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Thursday, June 11, 2009
Courts - Significant legal questions remain about the Chrysler-Fiat deal
Supplementing this ILB entry yesterday quoting Lyle Denniston of SCOTUSLaw Blog's commentary that:
Fundamental constitutional issues surround the use of federal funds in the Chrysler bailout, as do a host of questions about using the bankruptcy laws as they were in this case. They were raised in the papers filed at the Court this week, but they were not answered in any final way.Today Warren Richie of the Chrstian Science Monitor has more on this, in a story headed "Supreme Court steps aside on Chrysler-Fiat deal but questions remain: The legal issues raised in the case against the deal are likely to arise again with General Motors." Some quotes:
Washington - The US Supreme Court action Tuesday that cleared the way for the reorganization deal between Chrysler and Italian automaker Fiat did not resolve any of the potentially significant legal issues raised against the deal.Instead, the high court went out of its way to emphasize that its decision simply lifted the temporary stay entered on Monday.
"A denial of a stay is not a decision on the merits of the underlying legal issues," the court said in an unsigned two-page order. It added: "Our assessment of the stay factors here is based on the record and proceedings in this case alone."
Groups objecting to the Chrysler-Fiat alliance raised questions about using government bailout money and bankruptcy laws to speed completion of the deal.
The Supreme Court action lets stand the decision of a bankruptcy judge and a three-judge appeals court panel. But it does not signal an endorsement by the court of the legal reasoning in those decisions. * * *
The legal fight against the Chrysler bailout began when a group of pension and construction funds in Indiana as well as several consumer groups took issue with aspects of the special arrangements.
Lawyers for the pension funds argued that the US Treasury Department was illegally diverting money from the Troubled Asset Relief Program (TARP) to Chrysler to facilitate the Fiat deal. They argued that the Emergency Economic Stabilization Act of 2008 (EESA), which set up TARP, earmarked those funds for financial institutions – not car companies.
They added that Treasury officials were misusing bankruptcy laws in a "sham" that favored the United Auto Workers union and cheated secured creditors out of favorable treatment.
"The Chrysler and General Motors bankruptcies involve almost $100 billion in assets, and the government, without any specific approval from Congress, is using the bankruptcy system to re-order private property rights on a scale and in a way that America has never before seen," wrote Indiana Solicitor General Thomas Fisher in his appeal to the Supreme Court.
Posted by Marcia Oddi on June 11, 2009 08:35 AM
Posted to Courts in general