Tuesday, June 30, 2009
Death of Bankruptcy Law
"The US Supreme Court on Tuesday cleared the way for Chrysler LLC to exit bankruptcy court, lifting a stay on its proposed sale to a group including Italy's Fiat SpA. ... But the order is a setback for a group of Indiana pension funds and others who maintained the government's heavy-handed treatment of creditors in the case could chill private lending to distressed firms and alter the rules of bankruptcy reorganizations. ... Thomas Lauria, a White & Case [W&C] lawyer who led the legal challenge, said his experiences in the past month 'cause me to ... directly raise the question as to whether our judiciary is today able to fulfill its constitutional mission, that is, to ensure that the rule of law prevails--particularly in the face of perceived crisis.' ... The brief stay imposed by the high court on the Chrysler transaction shocked the administration Monday, provoking concerns that the White House's approach to restructuring the two firms [Chrysler and GM] might have been built on faulty legal logic", my emphasis, Mark Anderson & Neil King at the WSJ, 10 June 2009, link: http://online.wsj.com/article/SB124453532783397365.html.
"A government lawyer labeled him a terrorist. A top adviser to Chrysler LLC called him ridiculous. ... Late Tuesday, the court turned down the attorney's 11th-hour appeal on behalf of some Indiana pension funds. But Mr. Lauria, whom friends and foes alike say is tenacious to a fault, is likely to remain a thorn in the side of the administration's automotive task force. A hodgepodge of General Motors Corp. bondholders have asked him to represent them in a challenge to GM's bankruptcy filing. ... When the court cleared the way for the Chrysler sale, Mr. Lauria said he was disappointed, and added: 'I think it's pretty interesting that you can have a transaction as big as this, that impacts parties' rights as broadly as this, and no matter how hard you try, you can't get a substantive review from an appellate court.' ... Mr. Lauria's notoriety grew when he appeared May 1 on a Detroit radio station and said the administration had 'directly threatened' one of his clients, Perella Weinberg, and would use the White House press corps to 'destroy' his client. The firm and the White House denied the allegation, and Mr. Lauria eventually stopped commenting on it. ... As for Mr. Lauria, he says his experiences of the last month 'cause me to worry that there is something very wrong with the system'," my emphasis, Jeffrey McCracken and Neil King at the WSJ, 10 June 2009, link: http://online.wsj.com/article/SB124459032127399999.html.
"Judge Robert Drain ordered Delphi to hold an auction and allow bids to challenge the government-brokered sale to Platinum Equity. ... The ruling is a victory for a group of hedge funds that stand to lose 80% or more of their about $2.5 billion in debtor-in-possession, or DIP financing. ... The Delphi case is the latest in a debate over the administration's attitude toward creditors' rights in bankruptcy court. The federal government has been criticized in the Chrysler and General Motors Corp. bankruptcies for upending bankruptcy tradition and harming senior lenders in order to complete a transaction. 'The rule of law and commerical rights of lenders cannot bend in the face of political forces,' said Marc Abrams, a lawyer at Wilkie Farr & Gallagher LLP representing a group of hedge funds, in court Wednesday. ... Virtually all of Delphi's remaining assets--including its Troy, Mich. headquarters--would be sold to Platinum Equity, a Beverly Hills, Calif.--based private equity firm specializing in distressed companies. ... Platinum Chief Executive Tom Gores said in a statement his firm is 'uniquely equipped' to steady Delphi. 'Struggling companies need partners with strong operational capabilities, a deep understanding or their business and a track record of creating real value,' he said. ... Lenders argues that Platinum is a puppet of the government, which needs Delphi to emerge from bankruptcy for its GM bailout to succeed. ... Delphi's plan calls for some DIP lenders, including the most sentior creditors owed about $2.5 billion, to receive 20 cents on the dollar for their loans. ... 'A DIP loan should be money good,' said Mr. Abrams, whose clients include Silver Point Finance LLC and Monarch Alternative Capital LP. 'It's the T-bill of a bankruptcy claim'," my emphasis, Peter Lattman at the WSJ, 11 June 2009, link: http://online.wsj.com/article/SB124466769259803489.html.
POTUS Obama apparently missed Harvard's bankruptcy law class, not knowing of the absolute priority doctrine. Our "constitutional scholar", Obama uses "faulty legal logic"? Never. These are the last days. I agree with a W&C lawyer. Imagine, Obama was "shocked". What a scholar. I wonder what Sonia Baby's opinion is of this case or Elizabeth Warren's.
Way to go Lauria! If you need help making Molotov cocktails, call. Wow, a "White Shoe" law firm partner, like one in W&C, throwing Molotovs. Next Lauria will quote Kropotkin. The US rule of law is collapsing. Book suggestions: No Contest, by Ralph Nader and Wesley Smith, 1998 and Main Justice, James McGee, 1997. Lauria, how does it feel to be unable to get a meaningful appellate review? Welcome to the real world.
Wow, another "white shoe" law firm sees POTUS Obama's contempt for the law. I await the aggrieved parties taking real action. Like having PE partners march around the White House. They can probably find veterans of 1968's Paris Days of Rage, if they need help in planning the demonstrations. Well Eric Holder, Columbia law grad, have you anything to say about this? Or will you have the army fire on the protestors like 1932's "bonus army"? Will we face a "Yeltsin Moment", like in 1991, when Russian troops refused to fire on old Boris? Stay tuned! I last commented on Delphi on 11 October 2008, link: http://skepticaltexascpa.blogspot.com/2008/10/delphi-update-3.html. See also my 27 August 2008 comments, link: http://skepticaltexascpa.blogspot.com/2008/08/delphi-plot-thickens.html.