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Detroit pension funds seek expedited bankruptcy appeal

A man walks past graffiti in Detroit, Michigan, December 3, 2013. REUTERS/Joshua Lott
A man walks past graffiti in Detroit, Michigan, December 3, 2013. REUTERS/Joshua Lott

DETROIT (Reuters) - Detroit's two pension funds have asked the U.S. 6th Circuit Court of Appeals to hear an expedited appeal of a judge's ruling that the city is eligible for bankruptcy protection.

The General Retirement System and Police and Fire Retirement System. Detroit's two largest unsecured creditors, filed the appeal with the 6th Circuit late Thursday. The expedited appeal would bypass the U.S. District Court for the Eastern District of Michigan.

"Resolution of the City's eligibility will have life-changing consequences for active and retired police officers, firefighters, librarians, government clerks, public works employees and many others," attorneys for the pension funds wrote.

Earlier this month, U.S. Bankruptcy Judge Steven Rhodes ruled that Detroit met the federal requirements for bankruptcy because the city, with $18.5 billion in debt, was insolvent and could not negotiate with all its creditors. Rhodes also ruled that pension benefits could be cut as part of Detroit's restructuring efforts.

The pension funds, and others objecting to the Detroit bankruptcy, have maintained that Michigan's constitution protects pensions from being slashed.

In their appeal, the pension funds said Detroit's plan to cut pensions could set a precedent and cause other troubled U.S. cities to also cut pension benefits as a way to reduce debt.

Last week Rhodes said groups objecting to the bankruptcy could appeal directly to the 6th circuit. But he said it would be best for the bankruptcy court to decide on the merits of Detroit's debt adjustment plan without the distraction of any appeals.

"It is time now to begin that discussion, unfettered by piecemeal appellate litigation," Rhodes wrote in his opinion last week.

Detroit Emergency Manager Kevyn Orr has said he intends to submit to the court in early January the city's plan to deal with its debt.

(Reporting by Joseph Lichterman; Editing by Richard Chang)

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