DEALER’S PILING ON, IN LEGAL BID TO DEFEND RIGHTS TO THEIR FRANCHISES
by John Charlton
(Dec. 26, 2009) — Last night Attorney Leo Donofrio filed an Omnibus Motion to Reconsider in the case RE: in Chrysler LLC et al., in the name of Attorney Stephen Pidgeon and himself, and on behalf of more than 20 Chrysler Dealerships, seeking to recover monetary compensation for the loss of their franchises and contractual rights with Chrysler.
The case involves the disputed bankruptcy proceedings of Chrysler automotive corporation, known formally as Chrysler LLC. The many cases regarding the dissolution and sale of Chrysler are being heard before the Honorable Arthur J. Gonzalez, United States Bankruptcy Judge for the Federal Court, Southern District of New York.
Following the sale of Chrysler LLC to Fiat, the new corporation took the name “Chrysler Group LLC,” and the former is know know as “Old Carco LLC,” or “Old Chrysler.”
While the issue of Obama’s illegitimacy as President makes the dissolution and reorganization of the corporation by Obama and at his behest, one of the glaring crimes of his regime; the creditors in the case are not questioning his eligibility, but rather the nature of the corporate dissolution and reorganization.
Moreover, while Attorneys Donofrio and Pidgeon did not originally represent any of the claimants in the case, the nature of the bankruptcy proceedings has provided an opening where by any of the latter might make objection with their own counsel, to specific aspects of the Bankruptcy court’s decisions.
Such is the affair in the Omnibus Motion to Reconsider, which seeks from Judge Robert J. Gonzales the following:
- that he vacate his June 9, 2009 Rejection Order and Claims Bar Date therein;
- that he vacate his June 19, 2009 Rejection Opinion;
- that he order Old Chrysler to retroactively assume rejected dealers’ contracts;
- that he approve nunc pro tunc an implied Statutory Assumption of the rejected dealers’ contracts by Old Chrysler;
- that he order Movants’ claims are priority administrative claims;
- that he reverse payment to priority lien holders;
- that he order payment of damages to Movants as priority lien holders; and
- that he order an evidentiary hearing to establish the damages of Movants,
The lead plaintiff in the present action is Mr. James Anderer.
Attorney Donofrio, in an exclusive press release to The Post & Email, stated the following about his filing:
We filed a Motion to reconsider under Rules 60(b) and 60(d)(3). The 60(d)(3) count alleges “fraud on the court” by Judge Gonzalez, but please make it clear that the fraud we allege is due to “reckless disregard for the truth” and NOT intentional fraud.
Among the documents filed with the Bankruptcy Court last night are:
- Omnibus Motion to reconsider
- Memorandum of Law in support of Motion To Reconsider (35 pages)
- Proposed Order For Motion To Reconsider
The filings can be found in PDF format http://www.kccllc.net/chryslercommittee, searching for “Donfrio” among the Court Documents link. The Memorandum of Law has also been published at Scribd.com: http://www.scribd.com/doc/24515184/Memorandum-Supporting-Motion-for-Reconsideration.
Movants charge unintentional commission of “fraud” by the Court
The essential defect which movants claim provides a basis for their Motion is that,
the Court overlooked legal authority respecting its power to withhold approval of the rejections pursuant to Section 365(a) of the Bankrutpcy Code. To wit, the Court had the power to authorize the sale and to also refuse approval of the rejections. The Sale authorization would not have been invalidated had the Court failed to approve the dealership rejections. Appropriate and equitable relief was (and still is) available against the Debtor’s estate.
The movants then claim that Judge Gonzales unintentionally misconstrued the testimony of a principle witness, Fiat executive, Alfredo Altavilla, which resulted in the judicial interpretation of the witness’ testimony in a sense contrary to the clear meaning of that testimony. In this the movants are claiming the Court committed what is know as “fraud,” but they immediately qualify their assertion thus:
Before turning to our legal analysis of the elements necessary to establish fraud on the Court under FRCP Rule 60(d)(3), we should state that Movants do not allege Judge Gonzalez intentionally perpetrated a fraud on the Court. Regardless, we respectfully submit that the assertion wielded by Judge Gonzalez in Footnote 21 is fraudulent on its face and as such it exhibits a reckless disregard for the truth which is enough under controlling precedent to establish fraud on the court under Rule 60(d)(3).
Altavilla had testified that the dealers’ agreements need not be rejected prior to the sale be formalized; but Judge Gonzales mistakenly related it thus in his ruling. The Memorandum of the movants explains this in detail, the crucial part of which responds to Judge Gonzales’ footnote, in which he says:
“Altavilla also responded affirmatively to a question regarding whether a dealership network needed to be restructured for the Fiat Transaction to close, stating that a “restructuring needs to occur.”
The Memorandum responded to this:
The record indicates by clear and convincing evidence that this assertion by Judge Gonzalez is unequivocally false. It gives the appearance of judicial ventriloquism concerning the most important issue related to the Rejection Motion. Without this alleged affirmative response, the record of the case lacks any evidence whatsoever suggesting rejection of the dealership agreements was ever requested by Fiat, the US Government or the United Auto Workers as a condition precedent to the deal closing. Footnote 21 parses, “restructuring needs to occur” by ignoring the very next sentence of the very same answer given by Altavilla. And the complete answer made it perfectly clear that restructuring did not need to occur before the sale closed.
Wherefore, after a detailed analysis, the Movants request Gonzales’ order be vacated (i.e. cancelled):
We respectfully submit that the averment by Judge Gonzalez in Footnote 21 of the Rejection Opinion has caused the judicial machinery to work in an alien and wholly improper manner by subverting a clear response by a key witness as to the most important issue before the Court. Judge Gonzalez, in taking this action, has caused the appearance of impartiality to be disturbed by reckless disregard for the truth. The record of the case should not be allowed to remain so defiled. Accordingly, we request complete relief from the Rejection Order.
Movants contest that Business Standard was met
In the second half of the Memorandum, the movants contest whether the Debtor’s rejection of 789 dealership agreements met the business judgment standard overlooked many important facts which could have reasonably altered the conclusions stated in the Rejection Order and discussed in the Rejection Opinion.
In this regard the Memorandum challenges various aspects of the business judgement standard, such as:
- “Section 365(a) of the Bankruptcy Code requires that before a Debtor may assume or reject an executory contract, the bankruptcy court must approve the Trustee’s (or Debtor In Possession’s) decision thereto.”
- “Judge Gonzalez also failed to discuss how the controlling authorities define “benefit to the estate”. The definition was established in the oft-quoted 2d Circuit precedent of In re Minges, 602 F.2d 38 (2d Cir. 1979) which held that “general creditors” must benefit from the debtor’s rejection of an executory contract.”
- and . . . “overlooked the fact that Old Co would receive no benefit whatsoever from a streamlined dealership network as Old Chrysler was not going to be selling automobiles anymore.”
- Cost allegations;
- and that “the Court overlooked the fact that had the 789 dealership contracts been assumed on May 14th instead of rejected, the Debtor in Possession Budget would not have been affected at all.”
- “The Debtor – as Debtor in Possession – had a fiduciary duty to consider the impact of rejection damage claims upon the Debtor’s estate and to weigh such damages against any perceived benefit of rejection. Judge Gonzalez overlooked this breach of fiduciary duty.”
- “There is no evidence whatsoever in the record of the case indicating that Fiat, the US Government, the Canadian Government or the United Auto Workers ever requested dealers be rejected by the Debtor.”
Finally, the movants appeal to the Court on the basis of its failure to use its powers of equity to safeguard the jobs of more than 39,000 employees of Chrysler LLC, and the financial assets of the Dealers, many of whom purchased excessive quantities of stock from the Corporation in an attempt to save it prior to the bankruptcy.