NEW YORK CITY - U.S. Bankruptcy Judge Arthur Gonzalez peeled personal injury lawyers off New Chrysler on May 31, ruling that Italian automaker Fiat can buy old Chrysler's assets free and clear of tort claims.
He wrote that an appellate court decision in the Trans World Airlines bankruptcy "makes clear that such tort claims are interests in property such that they are extinguished by a free and clear sale" under section 363 of bankruptcy code.
Gonzalez wrote that the policy underlying the section "is to allow a purchaser to assume only the liabilities that promote its commercial interests."
Gonzalez sided with Chrysler chairman Robert Nardelli, who testified on May 27 that after the sale no money would remain for tort claims.
Injury lawyers bounced back by appealing to the U.S. Second Circuit in New York.
Then they rolled out heavy artillery for a bigger target: General Motors.
On June 1, the day GM's bankruptcy opened, asbestos giants SimmonsCooper of East Alton, Ill., Weitz & Luxenberg of New York City and Waters & Kraus of Dallas jointly requested service of all notices and papers.
The giants stayed out of the Chrysler case, filing no motions or objections.
Robert Phillips of SimmonsCooper entered an appearance in the Chrysler case on the day it opened but he hasn't posted anything further on the docket.
While the giants stayed away from Chrysler, responsibility for asbestos claims rested on Alan Brayton of Novato, Calif., and Peter D'Apice of Dallas.
They represented asbestos claimant Patricia Pascale, one of 13 members of Chrysler's committee of unsecured creditors.
The committee included car crash plaintiff Desiree Sanchez, giving injury lawyers two seats compared to one for taxpayers and one for the United Auto Workers.
Sanchez's lawyer, Benjamin Deutsch of New York, claimed $650 million on behalf of more than 150 current and future claimants.
Brayton and D'Apice didn't specify their asbestos claims.
Gonzalez threw out all tort claims in an order authorizing Chrysler to sell substantially all its assets.
"Various objections were raised related to property damage claims and personal injury and wrongful death claims, including those which have not yet occurred," Gonzalez wrote.
"Some of these objectors argue that their claims are not 'interests in property' such that the purchased assets can be sold free and clear of them," he wrote.
According to the TWA decision, he wrote, the sale extinguishes tort claims.
He overruled due process objections to a free and clear sale.
He overruled objections that it would be unfair, inequitable, or in bad faith.
And, he signed the order on Sunday, in a case that never stops.
In a separate order, Gonzalez rejected a claim from Indiana pension funds that U.S. Treasury unconstitutionally carried out a plan that favors some lenders over others.
Though Chrysler prevailed on all points, it moved on Monday for immediate appeal to the Second Circuit.
Every step requires immediacy, for Fiat's financing will expire on June 15.
Gonzalez certified an appeal on Tuesday.
As soon as he did, Deutsch and D'Apice filed their own notices of appeal.
So did Edward Peterson of Tampa, Fla. in association with Ralph Nader's group Public Interest and others on behalf of tort claimants.
The clerk docketed the appeals in the case Gonzalez initiated.
Meanwhile GM filed its bankruptcy petition.
In GM's case D'Apice didn't appear for a lone plaintiff of his own firm.
He appeared for a committee of claimants represented by SimmonsCooper, Weitz & Luxenberg, Waters & Kraus, and Brayton's firm, Brayton Purcell.
"Other asbestos personal injury claimants may join the ad hoc committee," D'Apice wrote.
Phillips of SimmonsCooper separately entered an appearance on June 1.
So did Deutsch, and on June 2 he moved to appoint a committee of tort claimants.
"Although a tort claimant and an asbestos claimant were appointed to the official unsecured creditors committee in the Chrysler case, the official committee, dominated by parties whose claims will be satisfied in one way or another through the sale transaction, supported the sale," Deutsch wrote.
"The tort claimants, who are individuals with limited financial resources, were left alone to attempt to press an objection to the sale," he wrote.
"Without a voice and a champion for their mutual cause funded by the Debtors' estates, the tort claimants could be left alone, unprotected and effectively disenfranchised," he wrote.
On behalf of more than 300 persons, Deutsch claimed $1.25 billion.
D'Apice didn't specify any numbers for asbestos claims.