Court Rejects Pension Cut Challenge by Detroit Retirees

A federal appeals court this week rejected a lawsuit, brought by a group of Detroit retirees, challenging cuts made to their pension benefits as part of the city’s bankruptcy proceedings last year.

Retirees at the time voted to cut their pensions by 4.5 percent, and have their COLAs eliminated; the alternative, city officials said, would be even deeper cuts.

But not everyone was happy with that deal, and so a group of 160 retirees sued the city over the cuts. But the appeals court ruled 2-1 in favor of Detroit.

To paraphrase one judge: the ruling wasn’t even close.

From the Detroit Free Press:

“This is not a close call,” said Judge Alice Batchelder at the 6th U.S. Circuit Court of Appeals.

The court noted that Detroit’s exit from bankruptcy in 2014 was the result of a series of major deals between the city and creditors, including people who receive a pension or qualify for one.

Altering the pension cuts, the judges said, would be a “drastic action” that “would unavoidably unravel the entire plan, likely force the city back into emergency oversight and require a wholesale recreation of the vast and complex web of negotiated settlements and agreements.”

In dissent, Judge Karen Nelson Moore said retirees at least deserve their day in court. She said Batchelder and Judge David McKeague were citing a “questionable” legal standard to dismiss the case, 2-1.

[…]

Jamie Fields, an attorney for about 160 retirees, said he wanted the court to consider the merits of his argument. He contends that the bankruptcy judge had no authority to override the Michigan Constitution, which protects public pensions.

“A lot of retirees are making choices between groceries and medicine,” he said.