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From: Nicole - nicole...@gmail.com

WaMu Wins Bid To Dig Into JPMorgan Books

By Christine Caulfield

Law360, New York (June 26, 2009) -- A bankruptcy judge has given
Washington Mutual Inc. the green light to examine the records of
JPMorgan Chase & Co. for evidence supporting allegations that the bank
sabotaged WaMu before its spectacular 2008 collapse.

Judge Mary F. Walrath of the U.S. Bankruptcy Court for the District of
Delaware on Wednesday granted a motion by WaMu to access JPMorgan's
books for proof that it crafted a plot to undermine the one-time
savings and loan giant prior to its bankruptcy in order to buy up its
banking assets cheaply.

WaMu's request on May 1 sought production of documents and depositions
connected to potential business tort claims against JPMorgan,
potential fraudulent transfer claims, potential turnover claims and
potential preferential transfer claims.

JPMorgan objected to the request, stating that WaMu must seek the
information it wanted in already pending litigation. WaMu could not
use Rule 2004 of the U.S. Bankruptcy Code to pursue discovery on
issues that were involved in two separate lawsuits, JPMorgan contended
in its objection filed May 13.

WaMu filed an adversary proceeding in the Delaware bankruptcy court on
April 27, seeking $4 billion in cash that was held in the deposit
accounts of subsidiary Washington Mutual Bank at the time WMB was
seized and sold by the Federal Deposit Insurance Corp. to JPMorgan for
$1.9 billion.

WaMu also sued FDIC 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, which intervened in that suit, 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 the
$7.9 billion in disputed assets.

It was the last two suits that JPMorgan referred to as the operative
pending proceedings.

In granting WaMu's request over the bank's objections, Judge Walrath
said JPMorgan had misapplied the pending proceeding rule, since WaMu's
motion did not seek evidence related to the bank's adversary
proceeding.

“Simply because JPMorgan chose to include background information
regarding the relationship of the parties involved in the JPMorgan
adversary action in its complaint does not mean that any Rule 2004
examination request dealing with those background facts is related to
the JPM adversary action,” the judge said.

“The court concludes that the debtors' motion does not seek the
discovery of evidence related to the JPMorgan adversary action,” the
judge added.

Judge Walrath said JPMorgan's suit sought the court's declaration that
it owned certain assets from the sale of WaMu, which occurred after
WaMu's closure, while WaMu sought to investigate conduct that occurred
before the closure.

Further, the judge ruled, JPMorgan was not a party to WaMu's action
against the FDIC and the mere possibility that it could be permitted
to intervene was insufficient to deny WaMu's motion.

“The 'pending proceeding' rule is predicated on there actually being a
pending action involving the two parties,” Judge Walrath said. “The
court concludes that there is no justification to prevent the Rule
2004 examination of JPMorgan simply because the debtors may obtain
evidence which could be used in a pending proceeding in which JPMorgan
is not yet a party.”

WaMu asked to conduct a Rule 2004 investigation into JPMorgan after a
group of WaMu investors sued JPMorgan in the U.S. District Court for
the Southern District of Texas. WaMu wants to investigate whether the
allegations in the shareholder complaint are true, it said.

The investors allege that JPMorgan deliberately drove down the value
of WMB 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.

Attorneys for JPMorgan and WaMu could not immediately be reached for
comment Friday.

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 Brendan Pierson

http://www.law360.com/articles/108412