By Brendan Pierson
Law360, New York (October 06, 2009) -- JPMorgan Chase Bank NA is
asking a district court to revoke a bankruptcy court's jurisdiction
over an adversary case it filed against Washington Mutual Inc.
regarding claims to billions of dollars in assets, which the
bankruptcy court refused to give up last week.
In a reply memorandum filed Monday in the U.S. District Court for the
District of Delaware, JPMorgan said that the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 meant that only the U.S.
Court of Appeals for the Third Circuit, and not a bankruptcy court,
could hear the case. Alternatively, it asked the district court to
hear the case itself.
JPMorgan initially filed the adversary proceeding in the U.S.
Bankruptcy Court for the District of Delaware in March. In July, it
appealed an order by the bankruptcy court denying a motion by JPMorgan
and the Federal Deposit Insurance Corp., an intervenor defendant, to
stay the case pending the outcome of a separate lawsuit between the
FDIC and Washington Mutual, and in September it appealed an order
denying its motion to dismiss counterclaims filed by Washington
Mutual.
In both cases, JPMorgan said the adversary case couldn't proceed in
bankruptcy court because of the FIRREA.
Washington Mutual has responded that JPMorgan's appeals are
“frivolous” and are simply a delaying tactic.
This argument “establishes only that debtors have pushed the
bankruptcy court to establish jurisdiction where none exists,”
JPMorgan said in Monday's reply brief.
“Even if the bankruptcy court disagrees with the FDIC and JPMC, the
'frivolousness' argument has no merit, and the bankruptcy court acted
beyond its authority in disregarding this court's jurisdiction over
these issues, which took hold upon the filing of the July appeals,”
JPMorgan said.
Judge Mary F. Walrath, of the Delaware bankruptcy court, rejected
JPMorgan's argument at a hearing last week, ruling that the adversary
proceeding would continue.
David Elsberg, an attorney for Washington Mutual, said that he
believed Judge Walrath's initial ruling was correct.
Through the adversary suit, JPMorgan is seeking to stake its claim to
at least $7.9 billion dollars in disputed Washington Mutual assets it
claims it sold in an emergency deal brokered in 2008 by the FDIC but
which the successors to the failed thrift argue should belong to the
bankruptcy estate.
Chase sought a declaration that it is the rightful owner of the
disputed assets, which include $4 billion in core capital for the
former Washington Mutual banking operations, $3.7 billion in a deposit
credit, and at least $234 million in tax benefits, as well as
intellectual property, Visa shares and employee benefit funds.
Washington Mutual fired back in April with its own adversary
proceeding, seeking $4 billion in cash held in the deposit accounts of
subsidiary Washington Mutual Bank at the time the bank was seized and
sold by the FDIC to JPMorgan for $1.9 billion.
Since the suits were filed, Washington Mutual and JPMorgan have
engaged in a feud over the appropriate forum to hear them.
Chase is represented in its adversary case by Sullivan & Cromwell LLP
and Landis Rath & Cobb LLP.
Washington Mutual is represented by Quinn Emanuel Urquhart Oliver &
Hedges LLP, Weil Gotshal & Manges LLP and Elliott Greenleaf.
The adversary case is JPMorgan Chase Bank NA v. Washington Mutual Inc.
et al., case number 09-50551, in the U.S. Bankruptcy Court for the
District of Delaware.
The bankruptcy 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 Erin Fuchs, Christie Smythe and Leigh
Kamping-Carder
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