Monday, June 8, 2009

Chrysler Sale Order Appeal -- Supreme Court Edition

Posted on Credit Slips by Stephen Lubben:

The appellants have asked Justice Ginsburg to stay the closing of the 363 sale so that the Supreme Court can consider the issues in the appeal. The SOCTUSBlog has good coverage of the various pleadings. I have previously indicated that the appellants bankruptcy-law arguments are not particularly compelling, save for perhaps the issue of barring future tort claims.

Interestingly, the appellants rely on several op-ed pieces to support their application for a stay. I have questioned the analysis in some of these op-eds here.

In a large part the bankruptcy part of the appeal to the Supreme Court is based on the old sub rosa plan argument. I believe it was Judge Sack who noted, in Friday's arguments before the 2d Circuit, that using the term "sub rosa" really does not add much to the analysis. Essentially, the key question is whether a 363 sale becomes so much like a plan that the there should have been voting and a disclosure statement.

The TARP issues strike me as the issues more likely to interest the Supreme Court. On the other hand, these issues may be the most fragile ones in the appeal because it is not clear that the appellants have standing. Moreover, as the 2d Cir. seemed to recognize on Friday, there is a sense in which the TARP issues are kind of "tacked on" to the appellants arguments. The Canadian funding of this case is plainly not subject to this challenge, and even if the challenge were successful, its not clear what role this would have in the bankruptcy case. Indeed, a "win" on this issue would arguably harm the appellants more than losing this appeal could. A withdrawal of Treasury funding would bring a quick end to Chrysler's chapter 11 case -- and leave a chapter 7 trustee with a daunting task.

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