U.S. Bankruptcy Court Judge Steven Rhodes has declared that his court has the authority to rule on a dispute between the city's pension funds and the city of Detroit — not the state court in Ingham County, Mich.Last week a Michigan state judge issued an injunction blocking the emergency manager of Detroit from filing a bankruptcy petition in federal on the grounds that doing so violated the Michigan constitution. There was controversy over whether an appeal of her order should be heard in state or federal courts.
Rhodes, in an order filed Monday, said he will hold a hearing Wednesday to consider the city of Detroit's request to put all lawsuits filed before the city filed for bankruptcy Thursday on hold.
The decision by Rhodes means that the first hearing of Detroit's bankruptcy case could prove to be a crucial moment in the city's effort to restructure under court protection.
One of the provisions of chapter 9 of the US bankruptcy code which specifically addresses municipal bankruptcies requires that municipal officials must have state authority to file. Judge Rhodes will be making a ruling on that in terms of Michigan law.