Today's Bankruptcy Court hearing...

First, hearing from individual creditors, rather than attorneys, is VERY, VERY rare. Judge Rhodes acted as we sometimes wish all our public servants would: varying the rules to effectuate democracy.

Second, you could see by the reactions to arguments which matter and which do not. The judge is receptive to the suggestion that a plan that impairs pensions violates the state constitution. That issue is likely what is called a "core proceeding" and would be in the scope of his authority to decide. He may, however, refer it to the state court or the US District Court.

I saw nothing that indicated that he was receptive to any of the arguments about PA 436. Whether that law is in accord with the state constitution is outside of his jurisdiction. And I don't see the higher courts of Michigan receptive to that either.

It was good to let people have their say. I doubt it changes much, but people have a right to be heard.

Thanks for the analysis BankruptcyGuy.

However, I do have something to add about your analysis regarding PA 436.

The three lawsuits that were filed against PA 436 were in the federal courts so they can be deemed unconstitutional under federal law. They have nothing to do with the Michigan state constitution or the Michigan state supreme court [[and the litigants were well aware that, simply for political reasons, they didn't have a chance getting the law invalidated in Michigan's courts). As a result, these lawsuits are technically within Judge Rhodes' jurisdiction as he is a federal court judge. Since Judge Rhodes extended the stay on all lawsuits against the city to include the state as well, the proceedings on those suits in the circuit courts have also been put on hold.

The litigants in these lawsuits DO have the option to bring the case in front of Judge Rhodes [[which they have done), but it is entirely at his discretion if he takes those cases on [[and he's already hinted that he won't, most likely because he knows it would just cause more uncertainty in the entire bankruptcy proceeding. Remember that Judge Rhodes also lives in Metro Detroit, so he's hardly brand new to any of this).

BTW, speaking of the lawsuits against PA 436, another thing did come to mind. Once Detroit exits bankruptcy and the lawsuits are allowed to continue, what if a judge rules PA 436 unconstitutional under federal law and thus invalidates all of the actions taken by Kevyn Orr and the State of Michigan [[including the bankruptcy proceeding itself)?

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Originally Posted by 313WX

Thanks for the analysis BankruptcyGuy.

However, I do have something to add about your analysis regarding PA 436.

The three lawsuits that were filed against PA 436 were in the federal courts so they can be deemed unconstitutional under federal law. They have nothing to do with the Michigan state constitution or the Michigan state supreme court [[and the litigants were well aware that, simply for political reasons, they didn't have a chance getting the law invalidated in Michigan's courts). As a result, these lawsuits are technically within Judge Rhodes' jurisdiction as he is a federal court judge. Since Judge Rhodes extended the stay on all lawsuits against the city to include the state as well, the proceedings on those suits in the circuit courts have also been put on hold.

The litigants in these lawsuits DO have the option to bring the case in front of Judge Rhodes [[which they have done), but it is entirely at his discretion if he takes those cases on [[and he's already hinted that he won't, most likely because he knows it would just cause more uncertainty in the entire bankruptcy proceeding. Remember that Judge Rhodes also lives in Metro Detroit, so he's hardly brand new to any of this).

BTW, speaking of the lawsuits against PA 436, another thing did come to mind. Once Detroit exits bankruptcy and the lawsuits are allowed to continue, what if a judge rules PA 436 unconstitutional under federal law and thus invalidates all of the actions taken by Kevyn Orr and the State of Michigan [[including the bankruptcy proceeding itself)?

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Good questions.

First, I do not share your opinion about PA 436 being on shaky ground due to the US constitution. There is no right in the US Constitution anywhere to home rule of municipalities. The states can make their own rules [[Article 10 of the US Const.) and have done so. Their could be claims that PA 436 could be invalid either de facto or as applied as a matter of Michigan law; I do not see any federal claims. But I guess our courts will be the final arbiter of that. I have read Phillips v. Snyder, and I hope there was a discount on the per word cost of the complaint.

No, a separate lawsuit brought in federal court claiming that PA 436 violates the US constitution would have to be brought in U.S. District Court, not Bankruptcy Court. See Stern v. Marshall [[the Anna Nicole Smith case). Both were, in fact. The Bankruptcy Court can allow the case to proceed or stay the case. I didn't read the full text of the order, but I believe these cases are specifically stayed.

As to your last question, it's a really tough one. The court which ruled it unconstitutional could give it retroactive or prospective effect. The unfortunate answer to your question is "it depends."

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Originally Posted by BankruptcyGuy

Good questions.

First, I do not share your opinion about PA 436 being on shaky ground due to the US constitution. There is no right in the US Constitution anywhere to home rule of municipalities. The states can make their own rules [[Article 10 of the US Const.) and have done so. Their could be claims that PA 436 could be invalid either de facto or as applied as a matter of Michigan law; I do not see any federal claims. But I guess our courts will be the final arbiter of that. I have read Phillips v. Snyder, and I hope there was a discount on the per word cost of the complaint.

No, a separate lawsuit brought in federal court claiming that PA 436 violates the US constitution would have to be brought in U.S. District Court, not Bankruptcy Court. See Stern v. Marshall [[the Anna Nicole Smith case). Both were, in fact. The Bankruptcy Court can allow the case to proceed or stay the case. I didn't read the full text of the order, but I believe these cases are specifically stayed.

As to your last question, it's a really tough one. The court which ruled it unconstitutional could give it retroactive or prospective effect. The unfortunate answer to your question is "it depends."

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My understanding is that in at least two of the lawsuits, the charge is that PA 436 violates the voting rights of citizens in each municipality [[Civil Rights Act of 1964), and therefore the law is unconstitutional. It doesn't really question the fact that the State of Michigan is a sovereign entity while the municipalities in the State of Michigan are not sovereign. However, the argument is that over half of the state's minority population is under control of an EM, and thus it dilutes the voting power of minorities in the state. The argument is kind of interesting, and the case may have also had an interesting outcome. Maybe this is also part of the reason Snyder/Dillon/Orr expedited the bankruptcy filing [[versus waiting any longer and risking the aforementioned), roughly two weeks before these hearings began?

Then there's also the argument that the lawsuits against PA 436 affects ALL cities/school districts under emergency management in the state of Michigan, not just Detroit. The thing is, except for Detroit, none of those cities have filed for bankruptcy, and that their right to a fair trial shouldn't be obstructed just because of Detroit's bankruptcy.

And yes, IIRC, Snyder and Dillon made a specific request to have lawsuits against the state stayed as well, and Judge Rhodes granted them their request.

Curt Guyette of the Metro Times had some interesting investigative articles about everything surrounding the PA 436 lawsuits. Respectfully, John Pattow who is also a bankruptcy expert with the University of Michigan and John Mogk of Wayne State's law school seem to disagree with your conclusion regarding Judge Rhodes having the power to rule on these cases [[versus only the U.S. Federal District Courts) in spite of the stay.

http://metrotimes.com/news/news-hits...imbo-1.1535586

http://metrotimes.com/news/news-hits...1538868?pgno=1

To all the unions who work for Detroit city government and former unions who cried 'BOO HOO!' for keep their benefits.


It's their fault they borrow lost of money.


It's their fault they don't a any deficit spending cuts.


It's their fault they squander they money for the luxurious living.

Detroit city government have been borrowing money for over 100 years and they pay a lot back. It's around the 1960s from Cavanaugh to Bing that Detroit started to pay back a little. Now the city can't borrow money and its creditors want their money back my any means necessary. You new puppet mayor Kevyn Orr will make sure that filing Detroit for bankruptcy will be the last option to get the city back on financial recovery.

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Originally Posted by 313WX

My understanding is that in at least two of the lawsuits, the charge is that PA 436 violates the voting rights of citizens in each municipality [[Civil Rights Act of 1964), and therefore the law is unconstitutional. It doesn't really question the fact that the State of Michigan is a sovereign entity while the municipalities in the State of Michigan are not sovereign. However, the argument is that over half of the state's minority population is under control of an EM, and thus it dilutes the voting power of minorities in the state. The argument is kind of interesting, and the case may have also had an interesting outcome. Maybe this is also part of the reason Snyder/Dillon/Orr expedited the bankruptcy filing [[versus waiting any longer and risking the aforementioned), roughly two weeks before these hearings began?

Then there's also the argument that the lawsuits against PA 436 affects ALL cities/school districts under emergency management in the state of Michigan, not just Detroit. The thing is, except for Detroit, none of those cities have filed for bankruptcy, and that their right to a fair trial shouldn't be obstructed just because of Detroit's bankruptcy.

And yes, IIRC, Snyder and Dillon made a specific request to have lawsuits against the state stayed as well, and Judge Rhodes granted them their request.

Curt Guyette of the Metro Times had some interesting investigative articles about everything surrounding the PA 436 lawsuits. Respectfully, John Pattow who is also a bankruptcy expert with the University of Michigan and John Mogk of Wayne State's law school seem to disagree with your conclusion regarding Judge Rhodes having the power to rule on these cases [[versus only the U.S. Federal District Courts) in spite of the stay.

http://metrotimes.com/news/news-hits...imbo-1.1535586

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Bob Sedler's comment, just further down in the article, is probably more correct. I think John was misquoted when it makes it sound like the bankruptcy court [[which is not an Article III Court) "has priority" over a US District Court. I certainly does not. Bob is a great scholar and one of the gems of Wayne State's Law School.

On your first point, you're unquestionably right--the bankruptcy was expedited to reduce the risk of losing any of these cases [[including the state court one, which really pushed them over the edge).

Thank you for your well thought out and reasoned response.

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Originally Posted by BankruptcyGuy

Bob Sedler's comment, just further down in the article, is probably more correct. I think John was misquoted when it makes it sound like the bankruptcy court [[which is not an Article III Court) "has priority" over a US District Court. I certainly does not. Bob is a great scholar and one of the gems of Wayne State's Law School.

On your first point, you're unquestionably right--the bankruptcy was expedited to reduce the risk of losing any of these cases [[including the state court one, which really pushed them over the edge).

Thank you for your well thought out and reasoned response.

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I agree, that it appears that he was misquoted. In fact, the Supreme Court recently curtailed the powers of the US Bankruptcy court [[non article III court) in Stern v. Marshall, 131 S.Ct. 2594 [[2011). In fact, the Court held that "when a suit is made of ‘the stuff of the traditional actions at common law tried by the courts at Westminster in 1789,’ and is brought within the bounds of federal jurisdiction, the responsibility for deciding that suit rests with Article III judges in Article III Courts."

Following that logic, the claims [[and counterclaims) being brought against PA 436 will most likely be stayed pending the bankruptcy lawsuit and will have to be vetted in either state court or in a US District Court [[i.e., Article III court).