Policy: Labor

Detroit union seeks automatic appeal of any bankruptcy order

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Labor unions,Labor,Detroit,Detroit Bankruptcy,Bloomberg News,Law

A Detroit municipal workers’ union asked a judge to send any ruling he makes on the city’s eligibility for bankruptcy court protection to an appeals court for automatic review.

The American Federation of State, County and Municipal Employees today asked U.S. Bankruptcy Judge Steven Rhodes to submit his decision to the U.S. Court of Appeals for the Sixth Circuit because it will hinge on whether the city bargained in good faith before filing its record bankruptcy on July 18. That question hasn’t been sufficiently addressed in prior cases, the union said.

Chapter 9 of the U.S. Bankruptcy Code requires that a municipality either try to reach a deal with creditors before it files its case or show that talks were impractical. AFSCME, which represents the majority of city workers other than police and firefighters, said in its filing that the city engaged only in “surface bargaining.”

Detroit’s $18 billion bankruptcy is the biggest filed by a U.S. municipality. Throwing the case out of court would leave the city vulnerable to lawsuits and other actions that could disrupt its turnaround effort.

Rhodes last week ended a trial over Detroit’s eligibility to stay in bankruptcy. The trial featured unprecedented testimony from a sitting governor, Republican Rick Snyder, who has made revitalizing Michigan’s biggest city a central goal of his administration.

Pension Cuts

Municipal unions and retired employee groups have argued that Snyder and other state officials pushed the city into bankruptcy court because that was the only way to skirt Michigan’s constitutional ban on cutting public worker pensions.

Rhodes asked both the city and the unions and retiree groups to submit analyses of whether the definition of good-faith bargaining should be affected by labor laws.

In its filing today, the union asked Rhodes to send his ruling to the Cincinnati-based Sixth Circuit because there are not enough cases that define such bargaining. Typically, bankruptcy court decisions are first reviewed by a district judge before going to the circuit court.

Rhodes has said he would issue his decision on eligibility after all sides have submitted their analyses of good-faith bargaining. Those filings are due today.

The case is In re City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).

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