The government was not running the business, it was supervising it and in the context of bankruptcy it was simply making sure the business was operating in a financially reasonable way. Even in the 9th circuit which leans so far to the left it might as well lie down, there's no way the DOJ will be estopped from its case. Its embarrasing, nothing more.
+1 for the effort though.
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"This thing is ready to do damage!"