UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

In re

Bankr. No. 13-53846

CITY OF DETROIT, MICHIGAN, Chapter 9

HON. STEVEN W. RHODES

Debtor.

__________________________________/

WILLIAM M. DAVIS, Case No. 14-cv-14920

Appellant, HON. BERNARD A. FRIEDMAN

vs.

CITY OF DETROIT, MICHIGAN, et al.,

Appellees.

__________________________________/

OPINION AND ORDER GRANTING APPELLEE’S MOTION TO DISMISS 

APPEAL AS EQUITABLY AND CONSTITUTIONALLY MOOT

PURSUANT TO FED. R. CIV. P. 12(b)(1)

This matter is presently before the Court on the “Corrected Motion of Appellee the

City of Detroit, Michigan for an order Pursuant to Fed. R. Civ. P. 12(b)(1) Dismissing Appeal as

Equitably and Constitutionally Moot” [docket entry 33]. Appellant, William M. Davis, has filed a

brief in opposition and appellee, the City of Detroit, Michigan (“the City”), has filed a reply. 

Pursuant to E.D. Mich. LR 7.1(f)(2), the Court shall decide this motion without a hearing. 

I. Background

After experiencing decades of financial decline, the City filed the above-captioned

Chapter 9 case (“Chapter 9 Case”) on July 18, 2013, in the United States Bankruptcy Court for the

Eastern District of Michigan (“the Bankruptcy Court”). This Chapter 9 Case is the largest and most

complex municipal bankruptcy in U.S. history. See In re City of Detroit, 504 B.R. 191, 281 (Bankr.

E.D. Mich. 2013) (finding that, as of July 18, 2013, the City had over $18 billion in escalating debt,

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over 100,000 creditors, and hundreds of millions of dollars of negative cash flow). The importance

of this Chapter 9 Case cannot be overstated. The Bankruptcy Court found that there existed a

“service delivery insolvency” such that the City did not have “the resources to provide its residents

with the basic police, fire and emergency medical services that its residents need for their basic

health and safety.” Id. at 193. 

Over the course of 16 months, the City engaged in negotiations and mediation with

representatives of the vast majority of its creditors, which resulted in a series of intricate and

carefully woven settlements with nearly all of the City’s stakeholder constituencies. These carefully

woven settlements were encompassed in the City’s Eighth Amended Plan for the Adjustment of

Debts of the City of Detroit (“the Plan”), which the Bankruptcy Court confirmed on November 12,

2014, in its Order Confirming Eighth Amended Plan for the Adjustment of Debts of the City of

Detroit (“Confirmation Order”) after conducting a 24-day evidentiary hearing. Appellant appeals

the Bankruptcy Court’s Confirmation Order, arguing that various aspects of the treatment of pension

claims under the Plan violate the Bankruptcy Code.

The “Grand Bargain” and the Global Retiree Settlement

At the heart of the confirmed Plan is the “Grand Bargain”–a carefully interlaced

settlement agreement that made it possible for the City, which cannot fully fund its future pension

obligations, to avoid drastic cuts to pensions. The Grand Bargain includes agreements by and

between the City, the State of Michigan, certain philanthropic foundations, and the Detroit Institute

of Arts (“DIA”) to provide a total of $816 million in funding (“the Outside Funding”) to the City

to finance its pension obligations (as adjusted by the Plan). In securing the Grand Bargain, the City

entered into a comprehensive settlement (“the Global Retiree Settlement”) of pension, healthcare,

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and other labor-related issues with employee and retiree representatives, including the official

committee of retirees appointed in the Chapter 9 Case; critical unions and retiree associations; and

the City’s two retirement systems, the General Retirement System (“GRS”) and the Police and Fire

Retirement System (collectively, the “Retirement Systems”). 

The Retirement Systems are fiduciary trusts and legal entities separate from the City. 

On behalf of the City, they administer the retirement programs established by the City for City

employees, retirees, and their beneficiaries. The GRS Board of Trustees administers a defined

benefit pension plan (“GRS Defined Benefit Pension Plan”) and a defined contribution annuity

program (“the Annuity Savings Fund”). The City is the sole sponsor of each Retirement System’s

defined benefit pension plan and is therefore ultimately responsible for any deficiency in funding

those plans. The City, however, is not responsible for funding the GRS Annuity Savings Fund.

Treatment of GRS Pension Claims Under the Plan

The Plan classifies the pension claims of members of the GRS (“GRS Pension

Claims”) in Class 11 of the Plan’s claims.1

 Even with the $816 million in Outside Funding

negotiated through the Grand Bargain, the City did not have the resources to fully fund GRS Pension

Claims over time. The Plan therefore adjusts GRS Pension Claims by providing for payment over

time for approximately 60% of the $1.879 billion underfunded portion of the GRS Defined Benefit

Pension Plan (hereafter the “underfunded claims”), assuming that $816 million is received from

Outside Funding. Because the City cannot fully satisfy the underfunded claims, the Plan adjusts the

future benefits of GRS members by eliminating annual cost of living increases in benefits

1

 Other pension claims are classified in Class 10. The Plan’s treatment of retiree healthcare

claims (which fall under “OPEB Claims”) are classified in Class 12.

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(“COLAs”) and imposes an across-the-board 4.5% reduction in earned pensions of GRS members. 

These adjustments were conditioned in part upon acceptance of the Plan by the holders of GRS

Pension Claims, who were notified that if they rejected the Plan, the Outside Funding would not be

available and the City would be required to reduce each GRS retiree’s pension by 27% instead of

by 4.5%. Holders of Class 11 GRS Pension Claims voted 73% in favor of accepting the Plan. 

ASF Recoupment

In addition to the GRS Defined Benefit Pension Plan, since 1973 the GRS has

sponsored the Annuity Savings Fund (“ASF”), a supplemental retirement program that allows

current City employees to invest up to seven percent of their after-tax salaries in a defined

contribution retirement account. Although ASF funds are not used to fund pensions earned under

the GRS Defined Benefit Pension Plan, these funds are nonetheless held in the GRS trust and are

invested with the assets that the City contributed to fund the GRS Defined Benefit Pension Plan. 

The ASF accounts operate like a 401(k) account–employees earn interest on their contributions

based on the returns from ASF account investments, which the GRS Board of Trustees determines

and then credits to those ASF accounts annually. But these ASF accounts were unlike any other

401(k) account because they were treated essentially as guaranteed investment contracts. From the

mid-1980s until fiscal year 2012, the GRS Trustees would credit each ASF account holder with no

less than a 7.9% annual return, regardless of the actual annual return on GRS Trust Assets.

The practice of crediting ASF account holders with a guaranteed 7.9% annual return2

was financed by diverting nearly $387 million contributed by the City to the GRS Defined Benefit

Pension Plan to the ASF participants’ individual defined contribution accounts. Not surprisingly,

2

 The City describes the illegality of this practice at length at pages 13-17 of its brief.

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this diversion process contributed to the City’s inability to fully fund GRS Pension Claims. Thus,

in negotiating the underfunded GRS Pension Claims, the City made known to the Retiree

Representatives that the City possessed various causes of action against the GRS and the GRS

Trustees, under which it could, and had an obligation to, recoup those diverted payments. After

months of negotiations, the City and GRS agreed to settle those causes of action as part of the Global

Retiree Settlement. The parties agreed that it would be unfair to address the underfunded portion

of the GRS Defined Benefit Pension Plan by reducing the pensions of all GRS participants

regardless of whether and how much they participated in the ASF program. Instead, to minimize

global reductions and to recover a reasonable amount of improperly diverted GRS Defined Benefit

Pension Plan funds, the parties agreed as part of the Global Retiree Settlement to recapture diverted

funds through an intricate ASF Recoupment program set forth in the Plan.

The ASF Recoupment program allows the City to recover approximately $190

million of the roughly $387 million in GRS Defined Benefit Pension Plan funds that were

improperly diverted from July 1, 2003, to June 30, 2013 (“ASF Recoupment Period”). Annual

recoupment is determined by the difference between the amounts earned on ASF accounts and the

amounts that would have been earned had the accounts been credited with actual returns, but capped

at 7.9% and with a floor against investment loss (0%). The ASF Recoupment program then recoups

from each recipient of excess interest, subject to two independent caps. In each case, the total

amount to be recovered is capped at 20% of the highest value of the recipient’s ASF account balance

during the ASF Recoupment Period. Further, the total pension benefit of ASF participants who

retired as of June 30, 2014, cannot be reduced by more than a total of 20% of their annual pension

benefit, including the reduction from both ASF Recoupment and the 4.5% across-the-board

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reduction of all GRS pensions. The parties agreed that the process to recover the ASF Recoupment

amounts would proceed as follows: (a) for current City employees who continued to maintain ASF

accounts, by debiting their ASF accounts in the amount of ASF Recoupment; and (b) for those who

already received a full distribution of their ASF accounts, by having their monthly pension further

reduced. 

The ASF Recoupment program therefore struck a balance between two opposite

objectives: (1) avoiding the imposition of even greater pension cuts for those who either did not

participate or participated minimally in the ASF program; and (2) minimizing, to the extent

reasonable given the City’s financial insolvency and inability to fully fund GRS Pension Claims,

the effect of recoupment on the pensions and income of those who had participated in the ASF

program. As noted by the Bankruptcy Court, ASF Recoupment is an “integral component of the

City’s [Global Retiree Settlement]” and is projected to recover about $190 million, without which,

the Bankruptcy Court further noted, the Plan would be required to impose a 13% across-the-board

reduction in GRS pensions, rather than the confirmed 4.5% reduction. Confirmation Order at 61,

95.

Impact of the Plan

Overall, the Plan (1) eliminates approximately $7 billion in City liabilities; (2) frees

approximately $1.7 billion in revenue over a nine-year period for reinvestment into the City’s

services, including directing funds to public safety services, blight remediation, and improvements

to information technology and public transportation; and (3) provides for $483 million in additional

revenue and $358 million in cost savings over the same time period.

Since the Plan became effective on December 10, 2014, the City has taken several

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steps to implement it. For example, the City (1) issued $287.5 million in bonds under the Exit

Facility; (2) issued $632 million and $88 million in New B and C Notes, respectively; (3)

irrevocably transferred all DIA assets to a perpetual charitable trust; (4) debited excess interest from

all but five current ASF account holders subject to the ASF Recoupment program; (5) transferred

interests of property pursuant to the Syncora Settlement and the FGIC/COP Settlement; and (6)

implemented a two-year City budget. These actions provide only a brief glimpse into the numerous

transactions that have occurred since the Plan’s effective date.

The Instant Appeal

Appellant appeals the Bankruptcy Court’s Confirmation Order, arguing that various

aspects of the treatment of pension claims under the Plan violate the Bankruptcy Code. Appellant

objects to the Plan’s reduction of GRS Pension Claims as violative of the Michigan Constitution. 

Appellant’s Br. at 2. Further, appellant objects to ASF Recoupment, arguing that members who

participated in the ASF program are treated less favorably3

 under the Plan.4 Id. For relief, appellant

asks the Court to “reverse the Confirmation of the Plan of Adjustment insofar as it violates Chapter

9 and the Michigan constitution” and to restore full pension benefits. See id. at 31.

II. Legal Standard

This Court has jurisdiction to hear appeals from “final judgments, orders, and

3

 In addition to the 4.5% across-the-board pension reduction, GRS members who

participated in the ASF program face a 14.5% further reduction to their pensions, whereas those who

did not participate in the ASF program are not affected by a further reduction.

4

 Appellant notes in his brief, however, that “[i]n the interest of judicial economy, Mr. Davis

relies and incorporates the arguments of fellow appellants in opposition to the annuity claw-back

recoupment.” Appellant’s brief therefore focuses primarily on the issue of pension adjustments. 

The Court will likewise focus on this issue.

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decrees” of the Bankruptcy Court. 28 U.S.C. § 158(a)(1). The City has moved to dismiss this

appeal as equitably and constitutionally moot pursuant to Fed. R. Civ. P. 12(b)(1). See Alexander

v. Barnwell Cnty. Hosp., 498 B.R. 550, 557 (D.S.C. 2013) (finding that a motion to dismiss an

appeal of an order confirming a bankruptcy plan as equitably or constitutionally moot is properly

brought pursuant to Fed. R. Civ. P. 12(b)(1)). 

III. Argument

A. The Doctrine of Equitable Mootness

The doctrine of equitable mootness applies “in appeals from bankruptcy

confirmations in order to protect parties relying upon the successful confirmation of a bankruptcy

plan from a drastic change after appeal.” In re United Producers, Inc., 526 F.3d 942, 947 (6th Cir.

2008). The doctrine promotes fairness and protects “parties’ settled expectations and the ability of

a debtor to emerge from bankruptcy.” Id. (citing In re Ormet Corp., No. 2:04-CV-1151, 2005 WL

2000704, at *4 (S.D. Ohio Aug. 19, 2005)). Equitable mootness operates on the premise that a

bankruptcy plan “once implemented, should be disturbed only for compelling reasons,” City of

Covington v. Covington Landing Ltd. P’ship, 71 F.3d 1221, 1225 (6th Cir. 1995) (internal quotation

marks and citation omitted), and is “grounded in the notion that, with the passage of time after a

judgment in equity and implementation of that judgment, effective relief on appeal becomes

impractical, imprudent, and therefore inequitable,” In re United Producers, Inc., 526 F.3d at 947

(quoting MAC Panel Co. v. Va. Panel Corp., 283 F.3d 622, 625 (4th Cir. 2002) (internal quotation

marks omitted)). The equitable mootness doctrine therefore prevents a creditor, or any party for that

matter, from overturning an order of the Bankruptcy Court–most often a confirmation order–if the

requested relief would unravel complex and interwoven restructuring agreements or would require

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the undoing of transactions that are “extremely difficult to retract.” In re Ormet Corp., 355 B.R. 37,

41 (S.D. Ohio 2006).

Appellant correctly notes that the doctrine of equitable mootness has been applied

to a Chapter 9 bankruptcy appeal in only two cases–neither of which originated from courts within

the Sixth Circuit. See In re City of Vallejo, CA, 551 F. App’x 339, 339 (9th Cir. 2013) (affirming

the Bankruptcy Appellate Panel’s order dismissing Chapter 9 appeals as equitably moot); Barnwell

Cnty. Hosp., 498 B.R. 550, 559 (D.S.C. 2013) (dismissing Chapter 9 appeal as equitably and

constitutionally moot). While it is true that “[e]quitable mootness is most commonly applied to

avoid disturbing [Chapter 11] plans of reorganization,” In re Fontainebleau Las Vegas Holdings,

LLC, 434 B.R. 716, 742 (S.D. Fla. 2010), this doctrine has been applied in other contexts, such as

in Chapter 7 appeals, see, e.g., In re McDonald, 471 B.R. 194, 196-97 (E.D. Mich. 2012) (applying

an equitable mootness analysis to a Chapter 7 appeal),5

 and in Chapter 11 liquidation proceedings,

see, e.g., In re BGI, Inc., 772 F.3d 102, 108-09 (2d Cir. 2014) (finding “no principled reason” why

the doctrine of equitable mootness should not also apply in Chapter 11 liquidation proceedings

where “substantial interests may counsel in favor of preventing tardy disruption of a duly developed,

confirmed, and substantially consummated plan”).6

 

5

 See also In re Shawnee Hills, Inc., 125 F. App’x 466, 469-70 (4th Cir. 2005) (applying

equitable mootness doctrine to a Chapter 7 appeal); In re Health Co. Int’l, 136 F.3d 45, 48-49 (1st

Cir. 1998) (same); In re Fitzgerald, 428 B.R. 872, 881-82 (B.A.P. 9th Cir. 2010) (same); In re Carr,

321 B.R. 702, 706-07 (E.D. Va. 2005) (noting that the equitable mootness doctrine applies with

equal force to a Chapter 7 liquidation of a bankruptcy estate as it does to a Chapter 11

reorganization). 

6

 See also In re President Casinos, Inc., 409 F. App’x 31, 31-32 (8th Cir. 2010) (affirming

district court’s decision that Chapter 11 liquidation appeal was equitably moot); In re Centrix Fin.

LLC, 355 F. App’x 199, 201-02 (10th Cir. 2009) (remanding Chapter 11 liquidation appeal to district

court with instructions to apply equitable mootness analysis); In re Superior Offshore Int’l, Inc., 591

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A survey of the case law discussing and applying the doctrine underscores the notion

that equitable mootness “is not limited to appeals of orders confirming [Chapter 11] reorganization

plans,”7

 has “been applied in a variety of [bankruptcy chapter] contexts,”8 and should be “accorded

broad reach.”9 As the case law illustrates, the doctrine is not concerned with the specific chapter

under which the debtor’s case was brought. Rather, what matters is whether hearing the bankruptcy

appeal could unravel the debtor’s plan and disturb the reliance interests created by it. Because the

underlying equitable considerations of promoting finality and good faith reliance on a judgment

applies with equal force to a Chapter 9 bankruptcy appeal, the Court sees no reason why the doctrine

should not be applied to avoid disturbing a Chapter 9 plan of adjustment. 

In urging the Court to hold otherwise, appellant relies heavily on the decision in

Bennett v. Jefferson Cnty., 518 B.R. 613 (N.D. Ala. 2014), where the court held that the doctrine of

equitable mootness is inapplicable to appeals of orders confirming Chapter 9 plans of adjustment.

The Court will not adopt the holding or rationale in Jefferson County, as it finds the discussion

regarding the differences between the underlying policy objectives of Chapter 9 and Chapter 11

bankruptcies to be particularly problematic. 

In deciding to exempt Chapter 9 bankruptcies from the equitable mootness doctrine,

the Jefferson County court found that the underlying policy objectives of a Chapter 9 bankruptcy

F.3d 350, 353-54 (5th Cir. 2009) (conducting an equitable mootness analysis in a Chapter 11

liquidation appeal).

7

 In re PC Liquidation Corp., No. CV-06-1935(SJF), 2008 WL 199457, at *5 (E.D.N.Y. Jan.

17, 2008).

8

 In re Arcapita Bank B.S.C. (c), Nos. 13 Civ. 5755 (SAS) & 13 Civ. 5756(SAS), 2014 WL

46552, at *2 (S.D.N.Y. Jan. 6, 2014). 

9

 In re BGI, Inc., 772 F.3d at 109.

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do not align as closely with the purpose of the equitable mootness doctrine as that of a Chapter 11

bankruptcy. That court found that a Chapter 11 corporate reorganization is concerned with

efficiency and “preserving going concerns and maximizing property available to satisfy creditors,”

id. at 635, whereas a Chapter 9 bankruptcy is concerned not with future profit, but with “continued

provision of public services.” Id. at 636. The court went on to conclude that “[t]hese major

differences in the purposes of Chapter 9 and Chapter 11 reorganizations alter analysis of whether

equitable considerations should factor into this court’s decision to hear the [Chapter 9] appeal”

because although the doctrine “requires a weighing of finality and good faith reliance against

competing interests that underlie the right of a party to seek review of a bankruptcy court order . .

. , [i]n the case of a Chapter 9 reorganization plan–finality and reliance may be required to yield to

the Constitution and interest of the public in the provision of governmental services.” Id. (internal

citations and quotation marks omitted).

The Court agrees with appellee that the interests of the City, its over 100,000

creditors, and its nearly 700,000 residents in relying on a final judgment cannot be marginalized and

dismissed in the broad brush manner adopted by the Jefferson County court. If the interests of

finality and reliance are paramount to a Chapter 11 private business entity with investors,

shareholders, and employees, then these interests surely apply with greater force to the City’s

Chapter 9 Plan, which affects thousands of creditors and residents. The Court will therefore apply

an equitable mootness analysis to the instant appeal.

B. Application

The Sixth Circuit applies the equitable mootness doctrine using a three-part test: 

“(1) whether a stay has been obtained; (2) whether the plan has been ‘substantially consummated’;

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and (3) whether the relief requested would affect either the rights of parties not before the court or

the success of the plan.” In re United Producers, 536 F.3d at 947-48 (internal citation omitted). 

1. Existence of a Stay

“When an appellant does not obtain a stay of the implementation of a confirmation

plan, the debtor will normally implement the plan and reliance interests will be created.” In re

United Producers, Inc., 526 F.3d at 948. The failure to obtain a stay will therefore “count against

the appellant in determining whether an appeal should be denied on equitable mootness grounds,” 

id. (citing In re Manges, 29 F.3d at 1040), but is “not necessarily fatal to the appellant’s ability to

proceed,” City of Covington, 71 F.3d at 1225-26. 

The Bankruptcy Court declined to issue a stay in this matter, reasoning that a stay

would jeopardize and bring “to a halt” “the City’s efforts to pull itself out of its service delivery

insolvency and to revitalize itself.” See Order Denying Motions for Stay Pending Appeal (Bankr.

Docket Entry 8533). Because “[a] stay not sought, and a stay sought and denied, lead equally to the

implementation of the plan of reorganization,” United Producers, Inc., 526 F.3d at 948, the fact that

appellant concurred in a motion that unsuccessfully sought a partial stay in this matter is of no

consequence and does not weigh in favor of appellant’s position. Accordingly, appellant’s failure

to obtain a stay weighs in favor of granting the City’s motion to dismiss.

2. Substantial Consummation 

The Bankruptcy Code defines “substantial consummation” as:

(A) transfer of all or substantially all of the property proposed by the

plan to be transferred; (B) assumption by the debtor or by the

successor to the debtor under the plan of the business or of the

management of all or substantially all of the property dealt with by

the plan; and (c) commencement of distribution under the plan.

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11 U.S.C. § 1101(2). Although the definition of “substantial consummation” is ordinarily used as

a statutory measure “to determine whether a bankruptcy court may modify or amend a [Chapter 11]

reorganization plan, In re United Producers, 526 F.3d at 948 (citing § 1127), “[t]he standard has

been adopted in the equitable mootness analysis to determine the extent to which the plan has

progressed,” Id. (citing In re Manges, 29 F.3d at 1040-41). “If a plan has been substantially

consummated there is a greater likelihood that overturning the confirmation plan will have adverse

effects on the success of the plan and on third parties.” Id. This Chapter 11 standard therefore

serves as a “yardstick . . . as to when finality concerns and the reliance interests of third parties upon

the plan as effectuated have become paramount to a resolution of the dispute between the parties on

appeal.” In re Manges, 29 F.3d at 1040-41. 

Appellant does not provide any argument in his response or brief as to whether the

Plan has been substantially consummated. Instead, appellant argues that “a finding of substantial

consummation is not dispositive and, in the context of this case, not very relevant.” Appellant’s

Resp. at 23. In contrast, the City argues that the Plan has been substantially consummated and notes

numerous major transfers and transactions that have been effectuated pursuant to the Plan, including

(1) the State of Michigan’s disbursement of $194.8 million to the City’s Retirement Systems; (2)

the DIA’s and other philanthropic organizations’ disbursement of $23 million to the Retirement

Systems; (3) the City’s issuance of $287.5 million in Financial Recovery Bonds, $632 million in

New B Notes, and $88 million in New C Notes; (4) the City’s irrevocable transfer of its right, title,

and interest in DIA assets to a perpetual charitable trust; (5) the Retirement Systems’

implementation of pension plan modifications, including pension and COLA reductions and ASF

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Recoupment; and (6) the substantial completion10 of ASF Recoupment of current account holders,

which has resulted in $58.5 million in recaptured funds. See Appellee’s Mot. at 28-31. The City

and other entities have also resumed or initiated management of substantially all of the property

dealt with by the Plan, as demonstrated by (1) Kevyn D. Orr’s resignation as Emergency Manager,

which restored day-to-day management of the City to the Mayor and City Council; (2) Governor

Richard D. Snyder’s decision to remove the City from financial emergency status and end

receivership; (3) the City’s implementation of $1.7 billion in Reinvestment Initiatives, of which 

$8.4 million went to the Detroit Police Department, $3.8 million to the Detroit Fire Department, $3.5

million for blight remediation, and $1.9 million to the City’s Income Tax Division to upgrade

information technology; (4) the establishment of the Great Lakes Water Authority and two VEBAs

to provide healthcare benefits to City retirees; and (5) appointment of the Michigan Financial

Review Commission to review the City’s finances. See id. at 31-33. Finally, the City notes that it

has substantially completed numerous payments and distributions under the Plan, including (1) $55

million in cash to holders of allowed Class 7 claims; (2) $17 million in New B Notes for distribution

to holders of allowed Limited Tax General Obligation Bond Claims; (3) $280 million in

Restructured UTGO Bonds to holders of allowed Class 8 Claims; (4) $88 million in New C Notes

to the COP Trustee for the benefit of settling claims with Class 9 claimants; and (5) $493 million

in New B Notes to the VEBAs to satisfy Class 12 claims. See id. 34-35. 

As these many transfers, transactions, and actions demonstrate, implementation of

the Plan has been set into motion and has been substantially consummated, especially as it relates

10 On January 2, 2015, ASF excess amounts were debited from 5,278 of 5,283 current ASF

account holders. Appellee’s Mot. at 30 n.17. The City notes in its motion that debits from the

remaining five accounts failed for technical reasons and will be re-attempted. Id.

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to GRS Pension Claims. Since the effective date, pensions have been reduced, COLAs have been

eliminated, ASF Recoupment has recaptured nearly all diverted funds from current ASF account

holders, and ASF Recoupment for non-current ASF account holders has taken effect by further

adjusting GRS pensions. Thus, this factor weighs in favor of granting the City’s motion to dismiss.

3. Rights of Third Parties and Success of the Plan

“Even when a plan has been substantially consummated, it is ‘not necessarily . . . 

impossible or inequitable for an appellate court to grant effective relief.’” In re United Producers,

Inc., 526 F.3d at 949 (quoting In re Manges, 29 F.3d at 1042-43). This is because the “most

important factor [a] court must consider is ‘whether the relief requested would affect either the rights

of parties not before the court or the success of the plan.’” Id. (quoting In re Am. HomePatient, Inc.,

420 F.3d 559, 564 (6th Cir. 2005)). This question “‘require[s] a case-by-case judgment regarding[]

the feasibility or futility of effective relief should a litigant prevail.’” Id. (quoting In re AOV Indus.,

Inc., 792 F.2d 1140, 1147-48 (D.C. Cir. 1986)). In assessing the feasibility of granting relief, the

court must “consider[] the nature of the relief requested and whether it amounts to a piecemeal

revision of the plan or a wholesale rewriting of it.” Id. (citing In re Manges, 29 F.3d at 1042) (“We

must evaluate [actions taken pursuant to the Plan], many of which appear irreversible, against the

backdrop of the relief sought–nothing less than a wholesale annihilation of the Plan.”). Essentially,

the Court must decide whether appellant presents a “plausible argument that the implementation of

[his] suggested changes to the confirmation plan would not require any of the actions undertaken

pursuant to the plan to be reversed.” In re United Producers, Inc., 526 F.3d at 950. 

In his brief and response, appellant asks the Court to reverse the Plan such that

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pensions are restored in full.11 Appellant argues that although “[t]he City of Detroit may have to

find some alternative funds to make up the difference in the funding necessary to restore pensions

to their full payments[,] . . . that funding will be relatively small and can be provided without

disturbing the plan of adjustment.” Appellant’s Resp. at 27. Appellant suggests that the City could

avoid disturbing the Plan by making up for the funding deficit by applying for federal funds for

blight remediation and “go[ing] after major banks, whose predatory lending policies led to the

destruction of neighborhoods throughout Detroit.” Id.

The Court disagrees with appellant’s suggestion that requiring the City to unimpair

approximately $1.9 billion in GRS Pension Claims would not “produce a ‘perverse’ outcome–‘chaos

in the bankruptcy court’ from a plan in tatters and/or significant ‘injury to third parties.’” In re

Semcrude, L.P., 728 F.3d 314, 320 (3d Cir. 2013) (quoting In re Phila. Newspapers, LLC, 690 F.3d

161, 168 (3d Cir. 2012)). The relief appellant requests–sending the City back to square one to keep

pensions intact–would require “nothing less than a wholesale annihilation of the Plan.” In re

Manges, 29 F.3d at 1043. Any argument to the contrary simply cannot be credited. 

11 In his response to the motion to dismiss, appellant suggests that if the Court does not grant

his request to restore full pension benefits, he seeks “(1) [an] order that an amended plan of

adjustment be adopted removing any language providing for further reduction of pension payments;

[and] (2) [an] order that any future amended plan of adjustments not contain any language impairing

or diminishing pension payments.” Appellant’s Resp. at 30. Appellant’s concern stems from a

condition in the Plan that states that in the event the DIA defaults on making its payments, pensions

shall be automatically reduced by the defaulted amount. Id. at 13. Such relief was never requested

in his opening brief and appellant cannot request such relief in response to the City’s motion to

dismiss. However, even if such relief had been initially requested in appellant’s brief, appellant’s

suggestion that the Plan would not be unraveled by adding his conditions post-confirmation cannot

be credited. The ability to further reduce pensions based on the DIA defaulting provides assurance

that the City will not become liable in the event of a default. By removing these conditions,

bargaining positions would change, requiring all stakeholders to return to the table to negotiate a

new Plan.

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As the City notes in its motion, the Global Retiree Settlement sought to ensure that

payment of GRS Pension Claims would be made at a specified level and that to achieve this level,

the State and the DIA Funding Parties would need to contribute $816 million to the City. This

Grand Bargain was contingent on the confirmation of the Plan and the implementation of the Global

Retiree Settlement, which relies on ASF Recoupment. Exempting pensions from the Plan would

therefore unravel the Grand Bargain, which could cause (1) the State to commence measures to

recover the State Contribution and (2) the DIA Funding Parties to withhold hundreds of millions of

dollars in funding not yet disbursed to the City. Appellee’s Reply at 4. Further, appellant’s

requested relief would disrupt ASF Recoupment by removing $190 million in necessary cost

savings. By losing $190 million in ASF Recoupment proceeds and $816 million in Outside

Funding, the City would be rendered incapable of (1) satisfying its obligations to creditors under the

Plan and (2) implementing $1.7 billion in Reinvestment Initiatives. In a Plan described by Martha

E.M. Kopacz, the court-appointed independent feasibility expert, as having “little space remaining

on the continuum of reasonableness,” where “[i]t is not realistic or prudent to believe that the City

could take on any additional plan obligations and remain within the continuum . . . necessary to

establish feasibility,” it is simply unrealistic to credit appellant’s claim that his requested relief

would not hinder the success of the Plan. Tr. of 11/7/2014 Hr’g at 54:13-14. Simply put,

unimpairing GRS Pension Claims would not only threaten the success of the Plan, it would cast the

City into a renewed financial emergency.

Further, reversing the Plan would negatively affect countless third parties who have

justifiably relied on the Plan. Equitable mootness has particular force when “[r]eversal of the

Confirmation Order . . . would require the invalidation of thousands of good-faith transfers made

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pursuant to the Plan,” In re Eagle-Picher Indus., Inc., 172 F.3d 48 (6th Cir. 1998), and “unraveling

the plan ‘would work incalculable inequity to many thousands of innocent third parties who have

extended credit, settled claims, relinquished collateral and transferred or acquired property in

legitimate reliance on the unstayed order of confirmation,’” In re United Producers, Inc., 526 F.3d

at 951 (quoting In re Public Serv. Co., 963 F.2d 469, 475 (1st Cir. 1992)). This reliance interest is

heightened when, as here, the plan “reflects a highly integrated settlement among various

constituencies.” HNRC Dissolution, Co., No. Civ.A.04-158 HRW, 2005 WL 1972592, at *9 (E.D.

Ky. Aug. 16, 2005). 

The record from the Bankruptcy Court reveals that appellant’s requested relief would 

negatively affect the success of the Plan and harm innocent third parties. Although appellant makes

light of these consequences, the record before the Court, as described above, establishes that various

parties have come to rely upon the Plan such that unraveling it would throw the City into financial

chaos. Thus, the third factor of the equitable mootness analysis weighs in favor of granting the

City’s motion to dismiss.

IV. Conclusion

All three factors of the equitable mootness analysis weigh in favor of dismissing

appellant’s appeal as moot: appellant did not obtain a stay; the confirmed Plan has been

substantially consummated; and reversal of the Plan would adversely impact third parties and the

success of the Plan. Having concluded that this appeal is equitably moot, the Court finds it

unnecessary to address the City’s secondary argument that the appeal is also constitutionally moot. 

Accordingly,

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IT IS ORDERED that the “Corrected Motion of Appellee the City of Detroit,

Michigan for an order Pursuant to Fed. R. Civ. P. 12(b)(1) Dismissing Appeal as Equitably and

Constitutionally Moot” [docket entry 33] is granted. This appeal is dismissed as equitably moot.

S/ Bernard A. Friedman__________

BERNARD A. FRIEDMAN

SENIOR UNITED STATES DISTRICT JUDGE

Dated: September 29, 2015

Detroit, Michigan

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