Detroit union victory worth 'refund on deck of Titanic'

Reuters

(Corrects 1st paragraph to show judge ruled pension boards canreinstate checks. Corrects 5th paragraph to show the citycouncil does not issue checks, but sets policy, and pensionboard issues the checks.)

By Joseph Lichterman

Oct 4 (Reuters) - Detroit's largest public sector unionscored a symbolic victory Friday when a Michigan administrativelaw judge said one of the city's pension funds could reinstatean extra annual pension check for city workers and retirees, andmake retroactive bonus payments, although the judge in thecity's bankruptcy case has prohibited enforcement of the ruling.

Bankruptcy Judge Steven Rhodes earlier this week allowedAdministrative Law Judge Doyle O'Connor to rule on the so-called13th check before O'Connor's retirement on Friday. But Rhodesforbade the parties from pursuing the matter further.

Rhodes has stayed all existing litigation against the citysince taking charge of the bankruptcy case, the largestmunicipal bankruptcy in U.S. history. Yet on Tuesday Rhodesruled O'Connor could proceed because a ruling would not injureDetroit.

O'Connor himself granted that the limitations imposed mightoffer "little more solace than an assurance of a fullticket-price refund offered while still on the sharply tiltingdeck of the Titanic."

Earlier this year, O'Connor read a verbal opinion supportingthe case brought by the American Federation of State, County andMunicipal Employees, claiming Detroit short-changed its membersbeginning in November 2011 when the city council ended thepolicy of paying bonus pension checks. The city's GeneralRetirement System board issued the checks.

For decades prior, the city's General Retirement Systemwould give bonuses to retirees and active employees when itearned more than 7.9 percent on its investments.

That payment and others cost the pension fund $1.92 billionfrom 1985 to 2008, a 2011 report to city council said.

AFSCME argued the city violated labor laws by unilaterallyending the extra checks. O'Connor said in February that "thechange directly affected an existing and fundamental conditionof employment."

Detroit's state-appointed Emergency Manager Kevyn Orr hassaid the policy contributed to the underfunding of the city'stwo pension funds, which he says have $3.5 billion in unfundedliabilities. The city's unions and pension funds dispute thatfigure.

O'Connor on Friday estimated the bonus money in question atroughly $174 million. He urged the city and union to seek anegotiated settlement of the matter. (Reporting by Joseph Lichterman; Editing by David Greising andPrudence Crowther)

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