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  • Chrysler Reorganization Stayed by the Supreme Court

    Posted by Chicago Boyz Archive on June 8th, 2009 (All posts by )

    One small victory for an economy governed by law rather than arbitrary power.

    A suit brought on behalf of Indiana pension funds claim that Chrysler deal orchestrated by Obama’s administraion illegally gave priority unsecured creditors, violating the law that gives priority to secured creditors. The Indiana brief argued:

    Without a stay, Chrysler’s section 363 sale will be able to close Monday afternoon, and this case will be moot. Mootness would not only deprive the Indiana Pensioners of an opportunity for full recovery, but it would deprive the Court and the Nation of the opportunity for final determination of substantial and novel issues of law never before addressed by this Court or any other (save the decisions below). These issues include (i) whether the Sale attempted here—indisputably the fastest reorganization on record—constitutes an illegal sub rosa chapter 11 reorganization plan and violates the longstanding and fundamental rule that first-lien creditors have absolute priority in bankruptcy, and (ii) whether Treasury has the authority to direct the course of, and fund, this bankruptcy through the use of TARP funds under the EESA. The Court should stay the Sale Orders so that the Indiana Pensioners may, in good order, ask the Court to review whether the law permits such wholesale alteration of bankruptcy law, not to mention the American capital markets, by the Executive Branch of the U.S. Government acting beyond the color of Congressional authority.

    From the Application For Immediate Stay Of Sale Orders Issued By The Bankruptcy Court filed by the State of Indiana. (Much of it is actually engrossing reading, especially the way the Feds bullied everyone to accept repeated violations of the bankruptcy law.)

    Stay granted.

    Details here.

    Probably only a speed bump. But it is good to see someone speaking truth to power for a change. Obama’s high-handed and lawless takeover of the auto industry is a disgrace, directed at helping his political allies first, and all other consequences second.

    It is good to see even a symbolic victory for the rule of law.

    Bravo to the Indiana Solicitor General’s office. A small victory, even a temporary victory, is better than no victory at all — and in a case like this one, much better than never having fought.

    UPDATE: This comment from the Althouse blog is a good summary of the situation.

     

    7 Responses to “Chrysler Reorganization Stayed by the Supreme Court”

    1. Jonathan Says:

      I think there’s a good chance the SC will block the deal. A failure to block it would be a disaster. Unfortunately, anything is possible, which is the problem.

    2. Robert Schwartz Says:

      It is especially amusing that the stay was granted by liberal doyen Ginsburg. The only thing that would be funnier would have been Sotomayer blocking it at the 2nd circuit.

    3. Tatyana Says:

      Thank you, Lex, for that link to Althouse thread. Some of the commenters are really excellent in explaining things to financial dummies (like me).

    4. Phil Fraering Says:

      Eh, it’s always those far-right conservatives like Ginsburg, only voting ‘No,’ blocking the country’s needed Hope and Change. Maybe if they had a positive vision of their own…

    5. david foster Says:

      A couple of months ago I quoted Ben Franklin:

      “There are two passions which have a powerful influence in the affairs of men. These are ambition and avarice–the love of power and the love of money. Separately, each of these has great force in prompting men to action; but, when united in view of the same object, they have, in many minds, the most violent effects.”

      One of the secrets to American success is that there has been at least some separation between the pursuit of wealth and the pursuit of political power. This principle is now under attack by the Obama/Pelosi/Reid triumverate. In their world, it will be increasingly difficult to gain wealth without political connections…and political success will increasingly lead to personal wealth and privilege on a very large scale.

    6. Lexington Green Says:

      Let’s give credit where it is due to Ginsberg. She is acting like a judge instead of a partisan. There is certainly something fishy here, and she at least agreed to a stay so the Supreme Court could decide on further action, if necessary. She is doing her job. So, credit where it is due.

    7. Phil Fraering Says:

      I know, Lex. I was being sarcastic, esp. given the previous thread here about how those nasty conservatives have nothing but ‘No.’

      What are we supposed to do, come up with a positive, life-affirming strategy of our own for Weimarizing the United States?