So… you think you’ve got rights? Right there, written in the Constitution?
Today everybody heads to court for the first hearing in the Detroit bankruptcy filing. And I’m guessing it’s about to get really scary. I’m guessing that one of the questions that will be posed is: whether Detroit workers’ Constitutional rights actually matter during a Chapter 9 bankruptcy.
Here’s the thing: yesterday, the Michigan Court of Appeals halted all state court action on the matter – including the lawsuit challenging the bankruptcy filing on Constitutional grounds.
Here’s the second thing: there is apparently a legal theory that
Under Chapter 9, a municipality has the clear authority to modify, assume or reject executory contracts, and these actions will not be subject to constitutional challenges outside of the bankruptcy proceeding while adjustment takes place.
Go back and read that again. “These actions will not be subject to constitutional challenges outside of the bankruptcy proceedings.”
And that category “executory contracts” could include… oh, say… collective bargaining agreements and pension obligations. (Yes, I’m thinking maybe it even includes those pension obligations written into the Michigan Constitution, back in 1963.)
And here’s the third thing: legal experts seem to agree that, under Chapter 9 bankruptcy proceedings, the federal court doesn’t have much say over what the state and municipality decide to do. Here that is, in lawyer-language:
A bankruptcy court’s power is greatly limited under chapter 9 in deference to the Tenth Amendment of the U.S. Constitution and principles of federalism that reserve to the states sovereignty over their own internal affairs. Accordingly, the state maintains its powers to control municipalities (subject to specific Bankruptcy Code provisions). The bankruptcy court cannot interfere with the political or governmental powers, property, revenues or use or enjoyment of income-producing property of the municipality.
So, here’s my huge question: what happens if neither the federal court nor the state court has jurisdiction to enforce the constitutional rights of Detroit workers?
Is it possible that the state of Michigan – through its Governor, Rick Snyder – really does have an unfettered ability to reject constitutionally-protected pension obligations?
Yep, looks to me like that would be a pretty scary legal theory, that I’m guessing they will start to test today.
Speaking of scary…
Remember Governor Rick Snyder’s Very Busy December? (He pushed through a replacement Emergency Manager law, and then days later he pushed through a Right to Work law? Merry Christmas, everyone!)
Also in December… The Michigan State University Extension program issued a very interesting report: “Chapter 9 Bankruptcy: Simulation Exercise.” You can read it here.
It would look an awful lot like a blueprint-for-bankruptcy, to me, if not for the disclaimer: “It is not intended to provide legal or financial advice or counsel and should not be construed as such to any of its readers. If legal or financial advice is needed, the appropriate licensed professional should be contacted.”
And here’s a disclaimer of my own: I AM NOT A LAWYER. I could be totally misreading things.
Maybe Gov. Snyder really isn’t going to try to use a legal loophole to get around the rights of Detroit workers.
Maybe I’m just being hypersensitive, what with all the recent attacks on workers and government programs. (Read today’s New York Times “House G.O.P. Sets New Offensive” here.)
Maybe I’m wrong about all this.
I really hope so.
UPDATE: Breaking News from Detroit.
(Reuters) — Lawyers for the city of Detroit on Wednesday asked a U.S. bankruptcy judge to set aside all other lawsuits seeking to block the city’s petition for bankruptcy protection, arguing that federal bankruptcy court is the only venue to debate the matter.
Read my Friday blog post about Detroit here.
Read Monday’s post here.
Read yesterday’s post here.