Right Juris

The sale of Chrysler was blocked today by Justice Ruth Bader Ginsburg. Justice Ginsburg issued an order today which temporarily blocked the sale of Chrysler Motor Company to the Italian auto manufacturer Fiat. Fiat retains the right to walk away from the deal if it is not completed by 15 June 2009.

The suit, brought by Indiana state pension funds asked the Court to halt the sale in order to revisit some of the terms which the secured creditors claim unfairly favor unsecured creditors. Justice Ginsberg handles the appeals from New York and the order states that the sale is “stayed pending further order”. The order was issued shortly before the 4 p.m. deadline imposed by the bankruptcy judge handling the case.

According to the story reported on CNN:

No reason for the delay was given in the order, and there were no details about how quickly the issue could be resolved by the nation’s highest court.

The Treasury Department said in a statement that “we understand this to be an administrative extension designed to allow sufficient time for the Court to make a determination on the merits of the request for a stay.”

Chrysler said it had no comment about the Supreme Court’s ruling. Fiat could not immediately be reached for comment.

It does not appear that this order is anything more than a move by the Supreme Court to allow more time to review the sale. Chrysler has repeatedly stated that if the sale does not close then it will have no option but to liquidate and cease all operations.

Alright, get out your tinfoil hats here people, here is the first thought that popped into my head when I heard this. What if the sale to Fiat is blocked in order to create a vehicle to allow the government to step in and take over control of Chrysler in a similar way that happened with GM? Now I will admit that this is far fetched, and extremely unlikely, but given the dizzying pace of the expansion of government that has accompanied this administration, is it out of the realm of possibility? Don’t answer too quickly there. I don’t know what is worse, the fact that this was the first thing that came to mind, or the fact that I can’t dismiss it as a possibility.

Now back to the real world. The implications of a successful suit would be far reaching, especially related to GM’s bankruptcy. Similar claims have been made by GM’s creditors that the secured creditors were unfairly dealt with. A successful suit against Chrysler would seem to provide the blueprint for opponents of the GM bailout plan.

It is highly unlikely that the sale will not be completed, but for now the Supreme Court has blocked the sale of Chrysler to Fiat. I would love to hear your views on the sale of Chrysler.