In re Chrysler Stayed

In a one sentence opinion, Justice Ginsberg stayed the order approving the sale of Chrysler assets brokered by the U.S. Treasury Department. The 2d Circuit affirmed the bankruptcy court order approving the sale Friday. It gave objecting creditors until 4:00 PM Monday to obtain a stay of the order from the Supreme Court. Justice Ginsburg, who is responsible for emergency matters from the 2d Circuit, entered the stay just before the last tick of the clock.

The objecting parties, Indiana State Pension Trusts holding Chrysler secured debt, have advanced two arguments for reversal of the bankruptcy court order approving the sale: 1) the sale to the Fiat SpA group is an improper and unfair sub rosa reorganization plan and the bankruptcy court exceeded its authority under 11 U.S.C. section 363 to order the sale; 2) the U.S. Treasury had no constitutional authority to use TARP funds allocated for the bailout of financial institutions to finance Chrysler-Fiat. On Sunday, a consumer group filed a brief in support of the pension trust investors. The consumers' group wants to stop the sale because its terms relieve Chrysler-Fiat of successor liability for old Chrysler consumers' product liability claims.

The U.S. government filed its brief with Justice Ginsburg today, arguing that the pension trust parties have no standing to complain about the sale. Chrysler is worth next to nothing without the Fiat deal and that the proposed sale yields a better return than the only other option, liquidation. As for the TARP money, the Solicitor General argues that the pension trust investors don't have standing to object to the government’s $8 billion injection of TARP money into the new Chrysler-Fiat. Whether Chrysler-Fiat is a "financial institution" eligible to receive TARP funds is not a question worthy of Supreme Court review. ("The relevant EESA [Emergency Economic Stabilization Act of 2008] provision was enacted only eight months ago and has not yet been construed by any federal court . . . .")

This could be one of those OK Corral moments in constitutional law. The pension trusts represented by Thomas Lauria of White & Case, are the last creditors standing alone against a barrage of pressure on senior lenders to get with the Chrysler-Fiat deal, or else. The Supreme Court may be the only law in town tough enough to stand up to President Obama, Treasury and auto industry czar Steven Rattner.

The gunfight at the OK Corral is said to have lasted about 30 seconds. The trial afterward took weeks. Whether the Earp brothers and Doc Holliday's actions were in self defense or murderous is still a good game for law students more than a century later. In the end, Judge Spicer ruled that "the tragic results accomplished in manner and form as they were, with all surrounding influences bearing upon resgestae of the affair, I cannot resist the conclusion that the defendants were fully justified in committing these homicides-that it is a necessary act, done in the discharge of an official duty."