The United States Supreme Court agreed Monday afternoon to delay the sale of most of Chrysler’s assets to Fiat pending further consideration of an appeal by three Indiana state funds and several consumer groups, in a move that injects a new element of uncertainty over the carmaker’s fate.
Justice Ruth Bader Ginsburg, who handles emergency matters arising from the United States Appeals Court for the Second Circuit, said in a one-sentence order, that the rulings of the bankruptcy judge allowing the sale “are stayed pending further order of the undersigned or of the court.”
The action indicates that the delay may be temporary, but for now the stay will keep Chrysler and Fiat from completing the transaction. What happens now is a bit unclear. The order made no mention of a next step — whether Justice Ginsburg would decide on her own or ask the court to decide.
Since Chrysler filed for bankruptcy on April 30, it had argued vociferously that it needed to complete its deal with Fiat as soon as possible or face liquidation. Under the terms of the deal, Fiat can walk away as soon as June 15.
Chrysler executives testified in court that despite spending more than a year scouring the globe for someone to buy the company, none save Fiat made an offer. And a lawyer for Chrysler argued in a recent court filing that the carmaker was losing $100 million a day while in bankruptcy.
For much of its court case, decisions had fallen Chrysler’s way. The carmaker won quick approval of its sale from two lower courts, and many legal experts said they did not expect the Supreme Court to further delay the deal.
But lawyers for the objectors, including Indiana funds representing teachers and police officers and several groups with product liability claims, filed their appeal to Justice Ginsburg late Saturday night, after the Second Circuit reaffirmed a lower court’s approval of the sale. The appeals court had delayed the closing of the deal until 4 p.m. Monday or until the Supreme Court declined to issue its own delay.
The Indiana funds have sought greater compensation for their portion of Chrysler’s $6.9 billion in secured debt. They have also argued that the Obama administration illegally used federal bailout money earmarked for financial institutions to help Chrysler.
“The negative economic consequences of permitting an unlawful sale to proceed may well over time dramatically outweigh Chrysler’s short-term harm,” the funds said in their brief.
On Monday, federal officials asked the court to allow the sale without additional delay.
The government, in papers filed by the Office of the Solicitor General, said that stays are only granted under extraordinary circumstances.
Lawyers representing Chrysler, the Indiana funds, the government, Fiat and others made their arguments in a two-hour hearing on Friday before the Second Circuit. The judges issued their decision after a 10-minute recess, affirming a bankruptcy court judge’s approval of the sale.
Last week, Judge Arthur J. Gonzalez of United States Bankruptcy Court for the Southern District of New York approved the sale to Fiat, overruling more than 300 objections. He later agreed to shorten a customary 10-day stay of the sale to four days, though the Court of Appeals stayed the transaction pending its hearing.
When Chrysler emerges from bankruptcy, a union retiree trust will own 55 percent, Fiat a 20 percent share that could eventually grow to 35 percent, and the United States and Canadian governments minority stakes.