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My Takeaway (so far) From Judge Rhodes’ Detroit Bankruptcy Hearing (and Grand Bargain misgivings)

U.S. Bankruptcy Judge Steven Rhodes

U.S. Bankruptcy Judge Steven Rhodes

I’ve learned (from cases like this) that trying to interpret judges’ off-the-cuff comments in courtroom hearings is like trying to read tea leaves: They may be tipping their own hands or they may merely be playing devil’s advocate, attempting to draw out further insights and greater clarity from the attorneys arguing a case.

That said, Judge Steven Rhodes seems to have made all the right noises at this morning’s hearing on whether to monetize the Detroit Institute of Arts’ [DIA's] collection.

As reported in Nathan Bomey‘s live blog for the Detroit Free Press (which will resume later today) and again in his and Mark Stryker‘s recap of the court proceedings, here are a couple of this morning’s juiciest interchanges:

“Whether any of us like it, the art is in play,” said Vince Marriott, an attorney for several European banks.

Rhodes interjected: “I have to say that that is not altogether clear to me at all. It depends on what you mean by ‘in play.’”

And here’s an interchange between Rhodes and Alfredo Perez, representing bond insurer Financial Guaranty Insurance, one of the city’s key creditors:

Perez: “My client looks at it [the DIA's art] as an asset that cannot [sic: I think live-blogging Bomey meant to type "can"] be monetized.”

Rhodes: “But the fact that you look to it doesn’t make it so. You have to be careful what you ask for. If you ask for a ruling that the art is part of the case, you might not get that ruling. [Emphasis added.]

We can only hope!

During a lull in the action, Bomey allowed himself, on his live blog, to editorialize briefly. He raised an issue that I have thought about, but dared not write about (until now).

Bomey wrote:

You can be absolutely certain that some Detroit creditors will fight the deal, regardless of how much foundations and the state raise [my link, not his]. Legal structure of the deal will be crucial, too: Does the money go directly to pensioners? Or into the general bankruptcy settlement pot? [Emphasis added.]

This was a question that troubled me when I first learned that the foundations contributing to the Grand Bargain were stipulating that the funds that they had pledged to, in essence, purchase the city-owned museum’s independence had to be “directed exclusively to the pensions owed to retired city employees,” in the words of the would-be benefactors in their recent opinion piece in the Detroit News.

Do private foundations have a right to dictate to city or state government and/or to the emergency manager how to earmark those funds? The donors can certainly say, “Take it or leave it,” but the correct answer, from the government’s point of view, might well be, “Leave it.”

The last thing I want is for this Grand Bargain to fail, which is why I’ve squelched my doubts until Bomey’s published remarks retriggered them. I understand why, from a political and moral point of view, everyone involved in the Grand Bargain wants the rescue of the DIA to be linked to a rescue of the pensioners. But I do think that a more equitable Grand Bargain would be one giving the city and/or emergency manager due discretion on how to use the donated funds…with the needed approval of Judge Rhodes.

an ArtsJournal blog