June 9, 2014 at 6:29 pm

Detroit bankruptcy trial delayed three weeks

U.S. Bankrupcty Judge Steven Rhodes blamed Detroit's 'unfortunate delays in producing documents' for the delay in the trial. (Brandy Baker / The Detroit News)

Detroit’s bankruptcy judge has delayed by three weeks the start of a planned July trial over the city’s debt-cutting plan.

U.S. Bankruptcy Judge Steven Rhodes on Monday changed the trial schedule to begin on Aug. 14 and scheduled 28 court days through Sept. 23.

In a court filing, Rhodes blamed the delay on Detroit’s “unfortunate delays in producing documents” for objecting creditors and “unreasonable document production requests” by bond insurer Syncora Guarantee Inc., the city’s most legally aggressive creditor facing multimillion-dollar losses under Detroit’s debt-cutting plan.

City spokesman Bill Nowling claimed Monday “over 1 million pages total have been submitted” to Syncora.

“As part of their delaying tactic, they keep asking for more documents,” Nowling said. “There are small forests that have sacrificed themselves for these document requests.”

Rhodes’ last trial schedule called for the confirmation hearings to begin on July 24 and last 17 days. The judge’s move Monday marks the second time he has delayed the trial. He originally wanted to start the contentious proceedings on July 17 and have them wrapped up by Aug. 1.

The judge did not change the July 11 deadline for retirees and other creditors to submit their votes on whether to approve the city’s debt-cutting and reorganization plan.

In the run-up to the trial, Rhodes has scheduled two days of hearings on legal issues surrounding Detroit’s plan to exist bankruptcy on July 16 and 17 and will hear from individual creditors without attorneys during a July 15 hearing.

A coalition of creditors objecting to the city’s plan to shed nearly $9 billion in debts asked Rhodes to delay the trial because of delays in depositions and document production by the city.

Attorneys for bond insurers, European banks, public safety unions and Oakland County pushed for a longer trial and Detroit’s attorneys conceded they needed more time to prepare for the courtroom battle.

“Given the highly complex and unprecedented nature of the factual and legal issues that will be raised during the confirmation trial, the city’s schedule is impractical and unnecessarily prioritizes speed over the parties’ due process rights to present and fully defend their positions,” Mark James, attorney for bond insurer Financial Guaranty Insurance Co., wrote in a court filing.

Detroit’s attorneys asked the judge on Friday for 168 hours of trial time spanning 24 days. Rhodes’ revised schedule would allow for 210 hours of trial time, assuming the judge calls his usual 90-minute lunch breaks.

Stuart Gold, a Southfield bankruptcy attorney following Detroit’s case closely, said the trial delay gives bond insurers more time to fight for a better recovery than the near wipe-out they face under the city’s plan, which favors retirees over investors of city debt.

“They’re fighting for their survival,” Gold said. “They’re looking under every rock to determine whether or not they can secure additional funds from this plan and ultimately for their benefit.”

If the trial lasts until Sept. 23, it would end just a week before the City Council and Mayor Mike Duggan can legally remove Emergency Manager Kevyn Orr from office.

Orr has said he hopes to get the judge’s approval to execute his Plan of Adjustment and allow the city to emerge from Chapter 9 bankruptcy by Oct. 15.

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