High Court Puts the Breaks on Chysler Sale--For Now

The Supreme Court has temporarily granted an emergency appeal asking it to halt the impending government-backed sale of Chrysler.

The order signed by Justice Ruth Bader Ginsburg stops for now Chrysler's sale to Italian automaker Fiat. This relief is only temporary as Ginsburg noted it exists "pending further order" by her or the Court.

A 4:00pm deadline had loomed for groups opposed to the sale who over the weekend filed emergency petitions with the Court. They are asking the justices to first halt the sale and then eventually agree to hear their appeal.

Should that happen, an eventual Court ruling to strike down the multi-billion dollar sale would place a black mark over the Obama Administration's aggressive handling of the economy. That scenario would also lead to historical comparisons to the high court's decisions overturning key parts of Franklin Roosevelt's New Deal.

This weekend, lawyers representing three Indiana public employee pension funds, a collection of consumer advocacy groups and a widow of a Chrysler employee, each filed emergency applications to the Court asking for more time so they can file additional paperwork arguing why the Court should overturn the sale.

Chrysler's sale was set to move forward Monday afternoon pending the Supreme Court's decision. The sale is now in legal limbo.

The emergency appeals were directed to Justice Ginsburg who has jurisdiction in this case. She can still unilaterally deny the emergency petition or refer the matter to the entire court. A stay requires the votes of five justices.

The parties each argue that the New York bankruptcy judge who approved the sale last week misinterpreted the law. The Indiana pensioners contend the government's handling of Chrysler was a "ploy" to divert Chrysler's assets towards preferred unsecured creditors.

Sen. Richard Shelby (R-AL) expressed his frustration over the Chrysler sale and the Administration's overall handling of the auto industry bailout. "The bondholders have been sacrificed. The unions have carried the day," he said on Fox News Sunday.

The pensioners fear if the sale goes through, it will deprive them and the nation as a whole from getting a fair legal shake at challenging the administration's use of taxpayer money. In their filings, they contend the government without congressional approval "is using the bankruptcy system to re-order private property rights on a scale and in a way that America has never before seen."

Five consumer rights groups joined in their own petition to the Court arguing against the terms of the sale which they say will prohibit all current and future legal claims against Chrysler. They contend the waiver of "successor liability" is a dangerous precedent that will encourage future bankruptcy filings to seek similar arrangements.

Patricia Pascale is presumably one person whose lawsuit against Chrysler will get tossed out of court by the successor liability provision. Her husband died of asbestos-related lung cancer and she's suing for damages. Pascale's trial is supposed to start next week but her lawyers say the Chrysler sale means her due process rights are being "trampled in a process that bears little resemblance to a fair or orderly judicial proceeding."

Late Sunday, a group of Chrysler interests supporting the sale responded by saying the balance of harms "tilts so overwhelmingly" against a stay. They contend the Indiana pensioners represent only hold a small share of Chrysler's secured debt. They also argue the pensioners have already had their case fully heard in lower courts and that further review by the Supreme Court is unnecessary.

That message was echoed on Monday by Chrysler itself when it filed its brief It argues the disgruntled creditors are unlikely to succeed in any potential legal challenge and "to unravel what the lower courts have ordered…[will] cause massive harm to Chrysler and the public interest."

Also on Monday, the Obama Administration sent its thoughts to the Supreme Court also asking the justices to deny the emergency relief.

Solicitor General Elena Kagan argues that the bankruptcy court’s ruling that Chrysler’s sale to Fiat is “the only feasible alternative to liquidation of Chrysler’s assets” and that the Indiana pensioners and others seeking the emergency relief would receive no more money under a liquidation.

Kagan goes on to write that “those findings were central both to the court’s determination that applicants lack standing to challenge the use of TARP funds and to the court’s ultimate decision to approve the sale...The application for a stay should therefore be denied.”