The Obama administration’s effort to hurry Chrysler through bankruptcy court ran into an unexpected last-minute delay on Monday, when the Supreme Court said it could consider whether to hear the objections of three Indiana state funds and consumer groups. þþThe implications of the court’s move — Judge Ruth Bader Ginsburg issued a one-sentence order that amounted to a holding action — are unclear. þþThe delay could be resolved by Tuesday, freeing Chrysler to join forces with Fiat. But if the court decides to hear an appeal that lasts weeks or months, it could put Chrysler at risk of going out of business. Fiat, the only company to show an interest in acquiring most of the assets of Chrysler, can walk away from the deal if it is not concluded by June 15.þþIn a broader context, such a decision would also give the justices an early opportunity to consider the scope of the wide-ranging but not unlimited authority that Congress granted the president to address the economic crisis. þþIndeed, the Indiana funds explicitly compared the Chrysler case with Youngstown Sheet and Tube v. Sawyer, the 1952 decision in which the Supreme Court rejected President Harry S. Truman’s assertion that he had the constitutional authority to seize steel mills during the Korean War. þþ“I think the points of law are so clear in this case that they need to be examined by this body,” said Richard Mourdock, the Indiana treasurer. “This is a step towards having that happen. I’m certainly not elated. There’s nothing in this story that would lead me to elation.”þþSeveral legal experts noted that the action should not be interpreted as a signal of the full Supreme Court’s intentions. And it is not unusual for the court to issue a stay while it considers whether to hear a case, but it rarely grants the kind of expedited hearing on the merits that the Indiana funds are seeking.þþ“I’m astonished she even stayed the sale, but I find it quite encouraging, because I find it important that they take a close look at the issues,” said David A. Skeel Jr., a law professor at the University of Pennsylvania. “I think it’s a good move. My guess is in the end they will approve the sale.” þþThe order represents a surprising turn of events to what President Obama had promised in late April would be a “quick” and “efficient” bankruptcy. þþHis concern for speed reflected, in part, a desire to limit the damage of bankruptcy to Chrysler and its workers, as more consumers were likely to steer clear of the automaker as long as a cloud of uncertainty hung over its future.þþIt was also seen as a test run for General Motors, which filed for bankruptcy on June 1, with a similarly ambitious goal of emerging from bankruptcy quickly.þþIn the case of Chrysler, Mr. Obama promised its bankruptcy would be “controlled,” by reaching agreements with crucial players before the filing. A new agreement, for example, was struck with the United Automobile Workers before the filing.þþBut many creditors objected to the discount they were being asked to accept on their Chrysler debt. Mr. Obama singled them out for criticism, referring to them as “speculators” in his speech announcing Chrysler’s filing. þþ“They were hoping that everybody else would make sacrifices, and they would have to make none,” Mr. Obama said of the creditors at the time. “I don’t stand with them.”þþMany relented, but other creditors dug in for a fight, including the three Indiana funds, which represent teachers and police officers and are seeking more compensation for their $42.5 million share of Chrysler’s $6.9 billion in secured debt. þþLawyers for the funds have questioned whether Chrysler could have received a better deal than the Fiat transaction or through a liquidation. They have also objected on constitutional grounds, saying that the Obama administration was not allowed to give bailout money meant for financial institutions to Chrysler.þþ“The negative economic consequences of permitting an unlawful sale to proceed may well over time dramatically outweigh Chrysler’s short-term harm,” the funds said in their brief. þþBut Representative John D. Dingell, Democrat of Michigan, said he was more concerned about the risk of Chrysler being forced to liquidate. “By refusing to make the relatively small sacrifices that would avert a calamity, the pension funds will instead create a great catastrophe,” he said in a statement Monday.þþChrysler, Fiat and the government were prepared to close the deal as soon as Monday night if the court let the deal go forward, according to people briefed on the matter. þþChrysler and Fiat declined to comment. An administration official responded to the court’s action by saying, “We understand this to be an administrative extension designed to allow sufficient time for the court to make a determination on the merits of the request for a stay.”þþUnder the terms of the deal, Fiat can walk away as soon as June 15, a move that Chrysler executives warned would mean near certain liquidation. Executives testified in court that despite spending more than a year scouring the globe for someone to buy the company, none except for Fiat made an offer. And a lawyer for Chrysler argued in a recent court filing that the carmaker was losing $100 million a day while it was in bankruptcy.þþUnder the government-backed plan, Chrysler would emerge from bankruptcy with a union retiree trust owning 55 percent, Fiat owning a 20 percent share that could eventually grow to 35 percent, and the United States and Canadian governments holding minority stakes.þþJustice Ginsburg, who handles emergency matters arising from the United States Court of Appeals for the Second Circuit, issued an order Monday, saying that the rulings of the bankruptcy judge allowing the sale “are stayed pending further order of the undersigned or of the court.”þþFor much of its court case, decisions had fallen Chrysler’s way. The carmaker won quick approval of its sale from two lower courts, and many legal experts said they did not expect the Supreme Court to stay the deal.þþBut lawyers for the objectors, which also included several groups with product liability claims, filed their appeal to Justice Ginsburg Saturday night, after the Second Circuit reaffirmed a lower court’s approval of the sale. The appeals court had delayed the closing of the deal until 4 p.m. Monday or until the Supreme Court declined to issue its own delay.þ
Source: NY Times
