DETROIT — U.S. Bankruptcy Judge Steven Rhodes has declared that his court has the authority to rule on a dispute between the city’s pension funds and the City of Detroit — not the state court in Ingham County, Mich.
Rhodes, in an order filed Monday, said he will hold a hearing on Wednesday at 10 a.m. to consider the city of Detroit’s request to put all lawsuits filed before the city filed for bankruptcy on hold.
The decision by Rhodes means that the first hearing of Detroit’s bankruptcy case could prove to be a crucial moment in the city’s effort to restructure under court protection.
The Police and Fire Retirement System and the General Retirement System and its 20,000 retirees filed a lawsuit in Ingham County court last week that argues that Detroit’s bankruptcy filing must be withdrawn because it violates the Michigan Constitution and state law.
If Rhodes rules in Detroit’s favor, it would put an automatic stay in the Ingham County case.
“The (bankruptcy) court finds that the court has jurisdiction over this matter,” Rhodes said in his order.
Rhodes also scheduled a separate hearing for Friday, Aug. 2 to consider other issues, including:
• Set a deadline for any objections to Detroit’s eligibility for bankruptcy protection.
• Detroit’s request for the appointment of a committee to represent retirees.
Earlier Monday, a hearing on whether Detroit’s bankruptcy filing violates the state’s law against tampering with pension benefits was adjourned to July 29 by Judge Rosemarie Aquilina.
Aquilina ruled last week that the bankruptcy filing violated the state constitution.
Aquilina said the Michigan Constitution prohibits actions that will lessen the pension benefits of public employees, including those in the city of Detroit. Michigan Gov. Rick Snyder and emergency manager Kevyn Orr violated the constitution by going ahead with the bankruptcy filing, because they know reductions in those benefits will result, Aquilina said.
On Friday, Michigan Attorney General Bill Schuette appealed an Ingham County judge’s ruling that Detroit’s bankruptcy filing must be withdrawn because it violates the Michigan Constitution and state law.
