Detroit bankruptcy on hold, Snyder admin. smacked down by judge for “cheating good people who work”


Surprise, surprise

[Caricature by DonkeyHotey from photos by Anne C. Savage for Eclectablog]

Yesterday afternoon, Detroit Emergency Manager Kevyn Orr, with the blessing of Governor Rick Snyder, filed bankruptcy paperwork for the city at 4:06 p.m. An emergency hearing by attorneys representing city pensioners was scheduled for 4:00 p.m. in the court room of Ingham County Judge Rosemarie Aquilina. The attorneys were asked by the legal team for Governor Snyder and Kevyn Orr for a five-minute delay on the 4:00 p.m. meeting. In that time, the bankruptcy paperwork was filed, making the emergency hearing moot.

The State lawyers literally tricked the legal team representing people receiving pensions from the City of Detroit so that they could file their bankruptcy paperwork.

An attorney for the pension funds who was seeking a temporary restraining order in Ingham County to block the historic bankruptcy filing said he felt blindsided because he agreed to delay an emergency hearing by five minutes at the request of attorneys for Snyder.

During those five minutes, he said, attorneys filed the bankruptcy petition in Detroit, which generally results in a stay in all other pending lawsuits involving the city. Ingham County Judge Rosemarie Aquilina later issued a temporary restraining order preventing further actions to cut pension benefits, but said she would have issued one to stop the bankruptcy filing altogether, if given the chance.

The judge said the bankruptcy filing was made at 4:06 p.m., five minutes before her emergency hearing began.

A furious Ronald King, a lawyer representing Detroit’s General Retirement System and the Detroit Police and Fire Retirement System, said he agreed to the five-minute delay that he now believes was not requested in good faith.

The basis for the emergency hearing was a pending lawsuit claiming that the bankruptcy is illegal because public employee pensions are protected by the state constitution. And they are:

Title IX § 24 – Public pension plans and retirement systems, obligation.
The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.

Financial benefits arising on account of service rendered in each fiscal year shall be funded during that year and such funding shall not be used for financing unfunded accrued liabilities.

Judge Aquilina is furious. In a hearing today, she put an immediate halt to the State’s effort to take Detroit into bankruptcy:

Ruling that the governor and Detroit’s emergency manager violated the state constitution, an Ingham County Circuit judge ordered Friday that Detroit’s federal bankruptcy filing be withdrawn.

“It’s absolutely needed,” said Judge Rosemary Aquilina, observing she hopes Gov. Rick Snyder “reads certain sections of the (Michigan) constitution and reconsiders his actions.” […]

Prior to her ruling on Friday, she criticized the Snyder administration and Attorney General’s Office for what appeared to be hasty action to outflank pension board attorneys.

“It’s cheating, sir, and it’s cheating good people who work,” the judge told assistant Attorney General Brian Devlin. “It’s also not honoring the (United States) president, who took (Detroit’s auto companies) out of bankruptcy.” […]

Aquilina said she would make sure President Obama got a copy of her order.

“I know he’s watching this,” she said, predicting the president ultimately will have to take action to make sure existing pension commitments are honored.

There’s more:

“I have some very 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,” and “this process shouldn’t have been ignored.” […]

Aquilina said the Michigan Constitution prohibits actions that will lessen the pension benefits of public employees, including those in the City of Detroit. Snyder and Orr violated the constitution by going ahead with the bankruptcy filing, because they know reductions in those benefits will result, Aquilina said.

“We can’t speculate what the bankruptcy court might order,” said assistant Attorney General Brian Devlin, representing the governor and other state defendants.

“It’s a certainty, sir,” Aquilina replied. “That’s why you filed for bankruptcy.”

Tea party Attorney General Bill Schuette has now involved himself and is appealing the Judge’s rulings to the Court of Appeals.

While I am still in support of the City of Detroit going through a managed bankruptcy, this sort of childish “Neener, neener, I win!” stunt to file paperwork mere minutes before a hearing could take place is insulting on so many levels. If the governor and his Detroit overseer are within their legal rights to file bankruptcy, they should let the legal process play out. There are real people’s lives at stake here, people who rely on their pensions to survive and have no other income outside of government assistance. They must be protected. They should be seen as Too Important to Fail.

Instead, Governor Snyder and his administration seem intent on playing whatever games are necessary to keep them from being heard.

I’m embarrassed that our state government is playing games like this with people’s lives and you can be very sure that as Election Day 2014 roles around, you will hear about this stunt again and again here on this site.

When they said that Detroit was under an “excessive heat warning” today, they most certainly were NOT kidding.

Stay tuned. This is very far from over.