Washington Mutual (WMI) - Closing Argument of The Equity Committee (1st Confirmation Hearing in December 2010)

11
IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE
In Re:
WASHINGTON MUTUAL, INC., et al.,
Vs
JP MORGAN CHASE BANK, N.A., et al.,
December 7, 2010
Closing Argument of Equity Committee
22
WhyThePlanShouldNotBeConfirmed
1.

TheDebtorsFailedtoConsiderthe

InterestsofAllStakeholders
2.

InsufficientShowingoftheLikelihood

ofSuccess
3.

AtaMinimum,MajorIssuesinthePlan

PreventConfirmation
33
FairAndEquitableStandard
Source:SpansionOpinion,p.7
The court must decide whether "the compromise is
fair, reasonable, and in the best interest of the estate." In re TSIC, Inc., 393 B.R. 71, 78
(Bankr.D.Del. 2008) quoting In re Louise 's, Inc., 211 B.R 798, 801 (D.Del. 1997). "Under the
'fair and equitable' standard, [the court looks] to the fairness of the settlement to the other
persons, i.e., the parties who did not settle." Will v. Northwestern Univ. (In re Nutraques(, Inc.) ,
434 F.3d 639, 645 (3d CiT. 2006).
44
Source:SpansionOpinion,p.7
BurdenOfProof
ddayn""".,mily . lI>;ndina it; ond(4) We p<lII1IllOUIIt bl1 .. Marrin. !?1 FJd 81
re.t.'lOOooie l1lI!&' of Ii ligauon "".Jibi liti ... " fit World li.allil AI"rnativtr. htc . 34-4 D.R. 291,
The Debtors carry the
burden of persuading the court that the compromise falls within the reasonable range of litigation
possibilities. Key3Media Group, 336 B.R. at 93. "While a court generally gives deference to the
Debtors' business judgment in deciding whether to settle a matter, the Debtors have the burden
of persuading the bankruptcy court that the compromise is fair and equitable and should be
approved." Jd.
I I
55
Source:ExhibitEC27(WMITPSS0114349)
EC27
n .. 10".", ir\ tr>l:"""" , '.vhidl OOYi:l oth""""etlll<. y .. ,. "'_.
1M, (JOt """*,,ed -- ',0., UlO> 1> <>! tl"l MIa,. tt:.! "re .. <lopoo:a.
"'" pia" . ' _ I""I IIOlW(,:Ol I, Ro/IT"'" Pr<>I' ", ,,,"
. Ied t, Jf'IA to . rreor;aMOd 1'.',,.1 '" JPr.oI ...
"".-. on oll'lc;,,,,, m",*",<" '''Il Ordo,.
Olhe ...... ". 1>9 d ff ' ::oJt III
1. All of the complex issues in the case, which could otherwise take years to resolve
through litigation, get resolved cleanly
From; _01100, Dlr.1<\
Sont: ""''''''/. I."""" ()"j , 2000 . :27 PM
Yo: ..... IM, 1,'"., ,,,,1: .. o.<UT1; Pleifl'o, aM": M"'",,". ROil on
13oi<o,: 81""",, Hod., . Fr.d:
Tal
RE: torm sh<xJ<
5rIon PleiJer. ft;r", )'<'U O; ' <' "I.UO<! tho ."ail _ linoo '" IM"bbJe<'" do",", 1 bOI e toat I
"""' ""' ...,.,-.
From: VIaI>l1, 101",,, ... 1 . coml
SO" t: M.r=h 2:lO9 1: , 1
y,,: .. b' ioo. pIo?I .... @fi ..... ,_.ron" [)<o.1<I; Ko.M"".
ROlon, OMn: S!<l..., Simm.
Ce: SapeiM, 1 . 1
SUbject: to"" ",",eel

66
EC27
r" K"""" OIIIE1KO<"-""'G_"" ,.-,. , .. ....
.. ""..,....,,_"',<>:nI
.,--, v .. "" ..
_ , TI!o.', 1'>!2000 "''''''''' ......
"""'-' ><0._
__ iIr. "".,
._, .... t
C .......... TnJ.
From, KoOl""", 8. ...... Mdrr.a'MI.CCm[
Sent : I lJ.ndoy. 200g 5:09 PM
To: Walsh. Go\.id;"Q . ..I,m
Subject , FV/ (ern} _"eo!
Pleiller, 8,..., [" ...
Scm: nw_y. 2009 2'00 PM
To, S.,Q" ,,", 0..1<1: W .... h.. Michool, . """,: K""u'O<I.1l l; Rc . .... ,
Il ... n; . " S;mm. : fb1.l .... Frod, S" .... "" , s.opo ...... , h i
ec, Kodon. AI.,. S ..
S" bjoct , RE . .... '1 . "n , o .. t
A:td!j .. e 001' & pteti1'lina.y W!oto ... . tile r""o:.. .. and 0_ ct tho
".,.,. Ir ""'" In p""),,,,,, th .. be fI<'Od pi..,., to OI t "".
:C11'''''''''l\on
01 f>9.""kJ PIIi' StruClln
Ikfwr,' iUlled .;u Iy of """'iIO""od ........ to bo to PI"" Iri
",.",":l'f JPt.or<g.M'lII ... ec<n>d 010 "" "II ... ,oI\Hl llnduding, wlcl>c"' "' ,tal.ouo. h
I'1I"'.og to.,., .. fut" .. tw. 1"=mMtOI """'"""""",,,.,-ould be
proo.'lriod by in of j; ofth<! ..,.... .... 1II'M1. ,1,1 1 Ill ... ,
"I'1I,Oi(., ............. 1110 """"", of th. R.' P,<>(orro;l Stock, ., 1
diOlMbu_ ," Ill . 101m uf <>I. h. ,.;", bled d&l>t Of.' ""'orwioo> OIl""'".
From: Kosturos, Bill
Sent: Thursday, March 05, 2009 5:09 PM
To: Walsh, Michael; Goulding, Jon
. Subject: FW: WMJ term sheet
It's about time that the seniors figured this out.
EXHIBIT
E
C
21
V,MHPS-SOff4:l48
77
Source:pp.96:1316;98:58;98:1718;99:79
Q.Yousayit'sabouttimethattheseniorsfiguredthisout,howlonghadyou

thoughtthatthebestresolutionoftheestatewasaglobalsettlementwith

JPMorgan?
A.Idon'tknow.
HearingTestimonyOfKosturos,12/02/10
Q.Howlong

howmuchpriorbeforeMarchof2009didyouthinkthatthe

correctresolutionoftheestatewasasettlement?
A.Idon'tknow.
Q.Wasitamonthafteryouwerehired?
A.Iwouldn'tbeabletoputitincontextforyou.
Q.Howearlydidyouthinkthataconsensualsettlementwaswhatyou

wantedtostrivefor?
A.Idon'tknow.
88
Source:ExhibitEC36(WGM_00033671)
EC36
,

M ,
!!
M
I
0
0
;;
0
t:i

;1
S&C LlRAfoT 3/11$/09
-
CONFIDENTIAL - SUBJECT TO FRE AND ALL SETTLEMENT PROTECTIONS \, ___ ,
WMIIJPMC SEITLEMEI\'T TERM SJ IEET
WMI/JPMC SETTLEMENT TERM SHEET
fret: an
coven
dcsc, io
WMI Proposal 3/12/09
entry 0
clni ms . .
-
I
lssur WMI J P.'tfC Pm 01>11 3(18109
I in "Deposit Accounts"

IPMC to (a) ply over $4 08 billion,

Agree<! except payment;5 of $4,Og
induding reli.Jllds billion iCSl; the amount ofapproximlltdy
plus (b) in:erest through S2S0 million in tJX refunds on
date Bt great er "f 25 hasi. 9110.'08 and accrual on balance
pomts or iIJ110um fonh In the due al upon rate!
f-$rccrncnt . plu! (c) rclClliIC cl aim. to th.
$292 million released in December 2008
99
Source:p.115:813,115:1719;181:1016
Q.

Withrespectsimplytoyouroffer,WMI'soffertoJPMorganinMarchof

2009,isitfairtosaythatgenerallyspeaking,withinsomeroundingerror,

whattheamountreceivedinthecurrentproposedsettlementforthe

categoriesthatwe'vediscussedisessentiallyequivalenttothe

current

proposedsettlement?
A.

Itseemstobefromthenumbersthatyou'vedescribed,youknow,

they

seemtobeclosebutIcouldn'tgiveyouanexactanswer.
Q.AndIbelieveaftergoingthroughthatentiretermsheetyou

agreedwith

Mr.Nelsonthattheeconomicresultorculminationofthenegotiations

betweenMarchof2009andwhatwasultimatelysubmittedbytheparties

astheproposedsettlement,thattheeconomicimpactremainedthesame,
essentially.Doyourememberthat?
A.Yeah...
10 10
Source:pp.121:22

122:3;pp.122:25

123:3
Q.

Again,withoutgettingintotheanalysisorworkproduct,

wasitQuinnwhoinstructedyoutocreatethesolvency
analysis?Wasityourlitigationcounsel?
A.

Yes.
Q.

Soinotherwords,itwouldthenhavetobeafterAprilof

2009?
A.

Iwouldagree.
Q.

ByApril2009hadyourattorneysprovidedyouanywork

productwithrespecttothebusinesstortclaimsagainst
JPMorgan?
A.No.
11 11
Source:ExhibitEC44
EC44
Bill.
on the table on that date.
JON GOULDING
Treawr .... Wasnloglon MllIual, I!\C.
Senior Director Moal'6<; , M&rS&I
SF (')fIIk,.,. (.115)"110.2257
MDbiII!: (415) 260 6061
To:
Cc:
From:
Sent:
Kosturos, Bill[BKosturos@alvarezandrnarsal.com]
Maciel, JohnDmaciel@alvarezandmarsal.com]
Goulding; Jon
Fri 2161200910:32:58 PM
~ ~ - - - - - - - - - - - - - - - - - - - - - - ~
FTlfAkin want to be prepared to put a global settlement
12 12
Source:p.125:1318
Q.

Thecreditorswereinvolvedinreinvigoratingthese

negotiations,correct?
A.Yes.Certainofacoupleofthecreditors,yes.
Q.

Andinfact,itwasIthinkthecreditorswhosentthe

termsheettoJPMorgan.Isn'tthatright?
A.

Yes,itwas,actually.
Q.

Ithinkyoutestifiedpreviouslythatthenegotiations
werereinvigoratedbyapossibilityofasecondtax

settlement,correct?
A.

Yes.
13 13
EC28
FlO)(: (212) 3103353
Emai l: bIion.rc.en@weJ.o<>m
From: Buono. Joooninc lm<lilto:J ... ln ...... On Behall Of
Scheler. Brad Eco
SOIlI: 09, <.'010 9:JB AM
To: Ro:!oOO, Srial; 'BKooturw@aI, ",.amm.rMl.oom'
Ce: Fl'HSJ WaMu Team
Subj ect: F'o'l: '1",":1 - Sr.:..t
Brien eO<! 8'11 -
Our clients believe that the structure presented in the term sheet provides the Debtors
with a fair and efficient means to distribute value and proceeds to creditors.
Om OJ..... toot the In Iha t<l"" tt>_ provides the Deb:w.
... it! , a hi". e!n:;!II1' mea"" 10 distribule value 9nd 10 cnoditcrs, Gi""n the
oom;lrChon. "" ofl\l holdin .. 01 cebl Jnd socuritioo c<x clients, our
cJ"n" :rust. an1ici>'OtO 000 boillie'l(! tile stNoture _ Ior1h In Ihn term shoot \'iii ho
embr,..;e<.! t>y of In to the dj,tril;ut!O!lS to creditors cA Tho
ptOcoods 01 tax r. ceilllld and caoh and other assets, the
horm oh...t pro.ide. fund iog Icrthe or and It.e
or WM MOIlQ"II" R .. ",s ... ance Companywlth flo gool .sUo atlle
J S"i. which ou, d" "" will benem ....."tl ', Th\t
" u,..;!;Qd tBfm .hut i. P""Mted on a is .ubjec:t I<:thft
wiSdom cle&::h of l aLK co:looagu,,",. OO'Q;enlS ilIld!.'OJ' FfHS&J

14 14
Source:MotionOfWashingtonMutual,Inc.AndWMIInvestmentCorp.ForAnOrder(A)DisbandingTheOfficialCommitteeOfEquityHoldersAppointedByThe

UnitedStatesTrusteeOr(B)LimitingTheFeesAndExpensesWhichMayBeIncurredBySuchCommittee,January28,2010;p.2.
STATES BANKRUPTCY COU1l.T
FOR THE DlSnuCf o r I)I';LAWAKl:
_______________ I
W ASIlJl'iGTOl'O MUTUAL. INc., 9 fI.,'
f) . hru ....
Ch .... ter 11
\lS- L21l9 (MW)
(J oinl.l .... Ad ,llill l. ",,"Cd)
n .. rInt 1>01<: J ..... y :uno.1 . 000 p.m.
Obj .. ,i .. 0...,.Il10: h .."ll, 201Q .. j:Q\l p. ...
MOTION OF WASHINGTON MUn IAL, INC AND WM1
W ltP. rml -""I ORDER (A) DISB,,/'o.l)ING
"\r\11TT..-.1I1 ' flm.m; RS APPOINTED
..s; ;;:---__ ---,
2. By all measures, the Debtors are insolvent - a conclusion supported by all
known facts and submissions to date in these chapter 11 cases. Indeed, this conclusion is
confirmed by the public markets. The Debtors' junior subordinated debentures are trading, as of
January 8, 2010, at approximately 50 cents on the dollar - a steep discount to par value. In
addition, WMI's cornmon stock trades at approximately 19 cents per share, indicating the
market's assessment that equity will not receive any distribution. In short, WMl's equity holders
are unlikely to receive any recovery and, therefore, have little, if any, economic interest in these
chapter II cases.
I
15 15
Source:p.248:37
Q....inthenegotiationsthatledtotheglobal

settlementyoudidnotinviteorincludetheequity

committeeinthosenegotiations,didyou?
A.That'scorrect.
16 16
EC32
r...,: llonoo, ... ,,: ...... UROCr
I!'Yl)IR(}I{F1JSP\lL
i lSU6/tIJDCDC]
11. 1&: J.'lO/2l) IO 12:3J: Il rt.t
To:
SoItiI: I'W: WNI _ Sao< /f"M r" Sdar.orJ .'.a'<..-.'

_, T""""'y . ... "'''"'''. .. ' ."

To """";os. "'-" ....... "' , Will; "" ....... ""_""': A'.., K ...... (""' .....
K'-';" o):<vi . KC)' ooiiilH<dtho\:.eoon)
Co: '0",0 .......... , .. ....... "'.,,,,.'I """"r.,.. .... :
3.- They later address Group Related Refunds based on a 50/50 split. This raises a possible T ARP
sensitivity .
2.._ As lOW ckhi';,. d er",. Rd-=! RttIolIio. eIou,.
... , .. I_d.." e.>:<<<' I""_ ....
..........-u., 11.,., ,.,,><'u,J;, .... ...J _"'_ ..... o-l"'.,
ob'8"'i f",tiIt ... oO' OL,1<MI do. nod-.o<Don d ... , "" lwi,
J,-'1>e)""" R<lI, .. ,lIb"";oo,WiWII'i" 110, """'" po<oibI' 1MI'

OSIo<:\eoj foo V .. in c",.,e<.t;on ",I , I'llin C<Qirm"tion Oriy
II"" Cun1I<h.IIi.1 kII"'''',*,"'
17 17
Source:pp.81:24

82:3
Q.Tobeclear,youbelievethattheMarchsettlement

thatwasbetween270millionto300milliondollars

lowerthantheMaysettlementalsomaximizedthe

valueoftheestate,correct?
A.IthinktheMarchsettlementwasaverygood

settlement.TheMaysettlementwasabetter

settlement.Yes.
18
CurrentSourcesOfAssets
JPMC Payment
for VISA Shares
Investment in
Subsidiaries & Other
$25 Million
$25 Million
Goodwill Utigation
$55 Million
80LUCOU
Reorganized WMI
$158 Million
$166 Million
~ * - ' - ' , - - - " : ' "
Tax Refunds
$2.195 811110n
"
t
.....- Pre-Exisiti ng Cash
Approx. $900 Million
WMI Assets on WMB Books
$4.2 Billion
(with two sub parts: Intercompany Loans $180 Million & Deposils $4 Billion)
Gross Estate Proceeds $7.575 Billion
Estate Expenses ($116 Million)
Net Estate Proceeds $7.459 Billion
19 19
DisputedAssetsReceivedByJPMC

$10B
S5B
IP: (Value Unknown)
Broad Releases of All Claims:
(Value Unknown)
Pension: S350M -
VISA Shares: $140M -;
Anchor Savings /
Litigation: $350-S00M
BOll/COLI : $58 -
TPS: S4B-
Tax Refunds: $2.36B -.
---,---::1112.3608+
JPMC Contribution to
Estate Proceeds: $25M
$o L-__________ J---____________ ________ ____ __J
20 20
PotentialAssetsOfTheEstate
$35B
11""
InterCOOllctl'f Recer/ables: S22.5N
$30B
J """rica. Savilg' $15M
\ Anchor S:r.'ings UlQaoon: S350-5OO111
TPS Shares: $48
-4- Fraudulent CCM'1'It1'f<1nce JIJ'y '08: $28
$25B
-4- eoove,/ance SepI'08: $500M
......- Fraudulent Coove'lance '07 Ap1I '08: $48
$20B
'"
"
.... Tax Refun.ds: S5.54B

CD
$?
$15B
-4- Loans: StaOM
.....

.... Cash on Hard: $900111
$10B
0&0 Ins. a'ms: 1238M-loo.
Pension Plat S36M+
VISA Shires: $140M
.... SOU'ca.1. S5B
$5B

Current
Gross
-
Recovery
+
$7.5 Billion
10
21 21
Source:pp.62:22

63:7;64:1417
Q.

YougaveBlackstonetheassumptionthatreorganizedWMIwouldnot

takeonnewbusiness,correct?
A.

WegaveBlackstoneasetoffinancialprojectionswhichprojectedthe

onlyoperatingassetofreorganizedWMI,whichisWimrick,which

isa

captivereinsurancecompanyinrunoff.Wegavethemaprojectionthat

wasbasedsolelyonthecaptivereinsurancecompanyWimrick

continuingtorunoffitsbusinessthroughtherunoffperiod.
Q.

ThoseassumptionsandprojectionsdidnotconsiderwhetherWMRIC

wouldtakeonnewbusinesscorrect?
A.

Wedidnotprojectnewbusiness.
HearingTestimonyOfGoulding,12/03/10
Q.

Well,okay.Oneofthereasonswhyyoudidn'tconsiderthepotentialof

newbusinessisbecauseyouclaimnottoknowwhotheownersofthe

reorganizedWMIstockwouldbe,correct?
A.

That'sright.
22 22
Source:p.95:1321
Q.

...[TheCreditorsCommittee]hadanideathatthe

goingforwardbusinessofreorganizedWMIwillhave

thebenefitofalargeNOLbasedonthecompany's

abilitytoclaimaworthlessstockdeductionrelatedto

itswithWMBstock.

Doyouseethat?
A.Yes.
Q.Itistruethatinthefinalsettlementthereisa

reorganizedWMIthatmayhavealargeNOL,correct?
A.That'scorrect.
23 23
Source:p.135:1216;139:1113
Q.Thesehedgefundsurgedyoutocreatea

reorganizedcompanyfor

totakeadvantageofthe

debtors

NOL;isn'tthatright?
A.Wehadseveraldiscussionswiththemaboutthat,

sure,yes.
...theirplanistocapitalizeWMRICandexpandits

business,correct?
A.That'swhatthetermsheetsays.
24 24
EC27
I ..... "f 1tte .. 10".", ir\ tr>/: "''''G, '.vhidl OOYi:l O1h""""e tBI<, y .. ,. '" _ .
L"r<>.9> 11.'901.." (J!It """*,,ed -- ',0., UlO> 1> <>! ttl MIa,. 11':.1 "re .. <lopoo:a.
""'la. pia" . ' _ I""I IIOlW(,:Ol I, Ro/IT"'" Prefo, r<od
Mpoth, cto . "c.1O b9 .. ""'.Ied t, Jf'IA to . r reor;anitOd 1'.',,.1 '" JPr.oI ...
"""r>PM"'. In pion strucl",_ pr<r.-. on oll'lc;,,,,, m",*",<" '''Il Ordo,.
lho . """hcn oro:! di'fisiorl , f . net no lab).,.. 11\:01 """"-':l Olhe.-. .. ". 1>9 d ff l::oJt III
actJrevo. loWditiol1, 1111 dlotrbJlbn. to hold"", 01 Re.1 Trust Pnl'r.rn<I 8100.: """,,>Ic\
"I>w t:>r third pony ,oIIa_ /ro ... sum _ .
:/, floorganl>:od ""'.11 COlI Ol bo e<rp"I',:<"L "'" "" pla n oln.oltuoo 000 tOO
. :notrII 01_ to be roi'-';I;;rtoxI, U .. ", ""'-"d l>o catI". .. ro<>rgIlOr.: 1o':f 'tiMI
IMI '"""" bo "ti';,oo by Iflo """II-'WIY yoing IofwIMl:!
Mle po"t .. tIN te hn. 1111 goi"Ig for.,"cd br"' ",,," of """1/""".0 '.",,11 I " ....
OL baol d on tM "",,"pon','s ob lily 10 0'.", ...... th ' ... slocI<
3. At some point in the future, the going forward business of reorganized WMI will have
the benefit of a large NOL based on the company's ability to claim a worthless stock
deduction relating to its WMB stock.
From: VIaI>11 , '-1",,,,,,1 . coml
SO.I: M.r=h 2:lO9 1: , 1
T,,: .. . Mm, b' ioo. pIo?I .... @fi ..... ,_.con" D<r.-io:I; Ko.M"".
ROI.n, BMn: S!<I,'" Simm.
Ce: SapeiM, 1 .1
SUbject: ",",eel
'II!AITPS __
25 25
Source:p.187:10188:9;189:713
Q.YourunderstandthatPIERS

certainPIERSholdersaregiventherighttobuyintoWMMRC,the

newreorganizedcompany,correct?
A.CertainPIERSholdersarereceivingsubscriptionrights,yes.
Q.Theonly
A.Theyhavezerovalueandhavetheabilitytosubscribetothat.Inourestimates,theyhave

zerovalue.Shouldtheyhavevalue,theycan

classesaheadofthemshouldtheynotbepaid,

theywillhavetopayupthatvalue.
Q.ThevaluethatyouhaveputonevenwithoutanyongoingbusinessofWMMRCis157.5million

dollars,correct?
A.You'remischaracterizingmytestimony.
Q.Allright.Well,letmerephrase.Iwanttounderstandandgetyourtestimonyonhowdifferent

membersofthesamePIERSclassaretreated.ItistruethatonlycertainmembersofthePIERS

classareabletobuyintothesesubscriptionrights,correct?
A.Idon'tbelievethat'strue,no.
Q...Accordingtoparagraph6submittedbyWMI,thesubscriptionrightexistsifsuchholderbased

onitsproratasharewasentitledtosubscribeforsharesforanaggregatesubscriptionpurchase

priceofatleasttwomilliondollars,correct?
A.That'swhatthissays,yes.
26 26
EquityInTheMoney
$3JB
$3OB
$25B
$20B
$15B
$10B
Claim Amount
$5B
Net Recovery
Known Value
of Disputed
Assets
Amount Required
To Be In the Money
$ o L - ~ - - - - - - ~ ___ L - - - - - - ~ I ____ ~ ______ ~ ____ =========
$348M
WMRRC NOL
$5.58
27 27
Source:ExhibitEC34(WGM_00002622)
EC34
P .... , ,....,. ,:; .. a, j",.(iQ WElLX:OU- IJOCHA':>iGEi\DMlNl STRJ\TIYEGROUP
(fWIIIOHF2l SPDL )09\'.

Do."
To: 's".,! " . 80"" Eo;';' [1l<. d.&ic.Scl>eI<l@friKfr
GI.."'-""J. 'BKo.o""oo@ol'''''''''"j,..,..l.oom'
I,coml
Subj w : lIE'
II ;"; I
From: Rosen, Brian [/O=WEILXlOU EXCHANGE ADMINISTRATIVE GROUP
(FYDmOHF23 SPDL T)/CN 513399F-
85256498-522BF4)
Date: 3/9/20102:08:03 PM
To: 'Scheler, Brad Eric' [Brad.Eric.Scheler@friedfr
ank.com), 'BKosturos@alvarezandmarsal .com' [BKosturoS@alvarezandmarsa
I.com)
Subject: RE:
--_ .... _ ... ,,-_._-----_._....... - ... ---_ ..... _ .. _--_._---
To me, the biggest issues in your email were the two economic ones: the price on the Visa Shares and
the .5%. On the first, I cannot help you and Bill must respond. On the second, your clients said they did
not care about that long ago and what if JPM gives all that away?
28 28
Source:OrderDenyingMotionToDismissDebtorsCounterclaimsFiledByJPMorganChaseBank,NationalAssociation,September14,2009,p.12
IN THE UJ\. TrED SJ 0\ TRS BA.. ... 'UlTP'K"Y COURT
1'01( UtE mSl1ucr OJ; DELAWARE
------ -----,
Inn:
WASHINGTO!'< MUTU,"\L L"IC . . L
JPMORGAN CHASE BANK, N.A..
PI'intilb
..
WASlllNGTONMUTUAL. INC. """
WMl lNYllSrM.I:NT COIU'.,
Olaptt. II
C"'" No. Ct8- 1:2229 (MFW)
For the re3SQns stated on the record of the hearing held on August 24. 2009. the
motion. dated June 18. 2009 (the "Motion") [Docket No. 41]. of JPMorgan Chase Bank. N. A.
for an order dismissing the counterclaims of Washington Mutual, Inc. and WMI Investment
Corp., it is hereby
ORDERED that the Motion and the relief requested therein is denied.
, TILe DetKcn til IIIose <iIlpoer I I 0""'" 01"", willi Lk lui \<Q <liP> of 1;O: bf>r". k<ia>11 ...
1d<.liIiulil.U<Bl>i:t lie: (i) W""iopJll Mwr .... lr>:. on,): >lid (ii) WMl In "",,,,,,,1 0Jrp.
TheDe""",' pri"'ipll cl[", .. _l",.Ied", IJOI 3e<o:olA ... nue,s.ottle, W .....
29 29
Source:p.247:713
Q.Haveyoueverbeeninvolvedinanynegotiationwhere

theothersidehasconcededthestrengthofyourclaims?
A.Veryrarely.
Q.DidyourelyonJPMorgan'swordabouthowvalid

yourclaimswereindecidingwhethertosettlethese

claims?
A.Asitrelatedtothesettlementnegotiationsand

thosediscussions,absolutelynot.
30 30
Source:p.129:1622
Q.Well,didyoudiscussthemeritsoflitigationpositions

withyourcounterpartsatJPMorgan?
A.Idon'trememberdiscussingourmeritswith

JPMorgan.Certainly,therewouldbein

conversationaswewerenegotiatingwhat

potentialpositionscouldbe,whatpotential

defensescouldbe,butIdon'trememberhavinga

verydetaileddiscussionaboutmerits.
31 31
Source:p.131:18132:7
Q.YoudidnothaveanydiscussionsindetailwithJPMorganaboutthe

businesstortclaims,didyou?
A.Idon'tifyouwanttopointmetothedepositionthatdbegreat.Butas

I'msittingherefromwhatyou'retalkingaboutisabusinesspersonto

businesspersonwoulditcomeup?Sure.Itwouldabsolutethecontextof

areyougoingtosueme?Ofcourseweareifwedon'thaveasettlement

agreementwe'llpursueallofourclaims.Inthatcontext,absolutely,it

cameup.AdetaileddiscussionofthebusinesstortclaimsIdon'tbelieve

washadwithJPMorgan.
Q.Andjusttoconfirmhere,you,infact,inyourdepositionthatwasaskedto

youandonpage262,line22.
Q.Duringsettlementdiscussions,didyoudiscussthebusinesstort

claimwithJPMC.
"A.Notinanydetail.No.
32 32
Source:pp.179:413;23

180:25
Q.Okay.AndwhatwasWaMu'spositionwithrespecttothetaxassets,taxrefunds?
A.I'dhavetoreferbacktotheinitialtermsheet,butthere

wasapercentagesplitofthetaxes.I

shouldcharacterizethatverylittleofthetermsheetdiscussionrelatedtothemeritsofthe

individualassetsbut,rather,itwasaneffort,certainlyonthepartofalotofthefundsthat

weretryingtobepartofthesettlement,toachievecertainhurdlesofreturn.
JPMCCorporateTestimony
Q.Whois"they"thatyou'rereferringtointhisdiscussion?
A.Well,again
Q.WaMu?
A.No.ItwasAppaloosa,Centerbridge,OwlCreek,Aurelius.Therewasanentireothergroupofbank

bondholdersthatwerelooking

everyonehadtheirhandouthere,lookingforsomemoneyfrom

thepotofassetsthatconstitutedwhatweatJPMorganChasepurchasedpursuanttothepurchase

andassumptionagreement.Sothereweremanydiscussionsaboutthesplitofassetsthatweremore

tiltedtowardshowmuchandwhogetswhatratherthantheunderlying

youaskedabouta

positionwithrespecttotaxes.Taxeswerereallyalmostacurrencybywhichvariouspartiescouldbe

allocatedvaluetoreachasettlement.
Q.Okay.Andthatwasthetenorofthediscussionrelatingtotaxesforthewholeperiod?
A.Ithinktherewereprobablysomemeritbaseddiscussionsbetweencounselas

throwninaswell.
Q.Butyoudon'trecallanyofthose?
A.Notspecifically.
Q.Youweren'tpresentduringanyofthose?
A.No.
33 33
Source:p.75:25 76:7
Q.DoyouhaveaballparkofwhatvalueChaseis

gettingoutofit?
A.Idon'tknowwhatdollarvaluesthatJ.P.

Morganisgettingoutofthis.
Q.Correct?
A.Right.
34 34
Source:p.100:1112
Yes,weweremotivatedtosettlethese

cases.That'swhywesettledthem.Ican

stipulatetothatnow.
FDICStatementsat6/3/10Hearing
35 35
TRUSTUS
36 36
1.


2.


ofSuccess
3.


PreventConfirmation
37 37
Source:Spansion

Opinion,p.78
MartinFactors
=1$ ( .. th .. Ibln pol}TJ>eII\ diredly 10 the alto",,,y.); an.! (i.) 1Iuo\ the Coouniu..: would receivo:
infonnati"" &Um SlI1nSW1g .... calculation aM "",,,"m of withholding la><u !"-rablc '"
KOIUJ1 "'" outhoririe" Al 1M hoo...m&, the VlmnU= SI3IM em \t$ tile
MdmOMi provisions (1"1. 31U/Q9 al 28 - 29). ""'rule !be Corwuimoeoorulnued to
exr= ""'"""""' """" Ihe lock of mllt\m!il!' a<oJ "'_ in ""nI:,,1 pru.isiOl1> of\hc
'W""'lIelll, il <Jt,cided nol \OJ rns. iii; objection Ie> the JCIlJ"""""1 rc:mainir41 groun;b, (Tr.
5118.'39 ... 167).
ApPJ SJ"6Nllc\,ltll !"oR eyAl l JADON Q(I SIllTl.EMIlN1S
collection; (3) the complexity ofllle litil>"tiQII inmlved, and Ifle ;"COIlVllfli<nce, and
ddlO)' Mteadin& it; ODd (4) the paramowll int=st of credW:n. Martm, 91 F.3d at 393.
.'in. dis" "'''''''''9"''''. 434 F 3d al644.
" In me tlt.Q) lUlG!y3i .. 11", cuwt J<x::. ILl h<: """,.;".""j th.1 tho i, LL:
t..". p" .. lble romprullu,;. R..1h;r, dJ< ""uri mUllI """"1 ..... ihll '011.10"",,1 iJ ",MiD I.b,.
te35OOOble rn"i" oflitigmiou p;laibilitia."In ,. World /nc" 1'" B.R. 291,
296 (&nlu,D,DeJ. 2006j(irncmnl 'I\K'l!Itionsand cltalions omill<dl. Til. Lkbll>n carryrhc:
burden of the oo:1rllhai \he C<Jm!l,<.""j"" r.ll, v.i!hin tl:o """,n&hlc ""'I!" of litigation
(I) the probability of success in litigation; (2) the likely difficulties in
collection; (3) the complexity of the litigation involved, and the expense, inconvenience, and
delay necessarily attending it; and (4) the paramount interest of creditors.
""I"" d . ;m lha. il bein
the C<>"'promi"" Ilf'Il!lOlaI." ,
eo"""UI""
An.:ftnon. 390 u,s. 41 4. 424
tho coWl stLouLd """"ide., (I .. in (2) th<: lildydifficulu... in
1
p....-tles bti"i .. by coun .. 1. "11>0 lJd:>tarsarguo !hat, b<licfin the
""""g:lh oftlrir cllirru ."d clef "" in the Acti<>n$. cQntinurng will> the ActioI\'! will"be rosIly
and tin,"ooa.wninll, ODd, like al lli.oo, in.hemttly r,, ;;y, f'ursuinS Ih. Action. _Id rttj\r1n
the to :;pend a oignifi<:n11 )l<.II'ti<m of thoi, tln.ndal "'soun::eo.. I<> the d<:nimmt of
Other OOsiM .. tleO><b ond '!he Action, "">1,1d A)..., COJ\lUIle oigniflCallt """""m of
38 38
Source:Spansion

Opinion,p.7
ValueOfClaimVersusValueOfCompromise
=1$ ( .. th .. Ibln pol}TJ>eII\ diredly 10 the alto",,,y.); an.! (i.) 1Iuo\ lbc Coouniu..: would receivo:
infonna!i"" &Um SlI1nSW1g .... calculation aM "",,,"m of withholding la><u !"-rablt '"
KOIUJ1 "'" outhoririe . Al 1M "",...m&, the VlmnU= SI3IM em \t$ 1M
exr= ""'"""""' """" t he lock of mllt\m!il!' a<oJ "'_ in ""nI:,,) pru.isiOl1> of\he
When considering the best interest of the estate, the Court must "assess and balance the
value of the claim that is being compromised against the value to the estate of the acceptance of
the compromise proposal." Myers v. Martin (In re Martin), 91 F.3d 389, 393 (3d Cir. 1996)
" ... . """j"""""""" .................................................. -'
,,. """.
. <tdoring 1"'" hoot in ..-...tofthe tile Coun mCllt ___ '" QI1d boJonce the
""I"" of ct . ;", lha. i, being agoinn the val .... 10 lbe tale of1he o.coep"""'" of
\he cornpromi"" j'Itn{lOloaI." !.ry,,,,, v 1&1 ..... " (In,. MlNlin), 91 F.ld 3&9, 393 (ld Ci r. 1996)
eo"""UI"" for iWt'J'C",liml SiwJ./""M.,s ojT}.[f" Troilc, Fcrry. Inc. v.
AIldtnon. 390 U.s. 41 4. 42425. 88 S.C!. 1157. 20 L Ed.2d 1 91961). ht.trilins lhis bakonce,
tile coWl stLouLd """"ide., (1) .. in (2) th<: lildydifficulu... in
1
39 39
ItappearsfromtherecordmadethattheDebtors

motivation

forenteringintotheSettlementAgreementwasbasedlesson

anevaluationofthemeritsoftheActions,thanduetoadesire

tonegotiateaquicksettlement.
Spansion:ImproperSettlementMotivation
40 40
Incredibly,[RestructuringConsultant]Brincko

testifiedthat

inreviewingtheSettlementAgreementandmakinghis

proposaltotheBoardofDirectors,hedidnotrelyuponadvice

receivedfromcounsel.
Spansion:IncredibleFailureToRelyOn

Counsel
41 41
Source:Spansion

Opinion,p.78
MartinFactors
5118.'39 ... 167).
ApPJ SJ"6Nllc\,ltll !"oR eyAl l JADON Q(I SIllTl.EMIlN1S
.'in. dis" "'''''''''9"''''. 434 F 3d al644.
te35OOOble rn"i" oflitigmiou p;laibilitia."In ,. World /nc" 1'" B.R. 291,
burden of the oo:1rllhai \he C<Jm!l,<.""j"" r.ll, v.i!hin tl:o """,n&hlc ""'I!" of litigation
(I) the probability of success in litigation; (2) the likely difficulties in
eo"""UI""
An.:ftnon. 390 u,s. 41 4. 424
1
and tin,"ooa.wninll, ODd, like al lli.oo, in.hemttly r,, ;;y, f'ursuinS Ih. Action. _ Id rttj\r1n
the to :;pend a oignifi<:n11 )l<.II'ti<m of thoi, tln.ndal "'soun::eo.. I<> the d<:nimmt of
42 42
Source:p.38:21 25;39:510
Q.Inyourdeposition,thisispage142ofyourdeposition,you

statedthatthefactualbasisforyourdeterminationthatthe

settlementisfairandreasonableisprivileged,correct?
A.That'swhatitsayshere...
Q.Whenyouwereaskedatyourdepositionwhetheryoudid

anyanalysisintothefairnessandreasonablenessofthe

settlementwithoutinputofcounsel,youranswerwasno,

youdidnot,correct?
A.Right.YouwereaskingmeifIdidanythingwithout

counselandIdidn't...
43 43
Source:p.52:2025;53:13
Q.AlloftheanalysisthatyouandWMIperformedwas

doneinconnectionwithcounsel,correct?
A.Again,it'sthesameissue.Wewouldve

withallof

thesebeinglegaldisputeswithrespecttoownership

ofassetsordifferentoutcomes,wewouldve

discussedthemwithcounselasisprudent...
44 44
Source:pp.87:1721
"Q.WhatanalysisdidWMIconductwithrespectto

thelikelihoodofsuccessonitsclaims?
"A.Well,mydiscussionswithmycounselobviously

areprivilegedandconfidential.Primarilywehad

severaldiscussionsamongstthelegalteam."
45 45
Source:p.173:1216
Q.Andweveheardtestimonyaboutthatalreadytoday.

AndagainIjustwanttoconfirmthatnowhereinthis

sectionofyourdeclarationdoyouprovideany

testimonyastothelikelihoodofsuccessofthose

claims.Isthatfair?
A.That'sfair.Yes.
46 46
Source:pp161:24

162:5
Q.Andyoudon'tputanysortofrangeofassessment

ofriskonanyparticularclaim.Isthatright?
A.It'sdifficulttoputanattorneyworkproduct

privilegeintoapublicdocument.SoI'm

followingitbutwedidn'tputourworkproductin

here.
47 47
Source:p.181:59
HearingTestimonyOfSimms,12/03/10
Q.Okay.Andtheanalysisthatwasperformedwith

counsel,wasthatwithrespecttothemeritsofthe

legalclaimsinvolvedintheseChapter11cases?
A.Meritsofpotentiallegalclaims,butanalysisthat

wedidthroughoutthecasewherecounselwas

involved...
48 48
Source:p.167:1223
Q.Okay.SowhateverWeilGotshal

hadtosaywhen

itcametimeforyoutoassesstheweaknessesand

strengthsoftheclaimsforthepurposesof

evaluatingasettlement,youerasedanythingthat

theytoldyoufromyourmind....Isthatfair?
A.Idon'tthinkyoucaneraseitfromyourmind.
49 49
Source:p.141:614
Q.Butyouneverascribedaparticularvaluetothose

[businesstort]claims?
A.Ididnotascribeapointvalue,no.Wehavetalked

about,inconnectionwithourlawyers,arangeof

valuesrangesofvaluesparticularly.Obviously,

thoseareprivilegedconversations.
Q.Aswesitheretodaythenyoucan'ttellusorwon't

telluswhetherthevalueisonedollarorahundred

billiondollars.
A.Ibelievethatthoseareprivilegedconversation.
50 50
Source:pp.89:24 90:14
Q.Thequestionwas,youareassertingprivilegeonwhetherWMI

conductedananalysisofwhetherornotitwaslikelytowinthe

TPSpreferredsecuritycounterclaim?
A.Iagree.
Q.Thequestionwenton:
"Q.DidWMIdeterminethatitwouldbesuccessfulonitsclaims

withrespecttotheownershipofthetrustpreferredsecurities?
Nowturntothetopof129.Thequestionisrepeated:

Q.Areyoufollowingyourcounsel'sinstructionsnottoanswer
thatquestion?
A.Allofthose,allofthatworkhasbeenconductedandcompleted

byourattorneysanditsattorneyworkproductprivilege.
Isthatyourpositionstilltoday?
A.Istandbymydeposition.
51 51
Source:p.91:1923
Q.Yesorno,sir,theanalysisthattheestate

conductedwithrespecttoBOLICOLIthatyou

justtestifieddon'tbelongtotheestateand

belongtoJPMorgan,thatanalysiswas

conductedbyyourcounsel?
A.Ourcounselparticipatedinthatanalysis,yes.
52 52
Source:
WMIProofOfClaimAgainstFDIC
o!aim< ,,&"iMt WMIl lin all such co"" <nI ""'P<'JI>e,. \lIM! will provide docurncntation with
COLI Pulio"", uwned
a.vert. ,him .. ""rust WMB fut
but tdleclcd "" t ho OOok.
52. In addition, WMI is the owner of certain bank-owned and corporation-
owned life insurance policies (the "BOLl-COLI Policies"). In certain instances, as reflected in
WMI's Schedules, WMI's ownership interest in the BOLI-COLI Policies is reflected on its
books and records and in certain other instances, WMI may have an ownership interest in BOLI-
COLI Policies reflected on WMB's books and records.
51. lu addDol\ with "'"{IeCl m the CUt Bot).," Poo!!ion Pla,,(lbII
fl&l"). io the e\"etll it tOOt tbe P<!Won I'IaD i. underfunded, WMI .. ! . II
rights", _ oIaim og.o i1!1t WMll hr tbe ornounl orouch underfundi:>g \hal iJ oItributabh: to
WMB w'or its subsidj ... fur 11>.:.. uf lbe .0S! of procuring lbe t>.1....ru.:!
1I.'Mll and any other oom. apense. Or iiabiiil;", """"';'t"" there"ooith.
(I"IVD!Id life insunt>C. pol io;', (the - DO) 1-COf.1 Poti d q "). in ocmin inmn.::es, as rtt1<:CIC>d ID
"
"
53 53
Source:p.45:713
Q.Justtobeclear,fortherecord,youcannottellus

withrespecttotheintellectualpropertywhether,in

termsofhowmuchit'sworth,thevalueofitisin

thebillionsandbillionsofdollars,correct?Yesor

no.
A.Iwouldn'tbeabletotestifyonthevalueoftheIP.
54 54
Source:p.124:1216
Q....Again,withoutgettingintothesubstance,Weil

andQuinnbothundertookanalysisabouttheworth

ofthetaxrefundclaim,correct?
A.Iwouldsayallofthatanalysiswascompletedby

thefinancialteamandreliedupontomefromthe

financialteam.
55 55
Source:p.152:116
Q.

Thereisaseparateissueabouttheownershipofthetaxissues

andtaxrefunds,regardlessofhistoricalpractices.You'reaware

ofthat,correct?
A.Iamawareofthedisputeconcerningthetaxrefund,yes.
Q.Youarenotheretotestifyinanyformabouttheownership

of

theoveralltaxissuesasitrespectstothelegaldisputedaspect;is

thatright?
A.I'mnotheretotestifywithrespecttotheownershipofthe

refund.Iamgenerallyawareoftheparties'positions,butthat's

justbasedonmygeneralknowledge.
Q.Soforexample,withrespecttothepurchaseassumption

agreement,whetherthatbelongstoWMIortheFDICortoJP

Morgan,youhavenoopiniononthatwhatsoever;isthatright?
A.Ihavedeferredtoourcounselwithrespecttoanycontract

legal

interpretationalongthoselines.
HearingTestimonyOfCarreon,12/03/10
56 56
Q.The[Kosturos]testimonyisnotaccurate,isit?

YouknowinQuinnatleast,Quinn,Quinnand

Weildidprovideanalysisofthetaxclaim,don't

you?
A.Iknowthatwecertainlyconsultedwithcounsel

onvariousaspectsofthesettlement,including

theentitlementtothetaxrefunds.
TestimonyOfSmith,12/06/10
Source:p.241:512
57 57
Source:pp.73:2123;74:24;74:1621
Q.WhatdidWMItelltheboardinordertoapprovetheplan?
A.Theconversationwouldvebeeninconnectionwith

counsel,soIthinkthatwouldbeaprivilegedconversation
...Iwasn'tonthecallinwhichtheboardactually

approvedtheplan,soIdon'tknow.
Q.Whentheboarddiscussedwhethertoapprovethe

settlement,whatdidWMIdiscusswiththeboardregarding

theworthoftheassetsthatwereplannedtosettled?
MR.MASTANDO:Objection.Ithinkthewitnessjustanswered

hewasn'tpresent,yourHonor.
58 58
Source:Debtors95,p.1
Debtors 95
Debtors95
59 59
Source:Debtors95,p.23
Debtors95
""" ..-.-..... --.._ ......... 1ftJf).
, I ...,. d ,.. ... ...............
,.., ___ .. __ el .... __ Iioo ..... _
!Itt OC-_ .... _ ...... ____ '-...'-- __
Nil r-_.,_ ..... roec: , .. ... rD!C""'J1'M_.""""_
--
"'''''',"0
1. poor Mu'.
v" ...............
.''''''<0
t. p.r-!e .. "..., ........ msllt
M< _ .. _ ...... __ ... -,.:tcn.
-"'''M m-WMrIIInZi 2O:aa...d""'" ..
., ..... ..__ .... __ - -,-, )0,0. .,...._ ... __
...
RCOo\CTED
",-_.---_ ...
..... ......-_ n.:.. ____ ..., ..... ____ -,
---,. II--.... .... ----. ... --
--,--.,. ... -'''"---.. -..
-
REtl"CTED
" S" ' HV m, '
,-,. ........ u._.toc ... __ ", ......... c-_,
.. t.oo """"_1I1OC, __
__ .. __
--
- 1_' ... _
60 60
Source:Spansion

Opinion,p.14
Factor1
million, or net of$SS million, i, a.tigni licant amount ofmoM)'. partieul .. ly fOl'. company in
OOnkroptcy. H (Tr, 5/18109 at 55-56). this may bern understandable tarly in this case,
tho Ad Hoc Consoniwn has argued (and !he Debtors baff 001 disputtd) !bat the Debtors'
liqWd;ty position has improved eoosidl'rttbly Jiooe the btmIcruplC)' fil i08_ Mr_ Brincto also
Under these circumstances, it seems unlikely that a reasonable evaluation of
the merits of litigation of this nature and extent could have been made without taking into
account the advice of patent litigation counsel.
helped me frame ness !It.:ision. it's
legal deciliOll .
(T" S/ IIIIW at Under 0;;; .. CIICums:tances, ,t IKCInS wlhkdy thai .-able evahwlQIl of
the merits ofliligalion OrlNS ltalUI'!: and extenl _Id lulve made withoul taking into
The seoond flIctorlO consider in "'" Mmrln analysis is thc likely difficuhiC3 in colloction.
Then: is no rndencc 10 ,hal coll:1ion of . judiPf""'lapimt Sam:lWla would be II
The third Mort;" fDCIOf 10 consider is !be romplooty oftbe litieation inV(lIved, and the
14
61 61
Source:Spansion

Opinion,p.78
MartinFactors
511 8.'39 ... 167).
ApPJ SJ"6Nllc\,ltll!"oR eyAl l JADON Q(I SIllTl.EMIlN1S
.'in. dis" "'''''''''9"''''. 434 F 3d al644.
te35OOOble rn"i" oflitigmiou p;laibilitia." In ,. World /nc" 1'" B.R. 291,
burden of the oo:1rllhai \he C<Jm!l,<. ""j"" r.ll, v.i!hin tl:o """,n&hlc ""'I!" of litigation
( 1) the probability of success in litigation; (2) the likely difficulties in
eo"""UI""
An.:ftnon. 390 u,s. 41 4. 424
1
and tin,"ooa.wninll, ODd, like al lli.oo, in.hemttly r,, ;;y, f'ursuinS Ih. Action. _Id rttj\r1n
the to :;pend a oignifi<:n11 )l<.II'ti<m of thoi, tln.nd al "'soun::eo.. I<> the d<:nimmt of
62 62
Source:Spansion

Opinion,p.78
MartinFactors
511 8.'39 ... 167).
.'in. dis" "'''''''''9"''''. 434 F 3d al644.
(1) the probability of success in litigation; (2) the likely difficulties in
eo"""UI""
An.:ftnon. 390 u,s. 41 4. 424
1
63 63
Source:Spansion

Opinion,p.15
Factor3
coon Mted that 'lilt i .moma(;" W( settttmtn( will .Imog( roduce !I,e comple";ty and
of litigation .. . The bclaocitqj of 1hoe co"'plerity -' delay or li(igUi<ln wiLh tile
or-cUlc",."" is ",J"t"d \0 tile lilclih""dof>u:cc:"" ill Llull litig;:niO:O" N"17"'1UUJ. 434
".3<1 ar.646. i. insuffId rot inii .. mation IIJ"If'" which 1Il 1llllh; . 0lS to the
ot' .Inc.::. di fficwl lO condude !haL Ih;
. "
There is insufficient information upon which to make a reasoned decision as to the
likelihood of success of the Actions. This likewise makes it difficult to conclude that the
settlement is preferable to the expense, inconvenience and delay of litigation.
nOlIu a!ieJI 001 podxnL ur palent ""TICIl or corurolled by il:i
Divi.iun" "'""' the bock or nllltuaJity lOr"," ",\co.oD. raillC oddiLi urud ... n' .. 10 the of
5e1tI.","",.
Ho_. ".npport" WIlle seni8lMni appears based primarily upon .., IDlwillinp;ne .. to let l!<>
ofa "bird in Ih< (T r. 5/18109., 166): tho! otXepl:ing "'" (Iayment nl' pO milt i""
"
64 64
Source:Spansion

Opinion,p.16
TMT
""IlI"'''''''1 "',W;g bctl",lhan laking lhe ri,k orlb. However, because !his
n.uml does not allow & J"'OPM eval uation of the srronglh>< flfthe Actions Of the
of flx: proposed settlement J'I'l ym<:nt, J ClImO! weigh CO<IImil",",'s

Litigation and delay are always the alternative to
settlement, and whether that alternative is worth pursuing necessarily depends
upon a reasoned judgment as to the probable outcome of litigation.
TMT Trailer, 390 U.S. at 434.

pn: .. nt.cd loc."lIIua<e of sucoe(li'I of The t\ClkllU, tbm: i. nal o:n. evitlmre befom
Dcbllm' businoss judgml"l L Th<:n:f<>re. J canJlOl condulh:, 00 the biai. of I:": record before
me, lhIIllhc Sell\erne"nt Agn::cmcnt is fair, ro::MOnabl-: and h the ml intcr 1 ill \he ""\lI\e.
16
65 65
Source:Spansion

Opinion,p.78
MartinFactors
511 8.'39 ... 167).
.'in. dis" "'''''''''9"''''. 434 F 3d al644.
(1) the probability of success in litigation; (2) the likely difficulties in
eo"""UI""
An.:ftnon. 390 u,s. 41 4. 424
1
66 66
1.


2.


ofSuccess
3.


PreventConfirmation
67 67
Q.Theyprovisionintendedtoapplytopreferredstockholders

becausetheyreceiveballots;isthatafairinterpretation?
A.Idon'tknowwhetherthat'safairinterpretationornot...
Q.Preferredshareholdersreceiveaballot,correct?
A.Idon'trecallifthepreferredshareholdersreceivedaballot,

actually.
TreatmentofPreferred?
Source:HearingTestimonyOfSmith,12/06/10p.179:1923;185:2124
68 68
Q.Myquestionforyou:aretherereleasesinherethatrelease

claimsbythedebtorwhichwould,asaresult,releaseclaims

beingassertedderivativelybyshareholders?Didyou

considerthatquestionwhenyouanalyzedthefairnessof

theseprovisions,sir?
A.Idon'trecalltakingthatspecificquestionunder

consideration.
TreatmentOfDerivativeClaims?
Source:HearingTestimonyOfSmith,12/06/10p.237:24238:8
69 69
Q.DoyouseeanexceptioninsectionCforequityholderswho

donotreceivearelease?
A.Idon'tandperhapsthissomelanguagethatneedstobe

clarifiedinthisregard.
Q.Sothiswouldbeareleasethatequityholdersaregrantingto

JPMC,wouldn'tit?
A.Initscurrentformitwouldappeartodoso.Unfortunately

itscurrentformitwouldappearto.
StillNotRight
Source:HearingTestimonyOfSmith,12/06/10p.222:12

17;214:1217
70 70
Onthisrecord,theDebtorshavenotmettheirburdenof

establishingthattherevisedreleasesareappropriate,because

ofthefailureoftheaffectedclass(theNoteholders)tosupport

theModifiedPlan.Weconcludethatthe"overwhelming

support"factorarticulatedinMasterMortgage

requiresthat

theaffectedclassaccepttheplanbyatleastthepercentages

requiredbysection1126oftheBankruptcyCode
RejectionByClassDoomsReleases
InreGlobalOceanCarriersLtd.,251BR31

BankruptcyCourt,D.Delaware2000
71 71
[N]onconsensualreleasesbyanondebtorofothernondebtor

thirdpartiesaretobegrantedonlyinextraordinarycases.
InreContinentalAirlines203F.3d203,212(3rdCir.2000)
Nondebtorreleasesareproperonlyinrarecasesandmaybe

"toleratediftheaffectedcreditorsconsent.
InreMetromediaFiberNetwork,Inc.,416F.3d136,14142(2ndCir.2005)
"[A]permanentinjunctionlimitingtheliabilityofnondebtor

partiesis`ararething'thatshouldnotbeconsideredabsent`a

showingofexceptionalcircumstances'inwhichseveralkey

factorsarepresent.
InreGenesisHealthVentures,Inc.,266BR591,

(Bankr.D.Del.2001)
CasesRejectingThirdPartyReleases
72 72
"Butwithrespecttothethirdpartyreleases,I,quitesimply,don't

thinkIhaveanyauthoritytograntthemforthethirdparties.

Thethird

parties,totheextenttheyhaveanyclaimagainstanypartyinthis

case,Ijustdon'thavejurisdictionoverthat...Ithinkyouneedtoget

affirmativeconsentofthecreditor.
InreMagn

Entm't

Corp.Bankr.CaseNo.0910720(MFW)(April26,2010confirmation

hearingtranscript).
NoJurisdictionOverThirdPartyReleases
73 73
"Mostcourts,however,concludethatterm['interestatthe

legalrate']meansthefederaljudgmentrate"(citing

cases).
Contractualrateofinterestonlyappropriatewhere"fair

andequitable"
Postpetitioninterestatfederalrate
PostPetitionInterest
InReCoram,315B.R.at34347
74 74
ClaimAmount

$7.807Billion
SS6
SS6
$46
S26
PIERS: $789M
,
Pre-Petition
PIERS: $160M

Amount
$ O ~ - - ~ - - ~ ~ ~ - - - - ~ - - - - - - ~ - - ~ ~ ~ - - ~ - - ~
75 75
Claim

DistributionAtFederalPostPetitionRate
$88 ,--
PostPetition: $49M
t
PnH'etition: $7.0328
$68
$48
$28
Claim Amount Net Recovery
w L - L - - - - - - - - - - - ~ ______ ~ - - - - - - ~ ~ ~ ______ _ L - - - - - - - - ~ ~ ~
$7.4598
76 76
LiquidatingTrust
77 77
Q.YouassumeinyourNovemberreportthattherewillbea

zerodollarcancellationofdebt.Isthatcorrect?
A.That'smyunderstanding,yes.
Q.Andthat'sbasedonwhatthedebtorstoldyou?
A.Theanalysistheyhaddone,yes,that'scorrect.
TestimonyOfZelin,12/06/10
Source:p.88:1017
78 78
END

Washington Mutual (WMI) - Closing Argument of The Equity Committee (1st Confirmation Hearing in December 2010)

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Washington Mutual (WMI) - Closing Argument of The Equity Committee (1st Confirmation Hearing in December 2010)

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11

IN THE UNITED STATES BANKRUPTCY COURT

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