Valdosta Daily Times

Top News

July 25, 2013

Judge stops lawsuits against Detroit bankruptcy

DETROIT — A federal judge agreed with Detroit on Wednesday and stopped any lawsuits challenging the city’s bankruptcy, declaring his courtroom the exclusive venue for legal action in the largest filing by a local government in U.S. history.

The decision by U.S. Bankruptcy Judge Steven Rhodes was a major victory for Detroit, especially after an Ingham County judge last week said Gov. Rick Snyder ignored the Michigan Constitution and acted illegally in approving the Chapter 9 filing. That ruling and others had threatened to derail the case.

Retirees had sued, claiming the bankruptcy threatened their pensions that are protected by the constitution.

“If these actions are not stopped, the city would be irreparably harmed. ... These litigants will have due process. They will have their day in court,” Detroit attorney Heather Lennox said during two hours of arguments by the city, pension funds and unions.

Rhodes said there’s nothing in federal law or the U.S. Constitution that gives a state court a shared role in a bankruptcy.

Questions about Detroit’s eligibility to overhaul itself through bankruptcy “are within this court’s exclusive jurisdiction,” he said.

Michael Nicholson, general counsel for the United Auto Workers, said he plans to review the judge’s order with his colleagues and decide whether to appeal, but he says the rulings raise “serious issues about the relationship of state and federal government.” He added the issue is bigger than creditors; it’s about states’ rights.

“State courts have the power to decide what the state constitution means,” Nicholson said. “In our view, retirees’ rights are a matter of Michigan constitutional rights.”

The courtroom was jammed with lawyers representing some of the thousands of creditors as well as rank-and-file city employees and retirees eager to know the outcome. Some wore T-shirts that said, “Detroit vs. Everybody.”

Detroit emergency manager Kevyn Orr, who recommended bankruptcy, sat in the front row for part of the hearing. Outside the courthouse, protesters held a banner with a message for Wall Street: “Cancel Detroit’s debt. The banks owe us.”

Detroit has about 21,000 retired workers who are owed benefits — including former officer workers at City Hall, police, paramedics, sanitation crews, firefighters and bus drivers — with underfunded obligations of about $3.5 billion for pensions and $5.7 billion for retiree health coverage.  

There are three lawsuits in state courts challenging the bankruptcy. They mostly focus on a provision in the Michigan Constitution that says public pensions “shall not be diminished or impaired.” Pensions have not been frozen or reduced in the bankruptcy so far, but officials say there are shortfalls in the funds and that payouts could be at risk.

Sharon Levine, an attorney for a union that represents city workers, urged Rhodes to let those lawsuits run their course. She said there’s no federal insurance for public pensions once they’re broken, unlike pensions at private employers.

“Our members who participate at most are at or below $19,000 a year. There is no safety net,” Levine said.

Snyder signed off on Detroit’s bankruptcy, calling it the only “feasible path” for a city whose population has plummeted to 700,000 from 1.8 million decades ago. Detroit’s $18 billion in long-term debt has become an urban millstone.

In March, the governor appointed Orr, a bankruptcy expert, as Detroit’s emergency manager. Orr had sweeping powers to reshape city finances but recommended bankruptcy after failing to reach any significant deals with creditors, including Wall Street bankers and Detroit pension funds. Many of those creditors, however, accused him of being inflexible and believe bankruptcy always was the plan.

Detroit has more than double the population of Stockton, Calif., which had been the largest U.S. city to file for bankruptcy before Detroit trumped it last week.

Retirees and city employees are concerned. Lt. James Edwards, who has worked 18 years at the fire department, attended the court hearing Wednesday.

“It seems as though we’re going to end up being the patsy for a lot of bad decisions that have been made over the years,” he said. “You base your life decisions on promises made to you when you came on the job.”

———

Follow Ed White at http://twitter.com/edwhiteap

 

For more on this story and other local news, subscribe to The Valdosta Daily Times e-Edition, or our print edition

1
Text Only
Top News
  • blood drive.jpg Give Blood

    Give Blood

    August 1, 2014 1 Photo

  • Man arrested in Valdosta drug raid

    Man arrested in Valdosta drug raid

    August 1, 2014

  • Taiwan Gas Explosions_Stew.jpg Gas explosions in Taiwan

    At least 24 people were killed and 271 others injured when several underground gas explosions ripped through Taiwan’s second-largest city overnight, hurling concrete through the air and blasting long trenches in the streets, authorities said Friday.

    August 1, 2014 1 Photo

  • Immigration Overload_Roge.jpg Immigration courts speed up children’s cases

    Immigration courts are speeding up hearings for the tens of thousands of Central American children caught on the U.S. border after criticism that the backlogged system is letting immigrants stay in the country for years while waiting for their cases to be heard.

    August 1, 2014 1 Photo

  • Extra jurors seated for long Ga. salmonella trial

    After three days of jury selection, a panel with plenty of extra members was seated Thursday to hear the case of three people charged in connection with a deadly salmonella outbreak traced to a southwest Georgia peanut plant five years ago.

    August 1, 2014

  • Liberia West Africa E_Roge.jpg Ebola outbreak tops 700 deaths

    The death toll from the worst recorded Ebola outbreak in history surpassed 700 in West Africa as security forces went house-to-house in Sierra Leone’s capital Thursday looking for patients and others exposed to the disease.

    August 1, 2014 1 Photo

  • Mideast Israel Palest_Roge.jpg U.S., U.N. announce deal on Gaza cease-fire

    Israel and Hamas have agreed to a 72-hour humanitarian cease-fire beginning Friday, during which time there will be negotiations on a more durable truce in the 24-day-old Gaza war, the United States and United Nations announced Thursday.

    August 1, 2014 1 Photo

  • APTOPIX Congress_Stew.jpg Congress oks VA, highway bills, not border measure

    Congress ran full-tilt into election-year gridlock over immigration Thursday and staggered toward a five-week summer break after failing to agree on legislation to cope with the influx of young immigrants flocking illegally to the United States.

    August 1, 2014 1 Photo

  • Wisconsin Unions_Stew.jpg Wisconsin Supreme Court upholds union law

    The fight over Wisconsin Gov. Scott Walker’s signature policy achievement, a law effectively ending collective bargaining for most public employees, ended Thursday with the state Supreme Court declaring it to be constitutional.

    August 1, 2014 1 Photo

  • Today in History

    In 1714, Britain's Queen Anne died at age 49; she was succeeded by George I.

    August 1, 2014

Top News
Poll

Do you agree with the millage rate increases?

Yes. We need to maintain services
No. Services should have been cut.
     View Results