In re Chrysler LLC
United States Court of Appeals for the Second Circuit
576 F.3d 108 (2009)
After a prolonged financial decline, Chrysler LLC (Old Chrysler) (defendant) filed a prepackaged Chapter 11 case proposing to sell substantially all its operating assets to New Chrysler in exchange for $2 billion cash and assumed liabilities, with Fiat providing management and technology for a 20% equity stake, the U.S. and Canadian governments providing roughly $11 billion in financing for 10% ownership, and a union benefit trust receiving 55% ownership. Fiat was the only viable strategic partner found after two years of searching, and liquidation — the only alternative — would have yielded over $1 billion less. The bankruptcy court approved the sale, and various pension funds and tort claimants (plaintiffs) appealed.
Whether a debtor-in-possession may, under 11 U.S.C. § 363(b), sell substantially all of its assets to an entity that will retain most of the debtor's employees and operate under a similar business model, if the only alternative to sale is liquidation.