By Martha Neil
From http://www.abajournal.com
Although Detroit is short of money to run the city, its Chapter 9 bankruptcy filing is expected to ring up business for multiple law firms.
Jones Day is representing the city, and bondholders, creditors, insurers, pension funds and retirees are expected to lawyer up, too, as big-bucks issues, such as responsibility for repaying some $8 billion in bond debt owed by Detroit, as well as another $5.7 billion in unfunded health care and retirement benefits to former workers, are negotiated, Reuters reports.
Opportunities for lucrative legal work abound. The Detroit Institute of Arts, for instance, retained partner Richard Levin of Cravath Swaine & Moore to represent its museum in a dispute over the city’s power, or lack thereof, to sell the museum’s art collection.
And Arent Fox, Kirkland & Ellis, Sidley Austin, Weil Gotshal & Manges and Winston & Strawn are also among the law firms either already hired or thought to be in the pipeline to represent entities caught up in the municipal maelstrom.
Already at issue is whether the state governor had the power to file for bankruptcy, under the Michigan state constitution, when doing so puts protected retirement benefits for public workers at risk. A state-court judge last week ordered the city’s emergency manager to withdraw the bankruptcy petition he filed on Thursday; however, the state attorney general has filed an appeal of that order, recounts another Reuters article.
Observers say they expect the bankruptcy judge to put the state-court case on pause, so that the city’s eligibility to file for bankruptcy can be dealt with in federal court. Also likely to be contested is whether Detroit made sufficient efforts to negotiate with creditors before filing.