Joel R. Glucksman
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201-896-7095 jglucksman@sh-law.comFirm Insights
First Detroit Bankruptcy Hearing Set by Judge
Author: Joel R. Glucksman
Date: July 30, 2013
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Legal challenges to a historic petition to file for Chapter 9 municipal bankruptcy continue, as the city braces for the initial Detroit bankruptcy hearing this week.
Less than one week after Detroit filed for the largest municipal bankruptcy in U.S. history, the city has requested that U.S. Bankruptcy Judge Steven Rhodes suspend pensioners’ lawsuits and prevent new ones from being heard in the court over fears that litigation could further slow down what is expected to be a long, arduous case.
Upon setting the first court hearing, Rhodes said he only plans to take up a few issues initially, according to The Associated Press. Already, disputes over worker pensions are expected to be a central issue, as pensioners face the risk of having their payments drastically reduced along with other city debts.
Last week, Ingham County Circuit Court Judge Rosemarie Aquilina issued a ruling mandating that Detroit Emergency Manager Kevyn Orr withdraw the bankruptcy petition he filed the previous day. Aquilina said that the state law, which permitted Michigan Governor Rick Snyder to approve of the city’s decision to seek bankruptcy protection, violated the state constitution, according to Reuters.
A representative acting on Gov. Snyder’s behalf later filed an appeal to Aquilina’s ruling. The AP reports that Snyder prefers the bankruptcy court to rule on pension issues, rather than the county circuit court.
Despite the Aquilina ruling, the bankruptcy court will hear Kevyn Orr’s motion to enjoin the state court litigation. Orr also requested that the bankruptcy court settle deadlines, timelines, and other logistical issues in the case, Reuters notes.
Union representatives are pushing to make retiree pension benefits a priority ahead of other bankruptcy law claims, citing a provision in the Michigan constitution that pensions for public employees “shall not be diminished or impaired.” The issue is expected to weigh heavily in arguments that surround Detroit’s bankruptcy.
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