Federalism Form and Function in the Detroit Bankruptcy

Abstract

This article tests the premise of limited federal court involvement in municipal bankruptcy cases against the real world of Detroit’s restructuring. The study is based on listening to digital audio recordings of court hearings and status conferences throughout the case in nearly real time, coupled with other primary source materials. Under the right conditions, we learn, a federal court can formally honor the explicit restrictions in the Bankruptcy Code while functionally exercising significant influence throughout a chapter 9 case. Some of the channels of influence operate beyond public view, including confidential mediation overseen by a powerful chief district judge and the court's feasibility team that, according to witness testimony, collaborated quite extensively with city officials. These tools form what I call the Detroit Blueprint – a procedural precedent sure to affect other municipal restructurings more than the (limited) substantive doctrine the case generated.

Keywords: Municipal bankruptcy, chapter 9, federalism, federal courts, judges, local government, judicial behavior

JEL Classification: H70, H74, J45