Detroit judge identifies 14 plan confirmation issues for July hearings

By Caroline Salls

Pittsburgh, June 5 – Several legal issues related to confirmation of the City of Detroit’s plan of adjustment will be addressed at hearings scheduled for July 16 and July 17, according to an order filed Thursday in the U.S. Bankruptcy Court for the Eastern District of Michigan.

After reviewing submissions in response to the court’s order on identifying legal issues and responses to the proposed order, judge Steven Rhodes said he identified the following issues that may be determined at the hearings:

• Whether the plan’s collective bargaining injunction violates the Public Employment Relations Act;

• Whether the plan violates the Fourteenth Amendment in that it impairs the relief available to specified violations victims;

• Whether the plan violates the Fifth Amendment or Fourteenth Amendment in that it impairs the relief available to parties whose property has been taken by condemnation or inverse condemnation;

• Whether the absolute priority rule is applicable to secured claims;

• Whether sections of the plan relating to classification satisfy the Bankruptcy Code;

• Whether the plan’s UTGO settlement violates the Unlimited Tax Election Act;

• Whether the Bankruptcy Code prohibits the interest rate and call protection modifications of bonds secured by special revenues;

• Whether sections of the plan relating to the treatment of the claims against the 36th District Court violate the Bankruptcy Code;

• Whether the failure of the plan to treat LTGO claims as senior unsecured claims violates the Bankruptcy Code, Michigan law or a contract right that is enforceable in bankruptcy;

• Whether Macomb, Oakland and Wayne Counties have standing to object to the plan;

• Whether any claim of custodian BNY Mellon that is not a direct claim against the city can be treated as a claim under the plan and whether the Bankruptcy Code authorizes Detroit to modify, release, discharge or enjoin claims of BNY Mellon against third parties;

• Whether the scope of the plan’s discharge and injunction provisions should be limited as requested in an objection to confirmation filed by the United States;

• Whether the plan is a specified plan that swap counterparties would be obligated to vote in favor of and refrain from objecting to; and

• To the extent the plan is not a specified plan, whether plan releases benefitting some non-debtor parties, are consensual as they relate to the swap counterparties, and, if nonconsensual, whether those releases are legally allowed.

Detroit filed bankruptcy on July 18, 2013 under Chapter 9 case number 13-53846.

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