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Comments and Briefs Related to the Stay in Chrysler

Akin Gump’s SCOTUS blog provides expert Supreme Court commentary that includes a post explaining why why the stay issued by Justice Ginsberg may not have much substantive meaning. The so-called “consumer groups’ ” request for a stay is here. The papers cogently cite some of the caselaw recognizing the constitutional issue inherent in enjoining future claims. The stay request filed by Ms. Pascale, the asbestos claimant, may be found here.

The government responded on the TARP issues, but its brief does not address the arguments raised by product liability claimants. Chrysler responded in a brief that is here.

The Chrysler brief is noteworthy in two ways for tort issues. Overall, the message of the brief is a disturbing one for tort claimants because the basic premise is that Chrysler is so badly off and so mismanaged that there is not enough money left to pay tort claimants, and the remaining money should instead go to secured creditors without delay.

The general argument includes two parts. First, Chrysler argues that the tort victims lack are simply out of luck because there is, they say, no money left for them and so the claimants will not be harmed if the sale goes through. This argument is false because it ignores the relief the claimants seek – to limit the scope of the order of the bankruptcy court so that there is an open door to invoke state law to try to recover from the Buyer entity. Chrysler’s argument is as follows:

“The unfortunate but unavoidable fact is that future tort claimants who will have claims against the Debtors based on vehicles manufactured by Chrysler simply have no value to be protected. Accordingly, just as with the Funds, because the price paid by New CarCo Acquisition for the Fiat Sale exceeds Chrysler’s liquidation value, creditors stand to gain more from the Fiat Sale than any other viable alternative. For both past and future tort claimants, their claims are valueless under either scenario. Accordingly, the “irreparable harm” that they claim will ensue in the absence of a stay is entirely the product of the economic collapse of Chrysler. It has nothing to do with the Fiat Sale or the Bankruptcy Court order approving it. The tort claimants’ application for a stay should therefore be denied.”

Second, Chrysler argues that an enormous bond must be posted in order to prosecute an appeal. The argument creates for the would-be appellants/objectors a problem reminiscent of the problems faced by oil companies and tobacco companies hit with large verdicts they sought to appeal. Specifically, the Chrysler brief argues:

“While the Funds’ application for a stay should be denied for all of the reasons set forth above, even assuming that a stay were to be entered here it should thus be conditioned on the Funds posting a bond in at least the amount of $1.2 billion to protect Chrysler against damages that would be caused by a stay. See In re Calpine Corp., No. 05-60200, 2008 WL 207841, at * 6-7 (Bankr. S.D.N.Y. Jan. 24, 2008) (requiring bond of $900 million to cover “aggregate additional interest expense the Debtors could suffer if they were unable to close their existing exit financing”); ACC Bondholder Group v. Adelphia Commc’ns Corp. (In re Adelphia Commc’ns Corp.), 361 B.R. 337, 347 (S.D.N.Y 2007) (requiring supersedeas bond of $1.3 billion). (footnote omitted)

#AsbestosBankruptcy #ConstitutionalLawMassTortLaw

About Kirk

Since becoming a lawyer in 1983, Kirk’s over 30 years of practice have focused on advising a wide range of corporations, associations, and individuals (as both plaintiffs and defendants) on both tort and commercial law issues centered around “mass torts.”

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