Washington Mutual put off a courtroom showdown with shareholders as the two sides discuss making changes to the company's reorganization plan.
Washington Mutual Inc., the former parent of the biggest U.S. bank to fail, put off a courtroom showdown with shareholders Thursday as the two sides discuss making changes to the company’s reorganization plan.
At the start of a hearing in Wilmington, Del., attorneys for the company and shareholders asked a judge to delay a decision on the shareholders’ request for a court-sponsored investigation of WaMu’s decision not to sue federal regulators and JPMorgan Chase & Co. over the bank’s failure.
“We are hopeful,” shareholder attorney Justin Nelson said in court. The two sides are still debating how much information WaMu must give shareholders about a potential lawsuit over the 2008 seizure of WaMu’s Washington Mutual Bank.
“There are serious and substantial issues that still remain among the parties,” Nelson said.
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Shareholders had asked U.S. Bankruptcy Judge Mary F. Walrath to order an investigation of WaMu’s assets, including the value of a potential lawsuit against JPMorgan and the Federal Deposit Insurance Corp. for their role in the 2008 collapse of Washington Mutual Bank.
The bank holding company filed for bankruptcy in September 2008, a day after federal regulators took Washington Mutual Bank away from WaMu and sold it to JPMorgan for $1.9 billion.
Seattle-based WaMu has proposed splitting nearly $10 billion in cash and tax refunds with JPMorgan and the FDIC in exchange for an agreement not to sue them. That settlement is the cornerstone of WaMu’s proposal to liquidate most of its assets and distribute the proceeds to creditors.
Shareholders would get nothing under that proposal.
Company attorney Brian Rosen asked Walrath, and both sides agreed, to put off the examiner motion and a related dispute over information sharing until July 8.
Last month, Walrath denied the shareholders’ attempt to have an examiner appointed, ruling that WaMu and its official committee of unsecured creditors should share the results of their investigations, and that would be sufficient.
The shareholders again asked for an examiner last week, claiming in court papers that WaMu and the committee “refused to produce the fruits of their investigation” and that “the scope of their actual investigation was minimal at best.”
While they still aren’t in complete agreement with the shareholders as to what documents will be included, they have agreed to create a “data room” by June 30 and “make available all the documents necessary to evaluate the settlement agreement,” Peter E. Calamari, a WaMu attorney, told Walrath.
“This is not a take it or leave it offer,” Calamari added. “We are prepared to work with the objectors.”
Rosen told Walrath that if their discussions “bear fruit,” the plan may be amended.
Walrath told the lawyers that approval of a disclosure statement is unlikely at a July 8 hearing if they file a revised plan after July 1 and the changes are material to how creditors are treated under the plan.
Separately, a shareholder lawsuit seeking to force WaMu to hold an annual meeting was transferred back to Delaware, court records show. The shareholders wanted to hold a meeting to nominate and elect a new board of directors. A bankruptcy judge in Tacoma Thursday granted WaMu’s request to move the case to Delaware because it’s related to the bankruptcy case there.
The Tacoma judge didn’t rule on the shareholders’ motion to send the case back to state court in Washington. That means shareholders retain the option of asking Walrath to send the case back to Thurston County Superior Court.
In April, Walrath ruled that shareholders aren’t automatically barred by U.S. bankruptcy law from suing to force an annual meeting.