Detroit bankruptcy judge hears slain cop suit, rules on 13th checks

U.S. Bankruptcy Judge Steven Rhodes heard several requests today to unfreeze lawsuits against the city, including one filed by the family of a Detroit police officer killed by her estranged husband, a homicide detective.

The hearing addressed issues playing out on the sidelines of the biggest municipal bankruptcy case in U.S. history. Rhodes has set a fast pace for the bankruptcy case and will hold a trial later this month to determine whether the city is eligible for bankruptcy protection.

Rhodes also modified an automatic stay so the city’s largest union can continue to fight for a controversial bonus payment for retirees and workers known as the “13th check.”

Also today, Rhodes heard the NAACP’s request to pursue its federal lawsuit challenging the constitutionality of Gov. Rick Snyder’s emergency manager law. The lawsuit has been in limbo since Detroit filed for bankruptcy in July, which halted related legal action against Snyder and state Treasurer Andy Dillon.

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U.S. Bankruptcy Judge Steven Rhodes scheduled an Oct. 8 hearing before deciding whether to unfreeze a lawsuit filed by the family of a slain Detroit police officer.

The hearing will give Detroit lawyers a chance to prove the city would be harmed if the lawsuit continues in federal court.

Attorney William Goodman asked the judge for permission to seek compensation for the estate of slain Detroit officer Patricia Williams, who was killed by her husband, Ed Williams, a Detroit homicide detective, in a murder-suicide in the Canton Public Library parking lot on Sept. 23, 2009.

Patricia Williams’ mother, Deborah Ryan, argues the police department is liable for a “state-created danger” for not hospitalizing Ed Williams after a string of domestic violence and suicidal incidents.

The lawsuit is two years old but was frozen after Detroit sought bankruptcy protection on July 18.

U.S. Bankruptcy Judge Steven Rhodes lifted the automatic stay freezing lawsuits against the city Wednesday to let Detroit’s biggest municipal union pursue a fight over bonus payments for retirees and Detroit employees.

The judge’s order was tailored to let an administrative law judge issue a written opinion involving a fight over so-called “13th check” program that was terminated by the city two years ago.

The administrative law judge is retiring Friday but during oral remarks has indicated the city improperly terminated the “13th check” program and must negotiate with the American Federation of State, County and Municipal Employees. The judge also could pinpoint the amount of money the city must repay the union.

City lawyers fear that that the move could lead to AFSCME trying to revive the “13th check” program, which they say cost the city more than $1.9 billion and weakened the financial health of two city pension funds.

The “13th check” program gave retirees a bonus pension payout when the city’s retirement system made more money than expected.

Rhodes said he has the authority to lift the automatic stay when another court is poised to rule on a specific issue.

He said lifting the stay would not appear to prejudice the city or interfere in the biggest municipal bankruptcy case in U.S. history.

“AFSCME’s proposed order only seeks to let the administrative law judge execute a decision before he retires,” Rhodes said.

The city can object later if it believes the fight over the “13th check” program could interfere with the bankruptcy case.

Rhodes cautioned other creditors that his ruling today does not mean he is inclined to lift the automatic stay for other people whose lawsuits are in limbo while the city is in bankruptcy court.

“The facts and circumstances here are unusual,” Rhodes said.

U.S. Bankruptcy Judge Steven Rhodes is expected to rule at 1 p.m. whether the city’s biggest union can continue to pursue litigation involving bonus checks paid to retirees and employees.

U.S. Bankruptcy Judge Steven Rhodes plays rhythm guitar in the cover band The Indubitable Equivalents.

U.S. Bankruptcy Judge Steven Rhodes plays rhythm guitar in the cover band The Indubitable Equivalents.

The American Federation of State, County and Municipal Employees wants Rhodes to modify the automatic stay halting lawsuits against Detroit while the city is in bankruptcy court.

If the automatic stay is modified, it could lead to a revival of the bonus checks being paid to retirees and employees, who have received more than $1.9 billion under the controversial program.

If the checks are allowed to continue, it would hurt Detroit’s ability to restructure its finances and continue to weaken the retirement system’s financial health, city lawyers claim.

If the NAACP’s lawsuit challenging the emergency manager law is allowed to continue, and is successful, it could wreck the city’s bankruptcy case, a city lawyer said Wednesday.

The NAACP’s lawsuit should be frozen while the bankruptcy case continues, an unidentified city lawyer argued.

Otherwise, if the NAACP case succeeds, all actions taken by Emergency Manager Kevyn Orr, including the filing of the Detroit bankruptcy case, could be unenforceable, the city’s lawyer told U.S. Bankruptcy Judge Steven Rhodes.

State Assistant Attorney General Nicole Grimm said the NAACP lawsuit, if allowed to proceed, would “eviscerate Detroit’s bankruptcy filing.”

The way the state law is written, only an emergency manager can file a Chapter 9 bankruptcy petition, she said.

NAACP lawyer Melvin “Butch” Hollowell said the group would not try to have the bankruptcy case dismissed if it wins the federal lawsuit challenging the state emergency manager law.

Rhodes said he would issue a written decision later.

More than half of the state’s black residents live in cities run by emergency managers, a lawyer for the NAACP told U.S. Bankruptcy Judge Steven Rhodes today.

Attorney Melvin “Butch” Hollowell wants the judge to let it pursue a federal lawsuit challenging the constitutionality of Gov. Rick Snyder’s emergency manager law.

hollowell

The city’s July 18 bankruptcy filing froze the lawsuit and halted related legal action against Snyder and state Treasurer Andy Dillon.

If the case is allowed to continue, and is successful, it would mean Detroit Emergency Manager Kevyn Orr would be removed from office, Hollowell conceded.

“What impact would that have on this (bankruptcy) case?” Rhodes asked.

“It would be speculative,” Hollowell said. “The elected mayor of Detroit would have the power and authority to move forward with the bankruptcy if he so chose to.”

The NAACP does not object to the city’s eligibility for Chapter 9 bankruptcy relief, which will be decided later this month.

“Is there any way the (NAACP) lawsuit could be tailored or permitted to proceed that would not have an impact on this bankruptcy case?” Rhodes asked.

“Yes. We don’t object to eligibility,” Hollowell said. “We are not alleging any pecuniary interest, we are not seeking money damages.”

“So if I gave you a period of time to file an eligibility objection that was based on claims you make in your complaint, you wouldn’t file an objection?” Rhodes asked.
“We would not file an objection,” Hollowell said.

The city’s biggest union wants to negotiate reviving the controversial 13th check program that Detroit’s lawyers claim drained the pension fund coffers of more than $1.9 billion.

The program was terminated two years ago but the city failed to negotiate with the AFSCME union before doing so. The union wants to determine how much retirees and workers are entitled to collect for the past two years, AFSCME lawyer Sharon Levine told U.S. Bankruptcy Judge Steven Rhodes.

The amount due to retirees and workers is “substantial,” Levine told the judge.

City lawyer Heather Lennox says reviving the 13th check program would have “far reaching implications for this case, creditors and the city going forward.”

The 13th check was a bonus of sorts for retirees and workers whenever the city’s pension funds’ performance exceeded expectations.

If the pension funds had saved the money, the savings could have lessened the impact of the recession and poor market performance, the city’s lawyers allege.

Patricia Williams, a Detroit police officer, was “extremely brutally” murdered by her husband in 2009, a lawyer for the late woman’s family told U.S. Bankruptcy Judge Steven Rhodes today.

William Goodman

William Goodman

Attorney William Goodman wants permission to pursue a lawsuit against the city and police personnel while the Detroit bankruptcy case is pending. The lawsuit is two years old but was frozen after Detroit filed Chapter 9 bankruptcy in July.

The bankruptcy case’s automatic stay violates the family’s constitutional rights to due process, said Goodman, who represents Williams’s mother Deborah Ryan.

“She has rights to full compensation, to an orderly process, to have her case heard, to not have it delayed or diminished,” Goodman told the judge.

“Is there any case law that holds the imposition of an automatic stay violates the 14th Amendment when it delays collection on a valid constitutional claim such as you assert you have here?” the judge asked Goodman.

“I have not been able to find any such case,” Goodman said.

The city is fighting the family’s request for relief.

“The stay doesn’t prohibit the claims…it just stays the claim,” city lawyer Eric Carlson said.

The judge said he would issue a written order soon.

Canton Police investigate a murder suicide in the parking lot of the public library in Canton, Michigan on September 22, 2009. (Brandy Baker / The Detroit News)

Canton Police investigate a murder suicide in the parking lot of the public library in Canton, Michigan on September 22, 2009. (Brandy Baker / The Detroit News)

The family of a slain Detroit police officer wants U.S. Bankruptcy Judge Steven Rhodes to let their lawsuit against the city and police personnel proceed despite the historic bankruptcy case.

The request, which you can read here, will be heard this morning, more than four years after Detroit homicide Detective Ed Williams, 36, of Canton Township, shot his wife, Patricia, 33, before turning the gun on himself. The shootings followed an argument in the Canton Public Library parking lot Sept. 23, 2009.

Patricia Williams

Patricia Williams

Patricia Williams’ family filed a lawsuit in 2011 accusing two Detroit sergeants of protecting Ed Williams from possible criminal prosecution following reports he had assaulted his wife in the days leading up to the shooting.

The 22-page complaint chronicled the last three days of Ed’s and Patricia Williams’ lives. The time was marked by allegations of domestic violence against the husband and a statewide law enforcement alert prompted by the discovery of what appeared to be a suicide note written by Ed Williams.

A Detroit police sergeant convinced Canton Township Police to cancel the alert, and Ed Williams eventually shot and killed his wife, according to the lawsuit.

Ed Williams

Ed Williams

The city and a police union are fighting the family’s attempt to lift an automatic stay freezing all lawsuits against Detroit while the city is in bankruptcy court.

“The requested relief would undermine the breathing spell afforded to the city and can only be granted upon a demonstration of sufficient cause and where the scope of the requested relief is appropriate,” city lawyer Stephen LaPlante wrote in a court filing. “The plaintiff in this action fails to identify any basis to distinguish her case and afford her the requested right to proceed as if the bankruptcy had not occurred.”

The city’s biggest union better chickity-check itself before it wrecks Detroit by reviving a controversial bonus payment for retirees and workers that cost more than $1.9 billion, the city’s legal team said in a filing Tuesday.

The filing centers on so-called “13th checks,” a since-terminated program that gave retirees a bonus pension payout when the city’s retirement system made more money than expected.

The General pension fund stopped issuing 13th checks in November 2011 while the Police & Fire retirement system awarded the checks between 1999 and 2001.

Heather Lennox

Heather Lennox

The American Federation of State, County and Municipal Employees wants U.S. Bankruptcy Judge Steven Rhodes to modify the automatic stay halting litigation against the city, a move the city says is ultimately aimed at restoring the 13th check program.

“Common sense dictates that the sanctioned skimming of pension earnings during the years when performance exceeded assumed rates of return would come home to roost in the years when those same investments underperformed assumptions,” city lawyer Heather Lennox wrote in a filing Tuesday.

In February, an administrative law judge ruled the city unilaterally eliminated the “13th check” program despite having a duty to bargain with the union.

AFSCME wants to modify the automatic stay so the administrative law judge can execute his opinion before he retires Friday. That administrative law judge also could award money to the union for the period since the 13th checks were scrapped by the city.

AFSCME’s goal, the city says, is reinstating the “13th check” program, which has contributed to a “significant underfunding” of the city’s pension funds.

“At a running cost of $1.92 billion as of 2008…the potential impact on the city’s efforts to restructure and the interests of other creditors and parties in interest in this chapter 9 case is difficult to overstate,” Lennox wrote Tuesday.

Robert Snell
Robert Snell is the Detroit News federal courts reporter. He can be reached at rsnell@detnews.com or (313) 222-2028.