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Shareholders seek fast-track appeal of WaMu ruling

Wed Jan 19, 2011 12:42pm EST


* Shareholders appeal ruling on JPMorgan, FDIC deal

* Seek to take appeal direct to circuit court of appeals

WILMINGTON, Del. Jan 19 (Reuters) - Washington Mutual Inc (WAMUQ.PK) shareholders appealed on Wednesday a bankruptcy court's ruling that approved the company's $10 billion settlement with JPMorgan Chase & Co (JPM.N) and a bank regulator, according to court documents.

The shareholders also asked that the appeal bypass the Delaware District Court and be heard quickly by the Third Circuit Court of Appeals, the last federal court level before the U.S. Supreme Court in Washington.

Delaware Bankruptcy Judge Mary Walrath found Washington Mutual's settlement with JPMorgan and the Federal Deposit Insurance Corp was "fair and reasonable" in her Jan. 7 opinion.

The battle over assets and legal claims has been waged since Washington Mutual's bank was seized by regulators in September 2008 and sold to JPMorgan for $1.88 billion. The seizure, the biggest bank failure in U.S. history, prompted the company's bankruptcy filing.

Shareholders took aim at Walrath's ruling, which they argue was made without proper analysis of the merits of the legal claims that were settled by the deal.

The shareholders have argued that when the company agreed to the settlement, it gave up the right to pursue lawsuits that could have been worth tens of billions of dollars, including claims of misconduct by JPMorgan surrounding the bank seizure.

The settlement provided most of the more than $7 billion that Washington Mutual will distribute to its creditors, which includes hedge fund investors as well as service providers such as software companies.

Most creditors will be paid in full when the company emerges from bankruptcy. Shareholders will receive virtually nothing.

The request to take the appeal to the Third Circuit Court of Appeals will be heard by Walrath at a hearing on Thursday.

An attorney for Washington Mutual and a spokesman for the FDIC declined to comment. A JPMorgan spokeswoman did not immediately respond to a request for a comment.

Shares of Washington Mutual were up 1.8 percent at 5.8 cents in pink sheet trading.

The case is In re Washington Mutual, U.S. Bankruptcy Court, District of Delaware, No. 08-12229. (Reporting by Tom Hals; Editing by Tim Dobbyn)

http://www.reuters.com/article/idUSN1923747220110119