AFSCME aide Tiffany Ricci and union attorneys Michael Artz and Sharon Levine arrive at the George Romney Building in downtown Lansing to question Gov. Rick Snyder about the Detroit bankruptcy filing. (Charles V. Tines / The Detroit News.)
Lansing — Detroit filed for bankruptcy in July a day before it actually planned to, according to an internal governor’s office document, fueling suspicions by city unions and retirees that the filing was a hasty attempt to dodge a court injunction.
The document surfaced Wednesday as an exhibit during Gov. Rick Snyder’s sworn deposition in the Chapter 9 case and could be used by objectors in their attempt to get Detroit kicked out of bankruptcy court.
Dated July 17, the three-page “City of Detroit Chapter 9 Communications Rollout Plan” indicated the city was to file for bankruptcy at 7 a.m. July 19, a Friday.
Instead, the city’s attorneys raced to the federal courthouse to file the historic bankruptcy petition at 4:06 p.m. on July 18, court records show. The typed date on the filing was July 19, but the “9” was changed to an “8” in handwriting on the document.
The News previously reported the city’s bankruptcy filing beat a state court judge’s plan to restrain Snyder from authorizing the filing by a mere five minutes. Once the city filed for bankruptcy, all litigation against the city and the Snyder adminstration was frozen.
One labor union attorney said the document underscores the argument by unions the Chapter 9 petition was hastily filed and that the city didn’t negotiate with creditors in good faith in the days before Emergency Manager Kevyn Orr went to court.
“They knew legally that once the bankruptcy is filed, that ousts the state court of jurisdiction,” said Bill Wertheimer, attorney for a group of United Auto Workers’ retirees who sued to stop the filing in early July.
State officials turned over the communications plan to creditors through the bankruptcy evidence discovery process. Whether it adds to the evidence unions and retirees are gathering to derail Detroit’s case for being eligible for bankruptcy remains to be seen. An eligibility trial is scheduled to begin Oct. 23.
“It depends on what the judge finds to be relevant, but arguably it goes to the good-faith issue,” Wertheimer said.
Snyder and Orr have previously sidestepped questions about whether the bankruptcy was filed on July 18 to avoid a state court injunction barring its filing.
Snyder spokeswoman Sara Wurfel downplayed the significance of the document, which included hour-by-hour plans for a July 19 media blitz by the governor and Orr.
“The timeline was simply prepared as part of our office’s contingency communications planning in the event of a bankruptcy filing,” Wurfel said in an email. “The governor had made his decision and was ready to move forward on the 18th, which he did.”
Orr has said he couldn’t continue to negotiate with unions and the city’s pensions funds in July when they were filing lawsuits against him.
In making its case for bankruptcy eligibility, the city’s lawyers could fall back on the argument that it was impractical to negotiate with about 100,000 creditors as some of them were taking legal action to block the filing, said Laura Bartell, a bankruptcy professor at Wayne State University Law School.
“It was quite clear they could be negotiating until dooms day, and they were never going to get anywhere,” Bartell said.“It just wasn’t (practical).”
On Wednesday, Snyder testified for three hours under oath in a sworn deposition about why he authorized the bankruptcy filing.
The UAW, the American Federation of State, County and Municipal Employees and retirees are challenging Detroit’s eligibility for bankruptcy on grounds that it could lead to the slashing of earned pension benefits in violation of Michigan’s constitution. Orr has said pensions will have to be cut as part of an effort to pare down $18.5 billion in debt.
Union attorneys said they grilled the governor about whether he believed employee pensions should be slashed in the debt-cutting process — but got few answers.
“There were certain times during the deposition when I think he was trying to be forthcoming, and he was,” AFSCME attorney Sharon Levine said after the deposition. “And there were other times during the deposition where he couldn’t recall, didn’t recall or was claiming the attorney-client privilege.”
Snyder said Wednesday he agreed to testify to “ensure this case is resolved fairly and as quickly as possible.”
“Authorization of the Chapter 9 filing was a difficult but necessary decision — one that clearly was the last and only viable option to resolve the city’s fiscal crisis and restore the greatness of this proud city,” Snyder said.
Levine declined to say whether AFSCME would call Snyder as a witness at the eligibility trial, though a transcript of the governor’s deposition could be introduced as evidence.
Union and retiree attorneys plan to depose state Treasurer Andy Dillon and Snyder aide Rich Baird about the bankruptcy filing today. Mayor Dave Bing is scheduled to sit for a deposition Monday.