Chrysler Update - Asbestos Plaintiffs' Objection to Asset Sale Once Again Demonstrates the Importance of the Manville/Travelers Case at SCOTUS

The objection lodged in the Chrysler proceedings by a representative for asbestos plaintiffs, Ms. Pascale, once again illustrates the importance of the issues to be decided in the Manville/Travelers case awaiting a US Supreme Court decision on the scope of bankruptcy court jurisdiction. Specifically, paragraph 8 of the pleading sets out the following objection regarding the scope of injunctions that may be issued by they Chrysler bankruptcy court:

[5] "The Sale Transaction, including any affiliated agreements and
proposals, provides for releases of, or injunctions in favor of,
non-Debtor third parties, outside of a plan of reorganization and
to the detriment of unsecured creditors as a whole and tort
claimants in particular."

Full Text of All Objections by Ms. Pascale:

Less than self-evident on the docket, the pleading is docket number 1175, filed May 19. The objection in itself is quite brief as it consists of only nine numbered paragraphs. Ms. Pascale is identified in paragraphs 5 and 6 as the widow of an individual who allegedly died from mesothelioma, with a wrongful death action pending in California in Los Angeles as case number BC 345910, and a trial date of June 15, 2009.

In paragraph 8 of the objection, Ms. Pascale sets out the following six objections (but with numbers added by me for ease of reference):

Mrs. Pascale objects to the 363 Motion on the following grounds:


1) The 363 Motion purports to grant successor liability protections
to New Chrysler from asbestos personal injury and wrongful
death claims, but the 363 Motion fails to comply with the
statutory requirements of 11 U.S.C. § 524(g).


2) As currently structured, sale of substantially all of Chrysler’s
assets constitutes an impermissible sub rosa plan of
reorganization and includes various releases, assumptions and
discriminatory treatment which would be prohibited in a plan.


3) The 363 Motion does not specify what will happen to tort claims
like Mrs. Pascale’s. Such claims are not listed among the
Assumed Liabilities that Fiat will assume. The Debtors should
be required to explain how tort claims will be treated and what
assets, if any, will be available for payment of tort claims if the
Sale Transaction is approved and consummated.


4) The Sale Transaction, including any related ancillary
agreements, as currently structured, allocates proceeds and
consideration of the sale disproportionately in favor of certain
unsecured creditors to the detriment of other, similarly situated
unsecured creditors, including Mrs. Pascale, and is not in the
best interests of unsecured creditors as a whole.


5) The Sale Transaction, including any affiliated agreements and
proposals, provides for releases of, or injunctions in favor of,
non-Debtor third parties, outside of a plan of reorganization and
to the detriment of unsecured creditors as a whole and tort
claimants in particular.


6) Chrysler has not met and cannot meet its burden to
demonstrate that the sale of substantially all of its assets as
contemplated by the 363 Motion satisfies all of the requirements
of 11 U.S.C. § 363 and General Order M-331 of this Court.




Naming and Politics in Chapter 11 Cases: It's interesting to watch the politics and gamesmanship in bankruptcy court. As previously covered here on this blog, the asbestos objector constituency was officially recognized by The Office of the US Trustee and given a seat on the Official Committee of Unsecured Creditors as shown at docket number 366. Moreover, Chrysler's asbestos issues are no secret to analysts or others, and finally started being mentioned in public articles around May 6.

One might then think that Ms. Pascale might readily identify use the title of her pleading to readily identify the constituency she represents. But, the title of the objection does not on its face reveal the reality that the objection is being asserted by an asbestos claimant, and instead bears the ponderous title:


OBJECTION OF UNSECURED CREDITORS COMMITTEE MEMBER,
PATRICIA PASCALE, TO MOTION OF DEBTORS AND DEBTORS IN
POSSESSION, PURSUANT TO SECTIONS 105, 363 AND 365 OF THE
BANKRUPTCY CODE AND BANKRUPTCY RULES 2002, 6004 AND 6006,
FOR (I) AN ORDER (A) APPROVING BIDDING PROCEDURES AND
BIDDER PROTECTIONS FOR THE SALE OF SUBSTANTIALLY ALL OF
THE DEBTORS’ ASSETS AND (B) SCHEDULING A FINAL SALE
HEARING AND APPROVING THE FORM AND MANNER OF NOTICE
THEREON; AND (II) AN ORDER (A) AUTHORIZING THE SALE OF
SUBSTANTIALLY ALL OF THE DEBTORS’ ASSETS, FREE AND CLEAR
OF LIENS, CLAIMS, INTERESTS AND ENCUMBRANCES, (B)
AUTHORIZING THE ASSUMPTION AND ASSIGNMENT OF CERTAIN
EXECUTORY CONTRACTS AND UNEXPIRED LEASES IN CONNECTION
THEREWITH AND RELATED PROCEDURES, AND
(C) GRANTING CERTAIN RELATED RELIEF