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June 03, 2009

Zombie Chrysler Sale Put on Hold

When last I wrote about the Obama- and UAW-sponsored sham sale of Zombie Chrysler for the purpose of shortchanging the failing healthcare and pension company's secured creditors, a U.S. district court judge had just denied a motion from Indiana state investors (more pensions) to stay the sale.

The sale hearing was supposed to happen tomorrow, but it's now on hold while the Second Circuit Court of Appeals takes a stab at the stay motion. The oral argument at the appeals court will now be on Friday. What happens next will largely depend on how the court rules. Earlier, the bankruptcy judge stated that his breakneak pace is because Chrysler is losing $100 million a day while it waits on the sale.

Last time we talked about this there were some questions about the precise issue in the district court (and now the circuit court) case. The pensions asked for several things, but most importantly they asked for a stay and for the case to be removed from the bankruptcy judge and placed in regular proceedings because the case involves constitutional issues not normally committed to bankruptcy court. The district court judge in his ruling also suggested that the Indiana pensions did not have standing to object to the sale.

The district court (and now the circuit court) will only be ruling on those issues: the stay, standing, and removal to a court of general jurisdiction. They will likely not be reaching the constitutional issues except insofar as they must to determine whether there is a likelihood that Indiana will prevail on the merits. That's the difference. This isn't on the merits...yet.

Even if the circuit court denies the motion, Indiana will still get a chance to appeal the bankruptcy sale hearing (if it goes as expected) after the bankruptcy judge issues a final order.


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posted by Gabriel Malor at 04:16 PM

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