complexity of contractual issues at stake. In addition, charting the changes in negotiation conditions over the case studies highlighted an evolution of those two conditions. The ultimate finding recognized that willingness to negotiate in municipal bankruptcies relies on court rulings answering contractual questions related to stakeholder inclusion in the overall adjustment of debts process. Therefore, in municipal bankruptcies, litigation cannot be prevented with mediation; it in fact assists mediation.