UPDATE, 6 a.m. Monday: Chrysler LLC itself has responded to the stay applications reported on below, in a brief by Thomas Cullen of Jones Day in D.C. In light of the company's "fragile state and daily erosion of value," Cullen argues that a stay would mean that "the sale will not happen," and the challengers would effectively prevail -- even though lower courts have upheld the sale agreement. That result would also force the company into liquidation and "cause massive harm to Chrysler and the public interest," the brief asserts.
UPDATE, 8:30 p.m. Sunday: The Official Committee of Undecured Creditors has just filed a response to the Indiana challenge to the Chrysler deal reported on below. The committee, represented by Jeffrey Trachtman of Kramer Levin Naftalis & Frankel in New York argues that the sale of Chrysler, while "not perfect," stands as "the only alternative to a far worse economic and human disaster." The brief adds that "the balance of harms tilts so overwhelmingly against a stay" that the Supreme Court should deny the stay for that reason alone.
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With a Monday afternoon deadline looming, three separate parties have filed significant challenges with the Supreme Court over the weekend, all aimed at stopping the deal that would end Chrysler's bankruptcy.
The unusual flurry of weekend activity at the high court was triggered when a panel of the U.S. Court of Appeals for the 2nd Circuit on Friday upheld the sale of the automaker's assets to a group that includes Fiat, a union trust and the United States and Canadian governments. The panel gave challengers until Monday at 4 p.m. to file appeals at the Supreme Court.
The stay applications were addressed to Justice Ruth Bader Ginsburg, who handles emergency appeals from the 2nd Circuit. She could rule on the matter herself or refer it to the full court, which is in session Monday morning to hand down decisions and orders. As of Sunday evening, no responses from Chrysler or from the U.S. government have been released by the Court.
Taken together, the challenges have hurdles including standing to overcome, and the Supreme Court may not want to stand in the way of an arrangement devised by the political branches that its supporters say will save thousands of jobs. But the applications also point out that if the high court does not intervene now, a deal that raises major questions relating to bankruptcy law and the power of the executive branch will go unreviewed, and the questions unanswered.
"The public is watching and needs to see that, particularly, when the system is under stress, the law will be honored and an independent judiciary will properly scrutinize the actions of the massively power executive branch," wrote Indiana Solicitor General Thomas Fisher, who sought a stay on behalf of three state funds that will lose out if the sale goes through. He says the deal could constitute a "sub rosa Chapter 11 reorganization plan" that violates the priority status of first-lien creditors in bankruptcy, and a misuse of so-called TARP funds. Also on the Indiana brief is a team of lawyers from White & Case led by partner Thomas Lauria. The case is titled Indiana State Police Pension Trust v. Chrysler LLC.
Also challenging the deal is a coalition of consumer groups, as well as individuals injured in Chrysler accidents, who claim that the sale agreement would release the new Chrysler company that emerges from bankruptcy from "pending and future product liability claims for injury caused by Chrysler vehicles." If that release is permitted, they assert, similar quick sales under Section 363(f) of the Bankruptcy Code will become an escape hatch from current and future claims for any company. The application titled In Re Chrysler LLC was filed by Adina Rosenbaum of Public Citizen Litigation Group. Also on the brief are lawyers from Lieff Cabraser Heimann and Bernstein in San Francisco and Schnader Harrison Segal & Lewis in Philadelphia.
A third application was filed Sunday on behalf of Patricia Pascale, widow of a Chrysler brake worker who died after contracting mesothelioma from exposure to asbestos on the job. Her suit against Chrysler is pending in Superior Court in Los Angeles, and she claims it will be wiped out with the company sale Monday. "Courts are not free to ignore the law in the name of the needs of the big or powerful," wrote Sander Esserman of Stutzman, Bromberg, Esserman & Plifka in Dallas in the case titled Pascale v. Chrysler LLC. "Rights of individuals may not be simply disregarded because some believe a quick sale of a car company will strengthen the U.S. economy."
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