Davis et al v. Detroit Downtown Development Authority et al; U.S Eastern District of Michigan Case Number: 2:17-cv-11742

Eastern District of Michigan U.S. District Judge Mark A. Goldsmith ruled on June 19^th that Detroit’s Downtown Development Authority can issue $34.5 million in bonds to pay for the relocation of the Detroit Pistons basketball team to the new Little Caesar’s Arena. The Judge’s ruling rejected arguments that the eventual use of school tax money to repay these tax increment finance bonds violates Detroit residents’ constitutional and statutory right to vote on a school tax money diversions.

Judge Goldsmith’s ruling denied Robert Davis‘ and D. Etta Wilcoxon’s motion for a preliminary injunction or temporary restraining order in their lawsuit against the Detroit Downtown Development Authority. The Judge said the plaintiffs did not establish the need for an emergency injunction. The Judge politely neglected to mention that Robert Davis was sentenced in the very same Eastern District U.S. District Court to an 18 month Club Fed vacation for stealing $ 200,000 from the Highland Park School District in 2014. Mr. Davis should still be on probation for this minor peccadillo.

One complication here is that the tax monies being diverted are not those of the current Detroit Community Public School District, but rather those of the legacy Detroit Public School District which was reduced to zombie status last year in the DPS bailout. Is the old DPS really a school district today, or just a financial entity? The Detroit Community Public School District is a near bankrupt ward of the State of Michigan that won’t receive any Detroit property tax revenues until the legacy DPS district debts are paid off. No one alive today will live to see that.

Another complication is an apparent conflict in Michigan law between the statutes governing tax increment finance and school finance. The Tax Increment Finance Authority Act (Public Act 450 of 1980, MCL 125.1812b) establishes state reimbursement rules for TIF screw ups, but does not explicitly override the Revised School Code Act (Public Act 451 of 1976, MCL 380.1216) statutory right of district residents to vote on school tax revenue diversions.

Davis and Wilcoxon’s attorney said:

“This is probably the most egregious denial of the right to vote,” Paterson said. “They didn’t announce until a public hearing on April 25 that they were going to capture school funds. … The defendants in this case are coming with unclean hands.”

Attorney David Fink, Representing Detroit’s DDA, dismissed MCL 380.1216 voting rights because the DDA have been diverting school revenues – without any votes – since 1978 without any previous challenge. He is of the opinion that the public notice provided by a Memorandum of Understanding between the DDA and Olympia Entertainment published earlier this year constitutes an adequate, lawful substitute for the right to vote in any event.

Judge Goldsmith in his ruling found no precedent to support Attorney Fink’s contention, but denied the plaintiffs’ motion nonetheless. Strangely, Judge Goldsmith seems to think that some kind of vote has already been taken:

Plaintiffs have not demonstrated that the right to vote guaranteed by the United States Constitution is somehow abridged by the violation of state laws regulating government financing that is subject to voter approval. This is especially true here, where the alleged misconduct only occurred after the votes had been, by all accounts, properly and fairly cast and counted…..

……Here, Plaintiffs make no claim of disparate or discriminatory treatment. They were not turned away from the polls based on some invidious classification. Neither free speech nor a federal statute is implicated. Their sole claim is that the state laws regulating how government financing authorization is secured have not been respected. However, simply because one aspect of that authorization process involves voter approval does not transform a disagreement about the operation of such laws into a federal claim for denial of the right to vote. Otherwise, every dispute regarding how later government action was taken following a ballot authorization would justify a federal court lawsuit. The vacuousness of such a position is confirmed by Plaintiffs’ inability to cite a single case that meaningfully supports their position that the fundamental right to vote includes a “right” to have government actors implement the results of a referendum in a particular way….

Judge Goldsmith doesn’t make clear exactly what vote he is referring to. However, he was exquisitely clear about the financial situation of the Detroit Pistons, Olympia Entertainment and the City of Detroit:

……“[P]laintiff’s harm is not irreparable if it is fully compensable by money damages.” Basicomputer Corp. v. Scott, 973 F.2d 507, 511 (6th Cir. 1992). Here, Plaintiffs “seek the issuance of a writ of mandamus compelling the Defendants to refund collected taxes to the taxpayers.” Am. Compl. ¶ 167; see also id. ¶ 164. Plaintiffs only other alleged damages are statutory damages under 18 U.S.C. § 1964(c) and attorney fees and costs. Id. at 64-66 (prayer for relief). Plaintiffs’ reply brief does not address this argument. Of course, “when reviewing a motion for preliminary injunction, if it is found that a constitutional right is being threatened or impaired, a finding of irreparable injury is mandated.” Bonnell v. Lorenzo, 241 F.3d 800, 809 (6th Cir.2001). As discussed above, however, this Court does not find that a constitutional right is being threatened or impaired. Because Plaintiffs complain of the misallocation of a sum certain, which could be completely remedied by an order compelling the return of that money to the appropriate coffer, Plaintiffs have not shown irreparable harm. This cuts strongly against the issuance of preliminary relief.

Harm to Others

Another relevant consideration is whether issuance of a preliminary injunction would cause substantial harm to others. Based on the proofs submitted to date, this Court concludes that this factor, too, weighs against issuance of preliminary relief. Plaintiffs conclude that “there is simply no conceivable evidence that the issuance of an injunction in this case would cause any harm to anyone.” Pl. Br. at 32. Defendants respond that, in fact, the injunction that Plaintiffs seek would cause great harm to the City of Detroit by making it very likely that the DDA would default on $250 million in bond obligations, which in turn would greatly damage Detroit’s creditworthiness. See Defs. Resp. at 2. see also Kantor Aff., Ex. 1 to Defs. Resp (Dkt. 24-2); Jensen Aff., Ex. 2 to Defs. Resp. (Dkt. 24-3). And the Detroit Pistons’ relocation plans would not merely be delayed if an injunction issues; instead, there is a significant likelihood that the plans would be canceled entirely, causing a ripple effect of lost business revenue in the district for years to come. Id. at 3. Plaintiffs do not address these claims in their reply. Having considered the unrebutted evidence offered by Defendants that an injunction would cause harm to them, as well as the City of Detroit and those living and working within it, this Court concludes that this factor cuts against issuing an injunction. The comparable harm faced by Plaintiffs if an injunction does not issue only highlights how much is at stake for Defendants: Plaintiffs have not stated a cognizable right-to-vote claim, suggesting that Defendants’ alleged wrongdoing is a matter of state law and, in any case, fully compensable by money damages. It is not the type of harm that the extraordinary remedy of a preliminary injunction is meant, or needed, to avoid…….

So the financial risk to a billion dollar enterprise, Olympia Entertainment, far outweighs Detroit residents’ right to vote on the diversion of their taxes. Rule of law be damned.

U.S. District Judge Mark A. Goldsmith was nominated to the Eastern District of Michigan bench by President Obama. The Judge was vetted by the judicial advisory committee created by Democratic Senators Carl Levin and Debbie Stabenow. Mayor Duggan and his minions are all Democrats. Denise Illitch, the daughter of Olympia Entertainment’s founder, is a Democratic politician and a past member of the Detroit Metro Convention and Visitors Bureau. There are no Republicans involved here. Wonder how Davis and Wilcoxon feel about their Democratic overlords now?

The legal issue here probably belongs in the Michigan Court of Claims, but the Federal courts have routinely usurped state jurisdiction on voting issues in the past – particularly those affecting minorities. Yet suddenly they abandon the voting rights of minorities.

Why did Judge Goldsmith decline to intervene? He was a fixer partner at Honigman, Miller, Schwartz, and Cohn LLP from 1988 until 2004. You become a pillar of the Southeastern Michigan establishment after 16 years at Honigman, culminating in a partnership. Honigman was also deeply involved in the DPS bailout and its aftermath, as well as the Detroit bankruptcy (arranging the sweetheart deal for the DIA) before that. Oddly, Honigman is now in a million dollar tax dispute with the City of Detroit. Honigman clearly believes that their sweetheart deals should be funded by the average Joes’ taxes, not theirs.

Watch Judge Goldsmith closely. He is also front and center in the current ACLU effort to usurp the jurisdiction of the U.S. EOIR Detroit Immigration Court over a bunch of Iraqi mobsters that ICE finally picked up for deportation.  At the top of that list is Lou Akrawi, the Iraqi mob’s godfather. Note also that Denise Illitch is a past member of the Board of Directors of the ACLU’s Detroit Branch.

The nexus here is that some of those same Iraqi mobsters were behind the Detroit Pistons point shaving scandal during their 1989 – 1990 season. The Feds never prosecuted that scandal, preferring to squeeze those Iraqi ‘persons of interest’ for the intelligence it took to stop the Iraqi mob war then raging across Oakland and Wayne Counties. Bodies were dropping and stores were going up in flames across Metro Detroit. The Iraqi mobsters were so reckless that many innocents were being killed and injured.  It was horrifying.  The ACLU pulls at your heart strings with a very ominous tale about the prospects of Iraqi mobsters returned to Iraq, without ever mentioning their many victims in Metro Detroit.

Metro Detroit’s Iraqi mobsters avoided deportation for years by touting their Christian religion and opposition to Saddam Hussein, but didn’t improve their behavior one bit They were also behind the basketball point shaving scandal a decade ago at University of Toledo, which was prosecuted. Organized crime in Toledo is run by the Detroit mob and their designees, in this particular case the Detroit Iraqi mob.  And the Metro Detroit Iraqi mobsters work hand in glove with their Islamic confreres, who have the same enthusiasm for illegal sports betting.

Gambling, specifically sports gambling, is an Iraqi mob specialty they conduct under the aegis of the traditional Detroit mob. Point shaving in basketball is very hard to detect, is driven by powerful economics, and it is impossible to know how many instances have gone undetected and unpunished. Should Judge Goldsmith succeed in blocking the deportations of the Iraqi mobsters, the Little Caesars Arena will undoubtedly become a fine new venue for viewing point shaving in action. Saddam Hussein is long gone and those Iraqi mobsters should be gone as well.

MCL 125.1812b makes the State of Michigan entirely responsible for any financial disaster which besets the DDA TIF bonds. The estimated cost of the Little Caesar’s Arena complex has already increased from $450 million to $862 million. The Detroit DDA will be on the hook for 38% of this, or about $ 327.5 million. It won’t all go bad, but there is real risk to the State of Michigan’s school students. It is only four years after Detroit’s Plan of Adjustment paid off their previous bonds at cents on the dollar. And the DCPS district set up last year is already functionally bankrupt.  Detroit’s financial performance record is not good.

There are other reasons to question reckless TIF adventures, beyond their immediate financial balances. From Wikipedia:

Capturing the full tax increment and directing it to repay the development bonds ignores the fact that the incremental increase in property value likely requires an increase in the provision of public services, which will now have to be funded from elsewhere (often from subsidies from less economically thriving areas). For example, the use of tax increment financing to create a large residential development means that public services from schools to public safety will need to be expanded, yet if the full tax increment is captured to repay the development bonds, other money will have to be used.

So Detroit’s Democratic politicians and a business cabal build a fine new stadium which sucks resources from Detroit’s declining neighborhoods, and stick schools across Michigan with the risk if anything goes wrong.

Crony capitalism at its finest.