Photo: Detriot Free Press
DETROIT -- The ninth and final day of Detroit's historic trial to qualify for Chapter 9 bankruptcy ended Friday,
but not before the judge took swipes at the city and state's lawyers on
the question of good-faith negotiations and the creation of Michigan's
emergency manager law.
Federal Bankruptcy Judge Steven
Rhodes challenged Bruce Bennett, the Jones Day lawyer who is
representing the city, to explain how Detroit can argue that it
negotiated in good faith with creditors while also arguing that it
became impossible to negotiate with them.
"It strikes me as factually impossible" for the city to simultanously to make both claims, Rhodes said.
said everybody involved knew that negotiations would be extremely
difficult given the depth of the city's financial crisis and the depth
of the concessions necessary.
Negotiations with creditors became
impossible because many of them said they were not authorized to deal on
behalf of the city's 23,500 retirees and others declined to consider
any concessions at all, Bennett said.
To gain the protections
provided under bankruptcy law, Detroit must prove that it is insolvent
and tried to negotiate in good faith with creditors before it filed.
Rhodes is expected to make a decision sometime after Wednesday.
last day of trial also included allegations that Gov. Rick Snyder and
Detroit emergency manager Kevyn Orr lied and misled Detroiters for
William Wertheimer, a lawyer for a group of Detroit pensioners that
oppose the city's bankruptcy, said all of Snyder's actions in the past
two years related to Detroit's crisis have been politically motivated.
are not saying the governor did anything evil," Wertheimer said. "His
political position has been no financial support from the state and that
has driven everything that has happened here."
Matthew Schneider, lawyer for the state, challenged that allegation.
"What political juice does the governor get out of this? It's not a popular move," he said of Detroit's bankruptcy filing.
Schneider painted Snyder not as a politically power-hungry governor but
as a hero who has done all he can to help rescue a crumbling city.
Schneider compared Detroit's financial crisis to a massive storm bearing
down on its residents.
"Years ago, the people of Michigan and the people of this city
started to learn that a tremendous and terrible storm was headed to the
city of Detroit, and this was no secret," Schneider said.
time Snyder took office, Schneider said the governor monitored
Detroit's financial crisis as it grew worse. Snyder also took a number
of steps to help the city control the problem, including a consent
agreement between the state and the city in spring 2012.
fall 2012, the lawyer said Detroit already was unable to meet the terms
of that agreement. That prompted the state to escalate discussions with
additional consultants to figure out what should be done, which led to
Orr's appointment as emergency manager in March.
"The governor took on an enormous task," Schneider said. "He saw that the problem was getting worse and nobody was solving it."
lawyers for unions picked apart the analogy, suggesting Snyder
orchestrated a planned takeover of the city and has withheld direct
financial aid for his own political purposes.
"The governor took more time to interview the consultants than they took
to negotiate the restructuring itself," said Sharon Levine, a lawyer
for the American Federation of State, County and Municipal Employees.