Subtitled - SCOTUS to Obama: Wrong, son, the Chrysler objectors are important enough
Here's a link to a brief discussion of the Order - not yet on the SCOTUS web site. FTA: Ginsburg’s brief, unexplained order said only that the bankruptcy court’s decisions approving the sale were “stayed pending further order” by her or the Court.
A small group of objectors to the heavy-handed Obama tactics in the Chrysler sale won a huge victory in SCOTUS today. It is a direct rebuke of Obama. The next deadline is June 15 - that's when Fiat, as a private entity, has said the deal must be finished or they walk. SCOTUS will need to hear the full case by then if they choose to honor that declared deadline. A briefing schedule has not yet come out.
The case is Indiana State Police Pension Trust, et al., v. Chrysler LLC (application 08A1096) case. The importance of the Order will be to delay the Chrysler sale pending a review by the Court.
Before we get into the position taken by Obama in his brief, let's review the money on the table so far:
Fiat offer: $2 billion
US Government bailout of Chrysler:
Jan. 2., Chrysler Holding, $4 billion; Jan. 16, Chrysler Financial Services, $1.5 billion; Apr. 29, Chrysler Holding, $500 million; Apr. 29, Chrysler Holding, $280,130,642; May 1, Chrysler LLC, $3.043143 billion; May 20, Chrysler LLC, $756.857 million
Total bailout: Over $9 billion
Obama: "Um, dad, I paid a bit over $9 billion to keep this company in business."
Dad: "That's a lot of money, son."
Obama: "Yes, it is, but I've found a buyer now."
Dad: "That's great son. What's the sale price."
Obama: "$2 billion."
Dad: "Son, we need to talk."
Obama's Brief seeking to stop the Court review is discussed at SCOTUS Blog (written before the Order was issued). The full brief can be found here. Links to all other filings can be found here. Of interest, Obama only responded to one of the three requests to delay the bankruptcy, and each of the three stands on its own merit.
The SCOTUS Blog entry summarizes Obama's position as follows:
The Obama Administration argued Monday that no court, including the Supreme Court, has the authority to hear a challenge by Indiana benefit plans to the role the U.S. Treasury played in the Chrysler rescue, including the use of “bailout” (TARP) funds. The Indiana debt holders, U.S. Solicitor General Elena Kagan wrote, simply have no right to raise that issue, thus putting it out of the reach of the courts.
Here's the summation of Obama's argument:
First, applicants hold only a tiny fraction -- less than 1% -- of Chrysler’s first-tier secured debt. App., infra, 11; see note 1, supra. The vast majority of debt holders in the same tier -- 92.5% -- have given their consent to the sale. Id. at 27. As the bankruptcy court correctly concluded, applicants agreed to be bound by that decision when it, along with all of the other first-tier secured creditors, gave the authorized agent the irrevocable authority to consent to the release of the collateral on behalf of all such creditors. App., infra, 24-30. As noted above, the consent by applicants’ authorized agent was one of the bases on which the bankruptcy court concluded that applicants had no injury in fact for standing purposes. Appl. App. 11a-12a. That fully effective waiver, which applicants do not dispute in this Court, precludes them from asking this Court to give them relief that they contracted away. As the bankruptcy court concluded, “[i]f [applicants] did not want to waive such rights, they should not have invested in an investment with such restrictions.” App., infra, 30.
Second, and more importantly, even on applicants’ view any potential harm to applicants pales by comparison to the harms to Debtors and the public interest. Applicants are owed approximately $42 million and contend that they will receive 29% of that sum from the sale. App., infra, 11. Even if all of the bankruptcy court’s factual findings were in error, and even if applicants might recover the full $42 million owed them upon disapproval of the sale, that speculative possibility cannot outweigh the much graver prospect of losses many times that sum that Chrysler, its stakeholders, and the American and Canadian economies would suffer if the last remaining alternative to Chrysler’s liquidation is foreclosed.
The upshot: These objectors should not get what they want because they are too small.
Too small compared to what? Page 24:
The liquidation of Chrysler would have very severe effects on the American and Canadian economies. More than 38,000 Chrysler employees would lose their jobs; 23 manufacturing facilities and 20 parts depots will be shuttered; more than 3000 Chrysler dealers would suffer significant and possibly fatal harm to their businesses; and billions of dollars in health and pension benefits for current and former Chrysler workers would be wiped out. C.A. App. 2974-2975.
Oh, so now they care about the dealerships.
Cited is several places is a claim that Chrysler is losing $100 million a day as it waddles through bankruptcy. Page 24:
Chrysler is losing $100 million per day, Appl. App. 25a, the impact of which directly falls on the United States as provider of debtor-in-possession financing. These losses will continue while Chrysler remains in bankruptcy. As applicants note (Appl. 28), New Chrysler will not re-commence production of automobiles until mid-August even if the sale is consummated immediately. But every day that Chrysler remains in bankruptcy without consummating the sale threatens to postpone the resumption of production even further and to prolong the period of $100-million-per-day losses.
At a sale price to Fiat of $2 billion, does this suggests that Chrysler will be worth nothing if the sale is postponed for a few weeks? A more accurate view may be that the daily accumulation of debt inures to the United States rather than Fiat.
Where did this number come from? One guy. Page 24:
Applicants contend that the $100-million-per-day figure is unproven (“the only source being the statement of a Treasury official at his deposition”) and that “a stay here will not cause Chrysler any harm.” Appl. 28. Those contentions lack merit. The bankruptcy court’s factual finding that Chrysler is losing $100 million per day, Appl. App. 25a, is based on deposition testimony that was admitted at trial with applicants’ express acquiescence and not contradicted at trial or elsewhere. C.A. App. 2109 (5/29/2009 Trial Tr. 41); see also C.A. App. 1447 (Feldman deposition 66:2-4).
What if the sale does not go through? Obama contends, on Page 20:
Accordingly, there is no need to speculate about what applicants’ security interest in Chrysler’s assets would be worth in the future. If the sale to New Chrysler does not take place, Chrysler will be liquidated.
Back to the beginning of this mess. These were TARP funds that were used. Funds that were passed to bail out the financial industry. How did Obama extend that to non-financial institutions? easy. Page 18:
In any event, although applicants contend that the government has “read out the word ‘financial’” from the term “financial institution,” Appl. 22-23, they do not discuss EESA’s definition of the term “financial institution” (or even acknowledge that “financial institution” is a defined term under the statute). The applicable definition encompasses “any institution, including, but not limited to, any bank, savings association, credit union, security broker or dealer, or insurance company,” that is “established and regulated under the laws of the United States or any State” and that “ha[s] significant operations in the United States.” 12 U.S.C.A. 5202(5) (West Supp. 2009) (emphases added). Where Congress expressly defines a term, courts do not parse the individual words that make up the term; they look to the statutory definition. See, e.g., Burgess v. United States, 128 S. Ct. 1572, 1577 (2008). And, to the extent that the statutory definition is ambiguous, the interpretation of that provision adopted by the Treasury Department -- the federal agency entrusted by Congress with administration of EESA -- is entitled to judicial deference.
According to this interpretation, TARP funds could be used for any institution - financial or not. Seems rather loose.
Today the little guy won - for a while at least. Obama cannot ram through his plan to pick apart the American economy. let's see what SCOTUS does next.
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