Attorneys for the workers, retirees, city unions and pension plans were expected to follow Lennox in presenting arguments to Rhodes.
The case has attracted massive U.S. media interest, with people lining up to gain entrance to the federal courthouse in downtown Detroit on Wednesday morning, forcing court officials to open overflow rooms to accommodate the crowd. Meanwhile, city firefighters, worried that bankruptcy, filed July 18, will lead to stinging cuts in their retirement benefits, protested outside.
Rhodes agreed on Monday to an expedited hearing requested by Orr that seeks to extend Chapter 9's automatic stay of litigation to lawsuits filed against Governor Rick Snyder, Michigan Treasurer Andy Dillon, and Orr by Detroit workers, retirees and pension funds. Those lawsuits are pending in state court in Michigan's capital city of Lansing.
Those lawsuits were halted by a Michigan Appeals Court panel on Tuesday in response to State Attorney General Bill Schuette's request to stop proceedings while he seeks to overturn orders issued by a lower court judge hearing the cases. One of those orders directs Orr to withdraw the bankruptcy petition on state constitutional grounds.
Ironically, Wednesday's launch of the historic bankruptcy began exactly 312 years after Detroit was founded in 1701 by French soldier Antoine de la Mothe Cadillac.
Detroit, a former manufacturing powerhouse and cradle of the U.S. automotive industry and Motown music, has struggled for decades as companies moved or closed, crime became rampant and its population shriveled by almost two-thirds since the 1950s to about 700,000 at present. The city's revenue failed to keep pace with spending, leading to years of budget deficits and a dependence on borrowing to stay afloat.
If Rhodes allows Detroit's bankruptcy petition to proceed without interference from the state courts, the city still must prove that it is insolvent and that it made a good-faith effort to negotiate with creditors, including its employee pension funds. Detroit has more than $18 billion of debt and unfunded liabilities. That includes $5.7 billion in liabilities for healthcare and other retiree benefits and a $3.5 billion pension liability.
In a June 14 proposal to creditors, Orr called for "significant cuts in accrued, vested pension amounts for both active and currently retired persons."
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