There’s an old adage that alludes to the futility of shutting barn doors once the horses have fled.  With that bit of folk wisdom in mind, it’s worth pointing out that there is a certain runaway horse aspect to the state of Michigan’s emergency manager law and the various legal actions that are trying to shut it down.
 
Nearly a year ago, when PA 436 – formally titled the Local Financial Stability and Choice Act – was about to take effect, a noteworthy team of attorneys representing people in four of the cities under emergency management, led by lawyers from the nonprofit Sugar Law Centerfiled suit in federal court seeking to have the law declared unconstitutional on a variety of grounds, including the suspension of the powers held by duly elected officials.
 
(Full disclosure: The ACLU of Michigan has filed a friend of the court brief arguing that the suspension of political rights occurring in cities under emergency management is illegal under international law.)
 
Soon after the Sugar Law Center case was initiated, a similar lawsuit was filed by the NAACP on behalf of a group of African-American Detroit residents. Both cases were assigned to U.S. District Court Judge George Caram Steeh. Before much headway could be made in those actions, however, the city launched bankruptcy proceedings.
 
This is where things get particularly twisted.
 
One of the consequences of Detroit’s bankruptcy filing last July was the issuing of an automatic stay that put all lawsuits against the city on hold. As soon as the proceedings began, attorneys for Jones Day – the law firm hired to oversee Detroit’s restructuring – asked U.S. Bankruptcy Judge Stephen Rhodes to expand that stay to include cases against the governor, treasurer and their appointees that might “…interfere with the Chapter 9 [bankruptcy] process.”
 
What’s important to realize here is that Emergency Manager Kevyn Orr, who derives his sweeping powers from PA 436, is the one who had to recommend Detroit seek Chapter 9 protections. Otherwise, there was no way for Detroit to get into bankruptcy court.
 
Let’s recap to make sure everyone is completely clear as to what happened:
  1. A lawsuit is filed by the Sugar Law Center in federal court on March 27, 2013 challenging the constitutionality of PA 436.

  2. A day later, PA 436 officially kicks in and Kevyn Orr, installed a few days earlier as an emergency financial manager under the previous, less-expansive law, automatically becomes Detroit’s emergency manager with, among other things, the power to recommend to Gov. Rick Snyder that Detroit be allowed to seek Chapter 9 bankruptcy protections.

  3. The NAACP files a second federal suit challenging the constitutionality of PA 436.

  4. As a result of Orr’s recommendation, Detroit files for bankruptcy on July 18.

  5. On the same day, and the request of Jones Day attorneys, U.S. Bankruptcy Judge Rhodes authorizes expanding an automatic stay of lawsuits against the city to include PA 436-related lawsuits that name the governor, treasurer and their appointees (i.e. Orr) as defendants. Also put on hold were several lawsuits challenging PA 436 in state court, with Rhodes deciding to take jurisdiction over them as well.
Consequently, lawsuits that could conceivably result in Orr and other EMs around the state losing their power were put on ice as a direct result of actions taken by Orr, who could, in fact, actually be found to be an illegitimate actor in all this if PA 436 were, in fact, judged to be unconstitutional.

Feels a bit like being on a carnival Tilt-a-Whirl, doesn’t it?
 
For those of you wondering why all this is being dredged up now, there is, in fact, what journalists refer to as an actual news hook worth reporting.
 
Within the past few weeks – despite repeated attempts by Michigan Attorney General Bill Schuette’s office to convince Judge Rhodes to keep the challenges in limbo – the Sugar Law Center case, after being kept on ice for nearly six months, was officially re-opened in front of Judge Steeh.
 
The Sugar Law Center case, as was pointed out above, includes plaintiffs from Flint, Pontiac and Benton Harbor. Why should Detroit’s bankruptcy prevent them from having their day in court?
 
You don’t need to be a lawyer to see the injustice of that. On the other hand, it is a point Attorney General Schuette has steadfastly refused to acknowledge, having spent a lot of time and tax dollars fighting to keep the challenges bottled up in bankruptcy court. His office was asked if it wanted to respond to questions about all this, but they politely declined.
 
There are a couple of other twists worth pointing out. One is that the NAACP lawsuit, which was brought on behalf of only Detroit residents, remains in bankruptcy-induced limbo. The other is that, in order to ensure that Detroit’s bankruptcy proceedings aren’t impeded, a sort of carve-out was put in place by Judge Rhodes when he sent the Sugar Law Center case back to Judge Steeh.  If, by chance, Steeh were to decide that PA 436 is unconstitutional, that ruling would apply everywhere in the state except Detroit; it will be up to bankruptcy court’s Judge Rhodes to decide what to do about Detroit if that does happen.
 
Meanwhile, emergency management in Michigan continues to trot forward, as appointees with largely unfettered authority continue to take actions – such as the sale of public assets -- that will be all but impossible to reverse, even if the barn door does eventually get closed. 
 


By Curt Guyette, Investigative Reporter

 

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