Two Detroit pension funds sued the city's emergency manager and Michigan's governor, asking that a court find a bankruptcy filing would conflict with the state's constitutional protection of public retirees' rights.
The $3.4 billion Detroit Police and Fire Retirement System and the $2.8 billion Detroit General Retirement System filed the lawsuit Wednesday in state court in Ingham County, Mich., seeking a judgment that Gov. Rick Snyder can't authorize a bankruptcy filing that could reduce pension benefits.
The pension funds also sued Kevyn Orr, the emergency manager appointed by Mr. Snyder in March to lead the city out of a fiscal crisis that has put it on the brink of a Chapter 9 municipal bankruptcy.
“It appears imminent that the governor will grant the emergency manager the unconditional power to proceed under Chapter 9,” pension fund lawyers said in the complaint. “The emergency manager will seek to have the city's pension debts impaired” unless the pension funds accept Mr. Orr's imposition of cuts.
Reducing payments to city retirees would conflict with a provision of the state's constitution that bars such action, according to the suit, filed on behalf of the plans and more than 32,000 active and retired Detroit employees. Two similar lawsuits were filed by individual retirees in the same court earlier this month.
A hearing on the other suits is set for July 22 in Ingham County Circuit Court in Mason.
“As a matter of policy, the emergency manager's office doesn't comment on pending litigation,” said Bill Nowling, Mr. Orr's spokesman.
The lawsuit is “premature and speculative given that there is no Chapter 9 bankruptcy filing or even a determination by the governor for such an action,” Sara Wurfel, a spokeswoman for Mr. Snyder, said in an e-mail. “We're fully confident in both the spirit and constitutionality of the state's most recent emergency manager law.”