Michigan Judge Says Detroit Bankruptcy Is Unconstitutional, Demands Filing Be Withdrawn

A Michigan judge says the city of Detroit's Chapter 9 bankruptcy filing Thursday was unconstitutional, and she demands that it must be withdrawn.

At issue are the city's pension obligations, which would be reduced in the bankruptcy process.

However, Ingham County Circuit Court Judge Rosemarie E. Aquilina says that would cause irreparable damage to pensioners, and asserts that in order to rectify the situation, Michigan Governor Rick Snyder must order the bankruptcy filing to be withdrawn.

Bloomberg's Steven Raphael and Megan Durisin report that Aquilina can't make that happen, though:

Kenneth Klee, the bankruptcy lawyer who spearheaded the bankruptcy restructuring of Jefferson County, Alabama, said a state judge can’t force Detroit out of federal bankruptcy, even if Snyder agrees to try to withdraw the petition.

Once Detroit city filed the bankruptcy petition, it came under federal jurisdiction and the case cannot be withdrawn, even by Snyder, said Klee, of Klee Tuchin Bogdanoff & Stern LLP in Los Angeles. A federal judge would have to agree to dismiss the case, according to Klee.

“If the governor changes his mind, it doesn’t matter,” he said. “Not only can’t she do that, but her order may be in contempt of a federal court, and a federal judge can put her in jail.”

Snyder is appealing Aquilina's decision. She is holding a hearing on the case on Monday morning.