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Trying to stop pension cuts

DETROIT — Labour unions trying to stop Detroit from cutting pensions filed a new challenge to the city in bankruptcy court as the federal judge overseeing the case said he would hear arguments tomorrow.

US Bankruptcy Court Judge Steven Rhodes agreed yesterday to a request by Detroit Emergency Manager Kevyn Orr to fast track a hearing on whether other courts can hear lawsuits against Detroit, while it seeks federal bankruptcy court protection.

Concerned that retirement benefits will be slashed, Detroit retirees, workers and pension funds have filed three lawsuits, including one backed by the United Auto Workers union, in state court in an effort to derail the biggest Chapter 9 municipal bankruptcy in US history.

A Michigan court judge, for instance, has ordered Orr to withdraw the July 18 bankruptcy filing.

The American Federation of State, County and Municipal Employees Council 25, which represents about 70 per cent of Detroit’s civilian workforce, yesterday argued if the other lawsuits were stopped, Orr, Michigan’s governor and others would be able to continue to operate beyond state constitutional authority.

However, many legal experts said they expect Judge Rhodes to put the other cases on hold.

“Federal bankruptcy law generally trumps state law,” and is designed to do so, said Stuart Gold, a Detroit-based bankruptcy lawyer at Gold Lange & Majoros PC.

If Orr’s request to put those lawsuits on hold is granted, top Michigan state officials, Orr and others would also be protected from litigation regarding last Thursday’s bankruptcy petition.

Detroit, a former manufacturing powerhouse and cradle of the US automotive industry and Motown music, has struggled for decades as companies moved or closed, crime became rampant and its population shrivelled by about 25 per cent in the past decade to 700,000. The city’s revenue failed to keep pace with spending, leading to years of budget deficits and a dependence on borrowing to stay afloat. (Reuters)

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