A judge for Michigan's Ingham County Circuit Court [official website] ruled [opinion, PDF] Friday that Detroit's bankruptcy filing is "unconstitutional" and must be withdrawn. Circuit Judge Rosemarie Aquilina said that Detroit's bankruptcy filing violates the Michigan Constitution [text], which bans any action that threatens to cut the pension benefits of public employees. Michigan Attorney General Bill Schuette said he intends to appeal the decision. The orders prevent Governor Rick Snyder and Detroit Emergency Manager Kevyn Orr from taking further actions that threaten to diminish the pension benefits of City of Detroit retirees. The ruling also requires Snyder to direct Orr to withdraw the Chapter 9 of the US Bankruptcy Code [text] petition filed on July 18 immediately. Aquilina requested a copy of the declaratory judgment be sent to US President Barack Obama.
The case arises from three separate lawsuits and a Detroit bankruptcy case. The City of Detroit, unable to pay its city pensioners, filed bankruptcy on July 18. The following day, the US Court of Appeals for the Sixth Circuit [official website] designated [order, PDF] US Bankruptcy Judge Steven Rhodes to oversee Detroit's bankruptcy case. The case is the biggest bankruptcy filing in the nation's history, involving more than $18 billion in debts. The three separate lawsuits were brought by city pensioners, who have been unable to collect their benefits. Lawyers representing pensioners and two city pension funds got an emergency hearing with Aquilina in an attempt to block the bankruptcy filing. Chapter 9 protects a city against most lawsuits so the municipality can reorganize its operations and debt without distraction. Detroit's financial woes are leading to discussion of an unlikely bailout, though federal officials have not commented definitively on the matter.