Detroit Pension Fund Files Suit to Stop BankruptcyBy: Mike Tuttle - July 18, 2013
Detroit has been beaten every which way over the past few years. The economic downturn of 2008 and beyond has left huge parts of the city a shell of its former self. In an effort to get the city out of debt and try to begin recovery, the possibility of filing bankruptcy and starting aresh has been floated.
The General Retirement System of the City of Detroit and the Police and Fire Retirement System of the City of Detroit has announced that they have initiated a civil action against City of Detroit Emergency Manager Kevyn Orr and Governor Rick Snyder in the Ingham County Circuit Court, Lansing, Michigan.
In the suit, the Retirement Systems challenge the authority of the Emergency Manager and the Governor to authorize bankruptcy proceedings for the City of Detroit that would in any way impair the accrued financial benefits of the Retirement Systems’ plan participants and beneficiaries. The System says those benefits are protected by the Michigan State Constitution. To file and walk away from those obligations would be considered an “impairment”. By allowing any such impairment, the lawsuit asserts that the Emergency Manager and the Governor would be in violation of their respective oaths of office.
The Retirement Systems say they want to work with the Emergency Manager as he addresses the financial condition of the City and say they have fully cooperated with the Emergency Manager and his team so far. But they say they are charged by law to make decisions and take appropriate actions that are solely in the best interests of the plan beneficiaries. The protections of Article IX, Section 24 of the Michigan Constitution represent the express will of the people of the State of Michigan and these protections cannot be subverted by a bankruptcy filing.
“The recent statements regarding an imminent bankruptcy filing, as well as the filing approximately one week ago in Ingham County Circuit Court of similar claims, prompted the Retirement Systems to take more immediate action,” said Ron King, a Clark Hill attorney representing the Retirement Systems.
The Retirement Systems have asked the Court for a declaratory judgment that would prevent either the Emergency Manager or the Governor from taking any action which would contravene the protections of Article IX, section 24 of the Michigan Constitution.