Friday, July 26, 2013

Bankruptcy Snakepit Grows Wilder

Posted By on Fri, Jul 26, 2013 at 7:20 PM

If you were already thinking that this whole Detroit bankruptcy thing has quickly turned into a crazy and confusing mess, I’ve got news for you: It’s even more bizarre than you probably realize.

A short time ago I field a Freedom of Information Act lawsuit against the city, trying to pry loose a video recording of a meeting that took place earlier this year. I just found out from Shaun Godwin, the lawyer representing me (and, by extension, the Metro Times) that, because of the Chapter 9 bankruptcy filing by the city, that action and other lawsuits against the city are automatically being put on hold.

Not that I doubted what Godwin had to say — he’s a good and competent guy — but there’s an old journalism maxim that advises,  “If your mother says she loves you, check it out.”

So I did, by contacting Bill Nowling, the spokesman for Emergency Manager Kevyn Orr. Nowling informed me via email that is indeed the case. “What,” I asked, “is the rationale for that?”

“It is the law,” answered Nowling. “When bankruptcy is filed, all litigation against the city is stayed.”

That’s potentially huge. It’s also something I never heard talked about at all prior to the bankruptcy filing.

The next people I contacted were lawyers involved in the two federal lawsuits challenging the constitutionality of the state’s emergency manager law, PA 436.

Are those lawsuits affected by all this? They aren’t directed at the city, but rather the governor and the state. However, U.S. Bankruptcy Judge Steven Rhodes, in his first ruling in the Detroit case last week, put a hold on three lawsuits in state court that were attempting to stop the bankruptcy from going forward I an attempt to ensure that state constitutional protections of pensions for municipal workers were preserved. Rhodes said those issues would be decided in his court, and included relevant actions against the state, Gov. Rick Snyder and state Treasurer Andy Dillion.

Attorney Melvin “Butch” Hollowell, who is representing the Detroit branch of the NAACP in one of the two federal suits challenging the EM law, said that the order issued by Rhodes is “unclear enough that clarification is required.”

He said a motion will quickly be filed on behalf of the civil rights group requesting that Rhodes lift any possible say on that suit, allowing it to move forward in front of U.S. Judge George Steeh.

Attorneys handling the other federal case — and there’s a bunch of them — said they will be meeting early next week in an attempt to sort things out and decide their next step. One of the team, though, provided some keen insight.

"It is certainly an understatement," observed attorney Julie Hurwitz, "to say that nothing is too weird to imagine as a consequence of what is going on."

— Curt Guyette

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