505 B.R. 151
Bankr. S.D.N.Y.2014Background
- Chrysler Group LLC seeks to enforce the Sale Order free and clear to stop Michigan, Indiana and Illinois from using Old Carco’s unemployment insurance Experience Rating for New Chrysler’s tax rate.
- The Sale Order defined Claims broadly and enjoined government authorities from asserting claims related to pre-Closing ownership/operation of the Assets, except for Assumed Liabilities.
- Old Carco filed Chapter 11 on April 30, 2009; the Asset Sale closed June 10, 2009; Post-closing, New Chrysler took over the Chrysler business.
- During 2009–2013, the three states transferred Old Carco’s Experience Rating to New Chrysler, causing New Chrysler to pay significantly higher unemployment taxes.
- New Chrysler protested and sought relief, but the court held it lacked subject-matter jurisdiction due to the Tax Injunction Act; the appropriate remedy is in state forums.
- The court notes it has bankruptcy jurisdiction to interpret its sale order, but the Tax Injunction Act governs and forecloses federal relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Tax Injunction Act bar federal relief here? | New Chrysler argues TIA prevents state tax collection actions from affecting sale-order interests. | States contend TIA applies and requires state fora for relief. | Yes, TIA deprives federal jurisdiction. |
| Are any TIA exceptions available to permit this action? | New Chrysler contends no applicable exception. | States argue remedies exist in state proceedings. | No applicable exception; state remedies suffice. |
Key Cases Cited
- Grace Brethren Church, 457 U.S. 393 (U.S. 1982) (TIA applies to state tax challenges and prohibits federal relief unless exception)
- Victory Markets, Inc. v. N.Y. State Unemployment Insurance, 263 B.R. 9 (Bankr.N.D.N.Y. 2000) (illustrates TIA precluding bankruptcy court from enjoining state tax transfer of experience rating)
- In re Eveleth Mines, L.L.C., 318 B.R. 682 (8th Cir. BAP 2004) (TIA as jurisdictional bar; bankruptcy court may interpret sale orders but must respect state remedies)
- Luan Inv. S.E. v. Franklin 145 Corp. (In re Petrie Retail, Inc.), 304 F.3d 223 (2d Cir. 2002) (bankruptcy court's core jurisdiction to interpret its orders and non-debtor disputes)
- Goldberg v. Ellett (In re Ellett), 254 F.3d 1135 (9th Cir. 2001) (recognizes limits of bankruptcy powers and specific provisions to adjudicate tax claims)