Shareholders of Washington Mutual are moving quickly to appeal the bankruptcy trustee’s decision that the underlying concept of the WAMU bankruptcy settlement was fair and reasonable. Lawyers for shareholders cited “the historic nature of this bankruptcy,” and the size of the settlement-nearly $6 billion-as the basis for asking permission to go to the appeals court quickly.
Washington Mutual’s bankruptcy was collateral damage from the collapse of the housing market and the near collapse of the U.S. financial system in the fall of 2008. Shareholders say they’re worried Washington Mutual will cure the legal defects in the Chapter 11 plan and put it in place before they have a chance to appeal. Putting Washington Mutual’s Chapter 11 plan in place means paying out some $7 billion to creditors. Once the money is gone, shareholders say, it won’t matter if they win or lose on the appeal.
The shareholders arguing against the bankruptcy settlement say that WAMU failed to provide sufficient evidence to support their Chapter 11 bankruptcy plan. When WAMU presented their Chapter 11 bankruptcy plan they claimed that they evaluated all of the claims but refused to discuss what advice their attorneys gave them.
The shareholders in this bankruptcy case insist that the company had already decided that they were not going to reimburse shareholders before they even hired legal experts to evaluate the claims. They want the bankruptcy court to reject the Chapter 11 bankruptcy plan and hope that they can get a settlement which will leave shareholders with at least something from the bankruptcy case.