Month: June 2009

Read ScotusBlog if you want to find out what is happening in the Supreme Court Chrysler sale challenge. Excerpt:

The case of In re Chrysler LLC, Debtor has the potential to produce the most significant Supreme Court ruling on the government’s power to deal with economic crisis since the Court struck down major parts of President Franklin Roosevelt’s New Deal, in Schechter Poultry Corp. v. U.S. in 1935 and U.S. v. Butler in 1936. But the Supreme Court will not actually rule on any of the basic legal challenges unless it first puts the Chrysler sale on hold, and then agrees to hear and decide the case itself. It has no legal obligation to do either. Two challenges have now been filed. UPDATE: A third challenge has been filed. . .

Read the Application filed in the case here.

UPDATE: Supreme Court Grants a Temporary Stay. Access the Order here.

UPDATE: The stay was lifted. You can access the two-page order here.

The Treasury could not have foreseen that it would have to carve out an exception under the 409A change in control rules for the federal government acquiring interests in financial institutions. Hence the issuance of Notice 2009-49 announcing future changes to the 409A regulations:

Questions have arisen whether the Federal government’s acquisition of an equity interest in a financial institution or other entity in connection with a Treasury EESA Equity Acquisition Transaction constitutes a change in control event and accordingly a permissible

From a Press Release:

Indiana Treasurer Richard Mourdock announced that two state pension funds have filed with the US Bankruptcy Court presiding over Chryslers Chapter 11 case objecting to the proposed sale of substantially all of Chryslers assets and seeking the appointment of a trustee to protect their security interests and property rights. Indiana was the sole creditor to file objections with the court. . .

“As fiduciaries, we can’t allow our retired police officers and teachers to be ripped off. . . “

You can view the documents filed in the case here.

See also this article from Bloomberg: “Chrysler Sale Appeal Will Bypass a Court to Save Time.”

[While these plans are governmental plans not subject to ERISA, if Indiana has laws which would impose fiduciary responsibility on fiduciaries of government plans similar to ERISA (as many states do), then these fiduciaries would have no choice but to file their objections if their plans’ rights are not being protected in accordance with the law.]

Don’t miss this Sixth Circuit case–American Council of Life Insurers v. Ross–holding that ERISA does not preempt a Michigan state law which prohibits insurers from including the Firestone discretionary language in insurance policies. The case is particularly noteworthy because the court cites the Glenn case in support of its decision that the state law should not be preempted:

Finally, we observe that Glenn provides further support for holding that Michigan’s law is not preempted by ERISA. There, the Court reiterated that a conflict of interest exists when the same insurer is responsible for examining and paying a benefits claim. Glenn, 128 S. Ct. at 2348. In view of that conflict, Glenn determined that courts, in reviewing a benefits decision by an insurer who has discretion over assessing and paying benefits, may consider that conflict as a factor in deciding whether the plan administrators decision amounts to an abuse of discretion. Id. at 2351. If, as Glenn reaffirms, there is a conflict of interest when the same plan administrator decides the merits of a benefits plan and pays that claim, and if, as Glenn also holds, it is consistent with ERISA to account for that conflict of interest in reviewing a plan administrator’s decision, it is difficult to understand why a State should not be allowed to eliminate the potential for such a conflict of interest by prohibiting discretionary clauses in the first place.

Read about the Glenn case in previous posts which you can access here.