After two months of tense court-mandated balloting, the results came in late Monday: Retired city workers approved Detroit's ambitious bankruptcy plan, bringing the city one step closer to its goal of emerging from bankruptcy by year's end.
Hailed as a grand bargain, the deal prevents the sale of Detroit Institute of Art masterworks while giving city retirees smaller pension cuts than they would be offered had they turned it down.
But as a five-month investigation by “America Tonight” showed in April, hundreds of people with lawsuits against the city — some with judgments and others as yet unresolved — have been excluded from these negotiations, left to take bigger hits than more high-profile groups of unsecured creditors.
In a bankruptcy, getting creditor groups with enough of a stake in the bankruptcy to vote yes on the plan sets the stage for a so-called cramdown, which would allow Judge Rhodes to approve a forcible restructuring plan in August over the objections of other creditors.
Key agreements the city struck with police and firefighters, as well as settlements with the banks UBS and Bank of America Merrill Lynch, helped bring these major creditor groups on board and prevented them from challenging the bankruptcy in court.
Still, limited tax general obligation bondholders, who would receive 34 percent recovery rates, have vowed to fight the plan.
"We understand why the retirees and unions voted in favor of the city's plan — if we were offered a similar deal we, too, would approve the plan," bondholder Financial Guaranty Insurance Co. said in a statement. "Unfortunately, the city's current offer to FGIC … is completely inferior, and until the city treats us fairly, we are compelled to fight for the fair and equitable treatment that is our right under the bankruptcy code."
But creditors like Payne and Provience don't have the same negotiating power. Because each tort claim is vastly different, it's more difficult for tort creditors to act in unison. They also have fewer resources at their disposal. Many of them are low-income and pay their lawyers only if they receive compensation.
"It doesn't look good — everybody pulls for Dwayne and he just keeps getting screwed," said his lawyer Wolfgang Mueller. "There's not much I can do to control what's happening with the bankruptcy."
And with their credit payable over 30 years, it could be a long time before any of them see their due.
"I don't think Jessie's going to make it another 30 years," said Payne's lawyer, Leonard Miller. "We made an offer to take a reduced amount in order to get it sooner, and got no response from the city."