Could Chrysler LLC's bankruptcy proceeding set a new legal precedent with respect to staying Section 363 sale orders?
Given
the magnitude of the automaker's recent Chapter 11 filing and the
current fight its first-lien lender have waged against its sale to
Italian car company Fiat SpA, the proof could very well be in the pudding.
The
Supreme Court on Tuesday nigh decided not to hear the appeal
of the Indiana State Teachers' Retirement Fund, Indiana State Police
Department Pension Trust and Indiana Major Moves Construction Fund, who
were attempting to overturn the approval of the sale by Judge Arthur
Gonzalez of the U.S. Bankruptcy Court for the Southern District of New
York in Manhattan.
While appealing a bankruptcy sale order seems a
somewhat commonplace action on the surface, it actually could very well
be the first time that one has successfully been stayed by a federal
court higher than a bankruptcy court. The 2nd U.S. Circuit Court of
Appeals upheld Gonzalez's decision, but stayed the sale until the
Supreme Court decided whether or not to take it up.
Heretofore,
the closest a company has come to staying a sale order in more recent
times was in consumer electronic maker Polaroid Corp.'s sale process.
When defeated bidder Patriarch Partners LLC attempted to
appeal an April 17 sale order issued by an Indianapolis bankruptcy
judge, it did so despite realizing that -- according to the buyout
shop's own records -- a sale order had never been successfully stayed by a
U.S. District Court, according to Patriarch spokesman, Taylor Griffin.
As a result, Patriarch gave up pursuit of an appeal, and the order
approving the $85.9 million sale of Polaroid to joint bidders Hilco Consumer Capital LP and Gordon Brothers Brands LLC was upheld.
The second most notable attempt made to stay a bankruptcy judge's sale order was in Noble International Ltd.'s
case, when its unsecured creditors attempted to stay a sale order
approving the sale of stock the debtor owns in its European operation.
A Detroit bankruptcy judge denied the creditors' request for a stay on
June 4, so it's unclear whether they will have any luck if they appeal
to a U.S. District Court or higher.
Comparing Chrysler to
companies such as Polaroid or Noble International, of course, is like
comparing apples to oranges. Both the size of the Big Three automaker's
April 30 bankruptcy filing and the degree of federal involvement in its
sale itself amount to historic legal and political events. It's
probably only natural that, given such proportions, it would be the
first to test a higher court's desire to stay a bankruptcy
sale. - Carolyn Okomo
Continue reading below
