Legal wrangling continues following Detroit's bankruptcy filing

Legal wrangling continues following Detroit's bankruptcy filing

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Spirit of Detroit statue outside the Coleman A. Young Municipal Center Spirit of Detroit statue outside the Coleman A. Young Municipal Center
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DETROIT (WJBK) -

The spokesperson for Detroit Emergency Manager Kevyn Orr said efforts to battle blight, improve lighting and increase trash removal are all underway despite the city's controversial bankruptcy filing and concern the city's workers will lose their pensions.

"We are still getting about the business of turning the city around even though we're in bankruptcy. None of that stuff is stopping," said Bill Nowling.

"I want to make sure that people understand they're going to continue to get pensions, but what we're talking about is the amount of under funded in the pensions, and we just have to deal with that. We have to come to an agreement on what that is, and we just have to move forward so people can know what to expect."

However, the city's pensioners, firefighters and police officers have taken action, filing an objection in federal Bankruptcy Court.

The Court of Appeals is now reviewing last week's ruling by an Ingham County judge that the bankruptcy filing was unconstitutional. She ordered Gov. Rick Snyder to withdraw it. A Monday morning hearing to find out why that has not happened was adjourned until next week.

"We have a governor who swore to take an oath to uphold the constitution, and unfortunately he's decided not to do that," said Richard Mack.

The labor attorney said by law, pension benefits cannot be impaired or diminished.

"It's money that you worked for and earned. It's your wage. That wage is yours, and if that's yours, you have a right to it per constitution," he said.

Mack said it is unfair to compare the city's 20,000 retirees to the bondholders.

"The bondholders get paid. The insurance companies get paid. At least let's treat Grandma Jones as well as Wall Street and the loan sharks and all the rest of them," he said.

"Generally, if you're an unsecured creditor you're supposed to be treated the same -- now here's the big exception -- unless there is a good reason," said John Pottow.

The University of Michigan law professor and bankruptcy expert said there can be exceptions, but right now it is still unclear how this current filing will hold up in court since a state judge has already declared it unconstitutional.

"Federal law is supreme. So under the supremacy clause of the Constitution, federal law trumps state law when there's a conflict between the two. With that said, you can't just ignore state laws," Pottow said.

Whatever the state Court of Appeals decides could be appealed to the Michigan Supreme Court. Meanwhile, the first hearing in federal Bankruptcy Court will be on Wednesday.

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