Detroit bankruptcy: Courtroom notes April 28, 2014
Rod Meloni: Good Morning, the line getting into the federal building was not long early so it appears an ontime start is in the cards today. Judge Steven Rhodes has a busy agenda. It is a motions hearings day and among the topics he will be addressing including the retiree ballot for the bankruptcy. We are likely to get more information on that union settlement announced this morning with the city and a final approval of a completed disclosure statement by the city. you will recall that there have been at least three different versions with a lot of blanks spaces in them. We received a new one over the weekend and while the disclosure sheet may be amended right up until the last minute as new deals are struck the judge had set a deadline of approving the disclosure statement's contents for today.
Rod Meloni: the hearing has begun. Attorney David Heiman is before Judge Rhodes announcing more progress with the city's unions. he is recounting where the city stands in the process to confirmations.
Rod Meloni: Discussions and hearings on the swaps and utgo creditors... the latter still needs a completed agreement statement that is in the process. The retiree side of the case has set the table for classes 10, 11 & 12... Public retirees association, the agreement with the pension systems and the pfrs... police and firefighters and the retiree committee has some issues to address. The general retirement system has some loose ends. We have an afformation of the unions including AFSCME "we have very much of a consensus building on these important issues".
Rod Meloni: There is still some heavy lifting to do, and there are sessions scheduled for this week but it is the City's hope to file a corrected and final documents in all of these situations by Friday of this week to keep Judge Rhode's timeline.
Rod Meloni: The city views this as a momentus occastion and wishes to thank for Kevyn Orr a number of parties. Heiman: "All parties that have come to the negotiating table have stretched themselves... including the city"
Rod Meloni: "It was not easy and sometimes seemed impossible, and the sun is beginning to shine on the City of Detroit"
Rod Meloni: Heiman did not want to misstate the situation but says "the city is much further along than anyone had reason to anticipate. We are quite pleased by that and want to thank the parties that came to the table to help the city get here."
Rod Meloni: He praises the charitable foundations under the leadership of Judge Gerald Rosen have stepped up in a way unbefore seen in corporate America. Heiman is thanking the DIA contributing "unprecedended" money. Thanks to Governor Snyder and the state "I really need to be careful here" as it is contingent on the legislature. "Quite incredible, unprecedented and earmarked for pensions. It should be clear to everybody inside the courtroom and outside the courtroom as we would not be here without them."
Rod Meloni: Heiman: "It is to use the words of a teenager it is an awesome position that we are in today and we are just so thankful to be here and thankful to your honor for the strong hand you have provided."
Rod Meloni: Jones Day Attorney Bruce Bennett is now speaking for the city. Judge Rhodes said he wants to take advantage to comment as well on the situation.
"Commend those who have worked as hard as they have in reaching the settlements.: It is extrordinary and uprecedented in bankruptcy history." "On the other hand, I strongly encourage those involved in negotiations and have not achieved settlements to keep talking." He encourages those in the regional water authority discussions wtih all vigor and good place.:
Rod Meloni: "The other deals show that nothing is impossible, the word does not exist in this case." A regional water authority is in everyone's best interest."
Rod Meloni: Bruce Bennett is now discussing the most recently filed disclosure statement filed late Friday night.
Rod Meloni: Bennett says there are some objections and other settlements on the disclosure statement.
Rod Meloni: Up now is attorney Vince Marriott for the objector. He says the wording in the disclosure statement "I surrender but not on the plan" Not to rain on today's parade reached with labor writ large have rendered the plan unconfirmable because it creates a disparity in treatment in the bankruptcy that cannot be defended." It will be part of the plan.
Rod Meloni: Allen Brilliant, attorney for Macomb County is on the telephone and he is pleading to Judge Rhodes. He says "Overall the disclosure statement is much fairer and have a minor comment". He is arguing language in a paragraph wants new languate that parties like Macomb county may dispute relating issues at the plan of adjustment trial scheduled for later this summer in late July.
Rod Meloni: There has been a steady stream of attorneys talking about the intracacies of the language and wording in the city's disclosure statement and some changes they want to see in the disclosure statement. They are just trying to make certain everyone is comfortable with things. Attorney Robert Gordon representing the retirement systems wants a status conference to finalize on Friday on the statement.
Rod Meloni: Gordon is also reminding the judge that the city's discussions about the deals struck today only pays attention to "Plan-A" the city's overall plan of adjustment that assumes the "grand bargain" will happen. Gordon says there is nothing talked about "Plan B" whether the legislature puts in the money. The Judge agrees with his concerns.
Judge Rhodes is now saying if there is nothing in place with the legislature and the "grand bargain" when the votes are sent in the court would make the Presumption that without that they would not have voted for the plan.
Rod Meloni: Judge Rhodes: "we are going to have to be somewhat creative in dealing with this issue."
Rod Meloni: There has been much discussion about contract language. The judge's discussion of the legislature's role in the "grand bargain" is getting interesting.
Rod Meloni: The legislature is going to be in session through the end of June. The city needs a decision by mid-June whether its money will come through. If it doesn't happen by then there must be a plan to deal with that possibility. Assistant Attorney General Steven Howell of dickenson Wright says the legislature is committee is committed to having legislation and voted on by the end of June. That may be too late or cause problems. The judge says this needs to be dealt with in the days to come.
Rod Meloni: Syncora the bond insurer has attorney Stephen Hackney up discussing the DIA art valuations. He wants very direct and clear information regarding the art and how the "grand bargain" is about. Hackney is is talking about an attorney general's opinion regarding the art.
Judge Rhodes asks what specific documents he wants from the state.
Rod Meloni: Syncora is looking for emails and documents that brought the attorney general to make his decision. Hackney wants the documentation and the conversations between the state and the city, particularly Kevyn Orr's discussions. Syncora wants to obtain the conversations to get a feeling for what was said and why.
Rod Meloni: Judge RHodes is qustioning him about the attorney general's opinion ahd its impact on federal bankruptcy. Isn't it sufficient to protect your clients rights and have that brief and respond in any other brief. Judge Rhodes says "I have no experience with attorney general's opinions in bankruptcy." "I don't know what it means to the case."
Rod Meloni: Aurthur Riley is an attorney for the Detroit Institute of Arts now before Judge Rhodes. The motion Mr. Hackney filed @ 11pm Friday. The DIA is a non-party to the motion. It is meant for the attorney general. That said the museum is an interested party.
Rod Meloni: He is actually attorney Arthur O'Riley. He wanted to have a resolution of the issues. He would suggest that it might make sense for the three parties to sit down and find a pathway that is more sensible.
Rod Meloni: Judge Rhodes: my question for you would be the subpoena was issued to the a.g. in his control, do you have any standing? O'Reilly says he has standing in that it is involved in our common interest. He is looking to get an agreement at least in part, the procedure would be to file a protectve order. His client doesn't want some of the documents released.
THe judge wants to know why the dia is objecting. "What's in it for you?" O'Reilly says some of the emails contain priviledged material that should have been destroyed and weren't for whatever reason. Judge Rhodes laughted
Rod Meloni: Now the attorney general's office has an attorney Authur Fistucia is now saying the subpoena is asking for all documents which includes partly attorney conversations which are priviledged. The attorney general does not want internal communications published. There is an agreement that was signed that is now being handed to judge Rhodes
Rod Meloni: Judge Rhodes is taking a 10 minute recess to decide whether to grant syncora's motion.
Rod Meloni: Judge Rhodes has returned to the bench
Rod Meloni: Syncora has requested an order requiring the attorney general's priviledge log reflecting communications with counsel for the DIA, back and forth. The timeframe is April 12 2013 to June 13, 2013. The basis of the objection is the common interest priviledge. The court concludes the claim of priviledge should be overruled and the production of these documents be granted.
Rod Meloni: The common interest privildege requires a common legal interest and the court is unpursuaded that at the time these documents were made there was any common legal interest between the attorney general and the detroit intsitute of arts.
Rod Meloni: The client is the corporate interest that maintains the art under contract with the city. Nothing suggests that contract requires this entity to take a position one way or the other the issue the attorney general expressed is opinion.
Rod Meloni: at the time these documents were produced the record does no establish the attorney general had no formal position on the issue. that only manifests itself after the a.g. came to a conclusion. These documents were made. For all of these reasons the priviledge issue is overruled. as for documents that should not have been included I will trust the counsel to work that out.
Rod Meloni: Stehphen Hackney has returned to the podium.
Rod Meloni: Syncora and the city have work to do regarding some objections and there are ongoing discussions and negotiations. The judge encouraged everyone to come to agreement.
Rod Meloni: Heather Lennox of Jones Day is now up speaking with Judge Rhodes. She is discussing the construct of the retiree ballots and believes there is agreement.
Rod Meloni: up next a ruling by Judge Rhodes. "It's going to be rough. Somehow I got in my head it would be resolved. It has not been"
Rod Meloni: Judge RHodes reads "on the ballot these bondholders will be given two choices to make. One is to vote for or against the plan and the other is to make a certain election, an election which the city at least contends provides the creditors concerned here better treatment"
Rod Meloni: The plan further provides that a party making this election waves any and all objections that the party might have to the plan and that waiver applies not only as to plan treatment in the class as to which the election is made also as the plan treatment that creditor might in which the election is not made. It is my further understanding that under the plan if the class accepts the plan the creditors in the class who made the elecgtion get the election but if the class does not accept the plan the creditors in the class do not gtet the election. A consequence of that is a creditor who has made the election but doesn't get it because the class didn't accpet the plan is construed to having waived objections to the plan. in response to that Mr. Bennet on the city's behalf offered then to allow such a creditor who otherwise would have lost the right to accept then to object. I am going to sustain assured's objection to that for the following reason:
Rod Meloni: the problem with this is mostly administrative. The administrative problem it forces the creditor who makes the election to nevertheless file an objection because of the possibility that the plan, the class may not vote for the plan and the objector has a filing deadline. that has the substantial likliehood of delaying the confirmation process. Because of the inherent inefficiencies the court will not permit it., We will leave it to the city and the creditors to work out a comporomise that does not impose unduly on the efficiency of this court's process.
Rod Meloni: court is in recess. We are finished for the day.