Since Detroit filed for bankruptcy July 18, all litigation against Michigan's largest city has been frozen, or stayed, pending the outcome of the Chapter 9 proceedings. (David Coates / Detroit News)
Detroit — U.S. Bankruptcy Judge Steven Rhodes on Tuesday gave Detroit 35 days to come up with a plan for disposing of nearly 500 lawsuits that were pending against the city when it filed for bankruptcy in July.
Rhodes issued a ruling from the bench Tuesday morning in response to a request from the mother of a slain Detroit police officer who wants to proceed with a liability lawsuit against the city involving the slaying of her daughter.
Since Detroit filed for bankruptcy July 18, all litigation against Michigan’s largest city has been frozen, or stayed, pending the outcome of the Chapter 9 proceedings. But the bankruptcy judge has the power to grant individuals limited relief from the automatic stay.
At an evidentiary hearing Tuesday morning, two city attorneys who work in the law department indicated they had not been advised by Emergency Manager Kevyn Orr’s office or the city’s restructuring consultants as to how the pending litigation would be settled in the bankruptcy proceedings.
Rhodes said the testimony showed that neither the city’s management nor its out-of-state attorneys have “yet spent any time focusing on this very issue on what should the process be for liquidating these claims.”
“If any time has been spent on this issue, that certainly did not come through the testimony that was presented here today,” the judge said.
In past bankruptcy court hearings, Rhodes has prodded city attorneys about how they plan to settle legal claims against the city, but has gotten few, if any, answers. On Tuesday, Rhodes renewed his previous suggestion that a committee representing claimants be formed to negotiate with the city on their behalf. There is already a committee representing Detroit’s 23,000 retirees in the case.
“I do not intend to dictate that; it’s just a suggestion,” the judge said.
The 500 claimants are among the nearly 100,000 different creditors that Orr estimates are owed more than $18 billion.
Attorney William Goodman asked the judge for permission to seek restitution 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, is pursuing a lawsuit against the city, arguing the Police Department is liable for a “state-created danger” for not hospitalizing Ed Williams after a string of domestic violence and suicidal incidents.
After 29 sworn depositions were taken over a period of nearly three years, the lawsuit was set to go trial in November before the bankruptcy filing halted the proceedings, Goodman said.
Goodman has argued the bankruptcy case’s automatic stay violates the family’s constitutional rights to due process.
Edward Keelean, the city’s deputy corporation counsel, testified Tuesday that if the automatic stay were lifted, the department remains understaffed after an “exodus” of 27 city attorneys in 2012 and the first few months of this year.
“One case is not going to bring the world to an end,” Keelean said.
But allowing just one case to proceed, Keelean said, will likely trigger more requests to the bankruptcy court to proceed with legal claims against the city.
“I’d expect we’d have a steady drum beat of similar requests,” he said.
During Tuesday’s hearing, Goodman argued that attorneys in the city’s Law Department have had nearly three months since the bankruptcy filing to prepare for the next stage of his client’s case.
“All of these things are relatively trivial within the context of a full time legal process and certainly in the context of the seriousness of the case involving Ms. Ryan and her family,” Goodman said.
If the city does not propose a process for settling lawsuits within in 35 days or seek an extension from the court, Rhodes said, Ryan would be free to pursue her claim against the city.
“If they don’t file, then the stay is lifted as of the 36th day,” Rhodes said in a ruling from the bench.
Also Tuesday, Rhodes signed an order prohibiting labor union attorneys from asking Gov. Rick Snyder for the names of the other Detroit emergency manager candidates during a sworn deposition Wednesday in the bankruptcy case.
Rhodes had set a hearing for today on the state’s effort to shield Snyder from having to disclose the names, but it was canceled after labor union and retiree attorneys agreed to not ask the questions when they depose Snyder Wednesday in his Lansing office.