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Tuesday, June 09, 2009

Courts - More on "Foes of Chrysler deal submit new plea" [Updated again]

Well, after the Indiana "foes of Chrysler deal" submitted a supplemental pleading this morning quoting Fiat as saying that it would not walk away from the deal even if the deadline passed, Fiat responded.

Justin Hyde of the Detroit Free Press has the story, headed "Fiat to court: Delay on Chrysler deal too risky." Updated at 3:40 pm, it begins:

WASHINGTON -- Fiat SpA warned the U.S. Supreme Court today that its agreement to buy Chrysler LLC's assets would automatically expire on June 15 and that there was "no assurance" a replacement deal could be reached.

Meanwhile, the Obama administration argued that any delay beyond the June 15 deadline for closing the deal could give Fiat the power to make new demands, possibly pushing Chrysler into liquidation.

The arguments came just hours after lawyers for three Indiana pension funds filed a new argument with the court, contending that Fiat Chief Executive Sergio Marchionne's vow Monday to "never walk away" from the Chrysler pact leaves no reason for the court to rule as quickly as the companies and U.S. government want.

Fiat, Chrysler and the Obama administration had warned that Fiat had a legal right to terminate its part of the pact by June 15 if the sale of Chrysler's assets weren't approved. But in an interview with Bloomberg Television, Marchionne said Fiat would be "patient and let the system work."

"The risk of termination by Fiat if the transaction does not close by June 15 no longer provides a basis for driving the timing of these proceedings," said the funds in a court filing.

Fiat countered that given the complexity of the deal, and a June 30 deadline for the government to stop providing the money to keep Chrysler alive in bankruptcy, reworking the deal "may simply be impossible."

"If the sale transaction is not completed soon, there can be no assurance that a replacement transaction could be structured and agreed that would preserve any aspect of Chrysler as a going concern," Fiat told the court.

And Lyle Denniston of SCOTUSBlog continues with his valuable posts, this one from this afternoon beginning:
In a flurry of new legal briefs, key players in the increasingly tense drama over the fate of troubled automaker Chrysler vied on Tuesday to shape the Supreme Court’s understanding of a June 15 deadline. The key challengers to the sale of Chrysler started with a brief in the morning, and now, the Justice Department, Chrysler and the would-be business spouse of a “new” Chrysler — Italian automaker Fiat — have joined in the debate. (Their new briefs are here and here and here, respectively.) * * *

The Indiana funds, in a somewhat triumphant though brief filing, contended Tuesday that they had undermined the claims that Fiat would back out and the deal would collapse if it is not closed by next Monday. Its evidence was a brief wire story on Bloomberg News quoting a Fiat executive as saying it “would never walk away” from the pact.

By early afternoon, the three main defenders of the rescue plan joined the new battle, with Fiat saying that the benefit funds’ new thrust was “unwarranted.” The deal, by its own express terms, “will terminate automatically” if not closed “on or before June 15.” (emphasis in the original).

There is only one exception to that — an agreement by Chrysler and Fiat to extend the deadline if government approvals have not occurred — “is inapplicable because those approvals are already in hand,” Fiat said.

If a legal assertion that was clearly intended to be more forceful than a quotation in a news story, Fiat’s lawyers wrote: “If the sale transaction is not completed soon, there can be no assurance that a replacement transaction could be structured and agreed that would preserve any aspect of Chrysler as a going concern.”

[Update] The NYT Dealbook Blog today has "An Interview With Indiana’s Treasurer." A quote:
Mr. Mourdock has pressed his opposition to the Chrysler sale perhaps more vociferously than anyone else. A group of hedge funds that, like the Indiana funds, held portions of Chrysler’s $6.9 billion in secured debt disbanded days after the carmaker filed for bankruptcy.

The battle hasn’t been cheap, Mr. Mourdock concedes: the Indiana funds, which represent teachers and police officers, have spent $2 million in legal fees pursuing their objections. They have been represented by the law firm White & Case, although in a potential Supreme Court hearing they will be represented by Indiana’s solicitor general. White & Case, notably its tenacious restructuring head Thomas Lauria — who was memorably derided as a “terrorist” by a member of the Obama administration’s auto task force — will consult in crafting that case.

[Update #2] Tony Mauro writes late this afternoon in The Blog of Legal Times in an entry headed "More Briefs, But No Action in Chrysler Case." Some quotes:
The briefing today focuses on how hard and fast the June 15 deadline is. In earlier filings with the Court, both the Justice Department and Chrysler warned that the deal would collapse and calamity would ensue if legal complications prevented the June 15 sale from taking place.

But earlier today, Indiana Solicitor General Thomas Fisher alerted the justices to a quote in a Bloomberg News Service story from the CEO of Fiat saying he would not walk away from the deal even if the June 15 deadline is not met.

Without denying the quote's accuracy, Thomas Cullen, head of the Jones Day team representing Chrysler, called that statement "hearsay" in a brief filed today, and again warned that the sales agreement will automatically terminate on June 15 if it is not allowed to go through. Cullen allowed that Fiat might try to renegotiate the deal after June 15, but probably at less favorable terms. In any event, he asserted, "Given Chrysler’s precipitous state, every day past June 15 increases the risk that Chrysler’s business will not be able to restart successfully."

Fiat itself also chimed in, with a brief by Steven Holley of Sullivan & Cromwell in New York. Also without denying the quote from CEO Sergio Marchionne, Holley said the urgency of allowing the sale to take place increases every day.

Posted by Marcia Oddi on June 9, 2009 04:36 PM
Posted to Courts in general | Indiana Government