Closing arguments in Detroit bankruptcy trial

DETROIT, Mich. (AP) - Closing arguments are wrapping up in the historic Detroit bankruptcy eligibility case.  High priced attorneys are arguing on both sides of the case but it comes down to one, Bankruptcy Judge Steven Rhodes. 

During closing arguments, Judge Rhodes asked the city attorney about negotiating in good faith with retirees and creditors while also claiming it was impractical.  Good faith negotiations is a legal requirement before bankruptcy.

During the afternoon Judge Rhodes asked an attorney about Governor Rick Snyder who authorized Detroit's bankruptcy filing.  "What was the governor's motivation in your view…other than to help the city?" the judge asked. 

AFSCME Attorney Sharon Levine responded the bankruptcy filing was an "unconstitutional application to get rid of legacy debt" that this was a "terrifying use of chapter 9 and it would set a "dangerous precedent" for other cities in financial trouble to follow.

No one is disputing Detroit has a debt of $18 billion with other financial reports. 
More than 20,000 Detroit city retirees face cuts in their pensions and health care. 

Pension underfunding has been set at $3.5 billion and health care costs $5.7 billion.  A separate lawsuit is pending over health care before Bankruptcy Judge Steven Rhodes.

Attorney Matthew Schneider who is representing the state presented his closing arguments first, telling the judge Detroit was facing a financial storm, and that early work with consultants and the Jones Day law firm in 2012 was "never about predetermining a Chapter 9 filing."

Schneider said it would be "irresponsible to fail to prepare."  He also said Governor Rick Snyder, who authorized the Chapter 9 filing showed leadership by making "...the hard decision.  That's not bad faith, that's good faith."

Governor Snyder testified early in the trial about Michigan Constitutional protections against cuts to pensions. 

The judge was reminded the governor said he has confidence in the judicial process, there has to be a "legal plan" so "the appropriate people can decide."

Attorney Bruce Bennett with Jones Day and representing the city, told the judge there was no provision for the city to pay legacy debts (pensions and health care). Bennett also said that Detroit was collecting only 57 cents on every tax dollar for city services and it "needs to be fixed."

Legal briefs on this issue are due November 13 and Judge Rhodes could rule on eligibility by the end of next week.

Print this article Back to Top