Limited challenge to Michigan emergency manager law moves forward

Reuters News
Posted: Nov 19, 2014 3:08 PM

(Reuters) - A federal judge on Wednesday allowed a lawsuit challenging the constitutionality of Michigan's emergency manager law to move forward on grounds that it might discriminate on the basis of race.

U.S. District Court Judge George Caram Steeh dismissed other counts in the lawsuit against the law, which allows the state to intervene in fiscally troubled local governments.

He ruled that the case brought by affected residents and a public labor union will proceed on an allegation that the 2012 law discriminates against African-American residents in cities run by an emergency manager.

He added that allowing the lawsuit to move forward would not impact Detroit, which was assigned an emergency manager and is poised to exit the biggest-ever municipal bankruptcy by year-end after a federal bankruptcy judge confirmed the city's debt adjustment plan on Nov. 7.

The lawsuit contended that 52 percent of Michigan's black population resides in cities with a state-appointed emergency manager or some other form of state oversight, while only about 2 percent of white residents are affected in the same way.

The judge noted that no majority-white cities that received high scores for fiscal problems under a system maintained by Michigan's Treasury department ended up with an emergency manager.

The judge tossed eight other counts in the lawsuit that alleged violation of constitutional amendments, including rights to due process, free speech and voting.

John Philo, executive director of the Sugar Law Center for Economic & Social Justice in Detroit, which is representing some of the plaintiffs, said depending on the outcome of the discrimination count, the parties could appeal the dismissal of the other counts with the U.S. Appeals Court.

The lawsuit was filed in 2013 against Michigan Governor Rick Snyder and then-state Treasurer Andy Dillon. A Snyder spokesman said the administration was pleased the judge dismissed the vast majority of the counts.

"Race has not and does not play a role in determining financial status," said spokesman David Murray.

The law was passed in December 2012 by Michigan's Republican-controlled legislature to replace a 2011 law that was repealed by voters in November 2012. The prior law beefed up the state's ability to intervene in fiscally troubled local governments, while the existing law gave those governments options including an emergency manager or bankruptcy.

Currently, 11 Michigan cities, one township and five school districts have some form of state oversight.

(Reporting by Karen Pierog in Chicago; editing by Matthew Lewis)