Hearing Date: August 13, 2009 at 9:30 a.m (Eastern time) (expedited hearing requested)Objection Deadline: August 10, 2009 at 4:00 p.m. (Eastern time) (expedited deadline requested)

KRAMER LEVIN NAFTALIS & FRANKEL LLPThomas Moers MayerKenneth H. EcksteinPhilip Bentley1177 Avenue of the AmericasNew York, New York 10036(212) 715-9100

Counsel for the Official Committee of UnsecuredCreditors of Old Carco LLC (f/k/a Chrysler LLC), et al.

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK

x

In re: : Case No. 09-50002 (AJG)

OLD CARCO LLC (f/k/a CHRYSLER : Chapter 11LLC), et al.,

Debtors.x

(Jointly Administered)

MOTION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORSFOR AN ORDER AUTHORIZING IT TO PURSUE CERTAIN CLAIMS

ON BEHALF OF THE ESTATE OF DEBTOR OLD CARCO LLC

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The Official Committee of Unsecured Creditors (the "Creditors' Committee" or

"Committee") of Old CarCo LLC (facia Chrysler LLC) ("Chrysler" or the "Debtor"), by and

through its undersigned counsel, submits this motion (the "Motion") for an order authorizing the

Committee to pursue certain claims on behalf of the Debtor's estate against Daimler AG

("Daimler") and related parties.

Preliminary Statement

Two months ago, by order dated June 5, 2009, this Court approved a global

settlement agreement, known as Settlement Agreement III, among the Debtors, Daimler and a

number of other parties. Among other things, this agreement provided for a broad release of the

Debtors' claims against Daimler, subject to a crucial carve-out. Specifically, the agreement gave

the Committee a two-month time period to investigate the Debtors' potential claims against

Daimler and to determine which' claims have merit and should be pursued. So long as the

Committee complies with specified procedures --- including filing a timely complaint against

Daimler after obtaining leave of Court to prosecute these claims on the Debtors' behalf — the

agreement exempts the claims brought by the Committee from the release given to Daimler. By

agreement of the parties, the deadline for the Committee to file suit against Daimler has been

extended to August 18, 2009.

The Committee's investigation has confirmed that the Debtor's estate possesses

claims against Daimler and related parties that, in the Committee's view, are meritorious and

have enormous potential value to the Debtors' estates. These claims are set forth in the draft

complaint (the "Proposed Complaint") attached as Exhibit A to this Motion. The firms of

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REDACTED COPYSusman Godfrey LLP and Stutzman, Bromberg, Esserman & Plifka have agreed to jointly

prosecute the Proposed Complaint on the Committee's behalf on a modified contingent fee basis,

an arrangement that will limit the cost of the suit to a small fraction of what it might otherwise

cost to pursue. By this Motion, the Committee seeks an order authorizing it to prosecute these

claims against Daimler, as well as against two Daimler affiliates and four former directors of the

Debtors.

The claims set forth in the Proposed Complaint arise out of a series of transactions

engineered by Daimler in 2007, which stripped Chrysler of its most valuable assets for grossly

inadequate consideration.' Daimler, the German car manufacturer, had acquired Chrysler in

1998.

Over the years, Chrysler has had a succession of names — first Chrysler Motors Corporation, then DaimlerChryslerCorporation, then DaimlerChrysler Corporation LLC, then Chrysler LLC, and finally Old CarCo LLC.

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The Committee seeks to hold Daimler responsible in damages for the billions of

dollars in assets stripped from Chrysler. The Proposed Complaint asserts claims against Daimler

and two of its affiliates for intentional and constructive fraudulent transfer, as well as claims

against Daimler and four former Chrysler directors for breach of fiduciary duty. The

Committee's determination that these claims have merit and should be pursued has been

corroborated by the independent judgment of the Susman Godfrey and Stutzman Bromberg

firms, which have agreed to pursue the claims on a largely contingent basis, thereby sparing the

estate most of the expense of this litigation. The Committee respectfully submits that the

Proposed Complaint amply satisfies the requirements set forth by the Second Circuit in In re

STN Enterprises, 779 F.2d 901 (2d Cir. 1985) ("STN"), and requests an order authorizing the

Committee to file and prosecute the claims set forth in the Proposed Complaint. 2

Jurisdiction, Venue and Statutory Predicates

1.

This Court has jurisdiction to consider this matter pursuant to 28 U.S.C.

§§ 157 and 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b). Venue is proper

2 As required by Settlement Agreement III, the Committee today delivered to the Debtors a written demand that theDebtors inform the Committee by August 10 whether or not they intend to prosecute the claims set forth in theProposed Complaint, and if they intend to do so, that they file a complaint of their own by August 11, 2009.

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REDACTED COPYbefore this Court pursuant to 28 U.S.C. §§ 1408 and 1409. The statutory predicates for this

Motion are Bankruptcy Code §§ 1103(c)(2) and (5) and 1109(b).

Procedural Background

2. On April 30, 2009 (the "Petition Date"), the Debtors commenced their

reorganization cases in this Court by filing voluntary petitions for relief under chapter 11 of the

Bankruptcy Code. The Debtors continue to operate their businesses and manage their properties '

as debtors-in-possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.

3. On May 5, 2009, the Office of the United States Trustee for the Southern

District of New York appointed the Creditors' Committee to represent the interests of all

unsecured creditors in these chapter 11 cases. The current members of the Committee are: (i)

International Union, United Automobile, Aerospace & Agricultural Implement Workers of

America, UAW; (ii) AutoNation, Inc.; (iii) DARCARS Imports, Inc.; (iv) Desiree Sanchez; and

(v) Patricia Pascale.'

4. On June 5, 2009, the Court issued an order that authorized certain Debtors

to enter into that certain Settlement Agreement HI, dated as of June 5, 2009 ("Settlement

Agreement III"), by and among Daimler, Daimler North America Finance Corporation

("DNAF"), Daimler Investments US Corporation ("DIUS", and together with Daimler and

DNAF, the "Daimler Parties"), CG Investment Group, LLC, CG Investor, LLC, Chrysler

Holding LLC, Carco Intermediate Holdco I LLC, Chrysler LLC, and the Pension Benefit

Guaranty Corporation ("PBGC").

3 As a result of the consummation of a sale transaction involving the Debtors and Fiat S.p.A., six Committeemembers — Continental Automotive Systems, Inc., Cummins, Inc., Magna International, Inc., Ohio ModuleManufacturing Co., Pension Benefit Guaranty Corporation, and Zanetti Chrysler Jeep Dodge — have resigned fromthe Committee.

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REDACTED COPY5. Settlement Agreement III provides for the release 'of certain claims against

certain parties, including the Daimler Parties. However, it provides that the Debtors' release of

claims against the Daimler Parties will be effective only until the later of (a) 45 calendar days

after the entry of the order approving the Settlement Agreement III (which time period would

have terminated on July 20, 2009), unless the Creditors' Committee during such period delivers

to Debtors' counsel a demand (the "Committee Demand") for the Debtors to bring claims against

the Daimler Parties as set forth in a proposed complaint, and (b) 25 calendar days after the

delivery of the Committee Demand (but in no event later than August 4, 2009), unless by that

date a complaint asserting. claims against the Daimler Parties is filed by the Debtors or by the

Committee (after obtaining leave of Court) if the Debtors do not do so.

6. On July 20 and 27, 2009, the Court "so ordered" stipulations modifying

Settlement Agreement III to provide the Committee with an additional two weeks (until August

3, 2009) to deliver the Committee Demand, and an additional 15 days (until August 18, 2009) to

file a complaint on behalf of the Debtors' estates after obtaining leave of Court to do so.

7. Today, in accordance with section 6(b) of Settlement Agreement III and

the Court's orders, the Creditors' Committee served the Debtors (with a copy to the Daimler

Parties) with a copy of the Proposed Complaint, together with a written demand that the Debtors

inform the Committee by August 10 whether or not they intend to prosecute the claims set forth

in the Proposed Complaint, and if they intend to do so, that they file a complaint asserting those

claims by no later than August 11, 2009.

The Committee's Investigation of Claims Against Daimler

8. In early June 2009, the Creditors' Committee began an investigation into

the existence and viability of potential claims arising out Daimler's restructuring of the Debtor

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REDACTED COPYand subsequent sale of the Debtor to Cerberus in 2007, including whether certain transfers that

occurred in connection with this restructuring were fraudulent and violated Daimler's fiduciary

duties to the Debtor and its creditors. In furtherance of its investigation, the Committee filed a

motion for an order authorizing Rule 2004 discovery, which order was entered by this Court on

June 17, 2009.

9. During the course of its investigation, the Committee served Rule 2004

discovery requests on six parties, reviewed many thousands of pages of documents, and

conducted depositions and interviews of witnesses produced by, among others, the Debtors,

Chrysler LLC, Daimler and Daimler's advisors Ernst & Young LLP ("E&Y"), Houlihan Lokey

Howard & Zukin, Inc. ("Houlihan Lokey"), and JP Morgan Chase & Co ("JP Morgan"). The

Committee was assisted in its efforts by its financial advisor, Mesirow Financial Consulting

LLC, which analyzed and interpreted financial and industry data, including business projections,

financial statements, valuations, analysts reports and myriad other relevant materials.

10. The Committee's Rule 2004 discovery took place within a very tight time

frame, particularly considering the complexity of the restructuring and sale transactions, as well

as the fact that several key parties are located in foreign jurisdictions. Moreover, many of the

parties that produced Rule 2004 discovery did not produce all subpoenaed documents or

witnesses, and sufficient time was not available to compel full compliance. For these reasons,

the Committee's investigation was necessarily preliminary, and many relevant issues and

transactions will need to be further explored through merits discovery.

The Proposed Complaint

11.It is apparent from the Committee's investigation that Daimler's 2007

restructuring of the Debtor stripped it of its most valuable assets, causing billions of dollars of

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REDACTED COPYdamages and leaving the Debtor insolvent or deepening its existing insolvency. The Debtor's

resulting claims against Daimler are set forth in the Proposed Complaint, which we summarize

below.

12.

13.

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21. Based on the allegations just summarized, the Proposed Complaint asserts

claims against Daimler and others for fraudulent transfer, breach of fiduciary duty and related

claims:

a. Counts I through IV assert constructive fraudulent transfer claims againstDaimler,.DCNAH and DC Holding under sections 544, 548 and 550 of theBankruptcy Code and New York Debtor & Creditor Law ("NY DCL") §§273, 273-a, 274 and 275.

b. Counts V and VI assert intentional fraudulent transfer claims againstDaimler, DCNAH and DC Holding under Bankruptcy Code §§ 544, 548and 550 and NY DCL §§ 276 and 276-a.

c. Counts VII and VIII assert claims for breach of fiduciary duty against fourformer directors of the Debtor, as well as against Daimler as the Debtor'scontrolling shareholder.

d. Count IX asserts a claim against Daimler for unjust enrichment.

e. Count X asserts a claim against Daimler as the corporate alter ego of itssubsidiaries Holding, DCNAH and DC Holding.

The Committee's Engagement of Susman Godfrey and Stutzman Bromberg toProsecute the Proposed Complaint on a Modified Contingency Fee Basis

The Committee has reached agreement with the law firms of Susman Godfrey and

Stutzman Bromberg, subject to documentation, on the terms of a modified contingent fee

agreement. Specifically, these firms will prosecute the claims set forth in the Proposed

Complaint on the Committee's behalf in exchange for attorneys' fees equal to (a) an up-front flat

fee of $2 million, and (b) a contingent fee equal to 20% of any recovery up to $200 million

obtained in the Committee's suit, plus 15% of any recovery in excess of $200 million. The

Committee will be responsible for payment of up to $7.5 million in expert fees and other costs,

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REDACTED COPYand Susman Godfrey and Stutzman Bromberg will be responsible for payment of any costs in

excess of $7.5 million. By its terms, this agreement will ensure that the cost to the Committee of

prosecuting this suit is in no event more than $9.5 million.

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The Committee Has a Right to Initiate Adversary Proceedings in theName of the Debtor With the Approval of the Bankruptcy Court

22. The Second Circuit has held that "there is a qualified right for creditors'

committees to initiate adversary proceedings in the name of the debtor in possession with the

approval of the bankruptcy court." In re Commodore Intl Ltd., 262 F.3d 96, 99 (2d Cir. 2001)

("Commodore") (quoting STN, 779 F.2d at 904) (internal quotation marks omitted). The

Bankruptcy Court may approve a creditors' committee initiating such adversary proceedings

where the debtor either unjustifiably fails to bring suit or consents to the creditors' committee's

suit. STN, 779 F.2d at 904; Commodore, 262 F.3d at 100; see also In re KDI Holding, 277 B.R.

493, 507-08, 519 (Bankr. S.D.N.Y. 1999) (Gonzalez, J.) (discussing STN).

23. Where a debtor refuses to bring suit, the Court must decide whether the

refusal is unjustifiable by determining whether (i) "the committee presents a colorable claim or

claims for relief that on appropriate proof would support a recovery," and (ii) "an action

asserting such claim(s) is likely to benefit the reorganization estate." STN, 779 F.2d at 905. The

latter determination includes, among other things, consideration of the "probabilities of legal

success and financial recovery in the event of success" and "the terms relative to attorneys' fees

on which suit might be brought." Id. Where a debtor consents to a committee bringing suit, the

Second Circuit has stated that a Court must determine whether the suit is "in the best interest of

the bankruptcy estate" and "is necessary and beneficial to the fair and efficient resolution of the

bankruptcy proceedings." Commodore, 262 F.3d at 100 (internal quotation marks omitted).

24. In making the determinations required by STN and Commodore, the Court

should not conduct a mini-trial. STN, 779 F.2d at 905-06; see also In re Adelphia •Commc'ns

Corp., 330 B.R. 364, 369 (Bankr. S.D.N.Y. 2005) ("[1]t was inappropriate for the Court to

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REDACTED COPYconduct a `mini-trial' or evidentiary hearing on the ... STN issues."). "Because the creditors'

committee is not required to present its proof, the [standing] inquiry is much the same as that

undertaken when a defendant moves to dismiss a complaint for failure to state a claim." In re

America's Hobby Center, Inc., 223 B.R. 275, 282 (Bankr. S.D.N.Y. 1998); accord, KDI, 277

B.R. at 508.

>I.

The Court Should Authorize the Committee to File the Proposed Complaint

25. The Proposed Complaint readily satisfies both the STN standards (which

will apply if the Debtor refuses to commence suit) and the Commodore standards (which will

apply if the Debtor consents to the Committee's suit). The Proposed Complaint's principal

claims rest squarely on black letter principles of fraudulent transfer and breach of fiduciary duty

and would, if successful, support a recovery in the billions of dollars. In contrast, the cost to

prosecute the suit amounts to a tiny fraction of the potential recovery — particularly given the

Committee's modified contingency fee agreement with Susman Godfrey and Stutzman

Bromberg, which caps the cost at less than $10 million.

A.

The Claims For Constructive and Intentional Fraudulent Transfer

26. Counts I and II of the Proposed Complaint rest on basic constructive

fraudulent transfer principles. These claims assert that the transfers that Daimler caused Chrysler

to make —

— were made for far less

than fair consideration (specifically, assets with an aggregate value of less than $ ).

Moreover, these transfers either rendered Chrysler insolvent or deepened its already-existing

insolvency. See Bankruptcy Code § 548(a)(l)(B). As a remedy, the Proposed Complaint seeks

to recover more than $3 billion of transferred assets' or their value from two subsequent

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REDACTED COPYtransferees ( ), and seeks also to recover the value of all transferred

assets from Daimler as the entity for whose benefit these transfers were made. See Bankruptcy

Code § 550(a)(1), (2); see also, e.g., In re Buckhead America Corp., 178 B.R. 956, 962 (D. Del.

1994) (fraudulent transfer claim was properly pled against corporate parent under Bankruptcy

Code § 550 where complaint alleged parent benefited from subsidiary's alleged fraudulent

transfer); In re Join-In International (U.S.A.) Ltd., 56 B.R. 555, 561 (Bankr. S.D.N.Y. 1986)

(denying defendant's motion for summary judgment on fraudulent transfer claim because

defendant was corporation's sole shareholder and "potentially a beneficiary of the transfer . . . in

the form of a dividend"). 6

27. Counts V and VI rest on equally settled principles of intentional fraudulent

transfer. The Proposed Complaint alleges, in considerable detail, that Daimler caused the Debtor

to make the challenged transfers in order to put the transferred assets beyond the reach of the

Debtor's creditors. This claim is amply supported by the usual "badges of fraud," including the

inadequacy (or in several instances, the complete absence) of consideration for the transfers, the

extremely close relationships between the transferor and the transferees, and the cumulative

effect of the multiple transfers that stripped the Debtor of its most valuable assets. See Salomon

v. Kaiser, 722 F.2d 1574, 1582-83 (2d Cir. 1983).

6 Counts III and IV assert additional constructive fraudulent transfer claims, each of which rests on principlesparticular to New York law. Count III asserts that the transfers were fraudulent because (a) the Debtor received lessthan fair consideration, and (b) at the time of the transfers, multiple lawsuits were pending against the Debtor thatsubsequently resulted in unpaid judgments or settlements. See NY DCL § 273-a. Count IV rests on allegations thatDaimler caused the Debtor, while insolvent, to repay approximately $ - of third party debt that Daimlerhad guaranteed. These repayments were not made in good faith, and therefore constituted constructive fraudulenttransfers under New York law for which Daimler is liable as the party for whose benefit the payments were made,because they were made for the benefit of Daimler, a corporate insider. See Levit v. Ingersoll Rand Financial Corp.(In re V.N. Deprizio Construction Co.), 874 F.2d 1186, 1194 (7th Cir. 1989) (corporate insider may be liable fordebtor's repayment to third party tender, within the preference period, of debt it guaranteed); see also.HBE LeasingCorp. v. Frank, 48 F.3d 623, 634 (2d Cir. 1995) ("New York courts have carved out one exception to the rule thatpreferential payments of pre-existing obligations are not fraudulent conveyances: preferences to a debtorcorporation's shareholders, officers, or directors are deemed not to be transfers for fair consideration.").

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B.

The Claims For Breach of Fiduciary Duty

28. The breach of fiduciary duty claims, Counts VII and VIII, also rest on

black letter principles — in particular, Delaware corporate governance principles concerning

conflict of interest. It is fundamental that corporate directors and controlling shareholders owe a

duty of loyalty to the corporation and, when the corporation is insolvent or in the zone of

insolvency, to the corporation's creditors. See Claybrook v. Morris (In re Scott Acquisition

Corp.), 344 B.R. 283, 286-88 (Bankr. D. Del. 2006) ("[T]he directors and officers of an insolvent

wholly-owned subsidiary owe fiduciary duties to the subsidiary and its creditors."). This duty

requires a corporation's directors and controlling shareholder to act free from any conflict of

interest and, where such a conflict arises, to bear the burden of proving the entire fairness of their

actions. See Weinberger v. UOP, Inc., 457 AD.2d 701, 710 (Del. 1983) ("The requirement of

fairness is unflinching in its demand that where one stands on both sides of a transaction, he has

the burden of establishing its entire fairness, sufficient to pass the test of careful scrutiny by the

courts.").

29. Here, Chrysler's transfers of FinCo and other assets to affiliates owned

and controlled by Daimler posed an obvious conflict between Chrysler's and Daimler's interests.

Nevertheless, every one of the Chrysler board members who voted to approve these transfers sat

on the board not only of Chrysler but of Daimler as well; not one director was independent.

Consequently, each of the four director defendants bears the burden of proving the entire fairness

of these transfers. Daimler bears this burden as well, given the undeniable control it had over

Chrysler as its sole shareholder and its use of that control to cause Chrysler to make these

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Notice

30. Notice of this Motion has been provided to (i) the U.S. Trustee, (ii)

counsel to the Debtors, (iii) counsel to Daimler, and (iv) all parties identified on the General

Service List and the Special Service List (as such terms are defined in the Case Management

Order]. The Creditors' Committee submits that no other or further notice is required.

Memorandum of Law

31. As this Motion includes citations of legal authority, the requirements of

Local Bankruptcy Rule 9013-1(b) for the submission of a memorandum of law

contemporaneously herewith has been satisfied pursuant to the Court's Case Management Order

No. 2, entered in these Cases on January 27, 2009.

No Prior Request

32. No prior request for the relief sought herein has been made by the

Creditors' Committee to this or any other Court.

Conclusion

33. The Creditors' Committee respectfully requests that this Court enter an order

authorizing the Committee to file and prosecute the claims set forth in the Proposed Complaint

' The Proposed Complaint's two remaining claims are for unjust enrichment (Count IX) and corporate alter ego(Count X). The unjust enrichment claim asserts that Daimler benefited unjustly from the transfers, and that it isinequitable for Daimler to have received these transfers without paying for their value. The alter ego, a/k/a veil-piercing, claim seeks to hold Daimler liable for the obligations of its subsidiaries DCNAH and DC Holding (but notfor Chrysler's obligations), on the ground that Daimler dominated and controlled those subsidiaries, functioned as asingle economic unit with them, and used them to commit a fraud on Chrysler's creditors. See Morris v.Mergenthaler, 1980 WL 268072, at *2 (Del. Ch. 1980) ("The plaintiffs' general allegations as to facts concerning aclose interrelationship between the defendants and as to corporate assets which have purportedly been fraudulentlyconveyed, appear to be sufficient averments of the elements of a claim [for piercing the corporate veil] to withstandthe test of a motion to dismiss."); Sonne v. Sacks, 314 A.2d 194, 197 (Del. 1973) (piercing claim available against"other corporations which have received assets without consideration" as an equitable claim when fraudulentconveyance unavailable).

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REDACTED COPYon behalf of the Debtor's estate, and granting such other relief as the Court deems proper.

Dated: New York, New YorkAugust 3, 2009

Respectfully submitted,

KRAMER LEVIN NAFTALIS & FRANKEL LLP

By:

Is/ Philip Bentley.

Thomas Moers MayerKenneth H. EcksteinPhilip Bentley1177 Avenue of the AmericasNew York, New York 10036(212) 715-9100pbentley@kramerlevin.com

Counsel for the Official Committee of UnsecuredCreditors of Old Carco LLC (f/k/a Chrysler LLC),et al.

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Exhibit A

[This document has been redacted in its entirety]