Law professor available to comment on Chrysler ruling
FOR IMMEDIATE RELEASE
June 9, 2009
BLOOMINGTON, Ind. -- For more than a week, the state of Indiana and Chrysler Corp. have been locked in a fast-moving legal struggle over Chrysler's plan to immediately sell nearly all of its profitable assets to "New Chrysler," a corporation owned by the United Auto Workers, Fiat and the federal government. Indiana's objections to Chrysler's plan were rejected first by the Bankruptcy Court for the Southern District of New York and rejected later by the U.S. Court of Appeals for the Second Circuit.
On June 7, Indiana elevated the dispute to the United States Supreme Court, where most observers expected the state's objections to be quickly rejected. Instead, Justice Ruth Bader Ginsburg issued an order late Monday (June 8) blocking the sale until further notice.
Ginsburg is the justice assigned to consider emergency appeals of cases arising in the Second Circuit. She has the option of refusing Indiana's appeal or referring it to the full court to consider hearing the appeal. At present, there is no indication which course of action she will take. Acceptance of the case by the Supreme Court could delay the sale beyond the June 15 expiration of Fiat's commitment to participate, according to Indiana University Maurer School of Law Professor Dennis Long.
"The ultimate final ruling regarding Indiana's objection will have a dramatic impact on Indiana and the nation and may well determine the success or failure of Chrysler's bankruptcy reorganization and the similar reorganization of General Motors," Long said.
"The stakes for Indiana are high regardless of the outcome. The funds the state is representing stand to lose up to $30 million if the Chrysler sale is approved. On the other hand, there are thousands of jobs in the state which may depend on a quick sale of assets to 'New Chrysler.'"
Both Chrysler and General Motors have taken the position that their survival depends on the rapid sale of each company's profitable assets to new corporations that are not parties to the bankruptcy cases. Both companies have described the property to be sold as "wasting assets," whose value will decline precipitously in a matter of weeks. "The approach to reorganization in these two cases is a departure from the common Chapter 11 process and raises some new issues," Long said.
"The state of Indiana, representing three invested funds administered by the Treasurer of State, has argued that the immediate sale violates the provisions of Chapter 11 of the U.S. Bankruptcy Code which calls for the preparation of a detailed plan for reorganization which becomes approved only upon an affirmative vote of creditors," Long said. "Such a plan usually takes six to nine months to gain confirmation. Indiana also challenges the price for which Chrysler plans to sell its assets, alleging the price is far below market value."
Professor Dennis Long is a former private practitioner focusing in the areas of creditors' rights, bankruptcy and secured transactions. He has lectured widely on subjects related to secured transactions and the implementation of Revised Article 9 of the Uniform Commercial Code. He is available to discuss the Chrysler case and can be reached at 812-856-0694 or at dhlong@indiana.edu.
