A Federal Judge Has Frozen All Legal Challenges to Detroit's Bankruptcy
Since the moment Detroit filed for bankruptcy last Thursday – making it the largest municipality in U.S. history to ever resort to the tactic – civil servants and retirees who stand to lose part of their pensions in any debt restructuring have argued that the city legally doesn't have the right to go bankrupt. The Michigan constitution, they've argued, bars any action that threatens the pensions of public employees, as a bankruptcy ruling would theoretically make possible. And on Friday, an Ingham County Circuit judge agreed with the unions, ruling the bankruptcy unconstitutional.
Now, some of those obstacles to city emergency manager Kevyn Orr's strategy have been cleared by a U.S. Bankruptcy Court judge. With protesting public servants picketing outside, a federal judge suspended all outside legal challenges on Wednesday. This doesn't mean that the city is eligible for bankruptcy – that decision is yet to come. But Judge Steven Rhodes ruled that federal courts, and not state courts (nor an Ingham County judge), will make that call.
Opponents of the bankruptcy effectively cannot try to derail or bog it down now with lawsuits filed in other jurisdictions (typically, all other litigation is suspended during a bankruptcy filing). All issues related to the city's bankruptcy, Rhodes ruled, will be decided in bankruptcy court. The decision is a victory for the city and its emergency manager. Further delays in the case, Rhodes said in his ruling, would only harm Detroit.
Now the city and everyone watching it can prepare for the next court date, on Aug. 2.
Top image of protesters outside a federal courthouse in Detroit on Wednesday: Rebecca Cook/Reuters