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Detroit bankruptcy appeals can go to 6th Circuit: judge

A man walk past graffiti in Detroit, Michigan, December 3, 2013. REUTERS/Joshua Lott
A man walk past graffiti in Detroit, Michigan, December 3, 2013. REUTERS/Joshua Lott

By Joseph Lichterman

DETROIT (Reuters) - Appeals of Detroit's historic bankruptcy will be allowed to bypass a federal district court and head straight to the U.S. 6th Circuit Court of Appeals, the bankruptcy judge overseeing the case ruled from the bench on Monday.

U.S. Bankruptcy Judge Steven Rhodes, after listening briefly to arguments from lawyers for the city's unions, retirees and others, ruled they can proceed directly to the appeals court. He added that he would decide in the "next day or so" whether to ask the appeals court to take up the matter in an expedited fashion.

Attorney Lisa Fenning, who represents the city's two pension funds, told Rhodes that an expedited appeals process would not hinder Detroit's ongoing mediation with its creditors or the city's ability to submit its restructuring plan to the court.

"We're not trying to slow down the confirmation process," said Fenning, a former federal bankruptcy judge in California. "We think they need to go in tandem."

Detroit Emergency Manager Kevyn Orr has said the city intends to submit its plan to restructure its debt to the court in early January.

Earlier this month Rhodes declared that Detroit met the requirements for Chapter 9 municipal bankruptcy under federal law. He said the city, with more than $18 billion in debt, was insolvent and that negotiations with its creditors were impractical.

Rhodes' December 3 ruling also said the city could cut retiree pensions as part of its restructuring.

The attorney representing the American Federation of State, County and Municipal Employees, Detroit's largest union, urged Rhodes' to request an expedited decision from the appeals court because his ruling will impact other struggling municipalities around the country.

"This is an issue of national importance," attorney Sharon Levine said. "We're seeing already across the country the impact it's having."

Detroit's attorney, Corinne Ball, said the city's sole focus was to get its plan of adjustment confirmed by the court. She said the city would support an expedited appeals process if it did not detract from that process.

"The city is dedicated to proceeding as rapidly as possible moving toward a plan of adjustment that will hopefully have broad creditor support," Ball said. "That is our objective."

(Reporting by Joseph Lichterman; Editing by Chizu Nomiyama and Leslie Gevirtz)

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