Michigan judge rules Detroit bankruptcy violates state constitution

July 19, 2013 at 4:29 PM
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DETROIT, July 19 (UPI) -- A Michigan circuit judge Friday ruled Detroit's federal bankruptcy filing violates the state constitution and should be withdrawn.

Ingham County Judge Rosemary Aquilina ruled Gov. Rick Snyder and the city's emergency manager, Kevyn Orr, were in violation of the state constitution when the city filed for Chapter 9 bankruptcy Thursday because the bankruptcy seeks the dismissal of union pension cases.

"It's cheating sir, and it's cheating good people who work," Aquilina told assistant state Attorney General Brian Devlin. "It's also not honoring the [United States] president, who took [Detroit automakers] out of bankruptcy."

The Chapter 9 bankruptcy likely would sharply reduce pensions of retired city workers and other public employees who are considered creditors. Lawyers for the pensioners and two city pension funds Thursday filed three lawsuits to force a halt to the bankruptcy proceedings and any actions that would reduce pension benefits owed.

"I have some serious concerns because there was this rush to bankruptcy court that didn't have to occur and shouldn't have occurred," Aquilina said. "Plaintiffs shouldn't have been blindsided."

Michigan Attorney General Bill Schuette said the state has appealed her ruling, which could slow down the bankruptcy case, to the Michigan Court of Appeals, the Detroit Free Press said.

Even before a bankruptcy judge was assigned to the case, attorneys filed a series of motions Friday they said were intended to speed up proceedings.

Attorneys said they wanted action to begin "immediately" on the Chapter 9 process "that returns the city to a patch for sustainable financial health and revitalization," The Detroit News reported.

The motions ask that a deadline for filing legal objections be set for Aug. 19 and the deadline for discovery set for Nov. 4.

After that deadline passes, the city wants the court to set a date for a hearing to determine Detroit's eligibility for bankruptcy.

Orr, the city's emergency manager, has said he wants Detroit to exit bankruptcy by September 2014.

In a letter authorizing the proceedings, Gov. Snyder said Thursday bankruptcy was "the only reasonable alternative" that would return Detroit "to financial and civic health for its residents and taxpayers."

Snyder said he reached that conclusion because the city's unemployment rate is twice the national average and some 78,000 buildings in the city have been abandoned.

The city's tax rate is at its legal maximum, he added, while its population has declined 63 percent. The decreasing tax base has made it impossible for the city to pay its creditors, who are owed more than $18 billion.

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