DALLAS -- A group of Detroit retirees may ask an appeals court to reconsider its failed appeal aimed at restoring pension cuts imposed as part of Detroit's Chapter 9 restructuring.
A 6th Circuit Court of Appeals appellate panel in a split decision on Monday rejected the Detroit retirement system participants' challenge to the pension cuts that were part of the city's historic bankruptcy settlement. The city, led by Emergency Manager Kevyn Orr and with the support of Michigan Gov. Rick Snyder, filed for bankruptcy in July 2013. It exited bankruptcy in late 2014.
Jamie Fields, an attorney representing many of the retirees, said the group is considering petitioning a full panel of the 23 6th appellate circuit judges to consider the case. Fields said the fact that the court decision was a split ruling is somewhat encouraging.
In a 2-1 decision Monday, the panel concluded that the restoration of the pension cuts would "adversely impact third parties and the success of the plan."
"The harm to the city and its dependents - employees and stakeholders, agencies and businesses, and 685,000 residents - so outweighs the harm to these appellants that granting their requested relief and unraveling the plan would be impractical, imprudent, and therefore inequitable," the majority wrote.
Judge Karen Nelson Moore dissented, concluding that the decision to avoid the legal claims is based on "equitable mootness." In other words, Moore explained, "the court is suggesting that the importance of adjudicating the retirees' rights pales in comparison to the importance of protecting the expectation of lenders and other who have choose to rely on Detroit's bankruptcy plan before appellate challenges to it were resolved."
"I fear that using such a justification to brush aside retirees' legal claims will leave them with the impression that their rights do not matter," Moore wrote.
Under the city's so-called "grand bargain" that leveraged civic foundation support to form a relief package for the bankrupt city, Detroit reached settlements with its pensioners that left intact public safety monthly checks and imposed a 4.5% cut on general employees. Their cost-of-living increases were reduced or eliminated. They also saw a big cut in the form of retiree health-care benefits, which were trimmed by nearly 90%, allowing the city to shed a $4 billion obligation.
At the time the pension plan was underfunded by more than $1.8 billion and retirees would have been subject to a 27% reduction. The $816 million gained from the city's bankruptcy deal reduced the reduction in benefits to 4.5%.
Former U.S. Bankruptcy Judge Steven Rhodes, who presided over the Detroit case, called the city's plan of adjustment reasonable, fair and equitable, key benchmarks under federal bankruptcy law.