Here's a comment on the filings from another lawtalker :
QuoteWith many thanks to WithCatz for paying the PACER tab, and to bigpictureboss for his efforts at highlighting WMI's filing today (PST), let me say the following:
In the last nine months of following the WaMu saga in detail on a daily basis and trying, like the rest of you, to understand and follow the legal intricacies involved in this unique case, I have never been more convinced of the absolute genius of our attorneys and never more confident that they have a winning strategy. The work of Quinn et. al. and Greenleaf et. al. in today's brief was truly stunning. It demonstrates Bop's admonition to us long ago to wait and watch "the awesome power of the bankruptcy court" unfold. We are in good hands, not only with these lawyers, but also with this judge.
I realize that this brief seems merely to address arcane procedural issues, but I urge all of you to read the entire brief. (You can skip the exhibits.) It is as good as anything I've ever seen in 35 years in the law biz. Absolutely top notch. Awesome!
I'm not going to address the details of this brief, because I could go on forever, but let me summarize: First, it's arguments are bulletproof and thoroughly supported by irrefutable case precedent and statutory law. Second, the brief continually reiterates simple, clear themes that enable the court to act decisively. Third, it subtly reinforces the court's prior decisions without being obsequious or fawning. Fourth, it persistently and effectively marginalizes JPM's and FDIC's prior arguments by demonstrating their absurdity and uncovering their double-dealing (in DC court) and delay tactics. Finally, it subtly motivates the judge's emotions (anger) against JPM and FDIC by exposing their duplicity and contempt for the judge's prior rulings, thus undermining her respect for their honesty and intellectual integrity and setting the stage for future strong rulings against them.
I have said this on the board before, but as a judge myself, let me reiterate: Once a party's lawyers first start lying to you (including misrepresentations of the law) or start showing disrespect for your prior, carefully considered rulings, that party is toast. That judge will never take that attorney's word for anything again. Ever. JPM and FDIC have misrepresented and obfuscated over and over again. WMI has once again put them both in their place. If I were in Judge Walrath's shoes, I'd ream both of them in open court on Monday, to show them who is really boss. She probably won't, because she's more careful and proper than I am, but I expect she will send a clear message of some sort.
Some light weekend reading.
main file(pdf) here:
http://www.mediafire.com/download.php?ij1enkmzmgt (http://www.mediafire.com/download.php?ij1enkmzmgt)
Just bumping so maybe Minsky(JR) can read it. I'm interested to hear some opinions on this case. It seems pretty interesting to a layperson like me.
These are all the docs for this particular opposition filing:
http://www.mediafire.com/?sharekey=c6b7930fca74efc436df4e8dca141969f77d49e3eb911c07c95965eaa7bc68bc (http://www.mediafire.com/?sharekey=c6b7930fca74efc436df4e8dca141969f77d49e3eb911c07c95965eaa7bc68bc)
This is mostly pretty techinical stuff about the circumstances under which one can bring an interlocutory appeal (i.e. an appeal of a court's determination of a particular question prior to a final entry of judgment on the case as a whole). There is an underlying issue about the scope of a jurisdictional bar under FIRREA and whether it applies to WaMu's case against JPMorgan - it appears that this is unsettled although there is some case law in the 3rd Circuit (which covers delaware) that favors WaMu's position. The fact that the judge invited briefing on this issue indicates that she is at least considering the possibility of allowing the appeal (alternatively she just may be covering herself by allowing the FDIC an opportunity to be heard before slapping them down again).
The brief looks perfectly decent to me though I don't quite buy into the gushing review from your commentator.
Thanks Minsky for your input. There's an omnibus hearing today. I'll post any rulings tonight.
Walrath denies Motion for Reconsideration.
Audio file of today's hearing:
http://www.mediafire.com/download.php?mmtgmjmzvtm (http://www.mediafire.com/download.php?mmtgmjmzvtm)
This audio file is the last one in this list:
http://www.mediafire.com/?sharekey=b932994e293c11f5c79b87b207592a1c3b995895f12920e5b8eada0a1ae8665a (http://www.mediafire.com/?sharekey=b932994e293c11f5c79b87b207592a1c3b995895f12920e5b8eada0a1ae8665a)
I'm sorry K, but exactly what makes this case so interesting? :huh:
Quote from: Barrister on July 27, 2009, 04:40:23 PM
I'm sorry K, but exactly what makes this case so interesting? :huh:
The players involved. The implications if WMI prevails over JPMC.
Aren't Quinn, Emanuel, Urquhart, Oliver & Hedges and Weil, Gotschal prestigous firms? They wouldn't just be out on a fishing expedition unless they knew what they're going to catch, right?
Quote from: citizen k on July 27, 2009, 05:06:05 PM
Aren't Quinn, Emanuel, Urquhart, Oliver & Hedges and Weil, Gotschal prestigous firms? They wouldn't just be out on a fishing expedition unless they knew what they're going to catch, right?
If they knew what they were looking for it wouldn't, by definition, be a fishing expedition.
Quote from: citizen k on July 27, 2009, 05:06:05 PM
Aren't Quinn, Emanuel, Urquhart, Oliver & Hedges and Weil, Gotschal prestigous firms? They wouldn't just be out on a fishing expedition unless they knew what they're going to catch, right?
I hope you were being sarcastic.
That's my point, it's not a fishing expedition. They've got something on JP Morgan and JPM is playing delay, delay, delay but Judge Walrath is having none of it. Discovery moves forward.
"Fishing expeditions", or at least attempts to go fishing, are exceedingly common in any kind of litigation however.
Quote from: citizen k on July 27, 2009, 05:14:39 PM
That's my point, it's not a fishing expedition. They've got something on JP Morgan and JPM is playing delay, delay, delay but Judge Walrath is having none of it. Discovery moves forward.
Then you should have said there was some substance to their requests rather then simply saying it wasnt a fishing expedition because some lawyers belonging to well known firms were doing the examinations.
Here's what another lawyer says about today's hearing:
Quote...The litigation surrounding the 2004 order is the most critical event in this case since WMI filed its 3/21 lawsuit as required by 1821(d), and today the court ruled the 2004 order will not be reconsidered. Moreover, given the Kaiser precedent, JPM can't appeal that order either, so it is stuck with having to comply. As I wrote this weekend, compliance entails surrendering information that could give rise to substantial liability, including, possibly, claims from 3rd parties.
In addition to this risk there is the damage to Jamie Dimon's reputation in the international banking community. As the most important and visible financial professional in the world (including the fact that Dimon is chair of the NY Fed this year) he cannot submit to deposition questions related to allegedly tortious (and, possibly, criminal) activity. Such depositions would damage his standing so he will not submit to them. Anyone who thinks otherwise doesn't understand the very elite world in which JD moves. In that realm no taint of scandal must attach to the person (scandal connected with the person's firm is another matter). In Dimon's case he knows he would have to pay a judgment eventually, so why sully himself by submitting to depositions when he'll have to pay eventually anyway?
I believe JPM's general counsel is discussing today's result with Dimon, and though I think he won't actually settle until a subpoena is issued against him, WMI got closer to that result today.
Motion to Investigate JPMorgan:
http://www.kccllc.net/documents/0812229/0812229090501000000000002.pdf (http://www.kccllc.net/documents/0812229/0812229090501000000000002.pdf)
Judge Walrath's Opinion for 2004 Discovery:
http://kideternal.com/2004Opinion.pdf
I have no dog in this hunt, and I don't pretend to know all the underlying dirt. The fact that the FDIC has come down on JPM's side is a problem for WaMu. The FDIC carries considerable clout and covers JPM in a patina of public interest. The FDIC appears to be taking the position that allowing the Debtor to effectively reopen the sale of assets to JPM risks complicating future efforts to resolve bank failures in an expeditious manner.
On the underlying legal issue addressed in these briefs about the FIRREA jurisdictional bar, it seemed to me like the FDIC had a pretty good legal argument based on the statute, and they are usually entitled to some deference. Their problem here is that there was an old appeals court case in the circuit that includes Delaware that made a different interpretation (albeit in a somewhat different context). The bankruptcy court is bound by that precedent, which explains by the FDIC and JPM were so hot to get an immediate appeal.
Thanks for giving your take on this fascinating case.
QuoteLaw360, New York (July 28, 2009) -- A bankruptcy judge has refused to reverse an earlier decision allowing Washington Mutual Inc. to go ahead with its investigation of JPMorgan Chase & Co. for evidence that JPMorgan sabotaged WaMu in order to acquire it at a depressed value.
Judge Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware on Monday denied JPMorgan's motion to reconsider an earlier order greenlighting the investigation.
The judge ordered the parties to produce witness lists by Saturday, according to Kevin Spittle, principal of Capital Search Group, a WaMu investor familiar with the case. WaMu's witness list will likely include JPMorgan CEO Jaime Dimon, he said.
Attorneys for WaMu and JPMorgan could not immediately be reached for comment on Tuesday.
Judge Walrath originally signed off on WaMu's motion to examine JPMorgan's books on June 24, and JPMorgan filed its reconsideration motion two days later.
WaMu had asked the court on May 1 for access to JPMorgan's books so that it could look for evidence supporting allegations that JPMorgan crafted a plot to undermine the one-time savings and loan giant prior to its 2008 collapse in order to buy up its banking assets cheaply.
JPMorgan objected to the request, stating that WaMu must seek the information it wanted in two separate pending lawsuits.
In one of those suits, WaMu sued the Federal Deposit Insurance Corp., which seized WaMu's assets and sold them to JPMorgan, in the U.S. District Court for the District of Columbia, alleging that the purchase price was too low and that the agency sold assets it had no right to seize. JPMorgan asked to intervene in that suit as a defendant.
JPMorgan also filed its own adversary proceeding against WaMu, seeking declaratory judgments asserting that it acquired the debtor in good faith and that it was the owner of $7.9 billion in disputed assets.
However, Judge Walrath found that the issues in those suits were separate from those involved in WaMu's proposed investigation.
WaMu's request for an investigation was prompted by a lawsuit filed by a group of WaMu investors against JPMorgan in the U.S. District Court for the Southern District of Texas.
The investors allege that JPMorgan deliberately drove down the value of Washington Mutual Bank by abusing confidential information and that JPMorgan engaged in sham negotiations with WaMu throughout 2008 about buying the banking arm in order to obtain confidential information.
JPMorgan then shared that information with WaMu bank customers to persuade them to withdraw their deposits, leaked information to the media to depress the bank's stock value and ultimately used it in its negotiations with the FDIC, allowing JPMorgan to acquire WaMu's bank assets for a "fire sale" price, the investors claim.
WaMu has said it wants to investigate JPMorgan to find out of those allegations are true.
WaMu filed for Chapter 11 protection on Sept. 26, citing approximately $33 billion in total assets and $8.2 billion in debts.
WaMu is represented by Elliott Greenleaf and Quinn Emanuel Urquhart Oliver & Hedges LLP.
JPMorgan is represented by Landis Rath & Cobb LLP and Sullivan & Cromwell LLP.
The case is In re: Washington Mutual Inc., case number 08-12229, in the U.S. Bankruptcy Court for the District of Delaware.
--Additional reporting by Jacqueline Bell and Christine Caulfield
From that article it sounds like another bullshit shareholder lawsuit.
Most of the bullshit shareholder lawsuits didn't have any legs and were dismissed. This is coming from the top.
The Texas lawsuit was from the company, American National Insurance.
http://www.law.com/jsp/tal/digestTAL.jsp?id=1202432921490&JPMorgan_Stirs_the_Pot_in_BillionDollar_WaMu_Litigation (http://www.law.com/jsp/tal/digestTAL.jsp?id=1202432921490&JPMorgan_Stirs_the_Pot_in_BillionDollar_WaMu_Litigation)
QuoteJPMorgan Stirs Pot in Billion-Dollar WaMu Litigation
Alison Frankel
08-10-2009
With $10 billion and its honor at stake, it's no wonder JPMorgan Chase and its lawyers at Sullivan & Cromwell are scratching and clawing in the litigation over JPMorgan's fire sale acquisition of Washington Mutual last fall. (As we've previously reported, WaMu's bankrupt parent company has accused JPMorgan of engineering a scheme to undermine the savings bank's assets in order to buy it on the cheap, as well as alleging that JPMorgan misappropriated $4 billion in WaMu deposits.) But a filing last week in Delaware federal bankruptcy court, in which JPMorgan seeks to compel members of an unofficial group of noteholders to identify themselves, has other folks in the litigation scratching their heads. No one would comment for the record for the Litigation Daily, but it seems that Sullivan & Cromwell may be trying to create a rift in the informal coalition that's trying to recover money from JPMorgan.
S&C referred our calls to JPMorgan; spokesperson Thomas Kelly said the bank would not comment on pending litigation.
The bondholders are cooperating with both the unofficial committee of unsecured creditors (represented by Akin Gump Strauss Hauer & Feld) and WaMu's parent company (represented by special litigation counsel Quinn Emanuel Urquhart Oliver & Hedges) in pursuit of billions of dollars from JPMorgan. Quinn Emanuel is leading the way, via a suit in the bankruptcy court in which Judge Mary Walrath recently granted the firm's motion to conduct discovery on JPMorgan's holdings.
JPMorgan's August 6 filing, which was first reported by The Wall Street Journal, suggests there's dissension among the noteholders. The filing requests a court order compelling each member of the so-called Washington Mutual Noteholders Group to comply with bankruptcy code rules and specify the amount of its claim. The filing notes that the group, which in October 2008 said it held $1.1 billion in WaMu notes, was first represented by White & Case, but more recent filings--in which the group claims to hold $3.3 billion in notes--have been signed by Kasowitz, Benson, Torres & Friedman.
The implication is a split in the bondholder group as it has grown. But Kasowitz partner David Rosner told the Journal there's no such rift. He said his firm and W&C are acting as cocounsel for the noteholders. (W&C may have a conflict that precludes it from litigating against JPMorgan; W&C partner Thomas Lauria didn't return our call and Kasowitz partner Rosner was not available for comment.)
In any case, we've heard that so far, the debtors, the creditors committee, and the noteholders are working together in the case against JPMorgan. Down the road they may fight over spoils from the bank, but they've got to get the spoils first.
Quote from: Admiral Yi on July 28, 2009, 07:29:17 PM
From that article it sounds like another bullshit shareholder lawsuit.
The fact that Quinn took on the case gives it a little more cred then your usual run-of-the-mill plaintiffs suit.
Quote from: The Minsky Moment on August 11, 2009, 09:12:18 AM
The fact that Quinn took on the case gives it a little more cred then your usual run-of-the-mill plaintiffs suit.
Come all within,
Come all without.
Court Weighs In On Whether Creditor Groups Must Disclose Trading Data
http://bankruptcy.cooley.com/2009/12/articles/business-bankruptcy-issues/the-return-of-the-rule-2019-question-delaware-bankruptcy-court-weighs-in-on-whether-creditor-groups-must-disclose-trading-data/ (http://bankruptcy.cooley.com/2009/12/articles/business-bankruptcy-issues/the-return-of-the-rule-2019-question-delaware-bankruptcy-court-weighs-in-on-whether-creditor-groups-must-disclose-trading-data/)
http://www.law.com/jsp/tal/PubArticleTAL.jsp?id=1202437094851&Privilege_Law_Firms_Take_Center_Stage_in_Suddenly_Hot_WaMu_Bankruptcy&slreturn=1&hbxlogin=1 (http://www.law.com/jsp/tal/PubArticleTAL.jsp?id=1202437094851&Privilege_Law_Firms_Take_Center_Stage_in_Suddenly_Hot_WaMu_Bankruptcy&slreturn=1&hbxlogin=1)
QuotePrivilege, Law Firms Take Center Stage in Suddenly Hot WaMu Bankruptcy
Zach Lowe
The article below was first published on The Am Law Daily.
Lawyers for Washington Mutual filed papers Friday in the bank's Chapter 11 case claiming Sullivan & Cromwell, on behalf of WaMu's new owners at JPMorgan Chase, have been sending out letters asking WaMu's old law firms to turn over their client files on WaMu--files that include privileged material. The letters, which WaMu's lawyers at Quinn, Emanuel, Urquhart, Oliver & Hedges have attached as exhibits, claim JPMorgan should have access to the privileged documents because JPMorgan and WaMu are essentially the same entity now. Those entities have "joint privilege," the letters claim. Firms that have received the letters include Weil, Gotshal & Manges, Simpson Thacher & Bartlett, Perkins Coie, and others.
Quinn Emanuel disagrees with the "joint privilege" notion, and it is not thrilled about how S&C and JPMorgan have been conducting themselves, court records show. The motion Quinn filed Friday asks a judge to require JPMorgan and its lawyers to give WaMu's estate advance notice if they are going to be sending these "joint privilege" letters to law firms and requesting client files. The Quinn motion says the WaMu team has requested advance notice in the last week, but says that JPMorgan's side has "declined to provide" it. (WaMu and Quinn claim they only heard about the letters because the firms that received them contacted WaMu and its lawyers).
Why do JPMorgan and its lawyers want these documents so badly? As we reported earlier this week, JPMorgan and WaMu's estate are engaged in a major spat in which WaMu's estate has accused JPMorgan of improperly using confidential information in 2008 to artificially lower WaMu's asking price and buy the distressed bank on the cheap. (JPMorgan eventually purchased WaMu's assets for $1.9 billion in Sept. 2008 after the FDIC placed WaMu in receivership.)
The letters JPMorgan and S&C sent to the various law firms request piles of documents related to the JPMorgan-WaMu transaction.
We reached out to some of the lead lawyers on both sides (Peter Calamari and Michael Carlinsky at Quinn, and Bruce Clark at S&C) but we have not heard back yet. We'll let you know if and when we do.
In any case, the WaMu bankruptcy is getting very interesting for lots and lots of Am Law 100 firms.
I can't see that standing up. WaMu's counsel is basically saying they should be able to pick and choose what documentation they want to show their owners. That's a lot of autonomy for an insolvent company under another's ownership.
Quote from: DontSayBanana on December 22, 2009, 03:44:32 PM
I can't see that standing up. WaMu's counsel is basically saying they should be able to pick and choose what documentation they want to show their owners. That's a lot of autonomy for an insolvent company under another's ownership.
http://www.portfolio.com/industry-news/banking-finance/2009/12/07/why-federal-regulators-closed-washington-mutual/ (http://www.portfolio.com/industry-news/banking-finance/2009/12/07/why-federal-regulators-closed-washington-mutual/)
QuoteEDITOR'S NOTE: In September, on the first anniversary of Washington Mutual's closure, the Puget Sound Business Journal reported that as executives fought to sell the bank during its final days, regulators undercut those efforts by signaling to bidders that the bank would soon be seized and sold at a much lower price. Now, further investigation reveals that, contrary to regulators' assertions at the time of the seizure, WaMu had sufficient liquidity and capital to meet regulatory standards and survive. Why, then, was it shuttered?
On a sunny Sunday afternoon in late September, a year and two days after regulators closed Washington Mutual, the bank's former leaders gathered for an improbable, and tragic, reunion at a Seattle restaurant.
Among those present: Lou Pepper, the CEO who guided WaMu through the 1980s, and Kerry Killinger, the CEO who presided over both its vast expansion in the 1990s and its later deep dive into risky mortgage lending.
They came to honor a widely respected WaMu veteran who had been let go this year after decades at the bank. Just 10 days earlier, wracked in part by his family's growing financial pressures, he took his own life at his Seattle home, according to a police report. He left behind a family and scores of colleagues who revered him. (Out of respect for the family, the Puget Sound Business Journal is not publishing his name.)
For nearly two hours at the memorial, speakers shared memories of the man's many accomplishments.
The speakers didn't address the looming questions, however. These were broached in hushed tones among some WaMu employees: Why exactly did the government seize our bank? Was all this financial pain and personal hardship necessary?
WaMu's regulators said they based their decision to close the bank and sell it to JPMorgan Chase on lack of liquidity—its access to ready cash—and the mounting pile of failed mortgage loans that were expected to cripple the bank's earnings for months to come.
But new information—gathered from internal documents and interviews with scores of former WaMu executives, regulators, and other experts—shows that WaMu had plenty of cash on the day it was seized, and a regulator-vetted plan to operate with even less money if necessary.
WaMu also had ample capital—more than the regulatory levels for a "well-capitalized" bank.
Quote from: DontSayBanana on December 22, 2009, 03:44:32 PM
I can't see that standing up. WaMu's counsel is basically saying they should be able to pick and choose what documentation they want to show their owners. That's a lot of autonomy for an insolvent company under another's ownership.
There's some pretty damning accusations against JP Morgan in this motion to expand the discovery:
Link to Full 2004 New Motion
http://www.kccllc.net/documents/0812229/0812229091214000000000008.pdf (http://www.kccllc.net/documents/0812229/0812229091214000000000008.pdf)
http://amlawdaily.typepad.com/amlawdaily/2010/01/wamumotion.html (http://amlawdaily.typepad.com/amlawdaily/2010/01/wamumotion.html)
QuoteJanuary 29, 2010 5:27 PM
S&C Can Breathe Easier in WaMu Case...for Now
Posted by Zach Lowe
A quick update from the ever-interesting Washington Mutual bankruptcy case in Delaware: A federal judge denied the WaMu estate's motion to compel discovery from about 20 different entities associated with WaMu's collapse and sale to JPMorgan Chase in 2008, according to Bloomberg.
Among those entities: Sullivan & Cromwell, the law firm that advised JPMorgan in its deal to acquire WaMu for about $1.9 billion after the FDIC seized the ailing Seattle-based bank during the height of the financial crisis in the fall of 2008. The WaMu estate, represented by Quinn Emanuel Urquhart Oliver & Hedges, has filed papers claiming that JPMorgan engaged in all sorts of allegedly nefarious behavior to discourage potential competing bids for WaMu and lower the price of the bank before the FDIC seized it, according to our prior reporting. The estate alleges that higher-ups at JPMorgan, including Jamie Dimon, leaked confidential WaMu data and e-mailed potential bidders with warnings that WaMu's losses were higher than public estimates.
The estate wanted to investigate these charges further, and asked Judge Mary Walrath to compel discovery from JPMorgan. The judge granted that motion, and the Quinn team followed it up with a similar motion asking to compel discovery from S&C, the FDIC, other federal regulators, and a host of rating agencies--all entities that could have been complicit in allegedly devaluing WaMu and pushing it JPMorgan's way, court records show. As the judge mulled that motion, a few entities, including the Treasury Department and the Federal Reserve, voluntarily turned over documents. Others refused and filed papers objecting to the motion; that group includes the FDIC (represented by DLA Piper) and PricewaterhouseCoopers, court records show.
In between: A third group that neither objected to the motion nor cooperated with it by turning over documents. That group includes S&C, according to two sources familiar with the matter. (Lawyers on the S&C team on the case, headed by H. Rodgin Cohen, have not returned our messages seeking comment on this matter.)
That group's strategy of waiting out the judge has apparently paid off, since Judge Walrath late Thursday denied the WaMu motion to compel discovery from all entities other than JPMorgan, according to Bloomberg and the Business Insider. The judge ruled that the information Quinn has already gleaned from JPMorgan (and those entities which coughed up documents voluntarily) gives the firm enough documentation to choose whether or not to pursue a claim against JPMorgan. (A similar case against JPMorgan over its conduct during the WaMu affair is already proceeding in federal court in Texas, and the WaMu estate is suing the FDIC in federal court in Washington, D.C.) Should WaMu file such a claim, they would able to conduct discovery under normal procedures, the judge said.
http://www.reuters.com/article/idCNN2813570420100129?rpc=44 (http://www.reuters.com/article/idCNN2813570420100129?rpc=44)
Quote
UPDATE 2-WaMu shareholders get their voice in bankruptcy
Thu, Jan 28 2010
* Shareholders to get unified role in bankruptcy
* Culminates year-long campaign by shareholders
(Adds judge refuses to expand investigation against JPMorgan)
By Tom Hals
WILMINGTON, Del, Jan 28 (Reuters) - Shareholders of Washington Mutual Inc will have a voice in the company's bankruptcy after a judge refused on Thursday to disband their committee, which Washington Mutual said would complicate the case.
The U.S. Trustee, who plays an oversight role in bankruptcy, appointed the committee earlier this month after being petitioned by 3,500 shareholders. The company immediately asked the court to disband it.
The committee will be able to speak with a unified voice and hire professionals, who would be paid by the company.
Washington Mutual has said since it filed for bankruptcy in 2008 that it is hopelessly insolvent, and therefore there is no need for an official committees of shareholders.
"Evidence that debt and equity are still trading ... establishes that at least the market thinks the debt is not hopelessly insolvent," said Judge Mary Walrath.
She also denied a request to cap the committee's expenses at $250,000.
Much of the value of the company depends on the outcome of various legal disputes surrounding the government's seizure of the company's banking operations during the depth of the financial crisis in 2008.
Brian Rosen of Weil, Gotshal & Manges, which represents Washington Mutual, said there was little need for an equity committee until the outstanding lawsuits are settled. "That's when the equity committee should come into being."
Gregory Cross of Venable, which represents the equity committee, pointed out that the additional cost for the equity committee would be minimal for the company, which already pays for the work of 19 sets of professionals. "But one more is the straw that breaks the camels back?"
The hearing attracted an overflow crowd, drawing shareholders -- from as far away as California and Seattle, where Washington Mutual is based -- who have organized themselves over the past year through message boards and websites.
"There's no settlement or outcome that will have validity for the people in this courtroom, or the 3,500 who wrote to the Trustee, without a committee," said Cross.
Walrath also denied a request by Washington Mutual to expand an investigation of claims it may have against JPMorgan Chase & Co <JPM.N>.
The company wanted to subpoena the Federal Deposit Insurance Corp, the Securities and Exchange Commission, Standard & Poor's rating agency and several others for information regarding the events leading to the seizure of Washington Mutual's banking operations.
Walrath has already compelled JPMorgan, which bought the seized bank for $1.9 billion, to provide documents.
"Issuing subpoenas against dozens of other parties just goes too far," she said.
A separate agenda item about the return of a deposit was postponed to Feb. 5.
The case is In re Washington Mutual Inc, U.S. Bankruptcy Court, District of Delaware, No. 08-12229.
(Reporting by Tom Hals; Editing by Phil Berlowitz)
QuoteDealBook - A Financial News Service of The New York Times
February 5, 2010, 5:00 am
Hedge Funds Fight Judges on Disclosure
Hedge funds will defend their coveted secrecy against bankruptcy judges who want more information about their economic interests before granting them an active role in Chapter 11 reorganizations.
The two sides will make their case on Friday before a regularly scheduled federal rule-making panel that will try to bring consistency to an increasingly unsettled issue that has divided normally like-minded judges, Reuters reported.
The body, which includes bankruptcy judges and legal professionals, has proposed expanding the amount of disclosure required by parties in a bankruptcy.
The proposal will mostly affect hedge funds, and the hearing follows recent rulings that exposed a sharp judicial split on the issue.
Proponents of added disclosure want more information about all positions of a group, particularly when financial instruments such as credit default swaps muddy the issue of the group's economic interests. This might reveal, for example, that an ad hoc committee fighting against a reorganization plan could actually benefit if the company liquidates.
Hedge funds are particularly protective of prices paid for a claim. Such information could reveal their investment strategy and might give others an upper hand in a reorganization if they know what return a hedge fund is making on its claim.
"Today, because of derivatives and the other sorts of financial technology it is increasingly the case that someone who owns the claim doesn't bear the risks or burdens associated with it, or doesn't need to," Richard Hahh, a bankruptcy attorney with Debevoise & Plimpton, told Reuters.
It recently burst into the open in Delaware's bankruptcy court, where judges have broken from their usual unity and issued very different rulings on the matter.
Judge Mary Walrath required broad disclosure from a group of holders of Washington Mutual bonds, noting in particular the role of complex financial instruments. She also cited the proposed rule change in support of requiring disclosure.
Delaware Judge Christopher Sontchi denied a request to compel disclosure by an ad hoc group of Six Flags bondholders a few weeks later, focusing his attention on the definitions of a committee. He noted taking into consideration the price paid for a claim went against 600 years of common contract law.
Stephen Lubben, a law professor at Seton Hall Law School in Newark, New Jersey, said Judge Walrath tried to address larger issues.
"Over the last decade there has been such a growth of financial products and other investment strategies that reduce transparency in the bankruptcy process," Mr. Lubben said.
The rule governing disclosure, known as 2019, requires every group representing more than one creditor to provide information about the value of their holdings, when those holdings were acquired and the amount paid, among other things. Few parties regularly comply in full.
The rule was drafted more than 30 years ago when it was assumed that creditors to a bankrupt company would hold their claims through the case and would benefit from a successful reorganization.
That has changed dramatically in recent years.
The original creditors in large cases now often have sold their claims to investors in distressed debt who have experience with the bankruptcy process. They buy these claims at deep discounts and may be able to a profit even with very limited recoveries of pennies on the dollar.
Robert Gerber, a bankruptcy judge for the Southern District of New York, recommended in a letter to the panel that rule 2019 require disclosure of holdings that would benefit from a fall in price of a claim or failure of a reorganization. The rule should also require the information from each participant in the group, he said.
Most importantly, Mr. Gerber said if those changes were made the rule could drop the controversial requirements for price disclosure.
The panel will consider the comments before issuing a final recommendation. That will eventually go to the U.S. Supreme Court for approval and a review by Congress before taking effect.
Opponents of wider disclosure tend to focus on prices.
"It's a bedrock principle of bankruptcy law that the price a creditor paid for a claim is legally irrelevant to that creditor's rights," wrote Abid Qureshi, a lawyer with Akin Gump Strauss Hauer & Feld, which often represents ad hoc groups, in testimony submitted to the panel.
Mr. Gerber said in his letter to the panel that if investors do not want to disclose their holdings, they can simply participate passively, rather than actively appearing in court with a group, and no disclosure is required.
Hipster Battles Funds
The 33-year-old Washington Mutual investor, with no legal experience, delivered what people in the courtroom called an unusually eloquent speech, helping persuade the judge to investigate trading by some of the nation's biggest hedge funds and to reject a plan for the bank's exit from bankruptcy.
http://online.wsj.com/article/SB10001424052702304778304576377880810167382.html (http://online.wsj.com/article/SB10001424052702304778304576377880810167382.html)
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fsi.wsj.net%2Fpublic%2Fresources%2Fimages%2FBF-AB080_WAMU_D_20110610152757.jpg&hash=de21eba13123f8b2d5a01408fca936a54ec966b5)
Anyone like to read objections? Here's a doozy.
http://www.kccllc.net/documents/0812229/0812229110712000000000032.pdf (http://www.kccllc.net/documents/0812229/0812229110712000000000032.pdf)
Post-Hearing Brief of the Official Committee of Equity Security Holders in Opposition to Confirmation of the Debtors' Modified Sixth Amended Plan of Reorganization
http://www.kccllc.net/documents/0812229/0812229110815000000000021.pdf (http://www.kccllc.net/documents/0812229/0812229110815000000000021.pdf)
CK - probably not a lot of takers on languish for reading a 100+ page brief submitted by an equity committee in a bankruptcy case.
Just started on it. Just to get some footing, since I'm quickly falling out of practice with respect to legalese- from what I'm reading, the objection is that the four hedge funds did insider trading with information from the settlement negotiations, and that the settlement committee pushed through a crap deal just to make sure that it would make it through; am I on the right track?
Quote from: DontSayBanana on August 16, 2011, 12:39:58 PM
Just started on it. Just to get some footing, since I'm quickly falling out of practice with respect to legalese- from what I'm reading, the objection is that the four hedge funds did insider trading with information from the settlement negotiations, and that the settlement committee pushed through a crap deal just to make sure that it would make it through; am I on the right track?
:yes:
Insider trading, bankruptcy fraud, that's why it's such a juicy case. Legal shenanigans of the highest order. Stay tuned, oral closing arguments scheduled Aug. 24.
Quote from: The Minsky Moment on August 16, 2011, 11:11:11 AM
CK - probably not a lot of takers on languish for reading a 100+ page brief submitted by an equity committee in a bankruptcy case.
Maybe I'm just an ADHD-addled criminal lawyer, but it utterly escapes me why K thinks this case is interesting...
Quote from: Barrister on August 16, 2011, 02:05:42 PM
Quote from: The Minsky Moment on August 16, 2011, 11:11:11 AM
CK - probably not a lot of takers on languish for reading a 100+ page brief submitted by an equity committee in a bankruptcy case.
Maybe I'm just an ADHD-addled criminal lawyer, but it utterly escapes me why K thinks this case is interesting...
I can't help myself.
QuoteWMI Reorganization Produces Potentially Disruptive Bankruptcy Decision
Oct 19th, 2011
By Christopher Faille
Shrapnel from the explosion of the subprime market may yet produce a significant change in the way investors and their managers with a distressed-assets strategy maneuver for advantage in the context of chapter 11 proceedings. Specifically, a Bankruptcy Court's refusal to confirm a plan in the Washington Mutual Inc. (WMI) reorganization proceedings may herald the rise of a new weapon – the "colorable claim" that a party with an interest prior to one's own has engaged in insider trading – in the in-fighting among interested parties.
All is fair in love and war but it is impossible to avoid the impression that Judge Mary Walrath's opinion could do a lot of mischief.
Background
WMI was a big part of the madness that we all fondly remember from the years 2007-2008. It was the holding company of Washington Mutual Bank (WaMu) back when WaMu was the country's largest savings-and-loan association. As the subprime crisis became a more general banking crisis, depositors decided WaMu was a bad bet, and then withdrew more than $16 billion from their accounts in a ten-day period in the middle of September 2008.
On September 25, WaMu's regulator, the Office of Thrift Supervision, seized the bank and appointed the FDIC as receiver. The FDIC immediately sold the bank to JPMorgan Chase through a hasty and, it turns out, rather sloppily drafted purchase and assumption agreement. It remained very unclear which assets belonged to the holding company, WMI, and which had passed through this seizure-and-sale into the hands of JPM. WMI filed a chapter 11 petition on September 26, and the resulting litigation has been even more-than- usually hard fought.
Refusal to Confirm
But we'll fast forward three years, to September 13, 2011, when Judge Mary Walrath of the Delaware bankruptcy court refused to confirm the reorganization plan, because the holders of equity in WMI argued that four hedge funds, collectively referred to as the Settlement Noteholders, had engaged in insider trading, in other words that they had become insiders under the law when the Debtor provided them with confidential information during the course of negotiations toward such a settlement, and that there is at least circumstantial evidence that the Settlement Noteholders knowingly traded on the basis of this information.
How exactly are the two issues (insider trading and plan confirmation) related? The equity holders noted that bankruptcy law requires that a plan, to be confirmed, must be "proposed in good faith and not by any means forbidden by law," 11 U.S.C. §1129(a)(3). They cited the alleged insider trades as a reason why the proposed settlement should be regarded as failing the good faith test. Strikingly, Walrath makes a point of rejecting this particular contention: "While the Court is not suggesting that the Settlement Noteholders be commended for their actions, the record shows their actions do not support a conclusion that the Modified Plan cannot be confirmed because it has been proposed in bad faith."
The allegations of insider trading arise again much later in Walrath's opinion, though, in the context of "equitable disallowance," the authority of the bankruptcy court to disallow the claims of a wrongdoer, thereby expanding the size of the estate available to other claimants. Judge Walrath made no finding on the question whether there had been insider trading, and thus no finding disallowing the Settlement Noteholders' claims. She did find, though, that the equity committee had made a "colorable claim" to that effect under both the "classical and misappropriation theories" of insider trading. She granted the committee permission to bring an adversary proceeding on that basis, but stayed any such proceeding pending efforts at mediation.
Scarce Precedent
Precedents for disallowance on the ground of insider trading would seem to be scarce – though Walrath cites a U.S. Supreme Court decision in its support, the decision is an old one, preceding the existing statutory language. It is the 1939 case of Pepper v. Litton, where the high court said that one who is in a fiduciary position with regard to a corporation "cannot utilize his inside information and his strategic position for his own preferment." That was one of a list of principles such a person cannot violate. When these principles are violated, the Pepper court continued, "equity will undo the wrong or intervene to prevent its consummation."
Walrath expressed her view that there will only be "extreme instances – perhaps very rare" when it will be necessary and thus appropriate for a bankruptcy court to invoke equitable disallowance. But evoke it (as the potential outcome of those "colorable claims") she did, and if her assertion of this power holds up it will provide a new piece of munitions, of indeterminate charge, for use in future reorganizations.
The Settlement Noteholders have appealed to the District Court, contending that there are "fundamental errors of securities and bankruptcy law and violations of due process" inherent in Walrath's opinion and order. They make the case for example that when Congress was debating the bill that became the existing bankruptcy statute, in 1978, it "considered – and then ultimately rejected – the inclusion of equitable disallowance as a remedy."
Does any of mean that Camper will come back? That's all I want. :Embarrass: