LexisNexis® Legal Newsroom
Detroit Files for Chapter 9 Bankruptcy; Cash Flow at Negative $198.5M

DETROIT — (Mealey’s) The City of Detroit late on July 18 filed for Chapter 9 bankruptcy in the U.S. Bankruptcy Court for the Eastern District of Michigan as its emergency manager declared that the city is insolvent and that, absent restructuring, he projects cash flows of negative $198.5...

Michigan Governor Rick Snyder Endorses Detroit Bankruptcy

Michigan Gov. Rick Snyder (R) signed off on the city of Detroit's Chapter 9 bankruptcy filing on Thursday, instigating the largest municipal bankruptcy case in the nation's history. The filing was made in U.S. District Court for the Eastern District of Michigan after Kevyn Orr, the emergency...

Cadwalader Clients & Friends Memo: City of Detroit Files Chapter 9 Bankruptcy Petition – Challenges Ahead

On the afternoon of July 18, 2013, the City of Detroit filed its highly anticipated petition for relief under Chapter 9 of the Bankruptcy Code in the Bankruptcy Court for the Eastern District of Michigan. This marks the largest municipal bankruptcy filing in United States history. [1] As a result of...

Cadwalader Clients & Friends Memo: Court Approves Extension of the Automatic Stay in Detroit’s Chapter 9 Case to State Officials

On July 24, 2013, Judge Steven W. Rhodes of the Bankruptcy Court for the Eastern District of Michigan approved the City of Detroit’s motion to extend the automatic stay to various non-debtor parties, including certain state officials. The Court’s ruling effectively stays all pending litigation...

Snyder Says Detroit Won't Sell Art Assets

Michigan Gov. Rick Snyder (R) said the state has no plans to sell any artwork from the Detroit Institute of Art as part of the city's Chapter 9 bankruptcy filing. Speculation has been rampant for months that pieces from the museum collection would be sold. Fears ramped up further last week after...

The Shadow of Detroit: Pension Gaps Threaten Cities and States

by Lou Cannon Detroit's bankruptcy made a brief splash last month before being driven from the headlines by terrorist warnings, congressional intransigence and the sexual shenanigans of a New York City mayoralty candidate and the San Diego mayor. But as a possible portent for other cities and...

Creditors Object to Detroit Bankruptcy

Scores of retirees and creditors, including the American Federation of State, County and Municipal Employees, have challenged Detroit's historic Chapter 9 bankruptcy filing, arguing that it is unconstitutional because it could be used to slash retiree pensions and that Emergency Manager Kevyn Orr...

Detroit's Bankruptcy: Lessons For Employers

Most of the national attention to Detroit's bankruptcy has subsided. Those of us here in Detroit, however, have a daily dose of news about the proceeding. The Detroit Free Press ran an excellent in depth article this Sunday concerning to the causes of the city's financial disaster. As painful...

White House: $311.33M Will Be Provided to Detroit to Assist Bankruptcy Recovery

WASHINGTON. D.C — (Mealey’s) The White House announced on Sept. 27 that it is providing more than $311 million to help the bankrupt City of Detroit through a combination of federal block grant programs as well as money from the U.S. Department of Transportation (DOT), the Federal Emergency...

Stockton Bankruptcy Settlement Preserves Pensions

The Chapter 9 bankruptcy case of Stockton, California has come to an unexpectedly quick and consensual resolution . The outcome here, which will see the city’s pension obligations maintained, is particularly surprising given the vehement opposition of Stockton’s bond insurers at the outset...

State Net Capitol Journal – November 18, 2013: States Turning To Tolls

Budget & Taxes STATES TURNING TO TOLLS: With the federal gas tax not having budged in 20 years and Americans driving less and in more fuel-efficient vehicles, states are increasingly turning to an alternate revenue source to pay for road construction and maintenance: tolls. Forty-two states...

State Net Capitol Journal – November 25, 2013; Budget & Taxes: Alabama Bond Sale May Establish Bankruptcy Template

Budget & Taxes AL BOND SALE MAY ESTABLISH BANKRUPTCY TEMPLATE: Jefferson County, Alabama sold $1.8 billion in bonds this month. What's particularly noteworthy about that is the county has been in bankruptcy since November 2011, after defaulting on $3.1 billion in sewer-revenue debt. The bond...

Alabama Bond Sale May Establish Bankruptcy Template

Jefferson County, Alabama sold $1.8 billion in bonds this month. What's particularly noteworthy about that is the county has been in bankruptcy since November 2011, after defaulting on $3.1 billion in sewer-revenue debt. The bond sale is part of the city's plan to exit bankruptcy by the end of...

Bankruptcy Judge: Detroit Is Eligible for Chapter 9; Unions Appeal Immediately

DETROIT — (Mealey’s) The federal bankruptcy judge presiding over the Chapter 9 case filed by the City of Detroit issued a verbal ruling today from the bench stating that the city is eligible to file for bankruptcy, a source said. The unions representing city employees immediately filed a...

Detroit's Bankruptcy: the Pension Issue

Judge Rhodes ruled yesterday that the city's bankruptcy can proceed. He also ruled that the state constitutional provision that protects state employees' pensions from being diminished or impaired is preempted by federal law. Appeals will be filed, but the bankruptcy will move forward. Judge...

Detroit Bankruptcy Ruling Imperils Pensions

by Korey Clark This month the federal bankruptcy court judge presiding over Detroit's bankruptcy case, ruled that the city's public pensions were not untouchable, even though they are expressly protected under Michigan's Constitution. "Pension benefits are a contractual right and...

Heard About Detroit? The First Word on Treatment of Public Employee Pension Benefits in Chapter 9 (And Absolutely Not the Last)

by Ben Feder The recent ruling by Judge Stephen Rhodes finding the City of Detroit eligible for protection under Chapter 9 of the U.S. Bankruptcy Code has rightly received considerable attention. The determination that Detroit has met the standards under Section 109(c) of the Bankruptcy Code to be...

State Net Capitol Journal – February 3, 2014; States Debate What To Do With Tax Windfalls

Budget & Taxes STATES DEBATE WHAT TO DO WITH TAX WINDFALLS: Rising tax revenues — and election-year considerations — are ratcheting up debate in state capitols over whether to cut taxes, restore spending eliminated during the recession or fund new programs. Although the debates...

Michigan Governor Wants to Open Bankrupt Detroit to World

Last month Michigan Gov. Rick Snyder (R) unveiled a plan to help revitalize bankrupt Detroit: issue special visas to lure highly skilled immigrants to the city, or as he put it, send the message that "Detroit is open to the world." The city's population has plunged by over 1 million since...

Detroit’s Proposed Plan of Adjustment – Two Crucial Questions

by Ben Feder The chapter 9 bankruptcy case of the City of Detroit has been as complex and litigious as anticipated . Nevertheless, Emergency Manager Kevyn Orr has kept plodding forward, and last week filed a proposed plan of adjustment , the road map for the Motor City to emerge from bankruptcy. There...

State Net Capitol Journal – June 9, 2014; Florida Hurricane Bonds On Rise

Budget & Taxes FL HURRICANE BONDS ON RISE: Six years ago, Florida's government-run property insurer, Citizens Property Insurance Corp., paid Warren Buffett's Omaha, Nebraska-based Berkshire Hathaway Inc. $224 million in exchange for a guarantee that the company would buy bonds issued by...

Michigan Lawmakers Approve 'Grand Bargain'

Michigan lawmakers have given their approval to the bankruptcy exit plan negotiated by federal mediators that has come to be known as the "grand bargain." The nine-bill package, passed with bipartisan support in both chambers and expected to be signed by Gov. Rick Snyder (R), calls for the...

State Net Capitol Journal – July 14, 2014; Federal Highway Funding Bottleneck Forces States To Hit Brakes On Road Projects

Budget & Taxes FEDERAL HIGHWAY FUNDING BOTTLENECK FORCES STATES TO HIT BRAKES ON ROAD PROJECTS: With the specter of an empty federal Highway Trust Fund looming, states — which count on that fund for 15 to nearly 60 percent of their transportation budgets (see Bird's eye view) —...

Stockton Judge: Pension Obligations Are Not Impervious to Impairment In Chapter 9 Bankruptcy. What Comes Next?

by Ben Feder The perception that public employee pension obligations cannot be impaired in bankruptcy suffered a damaging blow several months ago in the City of Detroit bankruptcy case , and has now been fatally wounded by the recent ruling of Judge Christopher Klein in the Chapter 9 case of Stockton...

Despite Earlier Ruling, Stockton Judge Confirms Plan Leaving Pension Obligations Intact

One month ago, Judge Christopher Klein ruled in the city of Stockton, CA bankruptcy case that public employee pension obligations can be impaired in municipal bankruptcy cases under Chapter 9 of the Bankruptcy Code. Last week, however, Judge Klein approved the plan of adjustment for Stockton that left...