The judge overseeing Detroit’s historic bankruptcy case removed from the record Syncora’s “personal attack” on the case’s chief mediator and gave the bond insurer’s attorneys until Sept. 12 to explain why they shouldn’t face sanctions.
Earlier this month, Syncora’s attorneys in a court filing criticized Chief U.S. District Judge Gerald Rosen for showing “naked favoritism” toward pensioners while leading negotiations between the city and the creditors. Syncora has argued for months that the Detroit Institute of Arts collection should be monetized to pay all creditors, not protected as it is in the “grand bargain” which also brings outside funding to the city’s pension funds.
Syncora accused Rosen and an additional mediator, Eugene Driker, of being “agenda driven, conflicted mediators who colluded with certain interested parties to benefit select favored creditors to the gross detriment of disfavored creditors.” The city asked the judge to strike Syncora’s filing from the record and to sanction the creditors’ attorneys.
On Monday, attorneys for the two sides argued in front of Rhodes, and Syncora’s attorney asked the judge to end the preferential treatment pensioners have received throughout the negotiations.
In his response issued late Thursday, Rhodes rejected Syncora’s claims and ordered the creditor’s objection be struck from the case docket. “Syncora’s highly personal attack on Chief Judge Rosen in the objection was legally and factually unwarranted, unprofessional and unjust,” Rhodes wrote. “Justice requires the court to strike the attack from its record.”
As part of the 22-page order, Rhodes wrote that he considered Syncora’s objection an end of what had been “professionalism and civility” in the case.
Syncora’s attorneys, who are from the Chicago firm Kirkland & Ellis, have until Sept. 12 to respond in writing with evidence as to why they shouldn’t face sanctions.
As an insurer in the 2005 “Certificates of Participation” deal that injected $1.4 billion into Detroit’s pensions, Syncora stands to lose hundreds of millions of dollars as the city’s Plan of Adjustment now stands and has objected at seemingly every step of the proceedings to date.
The trial is scheduled to begin Tuesday.