Emergency Management of Detroit Begins Amid Protests and Lawsuits

A legal fight against the state's new emergency manager law is expected to kick off today -- the same day the law takes effect -- with protesters descending on Detroit as a Federal lawsuit challenging it's constitutionality is being filed.
by | March 28, 2013

By Joe Guillen and Matt Helms

A legal fight against the state's new emergency manager law is expected to kick off today -- the same day the law takes effect -- with the Rev. Al Sharpton, clergy, unions and others converging on downtown Detroit to support the filing of a federal lawsuit challenging the constitutionality of the law.

The law spells out the broad powers given to Detroit's emergency financial manager Kevyn Orr, a Washington, D.C., bankruptcy lawyer who on Monday began his work to solve the city's financial crisis. His title changes to emergency manager today.

Orr's authority -- he can sell city assets, approve budgets, negotiate with unions, eliminate departments and cut elected officials' pay -- greatly reduces the power of the mayor and the City Council, inciting activists to label his arrival an unconstitutional attack on voting rights because Detroit is no longer under the control of elected leaders.

The local chapter of the National Action Network, a civil rights group Sharpton founded, the Rev. Jesse Jackson's Rainbow PUSH Coalition and the American Federation of State, County and Municipal Employees -- Detroit's largest labor union -- are among those planning a demonstration outside the federal courthouse downtown to coincide with the filing of their legal challenge.

Sharpton will meet with community and union leaders, politicians and others opposed to the emergency manager law, said Herb Sanders, an attorney working on the lawsuit. A protest also is planned outside the Coleman A. Young Municipal Center today.

There will be similar protests around the state, particularity in cities that have operated under the control of emergency managers, Sanders said.

Meanwhile, a lawyer for labor activist Robert Davis, affiliated with AFSCME, said he served subpoenas on officials involved in Orr's hiring.

Davis' group, Citizens Against Corrupt Government, filed suit March 8 alleging Gov. Rick Snyder violated Michigan's open meetings laws by meeting privately with Orr and recommending him to be approved as EFM, a decision technically left up to the state's Local Emergency Financial Assistance Loan Board. A hearing on Davis' suit is set for April 8.

Davis' lawyer, Andrew Paterson, said he served the subpoenas on Orr, Snyder, the loan board and Jones Day, the law firm where Orr worked until he resigned last week. Detroit Mayor Dave Bing wants to hire Jones Day as the city's legal counsel on restructuring matters, a decision that ultimately may be left up to Orr, raising concerns about conflicts of interest.

Treasury spokesman Terry Stanton confirmed that the department had received the subpoena but would say only: "We are consulting with counsel and considering potential next steps."

Orr's spokesman, Bill Nowling, said Orr was aware of the subpoena and had no comment. A spokesman for Jones Day did not return a phone call.

Davis said he wants copies of all communications between Snyder and other officials as well as Orr and Jones Day to reveal whether the governor violated open meetings laws in vetting and choosing Orr.

But Davis said the communications also could shed light on issues related to critics' concerns that Orr can't be impartial in decisions to hire his former law firm, which stands to make significant legal fees as a city contractor and potentially more as one of the top-tier U.S. bankruptcy firms, should Detroit file for bankruptcy.

"Mr. Orr, in the coming days, is going to have to approve the contract for Jones Day to act as the legal counsel for the City of Detroit. And certainly, if Mr. Orr participated in any negotiations between his law firm and the state and the city before his appointment, that's very problematic," said Davis, who is under federal indictment, accused of stealing public funds while serving on Highland Park's school board.

Federal bankruptcy court documents show Jones Day's top lawyers, leading experts in complex private and public bankruptcy restructuring, can command rates of $600-$975 per hour. The Plain Dealer of Cleveland, where Jones Day is headquartered, reported that the law firm sought in excess of $30 million in fees for its work on Chrysler's 2009 bankruptcy, in which Orr played a role.

Paterson said he isn't overly concerned about conflicts of interest between Orr and Jones Day, since Orr resigned his lucrative partnership there. But Paterson said he believes Snyder exceeded his authority in meeting secretly with Orr. State officials say it's within Snyder's legal rights to vet and recommend emergency managers to the loan board.

Until today, legal challenges to former emergency manager laws have been handled in state courts and in a statewide election.

(c)2013 Detroit Free Press


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