WASHINGTON (Legal Newsline) - The U.S. Supreme Court will delay the sale of bankrupt automaker Chrysler to Fiat while the objections of a group of Indiana pension funds are sorted out.

Justice Ruth Bader Ginsberg issued a one-page order Monday that requires Chrysler's proceedings in bankruptcy court to be stayed. The Indiana State Police Pension Fund, the Indiana Teacher's Retirement Fund and the state's Major Moves Construction Fund argued Chrysler's plans to sell its assets unfairly favors interests of Chrysler's unsecured stakeholders over debt holders.

Ginsberg wrote that the bankruptcy proceedings "are stayed pending further order of the undersigned or of the court."

The three pension funds hold about $42 million of Chrysler's $6.9 billion in secured loans.

"The negative economic consequences of permitting an unlawful sale to proceed may well over time dramatically outweigh Chrysler's short-term harm," the funds said in court papers.

U.S. Bankruptcy Court Judge Arthur Gonzalez of the Southern District of New York approved the sale last Sunday, but the Second U.S. Circuit Court of Appeals put the brakes on it Tuesday.

The pension funds also claim the Treasury Department illegally used Troubled Asset Relief Program funds to finance Chrysler's bankruptcy protection.

The sale was scheduled to be completed June 15.

From Legal Newsline: Reach John O'Brien by e-mail at

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