Chapter 9 judge blocks motion for Michigan governor’s deposition

The Detroit bankruptcy judge in Detroit’s Chapter 9 bankruptcy proceedings blocked a late motion filed by Michigan’s office of attorney general to stop the deposition of Michigan State Governor Snyder. The motion, which was presented to the court, was dropped after what Reuters describes as a “testy exchange” between the presiding Detroit bankruptcy judge and a Michigan official.

According to reports, the deposition was requested by the Creditors’ attorneys who want to talk to Governor Snyder, specifically with the intent of determining his motivations for approving the decision by Detroit’s state-appointed emergency manager, Kevyn Orr, to take the city into Chapter 9 bankruptcy.

Union officials argue the deposition is needed to determine if the bankruptcy filing was a strategic move by city and state officials, specifically Orr and Snyder, to “target” worker pay and benefits of city workers.

What is at stake if Detroit’s Chapter 9 bankruptcy is approved?

 

All eyes are on Detroit and specifically how the courts will handle the pension plan and creditor payments. If Detroit’s bankruptcy is allowed to go through it will be the largest municipal bankruptcy in United States history. Public sector unions, however, have cried foul arguing that the bankruptcy will violate protections for worker pensions, which they claim are protected under Michigan’s constitution. It is estimated that Detroit has $18.5 billion in long-term debt.

Why did the state argue?

 

Assistant state Attorney General Margaret Nelson argued in court that the motion to suppress testimony should be allowed because Snyder’s opinions about the bankruptcy were irrelevant to the case. Judge Rhodes disagreed with her, arguing that primary reasons some of the creditors were objecting to the bankruptcy were due to the perceived motives of the Governor. He also made it clear that the motion to stop the deposition, due to executive privilege, should have been made earlier.

The court concluded that Governor Snyder, a Republican, must give his testimony in a three hour deposition. Michigan’s state treasurer, Andy Dillon, will also be deposed.

What did the creditors argue?

 

The creditors called the bankruptcy judge’s decision “a victory for transparency.”  Sharon Levin, counsel for the union American Federation of State, County and Municipal Employees (AFSCME), noted that the main reason to depose the governor is so her clients can “understand the motive behind the filing.”

In related news surrounding the bankruptcy of Detroit, the judge has also postponed oral arguments about the legal challenges of Detroit’s Chapter 9 bankruptcy until an October 15th hearing, giving the creditors more time to file their challenge to the bankruptcy later in the week.

Detroit city officials hope to have their Chapter 9 Bankruptcy repayment plan done and turned into the court by the end of the year. The Chapter 9 bankruptcy trial will start October 23, 2013.

Hiring a bankruptcy lawyer

 

If you face a financial crisis and need legal help it’s time to talk to a bankruptcy lawyer. Bankruptcy is not right for everyone but it can be a solution for some individuals and companies facing a financial crisis.

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Beth

Beth L. is a content writer for Better Bankruptcy. Good content and information is one of many methods we utilize to bring you the answers you need.