Rule of Law RIP

Andrew Grossman, Heritage Foundation Senior Legal Analyst testified before the House Judiciary Committee yesterday at a hearing on Ramifications of Auto Industry Initiatives. Grossman made three points. 1. The Bush and Obama administrations have harmed the US auto industry by intervention meant to save it; 2. The Obama administration has abused its power to sidestep the rule of law, particularly bankruptcy law; and 3. These acts will prolong our current recession unless Congress reverses them.

Grossman's third point follows from the first two. If you mess with the stability of contract and property rights, nothing good can come of that.

Grossman said: "Lenders know how to deal with bankruptcy--it's a well understood risk of doing business. But the tough measures employed by the Obama Administration to cram down debt on behalf of the automakers were unprecedented and will naturally make lenders reluctant to do business with these companies, for fear they could suffer the same fate. . . . Impaired access to debt and capital will stymie future restructuring, investment, and growth, reducing the likelihood that either company will fully rebound and, beyond that, prosper."

And on and on in the downward spiral toward oblivion.

Chrysler Rejects 789 Dealers

As part of its bankruptcy case, Chrysler rejected one quarter of its dealership agreements under 11 U.S.C. sec. 365. Check to see if your hometown dealership is on the cut list. 2392 American Chrysler, Jeep and Dodge dealers will survive the sale to Fiat.

Here's what the axed dealerships heard in Chrysler's press release: “The unprecedented decline in the industry has had a significant impact on our sales and forced us to reduce production levels to better match the needs of the market. With the downsizing of operations after the sale and reduction of plants and production, similar reductions must be made to the size of the dealer body. We appreciate the support of our dealers and regret this painful action. We wish market conditions made it possible to keep everyone.”

In other words, "It's not you, it's me."

Song for Penn State Law Class of 2009

When it first opened, critics panned the musical Wicked (music and lyrics by Steven Schwartz and book by Winnie Holtzman). The musical is based on a novel by Gregory Maguire. The story starts before Dorothy arrived in the Land of Oz and explains how two girls became Elphaba, the Wicked Witch of the West, and Glinda the Good. Theatre critics called the plot "muddled" and the sound in New York's Gershwin Theater "smearing." No matter. Audiences loved it.

This song is the witches' farewell to each other after a long and sometimes difficult journey together. To the Dickinson School of Law Class of 2009 from me in thanksgiving for the blessing of each other:

For Good

I've heard it said
That people come into our lives for a reason
Bringing something we must learn
And we are led
To those who help us most to grow
If we let them
And we help them in return

Well, I don't know if I believe that's true
But I know I'm who I am today
Because I knew you:

Like a comet pulled from orbit
As it passes a sun
Like a stream that meets a boulder
Halfway through the wood
Who can say if I've been changed for the better?
But because I knew you
I have been changed for good

It well may be
That we will never meet again
In this lifetime
So let me say before we part
So much of me
Is made of what I learned from you
You'll be with me
Like a handprint on my heart
And now whatever way our stories end
I know you have re-written mine
By being my friend:

Like a ship blown from its mooring
By a wind off the sea
Like a seed dropped by a skybird
In a distant wood,
Who can say if I've been changed for the better?
But because I knew you:
Because I knew you:
I have been changed for good

And just to clear the air
I ask forgiveness
For the things I've done you blame me for
But then, I guess we know
There's blame to share
And none of it seems to matter anymore.

Like a comet pulled from orbit as it
Passes a sun, like
A stream that meets a boulder, half-way
Through the wood

Who can say if I've been changed for the better?
I do believe I have been changed for the better.

Because I knew you:
I have been changed for good.

A Tribute To The Enduring American Spirit

Today, Mine That Bird, a small horse with a big heart that cost $9,500 and was a 50-1 shot won the 135th running of the Kentucky Derby! He was trained by a former unknown in New Mexico who drove the hours 21 hours to Kentucky pulling his horse behind his pick-up all the way. When asked, trainer Bennie Woolley Jr. said, "They'll know who I am now."

Mine That Bird ran against million dollar horses and won with 6 and 3/4 lengths to spare, one of the largest margins of victory ever. I love this story and I love that stories like this happen in America every day, not just with horses but with people like you and me. Be encouraged and run like the wind!

In re Chrysler, LLC

Chrysler filed for relief under chaper 11 of the Bankruptcy Code on Thursday in the Bankruptcy Court of the Southern District of New York. Judge Arthur Gonzales is presiding. The filing became necessary after hedge fund creditors holding approximately 30 percent of Chrysler's total debt refused to sign on to the Treasury Department brokered workout by the April 30 deadline. Look at the the petition or go to the SDNY Bankruptcy Court and review the petition and first day motions. (You'll need a Pacer account for the second link). For readers who speak the language, Bankruptcy Litigation Blog has the word on the legal risks and rewards of a section 363 sale and links to affidavits filed with first day motions by Chrysler insiders and disgruntled creditors' experts.

Yes Alison, Jones Day represents Chrysler. The chapter 11 petition signed by Jones Day NY partner and bankruptcy mega celeb Corinne Ball explains that Chyrsler shut down its manufacturing facilities and will remain idle until the bankruptcy case concludes with a court-approved deal with Fiat and Chrysler creditors as outlined by Treasury. She warned that failure to move quickly through bankruptcy would mean liquidation for Chrysler and “the end of an iconic, 83-year-old American car company,” not to mention the loss of jobs for 38,500 people.

The first hearing in the case was this morning. Reuters reports that the courtroom was packed and very hot. Judge Gonzales halted the proceeding briefly when a Dewey & LeBoeuf associate standing with bankruptcy lawyer Martin Bienenstock (for Chrysler Financial) collapsed. Once the paramedics hauled her out, Judge Gonzales decided six motions in an hour.

A New York Story

In the New York Post of April 29th is the story, written by Laura Italiano, of the start of the defense’s presentation in the criminal fraud trial of Anthony Marshall, son of the late philanthropist and socialite Brooke Astor. Francis Morrissey is a co-defendant and was Mr. Marshall’s lawyer for the transaction under review. What follows is an adaptation of the Post story; quotations used were taken directly from the story.

Prosecutors claim that in 2004 Mr. Marshall and Mr. Morrissey manually transported Mrs. Astor, then 101 years of age and beset with Alzheimer’s disease, from the arms of her in-house nurse and down the hallway into the drawing room of her Park Avenue apartment (incidentally, it seems if you have a drawing room in your family, you are more likely to have experience with will contests than families without drawing rooms). Once there, she was, according to the Post story, confronted by a batch of… dark suited and gravely officious lawyers. And then she signed an apparently prepared codicil leaving 60 million worth of cash and bonds to Mr. Marshall. Mrs. Astor died a few years ago, at the great age of 104.

Fred Hafetz is Mr. Marshall’s defense attorney. Mr. Hafetz is a renowned criminal defense attorney, specializing in white collar crime. He successfully defended former Miss America Bess Meyerson, who was accused of bribing a judge in the competition that awarded her that title (perhaps the reigning Miss. California should have thought of that; e.g. Here's $50, ask me about world peace). I had occasion once to talk to Mr. Hafetz by telephone. He is grateful to my mother for a kindness done his family, and so agreed to counsel me on a career in the law. He is a nice man, and has a solid gold bar for a legal resume. Mr. Hafetz put up a slide during his opening remarks noting that Mrs. Astor, known to history as a philanthropist, gave nothing to charity between the years 1953 and 1993. In 1993, Mr. Marshall eloped with his current wife, Charlene. Mrs. Astor is recognized not to have been fond of Charlene, and the defense alleges she registered her disapproval by giving gobs of Mr. Marshall’s legacy to charity and by writing a series of wills, all of which kept Mr. Marshall from eventual possession of the 60 million, which before 1993 had been vouchsafed to him in each of a series of wills executed by Mrs. Astor (apparently, Mrs. Astor enjoyed executing and revising will instruments: Mr. Morrissey’s lawyer, noting her enthusiasm for the work, joked in his opening that “she probably could have taught trusts and estates at Harvard Law School”). Mr. Hafetz said in his opening statement that in 2004, nearing the end of her life, a lucid Mrs. Astor softened toward her son, if not also his wife, and signed the 2004 codicil that reinherited Mr. Marshall. Mr. Hafetz told the jury, “[s]omeone with dementia, someone with Alzheimer’s, is still a human being…[t]hey do not forfeit their human right…to make decisions.”

The prosecution seeks to prove its case by exclusively circumstantial evidence; testimony from household staff and famous friends of Mrs. Astor (among them Barbara Walters and Henry Kissinger) that the grande dame lacked the competence to meaningfully sign the codicil.

We’ll see who prevails, which is not necessarily the same thing as who is right. For what it’s worth, Andrea Peyser, writing a related opinion piece in the Post that is not a study in subtlety, thinks she knows where the merits lie: “Mrs. Astor, I fear, is rolling in her grave. Anthony Marshall should burn in hell.”

STOLI Hearing on the Hill Today

David J. Stertzer, CEO of the Association for Advanced Life Underwriting, sent out the following update this morning.

"U.S. Senate Special Committee on Aging Chairman Herb Kohl (D-WI) will hold a hearing today focused on the life settlement market and stranger originated life insurance ("STOLI"). The hearing will be at 2:00 pm EDT and can be accessed from the Committee webpage. For a complete witness list and announcement of the hearing, please click here.

AALU submitted this written testimony to the Committee focusing on our stong efforts in conjunction with the broader life insurance industry to enact state laws to prevent STOLI, while protecting legitimate uses of life insurance and life settlements.

We hope the hearing will further those efforts, because we cannot allow STOLI to detract from the critical role life insurance products play for 75 million American families.
We will be covering the hearing and will provide you with a report tomorrow."