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Detroit: Lawyers on the Case

2013 March 12
by John Wallbillich

Many in the United States think Detroit as an example of failure. Failed industry (autos), failed city (Chapter 9 looming?), failed leadership (see below).

As a life-long resident of the greater Detroit area, I agree that all those designations may be true. But they don’t tell the full story. I don’t see Detroit just as a current laggard. I also see Detroit as a potential leader. And lawyers are on the case.

The quick-rinse bankruptcies of GM and Chrysler were seen at the time as a virtual death knell for the US auto industry. Flash forward a few years, and GM and Chrysler are wildly profitable. Some of the high-end European automakers are starting to see what real worldwide competition is like while facing a horrible economic state and the mess that is the European Union (as a financial system).

Lawyers made the automaker bankruptcies happen. And one lawyer, involved in that, may be part of something more.

Detroit as a city had a lawyer as mayor (Dennis Archer, a former Michigan Supreme Court Justice) some years ago; he basically saw what was on the horizon (and the reality of an intransigent City Council) and took his formidable talents to the private sector. His successor, Kwame Kilpatrick, was a lawyer, until he resigned in disgrace and lost his ticket a few years ago. Yesterday we learned that a federal jury considered Mr. Kilpatrick a criminal, and their verdicts in the morning resulted in Mr. Kilpatrick to being remanded to the custody of federal marshals in the afternoon to await sentencing. It was a big win for US Attorney Barbara McQuade and her team (lawyers all, with AUSAs Mark Chutkow and Michael Bullotta on point).

But into the void of failed leadership rides someone new. That would be Michigan Governor Rick Snyder. He is–wait for it–also a lawyer (University of Michigan JD/MDA). He spent years in the private sector before running for governor. He is just about the least political politician you will ever meet. Under Michigan law, cities failing economically are reviewed by the state, and an Emergency Financial Manager (EFM) can be appointed. A hearing on such a financial emergency for Detroit will be held in Lansing today. All signs point to clear distress in Detroit; although, incredibly, some on the City Council disagree.

So who would Governor Snyder appoint as the Detroit EFM? Well, someone brave for starters. Press reports this morning mention one Kevyn Orr, a partner at Jones Day. Mr. Orr and his firm represented Chrysler in the bankruptcy mentioned above. I hope, if asked, Mr. Orr or someone of his pedigree accepts the challenge.

I have a hunch I’m not alone in thinking that there would be no more challenging public position in America than the Detroit EFM.

And the “Detroit as Leader” part? I see the challenges facing Detroit (financially and otherwise) to be present in many large urban centers and states around the country. Maybe not as urgent, maybe not in the same magnitude. Detroit is a sort of “leading indicator.” And if the Detroit EFM recommends to Governor Snyder that a Chapter 9 is required, it will be one for the record books (and the legal treatises).

Business Blogging 101 says you don’t stray into politics. That’s not really the focus here today. In much of what ails Detroit, there are serious legal challenges involved in fixing the results of 50 years of mostly failed leadership (and complex demographic trends).

Thankfully, there are some lawyers with courage who are willing to take the case.

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(Downtown Detroit from Belle Isle; not today, maybe someday. Source)

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