At least I think that’s what happened. Not sure. Here’s the good news, if a little late for the cannibalized companies:
In a summary decision so brief as to slip under the radar of many, the U.S. Supreme Court settled the law about this (at the time) white-hot legal issue with a silent bolt of lightning, vacating the appeals court ruling affirming the original judge’s legal reasoning.
A “summary decision” to overturn is taking this position: the original ruling was so dramatically improper that there’s no point even bothering to hear arguments as to why it should be upheld. Smack-downs such as these are very rare in American jurisprudence.
Now, the Supreme Court didn’t undo the sale of Chrysler; it merely took a stand that there should be no illusion that treating secured creditors – the ones who are supposed to get paid back first, from liquidation if need be – may not be so openly shortchanged in favor of unsecured creditors, such as the UAW and the U.S. government.
While Chrysler is a done deal, those who viewed the precedent established by the Chrysler case as a way to begin a new regime of quick bankruptcies will have to live with disappointment.
More from The Bankruptcy Litigation Blog:
Hard to ignore today’s bombshell summary disposition by the US Supreme Court today on the Indiana Pension Funds’ appeal of the Second Circuit’s decision in Chrysler (see earlier discussion of case here). Clearly, however, the Court’s six line summary disposition tossing the 2d Circuit’s decision in Chrysler requires careful thought. First, here’s what the Supreme Court held:
The petition for a writ of certiorari is granted. The judgment is vacated, and the case is remanded to the United States Court of Appeals for the Second Circuit with instructions to dismiss the appeal as moot. See United States v. Munsingwear, Inc., 340 U.S. 36 (1950).
One may be tempted (as this esteemed blogger was) to claim that Chrysler remains persuasive authority, but was simply “vacated on other grounds.” I don’t think that’s the case here, however. For starters, the Supreme Court couldn’t have vacated Chrysler on the basis that the matter was moot at the time the case was decided. After all, the 2d Circuit’s original order of 6/5/09 denying the appeal on the merits wasn’t moot at the time of entry since the effectiveness of the bankruptcy court’s sale order had been stayed by the 2d Circuit itself until it had a chance to rule on the merits. Additionally, the effectiveness of the 2d Circuit’s judgment itself was stayed by the Supreme Court. As such, there’s no basis for the Supreme Court now to have vacated Chrysler based on an argument that the matter was moot at the time of the original decision.
So, I think this restricts the Government’s ability to just take troubled company assets.