In Re Old Carco LLC

OPINION REGARDING AUTHORIZATION OF REJECTION OF ALL EXECUTORY CONTRACTS AND UNEXPIRED LEASES WITH CERTAIN DOMESTIC DEALERS AND GRANTING CERTAIN RELATED RELIEF

In an order (the “Order”) 1 dated June 9, 2009, the Bankruptcy Court granted the omnibus motion of Chrysler LLC, now known as Old Careo LLC, (“Chrysler”) and certain of its affiliates, as debtors and debtors in possession (collectively with Chrysler, the “Debtors”), for an Order, Pursuant to Sections 105, 365 and 525 2 of *187 the Bankruptcy Code and Bankruptcy Rule 6006, (A) Authorizing the Rejection of All Executory Contracts and Unexpired Leases With Certain Domestic Dealers and (B) Granting Certain Related Relief (the “Motion”), 3 filed on May 14, 2009.

An evidentiary hearing was held before the Court on June 4, 2009, at which 15 witnesses testified at the hearing and an additional approximately 66 witnesses presented testimony by proffered declaration. At the close of the presentation of evidence on that date, the hearing was continued to June 9, 2009, at which legal arguments were presented. Several of the Debtors’ employees, including Peter M. Grady (“Grady”), Director of Dealer Operations for Chrysler Motors, LLC, have made declarations to the Court, participated in depositions, and offered live testimony in various hearings regarding the Motion and its subject matter. The Debtors designated certain of this evidence into the record. 4 Over two hundred objections, statements, correspondence, and other responses (collectively with all supplements, amendments, and joinders thereto, the “Objections,” or in the singular, the “Objection”) were filed in response to the Motion. The Committee of Chrysler Affected Dealers (the “CCAD”) and other parties also designated certain evidence into the record. Additionally, the Debtors filed a consolidated reply (the “Reply”) in response to the Objections.

The facts and circumstances of the Debtors’ bankruptcy case have been extensively set forth in In re Chrysler LLC, 405 B.R. 84 (Bankr.S.D.N.Y.2009) and are incorporated, as further expanded upon by additional findings of fact relevant to the Motion, herein.

DISCUSSION

Business Judgment Standard

The Supreme Court has observed that the “fundamental purpose of reorganization is to prevent a debtor from going into liquidation, with an attendant loss of jobs and possible misuse of economic resources .... [T]he authority to reject an executory contract is vital to the basic purpose to a Chapter 11 reorganization, because rejection can release the debtor’s estate from burdensome obligations that can impede a successful reorganization.” NLRB v. Bildisco and Bildisco, 465 U.S. 518, 528, 104 S.Ct. 1188, 1197, 79 L.Ed.2d 482 (1984). In this case, substantially all of the Debtors’ assets were sold pursuant to § 363, which is to be followed by a plan of reorganization setting forth, inter alia, a distribution scheme for the Debtors’ estates, but that does not change the relevant analysis herein. See infra citations to *188 In re G Survivor Corp., 171 B.R. 755, 759 (Bankr.S.D.N.Y.1994).

The business judgment standard is employed by courts in determining whether to permit a debtor to assume or reject a contract. See In re Penn Traffic Co., 524 F.3d 373, 383 (2d Cir.2008) (citing In re Orion Pictures Corp., 4 F.3d 1095, 1098 (2d Cir.1993)). This standard “presupposes that the estate will ... reject contracts whose performance would benefit the counterparty at the expense of the estate.” Penn Traffic, 524 F.3d at 383; see also G Survivor Corp., 171 B.R. at 758 (noting that “the court for the most part must only determine that the rejection will likely benefit the estate” (citation omitted)). “Generally, absent a showing of bad faith, or an abuse of business discretion, the debtor’s business judgment will not be altered.” G Survivor, 171 B.R. at 757. Moreover, the business judgment standard “as applied to a bankrupt’s decision to reject an executory contract because of perceived business advantage requires that the decision be accepted by courts unless it is shown that the bankrupt’s decision was one taken in bad faith or in gross abuse of the bankruptcy retained business discretion.” Id. at 758 (quoting In re Richmond Metal Finishers, Inc., 756 F.2d 1043, 1047 (4th Cir.1985)). A motion to assume or reject “should be considered a summary proceeding, intended to efficiently review the trustee’s or debtor’s decision to adhere to or reject a particular contract in the course of the swift administration of the bankruptcy estate. It is not the time or place for prolonged discovery or a lengthy trial with disputed issues.” Orion, 4 F.3d at 1098-99. 5

Nevertheless, some of the Objections implore the Court either to apply a heightened standard because of the existence of state statutes designed to protect automobile dealers and franchisees (the “Dealer Statutes,” or in the singular, the “Dealer Statute”) 6 or to balance the equities by considering the harm to those impacted by the rejections, including the communities in which the dealers (the “Affected Dealers,” or in the singular, the “Affected Dealer”) with rejected dealer and site control agreements (collectively the “Rejected Agreements,” or in the singular, the “Rejected Agreement”) operate. Under the business judgment standard, “the effect of rejection on other entities is not a material fact to be weighed.” In re Wheeling-Pittsburgh Steel Corp., 72 B.R. 845, 848 (Bankr.W.D.Pa.1987), but under a heightened standard or a balancing of the equities, such effect would be a fact to be weighed.

Many of the Affected Dealers cite Bildisco, 465 U.S. at 523-24, 104 S.Ct. 1188, where the Supreme Court held that the rejection of collective-bargaining agreements was subject to a somewhat stricter *189 standard than business judgment even though there was no such indication in section 365(a). See id. The Supreme Court agreed with all of the Courts of Appeals that had considered that issue, concluding that Congress intended a higher standard than business judgment for rejection of collective-bargaining agreements because of, inter alia, the “special nature of a collective-bargaining contract, and the consequent ‘law of the shop’ which it creates.” Id. at 524, 526, 104 S.Ct. 1188 (citations omitted) (further noting “national labor policies of avoiding labor strife and encouraging collective bargaining” under the National Labor Relations Act (“NLRA”)). The Supreme Court therefore adopted the test articulated by two Courts of Appeals under which the debtor would be permitted to reject a collective-bargaining agreement if the debtor could show that the collective-bargaining agreement burdened the estate, and that, after careful scrutiny, the equities balanced in favor of rejecting the labor contract. See id. at 526, 104 S.Ct. 1188. Even in this context, the Supreme Court delineated the boundaries of such balancing: “the Bankruptcy Court must focus on the ultimate goal of Chapter 11 when considering these equities. The Bankruptcy Code does not authorize free-wheeling consideration of every conceivable equity, but rather only how the equities relate to the success of the reorganization.” Id. at 527, 104 S.Ct. 1188. 7

The heightened standard articulated in Bildisco has been called the “public interest standard.” See In re Pilgrim’s Pride Corp., 403 B.R. 413, 421 fn. 19 (Bankr.N.D.Tex.2009). The Fifth Circuit applied this standard in Mirant, 378 F.3d at 525, concluding that “the business judgment normally applicable to rejection motions is more deferential than the public interest standard applicable in FERC [Federal Energy Regulatory Commission] proceedings to alter the terms of a contract within its jurisdiction. Use of the business judgment standard would be inappropriate in this case because it would not account for the public interest inherent in the transmission and sale of electricity.” Id. (noting the purpose of FERC’s power under the Federal Power Act (“FPA”) as being the “protection of the public interest, as distinguished from the private interests of the utilities”) (quoting Fed. Power Comm’n v. Sierra Pac. Power Co., 350 U.S. 348, 355, 76 S.Ct. 368, 100 L.Ed. 388 (1956)); but see In re Calpine Corp., 337 B.R. 27, 36 (S.D.N.Y.2006) (holding, contrary to Mir-ant’s holding, that the court lacked jurisdiction to authorize rejection of certain power agreements because doing so would directly interfere with FERC’s jurisdiction over various aspects of wholesale energy contracts, even though rejection constituted breach rather than modification or termination of the power agreements).

Critically, both the Bildisco and Mirant courts found that a heightened standard for contract rejection was warranted because the authority to reject under § 365(a) conflicted with the policies designed to protect the national public interest underlying other federal regulatory schemes. In this case, though, while policies designed to protect the public interest may, in part, underlie the Dealer Statutes, those statutes have been enacted by state legislatures, not Congress, and by their very terms protect the public interest of their respective states rather than the national public interest. Further, the funda *190 mental interests sought to be protected by these state legislatures are the economic interests of local businesses and customer convenience and costs. Although some Dealer Statutes articulate a public safety concern in such enactments, the public safety issues raised by the closing of dealerships do not create an imminent threat to health or safety. See infra discussion of Midlantic Nat’l Bank v. New Jersey Dep’t of Envtl. Prot., 474 U.S. 494, 106 S.Ct. 755, 88 L.Ed.2d 859 (1986).

Some of the Affected Dealers point to the Automobile Dealers Day in Court Act (“ADDCA”), 15 U.S.C. §§ 1221, et seq., as evidence of a Congressional intent to protect the national public interest by allowing dealers to bring a federal cause of action for monetary damages against manufacturers who fail to act in good faith in, inter alia, terminating, canceling, or not renewing the dealer’s franchise. See 15 U.S.C. § 1222; see also id. § 1221 (defining good faith as “the duty ... to act in a fair and equitable manner ... so as to guarantee the one party freedom from coercion, intimidation, or threats of coercion or intimidation from the other party”). Plainly, the protections provided under the ADDCA are at most coextensive with rather than in conflict with the rejection power under § 365. Under the business judgment standard, “[a] debtor’s decision to reject an executory contract must be summarily affirmed unless it is the product of ‘bad faith, or whim or caprice.’ ” In re Trans World Airlines, Inc., 261 B.R. 103, 121 (Bankr.D.Del.2001) (quoting Wheeling-Pittsburgh, 72 B.R. at 849-50). The duty of good faith under the ADDCA is thus embodied by the requirement that a debtor’s decision to reject a contract not be in bad faith. Additionally, the monetary damages remedy for violating the ADDCA merely adds a complementary federal cause of action to the remedy for rejection under § 365(g), wherein rejection gives rise to a breach of contract claim against the debtor’s estate, the amount of which is determined according to state law. See In re Lavigne, 114 F.3d 379, 387 (2d Cir.1997). As discussed infra, the rights and remedies under the Dealer Statutes, such as mandatory waiting or notice periods and buy-back requirements, are more expansive than those under the ADDCA. Had Congress considered it in the national public interest to provide such substantive protections to dealers, it could have done so by amendment to the ADDCA or § 365 itself, or by a separate statute.

This observation is consistent with the Pilgrim’s Pride court’s observation that it was “unwilling to hold that a higher standard for rejection must be met any time another federal law is implicated by the contract to be rejected. Not every act of Congress that may touch a debtor’s contract will require the court to consider public policy or other extraneous requirements of federal law in determining whether that contract may be rejected.” Pilgrim’s Pride, 403 B.R. at 424-25. Indeed, the Affected Dealers point to no language in the ADDCA requiring such considerations. Similarly, the Pilgrim’s Pride court declined to apply the “public interest standard” in a case involving potential violations of the federal Packers and Stockyards Act (“PSA”) in the contract rejection context because the court could not find language in the PSA requiring such public policy considerations. See Pilgrim’s Pride, 403 B.R. at 424-25.

The Pilgrim’s Pride court identified an additional scenario beyond inconsistency with a federal statute or encroachment on the turf of a federal regulator where it may be appropriate to apply a higher standard than business judgment to contract rejection: local laws designed to protect public health or safety. See Pil *191 grim’s Pride, 403 B.R. at 424 & fn. 26 (citing Midlantic, 474 U.S. 494, 106 S.Ct. 755, 88 L.Ed.2d 859). Many Affected Dealers raised this very issue in the context of federal preemption, arguing that § 365 did not preempt the Dealer Statutes because they were enacted to protect public safety. While the Court continues discussion of this issue in its discussion of federal preemption infra, the Court notes that local laws designed to protect public health or safety, without imminent harm present, do not give rise to application of a heightened standard for contract rejection. 8 Further, because the ADDCA does not give rise to such application of a “public interest standard,” the Court applies the business judgment standard rather than a “public interest standard” here.

A related argument made by some of the Affected Dealers is that the Court should “balance the equities.” Any discussion of equity balancing must begin with the Supreme Court’s admonition in Bildisco that “[t]he Bankruptcy Code does not authorize free-wheeling consideration of every conceivable equity, but rather only how the equities relate to the success of the reorganization.” Bildisco, 465 U.S. at 527, 104 S.Ct. 1188. Instead of focusing on the success of the reorganization, the Affected Dealers direct the Court’s attention to the harm the rejections inflict upon them.

The Affected Dealers cite In re Monarch Tool & Mfg. Co., 114 B.R. 134, 137 (Bankr.S.D.Ohio 1990) for the proposition that “[disproportionate damage to the other party to the contract provides a ground for disapproving rejection.” Id. at 137 (citations omitted). However, in disapproving the rejection of an exclusive distributorship agreement, the Monarch court found that this factor was “reinforced by other consequential facts” such that the court could not find rejection of the contract would improve the debtor’s fortunes or benefit general unsecured creditors. Thus, even though the distributor would be “ruined” by its contract being rejected, the Monarch court did not hold that rejection was impermissible based on that factor alone but rather based on its evaluation of the rejection’s lack of beneficial impact on the debtor’s reorganization.

Critically, it was not within the ambit of Monarch’s holding that a court may disapprove the rejection of a contract when rejection would “ruin” the counterparty despite the rejection benefiting the estate. 9 *192 Moreover, in a case cited by both the Petur court and the Affected Dealers for a supposed “disproportionate damage” test, the court there addressed such interest-balancing only in relation to the benefit derived by unsecured creditors, with such benefit representing the primary criteria for rejection under the business judgment standard. See In re Chi-Feng Huang, 23 B.R. 798, 801 (9th Cir. BAP 1982) (citing In re Minges, 602 F.2d 38, 43-44 (2d Cir.1979)). In fact, the Bankruptcy Appellate Panel specifically found that the trial court erred by relying on “fairness” rather than the business judgment standard in disapproving the trustee’s rejection decision. See Chi-Feng, 23 B.R. at 800. In fact, these cases involve circumstances under which the business judgment standard either failed to be met or failed to be properly applied by the bankruptcy court.

However, the Affected Dealers argue that the Court should not allow the Debtors to reject the contracts because the Debtors cannot show that rejection will benefit the estate, particularly its unsecured creditors. The Affected Dealers cite In re Dunes Hotel Assocs., 194 B.R. 967, 988 (Bankr.D.S.C.1995) for the proposition that “there must be a showing that the rejection will benefit the estate or creditor, but certainly more than merely benefiting the debtor itself or its equity holders.” Id. (citations omitted). As discussed infra, the Debtors make a persuasive showing that rejection will benefit their estates. 10 Although couched in “benefit to the estate” language, the thrust of the Affected Dealers’ argument implies that the Debtors fail to show that the Rejected Agreements are “burdensome” to the estate (ie., that continued performance of the Rejected Agreements results in an actual loss to the estate, see In re Stable Mews Assocs., Inc., 41 B.R. 594, 596 (Bankr.S.D.N.Y.1984)), because the Affected Dealers argue that they cost the Debtors nothing. 11 “Burdensome property” is not the relevant test under the business judgment standard, which provides “considerably more flexibility” and “requires only that the trustee demonstrate that rejection of the executo-ry contract will benefit the estate.” Stable Mews, 41 B.R. at 596 (citations omitted) (noting that the “great weight of modern authority applies the business judgment test” (citations omitted)).

The Court is sympathetic to the impact of the rejections on the dealers and their customers and communities, but such sympathy does not permit the Court to deviate from well-established law and “balance the equities” instead of applying the business judgment standard. The Pilgrim’s Pride court explained this dilemma inherent in the chapter 11 process by returning to the notion of a “public policy exception” to the business judgment standard:

While the impact of rejection on the [counterparties’] community may be significant, that is not an uncommon result of the cut-backs that typically accompany a restructuring in chapter 11. Whether through contract rejections or *193 plant closings, contraction of a debtor’s business will often have a harmful effect for one or more local economies. If the bankruptcy court must second-guess every choice by a trustee or debtor in possession that may economically harm any given locale, the business judgment rule applicable to contract rejection and many other decisions in the chapter 11 process will be swallowed by a public policy exception. Pilgrim’s Pride, 403 B.R. at 425.

Other courts have held that absent Congressional authority, such as through a separate section of the Bankruptcy Code (e.g., § 1113) or a specific carve-out within § 365 itself, the court is not free to deviate from the business judgment standard and weigh the effect of rejection on debtor’s counterparty or the counterparty’s customers. See Wheeling-Pittsburgh, 72 B.R. at 847-48 (citations omitted).

Accordingly, the scope of the Court’s inquiry is limited. Under the business judgment standard, the Court must determine whether rejection will benefit the Debtors’ estates. As part of this determination, the Court must determine whether the Debtors made their decisions rationally. See Pilgrim’s Pride, 403 B.R. at 427. Irrational bases of decision-making include racial and gender discrimination and retaliatory animus. See id. at 428. Such bases are antithetical to sound business judgment and demonstrate “bad faith, or whim or caprice.” Wheeling-Pittsburgh, 72 B.R. at 849-50. However, “whether the debtor is making the best or even a good business decision is not a material issue of fact under the business judgment test.” Id. at 849.

Application of the Business Judgment Standard

The Debtors exercised sound business judgment in rejecting the Affected Dealers’ contracts. Rejection of the contracts pursuant to § 365(a) continued and accelerated the Debtors’ efforts to rationalize their dealership network. Beginning in 2001, the Debtors initiated a program with three goals: evaluate their dealership network and key locations; identify the most desirable dealerships and dealership locations from the perspective of long-term planning; and streamline their domestic dealership network to meet long-term goals, including, among other things, the consolidation of the Debtors’ brands at “partial line” dealers to make them “full line dealers.” 12 The Debtors re-named this program over the years, and most recently it has been called “Project Genesis.”

Project Genesis and its predecessors were launched in response to significant changes in the American automobile industry, particularly the entry of transplant Original Equipment Manufacturers (“OEMs”) such as Toyota, Honda, and Hyundai into the American market. The Debtors’ dealers have had to compete with these OEMs, the American OEMs, General Motors and Ford, and each other. The transplant OEMs established much smaller dealership networks with new and better locations and facilities in growing markets, and recently they have sold considerably more vehicles annually than the Debtors. As a result, the Debtors’ dealers’ “throughput” (i.e., annual sales of vehicles) was but a fraction of some of the transplant OEMs’ throughput. Meanwhile, the Debtors have had to contend with legacy network dealers, many of *194 which were no longer in the best or growing locations, served a diminishing population of potential customers, or operated out of outdated facilities.

The Debtors determined that to compete in the automobile marketplace, they would need to streamline their domestic dealership network, specifically through rationalization of dealerships that they determined would not improve their competitive position going forward. The Debtors identified numerous advantages of having a smaller dealership network, including better and more sustainable sales and profitability for each dealer, which in turn would provide greater resources for marketing, reinvesting in the business, improving facilities, enhancing the customer experience and customer service, and keeping and attracting more experienced and highly qualified personnel to work at the dealerships. Even though the overall size of the network would decrease, the Debtors estimated that the greater sales and profitably at the remaining dealerships would eventually result in greater sales for the network overall. A smaller dealership network is expected to concentrate profits such that more capital improvements will be made to a dealership facility, thereby attracting more customers and providing customers with a better experience. A smaller dealership network would also enable the Debtors to reduce expenses and inefficiencies in the distribution system, including reducing costs spent on training, new vehicle allocation personnel, processes, and procedures, dealership network oversight, auditing, and monitoring, and additional operational support functions. Consolidation of “partial line” dealerships would eliminate redundancies and inefficiencies in the dealership network. 13 As previously mentioned, these initial business judgments predated the Debtors’ bankruptcy cases by many years, and between 2001 and the filing of the bankruptcy cases, the Debtors reduced their dealership network by over 1100 dealers.

As part of the Debtors’ Viability Plan (as defined in Chrysler, 405 B.R. 84), the Debtors determined that completion of dealership rationalization was one of their main objectives. The Debtors further determined that to consummate the Fiat Transaction (as defined in Chrysler, 405 B.R. 84), they needed to transfer a strong, well-positioned dealership network to the purchaser. In Chrysler, 405 B.R. 84, 96, the Court concluded that the Fiat Transaction was the only viable option for the Debtors, with the only other alternative being immediate liquidation. See id. at 96. The Court further concluded that the procedures utilized by the Debtors to determine which contracts would be assumed and assigned to the purchaser was a reasonable exercise of the Debtors’ business judgment. See id. at 96.

The procedures utilized by the Debtors were substantially similar to those used prior to the bankruptcy cases in Project Genesis. 14 The Debtors evaluated each *195 dealership, reviewing and analyzing numerous performance and planning factors for each dealership. 15 The Debtors also drew on external metrics, including new vehicle registration information, demographic data, average distance to the nearest dealer for each locality, and competing manufacturers’ market share within the locality. 16 The Debtors used these factors to create comprehensive statistical assessments of each dealer and make judgments regarding the optimal configuration for each market in the domestic dealer network and the best means of implementing the goals of Project Genesis, as described supra. Once the Debtors decided to pursue the Fiat Transaction, the Debtors also worked with Fiat and New Chrysler to model an anticipated dealership network for the Alliance Viability Plan (as defined in Chrysler, 405 B.R. 84), including by refining their evaluation of dealers under the procedures just described. 17

In their business judgment, the Debtors determined that rejection of the Rejected Agreements was in the best interest of their restructuring efforts and estates. Based on a subjective and objective evaluation, the Debtors determined that the dealerships to be rejected lacked the operational, market, facility, and linemake characteristics necessary to best contribute to the ongoing dealer network under either current or future ownership. New Chrysler agreed with the Debtors’ approach. The Debtors determined, and New Chrysler agreed, 18 that rejection of the Rejected Agreements was necessary and appropriate for implementing the Alliance Viability Plan by enabling the Debtors to consummate the Fiat Transaction and transfer to New Chrysler a smaller, more effective, and more profitable dealer network without disruption while limiting the Debtors’ potential postpetition obligations to the Affected Dealers. The Debtors also determined that any delay in making rejection decisions could allow the best dealers or their personnel to be poached by other OEMs, thus reducing the value of the Debtors’ assets, specifically its dealership network, pending sale to New Chrysler.

Further, funding for the Affected Dealers under the Debtors’ debtor-in-posses *196 sion budget expired on June 9, 2009. Up to and including that date, the Debtors continued to pay all prepetition and post-petition incentives and warranty obligations to the Affected Dealers. Following that date, the debtor-in-possession budget decreased by 25% for such obligations, reflecting the anticipated rejection of agreements constituting 25% of the Debtors’ dealership network. 19 Therefore, if the dealership network were not reduced, the Debtors would be out of compliance with their budget. As a result, if the lenders did not authorize additional funds under the budget, funds set aside for the wind-down of the Debtors’ estates would have to be used to cover such expenses.

As previously stated, the Court has already concluded that the procedures utilized by the Debtors to determine which contracts would be assumed and assigned to New Chrysler was a reasonable exercise of the Debtors’ business judgment. See Chrysler, 405 B.R. at 96. The decision-making process used by the Debtors was rational and an exercise of sound business judgment. While the Court does not disturb that conclusion herein, the Court expands upon it by further concluding that rejection benefits the Debtors’ estates. The Court also finds that no evidence has been presented to the Court showing that the Debtors made their individual rejection decisions irrationally, such that the rejections demonstrate bad faith or whim or caprice. Despite intimations of racial and gender discrimination and retaliatory animus, the Court finds that the Affected Dealers making such intimations have not supported them with evidence such as to warrant the Court overturning the Debtors’ business judgment. The Court further notes that the scope of its inquiry regarding the business judgment standard for purposes of rejection does not include an evaluation of whether the Debtors made the best or even a good business decision but merely that the decision was made in an exercise of the Debtors’ business judgment.

With respect to benefiting their estates, the Debtors exercised sound business judgment in rejecting the Rejected Agreements. Following the closing of the Fiat Transaction, the Debtors would no longer be in the car manufacturing business. On the day prior to the legal arguments, June 8, 2009, the closing of the Fiat Transaction was stayed by the Supreme Court. On the following evening, June 9, 2009, the stay was lifted, and the Fiat Transaction closed the next day, June 10, 2009. Moreover, the Fiat Transaction involved the transfer of certain of the Debtors’ property, including their trademarks, to New Chrysler, such that the Debtors’ would not even have the right to “authorize” the Affected Dealers to continue doing, e.g., warranty work under the Debtors’ name after the Fiat Transaction closed. Rejection thus benefits the estate by removing the burden of postpetition performance under these contracts and instead giving the Affected Dealers claims against the Debtors’ estates. Certain Affected Dealers argue that they may have claims against the estates that would be characterized as administrative claims and *197 limited to unsecured claims under § 502(g). This issue is not before the Court and will be addressed if raised in the context of any such administrative claim request. However, the argument that the Debtors’ actions related to the rejection process would result in an administrative claim does not alter the conclusion that rejection of the Rejected Agreements benefits the Debtors’ estates.

Further, there is no doubt that the acceleration of dealership rationalization benefited New Chrysler by enabling it to avoid the costs attendant to such reduction if it took place outside bankruptcy. Yet this does not undermine the Debtors’ need to reduce dealerships to be in line with its budget and fulfill its commitments to its lenders. 20 Moreover, as previously discussed, the alternative to the Fiat Transaction was immediate liquidation. It is immaterial whether Fiat required the Debtors to reject the number of agreements it rejected. 21 Dealership rationalization was a component of the Alliance Viability Plan, and the Debtors were obligated to accelerate this program, as stated above, to fulfill their commitment to their lenders.

Many of the Affected Dealers have argued that the Debtors’ specific application of their rejection decisions was not appropriate or in bad faith. Affected Dealers arguing that the Debtors’ application of rejection decision was not appropriate primarily asserted that the Debtors erred in rejecting their agreements while assuming and assigning agreements with other dealers in the same market. The Affected Dealers asserted that those other dealers lagged behind them according to one or more of the Debtors’ metrics. However, the Debtors have stated that they conducted a subjective and objective evaluation of each dealership, including by balancing objective quantitative and qualitative metrics. Therefore, whether one dealer lagged behind an Affected Dealer according to one or more of these metrics is immaterial because the Debtors in their business judgment had the discretion to determine that another factor or consideration w