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Legal Analysis by John Charlton

(Jan. 24, 2009) — Yesterday Attorneys Leo Donofrio and Stephen Pidgeon filed their reply to the Defenses objections to their own Motion for Reconsideration in the case RE: in Chrysler LLC et al., on behalf of 76 former Chrysler  dealerships, whose owners lost their livelihoods when the Bankruptcy Court in New York canceled their dealership contracts with Chrysler as part of the forced sale to FIAT.

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 now known as “Old Carco LLC,” or “Old Chrysler.” The docket of the entire case can be viewed here.

The dealers are seeking to recover monetary compensation for the loss of their franchises and contractual rights with Chrysler. The central argument of the dealerships is that the FIAT executive, Mr. Alfredo Altavilla, never said that the nullification of their contracts was required for the forced sale; whereas Judge Gonzalez, in his decision, quoted Altavilla as saying such.

The court transcripts clearly support the dealerships’ claims, whereas the erroneous footnote written by Judge Gonzalez seems to be an honest mistake, caused by an inaccurate memory of Altavilla’s testimony.

The Post & Email covered the original Motion for Reconsideration on Dec. 26, 2009.

The disputed testimony of Altavilla, as it appears in the record, reads thus:

Q. If this transaction closes without an absolute requirement of a particular number of dealers that are being terminated, would Chrysler still go through with this deal — I mean, rather, would Fiat still go through with this deal?

Altavilla:  The answer is that a restructure needs to occur. Whether it occurs before or after the closing of the deal is not a material difference.

And the erroneous rephrasing of that testimony by Judge Gonzalez is that which occurs in Footnote 21 of his ruling in the case In re Old Carco, 406 B.R. at 197:

21 …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.”

However, in reply to that Motion, the lawyers for the Debtors and Debtors in Possession filed an Opposition Brief, which in 36 pages simply reiterated the claim that Altavilla did say that the nullification of the dealerships’ contracts was required.

To the objective observer who reads the entire brief submitted by the defense, the mere lack of proper citations to the actual testimony of Altavilla is proof that their argument is false.

In their own brief defending their original Motion for Reconsideration, Donofrio and Pidgeon quite pointedly remark on p. 6:

Debtors’ allegation that we have taken issue with the Court’s interpretation of this testimony is misplaced. It’s not that we take issue with the Court’s interpretation of testimony; it’s that we take issue with the Court’s misstatement of the testimony. Footnote 21 makes it appear as if the witness stated that restructuring needed to occur for the sale to close. The answer is parsed after the word “occur”. But the very next sentence (as properly described in Footnote 18) continues the response to the very same question. There was no intervening question. It’s all part of the same Q & A. Footnote 21 therefore improperly supplements the record. This is not merely “fact finding” as Debtors’ Counsel has alleged; this is fact making which is improper in the extreme and exhibits a reckless disregard for the truth. (Italics in the original).

In other words, Altavilla said that the restructuring was required, but he did not say it was required for the sale; it was required for the reorganization necessary to make the new entity an operative part of FIAT’s international company, but not for the sale of Chrysler to FIAT.

Since Judge Gonzalez’s order presupposed such a necessity as the reason for canceling the contractual and franchise rights of the dealers, his judgment, according to Attorneys for the Movants, cannot stand, because it is predicated upon facts not in evidence — in this case, upon a statement which Altavilla never made.

If Judge Gonzalez’s error was an honest one, it seems inevitable that the dealers should prevail in this action. If Gonzalez defends his error and rules against them, it seems likely that on appeal his ruling should be overturned.

For those wishing to read both briefs in their entirety, you can download them from The Post & Email, in PDF format:

Opposition to Movants’ Motion for Reconsideration (130 K)

Response to Debtors’ Rejection (650 K)

The lead plaintiff in this case, James Anderer, will be on Neil Cavuto’s program on Monday.

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  1. The Code of Hammurabi

    Law 5;

    If a judge try a case, reach a decision, and present his judgment in writing; if later error shall appear in his decision, and it be through his own fault, then he shall pay twelve times the fine set by him in the case, and he shall be publicly removed from the judge’s bench, and never again shall he sit there to render judgement.

  2. It’s amazing that this case has received no visible coverage in the main stream media. The only recent coverage has been the attempt to lure former Chrysler dealers into accepting arbitration so that the injustice of stealing their franchises does not proceed into a court case.