Pending settlements stall appeals of Detroit bankruptcy ruling

July 29 Tue Jul 29, 2014 1:22pm EDT

July 29 (Reuters) - Detroit has been making progress in settling disputes with its public safety unions, a development that has put the brakes on several appeals in federal court of a ruling that the city was eligible for municipal bankruptcy, attorneys said on Tuesday.

Robert Gordon, an attorney representing the city's two retirement systems, said two of the three appeals of the December ruling, including one by the pension funds, were postponed. The cases were slated for oral arguments on Wednesday before the Sixth Circuit U.S. Court of Appeals in Cincinnati.

In a letter on Monday to the Sixth Circuit U.S. Court of Appeals attorneys for Detroit, the pension funds, and the city's police officers and firefighters unions asked for the postponement. They cited "ongoing settlement discussions with the city, the Detroit Fire Fighters Association and the Detroit Police Officers Association."

The third appeal, by the Retired Detroit Police Members Association, was also put on hold pending a settlement with the city, according to a spokeswoman for the law firm representing the group.

The appeals court on Friday had ordered the three cases to proceed to the oral argument phase, while putting four other cases on hold, even though the city had asked the court to delay all the cases. The appeals were filed directly to the Sixth Circuit Court in the wake of U.S. Bankruptcy Judge Steven Rhodes' Dec. 3 ruling that Detroit was broke and eligible for the biggest municipal bankruptcy in U.S. history.

The appeals filed by the pension funds and various labor unions and retiree groups took issue with Rhode's contention that pensions could be cut as part of the city's restructuring efforts. They also argued against the legality of a Michigan law that enabled Detroit's state-appointed emergency manager to file the bankruptcy case in July 2013 with the governor's permission.

Since that time, Detroit has reached settlements with most major creditors, including a deal over pension cuts with its general and police and fire retirement systems. An overwhelming majority of the city's active and retired workers also supported Detroit's plan to adjust $18 billion of debt, according to voting results released last week.

One of Detroit's last remaining major hold-out creditors, bond insurer Syncora Guarantee Inc, will argue before the appeals court on Wednesday over a July 11 U.S. District Court ruling that prohibited it from blocking the city's access to casino tax revenue.

Syncora, which insures some city bonds and interest-rate swaps, claims it has a lien on about $11 million in monthly tax revenue that had been used as collateral since 2009 to secure the swaps. Earlier this year, Judge Rhodes approved a settlement between Detroit and the swap counterparties that did not include Syncora. (Reporting By Karen Pierog, additional reporting by Lisa Lambert; Editing by David Gregorio)