Detroit's Retiree Committee to Be Protected from Lawsuits in Bankruptcy Case
The 9-member retiree committee is safe if any of the 23,500 city retirees try to sue the members individually.
By Alisa Priddle
Lawyers for the City of Detroit and a retiree committee have reached an agreement to protect committee members from potential lawsuits from retirees unhappy with pension cuts, lawyers said Tuesday.
At a bankruptcy hearing last Wednesday, a lawyer for the nine-member retiree committee asked U.S. bankruptcy Judge Steven Rhodes to force Detroit to pay for a $602,000 insurance policy to cover legal costs for committee members if any of the 23,500 retirees sue the members individually. Rhodes had questioned the price, which the city must cover because it is responsible for the committee's expenses, and noted the money might be better spent improving emergency services for the city.
On Tuesday, retiree committee lawyer Carole Neville announced an agreement has been reached but did not want to reveal terms of the settlement during the hearing.
Lawyer Heather Lennox, who represents the city, confirmed there is an agreement that protects the committee.
Committee members have a degree of legal protection because lawsuits against court-appointed trustees or creditor committees require permission from the court that appointed them.
The brief hearing Tuesday also was convened to hear arguments about proposed voting procedures for the plan of adjustment designed to restructure Detroit's debt. Few lawyers for creditors attended, and there were no legal squabbles over class rights or standings.
The City of Detroit will be mailing packages to about 170,000 individual creditors eligible to vote on acceptance of the plan.
Retirees and creditors of record on April 14 will be entitled to vote, and there is a June 26 hearing on any disputes.
Individual bondholders and retirees have until June 30 to object to the plan, and a hearing on accepting the plan is scheduled to start July 16. Rhodes rejected a request to extend some dates.
Lennox said keeping some of the deadlines will help ballot counters, who already face the task of counting votes from almost 400 classes of claims in this bankruptcy case.
A 197-page document filed with the court Feb. 28 outlines who is eligible to vote and how that will be done in an effort to streamline the process as much as possible.
The city filed for Chapter 9 bankruptcy protection in July, claiming debts and project long-term liabilities of $18 billion. It is the largest municipal bankruptcy in U.S. history.
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