Nice find Dine! This is a fine doc! I had some free time and did a search of “shareholders” and the term came up more than 70 times and predominantly in a good way. I have posted some excerpts from the doc that I found rather salient ...
The Board of Directors that oversaw the destruction of WMI now wants to prevent shareholders - who would receive nothing in the proposed settlement - from exercising their statutory right to call a long-overdue annual meeting in order to protect the rights of all interested parties.
Here, without any type of shareholder input in corporate governance since well before the bankruptcy, WMI is attempting to settle its most significant outstanding claims while leaving shareholders with nothing.
Its principal justification for blocking the shareholders meeting is to protect the purportedly "groundbreaking, yet still fragile" settlement agreement among the Debtors, JP Morgan Chase, N.A. ("JPMC"), and the Federal Deposit Insurance Corp. (the "FDIC"). (Def. Opp. at 1). Without sufficient clarity about the nature and extent of investigations into additional sources of recovery for the estates, the Debtors will seek to include broad releases in favor of JPMC and the FDIC that will permanently bar future claims upon confirmation of the plan.
Most fundamentally, even if such concerns had a foundation, courts consistently have held that they are insufficient to deny shareholders the right to exercise their control over corporate governance. Moreover, the shareholders fully expect that a new slate of directors would act in a manner that is entirely consistent with their fiduciary and ethical obligations to WMI, which includes both the creditors and shareholders of WMI. WMI has introduced no evidence to the contrary.
The Debtors have not presented any evidence (let alone compelling evidence) that its proposed liquidating plan of reorganization-which is premised upon a global settlement of the most valuable pending litigation-should somehow preclude the prompt scheduling of a long-overdue meeting of shareholders.
Here, the only facts WMI proffers as showing "clear abuse" fall into this latter category, which is insufficient as a matter of law. WMI asserts that there is a clear abuse of process because the Equity Committee is trying to "extract a distribution" and engaging in a "naked grab for power," especially because the cases are "at a critical juncture." (Def. Opp. at 10). The Debtors provide no evidentiary support for those accusations at all, and in fact it is barely short of outrageous for WMI to characterize the desire of its owners to exercise their statutory rights as shareholders as a "power grab" or an effort to "seize control."
WMI's own assertion that final judgment be delayed until after the confirmation process serves only to highlight the need for immediate relief. The proposed plan purports to settle the vast majority of the most valuable litigation to the estate. Shareholders need a voice in that process now.
At their core, WMI's arguments amount to a transparent effort to exclude shareholders from any oversight role in how the company has investigated the nature and strength of its legal claims and how it has conducted negotiations to settle those claims, and to prevent them from playing a meaningful role in the plan-confirmation process. If the annual meeting does not take place quickly, the election of directors will be rendered meaningless because all critical decisions in the Debtors' reorganization will have already been made.
WMI does not dispute that the failure to schedule and conduct an annual shareholder meeting violates both Washington law and WMI's own bylaws. This is not a mere technicality; the shareholders' inability to appoint board members of their choosing, and in particular board members who are not potentially biased as a result of their involvement in pre-petition events leading to the bankruptcy, severely impairs the shareholders' ability to play a meaningful role in the negotiation of settlements and
development of a plan of reorganization.
III.
CONCLUSION
For the foregoing reasons, the Court should grant summary judgment to the Equity Committee and issue an order compelling WMI to (1) convene an annual shareholders' meeting as soon as practicable but no later than May 2010; (2) send notice of the meeting to the shareholders of record as of March 3, 2010 (the date the Equity Committee filed its Complaint); (3) designate the time, place and procedures to be followed in holding the annual meeting, as well as the form of notice of the meeting to be delivered to all shareholders by WMI; and (4) enter further orders as necessary to accomplish the purposes of the meeting. In the alternative, the Court should find that the automatic stay under Section 362 of the Bankruptcy Code does not apply or grant relief from the automatic stay such that shareholders may seek such relief in Washington state court.
…rs
