Law360, Wilmington (January 06, 2015, 7:39 PM ET) -- Former Washington Mutual Inc. brass on Monday appealed a recently approved $37 million settlement in a suit alleging the holding company’s officers and directors had recklessly approved a $500 million transfer to Washington Mutual Bank shortly before it collapsed.
A group of former WMI executives appealed a Dec. 23 order by U.S. Bankruptcy Judge Mary F. Walrath blessing the settlement, which ends litigation brought by the liquidating trustee against WMI's former directors and officers, among other issues, and features a $37 million payment from insurers.
Former chief financial officer Thomas W. Casey, former chief operating officer Stephen J. Rotella, former treasurer Robert J. Williams Jr., and David Schneider — a subset of the executives targeted by the liquidating trustee's litigation — seek to have the Delaware district court to take up the matter.
Monday's notice of appeal, filed in Delaware bankruptcy court, does not state a reason for the quartet's challenge.
The foursome objected to the settlement on Dec. 15, contending that the agreement had been entered into without their consent and would strip them of insurance coverage needed to fight the allegations.
The D&O litigation is based on “extraordinarily weak” claims, according to their objection, while the $37 million payment called for by the settlement is “grossly excessive and unreasonable.”
Counsel for the four executives was not immediately available for comment on Tuesday.
WMI's trustee launched a suit in Washington state court in October alleging that the holding company's directors and officers neglected their fiduciary duty by allowing $500 million to be transferred to the Washington Mutual Bank unit just before that bank went into receivership.
The liquidating trustee claimed the directors and officers should have known that the $500 million infusion into WMB would not solve the liquidity problems the bank was experiencing in September 2008, according to court documents.
The trustee proposed the settlement on Dec. 1, and subsequently praised Judge Walrath's decision to sign off on the the deal.
“We are pleased that the court approved this settlement agreement, which will help preserve the trust’s resources and enable future distributions,” WMI Liquidating Trustee William C. Kosturos said in a statement last month.
On Monday, the liquidating trustee filed a motion asking the bankruptcy court to extend the trust's term for another three years, saying the additional time is necessary for the trust to fulfill its obligations.
Judge Walrath is slated to hear the extension motion Jan. 26.
Washington Mutual Bank collapsed in 2008 in one of the biggest bank failures in U.S. history, after $16 billion in deposits were withdrawn in 10 days. The bank was placed into receivership with the Federal Deposit Insurance Corp., which immediately sold its assets to JPMorgan Chase Bank NA for $1.9 billion, while holding company WMI sought refuge in bankruptcy.
The holding company emerged in March 2012, reorganized as a reinsurance company under control of former shareholders after three and a half years under court protection, and set up the liquidating trust to pay back creditors.
The four appealing executives are represented by Stephen W. Spence and Aaron C. Baker of Phillips Goldman & Spence PA.
The trustee is represented by Mark D. Collins, Paul N. Heath and Amanda R. Steele of Richards Layton & Finger PA and Brian S. Rosen of Weil Gotshal & Manges LLP.
The bankruptcy is In Re Washington Mutual Inc. et al., case number 1:08-bk-12229, in the U.S. Bankruptcy Court for the District of Delaware.
The Washington suit is WMI Liquidating Trust v. Casey, case number 14-2-28048-3SEA, in the King County Superior Court of the State of Washington,
--Additional reporting by Stewart Bishop and Cara Salvatore. Editing by Philip Shea. |
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