John Kemp's Profile
Pension funds seek review of Chrysler sale in U.S. High Court
A group of Indiana pension funds made an emergency application to the U.S. Supreme Court at the weekend asking the justices to halt the bankruptcy sale of Chrysler pending review of the treatment of certain classes of senior creditors.
This is not my area of expertise but will be interesting to see if the Court intervenes to stay the bankruptcy. Supreme Court stays are very rare. But two points argue in favour one in this case:
(1) Claimants would suffer irreparable harm if the bankruptcy proceeds. There is no realistic remedy the Court could supply later if the petitioners prevailed on the merits/substance of the case. So there is a good legal case for granting a stay — *IF* the Court believes the petitioners have an arguable case.
(2) There is mounting disquiet about the fairness and legality of some of these large accelerated bankruptcies. The Lehman bankruptcy is already the subject of contention – with some creditors arguing the hurried bankruptcy sold the securities firm’s assets too cheaply and failed to protect the interests of all creditors.
While there is a clear need for the courts to act expeditiously to preserve value in the case of failed trading firms (whose principal asset is their creditworthiness and ability to do deals) and perhaps in the case of large industrial combines, such rapid bankruptcies limit the scope for effective judicial oversight and have been resulting in some controversial allocations of costs and benefits.
Initially, the case will go to Justice Ruth Bader Ginsburg as the supervising justice for the Second Circuit. She can accept/reject the decision, set an early hearing date, or refer it to the full court. If the matter is referred to the whole court, five votes are needed to grant the stay (though only four are needed to decide to hear the case).