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Published: Tuesday, 8/13/2013

Detroit judge named mediator in city's bankruptcy

U.S. District Judge Gerald Rosen was appointed as a mediator in Detroit’s bankruptcy case to help resolve disputes between the city and its creditors, in an effort to avoid a protracted stay under court protection.

U.S. Bankruptcy Judge Steven Rhodes, who last month proposed assigning Rosen to the post, announced the appointment after hearing from stakeholders in the case, according to court documents filed Tuesday.

On July 18, Detroit filed the biggest U.S. municipal bankruptcy after decades of decline left it unable to pay its debts and provide needed services. Public pension funds have said the filing, which could bring cuts in benefits, violated state law.

“Chief Judge Rosen may, in his discretion, direct the parties to engage in facilitative mediation on substantive, process and discovery issues,” on any matters the court refers to him and may designate and refer disputes to other mediators as he sees fit, Rhodes said in the filing.

As chief judge of the U.S. District Court in Detroit, Rosen, 61, oversees Rhodes and the other local bankruptcy judges. He was nominated by President George H.W. Bush to the Eastern District of Michigan federal court in November 1989 and became chief judge in January 2009.

Rosen will have the authority to decide what parties will attend the sessions and what documents will be produced, and all mediation proceedings will be confidential, according to court documents. If the parties reach a settlement, they would have to submit a formal request for approval to Rhodes within 14 days after an agreement is executed.

Before the bankruptcy, Detroit Emergency Manager Kevyn Orr proposed canceling about $2 billion in bond debt and reducing $3.5 billion in unfunded pension liabilities. Those debts would be replaced with about $2 billion in new notes, forcing bondholders and the pension systems to accept less than what they are owed.

Rhodes has proposed a March 1 due date for Detroit’s plan to cut its debt, if the city can survive creditors’ attempts to remove it from bankruptcy court protection. A proposed timetable would set a trial over its eligibility to remain in bankruptcy for October.

A lawyer for Detroit has said the city wants to file a plan to resolve its record $18 billion municipal bankruptcy by the end of the year. Orr has said he wants to get Detroit out of bankruptcy by September 2014, the same month he could be removed from his post by the city council.



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