Indiana Pensioners' Motion to Move Chrysler Case to Federal Court

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WHITE & CASE LLP1155 Avenue of the AmericasNew York, New York 10036-2787(212) 819-8200Glenn M. KurtzWachovia Financial Center, Suite 4900200 South Biscayne Blvd.Miami, Florida 33131(305) 371-2700Thomas E. Lauria (

admitted pro hac vice

)ATTORNEYS FOR THEINDIANA STATE TEACHERS RETIREMENT FUND,INDIANA STATE POLICE PENSION TRUST, ANDINDIANA MAJOR MOVES CONSTRUCTION FUND

IN THE UNITED STATES BANKRUPTCY COURTFOR THE SOUTHERN DISTRICT OF NEW YORK

)In re ) Chapter 11)CHRYSLER, LLC, et al., ) Case No. 09-50002 (AJG)) Jointly AdministeredDebtors. ))

MOTION TO WITHDRAW THE REFERENCE

The Indiana Pensioners,

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by and through their undersigned attorneys, submit this motionto withdraw the reference made to the United States Bankruptcy Court (the “Motion”) withrespect to (i) the issues raised herein, (ii) the Debtors’ Sale Motion (as defined herein), and (iii)the Motion to Convert Cases or Appoint a Chapter 11 Trustee and for Immediate Appointment of

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The Indiana Pensioners are comprised of the Indiana State Teachers Retirement Fund and Indiana State PolicePension Trust, pension funds which are fiduciaries for the investment of billions of dollars of retirement assets forapproximately 100,000 civil servants, including police officers, school teachers and their families, and the IndianaMajor Moves Construction Fund, an infrastructure construction fund, all of whom are holders of the Senior Debt (asdefined below).

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2an Examiner (the “Trustee/Examiner Motion”). In support, the Indiana Pensioners respectfullystate and represent as follows:

I. SUMMARY OF ARGUMENT

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The violation of federal law, including non-bankruptcy law, being directed by theExecutive Branch in this action under the guise of its Troubled Asset Relief Program (“TARP”)is breathtaking. Adopting a raw “the ends justify the means” rationale, the Treasury Departmenthas taken constructive possession of Chrysler and is requiring it to adopt a sale plan inbankruptcy that violates the most fundamental principles of creditor rights – that first tier securedcreditors have absolute priority, including over junior and unsecured creditors. Remarkably, theGovernment has orchestrated a plan that pays the secured lenders only 29% of their claims, whileproviding par recovery to certain unsecured creditors. This result, while perhaps reflecting apolitical compromise, has no basis in the law. The Government’s action is not authorized by anystatute, including TARP, and violates the unambiguous provisions of the Emergency EconomicStabilization Act (the “EESA”) and the Constitution of the United States. These critical issuesmust be decided by the district court and withdrawal of the reference is therefore required.2.

The mandatory withdrawal statute, 28 U.S.C. § 157(d), “require[s] withdrawal tothe district court of cases or issues that would otherwise require a bankruptcy court judge toengage in significant interpretation, as opposed to simple application, of federal laws apart fromthe bankruptcy statutes.” City of New York v. Exxon Corp., 932 F.2d 1020, 1026 (2d Cir.1991). That standard is readily met when novel issues or constitutional questions are raised.Such issues are plainly raised by what the Government is attempting to do in this bankruptcyproceeding, including through the pending Sale Motion and by the issues set forth in theTrustee/Examiner Motion.

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33.

The Indiana Pensioners are first lien secured creditors

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(“Senior Lenders” andholders of “Senior Debt”) who hold liens on substantially all of the Debtors’ U.S. assets,including their plants, equipment inventory and bank accounts, and approximately 65% of theDebtors’ equity interests in their foreign subsidiaries (the “Collateral”). In clear violation of theIndiana Pensioners’ rights, Debtors here have filed a Sale Motion which, if accomplished, wouldinvert the Bankruptcy Code’s well-established priority scheme and,

inter alia

, grant to unsecuredcreditors a significant equity interest in a new entity, “New Chrysler,” notwithstanding that theSenior Lenders have not been paid in full. Rather than pay the secured creditors as required, theDebtors – at the Government’s direction – are essentially transferring the Collateral with anyvalue to New Chrysler and then divvying up the majority of that value among unsecuredcreditors (the United Auto Workers (“UAW”)) and third parties (the US Treasury Departmentand Fiat).4.

These truly extraordinary Government actions are not authorized by any statute,much less by the TARP authority granted by Congress in October 2008 when the EESA wasenacted and under which the Government purports to be acting. Rather, TARP expresslyprovides that the Treasury Department may only purchase the “troubled assets” of “financialinstitution[s],” 12 U.S.C. § 5211(a)(1), which the statute then defines as “any institution,including but not limited to, any bank, savings association, credit union, security broker ordealer, or insurance company, established and regulated under the laws of the United States orany State, territory or possession of the United States . . . and having significant operations in theUnited States but excluding any central bank of, or institution owned by, a foreign government.”

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The Indiana Pensioners are party to that certain First Lien Credit Agreement dated as of November 29, 2007 (asmay have been amended or supplemented) with Chrysler LLC (“Chrysler”), as borrower, certain of Chrysler’ssubsidiaries, as guarantors, and JP Morgan Chase Bank N.A., as administrative agent. Under this credit agreement,the Lenders loaned Chrysler approximately $7 billion.