In re Chrysler, LLC, No. 09-2311 (2d Cir. 2009)

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The court issued a subsequent related opinion or order on January 25, 2010.

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09-2311-bk In Re: Chrysler LLC et al. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 2008 (Argued: June 5, 2009 Decided: June 5, 2009 Opinion filed: August 5, 2009) Docket No. 09-2311-bk - - - - - - - - - - - - - - - - - - - -x IN RE CHRYSLER LLC, Debtor. - - - - - - - - - - - - - - - - - - - -x INDIANA STATE POLICE PENSION TRUST, INDIANA STATE TEACHERS RETIREMENT FUND, and INDIANA MAJOR MOVES CONSTRUCTION FUND, Objectors-Appellants, THE AD HOC COMMITTEE OF CONSUMER-VICTIMS OF CHRYSLER LLC, Objector-Apellant, WILLIAM LOVITZ, FARBOD NOURIAN, BRIAN CATALON, CENTER FOR AUTO SAFETY, CONSUMER ACTION, CONSUMERS FOR AUTO RELIABILITY AND SAFETY, NATIONAL ASSOCIATION OF CONSUMER ADVOCATES, and PUBLIC CITIZEN, Objectors-Appellants, PATRICIA PASCALE, Objector-Appellant, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 - v.CHRYSLER LLC, aka Chrysler Aspen, aka Chrysler Town & Country, aka Chrysler 300, aka Chrysler Sebring, aka Chrysler PT Cruiser, aka Dodge, aka Dodge Avenger, aka Dodge Caliber, aka Dodge Challenger, aka Dodge Dakota, aka Dodge Durango, aka Dodge Grand Caravan, aka Dodge Journey, aka Dodge Nitro, aka Dodge Ram, aka Dodge Sprinter, aka Dodge Viper, aka Jeep, aka Jeep Commander, aka Jeep Compass, aka Jeep Grand Cherokee, aka Jeep Liberty, aka Jeep Patriot, aka Jeep Wrangler, aka Moper, aka Plymouth, aka Dodge Charger, Debtors-Appellees, INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE, AND AGRICULTURAL IMPLEMENT WORKERS UNION OF AMERICA, AFL-CIO ( UAW ), Appellee, FIAT S.P.A. and NEW CARCO ACQUISITION LLC, Appellees, CHRYSLER FINANCIAL SERVICES AMERICAS LLC, Appellee, THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS, Appellee, UNITED STATES OF AMERICA, Appellee, EXPORT DEVELOPMENT CANADA Appellee.* - - - - - - - - - - - - - - - - - - - -x 2 1 2 3 4 5 6 7 8 9 * The Clerk of the Court is directed to amend the official caption as set forth above. Before: JACOBS, Chief Judge, KEARSE and SACK, Circuit Judges. Appeals from an order entered in the United States 10 Bankruptcy Court for the Southern District of New York 11 (Gonzalez, J.) dated June 1, 2009, authorizing the sale of 12 substantially all of debtor Chrysler LLC s assets to New 13 CarCo Acquisition LLC. 14 for a stay and for expedited appeal directly to this Court, 15 pursuant to 28 U.S.C. § 158(d)(2). 16 heard oral argument, and ruled from the bench and by written 17 order. 18 stated in the opinions of Bankruptcy Judge Gonzalez, 19 stating that an opinion or opinions would follow. 20 issue this opinion to further explain our affirmance. 21 22 23 24 25 26 27 28 29 30 31 AFFIRMED. On June 2, 2009 we granted a motion On June 5, 2009, we We affirmed the June 1, 2009 order for the reasons We now GLENN M. KURTZ, THOMAS E. LAURIA (Owen C. Pell, Karen M. Asner, on the brief), White & Case LLP, New York, NY for ObjectorsAppellants Indiana State Police Pension Trust et al. NANCY WINKELMAN, (M. Christine 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Carty, Barry E. Bressler, Richard A. Barkasy, on the brief) Schnader Harrison Segal & Lewis LLP, New York, NY and Philadelphia, PA for ObjectorAppellant The Ad Hoc Committee of Consumer-Victims of Chrysler LLC ADINA H. ROSENBAUM, (Allison M. Zieve, on the brief), Public Citizen Litigation Group, Washington, D.C., and Elizabeth J. Cabraser (Robert J. Nelson, Scott P. Nealey, on the brief) Lieff, Cabraser, Heimann & Bernstein, LLP, San Francisco, CA, and Harley E. Riedel (Edward J. Peterson, on the brief) Stichter, Riedel, Blain & Prosser, P.A., Tampa, FL for Objectors-Appellants William Lovitz et al. SANDER L. ESSERMAN (Robert T. Brousseau, Jo E. Hartwick, Cliff I. Taylor, on the brief) Stutzman, Bromberg, Esserman & Plifka, PC, Dallas, TX, and Alan R. Brayton (Christina Skubic, on the brief) Brayton Purcell LLP, Novato, CA for ObjectorAppellant Patricia Pascale THOMAS F. CULLEN, (Corinne Ball, Steven C. Bennett, Todd R. Geremia, Veerle Roovers, on the brief), Jones Day, New York, NY and Washington, D.C., for Debtors-Appellees Chrysler LLC et al. DEBORAH M. BUELL, (James L. Bromley, Luke A. Barefoot, 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Kimberly C. Spiering, James Croft, on the brief), Cleary Gottlieb Steen & Hamilton LLP, New York, NY, for Appellee International Union of United Automobile Aerospace and Agricultural Workers of America STEVEN L. HOLLEY (John L. Warden, Laurent S. Wiesel, on the brief) Sullivan & Cromwell LLP, New York, NY for Appellees Fiat S.p.A. and New CarCo Acquisition LLC MARTIN J. BIENENSTOCK (Judy G.Z. Liu, on the brief) Dewey & LeBoeuf LLP, New York, NY for Appellee Chrysler Financial Services Americas LLC KENNETH H. ECKSTEIN, (Jeffrey S. Trachtman, Thomas Moers Mayer, on the brief) Kramer Levin Naftalis & Frankel LLP, New York, NY for Appellee The Official Committee of Unsecured Creditors JEANNETTE A. VARGAS, Assistant United States Attorney, (Tara LaMorte, Li Yu, David S. Jones, on the brief) for Lev L. Dassin, Acting United States Attorney for the Southern District of New York, New York, NY, and JOHN RAPISARDI, Of Counsel to the Presidential Task Force on the Auto Industry, Cadwalader, Wickersham & Taft LLP, New York, NY for Appellee United States of America MICHAEL J. EDELMAN, Vedder Price 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 P.C., New York, NY for Appellee Export Development Canada JOAN PILVER, Assistant Attorney General, (Matthew F. Fitzsimmons, on the brief) for Richard Blumenthal, Attorney General of the State of Connecticut, Hartford, CT for Amicus Curiae State of Connecticut ROGER NETZER, (Lisa D. Bentley, Emma-Ann Deacon, on the brief) Willkie Farr & Gallagher LLP, New York, NY, and Robert G. Zack, Chief Legal Officer, Oppenheimer Senior Floating Rate Fund and Oppenheimer Master Loan Fund, LLC, New York, NY for Amici Curiae Oppenheimer Senior Floating Rate Fund and Oppenheimer Master Loan Fund, LLC DENNIS JACOBS, Chief Judge: The Indiana State Police Pension Trust, the Indiana 29 State Teachers Retirement Fund, and the Indiana Major Moves 30 Construction Fund (collectively, the Indiana Pensioners or 31 Pensioners ), along with various tort claimants and others, 32 appeal from an order entered in the United States Bankruptcy 33 Court for the Southern District of New York, Arthur J. 34 Gonzalez, Bankruptcy Judge, dated June 1, 2009 (the Sale 35 Order ), authorizing the sale of substantially all of the 36 debtor s assets to New CarCo Acquisition LLC ( New 6 1 Chrysler ). 2 Pensioners motion for a stay and for expedited appeal 3 directly to this Court, pursuant to 28 U.S.C. § 158(d)(2). 4 On June 5, 2009 we heard oral argument, and ruled from the 5 bench and by written order, affirming the Sale Order for 6 the reasons stated in the opinions of Bankruptcy Judge 7 Gonzalez, stating that an opinion or opinions would follow. 8 This is the opinion. 9 On June 2, 2009 we granted the Indiana In a nutshell, Chrysler LLC and its related companies 10 (hereinafter Chrysler or debtor or Old Chrysler ) filed 11 a pre-packaged bankruptcy petition under Chapter 11 on April 12 30, 2009. 13 experienced deepening losses, received billions in bailout 14 funds from the Federal Government, searched for a merger 15 partner, unsuccessfully sought additional government bailout 16 funds for a stand-alone restructuring, and ultimately 17 settled on an asset-sale transaction pursuant to 11 U.S.C. 18 § 363 (the Sale ), which was approved by the Sale Order. 19 The key elements of the Sale were set forth in a Master 20 Transaction Agreement dated as of April 30, 2009: 21 substantially all of Chrysler s operating assets (including 22 manufacturing plants, brand names, certain dealer and 23 supplier relationships, and much else) would be transferred The filing followed months in which Chrysler 7 1 to New Chrysler in exchange for New Chrysler s assumption of 2 certain liabilities and $2 billion in cash. 3 agreed to provide New Chrysler with certain fuel-efficient 4 vehicle platforms, access to its worldwide distribution 5 system, and new management that is experienced in turning 6 around a failing auto company. 7 transaction -$6 billion in senior secured financing, and 8 debtor-in-possession financing for 60 days in the amount of 9 $4.96 billion--would come from the United States Treasury Fiat S.p.A Financing for the sale 10 and from Export Development Canada. 11 describing the United States Treasury s commitment does not 12 specify the source of the funds, but it is undisputed that 13 prior funding came from the Troubled Asset Relief Program 14 ( TARP ), 12 U.S.C. § 5211(a)(1), and that the parties 15 expected the Sale to be financed through the use of TARP 16 funds. 17 membership interests, 55% of which go to an employee benefit 18 entity created by the United Auto Workers union, 8% to the 19 United States Treasury and 2% to Export Development Canada. 20 Fiat, for its contributions, would immediately own 20% of 21 the equity with rights to acquire more (up to 51%), 22 contingent on payment in full of the debts owed to the 23 United States Treasury and Export Development Canada. The agreement Ownership of New Chrysler was to be distributed by 8 1 At a hearing on May 5, 2009, the bankruptcy court 2 approved the debtor s proposed bidding procedures. 3 bids were forthcoming. 4 bankruptcy court held hearings on whether to approve the 5 Sale. 1 6 law, the bankruptcy court approved the Sale by order dated 7 June 1, 2009. No other From May 27 to May 29, the Upon extensive findings of fact and conclusions of 8 After briefing and oral argument, we affirmed the 9 bankruptcy court s order on June 5, but we entered a short 10 stay pending Supreme Court review. 11 an extension of the stay, declined a further extension. 12 Sale closed on June 10, 2009. 13 The Supreme Court, after The The factual and procedural background is set out in 14 useful detail in the opinions of Bankruptcy Judge Gonzalez. 15 This opinion is confined to a discussion of the arguments 16 made for vacatur or reversal. 17 essentially on four grounds. 18 the sale of Chrysler s auto-manufacturing assets, considered 19 together with the associated intellectual property and 20 (selected) dealership contractual rights, so closely 21 approximates a final plan of reorganization that it The Sale Order is challenged First, it is contended that 1 Twelve witnesses testified (either live or through depositions), and 48 exhibits were introduced. 9 1 constitutes an impermissible sub rosa plan, and therefore 2 cannot be accomplished under § 363(b). 3 question first, because a determination adverse to Chrysler 4 would have required reversal. 5 argument by the Indiana Pensioners that the Sale 6 impermissibly subordinates their interests as secured 7 lenders and allows assets on which they have a lien to pass 8 free of liens to other creditors and parties, in violation 9 of § 363(f). We consider this Second, we consider the We reject this argument on the ground that the 10 secured lenders have consented to the Sale, as per 11 § 363(f)(2). 12 constitutionality of the use of TARP funds to finance the 13 Sale on a number of grounds, chiefly that the Secretary of 14 the Treasury is using funds appropriated for relief of 15 financial institutions to effect a bailout of an auto- 16 manufacturer, and that this causes a constitutional injury 17 to the Indiana Pensioners because the loss of their 18 priorities in bankruptcy amounts to an economic injury that 19 was caused or underwritten by TARP money. 20 the Indiana Pensioners lack standing to raise this 21 challenge. 22 advanced by present and future tort claimants. Third, the Indiana Pensioners challenge the We conclude that Finally, we consider and reject the arguments 23 10 1 2 DISCUSSION We review a bankruptcy court s conclusions of law de 3 novo, and its findings of fact under the clearly erroneous 4 standard. 5 F.3d 85, 90 (2d Cir. 2003). See Babitt v. Vebeliunas (In re Vebeliunas), 332 6 7 I 8 The Indiana Pensioners characterize the Sale as an 9 impermissible, sub rosa plan of reorganization. See Pension 10 Benefit Guar. Corp. v. Braniff Airways, Inc. (In re Braniff 11 Airways, Inc.), 700 F.2d 935, 940 (5th Cir. 1983) (denying 12 approval of an asset sale because the debtor should not be 13 able to short circuit the requirements of Chapter 11 for 14 confirmation of a reorganization plan by establishing the 15 terms of the plan sub rosa in connection with a sale of 16 assets ). 17 Sale transaction is a Sale in name only; upon 18 consummation, new Chrysler will be old Chrysler in 19 essentially every respect. 20 . . . 21 retained. . . . 22 Dodge cars and minivans, Jeeps and Dodge Trucks. . . . As the Indiana Pensioners characterize it, the It will be called Chrysler. Its employees, including most management, will be It will manufacture and sell Chrysler and 11 The 1 real substance of the transaction is the underlying 2 reorganization it implements. 3 46 (citation omitted). 4 Indiana Pensioners Br. at Section 363(b) of the Bankruptcy Code authorizes a 5 Chapter 11 debtor-in-possession to use, sell, or lease 6 estate property outside the ordinary course of business, 7 requiring in most circumstances only that a movant provide 8 notice and a hearing. 9 identified an apparent conflict between the expedient of a 11 U.S.C. § 363(b).2 We have 10 § 363(b) sale and the otherwise applicable features and 11 safeguards of Chapter 11.3 12 Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063, 1071 (2d 13 Cir. 1983); cf. Braniff, 700 F.2d at 940. Comm. of Equity Sec. Holders v. 14 In Lionel, we consulted the history and purpose of 15 § 363(b) to situate § 363(b) transactions within the overall 16 structure of Chapter 11. The origin of § 363(b) is the 17 Bankruptcy Act of 1867, which permitted a sale of a debtor s 2 The section provides: The trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate . . . . 11 U.S.C. § 363(b)(1). 3 Section 363(b) may apply to cases arising under Chapters 7, 11, 12, and 13 of the Bankruptcy Code. In this case, as in Lionel, we consider only its applicability in the context of Chapter 11 cases. 12 1 assets when the estate or any part thereof was of a 2 perishable nature or liable to deteriorate in value. 3 Lionel, 722 F.2d at 1066 (citing Section 25 of the 4 Bankruptcy Act of 1867, Act of March 2, 1867, 14 Stat. 517) 5 (emphasis omitted). 6 § 363(b) sales to preserve wasting asset[s]. 7 1068 (quoting Mintzer v. Joseph (In re Sire Plan, Inc.), 332 8 F.2d 497, 499 (2d Cir. 1964)). 9 concerned perishable commodities; but the same practical Typically, courts have approved Id. at Most early transactions 10 necessity has been recognized in contexts other than fruits 11 and vegetables. 12 advantageous for the debtor to begin to sell as many assets 13 as quickly as possible in order to insure that the assets do 14 not lose value. 15 Cafeterias, Inc., 128 S. Ct. 2326, 2342 (2008) (Breyer, 16 J., dissenting) (internal quotation marks omitted); see also 17 In re Pedlow, 209 F. 841, 842 (2d Cir. 1913) (upholding sale 18 of a bankrupt s stock of handkerchiefs because the sale 19 price was above the appraised value and Christmas sales had 20 commenced and . . . the sale of handkerchiefs depreciates 21 greatly after the holidays ). 22 manufacturing business can be within the ambit of the [T]here are times when it is more Fla. Dep t of Revenue v. Piccadilly Thus, an automobile 13 1 melting ice cube theory of § 363(b). 2 recognized, the text of § 363(b) requires no emergency to 3 justify approval. 4 if a good business opportunity [is] presently available, 5 id., which might soon disappear, quick action may be 6 justified in order to increase (or maintain) the value of an 7 asset to the estate, by means of a lease or sale of the 8 assets. 9 that only an emergency permits the use of § 363(b). 10 [I]f a bankruptcy judge is to administer a business 11 reorganization successfully under the Code, then 12 play for the operation of both § 363(b) and Chapter 11 must 13 be allowed for. 14 As Lionel Lionel, 722 F.2d at 1069. For example, Accordingly, Lionel reject[ed] the requirement Id. . . . some Id. at 1071. At the same time, Lionel reject[ed] the view that 15 § 363(b) grants the bankruptcy judge carte blanche. 16 1069.4 17 outside the ordinary course of business risked circumventing 18 key features of the Chapter 11 process, which afford debt 19 and equity holders the opportunity to vote on a proposed 20 plan of reorganization after receiving meaningful Id. at The concern was that a quick, plenary sale of assets 4 If unfettered use of § 363(b) had been intended, there would have been no need for the requirement of notice and hearing prior to approval. 14 1 information. 2 creditor, a § 363(b) sale might evade such requirements as 3 disclosure, solicitation, acceptance, and confirmation of a 4 plan. 5 a debtor in distress, as a Senate Judiciary Committee 6 Report observed, is to pacify large creditors with whom the 7 debtor would expect to do business, at the expense of small 8 and scattered public investors. 9 (quoting S. Rep. No. 95-989, 2d Sess., at 10 (1978), as See id. at 1069-70. See 11 U.S.C. §§ 1122-29. Pushed by a bullying [T]he natural tendency of Lionel, 722 F.2d at 1070 10 reprinted in 1978 U.S.C.C.A.N. 5787, 5796 (internal 11 quotation marks omitted)). 12 To balance the competing concerns of efficiency against 13 the safeguards of the Chapter 11 process, Lionel required a 14 good business reason for a § 363(b) transaction5 : 15 16 17 18 19 20 21 22 23 [A bankruptcy judge] should consider all salient factors pertaining to the proceeding and, accordingly, act to further the diverse interests of the debtor, creditors and equity holders, alike. [A bankruptcy judge] might, for example, look to such relevant factors as the proportionate value of the asset to the estate as a whole, the amount of 5 The Lionel standard has subsequently been adopted in sister Circuits. See, e.g., Stephens Indus. v. McClung, 789 F.2d 386, 389-90 (6th Cir. 1986); Inst. Creditors of Continental Air Lines, Inc. v. Continental Air Lines, Inc. (In re Continental Air Lines, Inc.), 780 F.2d 1223, 1226 (5th Cir. 1986). 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 elapsed time since the filing, the likelihood that a plan of reorganization will be proposed and confirmed in the near future, the effect of the proposed disposition on future plans of reorganization, the proceeds to be obtained from the disposition vis-a-vis any appraisals of the property, which of the alternatives of use, sale or lease the proposal envisions and, most importantly perhaps, whether the asset is increasing or decreasing in value. This list is not intended to be exclusive, but merely to provide guidance to the bankruptcy judge. 722 F.2d at 1071. After weighing these considerations, the Court in 19 Lionel reversed a bankruptcy court s approval of the sale of 20 Lionel Corporation s equity stake in another corporation, 21 Dale Electronics, Inc. ( Dale ). 22 on testimony from Lionel s Chief Executive Officer, who 23 conceded that it was only at the insistence of the 24 Creditors Committee that Dale stock was being sold and that 25 Lionel would very much like to retain its interest in 26 Dale, id. at 1072, as well as on a financial expert s 27 acknowledgment that the value of the Dale stock was not 28 decreasing, see id. at 1071-72. 29 not a wasting asset, and the proffered justification for 30 selling the stock was the desire of creditors, no sufficient 16 The Court relied heavily Since the Dale stock was 1 business reasons existed for approving the sale. 2 In the twenty-five years since Lionel, § 363(b) asset 3 sales have become common practice in large-scale corporate 4 bankruptcies. 5 Deadly Sins in § 363 Sales, Am. Bankr. Inst. J., June 2005, 6 at 22, 22 ( Asset sales under § 363 of the Bankruptcy Code 7 have become the preferred method of monetizing the assets of 8 a debtor company. ); Harvey R. Miller & Shai Y. Waisman, 9 Does Chapter 11 Reorganization Remain A Viable Option for See, e.g., Robert E. Steinberg, The Seven 10 Distressed Businesses for the Twenty-First Century?, 78 Am. 11 Bankr. L.J. 153, 194-96 (2004). 12 recounts the phenomenon: 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 A law review article Corporate reorganizations have all but disappeared. . . . TWA filed only to consummate the sale of its planes and landing gates to American Airlines. Enron s principal assets, including its trading operation and its most valuable pipelines, were sold within a few months of its bankruptcy petition. Within weeks of filing for Chapter 11, Budget sold most of its assets to the parent company of Avis. Similarly, Polaroid entered Chapter 11 and sold most of its assets to the private equity group at BankOne. Even when a large firm uses Chapter 11 as something other than a convenient auction block, its principal lenders are usually already in control and Chapter 11 merely puts in place a preexisting deal. Douglas G. Baird & Robert K. Rasmussen, The End of 17 1 Bankruptcy, 55 Stan. L. Rev. 751, 751-52 (2002) (internal 2 footnotes omitted). 3 09, § 363(b) sales have become even more useful and 4 customary.6 5 the main route of Chapter 11 reorganization plans. 6 Brege, Note, An Efficiency Model of Section 363(b) Sales, 92 7 Va. L. Rev. 1639, 1640 (2006). 8 9 In the current economic crisis of 2008- The side door of § 363(b) may well replace Jason Resort to § 363(b) has been driven by efficiency, from the perspectives of sellers and buyers alike. The speed of 10 the process can maximize asset value by sale of the debtor s 11 business as a going concern. 12 typically burnished (or cleansed ) because (with certain 13 limited exceptions) they are sold free and clear of liens, 14 claims and liabilities. 15 tort issues). 16 price for the assets because the buyer can select the Moreover, the assets are See infra (discussing § 363(f) and A § 363 sale can often yield the highest 6 For instance, Lehman Brothers sold substantially all its assets to Barclays Capital within five days of filing for bankruptcy. Lehman Brothers filed for bankruptcy in the early morning hours of September 15, 2008. On September 20, 2008, the bankruptcy court approved the sale to Barclays of Lehman s investment banking and capital markets operations, as well as supporting infrastructure including the Lehman headquarters in midtown Manhattan for $1.7 billion. See Bay Harbour Mgmt., L.C. v. Lehman Bros. Holdings Inc. (In re Lehman Bros. Holdings Inc.), No. 08-cv-8869(DLC), 2009 WL 667301, at *8 (S.D.N.Y. Mar. 13, 2009) (affirming the § 363(b) sale order). 18 1 liabilities it will assume and purchase a business with cash 2 flow (or the near prospect of it). 3 creditor can credit bid, or take an ownership interest in 4 the company by bidding a reduction in the debt the company 5 owes. 6 to credit bid at a § 363(b) sale). 7 Often, a secured See 11 U.S.C. § 363(k) (allowing a secured creditor This tendency has its critics. See, e.g., James H.M. 8 Sprayregen et al., Chapter 11: Not Perfect, but Better than 9 the Alternative, Am. Bankr. Inst. J., Oct. 2005, at 1, 60 10 (referencing those who decr[y] the increasing frequency and 11 rise in importance of § 363 sales ). 12 to the quantity or percentage of assets being sold: it has 13 long been understood (by the drafters of the Code,7 and the 14 Supreme Court8 ) that § 363(b) sales may encompass all or The objections are not 7 As stated in Lionel, [t]he Commission on the Bankruptcy Laws of the United States submitted a draft provision that would have permitted resort to section 363(b) in the absence of an emergency, even in the case of all or substantially all the property of the estate. See Report of the Commission on the Bankruptcy Laws of the United States, H.R. Doc. No. 93-137, 93rd Cong., 1st Sess. (1973) at 239 (proposed § 7-205 and accompanying explanatory note). Congress eventually deleted this provision without explanation . . . . Lionel, 722 F.2d at 1069-70 n.3. 8 The Supreme Court has noted that § 363(b) is sometimes used to sell all or substantially all of a debtor s assets. In a footnote in Florida Department of Revenue v. Piccadilly Cafeterias, the Court wrote: 19 1 substantially all of a debtor s assets. 2 of criticism remains what it was in Lionel: fear that one 3 class of creditors may strong-arm the debtor-in-possession, 4 and bypass the requirements of Chapter 11 to cash out 5 quickly at the expense of other stakeholders, in a 6 proceeding that amounts to a reorganization in all but name, 7 achieved by stealth and momentum. 8 v. Official Comm. of Unsecured Creditors and J.P. Morgan 9 Chase Bank, N.A. (In re Iridium Operating LLC), 478 F.3d 10 452, 466 (2d Cir. 2007) ( The reason sub rosa plans are 11 prohibited is based on a fear that a debtor-in-possession 12 will enter into transactions that will, in effect, short 13 circuit the requirements of Chapter 11 for confirmation of a Rather, the thrust See, e.g., Motorola, Inc. Chapter 11 bankruptcy proceedings ordinarily culminate in the confirmation of a reorganization plan. But in some cases, as here, a debtor sells all or substantially all its assets under § 363(b)(1) (2000 ed., Supp. V) before seeking or receiving plan confirmation. In this scenario, the debtor typically submits for confirmation a plan of liquidation (rather than a traditional plan of reorganization) providing for the distribution of the proceeds resulting from the sale. 128 S. Ct. at 2330 n.2. 20 1 reorganization plan. (internal quotation marks and 2 alteration omitted)); Brege, An Efficiency Model of Section 3 363(b) Sales, 92 Va. L. Rev. at 1643 ( The cynical 4 perspective is that [§ 363(b)] serves as a loophole to the 5 otherwise tightly arranged and efficient Chapter 11, through 6 which agents of the debtor-in-possession can shirk 7 responsibility and improperly dispose of assets. ); see also 8 Steinberg, The Seven Deadly Sins in § 363 Sales, Am. Bankr. 9 Inst. J., at 22 ( Frequently, . . . the § 363 sale process 10 11 fails to maximize value . . . . ). As § 363(b) sales proliferate, the competing concerns 12 identified in Lionel have become harder to manage. 13 need flexibility and speed to preserve going concern value; 14 yet one or more classes of creditors should not be able to 15 nullify Chapter 11 s requirements. 16 achieve, and is not aided by rigid rules and prescriptions. 17 Lionel s multi-factor analysis remains the proper, most 18 comprehensive framework for judging the validity of § 363(b) 19 transactions. 20 Debtors A balance is not easy to Adopting the Fifth Circuit s wording in Braniff, 700 21 F.2d at 940, commentators and courts--including ours 22 --have sometimes referred to improper § 363(b) transactions 21 1 as sub rosa plans of reorganization. 2 Iridium, 478 F.3d at 466 ( The trustee is prohibited from 3 such use, sale or lease if it would amount to a sub rosa 4 plan of reorganization. ). 5 transfer agreement in large part because the terms of the 6 agreement specifically attempted to dictat[e] some of the 7 terms of any future reorganization plan. 8 reorganization plan would have to allocate the [proceeds of 9 the sale] according to the terms of the [transfer] agreement See, e.g., In re Braniff rejected a proposed The [subsequent] 10 or forfeit a valuable asset. 11 Fifth Circuit concluded, [t]he debtor and the Bankruptcy 12 Court should not be able to short circuit the requirements 13 of Chapter 11 for confirmation of a reorganization plan by 14 establishing the terms of the plan sub rosa in connection 15 with a sale of assets. 700 F.2d at 940. As the Id. 16 The term sub rosa is something of a misnomer. 17 bespeaks a covert or secret activity, whereas secrecy has 18 nothing to do with a § 363 transaction. 19 blessed by the bankruptcy courts are openly presented, 20 considered, approved, and implemented. 21 have used sub rosa to describe transactions that treat the 22 requirements of the Bankruptcy Code as something to be 22 It Transactions Braniff seems to 1 evaded or subverted. 2 unhelpful. 3 § 363(b); and it is elementary that the more assets sold 4 that way, the less will be left for a plan of 5 reorganization, or for liquidation. 6 transaction, and the residuum of corporate assets, is, under 7 our precedent, just one consideration for the exercise of 8 discretion by the bankruptcy judge(s), along with an open- 9 ended list of other salient factors. But even in that sense, the term is The sale of assets is permissible under But the size of the See Lionel, 722 F.2d 10 at 1071 (a bankruptcy judge should consider such relevant 11 factors as the proportionate value of the asset to the 12 estate as a whole ). 13 Braniff s holding did not support the argument that a 14 § 363(b) asset sale must be rejected simply because it is a 15 sale of all or substantially all of a debtor s assets. 16 a § 363(b) sale may well be a reorganization in effect 17 without being the kind of plan rejected in Braniff.9 9 Thus See, The transaction at hand is as good an illustration as any. Old Chrysler will simply transfer the $2 billion in proceeds to the first lien lenders, and then liquidate. The first lien lenders themselves will suffer a deficiency of some $4.9 billion, and everyone else will likely receive nothing from the liquidation. Thus the Sale has inevitable and enormous influence on any eventual plan of reorganization or liquidation. But it is not a sub rosa plan in the Braniff sense because it does not specifically dictate, or arrange ex ante, by contract, the terms of 23 1 e.g., Fla. Dep t of Revenue v. Piccadilly Cafeterias, Inc., 2 128 S. Ct. at 2330 n.2. 3 contention that the proposed sale was a sub rosa or de 4 facto reorganization, a bankruptcy court confronted with 5 that allegation may approve or disapprove a § 363(b) 6 transfer that is a sale of all or substantially all of a 7 debtor s assets, using the analysis set forth in Lionel in 8 order to determine whether there was a good business reason 9 for the sale. Although Lionel did not involve a See In re Iridium, 478 F.3d at 466 & n.21 10 ( The trustee is prohibited from such use, sale or lease if 11 it would amount to a sub rosa plan of reorganization. . . . 12 In this Circuit, the sale of an asset of the estate under 13 § 363(b) is permissible if the judge determining [the] 14 § 363(b) application expressly find[s] from the evidence 15 presented before [him or her] at the hearing [that there is] 16 a good business reason to grant such an application. 17 (citing Lionel, 722 F.2d at 1071)). 18 The Indiana Pensioners argue that the Sale is a sub 19 rosa plan chiefly because it gives value to unsecured 20 creditors (i.e., in the form of the ownership interest in 21 New Chrysler provided to the union benefit funds) without any subsequent plan. 24 1 paying off secured debt in full, and without complying with 2 the procedural requirements of Chapter 11. 3 Bankruptcy Judge Gonzalez demonstrated proper solicitude for 4 the priority between creditors and deemed it essential that 5 the Sale in no way upset that priority. 6 security interests would attach to all proceeds of the Sale: 7 Not one penny of value of the Debtors assets is going to 8 anyone other than the First-Lien Lenders. 9 Debtor s Motion Seeking Authority to Sell, May 31, 2009, However, The lien holders Opinion Granting 10 ( Sale Opinion ) at 18. 11 all the equity stakes in New Chrysler were entirely 12 attributable to new value -including governmental loans, new 13 technology, and new management--which were not assets of the 14 debtor s estate. 15 As Bankruptcy Judge Gonzalez found, See, e.g., id. at 22-23. The Indiana Pensioners arguments boil down to the 16 complaint that the Sale does not pass the discretionary, 17 multifarious Lionel test. 18 constitute an adequate rebuttal. 19 factors, Bankruptcy Judge Gonzalez found good business 20 reasons for the Sale. 21 the only possible alternative to the Sale was an immediate 22 liquidation that would yield far less for the estate -and The bankruptcy court s findings Applying the Lionel The linchpin of his analysis was that 25 1 for the objectors. 2 Chrysler s prolonged and well-publicized efforts to find a 3 strategic partner or buyer, no other proposals were 4 forthcoming. 5 bankruptcy filing, and during the bankruptcy process itself, 6 Chrysler executives circled the globe in search of a deal. 7 But the Fiat transaction was the only offer available. 8 Opinion at 6; see id. at 16 17 ( Notwithstanding the highly 9 publicized and extensive efforts that have been expended in 10 the last two years to seek various alliances for Chrysler, 11 the Fiat Transaction is the only option that is currently 12 viable. 13 liquidation of the company. ).10 14 15 The court found that, notwithstanding In the months leading up to Chrysler s Sale The only other alternative is the immediate The Sale would yield $2 billion. According to expert testimony11 -not refuted by the objectors--an immediate 10 The bankruptcy court noted that Chrysler had discussed potential alliances with General Motors, Fiat, Nissan, Hyundai-Kia, Toyota, Volkswagen, Tata Motors, GAZ Group, Magna International, Mitsubishi Motors, Honda, Beijing Automotive, Tempo International Group, Hawtai Automobiles, and Chery Automobile Co. Sale Opinion at 6. 11 The Indiana Pensioners moved to strike the testimony of Chrysler s valuation witness because he has a financial interest in the outcome of the case: his firm would receive a transaction fee when the Sale was consummated. The bankruptcy court denied the motion on the grounds that such arrangements are typical; that the Indiana Pensioners did not object to the retention of the witness s 26 1 liquidation of Chrysler as of May 20, 2009 would yield in 2 the range of nothing to $800 million.12 3 Crucially, Fiat had conditioned its commitment on the Sale 4 being completed by June 15, 2009. 5 tight and seemingly arbitrary, there was little leverage to 6 force an extension. 7 factories had been shuttered, and the business was 8 hemorrhaging cash. 9 Chrysler was losing going concern value of nearly $100 10 11 million each day. Id. at 19. While this deadline was To preserve resources, Chrysler According to the bankruptcy court, Sale Order at 7. On this record, and in light of the arguments made by 12 the parties, the bankruptcy court s approval of the Sale was 13 no abuse of discretion. 14 factories dark, and its massive debts growing, Chrysler fit With its revenues sinking, its firm; and that the witness s interest goes to weight of the evidence, not admissibility. Sale Opinion at 19 n.17. The Indiana Pensioners have not persuaded us that the bankruptcy court abused its discretion. See generally Gen. Elec. Co. v. Joiner, 522 U.S. 136, 138 39, 141 43 (1997); Ball v. A.O. Smith Corp., 451 F.3d 66, 69 (2d Cir. 2006) ( We review the bankruptcy court s evidentiary decisions for abuse of discretion. ). 12 The expert s earlier estimates of liquidation value had been higher. For example, in early May 2009, the same expert opined that a liquidation might yield between nothing and $1.2 billion. But, from the beginning of May until the end, Chrysler expended $400 million in cash collateral. Sale Opinion at 19. 27 1 the paradigm of the melting ice cube. 2 was being reduced each passing day that it produced no cars, 3 yet was obliged to pay rents, overhead, and salaries. 4 Consistent with an underlying purpose of the Bankruptcy 5 Code--maximizing the value of the bankrupt estate--it was no 6 abuse of discretion to determine that the Sale prevented 7 further, unnecessary losses. 8 157, 163 (1991) (Chapter 11 embodies the general 9 [Bankruptcy] Code policy of maximizing the value of the 10 11 Going concern value See Toibb v. Radloff, 501 U.S. bankruptcy estate. ). The Indiana Pensioners exaggerate the extent to which 12 New Chrysler will emerge from the Sale as the twin of Old 13 Chrysler. 14 cars but it will also make newer, smaller vehicles using 15 Fiat technology that will become available as a result of 16 the Sale -moreover, at the time of the proceedings, Old 17 Chrysler was manufacturing no cars at all. 18 will be run by a new Chief Executive Officer, who has 19 experience in turning around failing auto companies. 20 retain many of the same employees, but they will be working 21 under new union contracts that contain a six-year no-strike 22 provision. New Chrysler may manufacture the same lines of New Chrysler It may New Chrysler will still sell cars in some of its 28 1 old dealerships in the United States, but it will also have 2 new access to Fiat dealerships in the European market. 3 transformative use of old and new assets is precisely what 4 one would expect from the § 363(b) sale of a going concern. Such 5 6 7 II The Indiana Pensioners next challenge the Sale Order s 8 release of all liens on Chrysler s assets. 9 under § 363(f), assets sold pursuant to § 363(b) may be sold In general, 10 free and clear of any interest in the assets when, inter 11 alia, the entity holding the interest consents to the sale. 12 11 U.S.C. § 363(f)(2). 13 although the Indiana Pensioners did not themselves consent 14 to the release, consent was validly provided by the 15 collateral trustee, who had authority to act on behalf of 16 all first-lien credit holders. 17 We agree. The bankruptcy court ruled that, Through a series of agreements, the 18 Pensioners effectively ceded to an agent the power to 19 consent to such a sale; the agent gave consent; and the 20 Pensioners are bound. 21 status or preference of Chrysler s secured debt are simply 22 not presented in this case. Accordingly, questions as to the 29 1 The first-lien holders--among them, the Indiana 2 Pensioners--arranged their investment in Chrysler by means 3 of three related agreements: a First Lien Credit Agreement, 4 a Collateral Trust Agreement, and a Form of Security 5 Agreement. 6 for the control of collateral property. 7 held by a designated trustee for the benefit of the various 8 lenders (including the Indiana Pensioners). 9 a bankruptcy, the trustee is empowered to take any action 10 deemed necessary to protect, preserve, or realize upon the 11 collateral. 12 direction of the lenders agent; but the lenders are 13 required to authorize the agent to act on their behalf, and 14 any action the agent takes at the request of lenders holding 15 a majority of Chrysler s debt is binding on all lenders, 16 those who agree and those who do not. 17 Together, these agreements create a framework The collateral is In the event of The trustee may only exercise this power at the When Chrysler went into bankruptcy, the trustee had 18 power to take any action necessary to realize upon the 19 collateral--including giving consent to the sale of the 20 collateral free and clear of all interests under § 363. 21 trustee could take such action only at the direction of the 22 lenders agent, and the agent could only direct the trustee 23 at the request of lenders holding a majority of Chrysler s 30 The 1 debt. 2 then under the terms of the various agreements, the minority 3 lenders could not object to the trustee s actions since they 4 had given their authorization in the first place. But if those conditions were met--as they were here-- 5 The Indiana Pensioners argue that, by virtue of a 6 subclause in one of the loan agreements, Chrysler required 7 the Pensioners written consent before selling the 8 collateral assets. 9 the loan documents themselves could not be amended without 10 the written consent of all lenders if the amendment would 11 result in the release of all, or substantially all, of the 12 collateral property. 13 Pensioners. 14 any loan document. 15 effected by implementing the clear terms of the loan 16 agreements--specifically, the terms by which (1) the lenders 17 assigned an agent to act on their behalf, (2) the agent was 18 empowered, upon request from the majority lenders, to direct 19 the trustee to act, and (3) the trustee was empowered, at 20 the direction of the agent, to sell the collateral in the 21 event of a bankruptcy. 22 amendment to the loan documents, Chrysler was not required 23 to seek, let alone receive, the Pensioners written consent. The clause in question provides that This clause is no help to the Indiana The § 363(b) Sale did not entail amendment of To the contrary, the § 363(b) sale was Because the Sale required no 31 1 Anticipating the consequence of this contractual 2 framework, the Indiana Pensioners argue as a last resort 3 that the majority lenders were intimidated or bullied into 4 approving the Sale in order to preserve or enhance relations 5 with the government, or other players in the transaction. 6 Absent this bullying, the Pensioners suggest, the majority 7 lenders would not have requested the agent to direct the 8 sale of the collateral, and the Sale would not have gone 9 through. 10 The Pensioners argue that this renders the lenders consent ineffective or infirm. 11 The record before the bankruptcy court, and the record 12 before this Court, does not support a finding that the 13 majority lenders were coerced into agreeing to the Sale. 14 the whole, the record (and findings) support the view that 15 they acted prudently to preserve substantial value rather 16 than risk a liquidation that might have yielded nothing at 17 all. 18 of coerced consent would have on the validity of the consent 19 given, or whether the bankruptcy court would have 20 jurisdiction--or occasion--to adjudicate the Indiana 21 Pensioners allegation. 22 Indiana Pensioners are not substantiated in this record, 23 their arguments based on those allegations provide no ground On Moreover, it is not at all clear what impact a finding Because the facts alleged by the 32 1 for relief in this proceeding, and we decline to consider 2 whether the allegations might give rise to some independent 3 cause of action. 4 III 5 6 The Indiana Pensioners argue that the Secretary of the 7 Treasury ( Secretary ) exceeded his statutory authority and 8 violated the Constitution by using TARP money to finance the 9 sale of Chrysler s assets. Pensioners raise interesting and 10 unresolved constitutional issues concerning the scope of the 11 Secretary s authority under TARP and the use of TARP money 12 to bail out an automobile manufacturer. 13 courts are constrained by our own constitutional 14 limitations, including the non-waivable Article III 15 requirement that we have jurisdiction over the case or 16 controversy before us. 17 515 U.S. 737, 742 (1995); Lujan v. Defenders of Wildlife, 18 504 U.S. 555, 560 (1992); United States v. City of New York 19 972 F.2d 464, 469 70 (2d Cir. 1992). 20 whether the Secretary s actions were constitutional or 21 permitted by statute, because we conclude that the Indiana 22 Pensioners lack standing to raise the TARP issue, and that However, federal See, e.g., United States v. Hays, 33 We do not decide 1 we lack jurisdiction in this case to entertain that 2 challenge. 3 Congress enacted the Emergency Economic Stabilization 4 Act ( EESA ) on October 3, 2008 in order to immediately 5 provide authority and facilities that the Secretary of the 6 Treasury can use to restore liquidity and stability to the 7 financial system of the Unites States . . . . 8 § 5201(1). 9 Secretary to establish the Troubled Asset Relief Program 12 U.S.C. Title I of EESA authorizes the Treasury 10 (or TARP ) to purchase, and to make and fund commitments to 11 purchase, troubled assets from any financial institution, on 12 such terms and conditions as are determined by the 13 Secretary. 14 include, but are not limited to, any bank, savings 15 association, credit union, security broker or dealer, or 16 insurance company. Id. § 5211(a)(1). Financial institutions Id. § 5202(5). 17 The statute details procedures for judicial review of 18 the Secretary s decisions, limitations on available relief 19 for TARP violations, and a host of legislative oversight 20 mechanisms. 21 example, courts review the Secretary s TARP decisions in 22 accordance with standards set forth in the Administrative See, e.g., id. §§ 5214 15, 5229(a), 5233. 34 For 1 Procedure Act, 5 U.S.C. § 701 et. seq., and the Secretary s 2 actions shall be held unlawful and set aside if found to be 3 arbitrary, capricious, an abuse of discretion, or not in 4 accordance with law. 5 are available only to remedy constitutional violations and 6 must be considered and granted or denied by the court on an 7 expedited basis, id. § 5229(a)(2)(A),(C),(D); likewise, 8 requests for temporary restraining orders must be considered 9 and decided by the court within 3 days of the date of the 12 U.S.C. § 5229(a)(1). Injunctions 10 request, id. § 5229(a)(2)(B). 11 oversight, the statute calls for (among other things) the 12 creation of the Financial Stability Oversight Board, which 13 reviews the exercise of the Secretary s authority (§ 5214), 14 the submission of periodic reports from the Secretary to 15 Congress (§ 5215), the creation of a Congressional Oversight 16 Panel to provide periodic updates to Congress (§ 5233), and 17 the appointment of a special TARP Inspector General 18 (§ 5214(a)(3)). 19 narrow, and deferential judicial review of the Secretary s 20 TARP decisions, limits judicial relief, and relies instead 21 on multi-faceted legislative oversight. 22 As for legislative In short, the statute provides swift, The Indiana Pensioners contend that the Secretary 35 1 exceeded his statutory authority and violated the 2 Constitution by using TARP money to fund the Sale because, 3 inter alia: auto companies are not financial institutions 4 under TARP; TARP does not authorize the Secretary to arrange 5 and finance the reorganization of a private company; and the 6 Sale effects an unconstitutional taking. 7 contend that the Secretary--and by extension, the Executive 8 branch--violated the Constitution by dispensing federal 9 money in excess of the statutory authority awarded by 10 11 In sum, they Congress under TARP.13 It is clear that TARP gives the Secretary broad 12 discretion to apply financial aid when and where he decides 13 it will best promote the stated goal of restoring stability 14 to the financial markets. 15 contains explicit limitations on the Secretary s authority, 16 and provides for review and oversight, so that TARP is not 17 all-purpose. 18 that any industry so inter-related with banks that its 19 dealings could adversely impact the national banking system But, as detailed above, TARP also At oral argument, the government suggested 13 See, e.g., Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 562, 585 (1952) (Executive power must stem either from an act of Congress or from the Constitution itself. ). 36 1 is, for TARP purposes, a financial institution.14 2 surely an expansive definition of financial institution, 3 albeit broadly protective of the nation s financial 4 structures and arguably related to TARP s mandate of 5 restor[ing] liquidity and stability to our markets. 6 scope of TARP is a consequential and vexed issue that may 7 inevitably require resolution in some later case; but this 8 Court lacks power to resolve it in the present dispute. 9 This is The Article III of the Constitution limits the judicial 10 power of the United States to the resolution of cases and 11 controversies. 12 limitation is effectuated in part through the requirement of 14 U.S. Const. art. III, § 2. This The government asserted at oral argument that: [T]he Secretary of the Treasury, in determining what is a financial institution, looks at the interrelatedness [of the company and its financing arm]. . . . . Chrysler Financial can t survive without Chrysler. . . . Without [Chrysler], the financial institution goes down. . . . [Chrysler Financial] is the financial institution and the relationship [with Chrysler is the one] that the Secretary of the Treasury based his determination on, and that determination is entitled to deference by this court under administrative law principles. Transcript of Oral Argument at 52. 37 1 standing. See Valley Forge Christian Coll. v. Ams. United 2 for Separation of Church and State, Inc., 454 U.S. 464, 471- 3 72 (1982). 4 disputes which are appropriately resolved through the 5 judicial process, Whitmore v. Arkansas, 495 U.S. 149, 155 6 (1990), from those generalized grievances which are 7 reserved for other branches of government, Valley Forge, 454 8 U.S. at 475 (internal quotation marks omitted). 9 requirement of standing would be unnecessary if the federal The doctrine of standing separates those The 10 courts [were] merely publicly funded forums for the 11 ventilation of public grievances or the refinement of 12 jurisprudential understanding. 13 Id. at 473. At an irreducible constitutional minimum, Article III 14 standing requires that: (1) the plaintiff suffer an injury 15 in fact; (2) the injury be fairly traceable to the 16 challenged conduct; and (3) the injury will likely be 17 redressed by a favorable decision from the court. 18 504 U.S. at 560-61. 19 jurisdiction bears the burden of establishing these 20 elements. 21 Pensioners lack standing because they cannot demonstrate 22 they have suffered an injury in fact. Lujan, The party invoking federal Id. at 561. We conclude that the Indiana 38 1 An injury in fact is an invasion of a legally 2 protected interest which is (a) concrete and particularized, 3 and (b) actual or imminent, not conjectural or 4 hypothetical. 5 quotation marks and footnote omitted). 6 Pensioners contend primarily that their injury in fact 7 arises from the release of the collateral supporting their 8 secured loans. 9 for a $2 billion cash payment and a residual deficiency Lujan, 504 U.S. at 560 (internal citations, The Indiana But that collateral was released in exchange 10 claim. At oral argument, the Pensioners touted the value of 11 the collateral at around $25 billion and complained that 12 the value received pursuant to the Sale was a tithe of the 13 actual asset value and an inadequate return on their 14 investment. 15 ignores the bankruptcy court s finding that, in the absence 16 of another buyer, the only viable alternative--liquidation-- 17 would yield an even lower return than the one achieved 18 through the sale funded by TARP money. 19 found, as a fact, that the liquidation value of the 20 collateral was no greater than $2 billion, i.e., the same 21 amount the first lien secured lenders are receiving under 22 the transaction. However, the Indiana Pensioners argument Judge Gonzales Opinion and Order Regarding Emergency 39 1 Economic Stabilization Act of 2008 and Troubled Asset Relief 2 Program, May 31, 2009, at 5. 3 [Pensioners] will receive [their] pro-rata distribution of 4 the value of the collateral, they simply cannot allege 5 injury in fact. 6 (but less-than-hoped-for) value is not injury in fact 7 sufficient to support standing. Id. Since the Indiana The release of collateral for fair 8 Furthermore, even if the Indiana Pensioners could 9 demonstrate injury in fact, there would still be a question 10 as to whether they have standing to challenge the use of 11 TARP funds here. 12 (as outlined in Section II), the lenders had authorized the 13 trustee to consent to the Sale on their behalf. 14 circumstances (and well-established agency principles), such 15 consent may bar the Pensioners from challenging the 16 trustee s actions and litigating a claim that would in 17 effect bind all of the first-lien creditors. Under the terms of the various agreements Under those 18 19 IV 20 Finally, several objectors appeal from that portion of 21 the Sale Order extinguishing all existing and future claims 22 against New Chrysler, that (a) arose prior to the Closing 40 1 Date, (b) relate[] to the production of vehicles prior to 2 the Closing Date or (c) otherwise [are] assertable against 3 the Debtors or [are] related to the Purchased Assets prior 4 to the closing date. 5 be divided into three groups: (1) plaintiffs with existing 6 product liability claims against Chrysler; (2) plaintiffs 7 with existing asbestos-related claims against Chrysler; and 8 (3) lawyers undertaking to act on behalf of claimants who, 9 although presently unknown and unidentified, might have Sale Order at 40. The objectors can 10 claims in the future arising from Old Chrysler s production 11 of vehicles. We consider each group s arguments in turn. 12 13 14 A. Existing Product Liability Claims The Ad Hoc Committee of Consumer-Victims of Chrysler 15 LLC and William Lovitz et al. challenge the foreclosing of 16 New Chrysler s liability for product defects in vehicles 17 produced by Old Chrysler. 15 18 relevant part, that a trustee may sell property . . . free 19 and clear of any interest in such property, under certain Section 363(f) provides, in 15 The Sale Order does not limit the right of tort plaintiffs to pursue existing claims against Old Chrysler. However, it is undisputed that little or no money will be available for damages even if suits against Old Chrysler succeed. 41 1 circumstances. 2 objectors argue that personal injury claims are not 3 interests in property, and that the district court s 4 reliance on In re Trans World Airlines, Inc., 322 F.3d 283 5 (3d Cir. 2003) ( TWA ), which advances a broad reading of 6 interests in property, was misplaced. 11 U.S.C. § 363(f) (emphasis added). The 7 We have never addressed the scope of the language any 8 interest in such property, and the statute does not define 9 the term. See, e.g., Precision Indus., Inc. v. Qualitech 10 Steel SBQ, LLC, 327 F.3d 537, 545 (7th Cir. 2003) ( The 11 Bankruptcy Code does not define any interest, and in the 12 course of applying section 363(f) to a wide variety of 13 rights and obligations related to estate property, courts 14 have been unable to formulate a precise definition. ). 15 In TWA, the Third Circuit considered whether 16 (1) employment discrimination claims and (2) a voucher 17 program awarded to flight attendants in settlement of a 18 class action constituted interests in property for 19 purposes of § 363(f). 20 Circuit began its analysis by noting that bankruptcy courts 21 around the country have disagreed about whether any See 322 F.3d at 285. 42 The Third 1 interest should be defined broadly or narrowly. 16 2 288-89. 3 trend seems to be toward a more expansive reading of 4 interests in property which encompasses other obligations 5 that may flow from ownership of the property. 6 (quoting 3 Collier on Bankruptcy ¶ 363.06[1]); see also 7 George W. Kuney, Misinterpreting Bankruptcy Code Section 8 363(f) and Undermining the Chapter 11 Process, 76 Am. Bankr. 9 L.J. 235, 267 (2002) ( [T]he dominant interpretation is that 10 Id. at The Third Circuit observed, however, that the Id. at 289 § 363(f) can be used to sell property free and clear of 16 For examples of bankruptcy courts divergent rulings on this issue, compare, e.g., P.K.R. Convalescent Ctrs., Inc. v. Commonwealth of Va., Dept. of Med. Assistance Serv. (In re P.K.R. Convalescent Ctrs., Inc.), 189 B.R. 90, 94 (Bankr. E.D. Va. 1995) (holding that Virginia s depreciation-recoupment interest in the debtor s property was an interest in property, even though the interest was not a lien), and Am. Living Sys. v. Bonapfel (In re All Am. of Ashburn, Inc.), 56 B.R. 186, 189-90 (Bankr. N.D. Ga. 1986) (holding that § 363(f) permitted the sale of assets free and clear and precluded successor liability in product liability suit against purchaser for cause of action that arose prior to date of sale), with Schwinn Cycling and Fitness, Inc. v. Benonis (In re Schwinn Bicycle Co.), 210 B.R. 747, 761 (Bankr. N.D. Ill. 1997) (holding that § 363(f) in no way protects the buyer from current or future product liability; it only protects the purchased assets from lien claims against those assets ), and Volvo White Truck Corp. v. Chambersburg Beverage, Inc. (In re White Motor Credit Corp.), 75 B.R. 944, 948 (Bankr. N.D. Ohio 1987) (stating that [g]eneral unsecured claimants including tort claimants, have no specific interest in a debtor s property for purposes of § 363(f)). 43 1 claims that could otherwise be assertable against the buyer 2 of the assets under the common law doctrine of successor 3 liability. ). 4 The Third Circuit reasoned that to equate interests in 5 property with only in rem interests such as liens would be 6 inconsistent with section 363(f)(3), which contemplates that 7 a lien is but one type of interest. 8 After surveying its owns precedents and the Fourth Circuit s 9 decision in United Mine Workers of Am. 1992 Benefit Plan v. 10 Leckie Smokeless Coal Co. (In re Leckie Smokeless Coal Co.), 11 99 F.3d 573 (4th Cir. 1996), 17 the TWA court held that 12 [w]hile the interests of the [plaintiffs] in the assets of 13 TWA s bankruptcy estate are not interests in property in the 14 sense that they are not in rem interests, . . . they are 15 interests in property within the meaning of section 363(f) 16 in the sense that they arise from the property being sold. 17 322 F.3d at 290. In Leckie, the Fourth Circuit held that Coal Act premium payment obligations owed to employer-sponsored benefit plans were interests in property under § 363(f). 99 F.3d at 582. The Fourth Circuit explained while the plain meaning of the phrase interest in such property suggests that not all general rights to payment are encompassed by the statute, Congress did not expressly indicate that, by employing such language, it intended to limit the scope of section 363(f) to in rem interests, strictly defined, and [it would] decline to adopt such a restricted reading of the statute . . . . Id. 44 1 2 322 F.3d at 290 (emphasis added). Shortly after TWA was decided, the Southern District of 3 California concluded that TWA applied to tort claimants 4 asserting personal injury claims. 5 States, 297 B.R. 774, 781-82 (S.D. Cal. 2003). 6 involved claims arising from the negligent handling of toxic 7 materials transported pursuant to a government contract. 8 Id. at 781. 9 plaintiff s claim for personal injury does arise from the 10 property being sold, i.e. the contracts to transport toxic 11 materials. 12 Steel Group, No. 2:04-CV-34 PS, 2005 WL 1172748, at *3 (N.D. 13 Ind. April 27, 2005) (applying TWA to bar successor 14 liability for racial discrimination claim). 15 See Myers v. United Myers Applying TWA, the Myers court ruled that the Id.; see also Faulkner v. Bethlehem Steel/Int l Appellants argue that these decisions broadly 16 construing the phrase any interest in such property fail 17 to account for the language of 11 U.S.C. § 1141(c), a 18 provision involving confirmed plans of reorganization. 19 Section 1141(c) provides that except as otherwise provided 20 in the [reorganization] plan or in the order confirming the 21 plan, after confirmation of a plan, the property dealt with 22 by the plan is free and clear of all claims and interests of 23 creditors, equity security holders, and of general partners 45 1 in the debtor. 2 Appellants argue that Congress must have intentionally 3 included the word claims 18 in § 1141(c), and omitted the 4 word from § 363(f), because it was willing to extinguish 5 tort claims in the reorganization context, but unwilling to 6 do so in the § 363 sale context. 7 this discrepancy on the basis that reorganization provides 8 unsecured creditors procedural rights that are not assured 9 in a § 363(b) sale. 10 11 U.S.C. § 1141(c) (emphasis added). Appellants account for We do not place such weight on the absence of the word 11 claims in § 363(f). 12 § 1141(c) and § 363(f) differ in many respects. 13 1141(c), for example, applies to all reorganization plans; 18 The language and structure of Section The Bankruptcy Code defines claim as: (A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or (B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured. 11 U.S.C. § 101(5). 46 1 § 363(f), in contrast, applies only to classes of property 2 that satisfy one of five criteria. 3 § 363(f)(1)-(5). 4 of the procedural safeguards of a reorganization, § 363(f) 5 is limited to specific classes of property. 6 See 11 U.S.C. Thus, while § 363 sales do not afford many Given the expanded role of § 363 in bankruptcy 7 proceedings, it makes sense to harmonize the application of 8 § 1141(c) and § 363(f) to the extent permitted by the 9 statutory language. See In re Golf, L.L.C., 322 B.R. 874, 10 877 (Bankr. D. Neb. 2004) (noting that, while § 363(f) 11 requires less notice and provides for less opportunity for a 12 hearing than in the reorganization process, as a practical 13 matter, current practice seems to have expanded § 363(f) s 14 use from its original intent ). 15 this in other contexts. 16 explicitly reference the extinguishment of liens, while 17 § 363(f) does. 18 have uniformly held that confirmation of a reorganization 19 can act to extinguish liens. 20 Planters Bank, NA, 539 F.3d 862, 870 (8th Cir. 2008) 21 ( Confirmation of the reorganization plan replaces prior 22 obligations, and a lien not preserved by the plan may be 23 extinguished. (internal citation omitted)); Elixir Indus., Courts have already done For example, § 1141(c) does not Notwithstanding this distinction, courts See, e.g., JCB, Inc. v. Union 47 1 Inc. v. City Bank & Trust Co. (In re Ahern Enters., Inc.), 2 507 F.3d 817, 820-22 (5th Cir. 2007) (holding that § 1141(c) 3 extinguishes liens that are not specifically preserved in a 4 reorganization plan, and citing cases from the Fourth, 5 Seventh, Eighth and Tenth Circuits reaching the same 6 conclusion). 7 We agree with TWA and Leckie that the term any 8 interest in property encompasses those claims that arise 9 from the property being sold. See TWA, 322 F.3d at 290. 10 By analogy to Leckie (in which the relevant business was 11 coal mining), [appellants ] rights are grounded, at least 12 in part, in the fact that [Old Chrysler s] very assets have 13 been employed for [automobile production] purposes: if 14 Appellees had never elected to put their assets to use in 15 the [automobile] industry, and had taken up business in an 16 altogether different area, [appellants] would have no right 17 to seek [damages]. 18 Leckie, 99 F.3d at 582. To allow the claimants to assert successor liability 19 claims against [the purchaser] while limiting other 20 creditors recourse to the proceeds of the asset sale would 21 be inconsistent with the Bankruptcy Code s priority scheme. 22 TWA, 322 F.3d at 292. 23 principle and assume that tort claimants faced a choice Appellants ignore this overarching 48 1 between the Sale and an alternative arrangement that would 2 have assured funding for their claims. 3 successfully blocked the Sale, they would have been 4 unsecured creditors fighting for a share of extremely 5 limited liquidation proceeds. 6 of outstanding secured claims against Old Chrysler, 7 appellants would have fared no better had they prevailed. 8 9 But had appellants Given the billions of dollars The possibility of transferring assets free and clear of existing tort liability was a critical inducement to the 10 Sale. 11 the expense of preserving successor liability claims was 12 necessary in order to preserve some [55],000 jobs, . . . and 13 to provide funding for employee-related liabilities, 14 including retirement benefits [for more than 106,000 15 retirees]. 16 3. 17 As in TWA, a sale of the assets of [Old Chrysler] at TWA, 322 F.3d at 293; see also Sale Opinion at It is the transfer of Old Chrysler s tangible and 18 intellectual property to New Chrysler that could lead to 19 successor liability (where applicable under state law) in 20 the absence of the Sale Order s liability provisions. 21 Because appellants claims arose from Old Chrysler s 22 property, § 363(f) permitted the bankruptcy court to 23 authorize the Sale free and clear of appellants interest in 49 1 the property. 2 3 4 B. Asbestos Claims On behalf of herself and others with outstanding or 5 potential claims against Old Chrysler resulting from 6 exposure to asbestos, Patricia Pascale argues that the Sale 7 Order improperly grants New Chrysler immunity without 8 assuring compliance with 11 U.S.C. § 524(g). 9 Section 524(g) provides a unique form of supplemental 10 injunctive relief for an insolvent debtor confronting the 11 particularized problems and complexities associated with 12 asbestos liability. 13 Ins. Co. (In re Johns-Manville Corp.), 517 F.3d 52, 67 (2d 14 Cir. 2008), overruled on other grounds by Travelers Indem. 15 Co. v. Bailey, 129 S.Ct. 2195 (2009). 16 authorizes the court to enjoin entities from taking legal 17 action for the purpose of directly or indirectly collecting, 18 recovering, or receiving payment or recovery with respect to 19 any [asbestos-related] claim or demand. 20 § 524(g)(1)(B). 21 must [c]hannel[] asbestos-related claims to a personal 22 injury trust [to] relieve[] the debtor of the uncertainty of 23 future asbestos liabilities. Johns-Manville Corp. v. Chubb Indem. The statute 11 U.S.C. To obtain relief under § 524(g), a debtor In re Combustion Eng g, Inc., 50 1 391 F.3d 190, 234 (3d Cir. 2004). 2 relief under this provision are subject to numerous 3 requirements and conditions. 4 § 524(g)(2)(B); Combustion Eng g, 391 F.3d at 234 & n.45. 5 Injunctions granting See 11 U.S.C. By its terms, however, § 524(g) applies only to a 6 court that enters an order confirming a plan of 7 reorganization under chapter 11. 8 see also Combustion Eng g, 391 F.3d at 234 n.46. 9 and II of this opinion conclude that the Sale was proper 11 U.S.C. § 524(g)(1)(A); Sections I 10 under § 363. 11 of § 524(g) because there is no plan of reorganization as 12 yet. 13 issue an injunction, as is permitted by § 524(g)(1)(B), and 14 the debtor did not establish a trust subsuming its asbestos 15 liability. 16 argument that the Sale Order violates § 524(g). That determination forecloses the application Moreover, the bankruptcy court in this case did not Accordingly, there is no merit to Pascale s 17 18 19 C. Future Claims The Sale Order extinguished the right to pursue claims 20 on any theory of successor or transferee liability, . . . 21 whether known or unknown as of the Closing, now existing or 22 hereafter arising, asserted or unasserted, fixed or 23 contingent, liquidated or unliquidated. 51 Sale Order at 40- 1 41. 2 (1) the Sale Order violates the due process rights of future 3 claimants by extinguishing claims without providing notice; 4 (2) a bankruptcy court is not empowered to trump state 5 successor liability law; (3) future, unidentified claimants 6 with unquantifiable interests could not be compelled to 7 accept a money satisfaction, 11 U.S.C. § 363(f)(5); and (4) 8 future causes of action by unidentified plaintiffs based on 9 unknown events cannot be classified as claims under the 10 11 This provision is challenged on the grounds that: Bankruptcy Code. We affirm this aspect of the bankruptcy court s 12 decision insofar as it constituted a valid exercise of 13 authority under the Bankruptcy Code. 14 delineate the scope of the bankruptcy court s authority to 15 extinguish future claims, until such time as we are 16 presented with an actual claim for an injury that is caused 17 by Old Chrysler, that occurs after the Sale, and that is 18 cognizable under state successor liability law. However, we decline to 19 20 CONCLUSION 21 We have considered all of the objectors-appellants 22 contentions on these appeals and have found them to be 52 1 without merit. For the foregoing reasons, we affirm the 2 June 1, 2009 order of the bankruptcy court authorizing the 3 Sale. 53

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