By Joseph Lichterman
DETROIT Nov 25 The judge overseeing Detroit's
historic bankruptcy petition set Dec. 3 as the date for issuing
his decision on whether the cash-strapped city qualifies as
bankrupt under federal law, according to a court filing posted
U.S. Judge Steven Rhodes will hand down his ruling in
federal bankruptcy court in Detroit at 9 a.m. EST on that day. A
written decision will be available shortly afterward, the court
No matter how Rhodes rules, it is expected that his decision
will be appealed. Rhodes also is considering a request from one
of the objectors, the American Federation of State, County and
Municipal Employees, Detroit's largest union, which asked the
judge earlier this month to allow any appeal to go directly to
the U.S. 6th Circuit Court of Appeals, bypassing the U.S.
District Court in Detroit.
Rhodes' ruling will cap months of anticipation, since
Detroit filed its bankruptcy petition on July 18.
During a nine-day trial that wrapped up on Nov.
8, Detroit sought to prove that it is bankrupt.
Under Chapter 9 of the federal bankruptcy code, it is
Detroit's burden to prove it is insolvent, it had proper
approval to file for bankruptcy and that it negotiated in good
faith with creditors or that negotiations were impractical.
The city's unions, public-sector retirees and two pension
funds have objected to Detroit's bankruptcy filing, arguing that
Kevyn Orr, Detroit's state-appointed emergency manager,
purposely drove the city into bankruptcy court and did not
negotiate with creditors for an out-of-court settlement.
The trial included a rare appearance from a sitting governor
on the witness stand as Michigan Governor Rick Snyder, who
approved the city's bankruptcy filing, testified. Orr also
testified along with a long line of other government officials,
consultants and union leaders.
City lawyers argued during the eligibility trial that
Detroit acted in good faith prior to the bankruptcy filing, but
that negotiations were impractical because of the large number
of creditors and an unwillingness on the part of union, retiree
and pension fund negotiators to make concessions.
Bruce Bennett, one of the city's lead bankruptcy attorneys,
said in his closing arguments earlier this month that the city
recognized it would be nearly impossible to negotiate with
creditors, but decided to try anyway.
"You absolutely can believe in your head that this is never
going to work, but try anyway," he said. "And I think that is
the situation in this case."
With $18.5 billion in debt and liabilities, Detroit is the
largest U.S. city to file for bankruptcy. Its liabilities
include $5.7 billion for healthcare and other obligations, and
$3.5 billion involving pensions, the city says.
The unions, retirees and pension funds have argued that
Michigan's constitution protects city pensions from being cut,
but Orr has said pensions are likely to be reduced as part of
the city's restructuring.
Bankruptcy opponents also argued Detroit rushed into court
without providing enough time or information to facilitate
negotiations between the city's release of its initial proposal
to creditors on June 14 and when it filed for bankruptcy in