In re City of Detroit

654 B.R. 266

IN RE: CITY OF DETROIT, MICHIGAN, Debtor.

Case No. 13-53846

United States Bankruptcy Court, E.D. Michigan, Southern Division

Signed October 6, 2023

Brian P. Lennon, Charles N. Ash, Stephen B. Grow, Warner Norcross + Judd LLP, Grand Rapids, Michigan, Attorneys for Former Governor Richard P. Snyder.

John D. VanDeventer, Michigan Department of Attorney General, Lansing, Michigan, Fadwa A. Hammoud, Daniel Ping, Michigan Department of Attorney General, Detroit, Michigan, Attorneys for the Michigan Department of Attorney General.

OPINION REGARDING THE CONTEMPT MOTION FILED BY FORMER GOVERNOR RICHARD SNYDER

Thomas J. Tucker, United States Bankruptcy Judge

This case is before the Court on the motion filed by former Governor Richard Snyder entitled "Interested Party Richard Snyder's Motion for (A) An Evidentiary Hearing and (B) An Order Holding the Michigan Department of Attorney General in Contempt and Granting Related Relief" (Docket # 13361, the "Motion"). The Motion alleges that the Michigan Department of Attorney General violated the confidentiality and non-disclosure provisions of several mediation orders entered in this bankruptcy case, by producing a large quantity of protected documents to nine defendants and their attorneys in criminal cases arising from the Flint water crisis.

The Michigan Department of Attorney General (sometimes referred to below as the "Department") objected to the Motion. The Court held a telephonic hearing on the Motion, and then entered an Opinion and Order on June 17, 2021, entitled "Opinion and Order Regarding Further Proceedings on the Contempt Motion filed by Former Governor Richard Snyder" (Docket # 13390, the "June 17 Order").

The Court's June 17 Order addressed the Motion in three ways: (1) it made certain findings and conclusions; (2) it ordered certain relief; and (3) it provided for certain further proceedings regarding the Motion.

After the entry of the June 17 Order, former Governor Snyder and the Michigan Department of Attorney General filed several more papers relating to the Motion, all of which the Court has reviewed. The Court has considered all of the oral and written arguments made by these parties to date, and all of the papers filed by the parties,¹ as well as other relevant parts of the record in this Chapter 9 bankruptcy case. For the following reasons, the Court now will follow up the June 17 Order with a further order containing the provisions described in this Opinion.

First, the Court reiterates and incorporates into this Opinion, by reference, the provisions of the June 17 Order. Among other things, the Court reiterates all of the following from the June 17 Order:

Initially, the Court notes that the Michigan Department of Attorney General argues that former Governor Snyder lacks standing to bring the Motion . . . . For present purposes, even if former Governor Snyder lacks standing to seek the relief at issue, this Court has the authority to consider whether, as the Motion alleges, the Michigan Department of Attorney General has violated the confidentiality provisions contained in the mediation orders issued by this Court, and if so, to order appropriate remedies for such violation of this Court's orders.

First, as this Court has held previously, "[b]ankruptcy courts have civil contempt powers. Those powers 'flow from Bankruptcy Code § 105(a) and the inherent power of a court to enforce compliance with its lawful orders.' " In re City of Detroit, Michigan, 614 B.R. 255, 264 (Bankr. E.D. Mich. 2020) (quoting Schubiner v. Zolman (In re Schubiner), 590 B.R. 362, 398 (Bankr. E.D. Mich. 2018)). Second, under Bankruptcy Code § 105(a), the bankruptcy court may "sua sponte, tak[e] any action or mak[e] any determination necessary or appropriate to enforce or implement court orders." See 11 U.S.C. § 105(a).

Now that the allegations of the Motion have been brought to this Court's attention, the Court will not ignore them. This is so regardless of whether former Governor Snyder has standing.

June 17 Order at 1-2.

Second, the Court reiterates, and will continue in effect, the following injunction contained in the June 17 Order, applicable to the Michigan Department of Attorney General (footnotes in original):

Effective immediately, and unless and until this Court orders otherwise in a future order, the Michigan Department of Attorney General is prohibited from disclosing to any person or entity any information or documents that are covered by the confidentiality provisions of this Court's previous mediation orders. Such confidentiality provisions state the following, applicable to all mediation proceedings in this bankruptcy case:

All proceedings, discussions, negotiation, and writings incident to mediation shall be privileged and confidential, and shall not be disclosed, filed or placed in evidence.²

This prohibition in this paragraph 6 of this Order applies to the entire Michigan Department of Attorney General, and all of its officers, agents, servants, employees, and attorneys, and all other persons who are in active concert or participation with any of the foregoing described persons, including, without limitation, all members of the Flint Criminal Team and all members of the Flint Civil Team.³

June 17 Order at 4-5, ¶ 6 (footnote omitted).

Third, this Court has subject matter jurisdiction over this Chapter 9 bankruptcy case and this contested matter under 28 U.S.C. §§ 1334(b), 157(a) and 157(b)(1), and Local Rule 83.50(a) (E.D. Mich.). This is a proceeding "arising in" a case under title 11, within the meaning of 28 U.S.C. § 1334(b). Matters falling within this category are deemed to be core proceedings. See Allard v. Coenen (In re Trans-Indus., Inc.), 419 B.R. 21, 27 (Bankr. E.D. Mich. 2009) (citing Mich. Emp. Sec. Comm'n v. Wolverine Radio Co., Inc., 930 F.2d 1132, 1144 (6th Cir. 1991)).

Because the Motion asks the Court to interpret and enforce its own mediation orders, this is a proceeding "arising in" a case under title 11. See In re City of Detroit, Michigan, 652 B.R. 81, 94 (Bankr. E.D. Mich. 2023); Palltronics, Inc. v. PALIoT Sols., Inc. (In re Lightning Tech., Inc.), 647 B.R. 76, 91-93 (Bankr. E.D. Mich. 2022) (detailed discussion of bankruptcy court's jurisdiction to interpret and enforce its own orders); see also In re Chesapeake Energy Corp., 70 F.4th 273, 281 (5th Cir. 2023) (citation omitted) ("Within its core jurisdiction, the [bankruptcy] court may also be called upon to interpret the terms of a confirmed reorganization plan.").

Fourth, the Court finds and concludes that former Governor Snyder does have standing to seek relief enforcing the confidentiality and non-disclosure provisions of this Court's mediation orders. It is true that he is no longer the Governor of Michigan, having left office in 2019. But the fact remains that former Governor Snyder was a participant in the mediations that occurred in this bankruptcy case, and even in his individual capacity, he is both bound by, and has a legally protected interest in, the protections of the confidentiality and non-disclosure provisions of the Court's mediation orders.

During the hearing on the Motion, the Department's attorney admitted that parties who would have standing to seek relief for a violation of the mediation orders include the City of Detroit and "the current office holders within the State of Michigan, anyone who holds those offices that were involved in the mediation."⁴ There is no logical reason why former Governor Snyder does not also have such standing now, in his individual capacity.

Fifth, even if former Governor Snyder lacked standing, it would make no practical difference in this case, because the relief the Court will provide, described below, would be the same. As noted in the June 17 Order, quoted above, under this Court's inherent authority to enforce its own orders, the Court has authority to consider whether the Michigan Department of Attorney General violated this Court's mediation orders, and if so, what should be done to remedy the violation(s). Similarly, the Court has civil contempt powers. This authority and power may be exercised by this Court on its own motion, regardless of whether former Governor Snyder has standing. And in considering these matters, the Court has discretion to consider, and does consider, the information and arguments brought to the Court's attention by former Governor Snyder.

Sixth, this Court recently discussed the elements of civil contempt, and reiterates that discussion now:

In City of Detroit, Michigan, 614 B.R. at 263-66, this Court discussed the law of civil contempt at length. The Court incorporates that discussion by reference, and adopts it in this Opinion. The Court stated the elements of contempt:

[T]he elements that must be proven for a court to find a party in civil contempt are that (1) the party violated a definite and specific order of the court requiring him to perform or refrain from performing a particular act or acts; (2) the party did so with knowledge of the court's order; and (3) there is no fair ground of doubt as to whether the order barred the party's conduct — i.e., no objectively reasonable basis for concluding that the party's conduct might be lawful. And at least as to the first two of these elements, the moving party must prove them by clear and convincing evidence.

If these elements are proven, the accused party may still avoid a contempt finding, by proving that his/her compliance with the order in question was impossible.

Id. at 265-66.

In re City of Detroit, Michigan, No. 13-53846, 653 B.R. 874, 892 (Bankr. E.D. Mich. Sept. 18, 2023).

Seventh, all of the necessary elements exist for holding the Michigan Department of Attorney General in civil contempt.

A. The Michigan Department of Attorney General violated "definite and specific" orders of this Court requiring it "to refrain from performing a particular act or acts." The orders were the mediation orders quoted above and in the June 17 Order, and cited in...