Detroit Bankruptcy Using Mediation

The bankruptcy proceedings for the City of Detroit are making good use of mediation. Judge Steven Rhodes, who is overseeing the bankruptcy, appointed U.S. District Judge Gerald Rosen as lead mediator last August, and Judge Rosen assembled a team of mediators, comprised of four federal judges as well as Attorney Gene Driker, an esteemed Michigan mediator who received the State Bar of Michigan ADR Section’s Distinguished Service Award in 2012.

The mediation team has experienced both successes and setbacks. Today was another success story: the mediation team announced that Detroit reached a tentative agreement with 14 of its unions. The team also brokered a deal recently with the Retired Police and Firefighters Association involving pensions and health care benefits. A setback occurred in January when Judge Rhodes rejected the deal hammered out with two banks that are major creditors of the city, UBS and Bank of America. Last week, Judge Rhodes ordered officials from Detroit and Oakland, Macomb and Wayne Counties last week to go into closed mediation to continue talks toward creating a regional water authority.

Mediation is not often used in municipal bankruptcies but perhaps Detroit’s experience will open doors for new opportunities in the future.

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