Two Detroit pension funds file expedited appeal for city's bankruptcy eligibility

By Nicel Jane Avellana

Dec 27, 2013 08:03 PM EST

Two pension funds in Detroit filed an expedited appeal with the US 6th Circuit Court of Appeals about a judge's decision that the city could seek bankruptcy protection, Reuters reported. The appeal was filed by the General Retirement System and Police and Fire Retirement System late on Thursday, December 26. The two pension funds are the two biggest unsecured creditors of the city. The report said the expedited appeal would not need to go through the US District Court for the Eastern District of Michigan.

Lawyers of the pension funds wrote in the filing, "Resolution of the City's eligibility will have life-changing consequences for active and retired police officers, firefighters, librarians, government clerks, public works employees and many others."

US Bankruptcy Judge Steven Rhodes ruled earlier in December that the federal requirements for bankruptcy were met by Detroit since it was already insolvent as it shouldered debt worth $18.5 billion. As a result, it could not negotiate with its creditors. As part of the city's restructuring efforts, Rhodes also ruled that pension benefits could be slashed.

The pension funds and those who don't agree to the bankruptcy said that the constitution of the State of Michigan shields pensions from being cut. In the expedited appeal, the pension funds said the plan of Detroit to reduce pension benefits could set a precedent for other troubled cities in the US to do the same in order to lower debt.

Rhodes said last week that those who objected to the bankruptcy could direct their appeals to the 6th Circuit. However, he said that it would be best if the bankruptcy court would be able to decide on the merits of the debt adjustment plan proposed by the city without getting distracted by appeals.

In his opinion last week, Rhodes wrote, "It is time now to begin that discussion, unfettered by piecemeal appellate litigation."

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