Many questions. For our purposes, the claim in the Federal Court of Claims is largely irrelevant. So forget the government's appeal for now. They can't appeal the underlying case, because they lost that on appeal and didn't even try to get Supreme Court review. So although litigation continues against the government in the Federal Court of Claims, it really isn't worth much worrying about - the main amount of money has already been won.
Turning to bankruptcy, the main issue is whether we are general unsecured (Class 12), or equity (behind preferred and ahead of common). That's the adversarial. If we're Class 12, we'll get paid - there's plenty of money for the classes behind us. If we're class 19 (I think that's the class between preferred and common), then we're out of luck unless more money appears for the preferred. That could happen because of the NOLs and valuation of WMI, but we don't know.
Turning to our case - it's pretty darned strong. Another thing to keep in mind is the credibility of Wamu, which is now shot. They cited to another LTW agreement as precident, but that wasn't a final LTW agreement, and it turns out that agreement (related to Golden State) ended up being identical to the DIME agreement, and the LTW holders got paid in full.
This has a couple effects. First, it makes it seem as if Wamu's entire decision to place the LTWs in Class 19 (or whatever) may have been misguided. Of course, once they made that agreement and came up with the settlement, they couldn't easily change course without disrupting the settlement agreement, so of course they'd fight the LTW holders, even w/o a legal basis, because letting them in disrupts the other creditors.
Secondly, the failure to correct their mistatement goes to their condor towards the court. Court generally make findings of fact and rulings of law. Rulings of law are freely appealable - findings of fact are very hard to overturn on appeal, because the "finder of fact" is uniquely positioned to assess witness demeanor and credibility, etc.
Now that Wamu's credibility is shot, it is quite likely that the court will not find their witnesses as credible. What does that mean? Well, if there's a contested fact, it's quite possible that the court will consider prior conduct and determine the facts in a manner that's less favorable to Wamu.
An example of this occurred in the original DIME litigation. Judge Block chastised the government for selective use of ellipses in one ruling. He then derided the parties for "scortched earth" litigation tactics. Once I read that, and otherwise analyzed the case (and other comparable cases), it was pretty clear to me that he was unlikely to rule in favor of the government. That's when I made my bet on Dime. It took him a LONG time to write his opinion, but he obviously took extra care so that this ruling would survive appeal, which it easily did.
IMO, the current adversarial proceeding has many of the same trends as the original litigation, insofar as credibility of counsel and "scortched earth" litigation tactics applies. Plus, the law on its face favors us. Look up the bankruptcy law's definition of "equity" and remember that the LTW agreement as amended provides that the LTWs are convertible to shares without consideration. That's a slam-dunk. Then review the risk factors in the LTW offering.
I think we'll win. But this is litigation and no one can ever be certain.
As I've stated before, if I were Wamu, I'd be looking to settle this, because leaving the issue of DIME hanging open causes any number of potential problems, especially as concerns a rights offering.
Of course, you need to do your own due diligence and get comfortable with this case.
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