Timothy J. Mullins, Board of Directors, Government Law and Insurance Defense Sections

Timothy Mullins recently quoted in Crain’s Detroit Business article online.

Attorneys: Snyder’s terms likely to pass legal test

Gov. Rick Snyder’s draft consent agreement placing Detroit under a proposed financial advisory board has some unconventional terms, but it would likely stand up to a legal challenge, local municipal attorneys said.

One provision states that “any action by the city … or its unions to contest, through legal proceedings or otherwise,” the power of the board or the validity of a controversial 2011 state law under review in court would scrap the pact in favor of a state-appointed emergency manager or a municipal bankruptcy.

Another states that a “material uncured breach” of agreement by Detroit would empower state Treasurer Andy Dillon to immediately put the city in receivership.

A third allows the agreement to continue even if Public Act 4, the state law allowing the state to declare a financial emergency and appoint an emergency manager of local governments, is overturned in court or by voter referendum.

Municipal attorneys agreed those provisions are unusual, but defensible.

“It’s not standard language, because this is not a standard area of practicing law for cities. I can understand the purpose of it, though,” said Timothy Mullins, partner at Giarmarco Mullins & Horton PC in Troy.

“If you enter into a consent agreement and then find later that if one party or portions of that party don’t continue to consent to the agreement, the state can still go back to its original position as allowed (by Public Act 4). It’s not standard, but it still makes good sense to include.”

Steven Joppich, partner at Farmington Hills-based Johnson Rosati Schultz & Joppich PC and municipal attorney for Farmington Hills and Independence Township, could not recall any municipal agreement with such an expansive protest clause. But he also said he hasn’t fully researched Detroit’s agreement.

“I can’t say I’ve ever crafted an agreement with a provision like it. But you do draft an agreement at the beginning in a manner that best serves your client,” he said. “I … could see an attorney for the state being concerned with protecting (Act 4’s powers).”

The Sugar Law Center for Economic and Social Justice last year sued on behalf of a group of Michigan citizens, saying Public Act 4 violates the state constitution, in a case now before the Michigan Supreme Court. Stand Up for Democracy, a coalition of labor organizations and some churches and community groups, submitted more than 225,000 signatures in a petition to put the law before voters in November.

Mullins said the unusual provisions could be part of the state’s efforts to frame the agreement so as not to inadvertently surrender any of its Public Act 4 powers. Thomas McGraw, municipal law attorney and president of Troy-based McGraw Morris PC, said the agreement gives the state little or no power that Public Act 4 didn’t already bestow.

“The reality is, the state has the right to appoint an emergency manager,” McGraw said. “The document as constructed is a (voluntary) peace offering from the state as it is, and if you don’t want to abide by it, the state is already within its rights.”

Chad Halcom

Click here to view the entire article.

Timothy Mullins