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Court rejects challenge to Detroit bankruptcy pension cuts

October 03, 2016 - 1:14 PM

DETROIT - A federal appeals court on Monday rejected a challenge to cuts in Detroit pensions, saying a sweeping plan that brought the city out of the largest municipal bankruptcy in U.S. history must not be disturbed.

"This is not a close call," said Judge Alice Batchelder at the 6th U.S. Circuit Court of Appeals.

Some retirees sued, saying they deserve the pension that was promised before Detroit filed for bankruptcy in 2013. Thousands saw their pension cut by 4.5 per cent; annual cost-of-living increases were eliminated.

The court noted that Detroit's exit from bankruptcy in 2014 was the result of a series of major deals between the city and creditors, including people who receive a pension or qualify for one in the future.

Altering the pension cuts, the judges said, would be a "drastic action" that "would unavoidably unravel the entire plan, likely force the city back into emergency oversight and require a wholesale recreation of the vast and complex web of negotiated settlements and agreements."

In dissent, Judge Karen Nelson Moore said retirees at least deserve their day in court. She said Batchelder and Judge David McKeague were citing a "questionable" legal standard to dismiss the case, 2-1.

"It has real-world consequences for the litigants before us — retirees who spent their lives serving the people of Detroit through boom and bust, and who feel that the city's bankruptcy was resolved through a game of musical chairs in which they were left without a seat," Moore wrote.

Jamie Fields, an attorney for about 160 retirees, said he wanted the court to consider the merits of his argument. He contends that the bankruptcy judge had no authority to override the Michigan Constitution, which protects public pensions.

"A lot of retirees are making choices between groceries and medicine," he said.

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Follow Ed White at http://twitter.com/edwhiteap

News from © The Associated Press, 2016
The Associated Press

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