Bloomberg News

Detroit Judge Opposes Quicker-Than-Normal Bankruptcy Appeal (1)

December 20, 2013

Detroit’s bankruptcy judge urged a federal appeals court to reject an effort by pension groups and unions to overturn his ruling that the city’s $18 billion bankruptcy was legitimate.

In a written memorandum clarifying his Dec. 16 oral ruling, U.S. Bankruptcy Judge Steven Rhodes in Detroit said “there is no good cause” for allowing union and pension groups to skip the normal appeal process and go directly to U.S. Court of Appeals in Cincinnati. Rhodes agreed to let the groups ask the appeals court to accept their case.

Should the appellate court accept the appeal, Rhodes urged the judges to confer with the mediator who is trying to broker a settlement among all creditors, including retirees and city workers who oppose the bankruptcy.

On Dec. 3, Rhodes found that Detroit was entitled to remain under bankruptcy court protection, where the city can decline to pay many of its bills and creditors are limited in what they can do to interfere with any restructuring efforts.

In his ruling today, Rhodes considered two requests by the city’s opponents. While he said opponents have a right seek an immediate appeal, the court should refuse to hear it because it’s not final.

If the appeals court does agree to decide the case, Rhodes said he’s not in a position to say whether it should be on a fast-track basis.

During a Dec. 16 hearing, Rhodes questioned whether a quick appeal might affect mediation efforts.

In the bankruptcy case of San Bernardino, California, a federal judge refused to allow opponents to skip the normal appeals step, saying it might cause them to drag their feet during settlement negotiations.

That decision by Meredith M. Jury was later overturned.

Normally, creditors must first ask a district court judge to review a bankruptcy ruling before going to an appeals panel.

The Detroit case is In re City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).

To contact the reporter on this story: Steven Church in Wilmington, Delaware at schurch3@bloomberg.net


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