By Paul Egan, Detroit Free Press
LANSING, Mich - An Ingham County judge says Thursday's historic Detroit bankruptcy filing violates the Michigan Constitution and state law and must be withdrawn.
Attorney General Bill Schuette said he will appeal Circuit Judge
Rosemarie Aquilina's Friday rulings and seek emergency consideration
from the Michigan Court of Appeals. He wants her orders stayed pending
the appeals, he said in a news release.
a spate of orders Friday arising from three separate lawsuits, Aquilina
said Gov. Rick Snyder and Detroit emergency manager Kevyn Orr must take
no further actions that threaten to diminish the pension benefits of
City of Detroit retirees.
"I have some very serious concerns
because there was this rush to bankruptcy court that didn't have to
occur and shouldn't have occurred," Aquilina said. "Plaintiffs shouldn't
have been blindsided," and "this process shouldn't have been ignored."
representing pensioners and two city pension funds got an emergency
hearing Thursday with Aquilina, and she said she planned to issue an
order to block the bankruptcy filing. But lawyers and the judge learned
that Orr filed the Detroit bankruptcy petition in Detroit 5 minutes
before the hearing began.
Aquilina said the Michigan Constitution
prohibits actions that will lessen the pension benefits of public
employees, including those in the City of Detroit.
Snyder and Orr violated the constitution by going ahead with the
bankruptcy filing because they know reductions in those benefits will
result, she said.
"We can't speculate what the bankruptcy court
might order," said assistant Attorney General Brian Devlin, representing
the governor and other state defendants.
"It's a certainty, sir," Aquilina replied. "That's why you filed for bankruptcy."
Devlin said Snyder has to follow both the Michigan Constitution and the U.S. Constitution.
office issued a statement saying an appeal has been filed on behalf of
the governor in all three cases before Aquilina.
"In addition, the
attorney general filed motions to stay the trial court rulings and any
future proceedings while the appeals proceed," spokeswoman Joy Yearout
said. "Later today, we expect to file additional motions seeking
Aquilina issued a declaratory judgment that says the bankruptcy filing violated the Michigan Constitution.
order to rectify his unauthorized and unconstitutional actions ... the
governor must (1) direct the emergency manager to immediately withdraw
the Chapter 9 petition filed on July 18, and (2) not authorize any
further Chapter 9 filing which threatens to diminish or impair accrued
pension benefits," she said in her order.
John Canzano, a
Southfield, Mich., lawyer representing retirees, cautioned that Snyder
faces no contempt of court implications if he doesn't follow the judge's
instructions. But Canzano said he likely will return to court seeking
further relief if Snyder doesn't instruct Orr to withdraw the bankruptcy
Asked what the judge could then do, Canzano said: "I will have to do my homework."
Douglas Bernstein, a partner with Plunkett Cooney law firm in Birmingham, Mich., said Aquilina's ruling is surprising.
is generally how bankruptcies occur: You file bankruptcy when there is
an impending crisis at the 11th hour," Bernstein said. "You file
bankruptcies to stave off litigation."
University of Michigan law
professor John Pottow said the issue could travel up the court system,
all the way to the Michigan Supreme Court. Or it could be answered
decisively and quickly in bankruptcy court.
nothing that precludes a federal judge from adjudicating the
constitutionality of the Michigan statute," Pottow said. "The bankruptcy
judge can interpret Michigan law."
Aquilina, who like most of the
judges on the Ingham court has a Democratic background, appeared
prepared for her orders to be appealed.
"Let's get this moving to the Court of Appeals because that's where you all are headed," she said.
also ordered that a copy of her declaratory judgment be sent to
President Barack Obama, saying he "bailed out Detroit" and may want to
look into the pension issue.