In Re Detroit Michigan

504 B.R. 97 (2013)

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Nature of the Case

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Facts

P was once a hardworking, diverse, vital city, the home of the automobile industry, proud of its nickname - the 'Motor City.' It was rightfully known as the birthplace of the American automobile industry. In 1952, at the height of its prosperity and prestige, it had a population of approximately 1,850,000 residents. In 1950, P was building half of the world's cars. For decades P has experienced dwindling population, employment, and revenues. This has led to decaying infrastructure, excessive borrowing, mounting crime rates, spreading blight, and a deteriorating quality of life. P no longer has the resources to provide its residents with the basic police, fire, and emergency medical services that its residents need for their basic health and safety. P's governmental operations are wasteful and inefficient. Its equipment, especially its streetlights and its technology, and much of its fire and police equipment, is obsolete. P estimates its debt to be $18,000,000,000. This consists of $11,900,000,000 in unsecured debt and $6,400,000,000 in secured debt. It has more than 100,000 creditors. At P's request, on July 18, 2013, Governor Richard Snyder authorized the filing of this chapter 9 bankruptcy case under § 18(1) of Public Act 436. M.C.L. § 141.1558(1). P filed chapter 9. Article IX, § 24 of the Michigan Constitution states, 'The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.' Nothing in Public Act 436 prohibits a municipality from seeking to impair pensions in a chapter 9 case. The governor's authorization to file this case did not include a condition prohibiting the City of Detroit from seeking to impair pensions in this case. P has stated that its plan of adjustment will propose to impair pensions because P is unable to propose a plan that does not impair pensions. Several objecting parties, including pension plans, assert that as applied in this case, chapter 9 violates the Tenth Amendment of the United States Constitution. Objections to P's eligibility were filed by 110 creditors on a variety of grounds. The questions presented are: 1. Does chapter 9 of the bankruptcy code violate the uniformity requirement of the bankruptcy clause of the United States Constitution? 2. Does chapter 9 violate the contracts clause of the United States Constitution? 3. Does chapter 9 violate the Tenth Amendment of the United States Constitution, as applied in this case? 4. Does the bankruptcy court have the authority to determine the constitutionality of chapter 9 of the bankruptcy code under Stern v. Marshall, 131 S. Ct. 2594, 180 L. Ed. 2d 475 (2011)? and on and on they go.