Supreme Court Says Challenge to Chrysler Sale Is Moot
Updated: The U.S. Supreme Court has derailed a lawsuit by three pension funds objecting to the sale of Chrysler.
The Supreme Court vacated a ruling upholding the sale to Fiat and ordered the New York City-based 2nd U.S. Circuit Court of Appeals to dismiss the case as moot, according to Reuters and SCOTUSblog. The sale closed June 10, a day after the Supreme Court refused an emergency request to delay the closing.
The pension funds had contended the Chrysler sale unconstitutionally favored junior creditors above senior lenders. They also argued that the quick bankruptcy proceedings and the use of federal bailout money to fund Chrysler violated federal law.
According to Reuters, “The legal issue at the heart of the case involved the power of a bankruptcy court to allow a failing company to quickly sell its assets without going through a reorganization process that protects creditors.”
A statement by the lawyer for the pension funds says it is incorrect to characterize the case as being thrown out by the Supreme Court. “The court did not deny the legal challenge filed by the Indiana pensioners, which held debt in the old Chrysler,” says the statement by Thomas Lauria, a partner at White & Case. “Instead, it granted our petition to vacate the decision by the 2nd U.S. Circuit Court of Appeals in New York and remand the matter to the 2nd Circuit with instructions to dismiss the appeal as moot.
“That the court granted our petition for certiorari and further gave us the unexpected relief of striking in its entirety the 2nd Circuit’s ruling—without even requiring the filing of briefs on the merits or hearing argument—is extraordinary. By taking this action, the court validated our position that the sale of Chrysler’s assets trampled on our clients’ rights as creditors and the normal Chapter 11 bankruptcy process.
“Given the brevity of the court’s order, it is unclear what its basis was for remanding the matter to the 2nd Circuit and directing the lower court to dismiss it as moot. In that regard, we continue to believe that mootness should not be used to shield questionable bankruptcy rulings from review and that remedies remain available to our clients. We are heartened by the court’s decision and are actively studying our clients’ options in light of the ruling.”
Updated on Dec. 15 to include the statement from Lauria.
