Issue: May 2009


Largest Chrysler Dealer Group Seeks Asset Sale Delay



Squire Sanders Represents Committee of Chrysler Affected Dealers

by Rob White

The Committee of Chrysler Affected Dealers, the largest national group protesting Chrysler's request to cancel 789 dealer franchise agreements, has objected to Chrysler's proposed asset sale and has asked the US Bankruptcy Court to delay hearings that would approve the sale and rejection of the dealer franchise agreements.

"Chrysler's proposed asset sale and request for immediate termination of dealer franchises will destroy several hundred independent businesses, ruin the livelihoods of their owners, cause the loss of thousands of jobs and precipitate inevitable personal and business bankruptcies flowing from the closing of the affected dealers," said Stephen D. Lerner, head of the bankruptcy and restructuring practice at Squire, Sanders & Dempsey L.L.P. Lerner leads the team representing the dealer committee, which represents the collective interests of nearly 300 dealers in 45 states. The number of dealers joining the committee's efforts grows daily.

The committee this morning filed a broad objection to Chrysler's motion seeking authority to sell nearly all its assets to the Fiat/UAW controlled "New Chrysler." The committee also requested a continuance, asking the court to delay the hearing dates and deadlines related to the proposed sale and rejection motion so the committee has a full and fair opportunity to take discovery and present its defense.

"The relief Chrysler seeks is unprecedented and improper," Lerner said. "We believe Chrysler's efforts through the sale and rejection motions violate due process, the US Bankruptcy Code, other federal statutes and the laws of all 50 states that are specifically designed to protect the interests of dealers and prevent the immeasurable harm that Chrysler is inflicting on these dealers."

"The Bankruptcy Court will be required to address several matters of first impression and Chrysler has by design given the affected dealers only three business days to respond. The emotional and financial catastrophe that would be wrought by the relief requested in these motions need not happen and should not happen, and certainly not with only three business days' notice," Lerner said.

He added that under well-settled principles of bankruptcy law and fundamental notions of due process, Chrysler's restructuring, as proposed, cannot lawfully happen.

The Committee requests the court require Chrysler to subject its restructuring proposal to the transparency, fairness and equal treatment of similarly situated creditors mandated by the disclosure and plan confirmation provisions of the Bankruptcy Code, and to give the affected dealers the notice and procedural protections that due process and the Bankruptcy Rules command.

"Chrysler's restructuring transaction is an improper and impermissible sub rosa plan that seeks to use the thinly veiled guise of an asset sale to subvert the normal distribution scheme and creditors' procedural rights as mandated by Chapter 11 in direct contravention of the basic goal of Chapter 11 reorganization," Lerner said.

About Squire Sanders: Founded in 1890, Squire, Sanders & Dempsey L.L.P. has lawyers in 32 offices and 15 countries around the world. With one of the strongest integrated global platforms and a longstanding one-firm philosophy, Squire Sanders provides seamless legal counsel worldwide.


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