THJMW Ruling/Transcript May 5th Examiner Motion.
Well Let me make my ruling. First a preliminary issue, the filing of a motion to appt a trustee will not eliminate the need for the court to address the EC’s Motion to Appt an Examiner. I made that point the other day and it could certainly lead to strategic filings of motion of appt of trustee, just to defeat a motion for appt of an examiner. So that is of no moment to my ruling on this motion.
As I have recently ruled orally (So you can’t really rely on it), I do believe the 1100c 2 does give the court some discretion if the debt level is reached the discretion is, the court has the discretion to determine what appropriate investigation of the debtor should occur and if the court determines that there is no appropriate investigation that needs to be conducted, the court has the discretion to deny the appointment of an examiner.
The courts have looked at various factors in determining whether an appropriate investigation is warranted. They include whether that same investigation has already been conducted by other parties, they have looked at whether the appointment of an examiner will increase costs and cause a delay with no corresponding benefit, the courts have looked at the timing of the motion, looked at whether the motion is a litigation tactic, which includes consideration of the timing, not just how soon it is in the case or whether it is timed to such as to evidence a litigation tactic, I think in this case it is a very close call,
I don’t find that this is a litigation tactic, although it has been suggested that the shareholders are simply seeking to delay things while they replace management, so that they can have a “excuse me BOD” so they can attack the settlement I will accept their motion as they stated
“An effort to have an investigation conducted by an independent 3rd party to determine whether or not the plan proposed by the debtor or this ‘global settlement’ referred to by the parties is appropriate or whether instead prosecution of those claims would result in a greater recovery for the estate.
Notwithstanding that, reviewing the factors, I think it is clear that the motion has to be denied “at this point”
First it’s clear to me that this debtor has been investigated to death and I’m sure that even the most experienced and talented examiner that the UST could appoint would not “find any stone unturned.” Investigations have been conducted not only by the debtor and creditors committee, but by the EC itself has done some investigation, the OTS, FDIC, Government Task Force (including the US Attorney for the Western District of WA, Dept of labor, the Dept of Justice, FBI, IRS, SEC, AG of NY, Class Action Plaintiff, Congress, The Us Treasury, and the Presidents Financial Fraud Task Force) they’ve all taken a look at WAMU,
It is true that their investigation exceeded the scope of what this court need concern itself with. They’ve talked about systemic problems; they have investigated possible criminal actions by the parties. In this case the court is limited to as the EC suggests “the value of the assets and how they will be distributed in this bankruptcy case.” I don’t think it is fair to the creditors in this case, to be saddled with the costs of an investigation into systemic problems that would only benefit future parties, but not benefit the parties in this case. In this case specifically the debtor and creditors committee have investigated specific assets owned by the debtor or the debtor claims to have owned. The debtor has vigorously appeared in and prosecuted its position in several adversaries in this case, in addition to filing a claim in the FDIC receivership and prosecuting claims in that forum. All of that information should be available to the EC and “I don’t want to hear about obstacles being placed in their path to getting full and open access to that information.” Whether it’s documentary or interviews with the debtor’s management or others who have conducted these investigations and the same goes with the creditors committee who’s been actively involved in all of this. Again the appointment of an examiner here really would only have the task of reviewing what others have already done, I don’t think there’s any original investigation left to be done. So I think that’s just a waste of assets.
Secondly I think the EC is fully able to conduct the investigation it seeks to have the examiner conduct.
IT HAS THE BENEFIT OF RULE 2004, IT HAS THE BENEFIT OF THE DISCOVERY RULE BECAUSE THERE ARE CONTESTED MATTERS PRESENTLY AND ANTICIPATED! In which the EC can fully avail itself of that discovery, but again I’m strongly urging the committee and the debtor to provide all the info for the EC without “TESTING THE COURTS PATIENCE” with discovery motion.
Again the appointment of a 3rd party to conduct that investigation and to report to the court its conclusion is no substitute for the adversarial process in BK court and the duty of the court after hearing the views of the opposing parties to make a decision as to what assets the debtor owns, what the value of those assets is, whether a settlement is reasonable, in resolving a conflicting claim to those assets, to ownership of those assets. Finally the timing of the motion, I don’t think this is a factor that I will rely on in this case I think in other cases, it’s been evidenced that parties have been litigating for many many months and only at the last minute when a party thought it was going to lose, did it file the motion for a tactical reason. In this case, the EC is relatively new to this case and only since Jan and I don’t think that the timing was meant to or is too late to consider it, nor was it meant as a litigation strategy.
Let’s See: I don’t know whether, I’m not going to accept the debtors argument or the committee’s argument regarding delay here being a negative, I’m not sure how quickly the debtor honestly can proceed with its proposed plan, but at any rate I think there is sufficient time, should be sufficient time for the EC to conduct whatever investigation it feels is relevant. So, I will deny the motion.
Here is what John Clarke of the FDIC said to THJMW this morning.
Court is aware we have not taken a position either for or against this motion. I just needed to respond to Mr Rosen’s comments, I would refer back to the comments I made at the omnibus hearing on April 6th as to the status, we don’t have any “CHANGED STATUS” to report from those comments and the record stands for itself as to what I said then.
THJMW: “You want to remind us of what you said then.”
We said that there were still significant open issues with the parties to the proposed settlement that we would continue to have discussions with those parties, we have not yet resolved those issues and there are other conditions to settlement that still haven’t been satisfied, but we’re working with the goal of trying to achieve all that and get the proposed settlement agreed to and presented to this court. Thank You.
THJMW: Before we conclude , Where do we stand on the 2019, did you send out a notice of a hearing on that?
Rosen: UH !! Yes we did your honor and that is on for May 19th, with parties required to file a notice with the court if they do not intend to comply with the court’s prior ruling.. Thank You
