Closing arguments begin Friday in Detroit's bankruptcy eligibility trial

Testimony is over, closing arguments set to get underway Friday

Detroit Emergency Manager Kevyn Orr (middle) testifies in city's Chapter 9 bankruptcy filing trial on Oct. 28, 2013.
Detroit Emergency Manager Kevyn Orr (middle) testifies in city's Chapter 9 bankruptcy filing trial on Oct. 28, 2013. (Sketch by Carole Kabrin)

DETROITLocal 4's Rod Meloni is blogging from inside Detroit's bankruptcy eligibility trial as closing arguments get underway Friday.

A judge will decide whether the city is eligible for Chapter 9 municipal bankruptcy. The city can then move forward with reorganizing its $18 billion debt.

9:45 a.m.

Detroit's Bankruptcy eligibility trial is nearing a close. Today's in-court activity is closing arguments.

Court promptly started at 9 a.m.

Taking first turn in the closing arguments was the state of Michigan. It's attorney was Matthew Schneider. He declared, "This city is eligible for bankruptcy."

Schneider made no bones about where he is coming from.
He said in no uncertain terms that the governor and the treasurer and Kevyn Orr worked diligently and did their jobs, to deal with a financial crisis.

"They did their jobs" was his constant mantra.

He said the State of Michigan came in because people were suffering in the city, police were taking an hour to respond to crimes, ambulances were falling apart and also not servicing emergencies. Schneider said the governor's overriding concern was for the citizens of the city of Detroit.

Schneider went on to say the objector unions and their criticisms of the city's Chapter 9 case make no sense. He likened them to people who ignore the weather forecaster.

He said the objector unions' cases surrounded the theory that the state and the city had decided chapter 9 was predestined because they were speaking with financial experts early on. He said logically the union position is nonsensical because if you do not listen or consult with the weather forecaster, and you do not put on a rain coat when it starts raining you want the storm to come!

Schneider went on saying you logically would expect planning, cooperation, be ready for anything.

Consultants came to the state volunteering help, the Jones Day Law firm, Huron Consulting, Miller Buckfire, Conway Mackenzie, Ernst and Young were listed among many. He said, "It would be foolish to go it alone and irresponsible not to prepare."

He said the governor's testimony was that he prepared for the worst and hoped for the best.

Rod Meloni: Snyder takes stand in bankruptcy trial

He further criticized objector unions for wanting to punish the governor and the treasurer and Kevyn Orr for doing their jobs. "This was never about predetermining a Chapter 9.

Even though the objector unions want to say that because there were emails from 2012 from Jones Day and Miller Buckfire that show they discussed bankruptcy early on this case is not about a preordained chapter 9.

He said it was not about Kevyn Orr being hired to execute a bankruptcy, not about an Ingham County judge's hearing that might prevent a chapter 9 filing, it was about doing the right thing.  

10:30 a.m.

Schneider went on to say this was all about following Public Act 436, the emergency manager law. He said Gov. Rick Snyder "the statutory process was followed to the letter and objectors cannot refute that. Objector unions can't refute the city is out of cash."

He pointed out the five main arguments the objector unions have presented in court and refuted them all.

1.) That the purpose of the appropriation put into PA 436 was made to prevent a referendum that would repeal the law down the road. Jones Day attorneys discussed this in early emails as the objector unions did produce, but Schneider said "Jones Day is not the governor and it was not his purpose. The purpose was to pay the emergency managers. Emergency management is not just for Detroit. There were 7 or 8 others in place. It is a statewide problem." He also said another appropriation to PA 436 was later added to cover consultants for a fiscal year at a much later date. He further explained testimony that showed cities had actually complained they paid for emergency managers and under PA 436 there was a decision that the state did not need to "put it on a city or school district" under emergency management.

2.) It was bad faith to rush to file the Chapter 9 in July. "The facts don't support that went back all the way. The governor testified he went back all the way to the beginning of his administration, read every file, every report and "conducted this process in good faith. The governor gave chapter 9 careful, thoughtful consideration."

3.) "Failure to place a contingency [a mechanism to put the state on the hook to pay unfunded pension obligations] was sinister and unconstitutional or both." "The governor testified we were in a crisis mode, that putting in contingencies would have resulted in more complexities." Snyder testified he had confidence in the court and while he did not write a contingency into his permission to file for chapter 9 he did include language in it that stated "any plan of adjustment must be a legal plan" as a nod to the constitutional requirement not to alter pension benefits.

4.)There was a scheme to end around the constition to cut pensions. Schneider said this is falsehood. He said the governor and the treasurer explained the city is still $14 to $15 Billion in debt" without the pension benefits included. "It is inconceivable that a Chapter 9 filing is to ‘get the pensions'. The pensions can't be the target

5.) The objector unions want to show that the consultants and the state and the city worked together to drive the city into chapter 9. He cited memos and emails that showed those kinds of discussions happened. But he reiterated  the point that advisors giving advice are still not the governor. "If we had a nickel for every time an attorney gave advice we all would be rich." He said "the best evidence is the governor's testimony."

He added contingency plans were made and contingency planning is part of the job.

"A chapter 9 filing was not our goal."

"The serious discussion of Chapter 9 came the week before the authorization. He pointed then to former treasurer Andy Dillon regarding the Jones Day emails of June 2012 where chapter 9 is first broached.

Schneider said of chapter 9 "It was always a last resort. If we were thinking of a Chapter 9, you don't go for a consent agreement."

As Dillon had testified you cannot get to a chapter 9 through a consent agreement.

To believe chapter 9 was preordained, "you must believe the consent agreement was a charade. The state wanted to avoid a financial emergency and work it out."

"The world is full of critics, objectors can critique the governor the emergency manager and the treasurer but what witness testimony shows it's about leadership. The governor say the problem getting worse and no one doing anything about it. That is not bad faith, it's good faith; good faith to step up and do what was best for the citizens of Detroit."

"The deplorable financial facts" are indisputable. He concluded by saying the city is eligible for bankruptcy.

10:40 a.m.

Schneider finished the state's close and now the city's attorney from Jones Day is Bruce Bennett.

He has asked for an hour and a half for his side of the case.

He took point by point the legal arguments that go along with the legal bases the city needs to touch in order to be found eligible. 

Using the Plunkett Cooney law firm's breakdown of the process it looks like this: The municipality must prove it is a municipality. That is not in question here.

In addition to the requirement of being a municipality, and that the filing must be authorized by state law, [which it was under PA 436] in order to be eligible for bankruptcy relief the debtor:

(i) Must be insolvent as of the date of filing of the petition; and,

(ii) Must desire to effect a plan to adjust debts; and

(iii) Must show one of the following requirements: 

a.)Has obtained the agreement of creditors holding at least a majority in amount of the claims of each class than the municipality intends to impair under a plan

b) Must have negotiated with creditors in good faith but has failed to reach an agreement

c.) Is unable to negotiate with creditors, because to do so would be impracticable;

d.) Reasonably believes that a creditor may try to obtain an avoidable preference. 

11 a.m.

Bennett's close is much less impassioned and more factual. Yet, he started out saying the Chapter 9 was filed in good faith.

He said the city is insolvent on a cash flow basis, which is the first Chapter 9 requirement.

He said no one disputes this.

Only one union put insolvency is an issue and it was AFSCME. Bennett said, "In their opening argument they made promises of proof I didn't see they proved anything. I don't see there is any dispute."

He equated the city's situation to a store. He said when a store is only restoring 57 cents on the dollar for goods sold, and the store down the street is giving 84 or 85 cents on the dollar value then in the store giving 57 cents value you have a reorganization issue needs to be fixed.

The point here is that the city of Detroit's legacy costs were requiring paying 57 cents on the tax dollar to retiree healthcare and pensions and the rest was going to city operations which is way out of whack with the rest of the world.

He went on to say, "increases in pension contributions only gets worse and worse and worse in future years. This has to be addressed and cannot be ignored."

11:15 a.m.

Bennett: He went on to say there is the question of pension underfunding. The dispute over underfunding never happened.

He pointed to the June 14th Kevyn Orr turnaround plan presented at Metro Airport as the cornerstone of his case.

Read: City of Detroit Proposal for Creditors

He said "We [the city] demonstrated [in the plan] and specified what a deal with a pool of creditors will get and what the good looks like."

He was pointing the the focal point of his case and that is negotiations were "impracticable" which voids the city's responsibility to "negotiate in good faith."

One of the cornerstones of this is the notion of "good faith".

Bennett took to calling Detroit "a good faith city" and often asked the question :"what was a good faith city to do when…" and then filled in the blank. He said often No plan offered would be the symbol of bad faith, the plan presented was vital to this process.

The court has decided to take an early lunch, we are in recess until 12:45.

Bennett then moved to the central issue of the entire case: pension benefit cuts.

He showed part of Orr's plan on the courtroom screen. It said: "because the amounts realized on the underfunding claims will be substantially less than the underfunding amount there must be significant cuts in accrued, vested pensions amounts for active and currently retired persons."

He said the city was up front and serious about letting everyone know where the city stood as it related to its financial problems and particularly toward retirees.

This sentence told everyone that the city viewed retirees as part of the "class" of unsecured creditors, creditors who had no dedicated revenue stream  backing their claims against the city. This lumped bond holders and pensioners into the same group that the city was offering a $2 billion note to solve the obligations it could not afford to pay.

Bennett explained that the city is "legally indifferent… not emotionally indifferent" about this situation. He explained that "pension adjustments worded this way creates the parties to a deal with consequences that might be looked at by law."

Essentially he is saying this is the city's way of trying to come to a negotiated settlement considering its financial condition, which was insolvent.

Bennett said he was baffled by the objector unions' positions that the pension underfunding was less than the $3.5 billion the city was claiming because "you stand to lose more in the process."

Judge Rhodes interrupted Bennett on a couple of occasions. He was very interested to hear more on this point, about the treatment of retirees and also the impracticability of negotiations.

Bennett talked about the large number bondholders, many of them are insured, some are not. The city was talking with insurers, getting started on some kind of negotiated settlements there but there was nothing heard from the unions.

In fact, Bennett points out that while the objector unions were told at the June 14th meeting with Kevyn Orr it wanted to negotiate a settlement the unions, when asked to, refused to represent retiree interests.

This is where his "impracticability" argument comes into play. Bennett said [because the judge had asked him about this] the unions responded to repeated inquiries by the city "we cannot or do not represent retirees."

Bennett went on saying, "there are numerous statements in United Auto Workers briefs, and even in the retiree committee [that was set up after the Chapter 9 filing] proclaim it is bad faith to even ask for impairment and they never would agree to negotiate."

Bennett cited retiree organization leadership who testified in the trial that "the would never have agreed to a plan that would impair pension benefits." He said it was impossible to negotiate in good faith with organizations or unions that refused to talk or offer any kind of counter proposal to Orr's turnaround plan.

Yet, Bennett said "no one objected to the data contained in the report. No one object to the math. This proposal stands as a monument of the city's good faith. The city's' financials were a horrifying story. No one is hiding the bad, everything that needs to be seen is there, this plan is a reflection of good faith, not bad faith."

Bennett said that while the objector unions would say otherwise "everyone understood that negotiations were "impracticable."

He cited former treasurer Andy Dillon's testimony "as the numbers got worse so did the negative surprises.

The chances of a deal to be worked out got worse. I don't think at any time anyone thought recoveries could be great, but you can look and see that the numbers were getting worse, beyond anyone's expectations."

In speaking about the June 14th turnaround plan presentation at Metro Airport for creditors and Kevyn Orr's plan shown at that meeting much has been made by the creditor unions that only cards were passed out for people to ask questions as it was a large room and only made sense. But even so, no one asked any questions.

He cited the testimony of the unions' own financial expert who admitted on the stand that while he saw the plan as an opening to start negotiating it never occurred to him to respond to it or ask questions that might have facilitated negotiations.

Bennett went on to say that the unions' recalcitrance, their unwillingness to even talk made negotiations impracticable and therefore the lack of negotiations is "not a reflection of the city's bad faith." He went on to say there was an initial round of discussions of stakeholders, mostly bond holders and "no one ever said we would negotiate a plan in four weeks or else."

He said the meeting at the airport was about taking a month to evaluate the situation to "make a shot that in our hearts we would love to have an out of court settlement that in our heads we knew was not possible."

Bennett moved on the objector unions claims that the pre-bankruptcy planning was an example of bad faith.

On the contrary, he said, "it's a sign of good planning."

He said likened the process that should have or could have happened to buying a car… taking a swipe at the New Yorkers in the crowd who may never had owned one… He said you find a car you like in a showroom and "you don't ever want to pay sticker price. What do you do to find a price? You make an offer or you don't buy a car."

He maintained as he has from the outset that "no one ever answered the question, that Nicholson and Taylor [retiree organization presidents] understood what was on the table, other professionals knew what to do if there was any hope of dialogue." Bennett asked the judge "what is a good faith city supposed to do with counter parties who will not respond other than to say no impairment could be acceptable and they don't represent the retirees."

He said the city was boxed in, the clock was ticking, the financial situation getting worse every day, uncooperative unions not wanting to talk.

Bennett moved on to say, just for the sake of argument, that the city decided to stop and spend more time talking. It would be assuming the city did not have any other pressures against it, raising the prospect of "instability risk", chaos in other words.

He also asked "what would more time have led to?" Bennett said in his most impassioned argument that "there is no evidence to show there was a path to a deal." He then pointed out the United Auto Workers were secretly financing lawsuit, the Flowers lawsuit, and in their briefs repeatedly said "they would never, ever, ever negotiate a deal that would impair pensions."

He reminded the judge time was running out, meaning the money was running out too. He asked "what is a good faith city supposed to do that works and is better?" He pointed to the "Ingham County forum" [the court where AFSCME took its lawsuits against the city and state fighting the chapter 9 filing] saying that did nothing to solve the city's problems, it only made matters worse" and that this was the kind of "uncoordinated creditor action bankruptcy law is in place to prevent."

"Chapter 9 not only was in good faith but sensible." Bennett said.

Bennett wrapped up by saying there is overwhelming evidence the City of Detroit is eligible for bankruptcy, that it is in legal terms "prima facie" meaning on its face it is obvious.

He said negotiations with the objector unions were impracticable, that the city operated in good faith in seeking those negotiations and that there is no basis to dismiss the city ‘s Chapter 9 request.

He then asked Judge Rhodes to consider one last point as he goes to hear the objector unions closing arguments… "consider whether any of the complaints the unions cite ‘if this particular thing happens' ask then what?" Bennett said the second half, the back part of the dialogue has never been followed. Ultimately he believes the unions need to be held responsible for their criticism of the city's action.

He said "they should specify what the city should have done to solve this issue."

In total the city is saying it had no other choice than to file bankruptcy with union partners who would not talk, would not cooperate and while it wanted a negotiated settlement the clock was running out and the cash was too.

Judge Rhodes gave objector union attorneys the option to have an early lunch and proceed with their closing arguments or take a 20 minute break and do the first close. They opted for early lunch. Court resumes at 12:45.

12:50 p.m.

The afternoon session of the City of Detroit Bankruptcy Eligibility trial has resumed @ 12:48pm.

Leading the closing arguments for the objector unions is Sharon Levine of AFSCME. She will be the first of at least four and perhaps as many as eight attorneys to make their case.

The judge has put no time limits on the closing arguments yet Levine has let on she knows her closing needs to be quick. Whether this ends today or laps over into next Tuesday is up in the air right now. [Monday the courthouse is closed for veterans day.]

1:45 p.m.

Levine put on a singularly impassioned and rapid-fire closing. The following is an attempt to get in as many of her remarks as possible. Anything that appears nonsensical highlights the speed at which Levine spoke and the attempts to follow her reasoning.

Levine: "The City of Detroit is not eligible for Chapter 9."

She looked to the closest relative to chapter 9 which is chapter 11. She said "it works because of transparency and value. There is a fishbowl. There are protections for pensioners in chapter 11. In Chapter 9 in Detroit there is no such safety net."

Levine went on: "and while we heard you ask Kevyn Orr if he had asked for the help of the state with this problem, and also heard the governor did not offer any contingency in the chapter 9 filing, as we sit here today there is no visibility on that issue. We respectfully submit in this Chapter 9 we are not operating in a fish bowl."

Levine started down a path where she actually blamed Governor Rick Snyder and Treasurer Andy Dillon for causing Detroit's bankruptcy. She also vehemently said that all of the consultants hired did not show the city's true financial status, although it is their job to do so. She said that the governor, in essence, slowly strangled Detroit of cash. She said "Particularly troubling, when the governor took office and the treasurer took office, they believed the city was distressed. There was a slow decline that did not make a crisis and an emergency that necessitated a July 19th bankruptcy filing."

She went on: "The governor chose to do nothing and Detroit suffered the consequences. That's not practical [meaning practicable] and not good faith."

She said she can see the blight and the difficult financial state the city is in: "We're not immune to the fact there is blight and there is a need for better services." But she said in bankruptcy it is the city's burden to prove insolvency and it failed. "Under code 109 one type of debtor has to prove insolvency, the municipality." She went for a metaphor as Bennett did.

"If I owe a dollar and choose not to pay it, even if I have it, it doesn't make me insolvent. And if the police chief gets on the stand and even if the testimony is compelling, and it was compelling, that is not proof of insolvency; it's anecdotal. Kevyn Orr has not given the city a budget; we don't know where the city is financially or know a path to a solution. We know they‘re going to take from the pensioners, from active employees, we don't know what that will mean or whether it will fix anything." She said of the city's poor tax collection system: "We can't collect taxes, therefore we don't know our revenue stream; we went through the 109 pages and don't know who pays and doesn't, we are saying a municipality has a burden of proof and they haven't proven it. We don't see any reports to the shortfalls in pension benefits or otherwise. We have heard that is because of strategic reasons. The city has to prove insolvency, we see slides they are insolvent. They haven't demonstrated financial insolvency and it's frankly baffling to stakeholders that they want to cut retiree health or pensions and they don't have an indication of the extent. We have a governor who would starve that city, yet it is not proof of insolvency."

On the subject of good faith she pointed out that "AFSCME and others sought to meet with the emergency manager on the day he took office. Ed McNeil taped a letter to his door, others wanted access to the data room and AFSCME asked for employee information. AFSCME wanted to meet and communicated it to the city and an answer to those requests was not forthcoming. There were no meetings nor responses to those inquiries. There was no time to make a negotiated settlement."

Of Orr's turnaround plan she said "This proposal isn't a proposal, If you look at it and you are a retiree counting on health benefits you don't know what your benefits are going to be, what is going to be cut; so you can't offer anything less devastating to you. Same goes for retirees. Pensioners don't even know if you are considered a creditor! For employees, how can you make a counter proposal without these basic facts? We've seen a plethora of evidence that people were looking at terminating the pensions as far back of 2012. Not one shred of evidence has been shown on how you conduct good faith negotiations."

Levine then went on a particularly severe attack saying "The state made it so we have a month and four days to negotiate. The governor did nothing to have discussions before the plan was offered. There was a concessionary agreement and the city worked hard on those negotiations and they had a tentative agreement but when those negotiations concluded the governor said no. The testimony in this case showed you can do settlements with retirees out of court, you can negotiate health care benefits legally. Pensioners will not take a case to the supreme court" [they do not have the means].

She said the state could have helped make the situation better by working with the city and its unions, but instead chose not to. She said the state could have worked at creating a safety net for pensioners, thereby "Making better the problem as opposed to being discarded. We're kicking people off to the side and disenfranchising them, and that is not the proper way to use chapter 9."

Levine said negotiations could have taken place and more time could have created a better settlement than a Chapter 9 filing.

"We don't mean two years to negotiate either. The governor took more time to interview the consultants than they did to offer a timeframe to negotiate this plan." To Judge Rhodes, she said: "You are setting a very dangerous precedent if the governor is allowed to allow a slow decline and then have a self-created emergency".

This is where Levine channeled the full vengeance and fire of the protestors who marched outside the courthouse as this trial began. She played the race card. She emphasized a laundry list of ill-willed agendas on the governor's part, calling it, among other things, a "political, socioeconomic agenda, a racial agenda… a self-created emergency."

She claimed the governor's solutions "are unrelated to solving the financial woes of Detroit." She called the governor's conduct "egregious." They actually stopped one stakeholder who's offer to work with the city was declined. They negotiated a consent decree and used PA 436 because it gave them the right to veto labor agreements.

She then went about the business of building a conspiracy theory, pointing out that by enacting PA436, the governor stops negotiations because it gives the emergency manager the right to suspend collective bargaining and refuse negotiations with AFSCME as a result. Yet when it comes time to negotiate a turn-around plan, "we have the consultants in a pretzel trying to figure out how they conduct negotiations." She pointed out that the state, and therefore the city, spent a lot of time planning a bankruptcy and not a lot of time negotiating: "had they spent time working on the pensions they could have come up with something."

Of this conspiracy, the judge interrupted Levine and asked: "What was the governor's motivation, other than to help the city?"

Levine said she would be speculating but said the evidence is to the contrary. The evidence says in 2011 he was aware of the financial condition and did nothing about it.

Judge: "He wanted to create an emergency? Why?"

I'd be speculating. Although speculating, it was not out of altruism.

Levine then went for her conclusion: There were no negotiations and "If this is really all you have to prove it's impractical, that we can use chapter 9 potentially to get rid of pensions and retirees or other debt, bond debt, that's an improper use of chapter 9. It's unconstitutional to apply chapter 9 in this way. It's unconstitutional to apply chapter 9 as a work-around for PA 436. The unconstitutional use of chapter 9 as an end-around to get rid of pensions."

As the unions started working out their schedule of attorneys for the rest of the closing, and a discussion of being succinct took place, the judge interjected: "succinct does not mean to talk fast!" [to much laughter considering the speed and volume Levine did her close.]

Up Next: Jennifer Green, retirement system attorney

2:20 p.m.

Green's closing was a much more controlled effort as the judge requested.

The sum total of her remarks was that "the end game was Chapter 9 filing."

What's more the city's position that negotiations were impracticable she said of the city "but it did not prove they were". She said in order to cure bad faith the city should not be allowed to file for Chapter 9. 

Now for the unions is Clark Hill attorney Robert Gordon. His close is even more subdued.

He said there was simply no time for good faith negotiations in the lead up to Detroit's Chapter 9.

He said, contrary to the city's assertions, the city "never asked the retirement systems and Gabriel Roder [the retirement system's actuaries] about this. They never came with a business plan, ‘here's a proposal, here are the needs of the city for diverting cash flows and is there is a way to restructure or reschedule employer contributions?" That discussion was never had. Nor was there ever a discussion with experts who might have been of assistance. There is no evidence that such discussions might have turned up a solution, we will never know, they never tried."

"Based on this city's purely internal conclusion that accrued benefits must be impaired it's impracticable because they are constrained by the constitution. There were solutions to this problem. The city uses an untested, internally created assessment and make a firm conclusion that negotiations are futile. It does not stand up to scrutiny or the legal test."

Gordon went on: "Particularly remarkable, the evidence shows the state and city were aware of the pensions clause. Instead of including it, they assumed they could not and instead decided to take their chances in bankruptcy court." 

Judge Rhodes interjected with a question: 

The Judge asks: "what inference do I draw here in the context of this trial from the fact that your client submitted no plan. That there was no viable way for the city to propose a restructuring of its retirement program?

Gordon: "Your honor, I think that's putting the shoe on the wrong foot. If the city had asked we would have had that conversation. There were only 34 days from the airport meeting to the chapter 9 filing. I hesitate to mention but the general counsel had reached out earlier than that and was rebuffed by the emergency manager and it did not fit his schedule. There was never an opportunity to have that discussion." 

The Judge went on:

Judge: whether the opportunity existed or not my question is what do I do with the fact that there was no alternative plan? All I know is that there was no alternative plan. What do I draw from that? That's the question." 

Gordon: "we don't have enough information. I'm not casting aspersions on the city, it's a complicated process. There was never enough information there. Based upon the information we had there is no evidence they need to impair. We don't have all of the information your honor." 

The judge pressed on again:

Judge: "that's good but isn't it, isn't the underfunded liability according to the retirement systems own experts at least a billion and something?

Gordon: "That's a difficult question. It depends upon whether the system is closed or frozen. I don't want to speculate. It's a long term issue. As Mr. Dillon said The liabilities can rise and fall.

Judge Rhodes: "What prevented your client from making a proposal based on the reasonable assumptions were necessary to create a proposal based on the underfunding its own experts showed?"

Gordon: "If you don't know and have to negotiate against yourself. You can't do that.

There were major pieces of information, missing making it impossible to have that discussion at this stage." 

With that Gordon finished his close saying the city is not eligible for chapter 9 bankruptcy.

2:35 p.m.

Up next is attorney Lynn Brimer arguing for the retired public safety unions.

The sum total of her close comes down to three things:

1.) PA 436 had funding attached that made it so no referendum could overturn the law. This disregards the will of the electorate

2.) Even if that is found not to be true she argues that PA 436 violates Michigan's constitution because it is a re-enactment of a law that was previously overturned by voters and they were not given the chance to vote again.

Judge Rhodes said that had already been argued and would only allow discussion of the evidence and would not hear any more about the particulars of that claim.

3.) Lastly there was a lack of good faith on the city's part by claiming that chapter 9 was inevitable. 

Of the minor changes made to PA 4 that became PA 436 she said :"If all it takes is a minor change to a law for it to be allowed, we have read out an entire section out of the Michigan constitution." 

"Looking at the history of the filing, there has been bad faith on the part of the emergency manager's bankruptcy consultants; that bankruptcy was preordained. The record is replete with that evidence."

Court is in recess until 2:55 p.m.

Read: Rod Meloni: Day 8 of Detroit's bankruptcy trial