This is an important part of the city’s case in that it claims AFSCME never countered its turnaround offer and deliberately did not do so, meaning it was not willing to negotiate a settlement with the city, thus making negotiations “impracticable” because the unions were not willing to negotiate in good faith. These are the points that are requirements to whether a city is eligible for Chapter 9.
Stewart went on and pushed Kreisberg on whether it was AFSCME’s belief that it was not in a position to negotiate pension obligation changes because it violates Michigan’s constitution.
Kresiberg answered, “That’s our position. I’m not a lawyer."
Stewart: Have you advised anyone to waive their constitutional rights to negotiate a settlement?
Judge Rhodes jumped in: “Don’t answer."
The judge was concerned this question might box in the witness and told Stewart to change his question to include the timeframe only up and until July 18th, when the city filed for Chapter 9. Stewart did and Kreisberg did answer saying no.
After a short re-direct, Kreisberg finished his testimony.
On the stand now is United Auto Workers national legal counsel Michael Nicholson. He is a highly experience attorney who led negotiations and was part of the government restructuring of Chrysler and General Motors. He also helped them set up their VEBA, a health care fund that managed retiree healthcare benefits and the funding of those programs. Nicholson has been giving expansive answers about his experience with retiree benefits and bankruptcy.
In the most easily explained exchange, UAW attorney Peter DeChiara wanted to know whether Nicholson attempted to make his expertise available to the city and attempt to negotiate some kind of pension benefit settlement with the city. Nicholson pointed out questions he wrote to city attorneys in meetings and his first question was how could the emergency manager file for Chapter 9 if it violates the Michigan constitution? He said Jones Day's Heather Lennox answered the question and claims she said, “We didn’t have any doubt and went on to say in Nicholson’s words, effect that “It was our problem."
DeChiara: Was the Union Willing to negotiate pension cuts?
Nicholson: The Michigan constitution Article 9 Section 24 is binding on everyone, our membership and even the governor. It precludes impairment and it is a violation of the law to do that. Only Michigan citizens have the authority to change that at the election booth and they have not done that. Neither the governor nor Mr. Orr can amend the constitution.
DeChiara: What were you willing to do?
Nicholson: We didn’t have access to the data room.
Judge: ”Please just answer the question.”
Nicholson: UAW was willing to do a class action and lead the negotiations with the city in July [before the bankruptcy filing] and the city was unwilling to do so.
Later there was more discussion regarding the lack of information available to the union as it was shut out of the “data room,” where the city made its financial records available to parties in the bankruptcy.
Nicholson: Good faith negotiations cannot happen without access to information. It is a basic tenant of U.S. Labor law and we were denied access here.
Nicholson continues his expansive answers and testimony and is starting the wear on the judge: Nicholson was asked by his counsel about his discussions with Jones Day attorneys [whom he knows from other bankruptcies] and Nicholson said, “I said what recovery would there be for lost benefits, benefits between what the city is offering and what retirees have coming, in other words the reduced benefits, under a deal. What would happen with that differential between? The Jones Day attorney Mr. Miller said no. I responded that is very unusual, that certainly is not the way it works in 11-14 [other bankruptcy law in the private sector]which I know about."
Later Nicholson went on about a meeting with city attorneys and in particular Jones Day attorney Evan Miller]
“Near the conclusion of the meeting I spoke up, having thought about this issue going into the meeting and I said I want you to go back and tell Mr. Orr that the UAW… There is a way to deal with this issue, you know what it is. A class action. … tell Mr. Orr the UAW is willing to engage and tell Mr. Orr that we are willing to lead that process," he said.