Jones Day Counsels City of Detroit Throughout Historic Municipal Bankruptcy Case; Welcomes Former Federal Prosecutor in Atlanta

Thursday, November 13, 2014 - 13:29

The Honorable Steven W. Rhodes of the United States Bankruptcy Court for the Eastern District of Michigan today issued a bench ruling confirming the City of Detroit's chapter 9 plan of adjustment, paving the way for the City's exit from the largest and most complex municipal bankruptcy case in U.S. history. Judge Rhodes will enter a written ruling within the next few days. Both the City's achievement – the adjustment of approximately $18 billion in debt – and the speed with which the case was resolved – 16 months after the City filed its chapter 9 petition – are unprecedented. Today's ruling follows a 24-day confirmation hearing and many months of out-of-court mediation and negotiations with retiree representatives, bond insurers, labor unions, and other creditor representatives. Jones Day has acted as lead restructuring counsel for the City of Detroit throughout these negotiations and the City's chapter 9 case.

The plan confirmed today reduces the City's estimated $18 billion debt burden by approximately $7 billion, restoring the City's financial solvency. Equally important, the plan establishes the framework for the reinvestment of approximately $1.7 billion over 10 years in a wide array of revitalization projects that will improve the everyday lives of its residents. These improvements include:

  •  Sweeping blight remediation initiatives;
  •  Renewed focus on public safety, with significant investment in the City's police, fire, and EMS departments;
  •  Comprehensive improvements to the City's public transportation system;
  •  An overhaul of the City's outdated and obsolete information technology systems; and
  •  Streamlining the operations of all City departments.

One of the most important aspects of the plan is the global settlement of issues related to the City's pensions and retiree healthcare. As a result of months of mediation and negotiation between the City, the official committee of retirees appointed by the Bankruptcy Court, the City's pension systems, and major unions and retiree associations, the plan enables the City's pensioners to retain between 95.5 percent and 100 percent of their current monthly pension allowance and increases the solvency of the City's retirement systems. This settlement also provides for the establishment of voluntary employee beneficiary associations (VEBAs) to assume the responsibility for providing healthcare benefits to current City retirees.

This comprehensive resolution of the City's pension and retiree health issues would not have been possible without another settlement – popularly known as the "Grand Bargain" – pursuant to which: The State of Michigan, certain philanthropic organizations, and the Detroit Institute of Arts (DIA) committed a total of $816 million to address the underfunding of the City's pensions; and the world-class art collection housed at the DIA was protected from dismemberment and placed in a perpetual charitable trust for the benefit of the City's residents and the surrounding region.

This "Grand Bargain" is unprecedented – parties with no existing obligation to the City have committed nearly a billion dollars to the City's restructuring efforts and have preserved a critical cultural asset. None of the foregoing would have been possible without the commitment and indefatigable effort of the outstanding mediation team appointed by the Bankruptcy Court.

Jones Day was retained in March 2013 as lead counsel to the City of Detroit in connection with its ongoing restructuring efforts and has counseled and served the City throughout its chapter 9 case. The Jones Day team was led by Business Restructuring & Reorganization partners David Heiman (Cleveland), Bruce Bennett (Los Angeles), and Heather Lennox (Cleveland and New York). The team included: Banking & Finance: Joel Telpner (New York); Business Restructuring & Reorganization: Corinne Ball (New York), Jeff Ellman (Atlanta), Brad Erens (Chicago), and Tom Wilson (Cleveland); Employee Benefits & Executive Compensation: Evan Miller (Washington), Sarah Griffin (Los Angeles), and Elena Kaplan (Atlanta); Labor & Employment: Brian Easley (Chicago), Jessica Kastin (New York), and Mike Rossman (Columbus); Litigation: Tim Cullen (Practice Leader, Global Disputes), Beth Heifetz (Practice Leader, Issues & Appeals), Geoff Irwin, Greg Shumaker, and Geoff Stewart (all Business & Tort Litigation), all in Washington; and Real Estate: Brian Sedlak (Chicago).  

***

Jones Day has announced that Jack M. Williams, a prominent trial lawyer and former assistant United States attorney, has joined its Atlanta Office as a partner in the Business and Tort Litigation (USA) Practice. Mr. Williams was previously a partner in the Atlanta office of Womble Carlyle Sandridge & Rice, LLP.

Mr. Williams has defended companies in products liability cases and in other types of business and commercial litigation including tobacco, asbestos, and pharmaceuticals, trying over 20 cases to verdict, and has represented companies and individuals responding to government investigations and criminal prosecutions. As assistant United States attorney for the Northern District of Georgia from 1995 to 2000, Mr. Williams focused on prosecuting business crime, serving as the government's lead trial counsel or co-counsel in a number of cases in which convictions were obtained. He also successfully defended several convictions before the United States Court of Appeals for the Eleventh Circuit.