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Sep 16, 2009, 9:36:14 AM9/16/09
to Washington Mutual
From: Nicole - nicole...@gmail.com
WAMUQ (Washington Mutual, Inc.)
0.172 0.000 (0.00%) Sep 15, 3:59PM EDT
Open:
High:
Low:
Volume: 0.00
Avg Vol: 132.78M
Mkt Cap: 293.32M
September 6, 2009
Delaware Bankruptcy Judge Rules 2004 Exam Proper Even Though Four
Adversary Actions are Pending
Brief by UWLA Law Student, Sara Hussain:
In re Washington Mutual, Inc., 408 B.R. 45 (Bkrtcy D. Delaware, June,
2009)
ISSUE: Does the existence of four pending adversary proceedings or
other litigation between the parties require denial of a requested
2004 examination?
HOLDING: No.
Judge Mary Walrath
The chapter 11 debtor filed a motion for a 2004 exam directing the
examination of JPMorgan Chase Bank (“JPM”). “For the reasons set forth
below, the Court will grant the Debtors' Motion.” Prior to the filing
of a chapter 11 petition, Washington Mutual, Inc. (“WMI”) was a
savings and loan holding company, which owned Washington Mutual Bank
(“WMB”). “Deteriorating confidence in WMB fueled a bank run beginning
September 15, with $16.7 billion in deposits withdrawn over a ten-day
period.” On September 25, 2008, FDIC took over WMB. It was the
largest bank failure in the nation's history. Immediately after its
appointment as receiver, the FDIC sold substantially all the assets of
WMB to JPM. On September 26, the Debtors filed chapter 11 petitions.
The Debtors filed proofs of claim with the FDIC in its capacity as
receiver of WMB which the FDIC denied. On March 20, 2009, the Debtors
filed suit in the United States District Court against the FDIC (the
“DC Action”) with the following five counts: (1) seeking review of the
FDIC's denial of the Debtors' proofs of claim; (2) wrongful
dissipation of WMB's assets; (3) taking of the Debtors' property
without just compensation; (4) conversion of the Debtors' property;
and (5) seeking a declaration that the FDIC's disallowance of the
Debtors' claims is void. JPM moved to intervene in the DC Action; the
Debtors have opposed JPM's motion to intervene.
JPM filed an adversary proceeding against the Debtors seeking
declaratory judgments regarding the ownership of various assets which
JPM asserts it acquired in good faith and for value from the FDIC (the
“JPM Adversary Action”). The Debtors then filed an adversary
proceeding against JPM seeking turnover of approximately $4 billion in
cash held in demand deposit accounts in the name of the Debtors at WMB
at the time WMB was seized and sold to JPM. JPM filed a motion to
dismiss the Turnover Action; the Debtors filed a motion for summary
judgment.
A fourth action was filed, in state court in Texas by a group of
insurance companies which held common stock of WMI against JPM (the
“Texas Action”). On March 25, 2009, the FDIC and JPM removed the
Texas Action to the United States District Court for the Southern
District of Texas.
ANALYSIS:
Rule 2004(a) of the Federal Rules of Bankruptcy Procedure states that
“on motion of any party in interest, the court may order the
examination of any entity.” The scope of a Rule 2004 examination is
“unfettered and broad.” “The examination ... may relate only to the
acts, conduct, or property or to the liabilities and financial
condition of the debtor, or to any matter which may affect the
administration of the debtor's estate. Additionally, in a case under
chapter 11 ... the examination may also relate to the operation of any
business and the desirability of its continuance, the source of any
money or property acquired or to be acquired by the debtor for
purposes of consummating a plan and the consideration given or offered
therefor, and any other matter relevant to the case or to the
formulation of a plan.”
“At issue in this case is the potential limitation on the use of the
Rule 2004 examination device caused by the shadow of pending adversary
proceedings or litigation in other forums. The ‘pending proceeding’
rule states ‘that once an adversary proceeding or contested matter has
been commenced, discovery is made pursuant to Federal Rules of
Bankruptcy Procedure 7026 et seq., rather than by a Rule 2004
examination.’” In addition, courts have also recognized that Rule 2004
examinations may be inappropriate “where the party requesting the Rule
2004 examination could benefit their pending litigation outside of the
bankruptcy court against the proposed Rule 2004 examinee.”
In this case, JPM argues that the 2004 examination is improper because
it seeks to elicit information directly related to issues and parties
already named in the JPM Adversary Action as well as the DC Action.
However, the Court held that nothing in the document production
request seeks any information related to the Turnover Action. “The
requested Rule 2004 examination does seek extensive discovery related
to the Texas Action and because the Debtor is not a party to the Texas
Action, the requested 2004 examination is proper, even though it seeks
information related to the Texas Action.”
JPM then argues that the Debtors' requested 2004 examination seeks
documents related to the JPM Adversary Action. The JPM Adversary
Action primarily seeks a series of declaratory judgments that JPM owns
a number of disputed assets it asserts that it purchased when it
acquired the assets of WMB from the FDIC. The Debtors' Motion seeks
production of documents and related depositions relating to potential
business tort claims, potential fraudulent transfer claims, potential
turnover claims against JPM, and potential preferential transfer
claims against JPM.
“The Court concludes that the Debtors' Motion does not seek the
discovery of evidence ‘related’ to the JPM Adversary Action. With
respect to the potential business tort claims, the Debtors seek to
investigate conduct which occurred before the OTS closed WMB. In
contrast, the JPM Adversary Action seeks to have the Court determine
the ownership of certain disputed assets from the sale of WMB's assets
to JPM, which occurred after the OTS closed WMB. Accordingly, the
Court finds that the Debtors' Motion does not seek to discover
evidence related to the JPM Adversary Action.”
JPM also argues that the Debtors' requested 2004 examination seeks
documents related to the DC Action. However, JPM is not a party to
the DC Action. “The possibility that JPM may intervene in the DC
Action is not a sufficient reason to deny the Debtors' Motion at this
time. The “pending proceeding” rule is predicated on there actually
being a pending action involving the two parties.”
“[T]here is no justification to prevent the Rule 2004 examination of
JPM simply because the Debtors may obtain evidence which could be used
in a pending proceeding in which JPM is not yet a party. One of the
primary purposes of a Rule 2004 examination is as a pre-litigation
device. Consequently, the Court should not permit a party to avoid
examination by simply filing a motion to intervene in a pending
proceeding against a third party. Since JPM is not a party to the DC
Action, the concern that the Debtors are attempting to circumvent the
Federal Rules of Civil Procedure is not present. The ‘relatedness’ of
the DC Action to the Debtors' requested 2004 examination is not
relevant.”
With respect to the DC Action, the “Debtors seek to discover evidence
regarding JPM's alleged malfeasance prior to the seizure and sale of
WMB. JPM argues that discovery of this evidence is related to the
Debtors alleged causes of action against the FDIC for dissipation of
WMB's assets and the taking of Debtors' property without just
compensation. However, these causes of action are premised on the
FDIC's failure to maximize the value of the receivership's assets in
the sale of WMB to JPM. Specifically, the Debtors assert the FDIC
would have received a higher value through the liquidation of WMB than
the sale to JPM. The requested 2004 examination does not seek to
discover evidence related to the hypothetical liquidation analysis
implicated in the dissipation and takings causes of action asserted in
the DC Action.”
http://lawprofessors.typepad.com/bankruptcyprof_blog/2009/09/delaware-bankruptcy-judge-rules-2004-exam-proper-even-though-four-adversary-actions-are-pending-.html
WAMUQ (Washington Mutual, Inc.)
0.172 0.000 (0.00%) Sep 15, 3:59PM EDT
Open:
High:
Low:
Volume: 0.00
Avg Vol: 132.78M
Mkt Cap: 293.32M
September 6, 2009
Delaware Bankruptcy Judge Rules 2004 Exam Proper Even Though Four
Adversary Actions are Pending
Brief by UWLA Law Student, Sara Hussain:
In re Washington Mutual, Inc., 408 B.R. 45 (Bkrtcy D. Delaware, June,
2009)
ISSUE: Does the existence of four pending adversary proceedings or
other litigation between the parties require denial of a requested
2004 examination?
HOLDING: No.
Judge Mary Walrath
The chapter 11 debtor filed a motion for a 2004 exam directing the
examination of JPMorgan Chase Bank (“JPM”). “For the reasons set forth
below, the Court will grant the Debtors' Motion.” Prior to the filing
of a chapter 11 petition, Washington Mutual, Inc. (“WMI”) was a
savings and loan holding company, which owned Washington Mutual Bank
(“WMB”). “Deteriorating confidence in WMB fueled a bank run beginning
September 15, with $16.7 billion in deposits withdrawn over a ten-day
period.” On September 25, 2008, FDIC took over WMB. It was the
largest bank failure in the nation's history. Immediately after its
appointment as receiver, the FDIC sold substantially all the assets of
WMB to JPM. On September 26, the Debtors filed chapter 11 petitions.
The Debtors filed proofs of claim with the FDIC in its capacity as
receiver of WMB which the FDIC denied. On March 20, 2009, the Debtors
filed suit in the United States District Court against the FDIC (the
“DC Action”) with the following five counts: (1) seeking review of the
FDIC's denial of the Debtors' proofs of claim; (2) wrongful
dissipation of WMB's assets; (3) taking of the Debtors' property
without just compensation; (4) conversion of the Debtors' property;
and (5) seeking a declaration that the FDIC's disallowance of the
Debtors' claims is void. JPM moved to intervene in the DC Action; the
Debtors have opposed JPM's motion to intervene.
JPM filed an adversary proceeding against the Debtors seeking
declaratory judgments regarding the ownership of various assets which
JPM asserts it acquired in good faith and for value from the FDIC (the
“JPM Adversary Action”). The Debtors then filed an adversary
proceeding against JPM seeking turnover of approximately $4 billion in
cash held in demand deposit accounts in the name of the Debtors at WMB
at the time WMB was seized and sold to JPM. JPM filed a motion to
dismiss the Turnover Action; the Debtors filed a motion for summary
judgment.
A fourth action was filed, in state court in Texas by a group of
insurance companies which held common stock of WMI against JPM (the
“Texas Action”). On March 25, 2009, the FDIC and JPM removed the
Texas Action to the United States District Court for the Southern
District of Texas.
ANALYSIS:
Rule 2004(a) of the Federal Rules of Bankruptcy Procedure states that
“on motion of any party in interest, the court may order the
examination of any entity.” The scope of a Rule 2004 examination is
“unfettered and broad.” “The examination ... may relate only to the
acts, conduct, or property or to the liabilities and financial
condition of the debtor, or to any matter which may affect the
administration of the debtor's estate. Additionally, in a case under
chapter 11 ... the examination may also relate to the operation of any
business and the desirability of its continuance, the source of any
money or property acquired or to be acquired by the debtor for
purposes of consummating a plan and the consideration given or offered
therefor, and any other matter relevant to the case or to the
formulation of a plan.”
“At issue in this case is the potential limitation on the use of the
Rule 2004 examination device caused by the shadow of pending adversary
proceedings or litigation in other forums. The ‘pending proceeding’
rule states ‘that once an adversary proceeding or contested matter has
been commenced, discovery is made pursuant to Federal Rules of
Bankruptcy Procedure 7026 et seq., rather than by a Rule 2004
examination.’” In addition, courts have also recognized that Rule 2004
examinations may be inappropriate “where the party requesting the Rule
2004 examination could benefit their pending litigation outside of the
bankruptcy court against the proposed Rule 2004 examinee.”
In this case, JPM argues that the 2004 examination is improper because
it seeks to elicit information directly related to issues and parties
already named in the JPM Adversary Action as well as the DC Action.
However, the Court held that nothing in the document production
request seeks any information related to the Turnover Action. “The
requested Rule 2004 examination does seek extensive discovery related
to the Texas Action and because the Debtor is not a party to the Texas
Action, the requested 2004 examination is proper, even though it seeks
information related to the Texas Action.”
JPM then argues that the Debtors' requested 2004 examination seeks
documents related to the JPM Adversary Action. The JPM Adversary
Action primarily seeks a series of declaratory judgments that JPM owns
a number of disputed assets it asserts that it purchased when it
acquired the assets of WMB from the FDIC. The Debtors' Motion seeks
production of documents and related depositions relating to potential
business tort claims, potential fraudulent transfer claims, potential
turnover claims against JPM, and potential preferential transfer
claims against JPM.
“The Court concludes that the Debtors' Motion does not seek the
discovery of evidence ‘related’ to the JPM Adversary Action. With
respect to the potential business tort claims, the Debtors seek to
investigate conduct which occurred before the OTS closed WMB. In
contrast, the JPM Adversary Action seeks to have the Court determine
the ownership of certain disputed assets from the sale of WMB's assets
to JPM, which occurred after the OTS closed WMB. Accordingly, the
Court finds that the Debtors' Motion does not seek to discover
evidence related to the JPM Adversary Action.”
JPM also argues that the Debtors' requested 2004 examination seeks
documents related to the DC Action. However, JPM is not a party to
the DC Action. “The possibility that JPM may intervene in the DC
Action is not a sufficient reason to deny the Debtors' Motion at this
time. The “pending proceeding” rule is predicated on there actually
being a pending action involving the two parties.”
“[T]here is no justification to prevent the Rule 2004 examination of
JPM simply because the Debtors may obtain evidence which could be used
in a pending proceeding in which JPM is not yet a party. One of the
primary purposes of a Rule 2004 examination is as a pre-litigation
device. Consequently, the Court should not permit a party to avoid
examination by simply filing a motion to intervene in a pending
proceeding against a third party. Since JPM is not a party to the DC
Action, the concern that the Debtors are attempting to circumvent the
Federal Rules of Civil Procedure is not present. The ‘relatedness’ of
the DC Action to the Debtors' requested 2004 examination is not
relevant.”
With respect to the DC Action, the “Debtors seek to discover evidence
regarding JPM's alleged malfeasance prior to the seizure and sale of
WMB. JPM argues that discovery of this evidence is related to the
Debtors alleged causes of action against the FDIC for dissipation of
WMB's assets and the taking of Debtors' property without just
compensation. However, these causes of action are premised on the
FDIC's failure to maximize the value of the receivership's assets in
the sale of WMB to JPM. Specifically, the Debtors assert the FDIC
would have received a higher value through the liquidation of WMB than
the sale to JPM. The requested 2004 examination does not seek to
discover evidence related to the hypothetical liquidation analysis
implicated in the dissipation and takings causes of action asserted in
the DC Action.”
http://lawprofessors.typepad.com/bankruptcyprof_blog/2009/09/delaware-bankruptcy-judge-rules-2004-exam-proper-even-though-four-adversary-actions-are-pending-.html
A Bi
Sep 17, 2009, 9:02:06 AM9/17/09
to Washington Mutual
Very good analysis,
Dificult to follow for not lawyers and non native english languages.
However I find the text very explicit.
Please send it to JPM and CO.
On Sep 16, 10:36 am, "I love WAMU !" <nicole100w...@gmail.com> wrote:
> From: Nicole - nicole100w...@gmail.com
> http://lawprofessors.typepad.com/bankruptcyprof_blog/2009/09/delaware...
Dificult to follow for not lawyers and non native english languages.
However I find the text very explicit.
Please send it to JPM and CO.
On Sep 16, 10:36 am, "I love WAMU !" <nicole100w...@gmail.com> wrote:
> From: Nicole - nicole100w...@gmail.com
I love WAMU !
Sep 22, 2009, 5:01:20 AM9/22/09
to Washington Mutual
From: Nicole - nicole...@gmail.com
Thanks ! :-)
The JPM Shareholders in the JPM and CO. Board don't want me to post
anything good about WAMU in there Board !
> >http://lawprofessors.typepad.com/bankruptcyprof_blog/2009/09/delaware...- Hide quoted text -
>
> - Show quoted text -
Thanks ! :-)
The JPM Shareholders in the JPM and CO. Board don't want me to post
anything good about WAMU in there Board !
>
> - Show quoted text -
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