Detroit Pension Funds Sue to Block City Bankruptcy Filing

7/17/2013
BLOOMBERG NEWS

DETROIT — Two Detroit pension funds sued the city’s emergency manager and the governor of Michigan, asking that a court find a bankruptcy filing would conflict with the state’s constitutional protection of public retirees’ rights.

The General Retirement System and the Police and Fire Retirement System of the City of Detroit filed the lawsuit today in state court in Ingham County, Michigan, seeking a judgment that Governor Rick Snyder can’t authorize a bankruptcy filing that could reduce pension benefits.

The funds also sued Detroit Emergency Manager Kevyn Orr, who was appointed by Snyder in March to lead the city out of a fiscal crisis that has put it on the brink of a Chapter 9 municipal bankruptcy.

“It appears imminent that the governor will grant the emergency manager the unconditional power to proceed under Chapter 9,” pension-fund lawyers said in complaint. “The emergency manager will seek to have the city’s pension debts impaired” unless the funds accept Orr’s imposition of cuts.

Reducing payments to city retirees would conflict with a provision of the state’s constitution that bars such action, according to the suit, filed on behalf of the plans and more than 32,000 active and retired Detroit employees. Two similar lawsuits were filed by individual retirees in the same court earlier this month.

A hearing on the other suits is set for July 22 in Ingham County Circuit Court in Mason.

Sara Wurfel, a spokeswoman for Snyder, didn’t immediately return calls for comment on the pension funds’ suit. Bill Nowling, Orr’s spokesman, also didn’t immediately respond to a call for comment.

The new suit is General Retirement System of the City of Detroit v. Orr., 13-768-CZ, Circuit Court, Ingham County, Michigan (Mason).

--With assistance from Chris Christoff in Lansing, Michigan. Editors: Andrew Dunn, Glenn Holdcraft

To contact the reporter on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net