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Chrysler and the meaning of June 15

In a flurry of new legal briefs, key players in the increasingly tense drama over the fate of troubled automaker Chrysler vied on Tuesday to shape the Supreme Court’s understanding of a June 15 deadline.  The key challengers to the sale of Chrysler started with a brief in the morning (see this post), and now, the Justice Department, Chrysler and the would-be business spouse of a “new” Chrysler — Italian automaker Fiat — have joined in the debate. (Their new briefs are here and here and here, respectively.)

Meanwhile, Justice Ruth Bader Ginsburg, who is considering pleas for delay of the Chrysler sale from three applicants, including the Indiana benefit funds that are mounting the most sweeping challenge, has taken no action Tuesday, leaving undisturbed her Monday order putting a temporary hold on the Chrysler-Fiat corporate unification.  There was no word from within the Court when something new might emerge, from Ginsburg or the full Court.  But it seemed clear that Ginsburg — and perhaps the full Court — were awaiting the new round of briefing on what a widely disputed June 15 “deadline” means.

It is not clear how central this dispute is to the Justices’ ultimate view of the legal and financial situation, but there was no doubt of the vigor with which all sides were debating that question.

The Indiana funds, in a somewhat triumphant though brief filing, contended Tuesday that they had undermined the claims that Fiat would back out and the deal would collapse if it is not closed by next Monday. Its evidence was a brief wire story on Bloomberg News quoting a Fiat executive as saying it “would never walk away” from the pact.

By early afternoon, the three main defenders of the rescue plan joined the new battle, with Fiat saying that the benefit funds’ new thrust was “unwarranted.”  The deal, by its own express terms, “will terminate automatically” if not closed “on or before June 15.” (emphasis in the original).

There is only one exception to that — an agreement by Chrysler and Fiat to extend the deadline if government approvals have not occurred — “is inapplicable because those approvals are already in hand,” Fiat said.

If a legal assertion that was clearly intended to be more forceful than a quotation in a news story, Fiat’s lawyers wrote: “If the sale transaction is not completed soon, 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 U.S. Treasury and a Canadian government agency have put up billions to tide Chrysler over during the transition to the new company, and they have “no obligation to continue” providing such funds after June 30.  And, if the current pact terminates next Monday, the 15th, “it may simply be impossible to get the large number of stakeholders that are critical to the success of the new enterprise to agree on the terms of a replacement transaction.”

U.S. Solicitor General Elena Kagan, speaking for the Treasury and the Obama Administration, disputed the Indiana funds’ claim that Fiat would not abandon the plan after June 15.  The government filing said “there is a substantial possibility” of just that happening.

But, even if it does not, Kagan wrote, “the delay sanctioned by a stay would result in irreparable harm to the debtors [Chrysler and its subsidiaries] and the public interest.”  Moreover, the brief said, a new agreement would be necessary beyond June 15, “and Fiat will be free to insist on additional concessions as a condition of its approval.”  Then, everyone might have to return to bankruptcy court, the brief suggested.

Kagan also contended that Chrysler’s financial situation “worsens each day it remains in bankruptcy,” and “Fiat is aware of that situation.”

Chrysler’s new brief made the same points, and dismissed the news story’s quotation of Fiat’s CEO as a “single hearsay statement reported by the media.”  The automaker said the Indiana funds were relying upon the quotation “as a basis for trying to delay the closing further.”

It warned that, if the present deal collapses, Fiat may opt to buy only some of Chrysler’s assets “in a free-fall liquidation.”