The legal squabbling over Detroit’s bankruptcy filing continued yesterday, and the federal judge overseeing the case said that he would hold a hearing Wednesday to determine whether a lawsuit by retired public employees can block it, the New York Times reported today. Bankruptcy Judge Steven Rhodes agreed to the hearing requested by Detroit’s emergency manager Kevyn Orr in response to a Michigan judge’s ruling that the city’s chapter 9 filing violated the state’s constitution because it could cut city workers’ pensions. Orr had filed a motion asking that the city be protected from litigation as it proceeds with its historic bankruptcy filing, made last week. The state judge, Rosemarie Aquilina, adjourned a hearing in the lawsuit—brought by retired police officers, firefighters and other public employees—until next Monday. ABI Executive Director Sam Gerdano noted that chapter 9 bankruptcy does have a provision that prohibits proposing a bankruptcy plan that violates state law, which in Michigan’s case could include making changes to accrued public employee pensions and benefits. “You have to take it seriously,” Gerdano said. “Michigan has this provision on public pensions, and it’s unusual.” He predicted that the federal bankruptcy case ultimately would move forward. “It’s going to proceed,” he said, adding that there is a possibility that public pensions could be taken out of the bankruptcy equation and preserved.
