Detroit Unions Can’t Halt City Finances Agreement, Judge Says

A federal judge said municipal workers unions can’t stop Michigan Governor Rick Snyder and Detroit from entering into an agreement over the city’s fiscal crisis.

U.S. District Judge Arthur J. Tarnow rejected a request for a temporary restraining order yesterday, finding the unions weren’t likely to succeed with their claim, a requirement for such an order. The unions contended the proposed agreement violates their members’ rights to collectively bargain.

“Plaintiffs have not shown that the extraordinary remedy of a TRO is warranted in this case,” Tarnow said in a four-page decision. “Plaintiffs’ arguments fall short on the critical factor of whether any of plaintiffs’ three claims have a strong likelihood of success on the merits.”

The decision came just before Detroit’s City Council passed the state’s plan to erase a projected deficit of almost $270 million by empowering an oversight board to review spending cuts and efforts to force concessions from municipal unions. The agreement was supported by Mayor Dave Bing.

Tarnow’s order was the second court defeat yesterday for challenges to the Detroit financial review process. A Michigan appeals court earlier yesterday in a separate lawsuit reversed a state court judge’s order barring the Detroit financial review team from meeting to discuss the city’s fiscal crisis.

The court decisions remove legal obstacles to the financial rescue of the city, Geralyn Lasher, a spokesman for Snyder, said in an interview yesterday. “We’re able to move forward,” she said.

‘Financial Stress’

Snyder appointed the team in December after a preliminary study found the city was in “probable financial stress.” The team, which has been considering whether Detroit needs an emergency manager, passed the state proposal yesterday.

Judge Joyce Draganchuk of Ingham County Circuit Court this week issued a temporary restraining order stopping the review team from meeting after a union official, Robert Davis, claimed the board’s term of office expired last month. The team canceled a scheduled meeting April 3.

Michigan’s Court of Appeals yesterday reversed Draganchuk’s decision and ordered her to dismiss the lawsuit, finding there were no time restrictions on the review team’s authority or actions. Davis couldn’t seek to block the review team from negotiating an agreement to resolve the crisis, the court said.

In the federal case, a coalition of non-public-safety unions sued Snyder, Michigan Treasurer Andy Dillon and the city March 30, alleging that a proposed settlement to address the city’s financial crisis would negate concessions the workers had already made. The union membership had ratified, or agreed, to the concessions. The council hasn’t approved the new contracts.

‘Political Negotiations’

Tarnow yesterday also said he wouldn’t order the council to approve the contracts or “regulate the political negotiations between the state and the city.” This “is simply beyond this court’s authority,” he said.

A third challenge to the Detroit financial review process awaits consideration by the Michigan Supreme Court.

Davis, in a separate suit, previously claimed the review team was breaking Michigan’s open-meetings law by conducting business in private. Ingham County Circuit Court Judge William Collette ruled the team had to hold public meetings. His separate order last month barring the review team from entering into an agreement was reversed by the Michigan Court of Appeals.

Davis appealed this decision. The Michigan Supreme Court hasn’t decided whether it will hear the appeal.

$270 Million Deficit

Detroit, the home of General Motors Co. (GM), the world’s largest automaker, may have a $270 million deficit by the end of June, according to a city council report in February.

Dillon said Detroit’s cash will run out in May. Detroit and Snyder have until today to agree to a recovery proposal, or the governor could name an emergency manager with sweeping powers over municipal finances and operations.

“The City of Detroit is facing the most significant financial crisis in its history,” Michigan Attorney General Bill Schuette said in his appeal of Draganchuk’s state court order. The city has “only $1 in assets for every $33 in liabilities,” he said.

Schuette had asked the appeals court to put Draganchuk’s order on hold or reverse it. The decision barring further review-team meetings “effectively” gave Governor Snyder only two options -- “appoint an emergency manager or do nothing,” Schuette said in the 10-page appeal. Draganchuk “fundamentally misunderstands” the effect of her order, he said.

‘No Middle Ground’

“If the council and the review team couldn’t have agreed, there was no middle ground,” Lasher, Snyder’s spokeswoman, said yesterday. “There was a very real sense of urgency.”

The unions said in their lawsuit in federal court in Detroit that city workers would “suffer irreparable harm if there is no immediate injunction” barring execution of the financial stability agreement.

Under the proposed agreement with the state, the “city will be forced to frustrate the collective bargaining rights of the coalition unions and their membership,” the unions said in the lawsuit.

“After the June 30, 2012, expiration of many of the bargaining agreements, the coalition membership will become near-at-will employees (save the Detroit civil service system and Michigan’s black letter contract law) with no contractual right to continued wages and benefits,” the unions said.

‘Inserting Itself’

The proposed state plan would interfere with the unions’ contracts with the city, Richard Mack, a union lawyer, told Tarnow at a hearing April 3. “The state is inserting itself where it has no right to insert itself,” he said.

Mack didn’t immediately return a call seeking comment on yesterday’s ruling.

The harm to the city and the public would be greater “than any harm plaintiffs would suffer if their request for an injunction is denied,” the attorney general said in court papers. “The fiscal instability of the state’s largest city that could result from issuance of a preliminary injunction does not and cannot serve public interest.”

The Ingham County lawsuit is Davis v. Detroit Financial Review Team, 12-315-CZ, Circuit Court, Ingham County, Michigan. The federal case is Valenti v. Snyder, 12-cv-11461, U.S. District Court, Eastern District of Michigan (Detroit).

To contact the reporter on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net

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