Those wacky members of Congress

I assume the Automobile Dealer Economic Rights Restoration Act of 2009 (H.R. 2743) is going nowwhere fast, but I do appreciate that a few members of the House were kind enough to provide this bankruptcy professor with some interesting reading on a rainy Thursday afternoon in Newark.

Section 3(a) of the bill provides that "[i]n order to protect assets of the Federal Government and better assure the viability of automobile manufacturers in which the Federal Government has an ownership interest" said manufacturers "may not deprive an automobile dealer of its economic rights and shall honor those rights as they existed" on the eve of a manufacturer's bankruptcy case.

Now the bill does not actually reference § 365, and one could easily question the premise of the opening clause, but I assume that this is intended to "unreject" Chrysler's unwanted dealership agreements, and thwart GM's expected move reject some of its own dealership agreements.

The thing that makes this amusing is that section 3(c) of the bill expressly states that if enacted it will have no effect on the sale orders in either chapter 11 case. In short, the dealers who are "saved" by this bill will have the dubious privilege of being dealers for liquidating corporations that no longer manufacture cars. That is, the bill does not to alter the reality that the dealers' contracts are with "old" GM and Chrysler and they are being left behind. As the dealers will say when they realize this -- "swell," or words to that effect.

Finally, there is a part of me that hesitates to point out this flaw, because, as I have argued, chapter 11 already suffers from excessive Congressional tinkering that has made it increasingly difficult to actually reorganize companies under the Code. I would also think that any attempt to do what Congress seems to want to do here might run afoul of due process and separation of powers, particularly as applied to Chrysler -- although I'm getting myself pretty far out on the constitutional law limb here and will retreat to the wonderfulness of the Bankruptcy Code at once.

UPDATE:  One way around the statutory problem I identify is to read this as an attempt to create some sort of successor liability in the reorganized companies for these contracts, essentially assigning them without using §365.  The constitutional law issues, whatever their merit, would still remain.  And I think Fiat (and maybe the Canadians) might have some problems with this -- it amounts to changing the deal after it's been closed.

Comments

[Let it go, Reps.]

For added enjoyment on a gloomy Thursday afternoon, I believe that H.R. 2750, which doesn't contain the section 3(c) sale carve-out and isn't specifically limited to Chrysler and GM, is also floating around out there.

[Lawrence D. Loeb]

Professor:

Doesn't this also conflict with 363(m), unless Congress is planning on inserting language that states that rejection of auto dealerships cannot be considered to be done in "good faith?"

[dWJ]

Perhaps Congress can simply make it illegal for automakers not to be profitable. That would solve all of our problems.

[Raymond Bell]

Has anyone in Congress held a paying job outside of politics?

[GREG SIGNORE]

I TO BELIEVE THEY SHOULD HAVE
TOTALLY LIQUIDATED CHRYSLER THAN EVERYONE WOUD HAVE BEEN TREATTED EQUALLY AS IN THE BANKRUPTCY NOT JUST CERTAIN DEALERS THROWN OUT !