CHICAGO -- U.S. Bankruptcy Judge Steven Rhodes, who oversees Detroit’s Chapter 9 case, will hear arguments over the legality of the state’s emergency management law, as well as other issues, in a hearing on Wednesday.
The tentative agenda features an argument from the Detroit and Michigan branches of the NAACP and others asking that Rhodes lift the automatic stay halting all litigation against the city, and allow their lawsuit challenging the state’s emergency management law to be heard in district court.
The NAACP, joined by other parties, filed a lawsuit in May in the U.S. Eastern District Court of Michigan challenging Public Act 436, the emergency manager law, on the grounds that it violates voting rights.
It names as defendants Gov. Rick Snyder, Michigan Treasurer Andy Dillon, and Secretary of State Ruth Johnson.
The lawsuit was halted after Detroit filed for Chapter 9 bankruptcy protection in July, under the automatic stay that halts legal action against the city during bankruptcy proceedings.
The NAACP is arguing that their lawsuit is not related to the city’s bankruptcy proceeding, that they are not creditors, and that the lawsuit deals with “important constitutional law issues” that should not be delayed due to the city filing for bankruptcy.
Several creditors opposed to the Chapter 9 filing have charged that emergency manager Kevyn Orr lacks the authority to file for bankruptcy because PA 436 is illegal.
Rhodes is also expected to consider a request from the Michigan Council 25 of the American Federation of State, County, and Municipal Employees to allow another judge to execute his opinion on a damage award tied to one of the city’s pension systems. AFSCME asked Rhodes to amend the automatic stay so that Administrative Law Judge Doyle O’Connor can issue an order before he retires on Oct. 4.
The hearing agenda is likely to change on Tuesday if late motions are filed.
The looming federal government shutdown could affect the historic municipal bankruptcy case if the shutdown drags on.
The federal courts are expected to continue to operate for about 10 days after a shutdown. After that point, the fate of the courts is still unclear, a spokesman said.
“After 10 days we’ll have to reassess and see where we go from there,” Rod Hansen, the media information officer for the U.S. District Court, said. “Judge Rhodes is determined to move this along without delay, and how persuasive he might be in being able to continue on, I don’t know.”
A trial on whether the city is eligible to enter into Chapter 9 is scheduled to begin Oct. 23.