MOTION OF THE OFFICIAL COMMITTEE OF EQUITY … · by Aurelius Capital Management, LP, Normandy Hil Capital L.P., Appaloosa Management, L.P., Centerbridge Partners, L.P. and Owl Creek

IN THE UNITED STATES BANKRUPTCY COURTFOR THE DISTRICT OF DELAWARE

Chapter 11

Debtors.

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Case No. 08-12229 (MFW)In re:

WASHINGTON MUTUAL, INC., et aI., i(Jointly Administered)

MOTION OF THE OFFICIAL COMMITTEE OF EQUITY SECURITY HOLDERSFOR AN ORDER EXTENDING THE TIME TO FILE ITS DESIGNATION AND

COUNTER-DESIGNATION OF RECORD AND STATEMENT OF ISSUES ON APPEAL

The Official Committee of Equity Security Holders (the "Equity Committee"), by and

through its undersigned counsel, hereby moves (the "Motion to Extend"), pursuant to section

105(a) of title 11 of the United States Code, 11 U.S.c. §§ 101-1532, et seq. (the "Banptcy

Code") and Rule 9006(b) of the Federal Rules of Bankruptcy Procedure ("Bankruptcy Rules"),

for entry of an order in the form attached hereto extending the time within which the Equity

Committee must file its (i) designation of record and statement of issues on appeal with regard to

its cross-appeal (the "Designation") and (ii) counter-designation of record and statement of

issues on appeal (the "Counter-Designation") with regard to the designations fied, or to be fied,

by Aurelius Capital Management, LP, Normandy Hil Capital L.P., Appaloosa Management,

L.P., Centerbridge Partners, L.P. and Owl Creek Asset Management LP, the WMB Noteholders,

the Official Committee of Unsecured Creditors, Wells Fargo Ban in its capacity as successor

Indenture Trustee and the Debtors (collectively, the "Appellants"), each in connection with their

various appeals required by Banptcy Rule 8006, and in support thereof, respectfully states as

The Debtors in these chapter 11 cases, along with the last four digits of each Debtor'sfederal tax identification number, are: Washington Mutual, Inc. (3725) and WMI InvestmentCorp. (5396). The Debtors' principal offices are located at 1301 Second Avenue, Seattle,

follows:2

STATEMENT OF RELEVANT FACTS

1. The Bankptcy Court entered an order and opinion (D.1. 8612, 8613) on

September 13, 2011 denying confirmation of the Debtors' Modified Sixth Amended Plan of

Reorganization (the "Confirmation Order") and granting the Equity Committee derivative

standing to prosecute an action for equitable disallowance of the Settlement Noteholders' claims

based on allegations of insider trading (the "Standing Order"). The Bankruptcy Court stayed the

Standing Order, and directed the parties to mediation on the insider trading/equitable

disallowance issue as well as the issues that remain an impediment to confirmation of any plan of

reorganization. (Opinion at 138).

2. Multiple parties filed notices of appeal from the Bankptcy Court's Confirmation

Order and/or Standing Order, including Aurelius Capital Management, LP ("Aurelius") (D.I.

8670), Normandy Hil Capital L.P. (D.I. 8671), Appaloosa Management, L.P., Centerbridge

Partners, L.P. and Owl Creek Asset Management LP (collectively, "AOC", and together with

Aurelius, the "Settlement Noteholders") (D.I. 8673), the WMB Noteholders (D.I. 8679), the

Offcial Committee of Unsecured Creditors (the "Creditors Committee") (D.1. 8726), Wells

Fargo Bank in its capacity as successor Indenture Trustee ("Wells Fargo") (D.I. 8771) and the

Debtors (D.I. 8785). The Settlement Noteholders and the Creditors Committee appealed the

Standing Order, and Aurelius, the WMB Noteholders and Normandy Hil appealed various

Washington 98101.2 Because some, but not all, of the appeals have been transmitted to the District Court, the

Equity Committee wil fie this Motion to Extend - which seeks, among other things, to extendthe deadline for the Equity Committee to file its combined counter-designation to all sevenappeals - in both the Banptcy Court and the District Court.

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aspects of the Confirmation Order. 3

3. In connection with their notices of appeal, several parties filed motions for leave

to appeal, including Aurelius (D.1. 8672), AOC (D.1. 8674, 8675) and the Creditors Committee

(D.1. 8727), with the Debtors joining in the Creditors Committee's motion (D.I. 8781). Aurelius

and the Creditors Committee submit that the Banruptcy Court order is final and appealable as of

right, but seek leave to appeal under 28 U.S.C. § 158(a)(3) in the event the Court concludes that

the order is interlocutory.

4. Neither the WMB Noteholders, Normandy Hil nor Wells Fargo have filed

motions for leave to appeaL

5. The Equity Committee filed a combined response opposing the varous motions

for leave to appeal (D.1. 8811).4 Indeed, the Equity Committee does not believe that an appeal of

the Confirmation Order or Standing Order is appropriate at this juncture. Notwithstanding, the

Equity Committee filed a notice of cross-appeal (D.1. 8790) and motion for leave to cross-appeal

(D.I. 8791). Importantly, however, the Equity Committee seeks leave to cross-appeal the

following issues only in the event the Court grants the various motions for leave to appeal, in

whole or in part: (i) whether the Bankptcy Court erred in holding that the federal judgment rate

3Aurelius seeks leave to appeal the "ruling embodied in the Confirmation Order

mandating that postpetition interest in any plan must be paid at the federal judgment rate ratherthan the contract rates bargained for by the parties." (Aurelius Motion for Leave to Appeal ~~ 2,79-82).4 In its opposition, the Equity Committee argued that neither the Standing Order nor the

Confirmation Order is finaL Appellate review of the Standing Order is premature. The

Bankptcy Court merely found the insider trading claims "colorable" and authorized the EquityCommittee to pursue them derivatively; however, the Equity Committee has not yet filed acomplaint. An appeal of the post-petition interest ruling embodied in the Confirmation Order islikewise premature. No plan has been confirmed and no final order has been entered on paymentof claims or post-petition interest. Moreover, for the reasons set forth in the Equity Committee'sopposition, the September 13, 2011 order does not satisfy the strict requirements for aninterlocutory appeaL

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should be calculated as of the petition date; (ii) whether the Bankptcy Court erred in holding

that the Modified Plan was proposed in good faith; and (iii) whether the Bankptcy Court erred

in holding that the $335 milion settlement with the WMB Bondholders is reasonable.

6. Normandy Hil (D.1. 8782), AOC (D.1. 8784), Aurelius (D.I. 8788), the WMB

Noteholders (D.1. 8789), the Creditors Committee (D.1. 8830) and Wells Fargo (D.1. 8861) each

fied a designation of items for inclusion in the record on appeal and statement of issues on

appeaL.

7. The Bankptcy Court has transmitted the motions for leave to appeal filed by

Aurelius (D.1. 8801), AOC (D.1. 8809) and the Creditors Committee (D.I. 8834) as well as any

responses thereto to the District Court. The Aurelius, AOC, Creditors Committee and Debtors

appeals have been docketed at 11-971(GMS), 11-979(UNA), 11-1001(UNA), 11-1004(UNA),

respectively. The District Court has not taken any action with respect to these matters as of the

date hereof.

ARGUMENT

8. By this Motion to Extend, the Equity Committee respectfully requests that the

Court enter an order extending the deadline for the Equity Committee to file its Counter-

Designation and Designation in support of its cross-appeal.

9. Bankptcy Rule 8006 provides that an appellant shall file its designation of

record and statement of issues on appeal "( w )ithin 14 days after filing the notice of appeal as

provided by Rule 8001 (a), entry of an order granting leave to appeal, or entry of an order

disposing of the last timely motion outstanding of a type specified in Rule 8002(b), whichever is

later." FED. R. BANKR. P. 8006 (emphasis added).

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10. AOC, Aurelius and the Creditors Committee prematurely filed their Bankrptcy

Rule 8006 designations as the District Court has not yet ruled on their pending motions for leave

to appeaL The better practice would have been for the appellants to await the appellate court's

decision on the motions for leave before filing the designations, which is clearly contemplated

(and permitted) by the rule. This approach would conserve estate resources as the time and

effort spent drafting and filing the designations and compiling the documents identified therein

would be wasted in the event the District Court denies the motions for leave.

11. In any event, the filing of Appellants' designations arguably triggers the Equity

Committee's fourteen-day period within which it must fie its Counter-Designation and

Designation with regard to its cross-appeal. FED. R. BANKR. P. 8006. Specifically, the rule

states:

Within 14 days after the service of the appellant's statement the appellee may fileand serve on the appellant a designation of additional items to be included in therecord on appeal and, if the appellee has filed a cross appeal, the appellee as crossappellant shall file and serve a statement of the issues to be presented on the crossappeal and a designation of additional items to be included in the record.

Id.

12. As of the date hereof, six separate Appellants have fied designations - Normandy

Hil (D.I. 8782), AOC (D.1. 8784), Aurelius (D.I. 8788) and the WMB Noteholders (D.1. 8789)

all filed their designation on October 11, 2011, the Creditors Committee (D.I. 8830) filed its

designation on October 18,2011 and Wells Fargo filed its designation earlier today (D.1. 8861).

Importantly, the Equity Committee's fourteen-day deadline to file both its Counter-Designation

and its Designation as cross-appellant has not yet run.

13. Bankptcy Rule 9006(b) provides, in pertinent part,

Except as provided in paragraphs (2) and (3) of this subdivision, (which are notapplicable,) when an act is required or allowed to be done at or within a specified

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period by these rules or by a notice given thereunder or by order of court, thecourt for cause shown may at any time in its discretion (1) with or without motionor notice order the period enlarged if the request thereof is made before theexpiration of the period originally prescribed or as extended by a previous order.

FED. R. BANKR. P. 9006(b); see also In re Hermosila, 2010WL 2719953, at *1-2 (Bank. D.

Mass. July 8,2010) (Bankrptcy Rule 9006 applies to extension of time to file designation under

Bankptcy Rule 8006).

14. As the applicable periods within which to fie its Counter-Designation and

Designation have not yet expired, the Equity Committee respectfully submits that cause exists to

extend the deadline to file its Designation and Counter-Designation.

15. The Equity Committee submits that it would be premature to file its Designation

and Counter-Designation at this time. The Equity Committee believes that there is a substantial

likelihood that the District Court wil find the Confirmation Order and Standing Order to be

interlocutory, deny the motions for leave and dismiss the appeals, in which case it would be

unnecessary to file the Designation and Counter-Designation at alL. Requiring the Equity

Committee to file its Designation and Counter-Designation now - before the District Court

considers the motions for leave - could be futile and a waste of estate resources. Rather, the

more prudent approach would be for the Equity Committee to fie its Designation and Counter-

Designation after the District Court disposes of the various motions for leave to appeaL.

16. The Equity Committee does not intend to fie a separate counter-designation to

each of the varous designations filed by the Appellants. Indeed, just as it fied a combined

response in opposition to the multiple motions for leave to appeal, the Equity Committee intends

to fie one combined counter-designation that addresses all of the Appellants' designations. The

Equity Committee submits that this approach would be most efficient and beneficial to the Court

and parties in interest. However, only six designations have been fied to date even though seven

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parties have appealed the Confirmation Order and/or Standing Order. Because the Debtors did

not file their notice of appeal until October 11, their designation is not due until October 25 - the

same day the Equity Committee's counter-designations to some, but not all, of the pending

appeals are due. Accordingly, absent an extension, the Equity Committee would be unable to

fie a combined counter-designation that addresses the designations fied by all seven Appellants.

17. The Equity Committee submits that no party in interest wil be prejudiced or

burdened by granting the relief requested herein. To be sure, extending the time within which

the Equity Committee must file its Designation and Counter-Designation wil not delay the

appellate process. Indeed, most of the Appellants must await a ruling on their motions for leave

to appeal before the appeal is permitted to proceed. Thus, it is not unreasonable to extend the

time within which the Equity Committee must file its Counter-Designation and Designation in

support of its cross-appeal until after the District Court rules on the pending motions for leave to

appeaL.

CONCLUSION

18. In sum, the Equity Committee respectfully requests that the Court extend the time

by which the Equity Committee must file its Designation and Counter-Designation until after the

Court disposes of the motions for leave to appeaL. In the event the Court grants the motions, the

Equity Committee requests that it be permitted to file its Designation and Counter-Designation

pursuant to an agreed upon schedule or a date established by the Court.

WHEREFORE, the Equity Committee respectfully requests entry of an order,

substantially in the form attached hereto as Exhibit A, extending the time by which the Equity

Committee must file its Designation and Counter-Designation until after the Court disposes of

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the motions for leave to appeal, and granting such other and further relief as the Court deems

appropriate.

Dated: October 24,2011Wilmington, Delaware

ASHBY & GEDDES, P.A.

lsi Gregory A. Taylor

Wiliam P. Bowden (DE Bar No. 2553)Gregory A. Taylor (DE Bar No. 4008)Stacy L. Newman (DE Bar No. 5044)500 Delaware Avenue, 8th FloorP.O. Box 1150Wilmington, DE 19899Telephone: (302) 654-1888Facsimile: (302) 654-2067

Delaware Counsel to the Offcial Committee ofEquity Security Holders of Washington Mutual,Inc., et al., and with respect to the Settlement NoteHolders, only as to Centerbridge Partners, L.P.,Appaloosa Management L.P., and OWL Creek AssetManagement, L.P.

-and-

SUSMAN GODFREY, L.L.P.Stephen D. Susman (NY Bar No. 3041712)Seth D. Ard (NY Bar No. 4773982)654 Madison Avenue, 5th FloorNew York, NY 10065

Parker C. Folse, III (W A Bar No. 24895)Edgar Sargent (W A Bar No. 28283)Justin A. Nelson (W A Bar No. 31864)1201 Third Ave., Suite 3800Seattle, WA 98101Telephone: (206) 516-3880Facsimile: (206) 516-3883

Co-Counsel to the Offcial Committee of EquitySecurity Holders of Washington Mutual, Inc. et al.

-and-

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SULLIVAN HAZELTINE ALLINSON LLC

lsi Wiliam D. Sullvan

Wiliam D. Sullivan (DE Bar No. 2820)901 N. Market Street, Suite 1300Wilmington, DE 19801Telephone: (302) 428-8191Facsimile: (302) 428-8195

Conficts Co-Counsel for the Offcial Committee ofEquity Security Holders of Washington Mutual,Inc., et al., as to Aurelius Capital Management,L.p.

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Exhibit A

(Proposed Order)

IN THE UNITED STATES BANKRUPTCY COURTFOR THE DISTRICT OF DELAWARE

Chapter 11

Debtors.

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Case No. 08-12229 (MFW)In re:

WASHINGTON MUTUAL, INC., et aI., i(Jointly Administered)

Related Docket No.

ORDER EXTENDING TIME FOR THE OFFICIAL COMMITTEE OF EQUITYSECURITY HOLDERS TO .FILE ITS DESIGNATION AND COUNTER-DESIGNATION

OF RECORD AND STATEMENT OF ISSUES ON APPEAL

Upon consideration of the Motion for an Order Extending the Time to File its

Designation and Counter-Designation of Record and Statement Statement of Issues on Appeal

(the "Motion to Extend,,)2 filed by the Official Committee of Equity Security Holders (the

"Equity Committee"), the Court finds that it has jurisdiction over this matter pursuant to 28

U.S.C. §§ 157 and 1334; this is a core proceeding pursuant to 28 U.S.C. § 157(b); venue is

proper in this district pursuant to 28 U.S.c. §§ 1408 and 1409; the relief requested in the Motion

to Extend is in the best interests of the Debtors, their estates and creditors; proper and adequate

notice has been given and no other or further notice is necessary; after due deliberation and

sufficient cause appearing thereof, it is hereby:

ORDERED, ADJUDGED, AND DECREED THAT:

1. The Motion to Extend is GRATED.

The Debtors in these chapter 11 cases, along with the last four digits of each Debtor'sfederal tax identification number, are: Washington Mutual, Inc. (3725) and WMI InvestmentCorp. (5396). The Debtors' principal offices are located at 1301 Second Avenue, Seattle,Washington 98101.2 All capitalized terms not otherwise defined herein shall have the meaning ascribed to

them in the Motion to Extend.

2. The deadline for the Equity Committee to file its Designation and Counter-

Designation is hereby extended until after the Court disposes of the motions for leave to appeaL.

3. In the event the motions for leave to appeal are granted, the deadline for the

Equity Committee to file its Designation and Counter-Designation is

or another date as agreed upon by the paries.

4. This Court retains jurisdiction with respect to all matters arising from or related to

the implementation of this Order.

Dated: ,2011THE HONORABLE MARY F. WALRATHUNITED STATES BANKRUPTCY JUDGE

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