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Second Time's the Charm for Plaintiffs in Washington Mutual Complaint

By Andrew Longstreth
October 28, 2009

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Like some editors we know, many judges have a sore spot for disorganized, confusing, or wordy complaints. As we reported earlier this year, Seattle federal district court judge Marsha Pechman didn't much care for how Bernstein Litowitz Berger and Grossmann presented their allegations in a 388-page complaint against various former Washington Mutual officers and directors, underwriters, and the auditing firm Deloitte & Touche. But she apparently liked the revision. In a decision issued Tuesday, Judge Pechman allowed most of the claims to move forward, and declined to dismiss any of the defendants from the case.

The allegations in the case center on Washington Mutual's residential lending practices. The plaintiffs contend that the bank's standards were relaxed to meet consumer demand and bolster the company's stock price. While Judge Pechman found the first complaint "verbose" and "disorganized," she described the allegations in the 267-page amended complaint as "cogent and concise."

Chad Johnson, a partner at Bernstein Litowtiz, said in an e-mail to us: "We are pleased that the judge took a pragmatic approach to the matter and agreed that the case can move forward because the complaint already shows a strong indication of fraud at the top level of WaMu's management--and the judge similarly sustained the complaint against Wall Street investment banks and the auditor Deloitte, all of whom failed in their duty to protect investors from the fraud at WaMu."