In a major victory for clients Daimler AG, Daimler North America Corporation, and Daimler Investments US Corporation (collectively, "Daimler"), a team of Shearman & Sterling lawyers won the dismissal of Daimler from a lawsuit brought by Chrysler LLC's creditors in the Chrysler bankruptcy proceedings. Chief Bankruptcy Judge Arthur J. Gonzalez granted Daimler’s motion to dismiss on all counts, dismissing some counts with prejudice, and dismissing other counts without prejudice and leave to replead. The case is Liquidation Trust v. Daimler AG, case number 09-00505 (U.S. Bankruptcy Court for the Southern District of New York, July 27, 2010).
On April 30, 2009 Old CarCo LLC f/k/a Chrysler LLC filed for bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York. On August 17, 2009, the Official Committee of Unsecured Creditors of Old CarCo (the “Creditors’ Committee”) filed a complaint against Daimler, which was subsequently amended on January 4, 2010. Following confirmation of Chrysler’s Plan of Liquidation, the Creditors’ Committee was replaced as plaintiff in the case by a Liquidation Trust (the “Trust”).
The plaintiff’'s case is premised on the theory that Daimler AG, in connection with the transfer of its majority interest in Chrysler to Cerberus in 2007, orchestrated a restructuring of Chrysler that stripped it of its most valuable assets and for which Chrysler received little or no value in return. The Amended Complaint asserted various causes of action based on intentional fraudulent transfer, constructive fraudulent transfer, breach of fiduciary duty, unjust enrichment, and corporate alter ego claims against Daimler and certain current and former members of Daimler AG's board of management who previously served on Chrysler LLC's board of directors.
Daimler’s motion to dismiss argued that the transfers challenged in the Amended Complaint could not properly be valued without considering the entirety of the transaction, including the ultimate transfer of the controlling interest in Chrysler to Cerberus that resulted in a major cash infusion into Chrysler. Judge Gonzalez agreed with this approach and concluded that the Cerberus transaction should be evaluated as a single integrated transaction for purposes of the fraudulent transfer analysis. The Court dismissed with prejudice the intentional fraudulent transfer claims and one of the constructive fraudulent transfer claims (the claims for breach of fiduciary duty had previously been dismissed by stipulation of the parties).
The litigation team working on the motion to dismiss consisted of partners Alan Goudiss (New York-Litigation) and Jaculin Aaron (New York-Litigation), associates Paula Howell (New York-Litigation), Mallory Tosch (New York-Litigation), Daniel Lewis (New York-Litigation), Joseph Barden (New York-Litigation), Scott Ledet (New York-Litigation), Wesley Pang (Paris-International Arbitration), and Brian Scibetta (New York-Litigation), and legal assistants William Bartholomew (New York-Litigation), Mariusz Jedrzejewski (New York-Litigation), and Jill Aberbach (New York-Litigation). Also contributing were counsel Susan Fennessey (New York-Bankruptcy & Reorganization); partner W. Jeffrey Lawrence (New York-Mergers & Acquisitions); and partner Markus S. Rieder (Munich-Mergers & Acquisitions) and associate Stefan Falge (Munich-Mergers & Acquisitions).