08-12229 (MFW) WASHINGTON MUTUAL, INC., et aI., 1 Jointly Administered Debtors.


Adam G. Landis (No. 3407) Matthew B. McGuire (No. 4366) LANDIS RATH & COBB LLP 919 Market Street Suite 1800 Wilmington, Delaware 19801 Telephone: (302) 467-4400 (Additional Counsel Listed on Signature Page) Counsel/or JPMorgan Chase Bank, National Association

Dated: November 19,2010 Wilmington, Delaware

1 The Debtors in these Chapter 11 cases and the last four digits of each Debtor's federal tax identification numbers are: (i) Washington Mutual, Inc. (3725) and (ii) WMI Investment Corp. (5395). The Debtors principal offices are located at 925 Fourth A venue, Seattle, Washington 98104




PRELIMINARY STATEMENT BACKGROUND ARGUMENT I. II. Standards Governing Approval of the Global Settlement JPMC Would Likely Prevail in the Protracted Litigation That Results If the Settlement Is Abandoned A.

1 3 5 6 7

JPMC Prevails as a Matter of Law on Claims to the most Valuable Assets in Dispute 7 1. 2. 3. 4. 5. 6. 7. Tax Refunds TruPS BOLIICOLI. Disputed Accounts Capital Contributions Goodwill Litigation Visa Shares 8 11 14 15 16 18 19 20

B. C. III. IV. V.

JPMC Is Voluntarily Assuming over $580 Million (plus Unliquidated Amounts) in Additional Liabilities

Any Potential Business Tort or Antitrust Claims Against JPMC Relating to the Collapse ofWMB Are Worthless 21 25 26 28 29

The Overarching Impact of Title 12 on All Settlement Issues Cannot Be Overstated The Examiner Has Determined That the Global Settlement is Reasonable and Provides Good Value to the Estates The Plan Releases Are Appropriate in Light of the Substantial Value Contributed by JPMC to the Estates for Distribution to Parties in Interest.. A. Releases By the Debtors



Releases By Third Parties

30 33 33





American National Insurance Company v. lPMorgan Chase & Co., 705 F. Supp. 2d 17 (D.D.C. 2010) Amende v. Town of Morton, 40 Wash. 2d 104 (1952) American Savings Bank v. United States, 62 Fed. Cl. 6 (2004) Anchor Savings Bank, FSB v. United States, 81 Fed. Cl. 1 (2008) Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (1990) Begier v. IRS, 496 U.S. 53 (1990) Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) Branch v. FDIC, 825 F. Supp. 384 (D. Mass. 1993) California Department of Toxic Substances Control v. American Honda Motor Co. Inc., No. CV05-7746 (CAS) (C.D. Cal.) Capital Bancshares, Inc. v. FDIC, 957 F.2d 203 (5th Cir. 1992) Contemporary Industries Corp. v. Frost, 564 F.3d 981 (8th Cir. 2009) Demopolis v. Galvin, 786 P.2d 804 (Wash. Ct. App. 1990) Franklin Savings Corp. v. OTS, 303 B.R. 488 (D. Kan. 2004)

22, 23, 25 12 18, 19 18 23 23 8, 9, 12 23 17 21 8 13 12 13, 14


R. D.2d 262 (9th Cir. S. 2005) In re Hill. Del. 98-2007 (MFW).. 10 13 31.R. 183 (Bankr. No. 537 (D.. Del.. 140 (Bankr.N. 327 B. 1993) In re Freedom Rings.3d 209 (2d Cir. 2010) In re Exide Technologies. Inc. 2004) In re Firstcorp Inc. 303 B. 203 F. 09-13449 (BLS) (Bankr. 2006) In re International Wireless Communications Holdings.In re Accuride Corp. 1993) In re Continental Airlines.D. 1999 Bankr. No.. 9.3d 203 (3d Cir. D. Inc. Del. Kan.R. 315 B. Del. 09-12416 (PJW) (Bankr. 342 B. 2000) In re Coram Healthcare Corp. 2010) In re Adelphia Communications Corp.R.001-WOO1l232. D. 48 (Bankr. 2004) In re Electroglas. 1973) In re Columbia Gas Systems Inc... 2006) In re Haights Cross Communications. D.R. LEXIS 1853 (Bankr. Del. D. 997 F. No.. D.NJ. D.. 32 30 31 30 10 13 9 31 31 17 17 30 {683. 10-10062 (BLS) (Bankr. 1999) 31 30 8. 973 F. Del. 05-14268 (CSS) (Bankr. LLC. D. 473 F..2d 243 (4th Cir. 377 F.. Del.R. 321 (Bankr. 368 B. 159 B. 1992) In re Franklin Savings Corp. Del. 2010) In re Hechinger Investment Company of Delaware. D. 2003) In re First Century Financial Corp.Y 2007) In re Bob Richards Chrysler-Plymouth Corp. No.2d 1039 (3d Cir. } -iv- . 9 (Bankr.. No. Inc.

. 92 (Bankr. Inc.D. D. 00-389 (MFW).3d 389 (3d Cir. 2001) In re PNG Ventures. 170 B. Tex. N. 243 (D. No. Del. 05-11697 (MFW) (Bankr. c. 1993) In re Spansion. 2010) In re Revco D. Del.. L. 1998) In re MCorp Financial. 09-13561 (BLS) (Bankr. Del. 241 B. Ill.D. Del. Inc. D. 30.3d 159 (3d Cir. 5 9 31 13 31 31 8 5 24 28. 04-00279. Inc.R. Supp.L.R.. Inc. 291 (Bankr.D. 114 (Bankr. Ohio 1990) In re RFE Industries.R. 2005) In re Martin.} -v- . Inc. 426 B. 29. 09-12452 (CSS) (Bankr. No. 2001) In re Longview Aluminum. 1994) In re Metalforming Technologies.. D.. 111 B. Del. Del.. Inc. Del. D. 2002) In re Southeast Banking Corp.. 2006) In re Overland Park Financial Corp.S. 31 > {683. D. No. 742 (S. 2010) In re RathGibson. Inc. Inc. Inc.R.. 1996) In re Marvel Entertainment Group. 899 (S. No. 222 B. 344 B. LEXIS 100 (Bankr.R..R. 236 F. 2010) In re World Health Alternatives. 631 (Bankr. Inc... Fla.. 2005 WL 3021173 (Bankr. No...3d 1246 (10th Cir.In re Integrated Health Services. 2006) In re Zenith Electronics Corp. 827 F. D. 2001 Bankr. 09-13162 (CSS) (Bankr. 2010) In re Stallion Oilfield Services. 31 31 5 29. D.. 6 17 5 2.. N. Del.001-WOOl1232. 91 F.D. 1999) 1. D. 283 F. Del. Inc. No.

C...S. 271 (D..} 6 -vi- .. 1993) {683.S..C. Martin v. § 365(0) 11 U.. Code § 19... 482 F.. 940 F. Campbell Soup Co.Kallop v.... 2007) STATUTES 12 9 23....... 475 U.041 Wash... 1998) Skidmore v... § 1821(d) 28 U.C..S. Article 8 Wash. 1991) Matsushita Electric Indutrial Co....051 OTHER AUTHORITIES 729 13 13 13 16 19.•.3d 624 (3d Cir.S..C... Rev. 11192.. § 1123(b)(3)(A) 11 U. Cooper Electric Supply Co.... § 157(d) Worker Homeownership and Business Assistance Act of 2009 § 13.. No.31 8 24 9... Rev.... 1996) ..C..... 1999) Pareto v..C. 678 A. 574 (1986) McMakin v.......001-W0011232.C..2d 526 (Del... v.3d 696 (9th Cir. Zenith Radio Corp.. § 507(a)(9) 11 U........ 123 Stat... 242 B....S. FDIC..R.N.40.S.......... § 548(a)(I)(B)(ii)(I)-(III) 12 U. Code § 19. Pine Bush Equipment Co..J. 25 26 9 12 16 16 9 COLLIERONBANKRUPTCY 9019.S...... Pub.2d 896 (3d Cir......30. Swift..C. 139 F........ 134 (1944) VFB LLCv. 10 17 11 U. 323 U... McAllister. L.40.03 (15th Ed..S..C. 2984 (2009) U..S.... § 546(e) 11 U..


as well as multiple related actions pending in the United States District Courts for the District of Columbia (the "DC District Court") and Delaware. (collectively. that "the proposed Settlement reasonably resolves contentious issues. ("JPMC") submits this statement in support of approval of the global settlement agreement and confirmation of the Sixth Amended Joint Plan Pursuant to Chapter 11 of the United States Bankruptcy Code (the "Plan") of affiliated debtors Washington Mutual.2010 (the "Global Settlement") resolves both of the major adversary proceedings pending in this Court. The Court-Appointed Examiner was entirely correct when concluding. JPMC. the Amended and Restated Settlement Agreement. but. the Settling Parties2 seek approval of a comprehensive. integrated settlement that has enabled Debtors to formulate and seek confirmation of the Plan. after a thorough investigation. as the foundation of the Plan. Not only does the Global Settlement guarantee the immediate receipt by the Debtors' estates (the "Estates") of over $7 billion in value contributed by JPMC. the "Debtors"). Inc. the intervention of numerous third parties. ("WMI") and WMI Investment Corp. the official committee of unsecured creditors appointed in the Debtors' chapter 11 cases (the "Creditors' Committee") and the various creditors of both WMI and Washington Mutual Bank ("WMB").001-WOO11232.A. PRELIMINARY STATEMENT After over a year of contentious litigation in multiple fora which has already spawned five interlocutory appeals. As a truly "global" settlement." and "the 2 The "Settling Parties" include the Debtors. and the appointment of an Examiner. the settlement results in senior creditors being paid in full as well as full or substantial recoveries for significant additional note holders and other creditor groups. the Federal Deposit Insurance Corporation (the "FDIC"). {683. N. the production of millions of pages of documents.} .JPMorgan Chase Bank. dated October 6.

favors JPMC. 2008 Purchase and Assumption Agreement ("P&A Agreement") to which neither the Debtors nor any other party otherwise has any rights whatsoever absent the Global Settlement. 2001 Bankr.Estates are receiving good value for their released claims. 3. D. at *7 (Bankr. Inc.) Although it is unlikely that any classes of WMI equity holders ("Shareholders") will recover any amounts under the Global Settlement. to justify rejecting the proposed Settlement. Jan.. refunds. and thus falls well above "the lowest point in the range of reasonableness. and the likely recovery too speculative. JPMC would prevail as a matter of law on virtually all competing claims to the most valuable asset categories in dispute-tax REIT preferred securities ("TruPS"). BOLl/COLI. LEXIS 100.001-W0011232. The Global Settlement should be approved and the Plan based upon the Global Settlement should be confirmed. in every instance. 00-389 (MFW). The Global Settlement represents a reasonable array of compromises that delivers tremendous value to the Estates and ultimately to creditors. JPMC made significant concessions that not only enabled the Estates to receive this value but to do so now.2001). absent the Global Settlement.") at 1." (Id. } -2- . Second. in addition to the substantial assets contributed to the Estates. under the Global Settlement JPMC is voluntarily assuming hundreds of millions of dollars in liabilities for which it bears {683." In re Integrated Health Services. resolution of such claims will be guided by legal analysis that. Because the material facts relating to the claims to these assets are largely undisputed. "[t]he amounts required to reach common equity are simply too large. No. All are assets JPMC purchased from the FDIC as receiver for WMB under a September 25. at 28." (Examiner's Report ("Rpt. To facilitate the Global Settlement. and capital contributions. short of the many years of continued litigation that would otherwise occur.) The Examiner's conclusion is correct. Del. First.

" (Rpt. 243. and in the interest of the estate. at 3. Third. which have been raised by the Equity Committee.) {683.) In light of the foregoing. Fifth and finally. 222 B. are of no value. Fourth. 249 ( responsibility whatsoever.001-WOOl1232. the product of many months of intense arm's-length negotiations. the FDIC and JPMC.. all of which redound to the further benefit of the Estates. at 2. Inc. and resulted in significant give-and-take among these parties to achieve a comprehensive resolution of a broad array of claims. These negotiations involved the Debtors.R. Del. BACKGROUND The foundation of the Plan is the Global Settlement. given their complete implausibility and the recent ruling of the DC District Court that all such claims against JPMC are barred under Title 12. the Examiner is right: "Not approving the Settlement will essentially result in gambling with currently guaranteed recoveries to unsecured creditors in order to attempt to obtain speculative recoveries for Shareholders and other 'out of the money' claimants. Reflecting the complex interrelations of the claims at issue." In re Marvel Entm't Group.} -3- . that recent DC District Court ruling confirms that the jurisdictional issues presented by Title 12 and specifically FIRREA-which are the subject of five pending appeals and a motion to formidable threshold withdraw the reference in the Adversary Proceedings-constitute obstacles to recovery which guarantee protracted litigation if the Global Settlement is rejected. the Examiner's findings confirm that the putative business tort and other claims concerning JPMC's acquisition of WMB' s assets. substantial WMI and WMB noteholders. 1998) (quotation omitted). reasonable. (Rpt. the Global Settlement constitutes an "integrated whole" such that removal or modification of anyone of its parts would cause the entire agreement to fail. the Creditors Committee. there can be no question that the Global Settlement "is fair.

5 billion Unquantified Comprehensive/Unquantified value Limited/Unquantified cost Debtors and creditors project that the Global Settlement provides $6. All of this amount reflects substantial value given by JPMC-value JPMC believes it purchased from the FDIC and to which JPMC maintains that -4- {683. as well as providing for the exchange of certain releases among the Settling Parties.8 billion in value to the Debtors. for which not otherwise liable Unquantified cost Unquantified cost Unquantified cost Visa shares Intercompany debt JPMorgan selling stock of HS Loan to WMI JPMorgan to provide loan to WMI " .The Global Settlement provides for the disposition of over $25 billion worth of disputed assets and liabilities that fall into over 30 categories.1 to $6.} .. forgiving $274 million WMI debt $356 million plus further recovery Assuming WMB liabilities and paying $50 million to satisfy WMI liabilities Acquiring Visa shares and assuming WMI . Paying $180 million debt. r\lll·lT1· '" $25 million $180 million Unquantified value Unquantified value Unquantified value Releasing claims Releasing claims Alleged by Debtors to be $6.. The most valuable assets and assumed liabilities and their proposed disposition under the Global Settlement are summarized below: Goodwill Contracts $55 million plus further Assuming pension and medical plans.001-WOOl1232..

thus enabling the Debtors to distribute funds to creditors which would otherwise be tied up in years of litigation. assumed liabilities. The bulk of that value-approximately {683. Of course." ARGUMENT The Plan should be confirmed because the Global Settlement that is its foundation "is fair. and are at least $7 billion out-of-the-money. The principal voice against the Global Settlement and in support of continued litigation in multiple fora-the Equity Committee-insists that litigation of claims targeting alleged wrongdoing by JPMC both prior and subsequent to the failure of WMB justifies rejection of the Global Settlement. 222 B. and protecting pension and significant employee benefit plans. By contrast. While JPMC continues to believe that its superior rights to these valuable assets would be vindicated at trial before the proper forum. following the Equity Committee's proposed course "will essentially result in gambling with currently guaranteed recoveries to unsecured creditors in order to attempt to obtain speculative recoveries for Shareholders and other 'out of the money' claimants. nothing for subordinated unsecured creditors. and equity holders $16 billion out-of-the-money.) $7 billion in assets." In re Marvel. JPMC understands that all of WMI' s unsecured creditors will be paid in full and subordinated unsecured creditors stand to receive at least 70 to 80% of their allowed claims. at 249.R. reasonable. In the absence of a settlement. As the Examiner concludes. } (Rpt. and waived claims-comes -5- . leaving only pennies on the dollar available for unsecured creditors. it has contributed this value to the Global Settlement to achieve a prompt resolution of disputes.the Debtors are otherwise not entitled. at 3. under the Global Settlement. WMI's equity holders-its owners-receive nothing. the Estates will have only $900 million in assets.001-W0011232. and in the interest of the estate. That agreement represents a comprehensive arm's-length compromise that provides substantial value to the Estates and immediate recovery to creditors.

3d at 393. and (4) the paramount interest of the creditors.." In re Martin." In re Marvel.R.3d 159. (3) the complexity of the litigation involved. D.. 222 B. is not to decide the numerous questions of law and fact raised .R." Martin. Inc." In re RFE Industries. The decision to approve the Global Settlement lies within the sound discretion of this Court. is "whether the compromise is fair.." Id. Moreover.directly from JPMC out of assets it purchased from the FDIC as receiver for WMB. inconvenience and delay necessarily attending it. at *7. In exercising that discretion. STANDARDS GOVERNING APPROVAL OF THE GLOBAL SETTLEMENT.. 291. and in the interest of the estate. LEXIS 100. reasonable. 91 F. The "ultimate inquiry. "[i]n approving a settlement the Court is not to determine that the settlement is the best that can be achieved by the debtor. In re World Health Alternatives. "The responsibility of the bankruptcy judge .. 344 B. but rather to canvass the issues and see whether the settlement fall[s] below the lowest point in the range of reasonableness. and the expense.03[1] (15th ed. (2) the likely difficulties in collection. at 249. Del.3d 389. (quotation omitted). 2002). 393 (3d Cir.001-WOO1l232. "[C]ompromises are favored in bankruptcy. as this Court has observed. } -6- . constitutes value to which the Debtors would otherwise have no legal rights. 283 F. P Settlements such as the Global Settlement are valued because they "minimize litigation and expedite the administration of a bankruptcy estate. the Court should examine four factors: "(1) the probability of success in litigation. JPMC's voluntary surrender of such amounts. 1996) (quoting 9 COLLIER ONBANKRUPTCY 9019. 1993)). coupled with its assumption of hundreds of millions of dollars in liabilities it did not assume under its purchase agreement with the FDIC. 296 (Bankr." however. 2006). {683.. 2001 Bankr. 91 F." In re Integrated Health Services. 165 (3d Cir. Inc. I.

JPMC Prevails as a Matter of Law on Claims to the most Valuable Assets in Dispute.. The resolution of the competing claims to the disputed assets as well as the putative business tort and antitrust claims against JPMC falls well above "the lowest point in the range of reasonableness." (P&A Agreement at § 3. JPMC's entitlement to the disputed WMB assets is rooted in the plain language of the P&A Agreement. title. JPMC would prevail as a matter of law on its claims to the vast majority of the most valuable disputed assets. all fail as a matter of law. Finally. {683.." [d. pursuant to which JPMC purchased from the FDIC "all right. Second. either because they are undisputed WMI liabilities.1. JPMC WOULD LIKELY PREVAIL IN THE PROTRACTED LITIGATION THAT RESULTS IF THE SETTLEMENT IS ABANDONED. The Debtors are immediately receiving more for the Estates under the Global Settlement than they would likely ever be able to recover after the years of protracted litigation that would otherwise be required to finally adjudicate their current and contemplated claims. and interest of the [FDIC] in and to all of the assets . Under the Global Settlement. the Debtors are poised to bring nearly $7 billion of value into the Estates to which they otherwise have no legal entitlement. of [WMB] whether or not reflected on the books of [WMB] as of Bank Closing. JPMC is voluntarily assuming over $580 million in liabilities (plus significant additional unliquidated liabilities) for which it bears no legal responsibility. A.} -7- .) While the Debtors have asserted numerous claims to the most valuable of these assets under various theories.II. JPMC would also prevail on the putative business tort and antitrust claims that have already been rejected as a matter of law by at least one federal court and tacitly by the multiple federal entities that have investigated the WMB collapse.001-W0011232. First. or liabilities of WMB that were not transferred to JPMC under the clear terms of the P&A Agreement.

111 B. Ohio 1990). Nor is there any dispute that WMB's losses have generated $5. This general rule does not {683. 1992)..1.2d 262.2d 203.R.S. Inc.8 billion in state and federal tax refunds attributable to the activities of WMB may be claimed by WMI as estate property where those refunds are paid to WMI as filing agent for the consolidated WMB tax sharing group (the "WMB Group"). In re Revco D. which could have generated the refund on its own had it filed with the IRS as a separate entity. 957 F. v. 473 F. Inc. 473 F. This is especially true in the banking industry.D. and the terms of the 1999 Washington Mutual Tax Sharing Agreement (the "TSA") all establish that such refunds are WMB's property. the policies of all four federal banking regulators. 1973). 631.} -8- . A parent corporation such as WMI that files consolidated tax returns and subsequently receives tax refunds based on its subsidiary's tax payments "receive[s] the tax refund from the government only in its capacity as agent for the consolidated group" and is therefore "acting as a trustee of a specific trust and [is] under a duty to return the tax refund to the subsidiary." In re Bob Richards Chrysler-Plymouth Corp. FDIC. or that JPMC stands in WMB' s shoes with respect to the rights to those refunds." Capital Bancshares. N." In re Bob Richards.265 (9th Cir. Put differently.210 (5th Cir.2d at 265. The agent-parent cannot convert the refund into its own property because "[t]he refund is the property of the [subsidiary] Bank.8 billion in tax refunds. Tax Refunds Debtors contend that $5.. WMB's share of the tax refunds "is not owing to [WMB] but rather is owned by it. The Debtors' argument that WMI is entitled to claim these refunds as estate property is economically senseless and legally unsupportable-a company's use of another entity as its tax-paying agent does not give that agent ownership of the company's refund. It is undisputed that almost all of WMB' s taxes were attributable to the activities of WMB.001-WOO11232.. Well-settled caselaw. 639 (Bankr.

g. but the TSA also repeatedly confirms the rule that no subsidiary is to be made any worse off by virtue of participation in the WMB Group than if they had {683. McMakin v.. Fed. Pine Bush Equip.) Not only does the TSA incorporate all the relevant federal "bank and thrift regulatory guidelines. 64. Pro. 111 B. 496 U.1.757. e. Accordingly. the members of the WMB Group entered into the TSA." Id.J. Reg. Co. IRS. at 64. 1998) (the "Policy Statement"). In re Revco. Begier v. an organization's tax -allocation agreement or other corporate policies should not purport to characterize refunds attributable to a subsidiary depository institution that the parent receives from a taxing authority as the property of the parent. at 64. See id. Consistent with these requirements. Every major federal banking regulator-the Federal Reserve. (See Adv. at 639. 23. 271.} -9- . the adopted Office of the Comptroller of the Currency." Id.R. see also.001-W0011232.N.758. 1999). and the Office of Thrift Supervision-has this same prohibition by issuing a joint policy statement in 1998 specifically providing that: [A] parent company that receives a tax refund from a taxing authority obtains these funds as agent for the consolidated group on behalf of the group members.64. No. 09-50934 (D.S. The regulators warn "that intercorporate tax settlements between a[] subsidiary institution and the consolidated group should result in no less favorable treatment to the institution than if it had filed its income tax return as a separate entity. 278 (D.change merely because one of the parties is in bankruptcy.757. at 264-65.. <J[ 5). 59 (1990). These regulators further caution that actions inconsistent with their policy statement may constitute violations of federal law and can be treated by the regulators as "unsafe and unsound practice [s]" that require "informal or formal corrective action. FDIC.759 63 (Nov." including the Policy Statement (id.R. 242 B. 103) at B21O-12. 53. INTERAGENCY POLICY STATEMENT ON INCOME TAX ALLOCATION IN A HOLDING COMPANY STRUCTURE.

Corp. 1991) (quoting Skidmore. 377 F. 2984 (2009).R.D. Swift. Fin. and In re Franklin Sav. 1993). 4(c). The remaining case. 900 (3d Cir. expressly or implicitly. it requires that any refunds WMI receives attributable to a subsidiary be paid right away to the subsidiary. 134. L. Cooper Elec. None of these cases otherwise applies to the TSA.3d 209 (2d Cir. In re First Century Financial. the Statement's guidelines would nonetheless carry decisive weight here under the doctrine of Skidmore deference. In re MCorp Fin. Tex.) Nothing in the TSA states that WMI owns refunds attributable to those subsidiaries' activities or losses. Pub." Martin v. The first two cases pre-date the Policy Statement and its express adoption of the Bob Richards rule as between bank holding companies and their bank subsidiaries. } -10- . 111-92. or even requires that any refunds be paid to WMI. at 140). See Skidmore v.S. Kan. 1994)... Consistent with Skidmore.) The Debtors do not dispute that JPMC acquired WMB' s tax assets under the P&A Agreement.. the Debtors have maintained-incorrectly-that the Bob Richards rule can be overridden by an agreement between the parent and the subsidiaries. including all refunds due for prior tax years and all net operating loss carrybacks created by Section 13 of the Worker Homeownership and Business Assistance Act of 2009. No. involved an insurance company and its parent (a non-bank that would not be bound by bank holding company rules). D. 140 (1944). (See id.' (See id. 899 (S. Inc..S.R.2d 896.001-WOO1l232. 323 u.. 9 (Bankr. to the contrary. Supply Co. 323 U. Instead. B 1-4. 123 Stat. the Third Circuit has held that an "agency's 'body of experience and informed judgment' . Nor could the Even had WMI not incorporated the Policy Statement into the TSA. 940 F. 3 {683. and argued that the TSA is such an agreement. 159 B. which does not purport. In support of this position. should be given 'considerable and in some cases decisive weight. Corp.. B 2(b). however.. to state that WMI is the owner of any tax refunds paid on account of WMB' s prior tax payments and operations. WMI could only cite to three inapposite cases: In re First Cent.separately filed an individual tax return. 170 B. 2004).

However.5 billion worth of] refunds pursuant to a [TSA] between the entities. } -11- . These claims fail as a matter of law under the clear terms of the governing documents. at 5.. the TruPS were structured to be exchanged automatically for WMI preferred stock if the OTS so directed (the "Conditional Exchange"). and the undisputed facts. to claim the entirety of the $5.parties to the TSA have so agreed. As such. {683. Adv. See supra note 3. M. 5549 at 5. 30.) 2. Fla. TruPS The Debtors have claimed $4 billion in TruPS. and WMI promised the OTS it would 4 While the Examiner's Report appears to give some weight to the recent decision in In re NetBank." (Rpt. allege that the Conditional Exchange that deprived them of all rights to these securities never occurred. Sept. "WMB has meritorious claims to all or most of these [$5. Whether the FDIC Receiver or JPMC owns the refunds does not change the fact that WMI ultimately will not be entitled to retain most of the refunds. WMI's capital maintenance commitments to the OTS. as the Examiner concedes (Rpt. WMI concedes in the Disclosure Statement that JPMC would have a substantial claim to the tax refunds on behalf of WMB under the TSA." The foregoing establishes that JPMC is entitled. third-party investors.8 billion in disputed tax refunds as property of WMB purchased from the FDIC pursuant to the P&A. without risking violations of substantive banking law as cautioned in the Policy Statement. at 144 n. Inc.D.537). who claim to hold TruPS. as demonstrated supra.!. In addition. 2010) that decision is not only factually inapposite. 08-346-JAF (Bankr. No. Pro. even if WMI were to prevail with its claims of ownership in the first instance of the tax refunds. asserting that the transfer of these securities to WMB was ineffective or can be avoided.) Thus. as the Examiner concludes. The TruPS are hybrid securities designed to qualify as core capital of WMB. as a matter of law. but ignores entirely (presumably because the parties failed to brief the issue) the deference due to the Policy Statement under the Supreme Court's decision in Skidmore. (D.001-W0011232.

No. the OTS would never have approved the TruPS as core capital. Galvin.I. the Conditional Exchange occurred "automatically. and were valid and effective assignments of rights. Demopolis v. (See Rpt. Pro. Once that happened. Without the Conditional Exchange and the Capital Commitments.transfer the TruPS to WMB in a Conditional Exchange (the "Capital Commitments").808 (Wash. as they contradict the plain terms of the governing agreements and Delaware law. 106. evidences an intent to assign.) At the very least. the $13. 10-51387 (D. Pro. the Assignment S Adv. The only condition precedent of the Conditional Exchange was that the OTS direct the exchange. 2008. Ct. 2d 104. at 166-67. Town of Morton. Although certain hedge funds-who after Debtors' bankruptcy-have purchased virtually all of their interest contested the Conditional Exchange. and that it did so.) Under Washington law. and shows sufficient irrevocability. As explained in WMI's and JPMC's summary judgment briefsr' these hedge fund claims are utterly meritless.2d 804. App. and the TruPS might never have been issued in the first place. after the OTS directed the exchange. which the OTS did. loss-absorbing support to WMB in times of distress.001-W0011232. 108). 5A-51. As with the Conditional Exchange. 110).} -12- .106 (1952). 10-51387 (D. 1990). (See Adv. there is no dispute between the Debtors and JPMC that the Conditional Exchange occurred on September 26. It is undisputed that WMI had authority to assign WMB any and all rights to the TruPS. WMI's contribution of the TruPS to WMB occurred as a matter of law. The Capital Commitment letters did all three. {683." and former TruPS holders immediately became holders of WMI preferred equity and had no further rights to the TruPS. 40 Wash.1. 57 786 P.5 billion of WMB mortgage assets supporting the TruPS would not have provided certain. Amende v. Exs. an assignment is effective if it describes the rights assigned with particularity. No.

but JPMC is bringing its own claims for the TruPS. whereby a purchaser obtains title if the transferor shows an "unmistakable intention" to transfer the securities. 496 u. Corp.2(b) required JPMC to submit bids for certain securities upon the FDIC's request. WMI surrendered any property interest it could have acquired when. 1996). so that when the Conditional Exchange did occur effective 8 a. The Debtors also contend that Section 3. as between JPMC and the FDIC. 1059 (3d Cir.S. 7B. 7 {683. Second.2(b) and Schedule 3. The transfer of the TruPS is both a settlement payment 6 Although the Debtors have challenged the effectiveness of the TruPS' transfer to WMB based on the delivery rules of UCC.} -13- . on September 26.Agreement executed by WMI on September 25. and JPMC made clear in its bid cover letter that the TruPS were key assets in the P&A Agreement.5 of the P&A Agreement indicate that JPMC cannot bring a claim for the TruPS. WMI cannot recover on its TruPS claims.C.m. First. McAllister. even if WMI once had a property interest in the TruPS-which it did not-Section 546( e) of the Code prevents WMI from avoiding the TruPS' transfer by providing a safe harbor for "settlement payments" and transfers made "in connection with" a securities contract if they involve financial institutions.5 excludes any WMB claims against WMI from purchased assets. Frost. IRS. See 1111 Begier v.. was an effective assignment of the TruPS under Amende. 997 F. and do not give WMI any rights. it lacks an equitable interest in the monies. Here. 529-32 (Del. 986 (8th Cir. Delaware law recognizes "constructive" delivery outside the bounds of the UCC. Section 3. 58 (1990). it committed to the OTS to transfer the TruPS to WMB in a Conditional Exchange.6 (Id. 2009). 678 A.? WMI cannot avoid this transfer to JPMC as a matter of law.2d 1039. in this action. where an OTS employee stood over a WMI employee's shoulder until the Assignment Agreement was executed (see Rpt. it is indisputable that WMI intended to transfer the TruPS to WMB. WMI assigned to WMB all rights to receive the TruPS before the Conditional Exchange occurred. 1993).S.2d 526. Article 8. see Con temp. Ex. In any case. 564 F. § 546(e).001-W0011232. 53. 2008. Both sections are inapposite. Schedule 3.3d 981. out of an abundance of caution.) In either case.. in 2006 and 2007. because it had no property interest in TruPS. v. In re Columbia Gas Sys. 11 U." making an avoidance claim improper. Indus. 2008. but the FDIC never requested such a bid. both sections speak merely to whether JPMC. may claim the TruPS. at 162). Kallop v. the TruPS immediately transferred to JPMC via the P&A Agreement with the FDIC-Receiver. not WMB's. "[W]hen a debtor is a mere conduit for funds to travel from one party to another.

observing "that it is unlikely that WMI could avoid or set aside the pre-petition downstreaming of the TRUPS to WMB by WMI and that. BOLl/COLI JPMC is also entitled.} -14- . or the original assignment proven ineffective.. WMI and WMB were both solvent and sufficiently capitalized at the time the challenged transfers were made. regulatory filings and internal and external correspondence-establishes that these assets were the property of WMB as of the date of the receivership." The uncontroverted evidence-including policy records of the insurers. to the entirety of various employee benefits-related assets-most notably WMB's bank-owned life insurance ("BOLl") and company-owned life insurance ("COLI") policies.S. OTS. 2001). 8 {683. "the vast majority of the [$5 billion worth of] bank and corporate owned life insurance belonged to WMB and was conveyed to JPMC when it bought the assets of WMB from the FDIC Receiver.and postretirement employee benefits. given both WMB's use of these policies. 488. Corp. Thus. Kan.8 3. WMI would be obligated to pay the $4 billion face liquidation value of the TruPS to JPMC as a priority claim ahead of general unsecured creditors. Inc. WMB used the BOLl as a financing or cost recovery vehicle for pre. As permitted by relevant banking regulations. § 507(a)(9). 303 B. and cannot be avoided. 1252 (lOth Cir.C. Corp. See Franklin Sav. v. 973 F.001-WOOllZ3Z. The Examiner reaches entirely the same conclusion. See In re Overland Park Fin.247 (4th Cir. even if avoided. 1992). JPMC would have a priority claim for the face value of the TruPS which would cancel any value to the estate of retaining the TruPS. see 11 U. there would likely be no material improvement in the outcome of this case for the Estates.S. 236 F. 2004). as a matter of law.3d 1246.502 (D. Third. even if this transfer were avoided.2d 243..R.C. Thus.. 499.and a transfer made in connection with a securities contract. and the uncontroverted evdience that JPMC has supplied to WMI demonstrating that WMB owned If WMI's contribution of the TruPS were avoided. As the Examiner concludes. § 365(0) that WMI must honor. accounting records. In re Firstcorp. and therefore were among the assets the FDIC sold to JPMC. WMI's promise to the OTS to contribute the TruPS is a "capital maintenance commitment" under 11 U.. as discussed infra.

the Examiner's report states that "the vast majority of the bank and corporate owned life insurance belonged to WMB and was conveyed to JPMC when it bought the assets of WMB from the FDIC Receiver. since ceasing operations. at 6. To faciliate settlement. JPMC is also surrendering its ownership interest in two list bills issued by Pacific Life that had a cash surrender value of nearly $50 million. These issues have already been extensively briefed and argued to the Court in connection with the Debtors' pending summary judgment motion.) Had the BaLI assets (or any other significant asset) been excluded from the FDIC acquisition. "JPMC . and were thus purchased from the FDICReceiver by JPMC. and the competing interests of multiple third parties in the Disputed Accounts." (Rpt. 11 10 See Adv.)10 Disputed Accounts The Debtors have asserted a claim under Section 542 for turnover of over $4 billion purportedly on deposit in six disputed accounts maintained at WMB and Washington Mutual Bank fsb (the "Disputed Accounts"). Nevertheless..." (Id.." (Rpt. Pro. 102). JPMC has agreed to release its clear property interest in these policies in the interests of reaching a fmal. 11 9 Endorsing this position. it is likely that it would have obtained clear title to these assets as well. Had the litigation continued. ownership of the funds purportedly transferred into the accounts. 180. No. which JPMC purchased under the P&A. the BOLl were owned by WMB.) The Examiner's Report also concludes that like the NOL tax refunds and TRUPS."JPMC and the Debtors have not disputed that WMB' s BOLl/COLI and Split-Dollar Policies were assets of WMB that were transferred to JPMC..9 As the Examiner has concisely noted. By foregoing collection of this receivable owed by WMI-and clearly not assumed by JPMC under the P&A Agreement-JPMC is voluntarily surrendering an asset valued at almost $274 million. despite the fact that numerous complex issues of material fact exist with respect to the creation.l. 09-50934 (D.these policies. understood that the . including the FDIC and WMB's bondholder creditors. Additionally. at 4. {683.} -15- .001-WOO11232. JPMC's rights of setoff as against any such purported funds. integrated settlement. the value of the excluded asset would have been deducted from JPMC's bid. WMI has failed to pay a substantial intercompany liability in connection with its sponsorship of the WMB Pension Plan. at 9. BaLI/COLI were valuable assets ofWMB that would be of significant benefit to JPMC. JPMC has not located any evidence that shows these assets were dividended up to WMI-the only lawful way the assets could have been transferred to WMI. funding and maintenance of these accounts.

providing over $3. However. it is impossible for Debtors to demonstrate that either WMI or WMB was insolvent at the time of these transfers. § 548(a)(I)(B)(ii)(I)-(III).8 billion in value to the Estates. in so doing. See 11 U.S.001-W0011232. In order to prevail on their constructive fraudulent transfer claims under both the Code and Washington State law.051(a). JPMC firmly believes that Debtors' turnover action is not only precluded as a matter of law given the numerous bona fide material disputed issues as to the Debtors' ownership of and entitlement to the funds they seek. (ii) April 18.40. but resolution of these issues would dramatically limit the Debtors' recovery of any such funds. WMI was clearly solvent at the time all four of the capital contributions were made to WMB because it is undisputed that WMI had a strongly positive market capitalization during this period. the Debtors must establish at a minimum that (i) WMI did not receive reasonably equivalent value in exchange for the transfers and (ii) WMI was insolvent at the time ofthe transfers. 5(a).40.5 billion in capital contributions from WMI to WMB. Debtors' attempt to claw back these capital infusions to WMB fails as a matter of law because.Quite apart from the jurisdictional issues raised by JPMC and the FDIC. see also UFTA §§ 4(a)(2). Nevertheless. Code §§ 19. (iii) July 21. Rev. ranging from nearly $4 billion at the time of the September 2008 capital contribution to over $12. which Debtors allege are avoidable as constructive fraudulent transfers. Wash. among other things.C. The capital contributions in question involve four separate transfers from WMI to WMB on (i) December 18. 19. 5. 2008. Capital Contributions The Debtors have asserted claims seeking to recover from JPMC $6.2007. 2008. and (iv) September 10. under the Global Settlement JPMC is compromising its claims to the Disputed Accounts and.041(a)(2).} -16- . 2008.7 billion at the time of the December 2007 capital {683.

537.'" VFB LLC v. Campbell Soup Co. it is not the place of fraudulent transfer law to reevaluate or question those transactions with the benefit of hindsight. and that "market price is a 'more reliable measure of the stock's value than the subjective estimates of one or two expert witnesses. the court will give deference to 'prevailing marketplace values' rather than to values created with the benefit of hindsight for the purpose of litigation" when making solvency determinations. N. at *7 (Bankr. 2008.. Mass.) prepared to put forward expert witnesses whose analysis establishes WMI's solvency during this period. 1993). In re Longview Aluminum. 1996)) ("[T]he price of stock in a liquid market is presumptively the one to use in judicial proceedings. to a great extent.2005)." Peltz. at 41. 85 F.} -17- . FDIC. 482 F. who noted that "WaMu remained wellcapitalized through September 25. less than two weeks after the last and smallest of the disputed capital contributions in September 2008. risks.. Del. Supp. 2005) (quotation omitted)." a view subsequently echoed by the Treasury Inspector General before the Senate's Permanent Subcommittee on Investigations. "[B]ecause valuation is. July 14.R. 825 F.")). 279 B. 2005 WL 3021173. of Del.2 billion in capital in WMI.contribution. 384. Ill. 548 (D.001-WOOI1232. the Third Circuit has instructed that the market's valuation of a company as solvent alone constitutes "strong evidence" of solvency. In re Hechinger Inv. invest $7. (Rpt. in fact. 2007 While JPMC is September 10.320 (7th Cir.) "When sophisticated parties make reasoned judgments about the value of assets that are supported by then prevailing marketplace values and by the reasonable perceptions about growth. a subjective exercise dependent upon the input of both facts and assumptions.D. 2007) (quoting In re Prince. Branch v. the OTS concluded that WMB was "well capitalized.. 399 (D. This defense is available to a subsequent transferee of a voidable transfer and requires proof of two elements: a lack of notice of the voidability of a transfer and an Further confirming WMI's solvency is the fact that in April 2008 JPMC proposed to purchase WMI and TPG did. 12 {683.12 Even assuming that WMI was not solvent and the capital contributions constituted constructive fraudulent transfers.2010.) WMB's solvency at the time of the September 2008 contribution means WMI necessarily received reasonably equivalent value for the transfer as a matter of law. December 18. 2008. at 738. accessed November 19.3d 314. via Bloomberg LP. when it was placed in receivership. L. 04-00279. Indeed.L. No.3d 624. Co. (See Stock data for Washington Mutual Inc. and the market at the time.633 (3d Cir. at 58..R. the Debtors would still not be able to recover the capital contributions because of the good faith defense afforded JPMC by Section 548( c) of the Code.C." (Rpt. 327 B.

and it is undisputed that JPMC exchanged significant value for the capital contributions when it purchased the assets ofWMB for $1.)13 Recovery of damage awards by WMB predecessors in the so-called "Goodwill Litigation" represents yet another class of assets that JPMC clearly purchased under the P&A and to which. 1 (2008). JPMC. 183. Thus.5 billion in capital contributions is reasonable. clearly satisfies both requirements of the defense: There is no evidence or suggestion that JPMC had any knowledge of the avoidability of the contributions. United States. 2010). Bank. it does not appear that the Debtors would even be able to contest solvency and simultaneously press any purported business tort claim as the Equity Committee urges. Sav. Cl.R. Cir. Cl.202-04 (Bankr. at 6. the Debtors would have no rights. it is difficult or impossible to establish damages caused by JPMC's alleged wrongdoing. Cir.")." (Rpt. 2008).88 billion and assumed $145 billion in deposit liabilities. as the Examiner of value.001-W0011232. 6 (2004). In re Hill. 342 B. the As the Examiner also notes. to the extent it is even a subsequent transferee of the capital contributions given WMB' s condition at the time JPMC purchased WMB's assets from the FDIC under the P&A Agreement. aff" d 597 F.3d 1316 (Fed. absent the Global Settlement. 2006).J.N. D. "the Debtors' avoidance actions with respect to the Capital Contributions do not represent significant claims that are being compromised under the Settlement Agreement" because they "likely fail or would result in competing claims that negate most of their value. } -18- .3d 1356 (Fed. Bank v. Or.) See Anchor Sav. FSB v. Goodwill Litigation 6. at 60 ("The question of solvency also affects potential business tort claims against JPMC because if WMI was insolvent. the Debtors' agreement to release their claims against JPMC to the $6. Given the weight of authority against their constructive fraudulent conveyance claims. Am. aff'd 519 F. 62 Fed.l" It is clear that the original plaintiffs to the Goodwill Litigation who actually suffered damages in their respective cases-Anchor Savings Bank and American Savings Bank- were merged into WMB after filing their lawsuits against the United States. (Rpt. 81 Fed. United States. 14 13 {683.

aff'd 519 F. JPMC has agreed to assume WMI's potentially substantial liabilities arising from or relating to the Visa litigation including a $5 billion proof of claim filed against WMI's estate. in the Global Settlement JPMC has agreed to pay WMI $25 million to resolve any potential disputes regarding ownership rights in the Visa shares. Indeed..A.I5 7. the Debtors failed to file any claim with the FDIC in connection with the sale of these assets to JPMC under the P&A Agreement.059 Class B shares in Visa U.C. as well as the potential additional future recovery in that action estimated to be in excess of $100 million. 62 Fed. Nevertheless. Bank v. Sav. United States. 2008). 12 U.} -19- .3d 1316 (Fed. Any argument of entitlement to the damage awards by the Debtors in either case is wholly without merit. Nevertheless. 6 (2004). and that JPMC is owner of the beneficial interest in the Visa shares following the purchase of WMB assets under the P&A.S.001-W0011232. 16 {683.sizeable judgments awarded in each case were acquired by JPMC pursuant to the P&A because they were assets of WMB.S. (13). Visa Shares The Debtors have consistently failed to counter JPMC's position that the Debtors hold anything other than bare legal title to 3.9 billion.147. thus waiving any rights they may have had to contest their ownership. as part of the integrated Global Settlement. Cir. Moreover. The Debtors have acknowledged that WMI's potential exposure (which JPMC has agreed to assume) could be as high as $2. and even though the Debtors have no legal entitlement. 16 15 Am. JPMC voluntarily agreed to surrender to the Debtors the $55 million damages award in the American Savings case. Cl. §§ 1821(d)(6).

B. in others. WMI had deferred compensation liabilities of $234 million as of September 25.v' Intercompany Obligations: JPMC will voluntarily pay nearly $180 million in unaudited balances remaining on master notes allegedly owed by WMB to various WMI affiliates under the Global Settlement. WMB and their respective subsidiaries and affiliates. 2008. On September 30. of the WMI Medical Plan and the employee welfare plan. these liabilities were valued at $117 million after JPMC paid over $100 million to participants in deferred compensation plans sponsored by WMI. despite the fact that these claims are WMI obligations not assumed or otherwise addressed under the P&A in any way. there are a number of significant WMI liabilities that JPMC is voluntarily assuming in the interests of bringing finality to these proceedings.00l-W0011232. whether or not the ledger balances are in fact accurate. 2008. In fact. JPMC's concessions represent a substantial voluntary compromise of its clear rights and defenses under the P&A Agreement. 17 {683. these substantial obligations all remained on the Debtors' balance sheet after WMB was placed in receivership and would remain as obligations of the FDICReceiver or the Estates absent action by JPMC. } -20- . JPMC has also agreed to become a "contributing employer" with respect to the WMB Pension Plans of September 25. In addition to each of the foregoing assets. absent the Global Settlement and. For example. In some instances. by whose terms JPMC assumed only a limited set of specific liabilities. Vendor Claims: JPMC has also agreed to fund the payment of $50 million worth of pre-petition claims of multiple vendors against WMI. these are liabilities that no one claims JPMC would plausibly have responsibility for. The payment of these funds into the "Vendor Escrow" by JPMC represents a direct savings to the Estates and ensures full recovery for vendors b) c) JPMC has also incurred significant liabilities by transferring heritage WMB employees to JPMC's own benefits programs which significantly increased JPMC's employee overhead expenses. It has never been established by the Debtors or any other party that these balances were legitimately incurred or otherwise owed by WMB. 2010. they represent liabilities of the receivership that were never assumed by JPMC under the P&A. JPMC Is Voluntarily Assuming over $580 Million (plus Unliquidated Amounts) in Additional Liabilities." thus ensuring that WMI's present and future benefits obligations will be covered in full and that covered employees will be eligible to continue receiving benefits. a) Other Employee Benefit Plans: JPMC is voluntarily assuming over $80 million in "liabilities and obligations associated with sponsorship. Moreover.

in any event. No.. d) BKK Liability: As part of the Global Settlement. suffer from multiple legal infirmities. The putative business tort and related claims against JPMC that the Debtors and the Equity Committee have threatened to bring are all facially implausible and. They are. in short. only receive partial compensation from proceeds of the bankruptcy estate. Thus JPMC's agreement to bear this liability also provides additional certainty to creditors and decreases the amount of reserves required to be held for allowed claims.) That case." These claims parrot those set forth in the AN/CO complaint against JPMC. Any Potential Business Tort or Antitrust Claims Against JPMC Relating to the Collapse of WMB Are Worthless.} -21- . in excess of applicable and available insurance" in connection with the BKK landfill litigation 18 that would otherwise fall to the Estates. JPMC has also agreed to fund significant liabilities for "remediation or clean-up costs and expenses . (ii) engaged in sham negotiations with WMI and improperly attempted to obtain confidential WMB financial information. and (iii) conspired with the FDIC to orchestrate the seizure of WMB and the sale of its assets in a sham bidding process." (Rpt. 18 {683.. Although the extent of these liabilities is difficult to quantify at this time. American Honda Motor Co. Although the Equity Committee theorizes these purported claims are potentially worth $30 billion.that would. at 230.. California Department of Toxic Substances Control v.001-WOOl1232. CV05-7746 CAS (JWJx) is currently pending in the United States District Court for the Central District of California. it is undisputed that any future liability would directly decrease the size of the Estates and recovery available for creditors. C. Such claims are based on unproven and unprovable misconduct by JPMC which is speculated to have caused both the collapse of WMB and the improper sale of "the crown jewels" by WMB to JPMC at a "fire sale price. the Examiner has concluded "that the potential tort and contract claims being released in the Settlement Agreement do not have substantial value. at best. worthless. alleging that JPMC (i) engineered a public misinformation plan to distort perceptions about WMB's financial health.

Setting aside the facial implausibility of such allegations. Id. Supp. any purported business tort claim against JPMC fails for lack of proximate causation. v." Am. 1995).) See also id. Plaintiffs were required to pursue their claims against the FDICReceiver administratively through the exclusive receivership claims process that Congress provided in [FIRREA]. The ANICO court's reasoning would similarly doom any attempt by the Debtors.} .C 2010) (concluding that "Plaintiffs' injuries depend on the independent intervening sale by the FDIC-Receiver. [FIRREA]'s exclusive claims process applies to "any claims relating to any act or omission" of the FDIC as receiver for a failed bank. 2d 17.").C. given that the alleged harm to WMI at the center of these theories is the direct result of OTS' s decision to seize WMB and place it into an -22- {683.00I-W0011232.3d 1394. 705 F.C.D. Nat'l Ins. JPMC. Plaintiffs' claims against JPMorgan Chase directly "relate" to an "act" of the FDIC-Receiver: the agency's "fire sale" of Washington Mutual Bank's assets. 20. 1821(d)(13)(D)(ii). The legal impediments to such claims against JPMC are not just jurisdictional. Cir. 12 U. at 21 (citing Freeman v. the DC District Court determined that all such "claims against JPMorgan Chase depend on harm caused by the FDIC-Receiver when it 'sold the crown jewels' of Washington Mutual Bank to JPMorgan Chase for a 'fire sale price'. The preposterous allegations of the ANICO plaintiffs fail to state any cognizable claim against JPMC for at least three reasons. Plaintiffs' claims are barred by [FIRREA]. In dismissing the ANICO complaint with prejudice. WMI shareholders or any other party to evade the exclusive receivership claims process by bringing ANICO-type claims against JPMC. 56 F. 21 (D. Co. ("Plaintiffs cannot circumvent the Act's jurisdictional bar by aiming their claims at the assuming bank of the failed bank's assets."). Consequentl y.S. FDIC. First. 1400 (D. Having failed to invoke and exhaust this administrative process. all such claims against JPMC have been determined by the DC District Court to be barred by FIRREA.

available at http://www.1950 (2009). 1937.. Bell Atlantic Corp. none of whom has even suggested that JPMC played any role in the bank's failure. v. See. "Determining whether a complaint states a plausible claim for relief will . Ev ALUA D (FD TIONOF FEDERAL REGULATORY OVERSIGHT OFWASHINGTON MUTUALBANK2 (2010). 567-69 (2007) (finding "obvious alternative explanation" to conspiracy theory). 2010) ("WaMu {683. these allegations are consistent with petitioners' [alleged improper purpose]."). But given more likely explanations. e." clearly "more likely explained Iqbal.S. The subsequent purchase of WMB assets by JPMC caused no additional or separate loss to WMI. this is precisely the conclusion reached by every federal entity that has investigated the collapse of WMB. Twombly. Indeed. OFFICEOFINSPECTOR GENERAL. EP'T OFTHETREASURY Ie). Ct. lawful. Ct.pdf(last visited November 19. 544. } -23- .FDIC receivership. 550 U.001-WOO11232." Ashcroftv. be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. the collapse of WMB and WMIwhich indisputably occurred against the backdrop of an unparalleled financial crisis during which hundreds of depository institutions have been closed since January 2008 by federal regulators-is they do not plausibly establish this purpose.fdicoig. Id. Even if such conclusory allegations about JPMC's conduct were true (and they are not). at 1951 ("Taken as true. Second. unchoreographed free-market behavior. Iqbal. which no longer possessed any interest in those assets. JPMC could not plausibly be the cause in fact of WMB' s failure as such allegations suggest.. 129 S. at 1950.g. Courts must acknowledge "more likely explanations" and "obvious altemative[s]" to the characterization of events proposed by plaintiffs. 129 S.

the section vests all rights and powers of a stockholder of the bank to bring a derivative action in the FDIC . 495 U. Zenith Radio Corp. Indus. an agreement solely between JPMC and a single European bank makes absolutely "no economic sense. 700 (9th Cir.." as it would do nothing to limit any other bidder anywhere else in the world interested in WMB from submitting a bid. rendering any such agreement wholly futile."). "[a] conspiracy between only Santander and JPMC also is not plausible... especially where [the holding company's] solvency and success were 'crucially dependent' on the Bank." (Rpt. Banking (S. 742. at 262. (Rpt.344 (1990) ("The antitrust injury requirement ensures that a plaintiff can recover only if the loss stems from a competition-reducing aspect or effect of the defendant's behavior. 589 (1986).. In particular." Pareto v. 1993).").. "harms suffered by WMI as a result of WMB' s Similar implausibility dooms theories of purported antitrust violations by JPMC in connection with communications with Banco Santander. In other words. Co.S. any stockholder" of WMB.745-46 In re Se.001-WOO11232. FDIC. The Examiner reviewed all the relevant facts and concluded that "[n]othing here suggests agreement" between JPMC and Santander. at 262.) Moreover.S. Fla. which have been suggested could reflect a possible conspiracy to restrain bidding on WMI or WMB. power. rev'd on other grounds. 19 Finally.D. not only do the facts not support this claim.3d 696. 328. Supp. 139 F. Congress has transferred everything it could to the FDIC. 1995). 475 U. or privilege to demand corporate action or to sue directors or others when action is not forthcoming. USA Petroleum Co. powers. see also Att. 574. titles.failed primarily because of management's pursuit of a high-risk lending strategy that included liberal underwriting standards and inadequate risk controls..) 19 {683. the FDIC owns any purported WMI claim against JPMC or any entity in connection with alleged harm to WMB. 827 F.. as alleged in the Complaint. "Plainly. derivative or otherwise. and privileges of . Section 1821(d)(2)(A)(i) of Title 12 provides that the FDIC as receiver for WMB "succeeds to all rights. under FIRREA. As the Examiner explains. 1998). v. 69 F. Richfield Co. arising from generalized harm to WMB because "there is no meaningful distinction between injury suffered by the holding company and the derivative claims of mismanagement. neither WMI nor WMI shareholders have standing to pursue claims.. As the Examiner concluded. and that includes a stockholder's [WMl's] right. } -24- .3d 1539 (11th Cir. v. Matsushita Elec." Corp.

the DC District Court has already determined that FIRREA bars litigation of the purported business tort claim that the Equity Committee has suggested might be asserted against JPMC. Code. The impact of this jurisdictional bar imposed by FIRREA on the various disputes and other issues raised before this Court cannot be overstated.S.} -25- . any attempt to raise such a claim now against JPMC is "barred by the Act. (b) relating to any act or omission ofWMB. timely appealed to the DC District Court or the U.. 12 U. JPMC and the FDIC maintain that Title 12's banking insolvency regime-specifically that enacted in FIRREA-sets forth the exclusive claims procedure for resolving disputes: (a) seeking a determination of rights with respect to WMB assets (e. THE OVERARCHING IMPACT OF TITLE 12 ON ALL SETTLElVIENT ISSUES CANNOT BE OVERSTATED.) III. the Global Settlement resolves all issues and disputes among the parties not merely in connection with the Debtors' bankruptcy proceedings.S. Nat'[ Ins. Under this same analysis." (Rpt. a fraudulent transfer or preference claim). Supp. 2d at 21.C. (13). any claims against JPMC to the more than $382 million in value represented by the Goodwill Litigation. at 245. or (c) relating to any act or omission of the FDIC as receiver for WMB. As a truly integrated agreement. {683.001-WOOl1232. As noted above. but also significant claims and disputes governed by Title 12 of the U. As the Court is well aware. District Court for the Western District of Washington." Am.g. Because no putative plaintiff-including WMI or WMI's shareholders-ever filed a claim in the FDIC receivership. any such claims are barred unless timely asserted with the FDIC and then.failure arguably are derivative claims that were transferred to the FDIC upon receivership so that Debtors have no claim. §§ 1821(d)(6). Under the plain language of the statute.S. Co.. if disallowed. 705 F.

00I-WOO1I232.S. were fully answered in the affirmative on November 1. These include two fully briefed appeals establishing that this Court lacks subject matter jurisdiction under FIRREA's jurisdictional bar to hear claims redundant of those already pending in WMI's DC Action. § lS7(d) for mandatory withdrawal of the reference of the adversary proceedings from this Court and to transfer those proceedings to the DC District Court for consideration of both Titles 11 and 12. } . 2010 when the Examiner appointed by this Court issued his Final Report. WMI's subsequent redundant litigation of the identical claims in this Court is void for lack of subject matter jurisdiction. IV. WMI has already acknowledged that FIRREA's exclusive claims process governs by first submitting claims to all such assets with the FDIC and then commencing an appeal of the FDIC's disallowance of those claims in the DC District Court. In the Final Report. even with respect to the competing claims to the primary and most valuable asset categories discussed above. both the FDIC and JPMC will proceed with their respective appeals and motions pending before the U.S.C. as well as provides good value to the Estates for the benefit of the creditors. the Examiner concludes unequivocally -26- {683. as well as JPMC's motion under 28 U. THE EXAMINER HAS DETERMINED THAT THE GLOBAL SETTLEMENT IS REASONABLE AND PROVIDES GOOD VALUE TO THE ESTATES. and numerous other asset categories are similarly barred because no claims to such assets were ever filed in the FDIC receivership. In the event the Global Settlement is not approved and litigation resumes before this Court. Thus. BKK litigation. although JPMC recognizes that this Court has to date disagreed with this position. Any questions concerning whether the Global Settlement reasonably resolves the Settling Parties' disputes. District Court for Delaware. Finally.Visa Shares.

"that the consideration to be paid to the Estates in connection with the Settlement in the form of assets or release to the Debtors is reasonable. it would not result in any material increase in value to the Estates in light of associated offsetting claims. even if they did in the first instance. "[n]ot approving the Settlement will essentially result in gambling with currently guaranteed recoveries to unsecured creditors in order to attempt to obtain speculative recoveries for Shareholders and other 'out of the money' claimants. The Examiner's Report also concludes that.) Indeed." Similarly. the Examiner's Report does not find any merit to possible claims against either the FDIC or the OTS relating to the execution of their regulatory functions. "it would be difficult to establish that JPMC' s actions caused the demise of WMB or resulted in damages to WMB and WMI.• • "that the proposed Settlement reasonably resolves contentious issues". at 1-2 (emphasis added).} . and the Estates are receiving good value for their released claims"." and notes that the Examiner "did not uncover facts likely to support viable claims against JPMC that would generate significant benefits for the Debtors. with respect to any putative business tort or antitrust claims against JPMC.001-WOOl1232. and "The Settlement Agreement provides significant funds for the creditors and for various note holders. according to the Examiner." The Examiner's specific conclusions about the likely outcomes of litigation of claims to the most valuable assets are entirely consistent with JPMC's analysis abovenamely that across the board the Debtors are unlikely to prevail on their claims to such assets and that. but "also concludes that further litigation concerning any disputed asset is highly unlikely materially to benefit classes that are 'out of the money'. The Examiner's Report concludes that "substantial legal impediments make it highly -27- {683." (Rpt." The Examiner specifically observes that the Global Settlement will result in • no recovery for WMI shareholders.

unlikely that any [analogous] claims against the FDIC would succeed. {683." such that "there are no viable claims that can be made against OTS based on the theory that they improvidently closed WMB." the Examiner is unaware of "facts sufficient to support a prima facie case for any case against the FDIC. THE PLAN RELEASES ARE APPROPRIATE IN LIGHT OF THE SUBSTANTIAL VALUE CONTRIBUTED BY JPMC TO THE ESTATES FOR DISTRIBUTION TO PARTIES IN INTEREST. To the contrary.} -28- ." v." and (ii) "there is no clear litigation path which would result in substantial recoveries beyond those to be paid to the Debtors under the Settlement Agreement." Most importantly. critical to the implementation of the Plan and provided in exchange for substantial value JPMC is providing to the estates for distribution to creditors and parties in interest." The Examiner's Report also concludes "that OTS reached reasonable conclusions that WMB was both unlikely to meet its depositors' demands and was operating in an unsafe and unsound condition. to justify rejecting the proposed Settlement. the Examiner's Report ultimately concludes that (i) proceeds from the Global Settlement "will be sufficient to pay almost all of WMI' s noteholders and creditors. These releases amply satisfy Third Circuit standards for approval because they are an essential component of the integrated Global Settlement." Nowhere in the report is the Examiner even able to identify a single reasonably possible scenario in which Equity can receive any recovery whatsoever. and the likely recovery too speculative." and that.001-WOO1l232. "even if the legal impediments could be overcome. the Examiner concludes that "[t]he amounts required to reach common equity are simply too large. The Plan provides for releases of claims against JPMC and its affiliates by the Debtors and by third parties.

5 of the Plan provides.A. such as waiving its right to receive distributions on its unsecured claims or assuming vast liabilities that otherwise would diminish the Debtors' estates and potential recoveries by creditors and parties in interest. inter alia. provide for the settlement or adjustment of any claim or interest belonging to the debtor or to the estate.S. that the Debtors will release various claims the estate holds against JPMC and its affiliates. Simply put. Through the Global Settlement." Id. v. 2010)." A debtor's settlement or adjustment of claims-including a release of claims-pursuant to Bankruptcy Code section 1123(b )(3)(A) is appropriate "if the release is a valid exercise of the debtor's business judgment.} -29- . reasonable. and in the best interest of the estate.001-W0011232. Moreover. Del. In determining whether releases by a debtor should be approved under section 1123(b)(3)(A). Wilmington Trust Co. this Court also has considered five separate factors: whether (1) there is an identity of interest between the debtor and the releasee. JPMC is providing the estate with more than 90% of the assets that will be distributed under the Plan. (In re Spansion. Bank Nat'l Assoc. 114.).. Under Bankruptcy Code section 1123(b)(3)(A). 143 (Bankr. 426 B. D. and in the best interests of the estate. (3) the release is essential to the reorganization {683. There can be no doubt that the Debtors' release of JPMC and its affiliates is "fair. absent the Debtors' release of claims against JPMC and its affiliates. (2) there is substantial contribution by the releasee of assets to the reorganization. reasonable.R. Releases By the Debtors Section 43. Without the releases. "a plan may . is fair.. Inc. and such contribution is expressly dependent on the Debtors' release of claims against JPMC and its affiliates. these assets would not be available for distribution to creditors and parties in interest. JPMC would not provide other substantial benefits to the Debtors' estates. the Debtors' valid exercise of business judgment in releasing JPMC and its affiliates is beyond question." U.

The Plan. 321. which provides for the release of claims they may have against Noteholders. and (5) the plan provides for payment of all or substantially all of the claims of the class or classes affected by the release.R. courts routinely have held that a vote in favor of a plan with non-debtor releases constitutes an affirmative acceptance of such releases. No. See e. (c) the Plan. because Debtors' release of claims against JPMC and its affiliates satisfy the factors identified in Zenith. (4) a substantial majority of creditors support the release. In re Coram Healthcare Corp. see also Spansion. these releases should be approved. at 143. Inc. 1999).. 1999). These factors are overwhelmingly satisfied in this case because (a) JPMC "share[s] an interest with [Debtors] in seeing that the Plan succeed and the company reorganize. the extent that. 110 (Bankr. D. In re Exide {683. they are bound by that. B.R. without the release. under section 43.. Thus. also provides for releases of JPMC and its affiliates by non-debtor third parties. 982007 (MFW). (b) 90% of distributions contemplated by the Plan are being contributed by JPMC. and (e) it is indisputable that the Plan will payoff all or substantially all of the claims of creditors in classes affected by the release.. 315 B. Del. D. D.6. 241 B.. there is little likelihood of success. 92. according to its express terms. In re Int'l Wireless Commc'ns Holdings." Zenith. With respect to holders of claims that vote affirmatively to accept the Plan.. 241 B. Mar. Id. Releases By Third Parties. In re Zenith Elecs.g. senior creditor claims will be paid in full and 70% to 80% of subordinated unsecured creditor claims will be paid under the Plan). such as by voting in favor of the plan.R.e. LEXIS 1853. These releases also are appropriate. 2004) ("[T]o the extent creditors or shareholders voted in favor of [the Plan]. 26.R. (d) parties are likely to agree to the releases given their anticipated recoveries (i.336 (Bankr."). at 110. at *22-26 (Bankr. Del. 426 B. will fail without the releases. 1999 Bankr.} -30- .001-WOOI1232. Corp.

48. at 607-08. and should be approved.. specific and identifiable consideration flowing from" the released parties in "a fair exchange for the releases being granted. D.R. Del. at 111.001-WOO11232. Aug..2009). or fail to exercise an option to "opt out. In re Freedom Rings. Applying Continental Airlines. See Zenith. 426 B. Del. 241 B. Apr.. D. 303 B.214 (3d Cir.20 such releases are consensual. Oct. Del. there is no need to consider the Zenith factors"). LLC. In re Isolagen. No. No.R. this Court has not hesitated to grant releases that bind non-consenting partiea" This Court routinely confrrms plans containing ballot provisions that allow creditors to "opt out" of releases-much like the opt-out provisions that are included in the ballots for this Plan. 08-12490 (MFW) (Bankr.3d 203. 2010) (approving non-consensual third party releases where there was "material. In re PNG Ventures. 09-13162 (CSS) (Bankr.R. Mar." without which it was "unlikely the debtor would be able to confirm a plan"). are supported by the substantial consideration provided by JPMC. 74 (Bankr. 20..R. in a case decided after this Court's decision in Zenith. Inc. 2003) (where a release is "consensual. See Genesis.268 (Bankr. D.g. this Court has evaluated whether parties to be "non-consensually" released provided critical and necessary financial support to the reorganization and whether non-consenting creditors received reasonable compensation in exchange for the releases. Tr. at 114.. 241 B. In re Continental Airlines. there is little prospect of confrrming a Plan"). L. 368 B. e. See. that non-consensual releases are permissible when they exhibit the "hallmarks" of fairness and necessity to the reorganization.D. Where. 1. In re Metromedia Steakhouses Co. "opt in" to the releases under section 43. at 17-18. the Continental criteria of consideration and necessity have been shown. 2006) (holding that "this Court does have jurisdiction to enter an order providing for non-consensual releases of third party claims" and approving non-consensual third party releases because "the entire Plan hinges on the releases. No. 140. Inc. 266 B.R. Del. e. 11.g. In re Metalforming Techs. With respect to so-called "non-consensual" third party releases of JPMC and its affiliates. to the extent creditors do vote for the Plan. S. as here. No. the Third Circuit has acknowledged. 5.. 09-12072 (MFW) (Bankr. Del.Y. 203 F. D. 0511697 (MFW) (Bankr.P. No. Thus. 2000). 27. 2007).N. at 144-45.R.. D. In re Adelphia Commc'ns Corp. Del...2006) (holding that "the Third Circuit does allow releases not simply by {683. } -31- . 20 21 See.6. Tr. at 111 (approving release of "claims of any creditor who actually voted in favor of the Plan"). Inc. Zenith. Tr.Techs. and the evidence is uncontroverted that without the releases. Spansion. 05-14268 (CSS) (Bankr. Apr. 2009). at 73. D.

D. over the objection of the United States Trustee. this Court routinely confirms plans with third party releases that are binding on unimpaired. third party releases that were binding on unimpaired class members who did not take "affirmatively any action to accept the release").001-WOO11232..For reasons explained above.. has clearly contributed substantial value to the Estates. those concerns clearly do not implicate JPMC who. Furthermore. 09-13889 (MFW) (Bankr. the Equity Committee cannot now dispute the benefit shareholders have received as a result of the Examiner's extensive effort and comprehensive report. {683. Oct. at 19-23). among other things. 10 2009). those who vote affirmatively in favor of a plan." and confirming non-consensual third party releases "because but for the contributions made by the . the non-consensual third party releases in this case satisfy the Continental Airlines standard and should be approved. et al. having agitated for the appointment of the Examiner. Accordingly. as the record reflects and as set forth herein. or affirmatively "opted in" to granting the releases. No. D. 22 To the extent the Examiner has expressed concerns regarding the Plan's releases of persons who have not contributed value to the Estates (Rpt. nonvoting classes. voted on the Plan and did not "opt out" of the releases. } -32- . In re Pliant Corporation. Del. Surely. 09-10443 (MFW) (Bankr. Del. those contributions make possible the payment of the estates' administrative expenses. 62009). see also In re Panolam Holdings Co. including the fees and expenses of various investigations undertaken by or at the behest of the Equity Committee and other out-of-themoney parties in this case. at 144 (approving. the hallmarks of permissible non-consensual releases are unquestionably present and form the cornerstone of a confirmable Plan that provides the certainty and finality sought by all parties to the Global Settlement. 426 B.f These parties either did not object to the releases. Moreover. releasees there would be no distribution to the general unsecured creditors").. See Spansion.. No.R. even the largest out-of-the-money party-WMI Shareholders-will receive direct and indirect benefits as a result of JPMC' s substantial contributions because. With respect to JPMC. Dec. the entire Plan is founded on contributions that JPMC is making through the Global Settlement and most (if not all) creditors and parties in interest affected by section 43.6 will receive a substantial distribution as a direct consequence of such contributions.

Delaware 19801 Telephone: (302) 467-4400 Facsimile: (302) 467-4450 -andRobert A.CONCLUSION For the foregoing reasons.001-WOO11232. 4366) 919 Market Street Suite 1800 Wilmington. reply. California 90067 Telephone: (310) 712-6600 Facsimile: (310) 712-8800 Bruce E. Friedman SULLIVAN & CROMWELL LLP 125 Broad Street New York. } -33- .2010 Wilmington. Dated: November 19. or statement in connection with confirmation of the Plan. McGuire (No. to objections or statements filed or made in connection with confirmation of the Plan. New York 10004 Telephone: (212) 558-4000 Facsimile: (212) 558-3588 Counsel for IPMorgan Chase Bank. by submitting this or any other response. Feldstein SULLIVAN & CROMWELL LLP 1888 Century Park East Los Angeles. at law or in equity. Sacks Hydee R. by written submission or argument at any hearing. National Association {683. Landis (No. Delaware Adam . RESERVATION OF RIGHTS JPMC reserves the right to supplement this response or otherwise reply. JPMC respectfully submits that the Global Settlement should be approved and the Plan confirmed. But JPMC does not waive any of its rights. Clark Stacey R. 3407) Matthew B.

Dero. Dero {683. AFFIDAVIT OF SERVICE STATE OF DELAWARE NEW CASTLE COUNTY ) ) SS ) Michelle M. N. attorneys for JPMorgan Chase Bank.A.001-WOO1l192. Jointly Administered Debtors. 2010. being duly sworn according to law. et aI. 08-12229 (MFW) WASHINGTON MUTUAL. National Association in the above-referenced cases. 1ut/LC"LLt 'fY1 kLO Michelle M.} .IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE Chapter 11 Inre: Case No. INC. IN SUPPORT OF APPROVAL OF THE GLOBAL SETTLEMENT AGREEMENT AND CONFIRMATION OF THE DEBTORS' SIXTH AMENDED JOINT PLAN to be served upon the parties identified on the attached service list in the manner indicated. and on the 19th day of November. deposes and says that she is employed by the law firm of Landis Rath & Cobb LLP... she caused a copy of the following: SUBl\flSSION OF JPMORGAN CHASE BANK.

Susman. Esquire Washington Mutual.001 Via Electronic Mail 8: Hand Delivery Via Electronic (Counsel for Official Committee of Unsecured Creditors) David B.001 8: First Class Mail . Calamari. DE 19801 683. Inc. NY 10036 683. Esquire Quinn Emanuel Urquhart Et Sullivan LLP 51 Madison Avenue New York. 8th Floor Wilmington.001 Via Electronic 8: First Class Mail (Counsel for the Official Committee Holders) Stephen D. INC. Esquire Pepper Hamilton LLP 1313 North Market Street. One Rodney Square Wilmington.001 Via Electronic 8: First Class Mail (Counsel for Official Committee of Unsecured Creditors) Fred S. Jang. DE 19801 of Equity Security Charles Edward Smith. Jr.A.P. Esquire Travis A.001 8: First Class Mail (Special Litigation and Conflicts Co-Counsel for Debtors) Peter E. Rosen. Meltzer. DE 19801 683. Esquire Office of the United States Trustee 844 King Street. 5th Floor New York. Room 2207 Wilmington.001 Via Electronic Mail 8: Hand Delivery (Counsel for Debtors) Mark D. 500 Delaware Avenue. P. NY 10065 of Equity Security 683.WASHINGTON MUTUAL. II. Schanne. Collins. NY 10153 683. Esquire Weil. 08-12229 (MFW) CONFIRMATION BRIEF SERVICELIST/LABELS Via First Class Mail = 5 Via Hand Delivery = 4 Via Electronic 8: First Class Mail (Counsel for Debtors) Brian S. NY 10010 683. Esquire Susman Godfrey.001 683. BANKRUPTCY CASE NO. 654 Madison Avenue. Esquire John H. McMahon. Stratton.L.001 Via Electronic Mail 8: Hand Delivery Via Electronic (Counsel for Official Committee Holders) William P. Esquire Ashby Et Geddes. DE 19801 683.. WA 98104 683. Suite 5100 Wilmington. Esquire Evelyn J. Layton Et Finger. Esquire Akin Gump Strauss Hauer Et Feld LLP One Bryant Park.001 Via Electronic Mail 8: Hand Delivery Joseph J. P. McRoberts. Gotshal Et Manges LLP 767 Fifth Avenue New York. Bowden. 41st Floor New York. L. Hodara. Esquire Chun I. Esquire Richards.A. 925 Fourth Avenue Seattle.

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