WaMu Maintains Hold On Shareholder Actions

WaMu Maintains Hold On Shareholder Actions - 1/13/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

SETTLEMENT NEWS:

WaMu Maintains Hold On Shareholder Actions
Samuel Howard

Securities Law 360. January 13, 2009
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EXCERPT: The bankruptcy judge overseeing Washington Mutual Inc.’s Chapter 11 has refused to force the debtors-in-possession to abandon derivative actions now part of its estate and allow shareholders to pursue claims against the failed bank’s top brass. On Monday, Judge Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware denied the shareholders' bid to have the debtors relinquish the consolidated derivative actions, which were launched against the bank’s directors prior to the bankruptcy filing but subsequently became property of the debtors’ estate. After considering the wholehearted objections of the debtors, the unsecured creditors and official noteholders, Judge Walrath ruled that Washington Mutual is not required to abandon the actions and give way for the shareholders to pursue claims against the bank’s officers on its behalf. The shareholder plaintiffs allege a breach of fiduciary duty on the part of Washington Mutual’s officers and directors accused of insider trading, improper accounting and making false statements regarding the bank’s exposure in the subprime mortgage market. The consolidated suits, pending in the U.S. District Court for the Western District of Washington, are unlikely to be enforced, if at all, until a reorganization plan is hammered out. Washington Mutual contends that the shareholder plaintiffs lost standing to pursue the derivative actions once the bankruptcy proceeding commenced in September, granting the debtors sole power to enforce the suits. The debtors contended that it is premature for them to abandon any estate causes of action, and, should the derivative suits prove to be of merit, the estate and not the shareholder plaintiffs are the appropriate representatives in the actions.

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