Pension funds opposing Detroit's reorganization were allowed by the judge overseeing the case to go directly to the U.S. Court of Appeals in Cincinnati in their effort to pull the city out of bankruptcy.
U.S. Bankruptcy Judge Steven Rhodes in Detroit, in permitting the pension funds to bypass a review by a U.S. district judge, also said he will decide “in the next day or so,” whether the appeal should be heard more quickly than normal.
Mr. Rhodes asked lawyers how going to the appeals court would affect confidential settlement talks being mediated by the chief federal judge in Detroit.
“This is a dual process,” said Lisa Hill Fenning, who represents the city's two pension systems. “We are not trying to slow down the process.”
The systems after the hearing praised Mr. Rhodes' decision to allow the direct appeal and said the challenge should be heard as fast as possible.
“In light of the expedited scheduling of this entire bankruptcy case, it is only appropriate that the appeal process be similarly expedited,” the systems said in a statement.
The pension systems cited a ruling in the bankruptcy of San Bernardino, Calif., to bolster their argument for bypassing the normal process. In that case, a judge in Los Angeles allowed the $277.3 billion California Public Employees' Retirement System, Sacramento, to go to the appeals court in San Francisco.
CalPERS and the Detroit pension systems have similar complaints, claiming city officials didn't negotiate in good faith with creditors before filing for bankruptcy.
The pension funds unsuccessfully tried to strip San Bernardino and Detroit of court protection by attacking rulings that the cities qualify for bankruptcy.
U.S. Bankruptcy Judge Meredith M. Jury refused to let CalPERS avoid the normal appeals process. A federal district court overturned that decision, saying the appeals court should look at the claims about good-faith bargaining.
Detroit won the right to stay in bankruptcy from Mr. Rhodes on Dec. 3. The city filed bankruptcy in July.
San Bernardino filed for bankruptcy last year.