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Detroit Bankruptcy Debrief—Judge Rhodes Speaks on the Grand Bargain and the Detroit Institute of Arts

Posted by Nicholas O'Donnell on February 20, 2015 at 6:58 AM

Last year’s biggest art law story was, in our view the Detroit bankruptcy. Nathan Bomey, who along with Mark Stryker formed the essential reporter team on up-to-the-minute updates on the proceedings, interviewed Bankruptcy Judge Steven Rhodes in the Detroit Free Press. The interview speaks for itself, but the highlights to me were:

Rhodes accepted the Michigan Attorney General’s opinion that the art at the Detroit Institute of Arts could not be sold, regardless of what the city wanted (and he underscored that the creditors certainly could never have forced the city to do so).

Over and above the city’s power to sell the art, Rhodes clearly was not persuaded that it was remotely a good idea. Even framed in terms of the tradeoff in very real city services, Rhodes said this:

Bankruptcy requires shared sacrifice. And the deeper truth than that immediate one that they were trying to express is simply this: Without a revitalized city, any pension promises that the city might make would be impaired.

A revitalized city was essential to any long-term promises that the city might make to any creditor, including the pensioners.

Lastly, he revealed that but for their apology, creditor Syncora Capital would have been sanctioned harshly for its impugning of the ethics of Grand Bargain mediator U.S. District Court Chief Judge Rosen. As we observed at the time, this is a lesson in advocacy. Don’t overplay the hand you have. Syncora was never going to get Rhodes to force Detroit to sell the art, but it was trying to persuade him to choose among some other options, and ended up offending him.

Topics: Judge Rosen, Mark Stryker, Chapter 9, Syncora Capital, Financial Guaranty Insurance Co., Judge Rhodes, Christie's, valuation, Detroit, Detroit Institute of Arts, Bankruptcy, Nathan Bomey, Detroit Free Press, Museums, Detroit Bankruptcy, grand bargain

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The Art Law Report provides timely updates and commentary on legal issues in the museum and visual arts communities. It is authored by Nicholas M. O'Donnell, partner in our Art & Museum Law Practice.

The material on this site is for general information only and is not legal advice. No liability is accepted for any loss or damage which may result from reliance on it. Always consult a qualified lawyer about a specific legal problem.

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