JPMorgan Stirs the Pot in Billion-Dollar WaMu Litigation
By Alison Frankel
August 10, 2009
With $10 billion and its honor at stake, it's no wonder that JPMorgan Chase and its lawyers at Sullivan & Cromwell are scratching and clawing in the litigation over JPMorgan's firesale 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; spokesman 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 specific 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 that 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.
www.law.com/jsp/tal/...he_Pot_in_BillionDollar_WaMu_Litigation
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