Michigan Court Cancels Bar on Detroit Review Meeting

A Michigan appeals court canceled a judge’s order barring a Detroit financial review team from meeting to discuss the city’s fiscal crisis.

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

Michigan’s Court of Appeals today 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 can’t seek to block the review team from negotiating an agreement to resolve the crisis, the court said.

Michigan law “provides a review team with authority to negotiate and sign a consent agreement with the chief administrative officer of the relevant local government with no set time limit on the exercise of that authority,” the appeals court said in a one-page order.

Andrew Paterson, Davis’s attorney, said he hasn’t determined whether to appeal the order. “We are considering the options available to us,” he said in an e-mail.

The Ingham County suit is one of three pending court challenges to the Detroit financial review process brought by union officials as the city weighs a state plan to resolve the crisis. Michigan Governor Rick Snyder has proposed empowering a new board to oversee spending cuts and reforms, and force concessions on municipal unions to erase a deficit approaching $270 million.

Municipal Workers

In a second lawsuit, a federal judge in Detroit is considering a request from a coalition of municipal workers’ unions for a restraining order blocking state officials and the city from entering into an agreement over Detroit’s fiscal crisis.

The coalition of non-public-safety unions sued Snyder, Michigan Treasurer Andy Dillon and the city on March 30, alleging that the governor’s proposed plan would violate workers’ rights to bargain collectively and void a previous set of concessions they made to reduce city costs.

U.S. District Judge Arthur J. Tarnow said at a hearing yesterday that he would rule on the request by April 9.

Business in Private

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 asked the Michigan Supreme Court (313512L) to review that reversal. His request is pending.

The governor appointed the team in December after a preliminary study found the city was in “probable financial stress.” It’s considering whether Detroit, Michigan’s largest city, needs an emergency manager.

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 tomorrow to agree to a recovery proposal, or the governor can name an emergency manager with sweeping powers over municipal finances and operations.

‘Financial Crisis’

“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.

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.

June Expiration

“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.

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

“Interference is not illegal,” Tarnow said. “What did they do that was wrong?” he asked.

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.”

Collective-bargaining agreements by public employees can be “rejected, modified, or terminated” under the local government and school district fiscal accountability act, lawyers for the state said in a filing today. “State law does not create a property right in collective bargaining that is protected under either the federal or state due process clause.”

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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