US Supreme Court Lifts Stay of Chrysler Sale to Fiat; Transaction Can Proceed
By Chris Haak
06.09.2009
Late today, the US Supreme Court lifted the stay that Justice Ruth Bader Ginsberg had placed on the sale of Chrysler’s assets to Fiat, which she placed on the transaction yesterday around 4:00 p.m. Based on the text of the ruling (available here as a PDF), the reason for the stay granted yesterday had very little to do with the merits of the claims of the three Indiana pension funds, and everything to do with the Supreme Court wanting to take adequate time to decide whether to review the matter. In the end, the Court decided that it didn’t warrant its review.
According to the per curiam decision (which means one rendered by the court as a whole, acting anonymously) (yes, I had to look it up), the denial of the stay is not a decision on the merits of the underlying legal issues, but whether the applicant [for the stay] has demonstrated reasonable probability that four justices will grant certiorari (meaning that the court would agree to hear the case, and that the case is scheduled for the filing of briefs and for oral arguments). The Court also looked at whether there was a fair prospect of a majority of justices will conclude that the lower court’s ruling was erroneous, and what the likelihood of irreparable harm would occur if the stay was denied.
The denial of certiorari does not mean that legal precedent has been set – so there still may be a challenge to the Obama Administration’s plans for GM’s larger and more complicated, yet similarly-patterned, bankruptcy proceedings, but it’s probably a safe bet that the sale of the New GM (comprised of desirable assets) to a new holding company will be able to proceed as well sometime during the next several weeks.
Frankly, I’m surprised that the court decided to deny the stay so quickly after instituting it in the first place. Justice Ginsberg had a few days to review Indiana’s appeal, and my interpretation was that the stay meant that a more extensive review would be forthcoming, but her brief order yesterday was purposely opaque, leaving the world to guess what was on her (and the Court’s) mind.
I’m even more surprised that the Supreme Court lifted the stay so quickly after Fiat CEO Sergio Marchionne vowed to “never walk away” from a deal with Chrysler and said that he wasn’t concerned about the June 15 deadline. The June 15 deadline was used as a pressure point by Chrysler, Fiat, and the Obama Administration to argue that Chrysler was losing $100 million per day (that’s about $9 billion per quarter or $36 billion annually if you’re keeping score at home) and that a lengthy delay in closing the sale and exiting bankruptcy could result in Chrysler’s liquidation.
The Indiana pension funds’ legal counsel immediately jumped on Marchionne’s comment and filed briefs with the Supreme Court requesting a detailed review of the case, but apparently that was not enough to sway the justices’ opinions. I said yesterday that the deadline would probably not mean anything, but I also expected that it would be held onto until the last minute as a negotiating tactic, but Marchionne’s actions took me by surprise.
The sale should be closing shortly, according to both common sense and a press release from Chrysler. However, maybe Chrysler doesn’t know exactly what they’re talking about in this whole thing, as illustrated previously here and here. I wish the New, New Chrysler the best of luck as it enters the next chapter in its long and storied history.
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