June 9 (Bloomberg) -- The U.S. Supreme Court cleared the way for Chrysler LLC to sell its best assets to a group led by Italy’s Fiat SpA, refusing to grant a stay sought by Indiana pension funds and consumer advocates.

The rebuff eliminates the last obstacle to a White House- backed plan that aims to make the Chrysler, Jeep and Dodge brands more competitive by spinning them off through bankruptcy. Chrysler, based in Auburn Hills, Michigan, says a quick sale is necessary to stanch losses of $100 million a day.

In a four-paragraph opinion issued by the court as whole, the justices said the challengers didn’t meet the legal standard for emergency intervention. The court said its ruling “is based on the record and proceedings in this case alone,” possibly hinting that it wasn’t reaching any conclusions about the planned General Motors Corp. reorganization.

“That’s what it sounds like, and it’s a very clever response by the court,” said David Skeel, a University of Pennsylvania law professor and author of “Debt’s Dominion: The History of Bankruptcy Law in America.” He said GM bondholders would have several legal arguments that weren’t available to those challenging the Chrysler accord.

GM is planning a similar quick sale of its best assets. Chrysler and Detroit-based GM have taken around $25 billion in federal bailout loans and want about $40 billion more to complete their reorganizations.

Administration Pleased

The Treasury Department issued a statement saying officials were “delighted that the Chrysler-Fiat alliance can now go forward.” Lori McTavish, a Chrysler spokeswoman, didn’t immediately respond to voice-mail or e-mail messages seeking a comment on the decision.

The ruling was one of two court victories won today by Chrysler, which also got court permission to cancel 789 car dealership agreements.

A federal appeals court in Manhattan last week upheld a bankruptcy judge’s decision to let the sale proceed. The appeals court put its ruling on hold until 4 p.m. yesterday. Justice Ruth Bader Ginsburg then issued a stay further delaying the sale until the full Supreme Court acted.

Three sets of opponents asked the Supreme Court to block the sale. The funds bought secured company loans for about $18 million and would receive $12 million under the Fiat plan, according to court papers. The consumer groups object to a provision that would strip accident victims of their right to press product liability suits against Chrysler.

‘Irreparable Harm’

The high court said it wasn’t ruling directly on the merits of the case and instead was using a traditional three-factor test to decide whether a stay was warranted. Those factors include whether a stay is needed to avert “irreparable harm” and whether a “fair prospect” exists that the justices would reverse the lower court ruling.

The court said the challengers “have not carried that burden.”

The court “did not affirm,” said Dewey & LeBoeuf LLP partner Martin Bienenstock, who has advised GM and Chrysler Financial Corp. on restructuring. “It simply determined that it did not want to risk the loss of the transaction because it didn’t have a firm conviction that it would reverse.”

Experts were divided on the impact the ruling will have on the GM case.

Not a Signal

“I don’t take it as a signal,” said Seton Hall University bankruptcy law professor Stephen Lubben. “The court is simply being careful to note that any stay application is based on the specific facts of the case before it.”

The Supreme Court cases are Indiana State Police Pension Trust v. Chrysler, 08A1096; Center for Auto Safety v. Chrysler, 08A1099; and Pascale v. Chrysler, 08A1100.

The bankruptcy court case is In re Chrysler LLC, 09-50002, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The appellate case is In re. Chrysler LLC, 09-2311- bk, U.S. Court of Appeals for the Second Circuit (Manhattan). The Supreme Court application is Indiana State Police Pension Trust v. Chrysler 08A1096.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

Last Updated: June 9, 2009 20:44 EDT