This weekend, the Supreme Court has received stay motions regarding Chrysler that provide concrete examples of the importance of the issues the Court faces in the Manville/Travelers case regarding how far a bankruptcy court can go in issuing injunctive orders that limit the rights of third-parties, including so-called “future claimants.” Indeed, some of the concerns raised this weekend illustrate the importance of due process issues raised in an amicus brief filed Manville/Travelers by a far-sighted group of bankruptcy law professors.
Specifically, the Court has received petitions seeking stays of the orders by Judge Gonzalez and by the 2d Circuit. The briefs are nicely collected and in general analyzed on the Scotus blog.
The current product liability claimants, and self-declared representatives of future product liability claimants, are of course complaining that their rights have been trampled by Chrsyler since no mony is being left behind to pay their claims, and the bankruptcy court has issued an order purporting to preclude claims against New Chrsyler. The latter of course takes away from the claiamnts their state law rights based on state law rules that would or may allow “successor liability” claims against New Chrsyler. At page 4 of their brief, they explain the rulings to data as follows:
“On June 1, 2009, the Bankruptcy Court for the Southern District of New York, Judge Arthur J. Gonzalez presiding, issued an opinion granting the relief sought in the sale motion. The opinion stated that tort claims and any potential successor liability claims are “interests in such property” that can be extinguished by § 363(f). Bankr. Op. at 42-43. The Court also held that the sale did not violate future claimants’ due process rights because “notice of the proposed sale was published in newspapers with very wide circulation,” id. at 43., citing Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 317 (1950), for the proposition that “publication of notice in such newspapers provides sufficient notice to claimants ‘whose interests or whereabouts could not with due diligence be ascertained.'” In addition, the court stated that the interests of future tort claimants had been presented to the Court. Bankr. Op. at 43. The order signed by Judge Gonzalez authorized the sale of substantially all of Chrysler’s assets free and clear of all liens, claims, interests, and encumbrances, “whether arising before or after the Petition date,” “including all claims or rights based on any successor or transferee liability.” Sale Order at 2-3; see also id. at 40, ¶ 35 (stating that New Chrysler “shall not have any successor, derivative or vicarious liabilities of any kind or character for any Claims, including, but not limited to, on any theory of successor or transferee liability, . . . whether known or unknown as of the Closing, now existing or hereafter arising . . . .”).