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Michigan Appeals Court halts challenges to Detroit's bankruptcy filing

The Michigan Court of Appeals on Tuesday ordered a temporary halt to three lawsuits that seek to derail Detroit's municipal bankruptcy, after the state's attorney general sought to overturn lower court rulings, including one that found the bankruptcy filing unconstitutional.

A three-judge panel of the appeals court said it stayed the lower court orders and any other proceedings in the lawsuits challenging the bankruptcy until the appeal by Attorney General Bill Schuette is resolved or the appeals court issues a further ruling.


A frown face drawn on the window of an abandoned office building in downtown Detroit is shown July 19, 2013 in Detroit, Michigan. Detroit's emergency manager Kevin Orr filed for Chapter 9 bankruptcy making Detroit the largest city to file for bankruptcy in U.S. history.
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A frown face drawn on the window of an abandoned office building in downtown Detroit is shown July 19, 2013 in Detroit, Michigan. Detroit's emergency manager Kevin Orr filed for Chapter 9 bankruptcy making Detroit the largest city to file for bankruptcy in U.S. history.

The lawsuits were filed by city workers, retirees and pension funds earlier this month on worries that an anticipated bankruptcy petition by Detroit would lead to cuts in retirement benefits. Detroit's July 18 Chapter 9 filing is the biggest ever U.S. municipal bankruptcy.

Judge Rosemarie Aquilina, of Ingham County Circuit Court in Lansing, on Friday ruled that the state law that allowed Governor Rick Snyder to approve the bankruptcy filing violated the Michigan Constitution. She ordered Detroit's emergency manager, Kevyn Orr, to withdraw the bankruptcy petition.

Aquilina said the governor cannot take actions that would violate constitutional protections for retirement benefits for public workers. That so-called declaratory judgment was issued in a lawsuit filed this month by a Detroit worker and retiree. Two other lawsuits are pending, one backed by the United Auto Workers union and another by the city's general retirement system, and police and fire retirement system.

Schuette on Friday appealed Aquilina's rulings, including temporary restraining orders to stop Orr and state officials from taking further actions in federal bankruptcy court.

John Canzano, an attorney handling one of the lawsuits, said if the litigation is also halted by the federal judge overseeing Detroit's bankruptcy case the appeals court would be unable to decide Schuette's appeal.

The U.S. Bankruptcy Court judge overseeing Detroit's case will hold a hearing on Wednesday on Orr's request to extend Chapter 9's automatic freeze on legal action to the lawsuits filed by the unions and others.

- By Reuters

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