LawFuel.com – Speed Bump: After U.S., Chrysler, and Fiat Warn of Economic Fiasco if Deal Is Not Approved, Court Lifts Stay on Asset Sale
A high court cliffhanger ended late Tuesday when the U.S. Supreme Court declined to extend Monday’s stay order on the sale of Chrysler assets to an investor group led by Fiat. Scotusblog has the Court’s unanimous two-page order, which said the three parties challenging the deal had not met their burden of proving the stay was justified. The ruling clears the way for the Fiat-led investor group to complete its purchase before the deal’s June 15 deadline.
The Court’s decision came after a day of frantic filings that warned of economic apocalypse if the Supreme Court continued to delay the deal.
First came a short supplemental statement by the solicitor general of Indiana (and White & Case) on behalf of the pension funds leading the challenge to the deal that’s supposed to rescue Chrysler from Chapter 11. Chrysler and the U.S., the statement said, had been arguing that Fiat would terminate the deal if it weren’t closed quickly–which is why the sale was approved so speedily in the lower courts. But Fiat’s chairman, the Indiana funds wrote, was quoted in a June 8 Bloomberg story about the Supreme Court stay as saying the Italian carmaker would “never” walk away from the Chrysler deal. So, the funds’ filing said, “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.”
But as the day went on, the Justice Department and Chrysler weighed in. The solicitor general detailed Chrysler’s deteriorating financial condition, insisting that any additional delay “would result in irreparable harm to [Chrysler] and the public interest.” The carmaker’s lawyers from Jones Day, led by Tim Cullen, posted a fiery response to the Indiana funds’ statement. By the very terms of Fiat’s agreement with Chrysler, the filing noted, the deal would be off if it were not approved by June 15–as the objectors well knew after a three-day bankruptcy court hearing in which they cross-examined Fiat executives on that very point. “There is a looming threat of drastic and irreparable harm to Chrysler, all of its constituencies…and the public interest if the Fiat sale is not closed by June 15, 2009. And every day that passes between now and then only contributes substantially to this harm,” the Chrysler filing said. “The [challengers’] entire strategy with this application is to wreak further havoc and apply coercive pressure by further delaying the sale. The Court should deny their application.”
Then we heard from a party that was silent Monday: Fiat itself, represented by Sullivan & Cromwell. In a four-page filing signed by S&C partner Steven Holley, Fiat called the Indiana funds’ reliance on its chairman’s quote “unwarranted.” The deal terminates on June 15, Fiat’s filing said. And if it were completed before then, “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.”
The last word, of course, came from the justices themselves. Their brief order seems to nod to the day’s desperate filings, noting that in a close case, it’s appropriate to weight the relative harm to the parties as well as the interests of the public. And in this particular case, the Supreme Court decided, the stay was not justified.