The Bankruptcy Weekly July 15, 2009 Brought to you by the National - PDF document

Page 1 of 5 The Bankruptcy Weekly July 15, 2009 Brought to you by the National Association of Dealer Counsel We are grateful to Venable for providing the topical mateiral for our weekly manufacturers' bankruptcy update. Follow the link at the end of the "Industry Wire Chatter" column, and you will find all of the articles summarized. Sincerely, Rob Cohen President National Association of Dealer Counsel In This Issue - Chrysler and GM Post Sale...Bankruptcy Proceedings - Retroactive Help from Congress - The Week At A Glance - Industry Wire Chatter. Chrysler and GM Post Sale This edition of The Bankruptcy Proceedings - Bankruptcy Weekly was co-edited by: What's Left? by Larry Katz, Esq. Lawrence A. Katz On June 11, 2009 the New York Times reported: "With the touch of pen to paper and a simple wire transfer, Chrysler completed its alliance with Fiat on Wednesday morning, largely ending its quick trip through bankruptcy." A similar report appeared in the Washington Post on July 10, 2009 with respect to GM: "CEO vows better performance as GM exits bankruptcy." In the minds of the general public, the Chrysler and GM bankruptcy cases are over, and in record time. The sale orders have been entered by the Bankruptcy Court and the asset sales have proceeded to closing. To most people, the only aspect of the bankruptcy proceedings that mattered -the transfer of assets from the "old" owner to the "new" Larry Katz is a senior partner in owner - is indeed over. However, to the tens of thousands of Venable's Bankruptcy and creditors who are owed money, to the dealers who were left behind, Creditors' Rights Group, where and to the plaintiffs with pending products liability claims, the he concentrates his practice on cleanup process is just beginning and it is likely to drag on for many complex Chapter 11 months, if not years. proceedings, workouts, business restructurings, and The bankruptcy proceedings of Old Carco, LLC (the company commercial litigation. formerly known as Chrysler LLC) and Motors Liquidation Company (the company formerly known as General Motors Corporation) have

Page 2 of 5 lakatz@Venable.com a long way to go before the end is in sight. Most significantly, Washington, DC Office neither case has gotten to the point where a chapter 11 plan of t 703.760.1921 reorganization or liquidation has been filed. In the various f 703.821.8949 oppositions to the GM plan, it was vigorously asserted that the asset sale to New GM was itself a " sub rosa plan," meaning a reorganization disguised as an asset sale without any of the creditor This edition of The protections that are built into the plan confirmation process. The Bankruptcy Court disagreed, finding that the sale was nothing more Bankruptcy Weekly than a transfer of assets and liabilities, with a determination of the was co-edited by: rights of creditors reserved for later proceedings. Those proceedings are now on the horizon. But before any plan Aaron H. Jacoby can be implemented, the claims of creditors must be determined. For every proof of claim filed by a prepetition creditor, there lies a potential objection, which then gives rise to a contested matter that is, in many respects, like a mini-lawsuit that must be litigated to determine the amount of the creditor's allowed claim and how it is to be classified under a plan. Cure amounts must likewise be determined. Dealers, together with other providers of goods and services, whose contracts were assumed by New Chrysler and New GM must either reach an agreement as to the amounts that were owed under their contracts at the time of assumption or litigate their claims. For those dealers and other providers of goods and services whose Aaron Jacoby is Chair of contracts were rejected, rejection claims must be resolved. These Venable's Automotive Industry claims, which arose when the debtors sought to reject the contracts Group. He focuses his practice through either immediate or deferred terminations, are grounded in on class actions and consumer state contract law and are likely to engender complicated and litigation, unfair competition, protracted litigation. federal and state regulatory matters and government Finally, there is the confirmation of the plan itself, the roadmap by investigations affecting the which the remaining assets of the debtors will be divided up and automotive industry. Mr. distributed among the legions of creditors. While drafting of the Jacoby's industry focus and plan is probably already in the works, it may be months before the broad-based litigation and plan is filed, along with a disclosure statement describing its business experience contents, and many more months before some later version of the enable him to counsel clients plan is ultimately confirmed by the Bankruptcy Court. on a wide variety of operational, regulatory and It would not come as any great surprise if, at the end of the day, litigation avoidance issues and the cost of all this legal wrangling leads to a plan that pays to offer pragmatic solutions to essentially nothing to unsecured creditors. the legal challenges they face. ajacoby@Venable.com Retroactive Help from Congress Los Angeles Office t 310.229.9940 by Aaron Jacoby, Esq. f 310.229.9901 The U.S. House of Representatives is trying to reverse the rejection of nearly 3,200 dealerships by General Motors Co. and Chrysler This edition of the Group LLC, setting up a clash with President Barack Obama's Bankruptcy Weekly is administration, Dow Jones Daily Bankruptcy Review reported sponsored by: yesterday. The U.S. House Appropriations Committee approved legislation seeking to restore dealer franchise agreements that were rejected by GM and Chrysler. A full House vote could come as early as this week. The legislation could force the automakers to increase severance payments to rejected dealers, significantly raising the costs of their restructurings. The initiative has widespread support among House lawmakers, including Majority Leader Steny Hoyer Dedication to the (D-Md.) (A similar bill has been introduced in the Senate.) Steven LaTourette, R-Ohio, who sponsored the amendment, told reporters, automotive industry "I think the closing of these dealerships was punitive and secretive, during difficult times. and it's the most un-American thing for the government to help force you out of business and deprive you of the American dream." With Chrysler and General Motors in bankruptcy, the need for As one would expect, the legislation is opposed by GM and competent bankruptcy and Chrysler, who contend that the proposal would upset the litigation counsel - with a focus on complicated deals they made to move quickly through bankruptcy. the auto industry - is increasing. They argue that the dealer cuts are a key element of survival, Venable's national team has saving the companies billions every year. As quoted in multiple worked in the automotive industry news sources, GM spokesman Greg Martin said, "This legislation, if for many years and is passed, would put our long-term viability at risk." providing insight in identifying