Courtesy of Mish.
As hoped and expected Detroit Bankruptcy Protections Affirmed, Snyder Shielded.
Detroit can enjoy the protections of bankruptcy, including immunity from lawsuits related to the case, a federal judge ruled, extending that shield to Michigan Governor Rick Snyder.
U.S. Bankruptcy Judge Steeven Rhodes in Detroit today blocked lawsuits by public employee groups and pension funds who allegd the state overreached in seeking court protection from creditors. Such claims must be heard in bankruptcy court, Rhodes said. His ruling gives the city the opportunity it said it needs to address $18 billion in debt without disruptions.
Chapter 9 of the U.S. Bankruptcy Code, which covers municipalities, typically prevents creditors from taking actions against the debtor that might interfere with reorganization.
City unions and pension officials claim Snyder, 54, violated Michigan’s constitution by authorizing Orr to file for bankruptcy. Pension funds for retired city workers sued in state court to have the filing declared illegal.
Barring lawsuits against Snyder related to the bankruptcy would be unfair to Michigan’s citizens, said Sharon Levine, an attorney for the American Federation of State, County & Municipal Employees, part of the AFL-CIO.
“We’re taking away very fundamental constitutional rights,” Levine said.
Michael Artz, a lawyer for the American Federation of State, County & Municipal Employees, said outside court after the hearing that while the question of the constitutionality of the Chapter 9 filing should have remained in state court, the union “will fight whatever court we’re in.”
Fights by AFL-CIO Welcome
I welcome these fights by the AFL-CIO. Indeed I hope they spend every cent they have because they are going to lose.
And when they lose, others cities will decide to escape preposterous unions contracts and pension benefits via bankruptcy.
General Obligation Bondholders Beware
Several people emailed me that that bondholders should have nothing to worry about because the bonds are backed by tax revenue….
