Tag Archives: Michigan

Detroit Bankruptcy is Unconstitutional

As a follow up to the prior post reporting on the bankruptcy filing of Detroit, now a Michigan court has ruled that the bankruptcy filing is unconstitutional.  The decision can be accessed here.

The background of this legal battle raises a lot of legal questions.  The events are as follows.  First, Detroit announces it will be declaring bankruptcy.  Then, lawsuits are filed to block bankruptcy filings/proceedings.  An emergency hearing is scheduled on Thursday (last week) in front of a judge about blocking the bankruptcy proceedings.  Five (5) minutes before the Thursday hearing, Detroit files a petition for bankruptcy.  Afterwards, another hearing is set for Friday.

On Friday, the Ingham County Court ruled against the city.  The court relied on Michigan’s state constitution, which prohibits actions that diminish or impair pension benefits of public employees.  Because Detroit was aware that declaring bankruptcy would affect negatively the pension benefits of public employees, the court ruled that it acted unconstitutionally.

Michigan’s Attorney General Schuette stated that Detroit will be appealing the ruling.  The Attorney General also stated that they will be requesting a stay on the bankruptcy proceedings until the appeal is heard.

This background is so interesting because it raises a lot of legal questions.  Filing a Chapter 9 petition gives the bankruptcy court exclusive jurisdiction over the debtor’s (Detroit) assets.  The interesting predicament is that Detroit filed a petition for bankruptcy five (5) minutes before the Thursday hearing — before any order from the Ingham County Court.

Yet, the state court is ordering the Governor to “(1) direct the Emergency Manager to immediately withdraw the Chapter 9 petition filed on July 18, and (2) not authorize any further Chapter 9 filing which threatens to diminish or impair accrued pension benefits.”

Some of the questions include how to reconcile the state’s and the bankruptcy’s court jurisdictions.  For example, can the state court order state officials (like the Governor) to withdraw the petition? How can a bankruptcy proceeding reconcile itself with Michigan’s state constitution? Are the plaintiffs subject to sanctions for violating a stay in bankruptcy court?

The Huffington Post has an interesting tidbit:

Michigan is one of nine states that explicitly protects public employee pensions in its state constitution.  But the state of Michigan doesn’t guarantee the money to public employees if a city defaults or can’t pay those bills…

The law of bankruptcy is enshrined in the U.S. Constitution.  And the limited case law of Chapter 9 bankruptcy, which applies to cities and municipalities, doesn’t say whether a judge can legally subvert Michigan’s constitution to lessen Detroit’s obligations to its pensioners.

You can read more about Michigan’s constitution protecting public employees’ pensions here.  Some other notable Chapter 9 bankruptcy proceedings nuclide Jefferson County, Alabama (2011) and Orange County, California (1994).

via Detroit bankruptcy unconstitutional, judge rules in pension case – ABA Journal.

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Detroit files for bankruptcy

When I heard about this story on NPR I wasn’t surprised.  Detroit has struggled since the closing of car factories.  Several years ago when I visited Detroit, in my opinion Detroit seemed like an empty city.  The factories were big lots of land deserted.

Yesterday (July 18th) Detroit filed for bankruptcy under Chapter 9.  Detroit is seeking to negotiate is $18.5 million debt.  Governor Snyder stated,

The fiscal realities confronting Detroit have been ignored for too long. I’m making this tough decision so the people of Detroit will have the basic services they deserve and so we can start to put Detroit on a solid financial footing that will allow it to grow and prosper in the future.

This is a difficult step, but the only viable option to address a problem that has been six decades in the making.

Consequently, two pension funds have filed a complaint against emergency manager Kevyn Orr (Gen. Ret. Sys. of the City of Detroit v. Orr., No. 13-768-CZ, Circuit Court Ingham County, Michigan) and Governor Snyder seeking to block the bankruptcy from proceeding.

The funds allege that a bankruptcy proceeding would interfere with the constitutional protection of public retiree rights.

via Detroit files for bankruptcy, the biggest US city ever to do so – ABA Journal.

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More on Michigan’s Right-To-Work Laws

The Michigan House of Representatives approved its right-to-work law illegally last week, while police locked the public out of the state Capitol, a union member claims in an Open Meetings Act complaint.  The right-to-work law makes it illegal to demand union membership as a condition of employment, though workers who do not pay union dues will still be covered by union-negotiated contracts.

Robert Davis, an AFSCME representative, sued the Michigan House in Ingham County Court.  Davis is seeking to invalidate the law on several grounds.

First, Davis alleges Michigan violated Michigan’s Open Meetings Act.  The Act provides that “all meetings of a public body shall be open to the public and shall be held in a place available to the general public.  All persons shall be permitted to attend any meeting except as otherwise provided by this act.”

In his complaint, Davis states that he “and at least one other member of the plaintiff Citizens United were denied entry and access to the State Capitol and to the defendant House’s December 6, 2012 session meeting by the Michigan State Police.”

Further, Davis alleges that no exclusion applies.  Pursuant to Michigan’s Open Meetings Act, “A person shall not be excluded from a meeting otherwise open to the public except for a breach of the peace actually committed at the meeting.”  Davis claims that he and his group “did not commit any civil disobedience or disturbances of the peace that would warrant plaintiffs being denied entry to defendant House’s December 6, 2012 session meeting.”

Therefore, Davis claims, the vote on the anti-union bill was illegal.

via Courthouse News Service.

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En Banc 6th Circuit Overturns Voter-Mandated Affirmative Action Ban in Michigan

An en banc federal appeals court has struck down a voter-approved ban on affirmative action in Michigan as a violation of the equal protection clause.

The Cincinnati-based 6th U.S. Circuit Court of Appeals said the ban on affirmative action in university admissions placed an unfair burden on supporters of racial preferences, whose only option would be to amend the state constitution. The New York Times, the Detroit News, the Detroit Free Press and Education Week have stories on the decision.

Unlike supporters of affirmative action, a student who wants alumni connections considered in admissions has a wide variety of options, including lobbying admissions committees and petitioning university leaders, the court majority said in the 8-7 decision PDF. The affirmative action ban undermines the right of citizens to “have equal access to the tools of political change,” according to the majority.

Michigan is among eight states that ban universities from considering race in admissions, according to the Times. The San Francisco-based 9th U.S. Circuit Court of Appeals has upheld California’s ban.

The 6th Circuit decision is Coalition to Defend Affirmative Action v. University of Michigan. The ruling comes as the U.S. Supreme Court is considering a university’s use of affirmative action in Fisher v. University of Texas at Austin. The Fisher case revisits the Supreme Court’s 2003 holding in Grutter v. Bollinger, in which the Supreme Court held 5-4 that universities may use race as a factor in admissions.

via En Banc 6th Circuit Overturns Voter-Mandated Affirmative Action Ban in Michigan – News – ABA Journal.

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6th Cir: ban on equal opportunity struck down

The 6th Circuit Court of Appeals recently struck down (2-1) Michigan’s ban on equal opportunity programs in public higher education, employment, and contracting.

The court ruled that the ban changed the political process in Michigan to such a degree that it puts “special burdens on minority interests,” which violates the Constitution’s Equal Protection Clause.

“The Constitution requires that our democratic processes must be open and accessible to all citizens, regardless of their race,” said John Payton, president and director-counsel of the NAACP Legal Defense and Educational Fund, Inc. (LDF). “Today’s decision ensures fairness for advocates of diversity and inclusion in higher education.”

In 2006, Michigan passed a ballot initiative, Proposal 2, amending its state constitution to ban equal opportunity programs. Following its passage, a coalition of civil rights organizations that includes the ACLU of Michigan, ACLU Foundation of Southern California, and the NAACP Legal Defense and Educational Fund filed a federal lawsuit challenging its constitutionality.

“Through this lawsuit, we set out to level the playing field so that racial identity is not treated as irrelevant or meaningless in this state,” said Kary L. Moss, executive director of the ACLU of Michigan. “Today we are one step closer to realizing that goal”

The leading proponent of these anti-equal opportunity ballot initiatives is Ward Connerly, a California businessman and former University of California regent, who has shopped similar initiatives in states around the country for over a decade. Connerly-sponsored initiatives have passed in four other states – California (1996), Washington (1998), Nebraska (2008), and Arizona (2010). Colorado is the only state where, in 2008, voters rejected a Connerly anti-equal opportunity measure.

The state of Michigan has indicated that it will appeal the decision to the full court.

via Federal Court Strikes Down Michigan’s Ban on Equal Opportunity.


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