As you have no doubt have heard by now, and as I had long expected, the 2d Circuit affirmed the bankruptcy court's decision in Chrysler, essentially incorporating the Bankruptcy Judge's opinion by reference. The courtroom was packed — at least 300 people in attendance — and there was notable surprise when the panel announced at the end of argument that they would take a ten minute recess and return.
Clearly this not only helps Chrysler — assuming the appeal to the Supreme Court is unsuccessful, as I expect it will be — but also GM, which is following the same basic template.
One of the most interesting parts of the hearing, from my perspective, occurred when the attorney for the Indiana Funds seemed to argue for Lionel to be overturned and for the appellate court to reduce the bankruptcy court's discretion in the area of 363 sales. Although the court clearly did not accept his invitation, that moment was the closest the appellants got to acknowledging just how significantly they needed to change chapter 11 practice if they were to win.