WILMINGTON, DEL, July 26: Meetings without the chance for any back and forth, unreturned phone calls and brusque tactics. To opponents of Detroit’s bankruptcy filing, Emergency Manager Kevyn Orr has utterly failed to negotiate with them.
But retired city workers, who are fighting to stop their pensions from being cut, and hope to stop Detroit’s bankruptcy by claiming in court that Orr didn’t engage in good-faith negotiations, are likely out of luck.
To be sure, Orr would have done himself a favor if he’d done more negotiating, legal experts say, but his cursory approach to talks won’t derail the city’s bid to go into bankruptcy.
In fact, Detroit more than meets the prevailing legal standards and Orr should have no difficulty persuading a federal judge to allow the bankruptcy to go ahead, they said.
“It’s highly unlikely that creditors will be able to block Detroit’s eligibility,” said Patrick Darby of Bradley Arant Boult Cummings. Darby, who represents Jefferson County, Alabama, in its bankruptcy, is not involved in Detroit.
In municipal bankruptcies, unlike corporate cases, cities and towns must prove they are eligible to go into bankruptcy before they can get court protection from their creditors.
Municipalities have several paths they can choose to be granted bankruptcy protection, including proving that they negotiated in good faith with its creditors.
In Detroit’s case, the numerous creditors and creditor groups have cried foul.
Instead of negotiations, the city held what creditors say were more like presentations. Creditors sat in an auditorium and wrote questions on index cards, which they passed on to Detroit’s lawyers from Jones Day.
And, for example, Syncora Guarantee Inc, which insured millions of dollars of the city’s bonds, complained in court documents it was unable to get Orr or members of his team on the phone.
David Skeel, a professor at the University of Pennsylvania Law School, said the standard for proving good-faith in negotiations was relatively low. While it probably would require more effort than one mass meeting of creditors “you don’t have to go to the ends of the earth with every creditor,” he said.
The city, though, has a much stronger argument on its side.
(AGENCIES)
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