August 1, 2014 / 6:31 PM / 3 years ago

Federal court agrees to suspend Detroit bankruptcy appeals

Aug 1 (Reuters) - A federal court agreed on Friday to suspend seven cases seeking to overturn a lower court ruling that found Detroit was eligible for municipal bankruptcy.

The Sixth Circuit U.S. Court of Appeals’ action followed motions filed on Thursday by attorneys for Detroit pension funds, unions and others requesting that the cases be suspended instead of dismissed until the city concludes a confirmation process for its bankruptcy exit plan.

The appeals court had initially scheduled oral arguments for July 30 for the seven cases. But those proceedings were eventually canceled at the request of the city and the appealing parties due to actual or pending settlements.

In the wake of the cancellations, the appealing parties were given a Thursday deadline to inform the court if they wanted to dismiss their cases.

Instead of dismissals, the parties asked the court to hold off on ruling on any issues in the cases, adding however that the appeals process could be resumed if Detroit’s current plan to adjust $18 billion of debt is changed or fails to be confirmed.

The appeals took issue with U.S. Bankruptcy Judge Steven Rhodes’ contention that pensions could be cut as part of the city’s restructuring efforts despite protections in the Michigan Constitution against impairing public worker pensions. 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 Rhodes’ December ruling, Detroit has reached settlements with most of its major creditors. Active and retired city workers overwhelmingly voted to accept the city’s debt adjustment plan, which calls for cuts to retiree pensions and health care.

Rhodes has set an Aug. 21 start date for the confirmation hearing, which will determine if the plan is fair and feasible. (Reporting by Karen Pierog; editing by Andrew Hay)

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