Monday, July 22, 2013

Veteran Detroit bankruptcy judge gets historic case

Story Originally Appeared in The Detroit News

Detroit— The city’s historic bankruptcy case was assigned Friday to U.S. Bankruptcy Judge Steven Rhodes, a veteran Detroit jurist with experience in large complex filings and a reputation for efficiency and diplomacy on the bench.

The appointment came 24 hours after Detroit filed the largest municipal bankruptcy case in U.S. history. Area lawyers called the Reagan-era appointee a quick-moving judge skilled at bringing opposing sides together to reach agreements.

“He’s had some big stuff and he’s not afraid of big stuff. That’s important. He’s had a wealth of experience in Chapter 11” reorganizations, Southfield lawyer Wallace Handler said. “He makes decisions in an appropriate fashion, which means he doesn’t sit on things for weeks and months.”

Gov. Rick Snyder and Emergency Manager Kevyn Orr have said Detroit doesn’t have a lot of time to restructure. They are hoping Detroit can restructure quickly and emerge from bankruptcy court by next summer or early fall.

Rhodes, who was appointed in 1985, presided over the Chapter 11 bankruptcy of auto-parts maker Collins & Aikman Corp. in 2005.

Alice Batchelder, chief judge of the 6th U.S. Circuit Court of Appeals, made the assignment Friday afternoon.

“I make this designation having reviewed the levels of experience and the respective caseloads of the judges of the Bankruptcy Court for the Eastern District of Michigan, and the availability of Judge Rhodes, and having received from the Chief Judges of both the Bankruptcy Court and the District Court for the Eastern District of Michigan the recommendation of those courts that Steven W. Rhodes be assigned to this Chapter 9 case,” Batchelder wrote in a court filing.

Any judge in the four-state region that includes Michigan, Ohio, Kentucky and Tennessee could have been assigned to the case.

“I just think he probably is the one who has the best background to handle this,” said G. Harvey Boswell, a retired bankruptcy judge from Tennessee. “He has the knack to be able to get people together.”

That will be a useful skill, experts said, as Detroit faces a costly and perhaps long battle with its creditors in bankruptcy court.

Rhodes is a graduate of the University of Michigan Law School, where he also has taught as an adjunct professor.

The Purdue University undergrad served as a law clerk for the late U.S. District Judge John Feikens, and is a former assistant U.S. Attorney and federal magistrate.

He plays guitar and serenaded his future wife with “The Sound of Silence,” “Eve of Destruction” and “Sloop John B,” according to a profile on the website of his rock band The Indubitable Equivalents.

Rhodes also is an American College of Bankruptcy fellow and last year co-authored “The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes.”

The bankruptcy bench unanimously recommended that the case be assigned to Rhodes, according to letters filed in court Friday.

“I have worked extensively with Judge Rhodes when he was chief judge of the bankruptcy court, and he has outstanding administrative and management skills, which of course will be necessary in handling a case of this magnitude,” Chief U.S. District Judge Gerald Rosen for the Eastern District of Michigan wrote.

The appointment and decision to file the case locally are significant, local bankruptcy lawyers said.

“It’s got to be heard in Detroit,” Handler said. “The whole cause and effect occurred in Detroit.”

Local bankruptcy judges are appointed to 14-year terms by the 6th U.S. Court of Appeals.

There are five bankruptcy judges assigned to the Detroit office and one each in Bay City and Flint.

Before the appointment, Snyder said: “We have confidence we’re going to get a good judge.”

Chief U.S. Bankruptcy Judge Phillip Shefferly said Rhodes handled the only other Chapter 9 bankruptcy case ever filed in the Eastern District of Michigan, which involved the Addison Community Hospital Authority.

Rhodes is “very knowledgeable about the relationship of federal bankruptcy law to state constitutional and other state law, which will likely be an important issue in this case,” Shefferly wrote in a letter filed in the case Friday.

The assignment is a coup for a bankruptcy bench that lost out on hearing the bankruptcy cases of General Motors Corp. and Chrysler LLC four years ago. The historic filings were heard by bankruptcy judges in New York.

“I don’t know if this would soften the sting, but if this case were not to remain in Detroit, that would be a tremendous black eye for the bench,” said Southfield bankruptcy lawyer Stuart Gold.

“The practitioners before this bench all have all the confidence in the world that any of the judges here can handle a case of this magnitude.”

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